Online Teaching: Promise, Pitfalls and Potential!

I am a teacher. That is how I describe myself to anyone who chooses to ask me what I do for a living. I am not a professor (sounds pedantic and pompous), definitely not an academic (how boring is that..) and don't consider myself anything more than a dilettante on almost every topic that I hold forth on. It is in pursuit of my teaching mission that I have put my regular classes online for most of the last two decades, though technology has made that sharing easier. For those of you who have read my postings before, I usually announce a few weeks ahead of every semester, the classes that I will be teaching at Stern, what each class is about and how you can access it, as I did in January with my Spring 2017 valuation and corporate finance classes. As September 2018 approaches, I was going to skip that ritual, since I will be on sabbatical next year (and if you have no idea what a sabbatical is, more on that later..) but I will be teaching, nevertheless, during the year.

Online Education

I still remember the first semester that I shared a class with an online audience was in the 1990s, when the internet was still in its infancy, we were still using dial-up modems and phones were connected to landlines. I recorded my regular classes using a VHS camcorder onto tapes, and then converted the tapes into videos of woeful quality, but with passable audio. I posted these online, but with only minimal additional material, since sharing was both time consuming and difficult to do. Needless to say, the internet has grown up and made sharing much easier, with class recordings now being made with built-in cameras in classrooms and converted to high quality videos quickly, to be watched on tablets on smart phones. Here, for instance, is my entire Spring 2017 valuation class, with links to the videos as well as almost every scrap of material that I provide for the class and even the emails I sent to the class.

I have long believed that the traditional university model not only is ripe for, but is deserving of , disruption, saddled with legacy costs and a muddled mission. That said, the attempts by online education to upend the university model have, for the most part, had only marginal success and it is in trying to answer why that I started thinking about how we teach, and learn online. In particular, online classes have proved a imperfect substitutes for regular classes due to three shortcomings:

1. No personal touch: This may be a reflection of my age, but there is a difference between being in a live  and watching a video of the same class, no matter how well it is recorded and presented. 
2. No interaction: We forget how much of the learning in a classroom comes, not from lectures, but from interaction, not just between the teacher and students but between students, often in informal and serendipitous exchanges. With online education, the interaction, if it exists, is highly formalized and there is less learning.
3. Tough to stay disciplined: When you were in college, and enrolled for an 8.30 am class, did you feel like not going to class? I certainly did, but what kept me going was the fact that my absence would be noticed, not just by the professor, but by other students in the class. In fact, it is that group pressure and class structure that keeps us focused on project deadlines and exam dates, with regular classes. With online classes, that discipline has to come from within, and it should be therefore no surprised that most people who start online classes never finish them. 

It is perhaps easiest to see the challenges and limits of online teaching by looking at what it is that makes for a good class, in person or online. In my view, the measure of good teaching is that students don't get just content (tools, techniques, models) but that they learn how to create their own content, i.e., the capacity to devise their own tools to meet their needs. In the context of a regular class, you use readings, problem sets, quizzes and exams to deliver the former (content) but the latter (learning) requires a more complex mix of classroom and informal interaction, real life projects and intellectual curiosity (and I believe that it is partly a teacher's responsibility to evoke that). The time schedule of a regular class also puts limits on how much students can procrastinate, and peer pressure, from others taking the class or working with you on assignments, serves to keep most on task. 

With this framework, the challenges of teaching online become clear. You have to find ways to keep students engaged, disciplined and interactive, and you have to do it online. While there are technical solutions to each one of these challenges (great videos for engagement, a time schedule and online exams for discipline, and discussion boards for interaction), and we have come a long way in the last few years, there is still a great deal of work to be done.  

Online Classes: My learning curve

My search for a better way of delivering what I teach online started about five years ago, with a simple first step. I decided to try to take each of my regular lectures, which go for 80 minutes, and see if I could compress it into a 10-12 minute slot and the results were both revealing and humbling. It was not that difficult to compress my classes, a testimonial to how much buffer I build into my regular classes to ramble and pontificate. (If you have been in one of my regular classes or watched one, you probably know that there is nothing I enjoy more than going off on a riff on a topic or news story and I think you need a few of these in a 80-minute class to keep your class engaged.) I also started developing short post-session quizzes with solutions that someone watching the class could take, to check on whether they were "getting" the session material. I organized and sequenced the sessions and you can click to see the online versions of my corporate finance, valuation and investment philosophy classes. 

I was under no illusions that I had unlocked the key to online learning with these classes, and these classes had significant limitations. First, packing material densely into 10-12 minute chunks can make watching even these short sessions taxing. Second, the videos that I made (with the help of a friend who was a camera man) were lacking in bells and whistles, basic talking-head videos with slides in the background. Third, there is no personal touch or interaction, since the videos are recorded. Finally, given the number of people in each of these classes, there was no way for me to give and grade exams, look over valuations or corporate financial analysis (a key ingredients of my regular classes) or provide certification that someone had taken the class.

Valuation Certificate Class

Just over a year ago, the Stern School of Business, which is where I teach, asked me whether I would be willing to teach an online certificate class. My initial response was to say no for two reasons. First, universities always seem to operate at deficits, no matter how much revenue they collect from tuition, and I knew that Stern would extract its pound of flesh from those who took the certificate. Second, I was concerned that if I did do a certificate class, and it became a money generator, that I would be asked to remove my free online classes. Stern must have wanted to do this certificate really badly since they offered to leave my online material untouched, if I agreed to work on the certificate course. It was this assurance, in conjunction with the opportunity to have videos shot in a studio, a platform that would allow me to offer exams and quizzes and discussion boards that finally led me to yes. 

So, what makes the valuation certificate class different from the free online version? It is certainly not the content, since everything I teach in the certificate class is available on my website in multiple forms, but here are a few of the primary differences:

1. Studio-shot videos: A studio, with professionals manning cameras, sound and lights, does allow for much better videos. With the help of a talented group that knows a lot more about editing and animation than I ever will, the final versions of the online classes are better than my online videos. There are, in all, 28 video sessions, with two sessions each week, over a 14 week time period. 
2. Supporting material: In addition to the post class tests and the supporting slides, I have links to papers, spreadsheets, data, YouTube videos and blog posts that go with each session. While I am a realist and know that much of this additional material will go untouched, having it accessible will make it easier for you to use it, if you feel the urge.
3. Live Webex sessions: Every two weeks, through the semester, we will have a live webex session, where you (if you are enrolled in the class) can ask questions, not just about material covered in the previous week's sessions but news stories and happenings. I know it is not much, but it is a step in the right direction.
4. Announcements and outreach: I contact the students in my regular classes about once a day, but I will spare you that level of harassment. You will hear from me a couple of times every week, checking in on how you are doing and keeping you updated on the course. 
5. Exams/Quizzes: There will be three quizzes and a final exam for the class. While they will  be scheduled on specific dates, you can take them any time during a 24-hour time period and if you miss a quiz, the points will be moved to the remaining quizzes. So, if life gets in the way and you are unable to take a quiz, it is not the end of the world.
6. Valuation Project: Each person in the class can pick any company he or she want to value and value it, over the course of the class. Midway through the semester, I will offer feedback, if you want,  to allow you to tweak your valuation, and at the end of the semester, it will become a significant part of your overall grade.
7. Certificate: After the final exam and valuation are graded, you will receive a certificate for the class, if you complete the requirements. If you do exceptionally well (and you will have to leave that judgment to me), your certificate will come "with honors".

There were 66 people who signed up for the pilot version of the class, which started in January 2017 and 39 completed the class in May 2017. I learned as much from my students as I hope they learned from me, and here are a few lessons. First, I discovered that the discussion boards were effective at creative interactive discussions, among the students, if I did my job and organized the boards by topic. Second, in perhaps the most rewarding part of the class, a few students, who found the material both interesting and easy to grasp, took on the role of teachers helping others deal with mechanical and conceptual questions. Since the most effective way to learn something is to explain it to someone who does not quite "get" it, I restrained myself from jumping into the discussion boards, unless absolutely necessary. Third, I was impressed with both the work that was put into and the quality of the valuations that were turned in by those who finished the class. Of the 39 who were certified at the end of the class, about a third did well enough to get "with honors" attached to the certificate. I would have been proud with any of these students in my regular classes.

This fall, Stern will be offering the valuation certificate class to a bigger audience, with a class of several hundred. The good news is that the class will be tweaked to reflect the lessons learnt from the pilot class. I will continue to do what I did for the pilot, with my webex sessions, and provide feedback and grades not only for your exams but on the companies that you choose to value. The bad news is that Stern will charge "university level" prices for the class and I will not try to tell you that it is "worth it", since that depends on your circumstances. It is entirely possible that you will decide that the price charged is too much for a certificate, that you cannot afford it, or that you are more interested in the learning than in the certification, and if so, I hope that you give the free online version of the class a shot. If you are interested in enrolling in the class, the webpage where you can start the process is here. Incidentally, a pilot version of my corporate finance class, also offered as a certificate class, will be run in Spring 2018, and if you are interested, here is that link.

My Sabbatical

I mentioned, at the start of this post, that I would be on sabbatical, and at the risk of evoking envy, I will tell you what that involves. I am taking the 2017-18 academic year (September 2017- September 2018) off from my regular teaching, as I am allowed to do every seventh year. It is an entitlement that people in most other professions don't have and I recognize how incredibly lucky I am to be able to take a paid break from work. I do have a few odds and ends to take care off during the year, including teaching the certificate classes that I just listed and writing the third edition of The Dark Side of Valuation, but I plan to spend much of the year idling my time away, thinking about nothing in particular. That may sound wasteful, but I have discovered that my mind is most productive, when I am not trying too hard to be insightful. At least, that's my hope and if it does happen, that would be great. I  But then again, if I don't have a single creative thought all year, that too was meant to be! 

YouTube Video

My Free Online Classes

1. Corporate Finance (YouTube Playlist version)
2. Valuation (YouTube Playlist version)
3. Investment Philosophies (YouTube Playlist version) (New version will be out at the start of 2018)

Stern Certificate Classes

1. Valuation Certificate (Fall 2017)
2. Corporate Finance Certificate Pilot (Spring 2018)

Read More

Almost time for class: My Line Up for the Spring Semester!

If you have been reading my blog for awhile, you should be familiar with the routine at the start of every semester. If I am teaching that semester, I list the classes that I will be teaching, describe them briefly and offer ways in which you can follow the classes online, if you are so inclined. This semester is shaping up to be a busy one, with an MBA Corporate Finance class leading the list, followed by an undergraduate Valuation class and closing with a new online valuation certificate class that will be offered by the Stern School of Business.

Corporate Finance

The most important class that I teach is corporate finance, not valuation. Put simply, this class (or at least the version that I subscribe to) is about the first financial principles that govern how to run a business, small or large, private or public and in any market. That sounds like an ambitious agenda but it makes for a fascinating class, where we break down everything that a business does into three categories: investing, financing and dividend decisions. At the risk of summarizing the entire class into a single picture, these are the questions that corporate finance tries to answer:

For a business to be successful, it has to find a singular objective and then make investment, financing and dividend decisions that advance that objective. We start the class by debating what that objective should be and then move into the investment principle, first looking at how best to estimate the hurdle rates (the threshold for a good investment) in a business and then then at measuring the returns on prospective or actual investments. We follow up by discussing whether there is a right mix of debt and equity to use in funding a business as well as the right type of financing (long term or short term, floating or fixed, straight or convertible, currency) for that business. We finish with a discussion of how much cash should be returned to investors in a business in the form of dividends or buybacks, why a business may prefer one form of cash return over another and how much cash (balance) is too much cash. We end the class by bringing all of these principles together in the value of a business, setting up for my next class (Valuation).

The first session will be on January 30, 2017, and we will meet every Monday and Wednesday from 10.30-12 until May 8. While you have to be enrolled in the class as a Stern MBA to attend the class physically, you are welcome to follow the class online in one of three forums. In each of these forums, I will post recorded webcasts of the lectures late on Mondays and Wednesdays, with links lecture notes and other material. I will also post the quizzes and exams that I will be giving in class online, with grading templates that you can use to grade yourself.

1. My website: The primary platform for my class is on the webpage for the class on my website. A one-page listing of the webcasts and other materials can be found at this link. You can watch the streaming videos or download them and also the slides and other links for each class. You can indulge your voyeuristic instincts by reading the emails I send to the class at this link.
2. Apple iTunes U: If you prefer a more polished and device-friendly platform and you own an Apple device (iPhone or iPad), you should download the iTunes U app from the store and once you have it installed, try entering the code " EXC-JJS-XEA", and the class should show up on your shelf. (If it does not, try this link instead.) As I post the lectures and other material on the site, you should get a notification (if you want) about the posting. If you have an Android device, you have to download the Tunesviewer app to be able to access iTunes U classes. 
3. YouTube: If you want a more minimalist set up, with limited demands on broadband, you can use YouTube and check out the playlist for the class. Again, as classes get posted, you should see them show on the playlist.

Valuation 

This is a class that I teach almost every semester to the MBAs and this semester, I will be teaching it to undergraduates. That said, I teach exactly the same class to both and this class follows the same structure as my MBA classes. It is a class about attaching a number to an asset or business and we will look at both intrinsic valuation and pricing of both public and private firms. 

Since I provided a much longer introduction when I wrote about my Fall 2016 class, you can read it full at this link. The first session for this class will be January 23, and as with the corporate finance class, you can follow the class online, in one of three ways:

1. My website: The primary platform for my class is on the webpage for the class on my website. A one-page listing of the webcasts and other materials can be found at this link. 
2. Apple iTunes U: If you download the iTunes U app from the store to your Apple device, you can enter the code "FHS-KWW-FPK" for the class. If you prefer a direct link, try this one.
3. YouTube: You can use YouTube and check out the playlist for the class. As classes get posted, you should see them show on the playlist.

Valuation Certificate

These postings, listing upcoming classes and offering them online, have been a ritual of mine for more than 20 years and one common query I get is whether I can offer certification. My answer, hitherto, has been no, not only because I have no way of testing or grading what you do or providing feedback. This semester, the Stern School of Business has decided to offer an online version of my class as Valuation certification class, with the following features:

1. Lectures: The class is built around twenty eight lecture sessions, each of which is about 12-20 minutes long. These sessions were recorded in a studio and should much more professional than the online videos that I make and more watchable than my full-length classes.
2. Timing: The class is scheduled to begin on January 30 and go through mid-May, requiring that you watch about two sessions a week. Each session will come with self-test assessment, practice problems, additional readings and other material to supplement learnings.
3. Synchronous sessions: Every two weeks, I will use WebEx for a live Q&A session, where you can ask questions about the four sessions from the prior two weeks.
4. Discussion Boards: If you are enrolled in the class, you will be able to participate in discussion boards organized by valuation topics, posting comments, questions or other links. A teaching assistant will monitor the boards and add to the discussion, if needed.
5. Quizzes and Exams: Just as in my regular classes, there will quizzes and exams. You will be able to take these exams online and I will grade them. 
6. Valuation Project: As in my regular class, each person in the certificate program will be both valuing and pricing a company and I will provide mid-semester feedback on the valuation and a final grade assessment at the end of the semester.

There is bad news and good news with this new offering. The first piece of bad news is that it is not free and you have to decide, for yourself, whether the price charged ($425) is worth the experience (and the certificate). The second is that this is Stern's first try at this type of offering; it will have a few hiccups and the number of students will be capped at fifty. If you are interested, you can find out more about the certificate program at this link and even if you are unable to participate or get into the class this semester, it will be offered again to a larger audience, later in the year. The good news, if you decide to be part of the program is that I will treat you like I treat my regular in-class students. I am not sure that even this is good news, since you will hear from me about once every day and you will be sick and tired of me by May 12.

YouTube Video: Valuation Certificate Class Preview


Links

1. Corporate Finance (MBA):  (a) My website (b) Apple iTunes U (c) YouTube Playlist
2. Valuation (Undergraduate):  (a) My website (b) Apple iTunes U (c) YouTube Playlist
3. Stern Valuation Certificate: Stern entry webpage

Read More

The School Bell Rings! It's Time for Class!

As most teachers do, I mark time in academic rather than in calendar years and as September dawns, it is New Year's eve for me and a new class is set to begin. In just under a week, on September 7, 2016, I will walk into a classroom and face up to a roomful of students, not quite ready for summer to end, and start teaching, as I have every year since 1984. This semester, I will be back to teaching Valuation to MBAs at Stern, and as I have in semesters past, I invite you to join me on this journey, as we look at the mix of art, science and magic that makes valuation such a fascinating discipline.

Class Philosophy

I have always believe that to teach a class well, you have to start with a story and that the class is an extended serialization of the story. I also believe that to teach well, you have to, at least over time, make that story your own and mold the class to reflect it. In fact, the valuation class that I will be teaching this Fall has its seeds in the very first valuation class that I taught in 1986, but the differences reflect not only how much the world has changed since then, but also how my own thinking on valuation has evolved. The class remains a work in progress, where each time I teach it, I learn something new as well as recognize how much I have left to learn.

I could give you an extended essay on what this class is about, but I would repeating what I said at the start of the Fall 2015 semester in this post. In short, I said this class is not an extended accounting class (where you forecast entire financial statements for extended periods), or a modeling class (where you become an Excel Ninja) or a theory class (since there is so little of it in  valuation to begin with). Instead, here are the broad themes that underlie this class, all captured in the picture below:

If you find this picture a little daunting, I did do a Google talk that encapsulated these themes into about an hour-long session. 

In particular, this class is less about the tools and techniques of valuation and more about developing a foundation that you can use to build your own investment philosophy. I know that faith is a word that is seldom used and often viewed with suspicion by many in the valuation community, but it is at the heart of this class, both in terms of how you build up faith in your own capacity to value assets and businesses and how you hold on to that faith when the market price moves away from your value.  Since I still struggle on both of these fronts, I cannot give you a template for success but I will be open about my own insecurities both about my own valuations and about markets.

Class Structure

Since my objective in the class is that by the end of it, you should be able to attach a number to just about any asset, I will roam the spectrum. I will start with the basics of intrinsic value, partly because it is where I am most comfortable and partly because it provides me with ways of dealing with other approach. The mechanics of estimating discount rates, cash flows, growth and terminal value are not just simple, but easily mechanized. It is the specifics that we will wrestle with in this class:

• On risk free rates, usually the least troublesome and more easily obtained input in valuation, we will talk about why risk free rates vary across currencies, what to do about currencies that have negative risk free rates and whether normalizing risk free rates (as many practitioners have taken to doing) is a good idea or a bad one.
• On risk premiums and discount rates, we will wrestle with questions of what risks should and should not be incorporated into discount rates and the different methods of bringing them in. In the process, we will examine how best to estimate equity risk premiums and default spreads, and why even if you don't like betas or portfolio theory, you should should still be able to estimate discount rates and do intrinsic valuation.  
• On cash flows, we will focus on why accounting inconsistencies (on dealing with R&D, leases and other items) can lead to misstated earnings and how to fix those inconsistencies, examine what should and should not be included in reinvestment (capital expenditures and working capital) and what to do about stock based compensation.
• On growth, we will start with the easy cases (where historical earnings growth is a good predictor of future growth) but quickly move on to more difficult cases (of companies in transition) and to what some view as impossible cases (like estimating growth in a start-up)>
• On terminal value, the big number in every DCF,  that can very quickly hijack otherwise well-done valuations, we will develop simple rules for keeping the number in check and put to sleep many myths surrounding it.

We will apply intrinsic valuation to value companies across the life cycle, in different sectors and across different markets. We will value small and large companies, private and public, developed and emerging and discuss how to value movie franchises (like Star Wars), phenomena (Pokemon Go) and sports teams. We will talk about why start ups can and should be valued in the face of daunting uncertainty and how probabilistic tools (simulations and decision trees) can help.

About half way through the class, we will turn our attention to pricing assets/businesses, where rather than build up to a value from a company's fundamentals, we price it, based on how the market is pricing similar companies. Put simply, we will shine a light on the practice of using pricing multiples (PE, EV/EBITDA, EV/Sales) and comparable companies not with the intent of improving how it is done. We will also talk about why, even when you are careful and take care of the details, your pricing of a company can be very different form its value.

In the last segment of the class, we will stretch our valuation muscles by talking about how option pricing models can sometime be used to estimate the additional value in a business, such as undeveloped reserves for a natural resource company or expansion potential for a young growth firm, and sometimes to value equity in deeply distressed companies. We will close by looking at acquisition valuation, where good sense seems to be in short supply, and how understanding value can be critical to corporate managers.

Want to sit in?

If you are intrigued or interested, you are welcome to sit in on the class (online and unofficially). While my immediate attention will be reserved for the Stern MBAs who will be registered in this class, you will have access to all of the resources that they do, starting with the lectures but also extending to lecture notes, quizzes/exams and even emails. The bad news is that I will be unable to grade your work or give you a certificate of completion. The good news is that the price is right. There are three ways in which you can join the class:

1. My website: The most comprehensive and most updated center of all things related to this class at this link. You will find the webcasts, lecture notes, past exams, reading and even the emails I send on this class here.
2. iTunes U: Just as I am not an Excel Ninja, my capacity to deal with html is primitive and my website's design reflects that lack of sophistication. If you prefer more polish, you can try the iTunes U app in the Apple app store. It is a free app that you can download and install on your Apple device. Once you have it installed, click on the add course and enter the enroll code FER-SFJ-AKA. Like magic, the class should pop up on your shelf. If you don't have an Apple device, you can get to the course on your computer using this link. If you have an Android device, you can use a workaround by downloading this app first. Like all things Apple, the set up is amazing and easy to work with.
3. YouTube: The problem with the first two choices is that they presuppose that you don't have a broadband constraint, perhaps a phone internet connection or worse. My suggestion is that you use the YouTube playlist that I have created for this class at this link. The nice thing about YouTube is that it adjusts the image quality to your connection speed. So, it should work in almost any setting.

Since I have made this offer for almost 20 years now, predating the MOOC boom and bust, I can offer some suggestions. First, it is a lot of work to watch two 80-minute lectures a week, try your hand out at working through actual valuations and finish the class in fifteen weeks, if you have other things going on in your life (and who does not?). My suggestion is that you cut yourself some slack and take more time, since the materials will stay up for at least a year after the class ends. Second, watching a lecture online for almost an hour and a half can be painful and for those of you who find the pain unbearable, I do have an alternative. A couple of years ago, I created an online version of this class, shrinking each 80-minute session into 10-15 minute sessions and this class is also available on my website at this link, on iTunes U at this link and on YouTube. Third, whichever version of the class you take will stick more if you pick a company and value it and even more, if you keep doing it. 

The End Game

I would love to tell you that I live a life of serenity and that I am sharing for noble reasons, but that would not be true. I am sharing my class for the most selfish of all reasons. I am a performer (and every teacher is) and what performer does not wish for a bigger audience? If I am going to prepare and deliver a class, would I not rather have thirty thousand people watch the class than three hundred. If you get something of value from this class, and you feel the urge to repay me, I will make the same suggestion that I did last year. Learning is one of those rare resources that is never diminished by sharing. So, please pass it on to someone else! See you in class!

Links

1. Entry Page for the Valuation Spring 2016 (on my website)
2. Webpage for the Valuation Spring 2016 class webcasts (on my website)
3. iTunes U for the Valuation Spring 2016 class (Enroll code on device: FER-SFJ-AKA)
4. YouTube Playlist for the Valuation Spring 2016 class
5. Webpage for Valuation Online class (short sessions)
6. iTunes U for the Valuation Online class (short sessions)
7. YouTube for the Valuation Online class (short sessions)

Read More