How to ace the GMAT in 28 days: Day 17 (result: 760)

A 760 on today’s practice test. I think that’s called a ‘result’: comfortably past the 99th percentile (i.e. beating 99% of the people who take this test). 108 questions, 52Q and 56V, with 11 errors giving me corrected raw scores of 44Q/50V, despite getting 5 wrong near the end of one section. Analysis tomorrow; here are the essays…

What this suggests is I’m starting to internalise the underlying formats and structures of many GMAT questions, hardwiring my brain to recognise which methods I need to use to solve each question.

ANALYSIS OF AN ARGUMENT

Time—30 minutes
Directions: In this section, you will be asked to write a critique of the argument presented below. You are NOT being asked to present your own views on the subject. Read the argument and the instructions that follow it, and then make any notes in your test booklet that will help you plan your response.

The following appeared in a memorandum to the planning department of an investment firm.

“Costs have begun dropping for several types of equipment currently used to convert solar energy into electricity. Moreover, some exciting new technologies for converting solar energy are now being researched and developed. Hence we can expect that solar energy will soon become more cost efficient and attractive than coal or oil as a source of electrical power. We should, therefore, encourage investment in Solario, a new manufacturer of solar-powered products. After all, Solario’s chief executive was once on the financial planning team for Ready-to-Ware, a software engineering firm that has shown remarkable growth since its recent incorporation.”

Discuss how well reasoned you find this argument. In your 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 conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.

The writer makes a reasonable business case for investing in Sontario, given the space limits of a memo. But – as with any investment – the planning department would need to conduct further research to confirm the validity of the proposal.

The writer reasons that the positive trends in the solar energy sector – falling equipment costs, exciting new technology – demonstrate the attractiveness of the sector as a whole. This broad-brush claim needs analysing first. Are equipment costs falling because of improved business methods and better process engineering, or something not driven by the industry itself, such as a short-term drop in the price of raw materials? Without a clear causal link with the ingenuity of the industry, the falling costs alone don’t constitute a reason to invest.

In addition, the memo uses the attractiveness of the solar energy industry as a whole to support investing in Solario in particular. Is this justified? Solario doesn’t make solar panels; it makes products powered by solar energy, which isn’t the same activity. This suggests that Solario’s success will be dependent on the success of the solar industry, rather than Solario itself being a key driver of the industry. Solario appears to be a second-tier player rather than a prime mover, and the investment team needs to look closely at how dependent the company is on the success of others.

Furthermore, the investment team needs to look beyond the solar energy industry and to the energy sector in general. Do the falling costs driving adoption of solar energy over fossil fuels represent a trend or a blip? If oil prices have been rising and are likely to continue doing so, then solar energy companies (and perhaps Solario in particular) may well be a good investment. Investment is about good timing, and if one major oil discovery is the difference between an investment’s success and failure, the investors may benefit from a cautious approach.

Narrowing down, the Chief Executive’s former role in a software company is not as negative as it first appears. Environmentally friendly firms have a reputation for being run on philosophical lines rather than sound financial sense, and Ready-to-Ware’s success in the market may well be a plus point for the competence of the CEO. His experience, albeit in a different industry, is on balance a plus point for the argument – with the caveat that his involvement with Ready-to-Ware ended some time ago.

In summary, the memo’s argument presents a reasonable case for investing in the solar industry – but not necessarily in Solario itself. The memo’s author conflates the potential of an entire industry with the potential of a single player within it… and this weakens the argument. The investment team parks its money not in industries, but in individual companies. It must make its decision based on Solario’s balance sheet and market potential, not on the basis of a good idea.

FAULTS: pleased with this one, finished just seconds before the 30min limit. But a monster typos – why did I write ‘Sontario’??? At least I picked up on something many GMAT takers will miss: Solario makes products, not panels. And I shouldn’t have repeated ‘reasonable business case’ at the beginning and end, especially since I don’t use them to make the same point. Probably a 5 for this essay.

ANALYSIS OF AN ISSUE

Time—30 minutes
Directions: In this section, you will need to analyze the issue presented below and explain your views on it. The question has no “correct” answer. Instead, you should consider various perspectives as you develop your own position on the issue. Read the statement and the instructions that follow it, and then make any notes in your test booklet that will help you plan your response.

“The best strategy for managing a business, or any enterprise, is to find the most capable people and give them as much authority as possible.”

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.

In business, people are everything, and capable people are the biggest asset any business can have. That’s why I agree strongly with the statement – with a single caveat: giving out authority in such measure must be accompanied by some fundamental ground rules.

To function as a coherent unit, an organisation’s people must work together. (However capable they are!) If Fred in R&D reasons that ten new hires would add £1m to billings, but Rebecca in HR needs to lose 20% of headcount – each having full authority to act – then the net result may not be positive for the company. Authority should be given out in well-defined chunks, and reporting lines made clear. Authority within each employee’s departmental function is a terrific idea; authority across-the-board, with overlapping opinions, leads to conflict and wasted resources.

In addition, a company’s board must remember that competency in one area doesn’t reflect expertise in another. For example, many world-class programmers are extremely poor at managing people; an expert coder given authority over hiring and firing may not have the skills to recognise the right balance of technical skills and team spirit needed for any large project. When giving people authority, it should be on the basis of what they’re best at, so they can wield that authority with confidence and gravitas.

Furthermore, with authority must go responsibility. If people are given the authority to take decisions, they must be aware that they are responsible for the consequences. An organisation where everyone takes responsibility for their actions is a strong organisation, because its people know they can trust each other not to ‘pass the buck’.

Finally, when granting authority, it’s important to remember that power is of little use without direction. People with authority to act still need leaders; the handing out of authority does not lessen the importance of managers and the CEO. Employees need to know what goals their authority is supposed to support, and the setting of those goals (company strategy) is a job for leaders.

Despite these points, giving people as much authority as possible remains an excellent idea which I fully agree with. Because my points above don’t diminish the power of authority; they enhance it. People will, I believe, be much happier accepting their authoritative powers if the rules are made clear first. Even when constrained by functional competency and departmental reach, there’s plenty of authority to go around.

FAULTS: finished this one early, but it’s no worse for it. I feel I’m getting stronger at ‘focussing on the question’, without going off on tangents. Can I award myself a 6 for this?