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an interesting tag line indeed. I won't comment too much since my week is busy enough to refrain me from thinking how come I have a time to write this post or even such a silly statement like this. However this tag line struck me when I was reading SMU Daily Alerts. It is easy enough to refute the statement with one argument: if non-flight training schools are allowed to run the flight, "this number of crashes" is surely an wonderful performance for them. Same like the case in business, who else except the MBAs? Honestly I don't know the answer too (it's not a rhetorical question, haha).
But one thing that is a bit out of this topic but interesting is George W. Bush is having an MBA from Harvard Business School!! The man with the 3 trillion dollars war, the man who changed the biggest surplus ever in US history (post-clinton era) to the biggest deficit ever in US history at the end of his service (I should add the last few words because Pres. Obama certainly has the biggest deficit now) is the man whom I thought never really has an undergraduate degree. What a powerful negative campaign that I heard before. I only knew just know that he is actually alumni of Yale and Harvard.
Anyway, back to the topic, something fishy in his view though. I believe the MBA or any other education is just like a technology. It's only a tool, even though it's more like a bigger tool that actually can control someone if one is not wise enough. It depends on the person. We just can't blame the system behind the people all the time. If it's people's fault, then let it be. It's the moral values of the educators that may become the reason of all these mess. But, once again, who knows except God?
Nevertheless, enjoy the article, it's quite a thought-provoking one if you enjoy business and economy.
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Weekend • March 28, 2009
Matthew Lynn
WHEN King Henry VIII broke with the Church in Rome, he shut England’s monasteries. When Fidel Castro took power in Cuba, he did the same with Havana’s casinos.
So let’s close down business schools to get into the spirit of the new financial order.
In the past 20 years, the Master of Business Administration factories have created the conditions that have helped land the global economy in the current mess.
They legitimised a pseudo-scientific approach to finance that turned out to be bogus; they promoted a management style that was too mechanistic; and they formed a managerial elite more interested in rewards than producing lasting wealth for the economies they operate in.
There is little mistaking the growth of business schools, especially as the economy contracts and jobless bankers seek to boost their qualifications. Applications to MBA programmes last year rose at the fastest pace on record, according to the Graduate Management Admission Council.
The trouble is, the last batch of MBA graduates who rose to the top made such a hash of things it is hard to believe the next will do much better.
The people who steered the global economy onto the rocks in the past year all benefited from the finest management education that money can buy.
Famous alumni
Mr Richard Fuld, who was chief executive officer of Lehman Brothers when it collapsed, has an MBA from New York University. Mr John Thain, the former CEO of Merrill Lynch, is a graduate of Harvard Business School. Mr Christopher Cox, the former chairman of the Securities and Exchange Commission, has an MBA from Harvard University. And so does former US President George W Bush.
The record isn’t much better in Europe.
Mr Andy Hornby, the CEO of British bank HBOS is another Harvard Business School alumnus. HBOS had to be bailed out in a merger with Lloyds Banking Group and then both had to be rescued by the British government.
Mr Peter Wuffli, who as CEO presided over the huge losses that took Zurich-based UBS to the brink of disaster, studied management at Switzerland’s University ofSt Gallen.
Of course, it is unfair to assign all blame to business schools. Over the last three decades, taking an MBA has become just another qualification, a hoop to be jumped through on your way to getting a good job on Wall Street, or in London or Zurich’s financial centres.
If we studied the records, we would probably find that most of the CEOs who led us into the crisis also did finger painting at kindergarten — and it would be wrong to pin the credit crunch on that.
Clueless leaders
Still, it raises the issue of what business schools are teaching, and how they managed to create leaders who were so unable to spot the flaws in the companies they were running. If a flight-training school produced this number of crashes, we would be asking some questions. There is no reason that business studies should be exempt from the same kind of scrutiny.
The schools should be called on to account for several things.
First, they encouraged a quasi-scientific approach to business, sermonising that everything could be nailed down in a textbook.
By preaching a set series of formulas, they encouraged students to believe that running a company could be mastered by anyone. The entire private-equity industry is founded on that principle. So are mergers and acquisitions.
An acquired skill
In reality, management is a skill that is acquired through experience, judgment and flair. Billions are about to be wasted relearning a simple fact that should never have been forgotten.
Second, the intellectual tools that led us into the financial meltdown were largely invented within academia. Complex models for pricing risk created the market for the options and derivatives contracts that have caused so much trouble in the past year.
The business schools took something that was mysterious and unknowable — risk — and tried to make it as easy to count as peas in a pod. By doing so, they encouraged a whole generation of young men and women to go into investment banking armed with the belief that they had mastered risk; that it had been tamed and brought under control.
The truth, of course, turned out to be different. Bankers can no more tame risk than sailors can tame the oceans. All they can hope to do is steer a safe course through it.
Third, the schools created a managerial elite that acted like a caste apart. One reason the bonus culture ran out of control was that many of the people involved were trapped in a bubble. They thought “guaranteed” bonuses, private jets and multi million-dollar payoffs were normal. That process started in business schools.
No doubt, we will hear a lot in the next year about how the schools are reorganising themselves. We will see lots of papers and proposals, and probably a few equations, explaining how to stop the credit crunch from happening again.
But as Henry VIII and Castro both concluded, for different reasons, sometimes an institution is beyond redemption. It can’t be fixed, simply because it is the problem.
Just shut them down.
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The writer is a Bloomberg columnist.
The opinions expressed are his own.
Copyright MediaCorp Press Ltd. All rights reserved.
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