Recently a small group of Stanford professors decided to see if they could make great college teaching available to everyone in the world over the internet — free. Their project is called COURSERA. (I think the first course they offered had 270,000 enrollees.)
I signed up for one of the first COURSERA courses, Introduction to Finance, taught by Gautam Kaul at the University of Michigan. After seeing the first 8 weeks of lectures I recommend the course to EVERYONE — not just decision coaches. The first 4 weeks do a great job of covering what I think every decision coach needs to know.
Here are 4 things taught in the first 4 weeks of this class that every decision coach needs to know:
1) Project evaluations are always comparative. New projects always have to be compared to the best available alternative. Often the best alternative is to leave the money in the bank or keep doing what we are already doing.
2) Decision making begins with an understanding of free cash flows. When are the checks written and to whom?
3) You have to be able to select a discount rate and to calculate net present value (NPV.)
4) Return on Investment (ROI) is a popular investment criteria with some important biases. ROI pushes project selection toward small projects with early payback.
For a straightforward case study that uses Gautam’s lessons see “Decision Analysis Case Study: Should I buy a Chevrolet Volt or a Toyota Prius?”
Weeks 7 and 8 of the Finance course discuss uncertainty. Probability is taught from a classical statistics perspective. This is useful for passive investment decisions but not for the kinds of strategic decisions faced by executives. (See the list of strategic decisions faced by executives on the left.) You can read more about decision coaching in my recent INFORMS presentation, “A New Profession is Emerging: Decision Coach.”
In his finance course Professor Kaul treats accounting as a separate subject. He says that ccounting is a language, not a science. I look forward to seeing a COURSERA offering on accounting. I will probably recommend that to everyone also. Too many people are mystified by accounting.
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