The Critical Discount Rate Mistake That Cost the Team's Valuation
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Enhanced transcript with interviewer insights
INTERVIEWER
And this one, it's, it's very unique for you as as a current student. I get that. Um, so I will because I know, Um, MBA programs focus a lot on collaborative work and teams and team structures, uh, all allow even school projects to, to be a part of this. But what I'm looking for is in a time window of 24 months, so recency bias, and if it extends beyond 24 months by a couple of months, don't worry about that. It's not a strict 24 month, but I'm looking for a tight window here, meaning a recency bias. Um, I, I'm looking for an error in judgment that you made. That didn't just impact you, but impacted people around you, whether it's, you know, you know, colleagues or people that work for you, whatever, just, just that the blast radius was not just you. Um, what was the decision or the, you know, kind of The error in judgment and what was the impact?
CANDIDATE
Yeah, uh, would you mind me to jot down a question? Yeah,
INTERVIEWER
of course.
CANDIDATE
Enroll in judgment that um Uh, so, did you mean that I need to, uh, present a, a, a recent, that within the 24, 24, past 24 months? Yes,
INTERVIEWER
please.
CANDIDATE
OK, um, I judgment. Um, Yeah, I think I would like to share a time that I I think I would like to share a time when I took a class in evaluation because I was selected student in our fast track in finance. We were having this advanced valuation course where we need to build financial model. So during this, uh, uh, yeah, during this, uh, group project that we're trying to evaluate, uh, uh, a, uh, a business in a case, in a certain case, we need to find out the discount rate, the proper discount rate. So, but this. Discount rate seeking process was very complicated because we don't have a, you know, direct. Number, and it's very hard for us to find a benchmark. So Basically, we have two choices. One is an easy route. We make an estimate based on past choices, based on past performances, and we made an estimate. The second thing is, we could, you know, dig it deep and really use some, you know, outside information. That we can pull some data, go to our school's data center to ask for TA, uh, teacher assistant help to pull some data and run some simulation. This is the second way that this is the harder way. But because my English was not that good, especially when it comes to debate. During the discussion, I couldn't, you know, make myself really clear that this Discount rate It was really important because if we chose the wrong discount rate, our whole valuation model would be, you know, Out of the ballpark. So, other teammates were so rushed that they want to finish this project quickly. They go with the 2nd, uh they go with the 1st 1. They go with the 1st 1 that use historical data of our own company and then calculated 1, calculated 1 beta so that we could, you know, figure out the discount rate and go from there. And finally, in the In the um class when the teacher finally revealed to us. He actually said that this is the critical part that he wants us to learn that in the real world, in the real world, nothing comes easily. For you. If you still have the mindset of students, yes, you would use the case data and generate the data on your own. But in the real business case, it was necessary for you to go to the data center, ask for teacher assistant help, and use the market data to simulate a more realistic one and apply it to your homework. And I was, you know, made an error judgment that this was not a big deal. This should be, you know, Either way, it's just a homework, but this homework actually comprised about 10% of our final ratings and uh I didn't Strongly, you know, hold my, uh, uh, ground to debate and, uh, discuss with them to persuade them to choose the harder way. And finally, we think goes the easy way and the teacher said, huh, this is not really What he wanted
Interviewer Insight
this is a case where the reality of being a student can be at odds with the challenges faced in a workplace. It is not the fault of the candidate, because of how the question was framed, that the candidate had to ultimately select from a lower impact situation. Candidate potentially mis-identified the Leadership Principle as Insist on High Standard.
INTERVIEWER
And so, looking back on it now, right, hindsight being 2020, do you think you had enough data at the time? To make the right decision, or do you? Do you feel that I guess, you know, do you feel like you had enough data to make the right decision and really it was the only thing getting in the way of the right decision was your English skills at the time. Or you didn't have enough data to make a persuasive argument.
CANDIDATE
Yeah, I think the, it's a little bit of mix. So, in order to persuade them, not only I need to, you know, articulate my uh uh uh uh point more clearly in English. Also, I could use, this is not an either or choice. Also, I could use some, you know, more Strong and firm data to support my opinion by consulting the teacher. If I would do it again, do it differently, I would go to seek out while they're proceeding with our project, I would definitely roll an email, reach out to our professor, and, you know, let him know that myself with this and ask for help from a, you know, seek advi, a different perspective from advi uh professor. Maybe I would get a different opinion. Or advice from our professors so that I can use it to persuade my teammates again. OK.
Interviewer Insight
provide specifics - what data?
INTERVIEWER
Um Jump over that question. OK.
Expert Assessment
Interviewer assessment - would be used in a hiring meeting
Stakes presented were quite low, but this is not a red flag as this was due in large part to the framing of the question. Candidate did not provide adequate second derivative analysis of the actions and this reduced the overall quality of the answer. From other answers in the interview the candidate has demonstrated sound judgement and sound process leading to a belief that the candidate will consistently be Right, A Lot.