Friday, March 27, 2009

RIP, MBA

Another bubble pops. CNBC, of all the channels is running this story. Its hard to imagine that someone would slander the MBA degree to such an extent. time for a new phrase. Wonder when we see these articles about Indian MBA schools like IIM's and ISB. All Economic times does is to print articles about their average salaries in rupees, skewed every time due to dollar salaries earned by some folks who got placed in the US/UK. Morons don't understand the meaning of medians and standard deviations.

Those who can, do it,
Those who cannot, teach,
and those who cannot teach, do an MBA.

however I would not say that the MBA is useless. It has its value but a 1 year program post graduation program is better then two. Again the 100k loans for US MBA's are bad financial decisions, specially when high paying jobs are scarce. If you would know a thing about finance, this could be something to consider

Put your ear to the ground near any business school campus, and you will hear the sound of another bubble about to pop. The MBA will soon be joining equities and house titles in the museum of formerly overvalued pieces of paper.

The problem in the short term begins, like so many other fine things these days, in the financial sector. Over the past two decades, about one-third of graduates from top business schools took jobs in finance. But banking will never be what it once was (we can only hope), and consulting—the other major consumer of MBAs—is reeling, too. Couple declining demand with the fact that at the onset of a recession, the supply of students actually rises as the prospectively unemployed look for ways to fill in gaps in their CVs, and "shorting" the MBA looks like a compelling near-term trading strategy.

The really grim news for the MBA, however, is about more than short-term trends. Isn't it just a little suspicious, after all, that the sector that showed the greatest appetite for MBAs was the most grotesquely mismanaged? In fact, the economic crisis has exposed long-standing flaws not just in the modern approach to business education but in the very idea of business education.

The truth is that the relevance of the technical training allegedly offered by the MBA was always overblown. The idea that there is some body of knowledge pertaining to business management that can be packaged up and distributed to the business universe in two-year course-lets—well, it sounded good about a century ago, when it was first conceived. Maybe it still had merit when the schools were turning out only a few thousand graduates per year. But it certainly stopped making sense well before the schools achieved their current level of production of a whopping 140,000 or so graduates per year. The empirical evidence on the contribution of the MBA to individual career performance seems to bear this out—mainly because it doesn't exist. In fact, if the relevance of an M.D. to the performance of doctors were even half as unsubstantiated, we'd probably be fantasizing about tossing a few physicians in jail, too.

The other truth helpfully revealed in the throes of the crisis is that ethics and integrity and social responsibility aren't just optional extras for good business management—unless by "management," you mean "looting." Managers don't need to be trained; they need to be educated—in the sense of "civilized." Unfortunately, a business degree isn't just irrelevant to that purpose; it's positively detrimental.

Now, to be fair, people don't behave like jerks just because they spend two years in business school. After all, as many of my business school friends have pointed out, most of the first year goes into heavy partying, and the second year is really a marathon job fair. No, for the most part, people behave like jerks because nobody stops them from doing so. The charmers at AIG walked away with multimillion-dollar second homes as a reward for exposing their institution and the entire financial system to outrageous risks because it was (so far as we know) a perfectly legal way to make money. The whizzes at Goldman Sachs hedged their supersize profits with underpriced, implicitly publicly backed insurance from AIG for the same reason.

If we ask why no one stopped these people, however, we come right back to business school. It was the market fundamentalism that dominates business school thinking that assured us that markets are self-regulating. It was the management myth—the idea that there is some specialized, teachable body of expertise that constitutes management—that confirmed the strange notion that these people were capable of regulating themselves. And it was the shareholder-value model from Business 101 that said all you need to do is load up managers with tons of stock options and they'll be sure to do the right thing. These aren't just ideas that happen to be taught at business school; these are the ideas that provide the rationale for the existence of the schools. The only semblance of a theory behind modern business education is that it purportedly produces "experts" in shareholder-value maximization who are capable of forming an ideal, self-regulating market.

It's a neat theory, of course, and pretty radical, too. But not since the fall of the Soviet Union has a system of belief woken up with so many parking tickets on its windshield.

The reality is that business school is now chiefly a community of intention. It brings together people who share certain career aspirations—for the most part, to make big bucks—and occupies their time teaching them a few technical things that they don't need to know, along with a code of conduct that says, in essence, whatever is legal is ethical; and if it makes money, it's a positive duty. It's now clear that we would have all been much better off if, instead of cloistering these people on fancy campuses with world-class golf courses, we'd have sent them off to do two years of national service.

For the benefit of beleaguered business school academics, it's worth pointing out that a world with fewer MBAs is not necessarily a world without business studies. On the contrary, once researchers dispense with the idea that they have to package their material for the purported benefit of junior managers everywhere, they could actually study business. Maybe they could even learn to criticize it. Maybe they and their students could even learn to report on it, the way that journalists used to do.


In the meantime, since the national-service idea probably isn't going to gain much traction, I suggest that it's time to go long on the humanities. Now that we've tried business with savages, perhaps it's time to give the educated a shot.

13 comments:

Shriniwas K said...

You are right - Any and every one who could not tell the difference between a Balance sheet or an Income Statement was becoming an MBA in finance. Those who could not speak a word of English had HR MBAs, those who could not even sell vegetables had Marketing MBA's. They did not do MBA for being what the degree defines - they just did it because there was apparent demand and the news channels and papers quoted high 6 figure US$ salaries. ... :P

Same case with many other fields. Especially In India where the ethical practices of the universities and colleges are not the very noteworthy, and due of opening so many Business schools, many good students were lured to them in search of making quick moolah. Sound educational background with an engineering degree or core financial degree (CA/ICWA) followed by a meaningful MBA can prop up skills but yo must have a good base for that to build up on.

People with just pass marks in 12th, BCom, BA, etc in India make up the bulk of our "human capital" work force. Even the better qualified teams at IT sweatshops usually have one or two star performers in a team of 12-15 that do all the important work where as the others just fool around and jump from bench to bench.

The bubble is not in the demand for this education but has to do with the fees paid for this. An MBA degree that had 30,000 Rs fees per year now has 9 lakh fees. How do you justify spending 9*2 = 18 lakh of your parent's hard earned money if you aren't even going to get that back in 3-4 may be 5 years...

I chose doing MS from US which also seemed initially a bad decision but being in technical field is never bad as long as your skills are sharpened as per industry needs. I think the time has come for all these MBA's to really get themselves re-educated and do something worthwhile in the Indian market... I plan to do the same - so what if I am staying in a different country - your roots don't change ... All the best to them

Anonymous said...

In last 4 years majority of the MBA guys in financial industry have joined back offices but not as a decision maker. This boom was started by MNC to outsource back office work to India. Only premier business school guys have got the good opportunity.
This is all part of corporate game, they needs good/dexterous labor at cheap price.

Ask yourself.
How many patents are there on your name?
In day to day work, how much a mind should be innovative?

MS degree is as junk as MBA degree.
Today the knowledge base is so expanded; the minimum requirement for research kind of position is Phd.

“The current issue is more of attitude problem. People have only one thing in mind, higher degree higher salary. There is no co-relation between the likings or interest in subject. Yes, we can’t blame people, they follow the market requirements.
On the other hand how many builders are civil engineers OR MBA who understand the business & follow business ethics? The game is simple; you should know how to make money.”

If you disagree, provide the reference of papers published in last 2 years.


http://www.prospect-magazine.co.uk/
article_details.php?id=10683


Vulture.

Shriniwas K said...

I did not spend any money to get my MS. Moreover I have a couple of publications and did highly complicated research work for my University. Along side I worked in a company and learned a hell lot of technical stuff outside my academic domain. I dont have patents but I have partnership in 2 companies. I was working in Pune as a developer too and I agree that there we did not have the lee way to take decisions as I do now. I have done enough innovative work for which I am proud of and which reflects well on my resume.

I never said that MBA is a waste, as long as you know what you want to do after MBA. I am worried about students taking loans and quitting good jobs to join MBA and then finding themselves in a soup. Many smart ones go ahead, but some find themselves cheated. If they were not paying a hell lot of money its a different case but as you know MBA machines have been literally extorting money off unsuspecting students.
I am worried about fly by night colleges like the one started by that Arindam Chaudhary or Amity etc who are not AICTE/ UGC recognized, has no university affiliation and other private universities who have questionable backgrounds. I would suggest students to carefully take steps before coughing money.

Also many universities have so called corporate programs where they will go to software companies and enroll their employees for MBA - They too may try to swindle you. What is the use of that MBA if its not of any worth. BE+MBA or CA+MBA gets same salary/ has same skills as that of CA or BE their MBA is just a batch.

Ironically there was big hoopla when Dr Murli Manohar Joshi tried to rein in IIM fees. There was equal hullaballoo when Arjun Singh added OBC reservation to IIMs. I think India's education system needs the guiding hands of the government to prevent cheaters from ruining student's careers.

I also feel sorry for the students placed in IIM's etc. The publicity of their salaries make them target for robbery, kidnapping extortion and general nuisance. I think the media should be more actively exposing corrupt officer's wealth than college placed grads.

just my 0.02$

Salil said...

People join premier MBA schools not only for the education but for the excellent alumni network.
So the parties in the 1st year are for a reason and used to build up the network.

This network is more important than any education you will ever get at a business school. Why else do you think people prefer IIMs, Wharton , Chicago, Stanford etc over other B'schools? If you think it's because of the quality of education then you are wrong !

Anyway, salary surveys everywhere (India, USA etc) are sham and only a marketing gimmick used by the schools. You need to glean the right information from these surveys ....

And I agree about US MBA's being too expensive and maybe the return on investment is better elsewhere. But good schools in India (IIMs, ISB etc) are still relatively cheap and graduates from these schools will remain in demand for a long time as there is no other alternative.

de ghooma ke said...

@ Salil above,

Any degree which gives you the idea/notion that networking is more important than sound educational/practical skills is just useless. If networking during an MBA course is what gets you a job and a career then decide for yourself whether it is worth it.

I have a US Master's in Mechanical Eng. and for my portfolio I have got 400% returns in the US stock market under the present conditions in the last 2 years.

I bet I can beat the I-Banking shit out of these wharton/iim guys anyday.

Bharat said...

Dear De Ghooma Ke,

I have heard this networking argument about MBA's for a long time. Two things come to mind -
1. Who endorses these kind of theses about networking? i.e., who stands to gain by making these kind of assertions? And, what is the real truth about this networking thing?
2. If you have to depend on a network for a living or for going ahead in life then I wonder what that says about you as a person and your productive capabilities as a whole?

I do not intend this as a slight or in any bad way...but just thinking aloud ...

Anonymous said...

Deall all-
Be it MBA or or a degree from IIT, it is all about networking. People from IITs get good funding offers from IIT profs who are alumni of IITs and well placed in US. Not many Americans are aware of IITs.

Corporate America needs cheap educated labor who have studied Harvard Business cases, and IIM/ISB fit the best match for the global scenario.

I think the salaries for MBAs are too blown out with hefty bonuses. I think Engineers/Doctors add more value to society and they produce something that helps mankind. MBA/Lawyers etc. are bullshit areas and get money for nothing.

A friend of mine while I was in MS came from IIT Kanpur and was very snobbish about being an IITian. Well, so be it but he could not pass the driving written test even in two attempts in Maryland. I had to ask him if his degree was real. The intelligence level of many of these IIT/IIM graduates is very-2 average. It is the street smart folks who keep learning new things everyday and do good in life.

Most of these graduates from good schools get a good start in life, get good networks and a lot of it is cooked for them. They just need to be there. Like IAS in India. Bunch of idiots running the country, they get enormous powers, who are always greedy to serve their own interests.

--HB

Anonymous said...

I think you are in pipe dream if you think MBA do not teach anything. I did mine from SMU COX, I learned great deal of skills, its different matter that I didnt utilize it.

Salil said...

Why do people think networking is bad ? I am sure most of you must have experienced that getting a new job is easier if you have been referred by someone within the company. Isn't that your network?
Sometimes the person who has referred you has directly worked with you and hence might know that you are good. But most of the times referrer only knows you thru someone (no direct work relations)or from outside work.

You do not need an MBA degree to form a network, but it makes it easier and most likely your contacts will be in decision making positions. And so you can use these contacts to get new job, building your business, getting new customers etc..

On a lighter note; De Ghooma Ke, you invested your own money to make more money, whereas MBAs in finance will use someone else's money to make more money for themselves :)

And another thing to point out MBA is not equal to MBA in finance. There are lots of other places where MBAs are "needed".

Anonymous said...

I think the comments are only one sided. There is not even consideration to management skill set.
The important quality of management is leadership, planning & decision making. Which will ranks way above lot of innovations. I agree very few MBAs show these qualities.

Networking is the most important part of the MBA. If you are not from specific school you can’t enter into elite corporate groups. I have couple of examples
but I can’t reveal the names of companies. Networking is very similar to cast based quota system. Only the grouping criteria are different.

Economist:
http://www.prospect-magazine.co.uk/
article_details.php?id=10683

Lawyer:
http://www.youtube.com/watch?
v=1G57MHExbsc&feature=related
http://ibnlive.in.com/news/shootatsight-
order-in-chennai-after-violence/85928-3.html

Charted Accountant:
http://www.123breakingnews.com/
cas-to-be-punished-if-found-guilty-in
-satyam-icai-1008-123

Software:
“Ganda hai per dhanda hai ye.”


Vulture.

@di said...

When "whom you know" starts mattering more than "what you know and can do" in your success, you know something is going wrong. Something like what we are seeing on wall street and its effect on economy in large.

So while networking has been beneficial for a lots of mediocre individuals in getting a pie of the big loot, behold where has it lead the society as a whole.

And networking can provide such benefits only while the party is on. Once the night is gone and hangover begins, the headache can be devastating for the assumed "self worth" of such individuals.

de ghooma ke said...

Dear Salil,

I am against networking because as Vulture pointed out

"Networking is very similar to cast based quota system. Only the grouping criteria are different. "

and as @di mentioned

"When "whom you know" starts mattering more than "what you know and can do" in your success, you know something is going wrong. "

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