The rise in CEO pay, and tying CEO pay to stock performance, are entirely orthogonal issues. The fact that the article doesn't seem to realize this distinction, makes me question how much of the rest of the article is similarly flawed.
The MBA Myth and the Cult of the CEO
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Re: The MBA Myth and the Cult of the CEO
#22I'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…
I definitely think you are right. But then again, there are so many confounding factors at play that this all becomes so difficult to detangle.
I posted this in a separate comment too: Freakonomics Radio had a series called "The Secret Life of a CEO" that covered CEO performance and many other topics. I highly recommend it!
Re: The MBA Myth and the Cult of the CEO
#23This 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…
> 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.
Same as most degree credentialism. People don't hire Harvard graduates because of all the valuable stuff they learned at Harvard, they hire them because they were smart and driven enough to get in to Harvard.
Re: The MBA Myth and the Cult of the CEO
#24This 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…
We don't need Presidents and Popes either.
The world is a much more complicated place today, than during the time of kings, and the accumulating data is going to keep revealing the complexity is too much for one man or woman to be responsible for it all.
But when a Deepwater Horizon type event happens and the whole herd starts baying for blood, are we sophisticated enough to say hey look at the data whats the point of lynching one person?
Of late the US seems to have attained that level of maturity, given how they have dealt up with Wall St after 2008, or the Pentagon for the 20 year war or dear Mark Zuckerberg. So maybe it's time.
I don't see older firms changing but newer firms might turn less hierarchical.
Re: The MBA Myth and the Cult of the CEO
#25The rise in CEO pay, and tying CEO pay to stock performance, are entirely orthogonal issues. The fact that the article doesn't seem to realize this distinction, makes me question how much of the rest of the article is similarly flawed.
Can you elaborate on why they’re “entirely orthogonal?” Since this increased compensation is stock, aren’t they at least somewhat related?
Re: The MBA Myth and the Cult of the CEO
#26One 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.
No wonder he's doubling down on Apple.
Re: The MBA Myth and the Cult of the CEO
#27One 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…
An important part of an executive’s job is hiring the right people to execute, which requires some level of skill or networking in my opinion, even if results aren’t always guaranteed.
Re: The MBA Myth and the Cult of the CEO
#28I 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 f…
Interesting story. I'm curious about the "petty shit" part. Did he step on the owners' toes? Did he have an abrasive personality? Was he fudging his expense reports?
Also curious what happened after he left. Did sales/profits drop? Did his legacy of reforms carry on?
Re: The MBA Myth and the Cult of the CEO
#29I am thinking about starting MBA in the fall (having MS in CS from a Top 10 US school), just because I can and it could be helpful for running my own companies. Talk me out of it please!
(I might do a PhD in ML in parallel if I feel crazy enough)
Re: The MBA Myth and the Cult of the CEO
#30I'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…
>Over the past year, we set out to answer these questions. We created a database of approximately 8,500 CEOs and their characteristics, each individually mapped to their respective companies for the duration of their tenure, and pulled company fundamentals from Compustat, stock returns from the University of Chicago's Center for Research in Security Prices (CRSP), CEO tenure and education from BoardEx, and long-form CEO biographies from Capital IQ. We then ran a battery of tests on the new data set, looking for correlation, persistence, and predictive power.
...Nevermind that, I heard that some guy took the job because he liked challenges.
Maybe Dara was already wealthy and the marginal utility of the money at Uber wasn't a factor? Maybe this would lead him to beleive that his own decision making an knowledge would be superior and he wouldnt listen to his peers. Soooo many variables.
It never ceases to amaze me we can dismiss data driven ideas in a blink of an eye because it doesn't fit a narrative we've developed through anecdotes.