Whenever I hear critiques of MBAs I think of this anecdote from a paper [1] by Yanis Varoufakis:

In the parlance of signaling theory these [MBA] transcripts are known as screening devices. One personnel manager (of a financial services company) explained this to me candidly: “I have no doubt that economics courses, MBAs, etc. teach nothing I need my employees to know. If anything I need to reprogram them on the job. The courses they have taken encourage bad thinking.” “But then,” I asked, “why do you prefer to hire college graduates?” “Because,” he answered matter of factly, “if these kids were willing (and able) to pay large sums of money in fees; if they submitted boring assignment after boring assignment without fail, and did not complain vigorously in the process; then there is a good chance that they are the kind of people who will appeal to my customers and do as they are told.”

[1] https://www.yanisvaroufakis.eu/wp-content/uploads/2017/02/ag...

The classical model of capitalism is that profits are a side effect of some socially beneficial activity. But today, "maximizing shareholder value" as a goal has been so well optimized that it often no longer requires doing anything useful. This led to such strange situations as 40% of US corporate profits coming from financial activities. (That ended in 2008.) There's still the hedge fund industry, which is a net lose for its customers but a huge win for its operators.

The Harvard Business School helped develop the theory, and the policy thinking, that made this possible. Short-term capital gains are not heavily taxed, for example. Both Bill Gates and Warren Buffett have said they should be. That policy, which favors financial maneuvering, is so well entrenched that it's not even discussed politically any more.

The modern MBA is so efficient that is has optimized out research and development and many times the building part, which leads back to r&d. This is great for short-term and the upper end, bad long-term and for the core product. A big part of the equation missing today is longer term consumer strength i.e. wages, community impact, continue self-disruption/research etc.

Startups usually do most of the r&d now, and once it gets to small/mid level and "the process" comes in, the bizdevs take over after it is usually already an established product and r&d mostly completed. Depending on the balance of that takeover it either kills the product, slowly bleeds it, or if the focus is still on product then sometimes a super growth engine.

Companies that can keep a focus on r&d, building and changing markets while being very efficient are key. Usually these are engineer led (Amazon, Tesla, Google etc)

I have a Harvard MBA ('14, sec C), and where this whole argument falls apart for me is the idea of "The Golden Ticket". The author is confusing correlation with causation.

My MBA has had virtually no effect on my opportunities or employability. Heck, as an engineer and entrepreneur, it has probably done more harm than good. This is a consistent experience - with the exception of (perhaps) the military and overseas students folks tend to go back to their previous career track and trajectory.

Furthermore it's not really a very transformative experience. The ideals, priorities and abilities students bring to the program are generally the ones they leave with.

What HBS does well, above all else, is act as a filter. They really do a remarkable job at admissions, putting together a group of folks who are likely (by nature or nurture) to go on to have an outsized impact on the world.

Prof. Michael Jensen's higly-cited 1976 paper [0] identified the principal-agent problem [1] then argued that a company's sole purpose is to maximize shareholder value. This thinking is what gradually led to the now widespread obsession with stock prices and short-term results.

Short-termism is harmful.

Jack Welch said it best in a Financial Times [1] interview:

“On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal. … Short-term profits should be allied with an increase in the long-term value of a company.”

[0] Theory of the firm: Managerial behavior, agency costs and ownership structure, http://www.sciencedirect.com/science/article/pii/0304405X769...

[1] https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...

[2] http://www.ft.com/intl/cms/s/0/294ff1f2-0f27-11de-ba10-00007...

> [Professor Michael Jensen] advocated an "agency" theory of management in which management's sole duty was to maximize shareholder value. This upended the long-held "stakeholder" model, in which management was seen as having broader obligations to a corporation’s workers, customers and communities.

It's interesting how that theory has filtered into public consciousness. My sense is that the public doesn't grasp it as one theory among many possibilities, but as a law of nature (a pattern I see for many ideas - people lack perspective that the theory is one of many possibilities, and different concepts were popular before and others will be popular later). You can read people using agency theory, thought not by that name, on HN regularly.

Consider how amazing that is: An academic comes up with a theory, and eventually tens of millions (or more) are repeating it. Is it marketed? Even if it is, many or most of the people repeating it probably have no idea of the marketing. Is it part of an intentional political propaganda campaign? I know other popular ideas successfully pushed on the public this way (one I know of in particular is the "death tax", and I've observed others where the talking points frame and effectively end the discussion).

What incredible power. Is it random? Can it be directed and controlled? Who knows how and who is doing it? I know political groups do it to an extent, as I said, but I don't know their range or accuracy, so to speak.

Clayton Christensen, Harvard Business School prof, has promoted a tax structure that has much lower taxes on investments that last multiple years (say 5), and higher taxes on short-term investment (less than a year) as a way to incentivize long-term R&D. I like this as a mechanism to change the way MBAs think about profit and investment. I.e., as something that I'd love to see more at Harvard get behind.

I am admittedly out of my depth here, but I want to make a quick comment about something I've noticed from HBR publications (which claim to be primarily from HBS professors).

Typically, they strike me as the most stereotypically "academic" writings that I regularly run across. Meaning they are working hard to maintain an appearance of rigor and neutrality, but spend a great deal of time and effort squinting and straining to produce an outcome that aligns with their intended philosophy and desired conclusions. There is just so much output that is naive and tone-deaf to what's experienced on the ground in the white-collar world. While you can arrange some battery of numbers to support almost any case ("there are lies, damned lies, and statistics"), it doesn't change the efficacy or practicality of some of the things they end up endorsing/suggesting.

This is not a universal or blanket condemnation, as I do follow HBR precisely because sometimes their output is interesting or valuable. But many times it's clearly the result of a bubble.

One of the most offensive habits of academia is to elevate people to professorships almost straight out of school, despite these people having virtually zero real experience practicing the art they claim to know how to teach. This is particularly offensive when it comes to fields where the art is a crucial part of the application, like business and law -- which, afaik, are two fields where these farcical elevations happen routinely.

What do people really think about business school degrees? To me there seems to be a large disconnect between what we think of the person who takes one (ambitious, hard-working) and what he is taught there (basically nothing).

I went to business school as part of my degree at a top UK institution. They have 1 year MBAs so the joint school people got a fair taste of what the MBAs did.

And let me tell you, as half engineers nobody was impressed. Is this really what they do? Read a bunch of stories about Betamax or various Japanese firms, and extract lessons from that? That's not even a rigorous history course.

As to what the overall effect is, it just appears there is a class of firms who are fearful of hiring the wrong people, so they hire a brand name. These people are more likely to get into such firms, but it's not clear at all anything from the course is used there in a way that is more than superficial.

Have they damaged society by being too focused on short term gains? Well, it's not just Harvard and MBAs that went that way in the 1980s. Society as a whole did, too.

What underlines this, I think at least, is the fundamental failure of representative democracy: if the representatives can gain larger personal wealth especially on the long run by electing rules that concentrate wealth they will do so. This will work, alas, even without any corruption -- when they leave their post they will be able to get compensated for participating in the "system" and they know this. Because a Business School can only corrupt society if regulation lets that happen.

Breaking this up is not easy. I believe liquid (or delegative) democracy is the road forward. It is very interesting that the early Soviets before the Bolsheviks took over were pretty much this. http://www.ditext.com/voline/89.html But the time was not right for that -- now everyone has the means to communicate in their pocket so perhaps it's time now.

It's so easy to criticize Harvard Business School (HBS). Outsiders -- and insiders -- have been doing it for decades now, this book being the latest example. The Web is littered with accounts of spoiled Harvard MBAs full of hot air who have done stupid things.

Yet the school somehow continues to churn out an impressive number of people who rise to the top in extremely competitive fields, from Michael Bloomberg to Ray Dalio to Mitt Romney to Sheryl Sandberg, to name just a few.[1]

How does THAT happen?

My take is that over time HBS has evolved a process for identifying and attracting a disproportionate number of people with that kind of potential. Speaking from personal experience, I know and/or interact regularly with a good number of HBS grads. While some of them are indeed full of hot air, a surprising number are truly impressive individuals who are not only thoughtful and likable, but also capable of "running through walls" to achieve their goals.

[1] https://en.wikipedia.org/wiki/Harvard_Business_School#Notabl...

What does a university do with a $32.7 billion endowment?

On the same note, here's some research on the impact of Harvard MBAs as CEOs: http://www.mintzberg.org/blog/mbas-as-ceos

> "A decade after its publication in 1990, I looked at a book called Inside the Harvard Business School, by David Ewing, long an insider. (The first line was “The Harvard Business School is probably the most powerful private institution in the world.”) The book listed 19 Harvard alumni who “had made it to the top”—the school’s superstars as of 1990. My attention was drawn to a few of them who would not have been on that list after 1990 [...] So Joseph Lampel and I studied the post-1990 records of all 19. How did they do? In a word, badly."

It was explained to me once that it wasn't Harvard Business School that was responsible for the decline of capitalism, but Wharton. That the two represented two very different approaches to people. Harvard supposedly taught to value employees and customers as people, and to strive for social good as a primary goal. Wharton supposedly taught to treat employees and customers as renewable resources, dehumanizing them, and to strive for profits and shareholder value as the only goals. The source was biased to old-school ivy league, but someone I trust. I've never attended either school.

I'm sympathetic to arguments that MBAs, particularly at elite institutions, mostly benefit the graduate and not the company that employs him. I read an interesting study recently that made this claim by comparing the stock-returns of companies led by Harvard MBAs vs the market as a whole. Sure, the study is no smoking gun, but it's on the right track.

In contrast, the entire book reads like a series of anecdotes. And given that Harvard-MBA recruits the best and most ambitious students who go on to occupy numerous positions of power, you can always find a harvard MBA scapegoat behind every business failure that ever occurs. I don't see how this proves anything about the quality of Harvard-MBAs, other than the fact that they aren't perfect supermen. One could use this exact same line of reasoning and "evidence" in order to claim that white men are the cause of all problems in America.

HBS now has courses like Building Sustainable Cities and Reimagining Capitalism, both courses created in response to what I presume is student interest in subjects beyond the profit maximization motive.

Outside of a few courses and a few class discussions within each course that are centered in exploring social value, the overwhelming majority of the experience requires students to check their social mindsets at the door and think like stewards of shareholder value.

One of the saddest parts about the HBS classroom is its reliance on student participation and student-led learning. While this is an effective way of training students to assert their opinions, I have seen several circumstances in which groupthink and conformist pressure keeps the "social" viewpoint at the margins of the in-class discussion. HBS just isn't the place for critically thinking about anything other than profit and loss.

Edit: grammar

These kinds of narratives are so appealing, but they are so very difficult to justify.

Harvard has monumental cachet, and 2008 is still an interesting topic. So it makes for a super interesting argument to suggest that Harvard is somehow responsible for 2008. But come on. This is simplistic, to say the very least.

This kind of narrative reminds me of when people "explain" why Apple under Steve Jobs was so successful. It's safe to theorize in that case because we can't rerun history and do experiments. 2008 is the same way.

It does seem like Jensen was key in evangelizing ideas that tied executive compensation to stock performance. This even led to a 1993 IRS rule [1]. Here "value" was clearly shareholder value; the dollar value of stock.

Then, in 2000, on the verge of the Enron collapse, Jensen offered an updated theory - "Value Maximization and the Corporate Objective Function" [2]. Here, he suggested that the definition of "value" perhaps needed to evolve, and consider stakeholders. However, I'm not sure this later work had the impact of changing executive compensation, or corporate decision-making, probably just created debate.

Probably feels something like not being able to fix a bug in production..

"Undeniably one of the most influential business theorists of modern times, he (Michael Jensen) advocated an “agency” theory of management in which management’s sole duty was to maximize shareholder value. This upended the long-held “stakeholder” model, in which management was seen as having broader obligations to a corporation’s workers, customers and communities."

Wikipedia [1]: "After Jensen and Murphy (1990), Congress passed a law, making it cost effective to pay executives in equity. As a result, executives had a financial incentive to focus their efforts on increasing stock price. In the short run, some executives even manipulated accounting numbers (e.g., Enron, Global Crossing) to achieve this goal"

HBS '00 [3]: Jensen, new theory of Enlightened Value Maximization: "We must give people enough structure to understand what maximizing value means so that they can be guided by it and therefore have a chance to actually achieve it. They must be turned on by the vision or the strategy in the sense that it taps into some human desire or passion of their own—for example, a desire to build the world’s best automobile or to create a film or play that will move people for centuries. All this can be not only consistent with value seeking, but a major contributor to it.

And this brings us up against the limits of value maximization per se. Value seeking tells an organization and its participants how their success in achieving a vision or in implementing a strategy will be assessed. But value maximizing or value seeking says nothing about how to create a superior vision or strategy. Nor does it tell employees or managers how to find or establish initiatives or ventures that create value. It only tells them how we will measure success in their activity."

[1] https://en.wikipedia.org/wiki/Michael_C._Jensen [2] http://www.hbs.edu/faculty/Publication%20Files/00-058_f2896b... [3] http://hbswk.hbs.edu/item/value-maximization-and-stakeholder...

"France’s prestigious “Grandes Écoles” — not H.B.S. — appear to have generated a disproportionate number of the financial engineers who unwittingly helped cause the crisis.)". Wow... just wow.

Read Chomsky and weep.

I thoroughly enjoy John Ralston Saul -- he popped up on HN a while back[1]. A Canadian philospher with a GSOH - what's not to love?

From his Doubter's Companion (highly recommended) - an occasionally acerbic description of many things - comes this definitive entry under Chicago / Harvard School of Economics:

> A great centre of contemporary SCHOLASTICISM. The economists working there and produced by it are as important to the stagnation of useful thought as the Schoolmen of the University of Paris were at the height of the Middle Ages.

> Like that of the Paris scholastics, their mastery of highly complex rhetorical details obscures a great void at the centre of their argument. They also share a tactical genius for exporting their conceptual definitions to less important centres around the world. The result is a pleasing symphony of international echoes imitating their calculations and cadences and so confirming their correctness, even when their policies bring economic disaster. The percussion section of Chicago’s orchestra is the Nobel committee for economics. Each golden medal is like another congratulatory parchment presented at the end of an elaborate theological debate.

> But what of content? There isn’t much. What of Friedrich Hayek and Milton Friedman? These minor Thomists preach little more than inevitability and so counsel passivity.

> What they call libertarian economics is a remarkable revenge of the scholastics on the men of the Enlightenment, who had theoretically destroyed them. Peel away the tangle of intellectual leaves from the Chicago School and what remains is a great clockmaker god who has set the world ticking. But the conclusion of the Enlightenment was that god’s indifference left humans free to organize the world as they wished. Chicago has so deformed this idea as to invert it. The great clock has been turned into an absolute, all-encompassing system. Better than an ideology, the world is its own absolute economic truth. We must remain passive before its majesty.

> This is a denial of Western experience. It is nonsense which simply comforts the power slipping increasingly into the corporatist structures.

> Strategic thinking can save a great deal of time wasted over tactics. A large number of America’s economic problems, and those of the West, could be solved by shutting down the Chicago School of Economics.

> This would not prevent the academics employed there from preaching their essentially anti-social and amoral doctrines. They would be gathered up with delight by the hundreds of imitation Chicago Schools. The purpose of closure would be simply to disentangle a tendentious ideology from its unassailable position within contemporary power structures. The same sort of liberating shock treatment was applied to European civilization in 1723 when the Society of Jesus (Jesuits) was disbanded. The effect was to set free the ideas of the Enlightenment.

[1] https://news.ycombinator.com/item?id=10139144

one solution for the "...the Moral Failure of the MBA Elite " - part:

https://en.wikipedia.org/wiki/MBA_Oath

"MBA Oath (short version)"

"As a manager, my purpose is to serve the greater good by bringing people and resources together to create value that no single individual can create alone. Therefore I will seek a course that enhances the value my enterprise can create for society over the long term. I recognize my decisions can have far-reaching consequences that affect the well-being of individuals inside and outside my enterprise, today and in the future. As I reconcile the interests of different constituencies, I will face choices that are not easy for me and others.

Therefore I promise:

-I will act with utmost integrity and pursue my work in an ethical manner.

-I will safeguard the interests of my shareholders, co-workers, customers and the society in which we operate.

-I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.

-I will understand and uphold, both in letter and in spirit, the laws and contracts governing my own conduct and that of my enterprise.

-I will take responsibility for my actions, and I will represent the performance and risks of my enterprise accurately and honestly.

-I will develop both myself and other managers under my supervision so that the profession continues to grow and contribute to the well-being of society.

-I will strive to create sustainable economic, social, and environmental prosperity worldwide.

-I will be accountable to my peers and they will be accountable to me for living by this oath.

-This oath I make freely, and upon my honor."

more:

- http://mbaoath.org/

- https://hbr.org/2009/06/why-we-created-the-mba-oath

- FT:"Is the MBA oath still relevant?" 2015 https://www.ft.com/content/e853f5a2-fe41-11e4-8efb-00144feab...

- debate: "Why MBAs should not sign the Harvard Business School oath"? http://knowledge.insead.edu/leadership-management/why-mbas-s...

or alterative suggestions from the "debate":

"I pledge to maximise the wealth of the people who pay my salary, i.e. the shareholders, unless the shareholders tell me in advance that they want me to do something else. I will do my best to learn how to do this by taking the relevant courses"

The failing New York Times failed to point out the author of the critique, James Stewart, is a Harvard grad himself. Hardly an unbiased article. No conflict-of-interest disclosure. Many half-truths and disingenuous statements in defense of Harvard.

Sad.

> junk-bond-induced takeover mania and resulting scandals of the 1980s; the corporate scandals of the 2000s; the egregious increase in the pay gap between chief executives and ordinary employees; the real estate mortgage bubble and ensuing financial crisis; even the election of Donald Trump

Just leave out the part about President Trump. Plenty of people like him.

> Harvard has obsessively pursued money, sending a disproportionate number of its graduates to consulting firms

I assume the students are the ones pursuing money

> An obsession with stock prices and short-term results was the motive for many of the accounting scandals of the 2000s

Was it ? I thought it was unscrupulous people doing accounting fraud and information asymmetry between shareholders and executives.

> McDonald insists he isn’t “anti-business-school” (he attended Wharton), nor is he “anti-wealth.

But just a few sentences above :

> McDonald notes that in 1992, the C.E.O.s of Fortune 500 firms made an average of $2.7 million a year. By 2000, the average was $14 million.

> It’s a shame that some of them didn’t see the looming disaster and sound an alarm

Some did and made a lot of money from shorting these bonds. Only when it became possible to short these bonds that the bubble finally collapsed and the money went to fund more useful ventures.

> lay a part in helping more people who think about business rediscover a purpose other than profit

A better solution would be to ensure more information symmetry ( even through government action ) and having more ambitious people in regulatory agencies. 'Pitting ambition against ambition' ( to use a Madison quote ) is a system that has historically worked very well to curb these types of predatory behavior