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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

#11

Post by pembrook »

One of the best things to come out of so-called “big data” is the slow destruction of the human ego.

I read an interesting joke few months back (not sure where, might have been in Capital Minded), the gist of it was basically:

If 99% of people who buy corporations for a living can't beat a monkey throwing darts over time...why do we believe people who run corporations for a living are any smarter? They're both looking at the same corporate balance sheets and industry trends!

I mean, it makes intuitive sense. For a fully scaled company in a legacy industry, what would really change if we removed the CEO and replaced him with the Janitor? The business will still be subject to the greater trends of the market and its industry. It doesn't take a Harvard MBA to take a data input like: electric cars are the fastest growing automotive segment therefore...my auto company should probably invest in electric cars?

Edit: where I think this could fall apart is in frontier industries like tech. The decisions require much more specialized expertise and the industries are much less mature (ie. Say ridesharing).

Re: The MBA Myth and the Cult of the CEO

#12

Post by walshemj »

pacala wrote: post #4
lordnacho wrote: post #2

This 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 disastrous pivot that the Provident Financial did in the UK is one example.

Re: The MBA Myth and the Cult of the CEO

#13

Post by marktangotango »

lordnacho wrote: post #2

This 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…

Well, poor outcomes can certainly be attributed to poor direction from a CEO. Many of us have experienced that. My example is a new ceo who came in making a lot of noise about cleaning house and righting the ship. His intention was the sales org, but effectively scared off the best developers. He did also gut the sales org, and sales never recovered.

So objectively it’s not out of the question the reverse could be true, that a ceo could influence a positive outcome, maybe just harder to measure?

Re: The MBA Myth and the Cult of the CEO

#14

Post by cm2012 »

pembrook wrote: post #11

One of the best things to come out of so-called “big data” is the slow destruction of the human ego. I read an interesting joke few months back (not sure where, might have been in Capital Minded), the gist of it was basically: If 99% of people who buy corporations for a living can't beat a monkey throwing darts over time...why do we believe people who run corporations for a living are any smarter? They're both lookin…

Warren Buffet famously says he likes to invest in businesses that could be run by a ham sandwich.

Re: The MBA Myth and the Cult of the CEO

#15

Post by hjk05 »

The success of a company rests on thousands of factors one of which is the CEO. Even the best CEO can’t ensure success when all other factors are against it, but a mediocre CEO will sometimes fail when all favors are in their favor.

Which is to say. When trying to figure out if a CEO is ‘worth it’ don’t like at company success as a metric. You need to look across the industry and find “big obviusly avoidable but extremely costly mistakes” and see how much they cost, and ask: is it worth it if they can avoid all thoses issues.

Re: The MBA Myth and the Cult of the CEO

#16

Post by maxxxxx »

pacala wrote: post #4
lordnacho wrote: post #2

This 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…

Saying “no” is easy. But it’s hard to say “yes” if it involves some risk.

Re: The MBA Myth and the Cult of the CEO

#17

Post by bluedino »

sys_64738 wrote: post #5

I 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…

>> I always figured to be an effective leader requires knowing your product.

One of the best bosses I ever had was when I worked at a small manufacturing company.

This guy spent a ton of time with our customers and our products, came up with improvements, made lots of fixes, found other products our customers could use, made some people really happy.

Then he went through the production floor. Looked at everything a fresh set of eyes, why do we do this, why don't we do this. Sped up production, saved money, simplified things, made everyone's life easier.

Next stop was the office. Why do we touch this document 5 times through 4 people? Why do we do this backwards? How come this person doesn't do anything all day? Let's move this schedule around.

It was about that time the owners fired him for petty shit even though we had record sales and profits for the 3 years he was here. Lesson learned, don't try to make any changes or recommendations that come a little too close to home.

Re: The MBA Myth and the Cult of the CEO

#19

Post by crazygringo »

JamesBarney wrote: post #8
sys_64738 wrote: post #5

I 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.

Whichever edges are rough for you personally, that's the point.

Like if you're great at finances but terrible at understanding sales and marketing, then the sales and marketing part of the MBA will be most valuable for you. And vice-versa, and all the other combinations.

MBA's ensure you have at least a minimal competence in each classic area of running a business, and aren't going to make bone-headed decisions that might otherwise seem logically plausible.

That's one of the reasons MBA programs tend to be centered around case-studies: so you're exposed to a ton of ideas that seemed reasonable but then turned out to be disastrous. As long as you've done the MBA, you're unlikely to repeat those. If you don't have an MBA, you might not know any better.

Re: The MBA Myth and the Cult of the CEO

#20

Post by lordnacho »

marktangotango wrote: post #13
lordnacho wrote: post #2

This 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…

Well, poor outcomes can certainly be attributed to poor direction from a CEO. Many of us have experienced that. My example is a new ceo who came in making a lot of noise about cleaning house and righting the ship. His intention was the sales org, but effectively scared off the best developers. He did also gut the sales org, and sales never recovered. So objectively it’s not out of the question the reverse could be tr…

But this doesn't test what another CEO would have done in the same situation.

All we can do is make a guess about how the average CEO would have performed. There's no way to really test it.

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