The 3 business school concepts everyone should know

There is a lot of utterly useless content taught in business school. Business is a difficult subject to study — especially in recent years — because of how fast it changes, and because of the value of originality.

I have always chosen to work part time in business while studying for my BComm, having held positions in a private equity firm and a software startup. I’ve got some big ideas about where business should go, but to achieve the monumental, the foundation must be solid.

That being said, there are some lessons that are taught in the business classroom that can be useful to anyone, in any profession, at any stage of their life. They are:

  1. Opportunity Cost
  2. The Sigmoid (S) Curve
  3. The 80/20 Rule (Pareto Principle)

When you choose to take on a project, you necessarily forego other projects. The profit of the projects you forego is your opportunity cost. If you invest $20,000 into your friend’s business, you are foregoing the opportunity of investing in stocks, or making a down payment on a house. Every project carries risk, but opportunity cost teaches us to evaluate projects based on all available alternatives.

In my opinion, the most relevant application for you and I is the opportunity cost of time. When you spend 3 hours bingeing a new show on Netflix, your opportunity cost is the lifetime value of spending that time watching Ted talks, or building relationships with friends, or even working towards your dreams.

Nothing lasts forever. The S curve is a way to visualize the life cycle of projects within the bigger picture of the life cycle of your business. Each project starts out as an investment, moves into growth and profit, then tapers off and eventually loses all utility. Before your project gets to the last stage, it is critical that you start looking forward at what’s next.

This concept applies to any and everything you do. Whether it is consulting gigs, consumer products, or social media marketing, everything eventually starts to taper off. For example, this video I made about the content of this article will create value for people for a few days, but by the time they get bored, I will have a new video with a new subject

Here is my video on this topic

Finally, the Pareto Principle. Essentially, this rule states that 80% of the effects come from 20% of the causes. In the business context it translates to 80% of the profits come from 20% of your customers.

Most people see that and think that means you should focus all of your energy on those 20%, but I don’t see it that way. I see the necessity of attracting and keeping the 100%, growing the foundation of the 100% so that in turn, the 20% grows. The Pareto Principle is a guideline, not a law, and there is nothing stopping you or your business from having 30% or 10% of your customers generate most of your revenue.

So those three concepts — Opportunity Cost, Sigmoid Curve, and Pareto Principle — are the most essential lessons I have learned in my three years studying business. Let me know if there is something I should add!

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