MBAs as CEOs

I find it odd how MBA's are painted with such a broad brush here. It's literally just a degree.

IMO, anyone who hires purely based on a degree - whether it be a PhD, MBA, CS or whatever, is probably lazy and bad at hiring. If MBAs ruined a company, the people to blame should be the people who hired those individuals who happened to have MBAs and allowed them to ruin the company.

Granted, MBA programs do attract certain types of personalities - there were plenty of jerks when I started my MBA almost a quarter of a century ago (wow, i'm getting old), but there are also plenty of people with MBAs who aren't stereotypical money-grubbing, buzzword-spewing drones either.

It is absolutely fascinating to look at the explosion of books, both self-help and entrepreneurial, that started in the 1980s and continues to this day. Some of those books are very good, and worth reading (my favorite, is Drucker's 1985 book "Innovation and Entrepreneurship"). Some of the self-help books are useful to salespeople (a good interview technique, when hiring salespeople, is to ask them the last 3 self-help books they've read. If they haven't read any, then they are not serious about sales).

Many of these books are complete garbage. But there are a lot of them.

The fascinating thing is how much this explosion of exciting rhetoric coincides with a sad and darkening reality, as described in sources such as these:

"The Surprising Slowdown in Startups"

http://fortune.com/2016/03/18/startup-growth-stagnation/

What if the conventional view of startups and entrepreneurship in the U.S. turns out, like so many conventional views, to be wrong? Substantial recent research suggests that it is. So brace yourself for decidedly counterintuitive findings that may help explain some of our era’s economic puzzles. First surprise: Startups aren’t increasing in the U.S. On the contrary, entrepreneurship has been declining for decades. The startup rate has fallen sharply over the past 30 or so years, from 14% of total companies in a given year to about 8%, say multiple papers by researchers Ryan Decker of the Federal Reserve Board, John Haltiwanger of the University of Maryland, and Ron S. Jarmin and Javier Miranda of the U.S. Census Bureau. That’s bad news because the rise of new companies is an important way in which capital and labor get reallocated from low-productivity uses to high-productivity uses. But this bad news gets worse.

And also:

http://www.governing.com/topics/mgmt/gov-businesses-economic...

Startup rates, or the share of all companies formed within the past year, had exceeded closure rates every year since at least the 1970s — even during recessions. That all came to a halt in 2008 with the economic downturn. While it’s normal for growth to diminish somewhat during economic recoveries, it has been slower than usual: There were still 182,000 fewer businesses in 2014 than in 2007, according to the report.

Falling startup rates aren’t just confined to a few industries. All major sectors of the economy experienced gradual declines.

The slowdown in the formation of new businesses has led to what the report calls a “golden age of incumbency,” with a larger share of Americans working for well-established companies than ever before.

Its a joke about how Tim Ferris followers can be very protective and dogmatic about his teachings, which parallel the way followers react to a certain prophet of a certain religion we all know.

> So why do they persist in promoting this education for management, which, according to mounting evidence, produces so much mismanagement?

> The answer is unfortunately obvious: with so many of their graduates getting to the “top”, why change? But there is another answer that is also becoming obvious: because at this top, too many of their graduates are corrupting the economy.

The MBA is a graduate degree that is the highest compensated of the Masters degrees that you can get from business schools. Here's why I think that is:

How do you put together economics, finance, accounting, organizational behavior, marketing, and operations, in a way that makes sense?

A lot of people have trouble thinking of these things both holistically and distinctly.

The MBA is both a high-level overview of these subjects, and a sustained study on putting them all together in an aligned way.

The degree says the owner has studied that specific body of knowledge rigorously and at length. It does not mean the owner has studied each component as in-depth as someone with a degree in any of these individual subjects.

I have a generalist MBA myself. But I supplemented my studies with a lot of time in the library studying books and journals on finance, statistics, computer science, and management. I tried to lock down my learning by logging each article and book, and I believe I had 400 items in my bibliographic database when I graduated - I understand the rest of my cohort used the bibliography tools built into Microsoft Word. I didn't get any networking value from the degree - I got it from a half-decent state school in Florida - most of my cohort was civil service, local accountants, and a couple of engineers and housewives.

I used R for my statistics project. The rest of my cohort used Excel.

For the capstone project, a business competition, I tracked my competition in spreadsheets for simple charting (every turn took about an hour of data input manually from pdf) - I don't believe the rest of my cohort did anything of the sort.

I was able to do a lot more than my cohort with the same education as my cohort. The business school was accredited by the same standards body as Harvard.

I don't know if I'm qualified to be a CEO yet. I like to say that I want to be qualified to run technology at a hedge fund. I'm continuing my education by signing up for the CFA, and I take my first test in December. Wish me luck.

But to answer Mintzberg's question - why keep promoting this education for management, which, according to mounting evidence, produces so much mismanagement? - This is the wrong question. The course material is correct. The problem is selection bias. Those looking for the fastest route to career acceleration go for their MBAs - thus being, at least on paper, the best qualified to run firms. We need to get this education in the hands of the right people.

We can also address the problem on the CEO side by better aligning their compensation to long-term performance instead of short-term performance measures. But shareholders are fairly impatient, and boards of directors seem to like the idea of juicing short-term performance.