Author Archives: Carl Incognito

All Around the World, We can Make Time…

… rompin’ and stompin’ cuz I’m in my prime.

I’ve come up with a travel bucket list, inspired by a conversation with a good friend (you know who you are!). The list includes places/events I would like to visit in the next 7-8 years, and when I hope to travel to each place.

  1. London (+Europe?) 2012 – maybe swing by a couple of other European destinations for 2 weeks or so before heading to London to catch a part of the Olympic action.
  2. Korea/Japan/Thailand/Vietnam 2013 – This might be a bit too much to see in a few weeks, but could be doable.
  3. Rio/Bolivia 2014 – Salar de Uyuni in Bolivia after World Cup action, cross two things off the list in one trip. If there’s time, maybe some exploratory trips in the Andes or the Grand Sabana in Venezuela.
  4. North America – mini trips over the years. Need to see New York, Chicago, Vancouver and Miami. Other potential places to visit include Boston, Washington D.C., L.A., San Fran, and Seattle. I know I’ll be visiting family in Portland at some point, so I could probably arrange some of these trips around those visits.
  5. India – visiting family/friends every so often.
  6. Africa – shouldn’t really be mentioned in the same breath as others because it wouldn’t be a vacation. I want to visit on a volunteer trip, perhaps even for an extended secondment/service with a volunteer organization,  something I’ve wanted to do for years, but always had things preventing me from pursuing.

I should print this and post it above my desk to make sure it happens now. Cuz life is beautiful around the world.


You Oughta Know…

… which GMAT resources to use. So here is my review of the various resources I used and the benefits/drawbacks of each.

Princeton Review: Cracking the GMAT 2011 Edition

My Experience:

I finished reading all the material in this book in about 6 hours, because for the most part, there wasn’t too much of great substance in it (including time to do warm up test, but not including time to do practice questions). The book had some useful insights into how the test was structured, and since it was my introduction to the format of the GMAT and how it was marked, I gained a lot from this information. After the introductory material and the diagnostic test, specific strategies and tips are provided on how to approach each section. I found most of these strategies generic, and an articulation of common sense to some degree. If you are familiar with multiple choice exams, and comfortable with eliminating choices and making educated guesses, there is not much in the way of unique insight in these strategies.

Two specific sections I found useful in the book were the suggested approach to allocating time, and the approach to data sufficiency questions. I used the timing strategies suggested in all my practice exams, and also my actual attempt, and they seemed to work well. The data sufficiency approach is really common sense, but since it was the first time I had really seen these types of questions I found the description of the strategies useful. The Princeton Review also introduces what they term the “Joe Bloggs” principle; Joe Bloggs represents the average test-taker who would achieve a 550 score on the GMAT, and by being aware of the tricks GMAC uses in trying to confuse the average test-taker, writers can avoid some of the common mistakes test-takers make and improve their scores. None of these strategies are revolutionary, and might not really be different from anything other test prep companies offer, but they serve as decent introductory material to a first-time writer.

I only attempted the most difficult category of questions provided in the book, since I was fairly comfortable with the rest. These questions were at least one or two degrees of difficulty higher than the GMAT, and served as good practice. They also provided good exposure to the different types of questions to expect. The one downside was that the phrasing on the questions did not seem to mimic that of the questions on the GMAT, and there was definitely a different feel to them.

Along with the book, I received access to 4 CATs. These CATs were, in my opinion, fairly poor representations of what to expect. Like the practice questions, the feel and phrasing of the questions was very different from the GMAT. Moreover, the algorithm used did not seem too similar to that actual GMAT – there were many times where I felt like I did fairly well (relative to other CATs) and ended up scoring in the low 700s. This is bad given that I felt worse on other CATs and GMATPrep CATs, but ended up scoring higher on those. For most other CATs, there is some sort of consensus on whether they underestimate or overestimate scores, but I couldn’t seem to find any such consensus for the Princeton CATs. My scores were underestimated on average by around 70 points. Overall I felt that the Princeton CATs were not great representations of what to expect on the GMAT, in predicted scores and in overall feel.


Strengths -tough practice questions in the book, good introductory material/strategies, good time-management strategies

Weaknesses – CATs do not represent real GMAT well (feel/phrasing of questions), predictability of scores is not great, not too many insightful/unique strategies

Overall: 3/5  (grain of salt: I have no experience with other prep companies’ guide books and material intended to rival this offering, so nothing to really compare to)


The Official Guide for GMAT Review, 12th Edition

My Experience:

Started off with this book, while waiting for the Princeton Review Cracking the GMAT to arrive in the mail. I did the diagnostic test to get a sense of where I stood, and it was a pretty good indicator. My quant scores were lower than my verbal, but still fairly good. In the actual test, I scored a 49 on the quant (86th percentile) and a 46 on the verbal (99th percentile).

The Official Guide says that in the estimate of the GMAC, no other resource should be necessary to prepare for the test. For the most part, people do not see significant improvement in scores across multiple events, and the GMAC believes that by working through all the sample questions in the book and familiarizing oneself with all the material, one can achieve the level of proficiency required to meet their potential. I only did a few questions from the guide, as I was more focused on doing practice tests and the material from the test prep companies, but the questions in the guide were definitely the best reflection of what to expect on the GMAT. So there is some merit to the argument that one can do well using no other materials, but I would err on the side of caution and use multiple resources when possible.


Strenghts – Material is very good, diagnostic test is a good representation of skills to start

Weaknesses – content is limited if you’re looking for lots of practice

Overall: 4/5

Manhattan GMAT Strategy Guides, 4th Edition

My Experience:

I used these guides mostly to augment my preparation in areas where I felt I was weak. The only two guides I really used were the sentence correction and the word translations guides. The latter was a good source for practice in combinatorics, probability and statistics, areas in which I was not the most comfortable. The guides were very thorough, and provided in-depth explanations of various rules. They also used pretty good examples to illustrate concepts. Each chapter in each guide had questions at the end, to practice the concepts just learned. These questions were generally pretty good and helped impress the concepts into memory. Everything I have read about these guides says that they are very useful once areas of weaknesses are identified because they really drill down into the fundamentals of the concepts and help build knowledge and understanding from the ground up, rather than assuming an understanding of these fundamentals.

I also did an MGMAT CAT, and found that it was pretty good overall. The feel was not too different from the actual GMAT. The quant questions were more difficult than the actual GMAT, but this provided a good source of practice. If I were to go back and do it all over again, I’d probably purchase access to the 6 MGMAT CATs instead of the 4 Princeton Review CATs.


Strengths – in-depth explanations of fundamentals, good practice problems, broken down by types of questions, comprehensive, CATs are good representations of GMAT

Weaknesses – best used as a way to shore up weaknesses, might not be the greatest tool if used by itself, math questions on CATs are more difficult than actual GMAT

Overall: 4/5

GMATPrep Software

My Experience:

Took the GMAT Prep Test 1 after some basic prep, and then near the end took the second test and re-took the first test. On my re-take, I didn’t find too many repeats (maybe 5-6), and since it had been almost 2 months, I only barely remembered anything about the repeats I saw. These are definitely the best predictors of performance, and most closely reflective of the actual GMAT. The difficulty level, phrasing, feel, and expectations I had coming out the practice tests were all very similar to my experience with the actual GMAT. I think this is hands down the best resource to use, but unfortunately there are only 2 practice tests so one has to be careful with how they are used.


Strengths – best predictor of scores, most similar feel to actual GMAT

Weaknesses – only 2 practice tests, might need to re-take to get more use out of them

Overall: 5/5


My recommendation would be to use a good mix of all the resources above. One introductory guide book like the Princeton Review, the Official Guide, and the GMAT Prep software should be used for sure, and if needed, the MGMAT strategy guides can be a good way to sharpen areas of weakness. I would suggest purchasing the 6 MGMAT CATs – along with the two GMAT Prep tests, this should be more than enough to evaluate skills accurately and also provide practice. I hope this review helped provide some insight into the strengths and weaknesses of the resources above, and that it can help shape some of your study plans!

Here Comes the Sun

This is where I want to be right now...

It’s over. I made it. Step 1 complete. Mission: accomplished. Everything went better than expected. I took it one step at a time. I gave it 110%. Game, set, match. It is what it is. I know how Dwyane Wade felt when he hit that dagger 3 to seal Game 2 with 7 minutes left…

OK, I’ll stop with the lameness. Yesterday was d-day – I finally wrote the official GMAT. This is going to be a loooong post detailing my experience on test day, and my thoughts on preparing for the GMAT overall, so strap yourself in for the painful ride.


Saturday morning, I woke up around 7 a.m. with a really dry mouth and the beginnings of a bad headache – the telltale signs of a hangover-in-waiting. After cursing myself for over-doing it on Friday night, I grabbed some painkillers for the headache, chugged down a litre of water, and went back to sleep. Thankfully, when I woke up around 9, the headache was gone and I was just feeling tired.

My test was at noon, so I woke up at 9 a.m. with the intention of getting some last-minute prep in. I grabbed a coffee, and spent about an hour doing some word problems from the Manhattan GMAT strategy guides. It wasn’t anything too stressful and I just wanted to get my brain working and not feeling exhausted. By around 10 a.m., I was done with the prep work, and I felt comfortable. My headache was gone, and I was alert again. I grabbed a pretty big meal so that I could last past 4 p.m. and then watched some TV to get myself relaxed. Then, after a quick shower (read: 20 minutes soaking in boiling hot water), I grabbed some water and a bag of pretzels and headed out the door.

For the first time in as long as I can remember, I was driving at or below the speed limit. It was pouring cats and dogs outside, and I didn’t want to risk getting into any sort of accident. I hugged the right shoulder and made a few people go around me, and I got to the test centre at around 11:45 a.m. For those who are unfamiliar with the testing process, there is an extensive set of procedures you go through when you enter and sign in. After your ID is verified, you are asked to provide biometric information for documentation purposes. This consists of a scan of your right and left palms. They also take a mugshot for their records, and make sure you empty out your pockets into a locker provided. The testing room is a fairly large space, with cubicles and terminals along the perimeter. To enter or exit the room, you have to be escorted by one of the invigilators. Every terminal is under video surveillance, and outside the room, one of the invigilators sits and monitors the cameras. Before you enter, and when you exit the room, you are required to scan your palm on a reader which matches it with the information collected upon registration. They take every precaution to prevent any sort of cheating on these tests, and while the procedures are cumbersome, the overall experience is not really unpleasant.

After going through all the sign-in procedures, I was escorted to my terminal and provided with the standard erasable booklet and markers for my rough work. I quickly clicked through all the disclaimers and tutorial screens, and was finally ready to begin the test.

The AWA section was good, but not great. The argument essay was fairly straightforward, and I rattled off reasons why the argument was weak and how the author could strengthen them. The topic for the analysis of an issue essay was something I was comfortable with, so I again rattled off some points and provided my thoughts on the issue. Overall, I thought I wrote pretty well. My only apprehension is that I wrote too much again, in an attempt to develop my points thoroughly. Because of this, I think I sacrificed some clarity in my points and this might come back to bite me.

Once the essays were done, I took my 8 minute break, and went out and stretched a bit. The quant section was not as easy as I was used to seeing. There were far too many questions with absolute value inequalities and this slowed me down. I was behind pace for almost the entire second half of the section, and I had less than 1.5 minutes per question. Having to rush so many of these was not fun, especially since the difficulty level was consistently high (which I suppose is a good indication that I was doing all right). I had less than 45 seconds to finish the last question and wasn’t able to get an answer in on time. So once I was done, I didn’t feel very good. I knew I hadn’t bombed it, but I felt like my goal of hitting a 740 overall was now in doubt. I took a few deep breaths, and told myself that I would just have to try to make it up on the verbal section. I decided to skip the break because I was pretty focussed, and I thought I would be fine going right through to the end.

When I first registered to write the GMAT, my brother told me that I would have to focus on the verbal section a lot more than I would the quant section because the math should come easily to me. My friends echoed the same thoughts, and it made sense given that my undergraduate degree is in mathematics. But looking back, my performance on the verbal section has actually been consistently as strong as my quant performance, on a percentile basis. I always finished the verbal section with  more than 10 minutes to spare, and most of the time it was careless errors that got me in trouble. So before I started the verbal section, I told myself that I could still reach my goal as long as I took my time and read every question thoroughly. I would have enough time, and although my stamina was running out and I was starting to feel tired again, I had to just work through it. I got started, and found myself breezing through again. Most of the questions were not as challenging as some I had seen in my practice tests, and I managed to still finish with about 10 minutes to spare. The key difference was that I didn’t feel like I had rushed. I genuinely took my time on any questions I was not 100% sure on. So coming out of the verbal section I felt a little more confident overall.

After the 4 minutes of post-game Q&A (GMAC collects demographic information etc.), I was finally on the confirmation screen. I confirmed that I wanted this attempt and the scores to count, and felt a rush of adrenaline in the split-seconds it took for my score to pop up.

Quantitative: 49 (86th percentile)
Verbal:           46 (99th percentile)
Total:             770 (99th percentile)

When I saw those unofficial scores, I felt satisfied. Not elated, and not ecstatic, just satisfied. I think that was my competitive instinct kicking in. See, when I first started, I set a goal of 740 based on median scores to enter the top schools. Since then, I have talked to a few people, and knowing how they performed raised the goal in my mind. I knew that if I got anything below a 760, I would be dissatisfied. I would have still hit my original goal, but that would not have been enough. I think this competitive instinct made me feel like a 770 was around what I was expecting, and not a score to really be happy with. That, combined with the knowledge that I didn’t have my best showing on the quant section, curbed my elation. This morning, after letting it sink in, I am actually glad. Regardless of how well I could have done, I do have an excellent score and managed to beat my own high expectations.

What I Learned While Preparing for the GMAT

I learned that the GMAT is a test like any other. It is not an IQ test. Like every other exam students write, with the right level of preparation, anybody can do very well on the GMAT. The key is to get a proper understanding of where you stand before you begin preparing, and then create the best study plan for YOU. Although sites like Beat the GMAT and GMAT Club are very useful to get study tips and ideas, the only way preparation will be effective is if you are able to evaluate yourself effectively at every step. Knowing how much work  you have to put in at the beginning, and measuring progress after each practice test is incredibly important to actually achieving your target score. Rather than following an arbitrary study plan you see on any of those sites, the best approach is to learn about all the resources available (strengths, weaknesses, best practice tests, difficulty level etc.) and then create your own study plan. After every practice test, evaluate whether you have improved in the areas you wanted to improve, and revise your study plan if you need to. There is no benefit to simply outlining an x-hours a day approach where you tackle one study guide after another. That kind of approach is just throwing everything at the wall and seeing what sticks. So the key to GMAT prep is not which resources you use or how much you study, but whether you use the right resources and spend the right amount of time preparing based on YOUR needs.

I put in about 50-60 hours of studying. I was lucky because for most people the hardest part is remembering all the math concepts and re-learning geometry and algebra, and I had no issues with these topics. My prep was essentially just getting used to the 4 hour length, and building the stamina required to stay focussed for that long. I did 8-10 practice tests, despite constantly reading that too many practice tests can be a bad thing, because my needs were not to learn the material, but to get used to the environment of writing the test.

So before any of you commit to writing the GMAT, or any other similar exam for that matter, first understand what is involved and how much preparation you will have to do. Then, create a realistic study plan with extra time built in so that if you find yourself struggling to prep, you have a few days to get back on track. Book your test as soon as you have this plan, not before or after, because that will keep you motivated while giving you enough time to prepare as you need.

Other Tips

I’m not going to leave detailed tips on how to approach each section, as there are tons of resources online that probably articulate this better than I can. I will talk a bit about general approach though. The best thing you can do, is have fun while preparing. When I went through the consulting case interview process, I was repeatedly told that if I was not enjoying doing practice cases, I should re-consider whether consulting was the right choice for me. The cases are reflective of the entire profession, albeit on a very basic level, and I genuinely liked doing prep cases with friends. Similarly, the GMAT is reflective of what being a higher-level professional in business is all about.

You might never have to do a set of geometry problems as an executive, but the principles the GMAT tests are essential to succeeding in business school and beyond. For obvious reasons, reading and writing skills are relevant, as are critical reasoning skills. The quant section just tests your general comfort level with basic mathematics to judge whether you will be able to perform and evaluate quantitative analysis in the future. Data sufficiency questions test quant skills, as well as your ability to reason whether you have enough information to reach a conclusion – it’s a test of critical reasoning as well as math skills. Given all of that, wouldn’t it seem intuitive that if you are to enjoy the lines of work for which an MBA is necessary, then you should enjoy using the skills required in that line of work? And if you enjoy using these skills, on some level, you should be able to derive some pleasure out of tackling GMAT questions. So treat them as an exercise in sharpening your skills, skills you should enjoy applying, rather than an obstacle you have to overcome.

When preparing, I repeatedly read things like “no sane person would find the reading comprehension passages interesting, so just get through them.” Perhaps fittingly, I found the passages really interesting. Many of them were not easy to read, and the points were made laboriously, but the subject matter was interesting to me. I approached every RC question as if I was just reading an interesting tidbit online, and that made it a lot more fun. I now know random facts about the women’s liberation movement in the early 50s, and the potential impact of solar winds on climate, and those kinds of things always come in handy at parties.

So that’s all she wrote. I’m done with the GMAT, and now I’m on to other things in life. I will probably post some reviews of resources I used, and maybe some other specific thoughts around how to prep, but otherwise, I’m off to go enjoy me some sunshine.

Waiting for the End

Today I finished my last practice test. 3 more days until I write the real thing, and I can probably safely say I am basically done preparing. Before the actual test day, I’m going to do some of the more difficult problems from the Original Guide 12th Edition that I have been saving. Aside from that, my plan is to just review the list of AWA topics, and some probability questions as that is my weakest area.

My test results were not that great in the middle there. I was hoping to consistently hit the 750+ range on my last few, but didn’t quite manage. The encouraging sign is that I was able to get 760+ on all my GMAT Prep tests, which are supposedly the best predictors of actual performance. My weakest scores were on the Princeton Review tests, with my second last test hitting a 670. I didn’t panic with that score because I was sick that day and I knew my concentration was affected. Overall, I think I should be able to hit my goal of 740+ comfortably as long as I don’t spend excessively long on any questions and don’t have some sort of anxiety attack.

I’ll be posting after my exam is done with my results, and again shortly after with a review of the materials I used and some observations on what worked well to prepare for the exam. Here’s hoping that my next post comes with some good news!



Lazy Day

Today I didn’t feel like doing anything. I wish I could have kicked my feet up and lounged in my snuggie like Bruno Mars, because that would have been awesome. After a weekend filled with classes and socializing, all I wanted to do was sleep through the day. Unfortunately, Tuesdays are my test days (what with no classes and all).

So I mustered up some energy, dragged myself out of bed and after a quick shower, got to it. I did a Knewton free CAT today. Here are the results:

Q 47 (77%)

V 43 (96%)

Scaled Score: 730

On the quant side, I failed miserably near the end. For the life of me I could not do basic algebra… my mind was not on yet. This led to me spending almost 4 minutes on an absolute value question, which ate into a bit of the cushion I had built up, and another 4 minutes on a simple ratio question. I got the ratio question wrong, and after wasting that time, I had under 2 minutes left for each of the remaining  8 questions – I got 5 of them wrong.

On the verbal side, I only got 4 wrong, but one of them was because I misread the word “exports” as “experts.” I spent 5 minutes on that critical reasoning question, reading and re-reading the argument and all the options. I felt like I was the subject of some cruel prank because none of the options made sense to me. In the end, I selected the option that had the most semblance of rationality to it, and ended up getting it wrong (of course). After all that, I somehow still finished the verbal section with about 8 minutes remaining.

I suppose that all things considered, the test went ok. I was definitely very sluggish while writing, and it showed in the errors I made. I was expecting a 650 ish score when I was done based on how crappy I felt. Luckily I did not write essays before this one – I’m not sure I would have lasted through the CAT if I had, and I’m certain I would have gotten a much lower score had I written the essays. I feel like I skimped out on some practice by not writing the essays, but I plan on making up for it down the line.

This experience definitely showed me that I need to be well-rested in the last couple of days leading up to my actual test date, and I need to be focused and ready to go. I’m also a bit concerned that while I’m consistently getting 700+ scores, I’m not yet consistently hitting my goal of 740. I know these tests are not the best indicators, but with just under 3 weeks left, I’m hoping to see stronger results on the remainder of the practice CATs I intend to take.

Analysis of an Argument Essay

Again, all feedback is appreciated!!Group #1: Analysis of Argument
The following was used as part of an internet advertising company’s appeal to businesses: Furniture Depot employed our internet advertising company to help. Since then its sales increased by 10% over last year’s totals. Furniture Depot’s success demonstrates how using our internet services can increase your profitability.

Describe how well reasoned you find this argument. In the discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the argument’s conclusion. You may also address possible changes in the argument that would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.


In the statement above, the author argues claims that using his or her internet advertising company’s services can improve profitability for any company. This claim is supported by evidence that one client, Furniture Depot, saw increased sales of 10% after using the author’s advertising services. There are many issues with both the claim the author makes and the evidence used to support it. These issues, which are outlined below, make the author’s argument weak and difficult to accept.

The first and most obvious point of weakness in the author’s argument arises from the evidence provided. The author claims that Furniture Depot experienced a 10% sales increase after employing his or her advertising services, but provides no evidence to establish a causal relationship between the two events. There are numerous other reasons Furniture Depot might have experienced increased sales, and if any of them are true, then the author’s argument is weakened. For example, Furniture Depot might have employed other advertising services or pursued other forms of advertising such as print or TV advertising, which might have contributed to the increase in sales. There could have been company-wide price increases on furniture, or even inflationary pressures on prices, that led to an increase in sales figures. Perhaps Furniture Depot invested heavily in increasing its sales force or
training them better, leading to improved sales. Furniture Depot might also have launched new product lines or entered new markets, thereby encountering new sales from these products. If any such factors exist that might have increased sales for Furniture Depot, then the author’s claim is significantly weakened because the implicit assumption that the 10% rise in sales is attributable to the use of his or her company’s advertising services is rendered invalid.

The second assumption that author makes is that results for companies would be similar regardless of differences in industry, geography or target market. There is no evidence provided that a shoe company or clothing retailer would experience similar sales increases, or that a company operating in a different part of the country than Furniture Depot can expect similar results. Therefore, even if it was proven that the 10% sales increase was directly attributable to the usage of the author’s advertising services, there is still some doubt regarding the effectiveness of the advertising for other types of businesses. If the author had provided some background on how his or her services works to attract customers, or perhaps some additional data for different companies across various industries, then the argument could be strengthened.

A third point of weakness in the author’s argument lies in the claim made that using his or her internet services can increase profitability. Not only has the author failed to establish a causal link between Furniture Depot’s sales increase and its usage of the author’s services, but he or she also failed to state the claim accurately. increased sales do not necessarily lead to increased profitability. If a company were to employ the author and the cost of using the author’s services exceeded the resulting increase in sales, then profitability would actually be lowered. Therefore, even if the author had successfully proven that using his or her services increased sales for Furniture Depot, and that other companies could expect similar results regardless of the business they were in, there is no evidence that profitability in the author’s clients actually increases. This point renders the claim absolutely invalid and makes the author’s argument very weak. Replacing the word ‘profitability’ with ‘sales’, and addressing the other weaknesses outlined above would go a long way to strengthen the author’s argument.

The author claims that Furniture Depot saw an increase in sales because of using his or her internet advertising services, and that any company can experience an increase in profitability by using his or her services. This argument is weak because a causal link between Furniture Depot’s sales increase and its usage of the author’s services is never properly established. In addition, there is no evidence provided that Furniture Depot’s success can be replicated by any company in any industry by using the author’s services.
Lastly, an increase in sales does not always equal an increase in profitability as the author appears to claim. These weaknesses render the author’s claim invalid, and need to be addressed in order to strengthen the author’s case.


Analysis of Issue Essay

Any feedback is much appreciated, thanks!!

Group #1: Analysis of Issue
The desire of corporations to maximize profits creates conflict with the general welfare of the nation at large.

Discuss the extent to which you agree or disagree with the opinion stated above. Support your views with reasons and/or examples from your own experience, observations or reading.


The issue of whether corporations’ objective of maximizing profits benefits society as a whole is very divisive. This issue plays a major role in every political debate around the world today, as governments wrestle with how to treat corporations. On one hand, when corporations maximize profits, there is usually a trickle down effect, with these corporations re-investing their profits thereby creating jobs and providing benefits to society at large. On the other hand, those opposed to this theory argue that profits are hoarded by shareholders and owners of corporations and there is very little benefit received by society from these profits. The desire of corporations to maximize profits creates conflict with the general welfare of the nation at large in numerous ways.

The prevailing argument put forward by economists in favor of helping corporations maximize their profits is the tricke-down theory. President Reagan is credited with implementing a plan to provide corporations with tax breaks and other incentives to carry on with their businesses, and subsequently bolster the economy through increased job creation and investment in new businesses. There have been numerous studies that discredit this hypothesis, and the validity of the claim that corporations are apt to re-invest their profits is questionable. Moreover, there is not strong enough evidence to convincingly prove that the propensity of investors to spend profits remains constant with increasing profits; if this propensity is decreasing as profits rise, then the benefit received by society as a whole as profits are maximized is marginally lower. In today’s economy, with the shift towards a more technology-based and service-based economy, profits can be maximized more efficiently than in the past. Corporations need fewer employees and lower investment to generate higher returns, and as such, even if corporations re-invest their profits, the corresponding benefit to society in today’s economy is lower than it would have been under President Reagan. All of these factors combined indicate that there is not much credit to trickle-down economics or “Reaganomics” as they are often referred to, and that corporations maximizing profits does not necessarily equal increased benefit to society as a whole.

For decades, economists and philosophers have argued that when corporations are successful, there is less scarcity of resources and thus the success of corporations is directly correlated to increased benefits for society. There is a popular theory, called the “Boiler Room Theory”, which refutes this argument. The theory analogizes corporations maximizing profits to a boiler room operator. The goal of the boiler room operator is to maintain the temperature of a given building within a specific range. This temperature is measured by the gauge on the boiler. If the boiler room operator is judged solely on the gauge, then he can accomplish great results by simply breaking the gauge so it is always within the specified range, and not have to deal with the consequences. Similarly, if corporations are judged solely on their profits, which are merely a gauge of performance and not indicative of the entire story, then they can work outside the system to inflate profits while not necessarily creating benefits for all their stakeholders. This phenomenon has occurred numerous times in history, through accounting and financial frauds, and other types of white collar crime. Therefore, judging corporations solely on their profits can lead to conflict with the general welfare of the nation at large.

Another example of how corporations maximizing profits can lead to conflict with the welfare of society is seen with the rise of corporate lobbying. Often, these lobbyists are able to corral the support needed to quell the passage of bills that would be detrimental to profits of the companies paying them. This phenomenon is seen with tobacco and oil lobbyists in particular, who have a history of being able to beat bills which would pass stricter environmental regulations that would eat into the profits received by their respective industries. Clearly, in such instances, the power of these lobbyists is an advantage for the corporations, and their success comes at the expense of laws that would benefit society as a whole.

The existing economy and legal structure creates an environment where the desire of corporations to maximize profits creates conflict with the general welfare of the nation at large. There are ways in which profits can be re-invested in today’s economy which would negate the impact of trickle-down economics. Profits are merely a gauge on which corporations can be judged and do not reflect the big picture; as such, judging corporations on profits alone can lead to perceptions of success while creating little benefit for society. Lastly, the rise of corporate lobbying in government has lead to an environment where regulations that might benefit society at the expense of corporate profits are regularly defeated. All of these factors demonstrate that the desire of corporations to maximize profits creates conflict with the general welfare of the nation at large in today’s American economy.

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