The MBA Myth and the Cult of the CEO • Hacker News Board

Re: The MBA Myth and the Cult of the CEO

#51

Post by kartan » Sun, Mar 03, 2019, 7:32 PM UTC

crazygringo wrote: post #9

I'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…

> To play devil's advocate: what if top CEO's (whether by school or by track record) look for harder challenges?

That literally means that CEO's do not know how to do their jobs. Even if they do it knowing it.

> 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".

And there is families that depend on that companies salary. Drivers around the world will be affected by Uber's CEO decisions. That is a job that will not be a game for most people. But, maybe it is for anyone that want that kind of job. They are just playing while others are the ones that are affected by it.

Re: The MBA Myth and the Cult of the CEO

#52

Post by darawk » Sun, Mar 03, 2019, 7:34 PM UTC

I've done these same analyses before as well, and more. This is the correct analysis to do if you're looking to build an alpha-generative trading strategy. It is not necessarily the correct analysis to do if you want to measure actual CEO performance.

If you want to measure CEO performance, you need to look at growth in fundamentals, not share price. The share price is going to reflect the market's beliefs about the CEOs. Which, if the market is efficient (as it seems to be for these variables), should show exactly no effect. If there were an effect here manifest in share price returns, we could all read this article and arbitrage it away. This would mean that the next person who looked for this effect would conclude "CEO performance has no correlation to share price returns!".

I'm kind of surprised they would do all of this statistical work and not be aware of this gaping hole in their reasoning. Now they do make the point at the end that they're arguing against stock-based compensation here, which is a good point. If the market prices in your value as a CEO the moment you're hired, you don't want to have share-price based compensation. You want comp tied to growth in fundamentals.

Re: The MBA Myth and the Cult of the CEO

#53

Post by bluedino » Sun, Mar 03, 2019, 7:41 PM UTC

klenwell wrote: post #28

bluedino wrote: post #17

Earlier quoted context omitted.

>> 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?

Things are starting to go back down, but they’re staying in the black at least for now.

Petty things would be exposing inefficiencies in the owner’s pet departments, usually consisting of underperforming employees that are family members, and the owners undermining random decisions he made just to spite him.

Re: The MBA Myth and the Cult of the CEO

#54

Post by [deleted] » Sun, Mar 03, 2019, 7:46 PM UTC

UncleMeat wrote: post #50

lordnacho wrote: post #6

Earlier quoted context omitted.

> 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?

Lots of people come to my team asking for work on X. If I said yes to everything my team would collapse from being spread too thinly. Being able to say that X is lower priority than what I am currently working on and leave the door open for re-evaluating priorities if needed is a key part of my job. My team also frequently comes to me with ideas for interesting work that also isn't contributing to our vision. If we j…

[deleted]

Re: The MBA Myth and the Cult of the CEO

#55

Post by drieddust » Sun, Mar 03, 2019, 7:49 PM UTC

crazygringo wrote: post #9

I'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…

Not really. I would put it this way. What would you do when you have build a reputation over years. Would you simply forego it for an adventure. I don't think so and I have not seen example to prove your hypotheses.

Even when these guys have taken impossible jobs, they negotiated for themselves first and ensured getting paid even when they didn't succeed.

Re: The MBA Myth and the Cult of the CEO

#56

Post by lordnacho » Sun, Mar 03, 2019, 7:53 PM UTC

darawk wrote: post #52

I've done these same analyses before as well, and more. This is the correct analysis to do if you're looking to build an alpha-generative trading strategy. It is not necessarily the correct analysis to do if you want to measure actual CEO performance. If you want to measure CEO performance, you need to look at growth in fundamentals, not share price. The share price is going to reflect the market's beliefs about the…

> You want comp tied to growth in fundamentals.

This has the same problem as tying it to the market. You don't know what the baseline is. Would a good CEO always grow the fundamentals? What if it's a declining industry? And vice versa.

Re: The MBA Myth and the Cult of the CEO

#57

Post by achow » Sun, Mar 03, 2019, 8:00 PM UTC

> Headhunters and corporate boards often look for CEOs with a track record of creating value at another company when choosing whom to hire. But if past performance doesn’t predict future results, then they might be looking at an irrelevant variable.

I don't understand this. I would imagine there is lot of accumulated knowledge, connections, network, skills etc. that are involved in taking day to day or strategic decisions.

Not irrelevant at all if my money was at stake.

Re: The MBA Myth and the Cult of the CEO

#58

Post by hitekker » Sun, Mar 03, 2019, 8:00 PM UTC

lordnacho wrote: post #6

pacala wrote: post #4

Earlier quoted context omitted.

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?

Agreed. Being a decision maker means saying "yes" and "no", with the awareness that saying "yes" to some things, means saying "no" to others.

In my experience, those who say "the primacy function of manager is to say no" have either failed at management, or are working in organizations so conservative that they are immobile.

Re: The MBA Myth and the Cult of the CEO

#59

Post by victor106 » Sun, Mar 03, 2019, 8:01 PM UTC

When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact. - Warren Buffett

The business that the company is in matters much more than any individual CEO or their background.

Re: The MBA Myth and the Cult of the CEO

#60

Post by 1024core » Sun, Mar 03, 2019, 8:08 PM UTC

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…

> You can complement your leadership by getting an MBA which rounds out the rough edges of business.

If you're already a leader, an MBA can help.

However, I see a lot of MBAs who come skipping out of a B school (even a good one like Wharton or Kellogg), and their approaches to problem solving are so identical!

I have seen my share of CEOs, but it's staggering how similar they are in their approaches. You could, after interviewing a few of them, come up with a flow chart and you'd capture about 90% of their actions. I have seen many a CEO run the company into the ground, but very, very rarely seen a CEO lift a company up and make a difference.

I think Satya Nadella in MSFT has really turned that ship around (please correct me if I'm wrong). But for every Satya, there are a 1000 mediocre ones, just trying one tool after another that was taught them in B school, and when the board gets tired, it throws them out with a golden parachute, only to be replaced by another cookie-cutter who does the same.