The MBA Myth and the Cult of the CEO
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The MBA Myth and the Cult of the CEO
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Re: The MBA Myth and the Cult of the CEO
#2This is great work. It's a real job gathering and analysing all that CEO performance data.
My guess is that most people were suspecting this anyway. The fact is the CEO is there for a few years making a few key decisions, a large company is like an oil tanker, and markets are quite hard to predict.
Taleb has cooked a fair bit of soup on the fooled by randomness idea, but in this case his observations are correct. It is very very hard to show that CEO performance is something other than random.
That's not to say that everyone's performance is pure chance. Sports generates a lot of reproducible data about its performers, and we can tell from the numbers which players are better.
This is why it's not such a big deal for most people that Ronaldo or Messi get paid a lot more than their teammates, and the rest of society.
What does bother people, including myself, is that people are given far more credit for outcomes than is credible. Why should there be a many-multiples reward for being slightly up the senior management ladder at each step? Is it not most plausible that the leaders just under CEO also understand the firm's situation, and can make sensible decisions? And the step under them? Is it really so hard to find a CEO that you have to pay hundreds of grunt salaries to get one?
The other issue is MBAs. I don't think anyone is surprised that it doesn't help at all. I went to a well known business school too, and it's not like they tell you how to run a company. It's really just a kind of brainstorming exercise where you have bit of a think about what a company might do to be successful. What it does seem to be is a kind of stamp of ambition. People who go to business schools are keen to work hard to reach the top of the business world.
This might seem fine, but you have to wonder whether the best managers are ambitious people who want to be managers, or people in the line of business who want to compete for the same jobs.
I know who I'd pick.
Re: The MBA Myth and the Cult of the CEO
#3The basic unit of information for a human being is a story, not a number or a fact. So it doesn't surprise me that we're obsessed with something as trivial as how Elon Musk's $1/day diet shaped him into an entrepreneur[1].
I don't think it's a bad thing to have a vague awareness of the things that make people successful: unafraid of failure, hard work & dedication, true passion about what you're creating.
But I think it does actively hurt you if you overfit what causes success, because you focus way to much on getting the little things right that you miss the big picture.
[1] https://www.independent.co.uk/life-style/gadgets-and-tech/ne...
Re: The MBA Myth and the Cult of the CEO
#4This is great work. It's a real job gathering and analysing all that CEO performance data. My guess is that most people were suspecting this anyway. The fact is the CEO is there for a few years making a few key decisions, a large company is like an oil tanker, and markets are quite hard to predict. Taleb has cooked a fair bit of soup on the fooled by randomness idea, but in this case his observations are correct. It…
To play devil's advocate: The primary function of a manager is to say "No". As one goes higher and higher up the hierarchy, one has to say "No" to pushier and pushier subordinates, and the cost of every misplaced "Yes" is higher and higher. While leaders just under the CEO may understand the firm situation just fine, they may also be unable to say "No" to enough bad ideas for a myriad reasons, including lack of political clout with other leaders, with investors or with peer CEOs.
Re: The MBA Myth and the Cult of the CEO
#5I always figured to be an effective leader requires knowing your product. For software companies that means working in their field so you understand the tech or problem area then can make better decisions. You can complement your leadership by getting an MBA which rounds out the rough edges of business.
Career MBAs who have no experience of the area of the business are red flags in my experience. It's like a manager who isn't technical. They make wrong decisions by themselves or listen to the wrong people.
Re: The MBA Myth and the Cult of the CEO
#6This is great work. It's a real job gathering and analysing all that CEO performance data. My guess is that most people were suspecting this anyway. The fact is the CEO is there for a few years making a few key decisions, a large company is like an oil tanker, and markets are quite hard to predict. Taleb has cooked a fair bit of soup on the fooled by randomness idea, but in this case his observations are correct. It…
To play devil's advocate: The primary function of a manager is to say "No". As one goes higher and higher up the hierarchy, one has to say "No" to pushier and pushier subordinates, and the cost of every misplaced "Yes" is higher and higher. While leaders just under the CEO may understand the firm situation just fine, they may also be unable to say "No" to enough bad ideas for a myriad reasons, including lack of polit…
> The primary function of a manager is to say "No".
I'm a manager, and I can't really see this being the key job description.
But if it was, why would that have gotten harder in the last few decades?
Re: The MBA Myth and the Cult of the CEO
#7This is great work. It's a real job gathering and analysing all that CEO performance data. My guess is that most people were suspecting this anyway. The fact is the CEO is there for a few years making a few key decisions, a large company is like an oil tanker, and markets are quite hard to predict. Taleb has cooked a fair bit of soup on the fooled by randomness idea, but in this case his observations are correct. It…
To play devil's advocate: The primary function of a manager is to say "No". As one goes higher and higher up the hierarchy, one has to say "No" to pushier and pushier subordinates, and the cost of every misplaced "Yes" is higher and higher. While leaders just under the CEO may understand the firm situation just fine, they may also be unable to say "No" to enough bad ideas for a myriad reasons, including lack of polit…
Next study "is ability to say no significantly different between COOs/CFOs and CEOs?"
My money is on no.
Re: The MBA Myth and the Cult of the CEO
#8I always figured to be an effective leader requires knowing your product. For software companies that means working in their field so you understand the tech or problem area then can make better decisions. You can complement your leadership by getting an MBA which rounds out the rough edges of business. Career MBAs who have no experience of the area of the business are red flags in my experience. It's like a manager…
What edges does the MBA rough out?
I've always been skeptical of them, and my friends with MBAs haven't helped. They were all optimistic about how much they were going to learn, but by the end thought "at least I got a network and a degree on my resume".
I don't think anyone would get an MBA if you couldn't see it on their resume.
Re: The MBA Myth and the Cult of the CEO
#9I'm not sure this proves anything at all.
To play devil's advocate: what if top CEO's (whether by school or by track record) look for harder challenges?
Someone once said Dara Khosrowshahi took the CEO job of Uber not to make money, but because anyone willing to take that job is somehow who wants to play the CEO game on "hard mode".
If everyone's taking a job where there's a 50% chance of failure for their personal skill level -- which means the more skilled CEO's are taking the harder jobs, and the less skilled CEO's are taking the "safer" harder-to-mess-up jobs -- then statistics will look like CEO skills don't make a difference... even though they do.
And since employment markets (in general) tend to funnel higher performers to harder jobs (because that's economically efficient), this doesn't seem implausible.
Re: The MBA Myth and the Cult of the CEO
#10I'm not sure this proves anything at all. To play devil's advocate: what if top CEO's (whether by school or by track record) look for harder challenges? Someone once said Dara Khosrowshahi took the CEO job of Uber not to make money, but because anyone willing to take that job is somehow who wants to play the CEO game on "hard mode". If everyone's taking a job where there's a 50% chance of failure for their personal s…
Yep. Also this is all based on stock price data, so it could be that businesses typically hire the person that the market "expects"...which would predict zero alpha even if counterfactually hiring a bad CEO would've tanked the stock price.