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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

#71

Post by grogenaut »

nugget wrote: post #40
supercanuck wrote: post #30

Earlier quoted context omitted.

>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…

You’re absolutely correct, some of the time. On the other hand, at other times, academic researchers can conjure up an armada of buzz words and hot air balloons to support a position that even very limited real-world experience and common sense proves laughable misguided.

Yes it was very obvious that spontaneous generatuon was the correct answer, that Pasteur guy was a moron.

Re: The MBA Myth and the Cult of the CEO

#72

Post by bkohlmann »

The lead author is a friend of mine. The beautiful thing is that he got an...MBA from Stanford.

I’m consistently intrigued by his observations about the world. He doesn’t let his own background get in the way of questioning established wisdom. The fund he runs now is based on a belief that private equity is seriously flawed...which he discovered by working as an analyst for one of the top firms.

He hosts a fantastic weekly newsletter with a lot of quantitative insights - can discover his strategy and sign up here:

http://verdadcap.com/strategy/

Re: The MBA Myth and the Cult of the CEO

#73

Post by supercanuck »

nugget wrote: post #40
supercanuck wrote: post #30

Earlier quoted context omitted.

>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…

You’re absolutely correct, some of the time. On the other hand, at other times, academic researchers can conjure up an armada of buzz words and hot air balloons to support a position that even very limited real-world experience and common sense proves laughable misguided.

you just did exactly what I was talking about.

Re: The MBA Myth and the Cult of the CEO

#74

Post by bloomer »

sk5t wrote: post #32
bitL wrote: post #29

I 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)

If you have the time and money to spend (or it's otherwise paid-for) and a spot at a top 5 program--why not?

Opportunity cost

Re: The MBA Myth and the Cult of the CEO

#75

Post by sokoloff »

cm2012 wrote: post #14
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.

"I try to invest in businesses that are so wonderful that an idiot can run them.

Because sooner or later, one will." --Warren Buffett

Re: The MBA Myth and the Cult of the CEO

#76

Post by AznHisoka »

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…

“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?“

Because the 1st requires predicting what other investors think about a company or the economy (after all, the stock price doesn’t move in align with its profits/revenues). Not whether a company will be successful.

The 2nd simply requires knowing what consumers want, whether they be individuals or businesses. You just need to solve their problems in a better way than competitors. So understanding the fundamentals of a market is enough.

Re: The MBA Myth and the Cult of the CEO

#77

Post by pembrook »

AznHisoka wrote: post #76
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…

“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?“ Because the 1st requires predicting what other investors think about a company or the economy (after all, the stock price doesn’t move in align with its profits/revenues). Not whether a company will be successful. The 2nd simply requires knowin…

What you're describing is the "Greater Fool Theory" of asset pricing...where the emotional temperature of other investors sets the price for an asset. This is true only for assets that don't produce cash flows and thus can't be valued using traditional valuation models (ie. like gold, crypto, etc).

Businesses on the other hand are properly valued for their profit/revenue potential given the available information at the time. This has been proven over and over again. The data is clear on this; the high level of market efficiency is why the stock market is so hard to beat.

Successful investing (not trading) absolutely does require predicting whether a company will be successful. Both investors and employees of a company need to be correct about the thesis for why the company solves a consumer need. Otherwise both parties will lose.

Re: The MBA Myth and the Cult of the CEO

#78

Post by blunte »

Not only might there be issues with choosing CEOs based on pedigree and past performance (related to share value), but even the measurement of share value is arguably a weak indicator of company health and profitability.

Many institutions and media organizations are focused on quarterly or annual share price, but those numbers can be temporarily inflated if the company is willing to take actions that would damage itself longer term. And when I say "would", I actually mean "usually do". Also, global and industry factors can push a whole sector up or down for months or years.

Re: The MBA Myth and the Cult of the CEO

#79

Post by pembrook »

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…

Except, we've learned via a robust body of research over the last 5 decades that the market is largely efficient.

Therefore, a change in share price over time (not measured in quarters, but over 3+ year periods...as was done in this study) is an excellent proxy for change in fundamentals.

Re: The MBA Myth and the Cult of the CEO

#80

Post by usrusr »

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…

But is CEO quality really about the best decisions?

Playing the MBA's advocate, maybe it is so hard to "consistently beat the market" with decisions, that their usual quality spread does not even matter that much? Amongst other reasons, because even an apparently foolish decision, if for some unexpected turn of events it suddenly is the "golden path" will give the bigger returns than an "obviously smart" decision ever could?

If that is the case then the decisions themselves would be secondary to how those decisions are executed. Then you wouldn't look for the best decisionmaker for filling the CEO position, you'd search for the best at getting the team united behind a decision who isn't completely terrible at making them. Basically someone who is good at commanding respect, which is exactly what those high-status institutions are teaching/selling.

Being the typical overconfident dev I always tend think that I would make the smartest decisions ever if in the captain's chair (surely this isn't true, but it feels true way too often), but I never think that this would make me an actually good CEO.

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