This article is bullshit. It's premised on a single piece of evidence: the decline of jobs for MBAs. Holding the decline of jobs in a recession as a sign a qualification is worthless is ridiculous. The demand for engineers has gone down as well, does that mean engineering qualifications are worthless ?
Following the same logic if the demand for MBA graduates went up then it would make sense to argue that MBAs are valuable. So if we look at the early 2000s where this was true was Lucy Kellaway writing articles calling out the merits of MBAs ? - well no, it turns out Lucy Kellaway has been writing articles slagging off MBAs since the 90s.
Ms Kellaway is just using the recession to ride her hobby-horse.
We shouldn't be any less critical when reading articles that support our personal opinions than those that oppose them.
This article is from their speculative 'The world in 2010' publication, which attempts to forecast the coming year. That means its a bit more speculative than standard economist articles.
Wall-street bailouts definitely made business less sexy on main street
frankly it's not business that's sexy, making tons of money is. i used to work on wallstreet, and i can assure you the people there are smart enough, well connected enough, and greedy enough to find new ways to make fortunes again, in fact they already are. the bonus' at goldman sachs and scores of hedge funds this year will seem quite sexy again for those undergrads and mba students.
Hmmm... you might be right. Business people, representing capital owners in a world with increasing capital concentration, exert a lot of leverage. Leverage pays well.
"No financial man will ever understand business because financial people think a company makes money. A company makes shoes, and no financial man understands that. They think money is real. Shoes are real. Money is an end result."
This is silly. Both aspects are important. Someone who thinks money isn't real may make huge basic business blunders like not paying the right taxes, not managing their debt/income correctly, or just making horribly inefficient business choices (I've seen this a lot). The result may be a company that goes out of business even though it's perfectly viable if run correctly. Or a company that dies because it inadvertently violates tax law, or labor law, or environmental law, etc, etc. Or merely a company that doesn't compete as effectively against its cohorts and falls so far behind it becomes irrelevant.
I fail to see the connection you draw between Drucker's teaching (eg What gets measured gets managed) and the poor management you see in corporations today. Have you ever read any of his articles/books? Can you point to anything particularly offensive?
Anyway Drucker wasn't a "management as a science" guy. He was an economist, or a microeconomist if you're nitpicking.
He certainly fits the mold of a microeconomist, but he revolutionized the study of management in the US. I don't think it's at all disingenuous to say that he drove management science to what it is today.
And to sum up his teachings as "What gets measured gets managed" is fairly trite when he wrote 30+ books on the subject of organizations and management.
So yes, I think "management as a science" guy is totally appropriate. Or as he is described so often on book covers - "Managment Guru"
My point is, we have MBA's coming out of programs which rely a great deal on the teaching of Peter Drucker, and companies are starting to wake up to the realization that Drucker's "Knowledge worker"/MBA doesn't possess the generalizable skills that he argued for.
Drucker argued for large corporations and layering, giving rise to the current bought of middle management that make up the majority of cruft in a today's organization.
And yes, I was required to read Drucker my my management classes.
And absent a control that article is still meaningless. Perhaps 1/100th of employees would feel engaged with their jobs today absent Drucker.
Additionally, the line "success depends on a company’s ability to unleash the initiative, imagination and passion of employees at all levels" made my head spin. I really don't wan the unleashed initiative of a lot of people--they're just not that bright, not that creative, and left to their own devices they'd be potentially counter-productive.
I'd like to know what counts as bullshit. Six Sigma and other such fads certainly seem like they ought to be included. But, what's not bullshit? A good MBA program is an amalgam of fundamental concepts in economics, sociology, mathematics (at least stats), and such. Six Sigma might be analyzed, but it's not presented as a fundamental truth or even a profound idea.
Let's take a specific example: the concept of "agency costs". An economist defines these to be the inefficiencies resulting from one's agents (those doing work for him, and those doing work for those agents, etc.) having different incentives than himself. MBA program include agency costs as one of many economic concepts discussed.
A friend with a Harvard MBA was selling his house while living in another city. He noted that the traditional real estate agent's "6/4" commission structure (6% of the first 100K and 4% thereafter) causes a rational agent to sell as many homes as possible without regard to the actual selling prices. Why bother seeking out a buyer willing to pay $20K more when you only get $800 of that? It would be easier to seek out an additional seller instead. An agent incentivized with this structure likely would not act in his best interests.
So, my friend persuaded an agent to accept a very different plan: 2% up to the price he felt he could get by putting out a FSBO sign in the front yard and 10% thereafter. With this, the agent could earn significantly more by working to find a high-paying buyer. The house ended up selling for a little more than the "FSBO sign" price, so he at least saved on commission.
Those here without MBAs might also think in this way -- much as those without CS degrees might also understand algorithmic complexity. It's not that the content of a top MBA program can't be learned through self study in the same way that good developers are sometimes self taught. But, to suggest that the fundamental content of an MBA program is "bullshit" ignores what is valuable.
Perhaps we are most aware of frat-boy MBAs' self-important yapping, but the fundamental concepts of these programs are generally sound. I have an MBA from a less-than-Harvard program and have found what I learned there to be of benefit. And, I consider myself pretty much bullshit free.
I can certainly understand the desire to vilify MBAs, there's certainly plenty to complain about. However, it's also worth remembering that folks with sound business sense and good intentions are really very valuable. There are countless examples of very talented people (engineers, artists, musicians) who came to ruin because they lacked even the slightest business sense and made some bad choices they couldn't recover from. Weighed along with that there are many examples of healthy working relationships where makers and business folks work with each other, complementing each other's skills, making a more successful business venture than either could alone. Would Woz have helped revolutionize the computer industry to the same degree without the help of Jobs? How many other examples of that sort exist?
As well, the quality of the average programmer is nothing to crow about (just check Daily WTF if you need examples). Personally I can't say for sure whether I would rather work with an average programmer or an average MBA, neither situation fills me with enthusiasm. The absence of business savvy professionals from the startup world is not something to look forward to, even if it comes with the beneficial result of fewer predatory MBAs. A preferable future would be one where a greater percentage of makers gain enough business sense to be able to get along on their own, avoid the worst business mistakes, and also to develop the radar to be able to avoid the sharks and find the angels.
[I]f fewer bright, ambitious people go into business, economies may suffer. Instead the talent will go increasingly into the public sector, the law, medicine—which are already bursting with bright people as it is.
This must be some new definition of “suffer” that I was not previously aware of.
I think it would be conservative to estimate that millions of jobs and billions of dollars of production are generated regularly from firms founded by "bussinessy" business types. Yesterday I was listening to an interview of an entrepreneur that I admire, and I didn't realize until then that he had an MBA. There are probably tens of thousands of people employed by him.
But don't let me get in the way of your prejudices, it's always fun to kick an unpopular person in public for the general amusement.
The prejudice is not in me, but in the author of the original essay.
There are entrepreneurs who have led companies to provide great value for their customers, employees, and stockholders, and entrepreneurs who have led companies straight into the ground. There are doctors who work heroically and insightfully to save lives and there are doctors who are more interested in satisfying their God complex than actually caring for patients. There are lawyers who help right the injustices of the world and lawyers who just look for excuses to run up their bills.
I don’t see why we should assume, a priori, that fewer bright and ambitious people in business and more in law or medicine will be a net social loss.
Really, Think ambulance chasers, class-action specialists, and medical specialists. Why are there so few family practitioners, yet so many specialists.
That's a pretty shallow explanation though, because the question is why. Assuming some level of supply and demand still applies to the medical profession, people seem to go to specialists more often than GP's even for things a GP could probably handle. But why do they do that? One possible explanation is that people don't like doctors, so they only go when something is wrong with them, at which point they spend most of their time seeing a specialist for that particular ailment and then forgetting about it.
Oh, yeah, liability. A GP can reduce their liability by referring you to someone else pretty often.
It's also possible that being a specialist carries other benefits, like prestige and status and personal interest.
Wow. So you don't think that the abilities and attitude of business people matter to the economy, even startups? I hope that the potential and actual startups/businesses on this site don't have this attitude. If this was the prevailing attitude then to say the economy would 'suffer' would be an understatement. Whether an MBA improves or signifies ability is another matter entirely.
> No, I think the parent's point was that if bright people still go into fields that matter, then the economy won't "suffer."
So by implication business isn't a field that particularly matters. People passionate about startups just wouldn't agree with that.
> Also, the parent joined HN 12 days after you.
I was more talking about the voters (both parent up voters and my down voters). Anyone can make a throw away comment but voting patterns say something. It would be really interesting to know the average 'age' of the up-voters and what other posts/comments where correlated. I'm detecting a growing 'arts studenty', anti-capitalist, humanist, complaining sentiment here (i.e. reddit). I'd prefer a community that has a deeper interest in getting stuff done rather than complaining about the 'system'.
Yes it is. There is no other interpretation other than one that diminishes the contribution of business as a productive endeavour with respect to other areas. If there is explain it.
To me studying business because you want to be good at business is like studying the concept of winning if you want to be good at a sport.
That could probably be phrased a little better, but I am just amazed at the number of smart young people I know who aspire to study an MBA rather than something tangible/critical that will give them a useful or scarce ability.
Sports teams spend hours every day watching film for a reason. You have to study the problem you're facing in order to figure out the best way to handle it. Business is simply solving one problem after another until you've got a profitable company.
You learn a ton by starting and running a business, but a formal education can give you a more encompassing framework on how to think and approach specific situations.
I'm going to an undergraduate business school right now, and I'm also a web developer and entrepreneur. Sure, some stuff is common sense, but I've also learned a lot that was under the surface that I've already found to be invaluable in my endeavors.
I think the films being referred to were more along the lines of "how to spend your millions", "what it's like to show off your superbowl ring", or commercials where sports stars are asked "What are you going to do now?" and they respond "Go to Disney Land", as if these somehow indicated HOW to win. The films you're referring to are the proper ones to watch to, as you say, study the problem area and come up with winning strategies. It's not watching movies like Big to find out how to become an executive at a toy company or Gung Ho to determine how to run an auto manufacturing plant.
In defense of MBAs, they can actually be useful IF you already have domain knowledge. The problem is when MBA graduates with no domain expertise are unleashed to manage and lead a business. It's dangerous even in small markets, for example the Stanford MBA trying to sell condom keychains (http://www.storylog.com/how-my-start-up-failed/)
I work in a multi-disciplinary engineering firm. In the past, the project managers were typically promoted from the senior engineering ranks (like a lead mechanical engineer). About 5 years ago, the company decided to create a separate discpline for project management. So graduate engineers would go straight into assisting project managers, and then becoming one themselves without ever working on a project as a discipline engineer.
Now we have to deal with project managers who've never actually worked on a project and don't understand how projects really get done. They only know how to manipulate cost and schedule spreadsheets and set unrealistic milestones.
The best project managers I've worked with have had extensive experience working on projects in their discipline, then supplemented these skills with an MBA or similar such management training.
If The Economist can use the word bullshit, in the technical sense -- self-conscious jargoneering intended to inflate the speaker's perceived importance -- then the rest of us can too, right?
Where did I claim otherwise? I only noted that his suggested approach -- which is clearly reflected by 37signals -- has led to me maintain a lower estimation of their decorum and the value of their positions.
Sounded wrong to me too. But, as 'ig1' pointed in another comment, it's a signed piece extracted from a book - seems like one of those "we asked N people question X" things.
As entrepreneurs our focus is different anyway. Some people will attend b-school to get a better job. We'll attend to learn skills, which is part of what the article says:
"In future, those who stump up will do so because they want to learn the skills, not because they think they are buying entry into a cool and exclusive club"
B-school is what you make of it. You get a couple years to soak up a ton of knowledge. Sure there's always BS but there are some incredibly powerful models that you just won't learn outside of it unless you're very dedicated. HR? As primarily a developer, I'm not going to read an HR textbook unless someone tests me on it. Turns out it's a very interesting subject and links strongly to your strategy. Same with marketing, finance, etc etc.
You can also attend, get through the exams and have the primary output being a piece of paper - same as any other degree.
Clayton Christensen predicted the coming decline of the MBA several years ago in The Innovator's Solution (very good book BTW). The financial bubble has extended the popularity of MBAs, but it is a net loss to take several years out of your career to gain information that you could gain on the side while continuing working with an executive MBA. Eventually the market is going to come to accept that.
A friend told me that a Harvard MBA graduation dinner Warren Buffet was invited to speak. Apparently one of his lines was something like: "If you were going to do anything incredible you'd have dropped out by now". I bet that went down well.
Please. There's enough bullshit in the world to outlast oil, water and sunlight. A few less MBAs, at best, means that some of that bullshit will have to find real jobs and will make slightly less money. More environmental engineers, now that would be something to celebrate.
One the hats I wear is that of a recruiter (its business we operate here) focused on finance and biotech. I couldnt agree more: MBAs aren't that hireable right now, even in banking. In fact a good junior, with 2 years of experience, are much more placeable. As for higher degrees, if you want into banking or business, comp sci, physics, applied math, statistics are better MS degrees.
I dont have an MBA, and havent pursued one thus far, but for the cost and knowing the job market, I think the article is mostly right. Good managers can teach business stuff as long as the talent is dynamic enough. Those analytical skills, though, are highly valuable in this market to smart hiring managers.
It's good to see The Economist addressing some of the fundamental flaws in how "business" is practiced today, particularly at the end of the article.
The past two decades transformed business from the valuable business-building concepts of management, distribution, and efficiency to obscure concepts like deal-making and arbitrage.
They have their place in the financial/economic systems, but they are not the foundation of business. With shows like "The Apprentice", these are the parts that are glorified, and it leaks into our business education.
Business isn't about finger-guns and handshakes. It's about creating value and then getting it to those who need it.
I wonder if the decline in MBA's and the associated value placed on them directly correlates to the fact that law school applications are surging. I seems to me that Law may be a close second for someone considering an MBA, I know Law is a close second for those who opt not to go to Med school.
The submission title is a direct quote from the article: The decline of the MBA will cut off the supply of bullshit at source
Second, this article has the facts wrong. MBAs from top schools aren't having trouble finding jobs, nor have those jobs started paying way less.
I don't have the statistics to support or refute this claim, but the article discussed a massive glut of graduating MBAs, not just the top of the class from "top schools". I'm not sure if you actually read the article, or simply penned a knee-jerk defensive response to the harsh wording.
Also, I don't think it's the MBAs that are the problems. Rather, the job market was sending the wrong signals by paying people with MBAs far more than they're worth. Due to the inflationary monetary supply enabled by the federal reserve, the finance industry was able to grow and become extremely profitable, attracting lots of talent with large salaries. These people would have naturally gravitated to many different career choices if the pay scales weren't so lopsided.
Inflationary monetary supply enabled by the federal reserve... lots of talent with large salaries.
This sounds like a villain-hunt: a well-known cognitive bias that seeks to explain circumstances in terms of human agents with simple, understandable motivations to the exclusion of environmental, structural, or probabilistic explanations that lack such features.
In this case, while I'm sure the Fed bears some responsibility, a lot of the growth of the financial sector over the last 30 years is probably due to the fact that several billion Asians have entered the world economy in that time. Their work creates wealth, which is useful as capital, for which there are markets, which grow from the influx and thus offer larger rewards to clever people who work in finance, should they find a better/faster/more efficient way of getting things done.
The Fed began expanding the M3 monetary supply at a historically unprecedented rate in the 80s, and has become more and more aggressive with this policy over time. The entire point of this policy is to stimulate business by encouraging spending, make credit more attractive because the value of debt loses value over time due to inflation, and discourage saving. As consumers spend more, businesses make more, sending signals to the job market that getting into business and getting an MBA is a really good idea because you make more money. So that's exactly what people have done. Now that the American consumer is tapped out, broke, and unable to take on any more credit, obviously businesses are going to do poorly because their goods aren't being purchased, and they certainly can't afford to hire any more expensive MBAs. Do you agree?
A growing and productive world workforce does lead to additional production/wealth creation, and I do think this is conducive to business, but I don't think it's the significant factor explaining the current glut in the job market for people with MBAs in the United States.
The population in China is still expanding, workforce is growing, and GDP is still booming, so if this were the driving force fueling the demand for MBAs from America then that demand should still be there.
First, the title wasn't editorializing, and second, you are the one with the facts wrong about the MBA job market:
MBAs Confront a Savage Job Market
The MBA Class of 2009 was hit harder than expected by the recession. At some top schools, 1 in 5 are jobless 3 months after graduation....For many programs, it marked the first time since the tech bubble burst that salaries didn't increase. Signing bonuses, too, fell both in value and quantity.
2. The love affair with business is cyclical. The 1980s probably tied in with MBAs just because more people were going to get graduate and professional degrees.
What do the brightest and poshest students at Oxford and Harvard want to study? Business.
Brightest? Math, computer science, the natural sciences, and the humanities.
Poshest? Philosophy, classics.
Neither has much interest in an undergraduate business degree, and both classes of people come from an environment where people with undergraduate business degrees are considered not to have gone to college.
Regarding business <strike>credentialing</strike> education: you do that after college, especially if you need or want a late 20s boost. That's what the MBA's for.
Following the same logic if the demand for MBA graduates went up then it would make sense to argue that MBAs are valuable. So if we look at the early 2000s where this was true was Lucy Kellaway writing articles calling out the merits of MBAs ? - well no, it turns out Lucy Kellaway has been writing articles slagging off MBAs since the 90s.
Ms Kellaway is just using the recession to ride her hobby-horse.
We shouldn't be any less critical when reading articles that support our personal opinions than those that oppose them.