{"id":3149,"date":"2010-05-13T15:00:28","date_gmt":"2010-05-13T23:00:28","guid":{"rendered":"https:\/\/gmatclub.com\/blog\/?p=3149"},"modified":"2010-07-24T22:02:14","modified_gmt":"2010-07-25T06:02:14","slug":"veritas-prep-gmat-tips-critical-reasoning-the-warren-buffett-way","status":"publish","type":"post","link":"https:\/\/gmatclub.com\/blog\/veritas-prep-gmat-tips-critical-reasoning-the-warren-buffett-way\/","title":{"rendered":"Veritas Prep GMAT Tips: Critical Reasoning The Warren Buffett Way"},"content":{"rendered":"

Brian Galvin is the Director of Academic Programs at Veritas Prep, where he oversees all of the company\u2019s GMAT preparation courses<\/a>.<\/p>\n

While the \u201ctallest building in Omaha\u201d has become the default analogy for something that\u2019s the best of a lackluster field, the \u201crichest man in Omaha\u201d is, depending on the stock market that day, sometimes the richest man in the world. \u00a0Warren Buffett is one of the most admired men in business history and quite possibly the shrewdest investor of all time.\u00a0 Business schools would obviously each love to lay claim to an alumnus like Buffett (his Masters degree, incidentally, is in economics from Columbia), so how can you demonstrate via your GMAT score that you\u2019re capable?<\/p>\n

Buffett\u2019s investment philosophy, simply stated, is to focus only on the statistics that matter for long-term growth.\u00a0 Eschewing the popular market trends, Buffett looks specifically at the intrinsic value of companies \u2013 return on equity, debt-equity ratio, market differentiation, etc. \u2013 to determine whether a stock is a long-term value.\u00a0 If it is, and if the market has undervalued it (perhaps in search of glitzier, short-term statistical trends), he\u2019ll buy and hold the stock, pretty much always to a high return.\u00a0 By clearly articulating his goal \u2013 long-term profitability \u2013 and by only making his decisions on the basis of information that speaks specifically to that goal, Buffett has outperformed the market consistently over the past 50 years.<\/p>\n

Accordingly, Buffett would outperform all comers on the Critical Reasoning portion of the GMAT, which seek to determine candidates\u2019 skills in Buffett\u2019s arena.\u00a0 Those who can make sound decisions as they impact a specific objective are rewarded by the exam.\u00a0 Consider the question:<\/p>\n

Citizen:<\/em><\/strong> Each year since 1970, a new record has been set for the number of murders committed in this city. This fact points to the decreasing ability of our law enforcement system to prevent violent crime.<\/em><\/p>\n

City Official:<\/em><\/strong> You overlook the fact that the city\u2019s population has risen steadily since 1970. In fact, the number of murder victims per 100 people has actually fallen slightly in the city since 1970.<\/em><\/p>\n

Which one of the following, if true, would most strongly counter the city official\u2019s response?<\/em><\/p>\n

(A) The incidence of fraud has greatly increased in the city since 1970.<\/em><\/p>\n

(B) The rate of murders in the city since 1970 decreased according to the age group of the victim, decreasing more for younger victims.<\/em><\/p>\n

(C) Murders and other violent crimes are more likely to be reported now than they were in 1970.<\/em><\/p>\n

(D) The number of law enforcement officials in the city has increased at a rate judged by city law enforcement experts to be sufficient to serve the city\u2019s increased population.<\/em><\/p>\n

(E) If the health care received by assault victims last year had been of the same quality as it was in 1970, the murder rate in the city last year would have turned out to be several times what it actually was.<\/em><\/p>\n

Much like Warren Buffett in his financial planning, you should first consider the primary objective or conclusion in this case.\u00a0 The City Official is attempting to refute the claim that the police force is doing an inadequate job of \u201cpreventing violent crime\u201d, so it can be inferred that his point is to the extent of:<\/p>\n

\u201cLaw enforcement is doing an adequate job of preventing violent crime.\u201d<\/p>\n

Because we\u2019re asked to weaken his claim, we can then look at the evidence he provides.\u00a0 That evidence is specific not to violent crime as a whole, but rather solely focuses on one type of violent crime, referencing the murder rate.\u00a0 The logical flaw in this argument is that he purports to talk about violent crime, but references a statistic that doesn\u2019t address that specific conclusion.\u00a0 At this point, Buffett\u2019s instincts would sound alarms: the evidence does not directly support the conclusion!<\/p>\n

Looking at the answer choice, our goal is then to find justification for the idea that the murder rate could be down since 1970 while the violent crime rate remains up; choice E provides just that sentiment.\u00a0 If the primary driver in the reduced murder rate is that what was once a murder is now simply a violent assault \u2013 the healthcare has prevented the death, but the crime was still committed \u2013 then the violent crime rate can surely remain high, and the City Official\u2019s point is invalid.<\/p>\n

When facing Critical Reasoning questions that involve statistics, awaken your inner \u201cOracle of Omaha\u201d and be skeptical of the statistics.\u00a0 Like Warren Buffett, first identify the conclusion or objective that you seek to accomplish, and then only accept as relevant those statistics that directly impact it.\u00a0 While you won\u2019t be able to match Buffett\u2019s percentage growth with your GMAT score \u2013 that cap of 800 makes exponential growth tricky \u2013 you can nevertheless use his ideology to maximize the value of a number that is quite important to you.\u00a0 \u201cHighest GMAT score in Omaha\u201d doesn\u2019t sound so bad\u2026<\/p>\n

Read more GMAT advice on the Veritas Prep blog<\/a>. Ready to sign up for a GMAT course<\/a>? Enroll through GMAT Club and save up to $180 (use discount code GMATC10)!<\/p>\n

\"Veritas<\/p>\n","protected":false},"excerpt":{"rendered":"

Brian Galvin is the Director of Academic Programs at Veritas Prep, where he oversees all of the company\u2019s GMAT preparation courses. While the \u201ctallest building in Omaha\u201d has become the…<\/p>\n","protected":false},"author":101,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3149","post","type-post","status-publish","format-standard","hentry","category-uncategorized","entry"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/posts\/3149","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/users\/101"}],"replies":[{"embeddable":true,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/comments?post=3149"}],"version-history":[{"count":3,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/posts\/3149\/revisions"}],"predecessor-version":[{"id":3152,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/posts\/3149\/revisions\/3152"}],"wp:attachment":[{"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/media?parent=3149"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/categories?post=3149"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gmatclub.com\/blog\/wp-json\/wp\/v2\/tags?post=3149"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}