Opportunity Lost

There are some who believe that a teacher, by def­i­n­i­tion, can teach any­thing. That being said, would you want your sur­geon taught surgery by a grade school teacher? Why then are we okay with teach­ers teach­ing finan­cial subjects?

Now, I’ve been a teacher myself, so I respect the amount of work that goes into the job, but I also know that most teach­ers know next to noth­ing about run­ning a busi­ness or invest­ing, yet they con­tinue to try and “edu­cate” the next generation.

A friend of mine has a son in high school. As part of his finan­cial course, he was charged with devel­op­ing and run­ning a busi­ness. They were allowed to do any­thing they wanted, alone or in a group. Great idea. Unfor­tu­nately, that was about all the instruc­tion they were given.

Most of class, from what  heard, had no idea how to select a busi­ness, or what’s involved in fig­ur­ing out how to make it successful.

My friend and I had lunch and dis­cussed the issue. I sug­gested, know­ing the mar­ket, that his son look into devel­op­ing a “con­sum­able” business…preferably some­thing involv­ing sugar. After show­ing him a num­ber of ideas, from home­made candy, to gummy skew­ers, he went back and talked with his son.

They had a long talk about what the expenses would be for var­i­ous options, as well as the work and skillset involved for each option. Even­tu­ally they decided to make candy floss. It has a very high mar­gin, low skill set, but the equip­ment had a cost (about $80 to rent a machine).

Next the plot­ted out all their expenses on a spread­sheet (gas, rental, sugar, flavour­ing, bags, twist ties, time, etc) and pro­jected how many bags they’d have to sell to break even depend­ing on the price they charged. They also had to decide if they should pre-make some bags to sell, or only sell on demand (if they pre-made too many bags, they’d have unsold inven­tory, if they made to order, they may not be able to fill demand dur­ing the allo­cated time).

Then there was the issue of hav­ing part­ners or not. More part­ners may mean less work, but it also meant split­ting the prof­its, not to men­tion part­ners may have other ideas or may not work equally.

In the end, my friend’s son man­aged to make a profit (income minus expenses) of nearly $200 in the hour he had to sell his prod­uct (not to men­tion he still has a lot of raw mate­ri­als he can still use that have been paid for), and prob­a­bly learned a lot about busi­ness. All this thanks to his dad who took the edu­ca­tional por­tion of this project upon his shoul­ders. From what I heard of the other mem­bers of the class, they may, or may not of made money (most never fac­tored in costs when they talked about the money they made) and are prob­a­bly no bet­ter edu­cated about run­ning a busi­ness today than they were before this project.

I’m not even sure how the teacher will grade these stu­dents, from what I’ve heard the teacher has no expe­ri­ence and no basis from which to judge suc­cess. In busi­ness, it’s not about quan­tity of sales, or even qual­ity of products…winning and los­ing is scored by prof­its, plain and sim­ple. If you don’t make a profit, after all expenses includ­ing your time, then you fail. It’s a les­son that 7 out of 10 busi­nesses learn within the first three years of exis­tence, but it’s not one that teach­ers ever have to learn.

I used to attend a con­fer­ence that was held yearly at a uni­ver­sity. They had two streams at this con­fer­ence, one was the edu­ca­tional stream (where pro­fes­sors pre­sented the lat­est tech­nolo­gies and their “uses”) and the other was the busi­ness stream (where busi­nesses pre­sented how the same tech­nolo­gies were actu­ally being applied). It was inter­est­ing watch­ing the aca­d­e­mics when they attended the busi­ness ses­sions. Some were hor­ri­fied at the way busi­ness was imple­ment­ing the tech­nol­ogy, it wasn’t being done in the way they’d envisioned.

I also remem­ber see­ing busi­ness pro­fes­sors crit­i­cize suc­cess­ful, work­ing com­pa­nies for not doing things prop­erly. In other words, they weren’t oper­at­ing accord­ing to the­ory, the pro­fes­sors had never run a suc­cess­ful com­pany. I don’t know any com­pa­nies run by pro­fes­sors (I’m sure there are some, I just can’t name any). I do know a lot of busi­ness­men who teach at uni­ver­si­ties and other schools…

Les­son: While it’s a great idea to teach finan­cial edu­ca­tion, entre­pre­neurism, invest­ing, etc., you need to have it taught by some­one who has the knowl­edge and under­stand­ing. The­ory has lit­tle to do with real­ity when it comes to busi­ness. Those raised on the­ory don’t have the skills to teach, unless they’ve been in real­ity for a few years.

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