(A Game Changer for the CA Course)
In this day and age, information is instantly available to all of us. All we need is a smart phone and an internet connection to get access to information. But how many of us can claim to use the information productively? How many of us can make sense of the information that’s available at our disposal? Why did the abundance of information failed to create a knowledge society?
Unfortunately, our Centuries old education system focuses on memorizing information than on learning the concepts. Of course, I don’t mean that memorizing information is futile. But what is the point in memorizing something that we don’t understand? What’s the point of cramming up all the content from the books (or from various other sources) when we don’t know what to do with it? As a society, we failed to realize the fact that all information is not knowledge! Ironically, the modern world doesn’t value people with information unless they possess the ability to exploit it for productive purposes. This is a hard hitting fact! That’s why it may not come as a surprise to learn that more than 95% of Engineering graduates from IT and Computer engineering backgrounds in India are found to be unfit for the Software sector (As per a 2018 Survey conducted by Aspiring Minds) and more than 80% of Engineering graduates are found to be unfit for any entry level job in general. Unfortunately, things aren’t any better for freshly qualified Chartered Accountants either. The Campus Placement record for Sept-Oct 2019 was so dismal that ICAI felt ashamed to even disclose the % of candidates that have been offered jobs.
If you’re a CA Final Student, then you must know the difference between data and information. Information is data that has been processed, organized and turned meaningful. For eg, take food crops. Unless the crops are harvested, husked and turned into edible food grains, they are pretty much useless. So if the food crops are the data, then the food grains are the information. Though information is useful, its full utility depends on the person using it, and the purpose for which it is used. For instance, you can buy the food grains, just boil them and eat! As simple as that. Or you could also make flavourful, elegant dishes with the grains. It’s not the food grains that matter. It’s what you do with it that makes all the difference! A Chef at a 5 Star hotel is not paid for just cooking. He’s paid well enough because he can cook better than most other cooks/chefs.
Jeff Bezos, the founder of Amazon is a self-made Entrepreneur. However, during the initial days of Amazon, there were several critics who ridiculed Amazon’s business model. They opined that Amazon with its huge fixed costs and razor thin margins, would never be profitable. A couple of decades later, Jeff’s top ranking in the Forbes list not only proved the critics wrong, but established Jeff as a visionary leader! Watch the following video clip to learn how Jeff responded to the criticism….
It’s obvious from the above video clip that Jeff’s strategy was very simple. Anyone with a basic education in Economics or Cost Accounting should be able to understand his game plan. Then how come his competitors or critics didn’t get this simple logic? Where exactly did they go wrong in their analysis?
First of all, let’s not bash up the critics. They do have valid reasons for expressing their concerns. The Amazon business model required huge capital outlays and the fixed costs seemed almost out of control. In contrast, the cost structure of brick and mortar retailers was more or less dependant on the scale of the operations. Therefore, everyone accused Jeff of running a business model that would never be financially viable. But there’s one aspect that these critics grossly misjudged about Jeff Bezos, i.e., Jeff’s ability to apply the knowledge of a traditional subject to a contemporary and evolving business environment.
As a CA Student, you must have learnt the concepts of ‘Marginal Costing’ and ‘Operating Leverage’ during CA Inter. Marginal Costing taught us that an entity that incurs vast sums of fixed cost achieves break-even only at high sales volumes. Such an entity needs to operate at a large scale to barely stay afloat. However, on the flip side, the concept of ‘Operating Leverage’ taught us that such entities have a competitive edge over the others once a feasible scale of operations is achieved. If you’re wondering what Marginal Costing has to do with Jeff Bezos or Amazon, let me tell you that the business model of Amazon is built entirely on the principles of Marginal Costing!
Jeff Bezos is considered a visionary because he was able to foresee the rapid growth of the now ubiquitous internet technology. He understood that the internet would become all pervasive in no time. With such a huge market potential, he realized that the only way to succeed in internet enabled commerce was by focusing on scale rather than on profits. Jeff knew that the product economics that works for brick and mortar entities will not work for internet based retailers. Amazon burnt billions of dollars in its initial years and incurred heavy losses, thanks to its humungous fixed costs. But Jeff Bezos never wavered because he knew that once a viable scale is achieved, the entity would eventually become profitable.
Not just Jeff Bezos, if you consider any successful Entrepreneur or Inventor or Scientist, they all have one common trait. They are lifelong learners and they practice what they learn. Fortunately, ICAI too has realized the importance of inculcating the students with application oriented knowledge and therefore, introduced the Open Book Exam Format at the Final level.
An Open Book Exam tests more than just rote learning. It tests your ability to quickly find relevant information and then to understand, analyze and apply knowledge, while thinking critically. Answering the question will require more than just copying information from texts. Having access to a textbook may stop you from giving a wrong answer if you cannot remember a fact or formula, but just getting the fact correct will not fetch you good marks. How you locate, apply, and use information is more important.
There’s no simple way to answer that. It totally depends on the type of questions asked in the exam. However, it depends on the attitude of the student as well. Those who are accustomed to years of rote learning may find this new format difficult, whereas those who relish the process of discovery and learning will be more than gratified
All said and done, I think we have a long road ahead of us in bringing the required structural changes to the education system. The traditional methods of learning and examination are no more suitable to our modern lives. But at least, we started taking baby steps in the right direction. Let’s hope for the best. Fingers crossed!