The Coming B-School Collapse

As is well known, one of the consequences of the economic and financial malaise that has engulfed the world for the past couple of years has been a very substantial increase in the number of applications to MBA programs. B-school has traditionally been a safe haven for those unlucky enough to count themselves as workplace victims of downturns and recessions, a nice hideout where to seek refuge for a couple of years in the hope that better job conditions would await once they graduate. But this time, the tradition seems to have played out with particularly passionate forcefulness. All across the board schools have been deluged with a flood of interest, happily collecting record numbers of application fees. The GMAT was taken in 2008 by more people than on any other prior year.

Not only are the sheer numbers different, the composition of the MBA cohorts may also be unprecedentedly unique this time around. Simply put, never before may so many highly-experienced, (formerly) highly-paid folks have decided to join the campus and embrace late-night homework assignments. Not only would a lot of the potential students be laid-off bankers and assorted refugees from the financial industry, but tons of decently-senior professionals have lost their jobs across a full spectrum of business fields and they too would rather go back to school than stay at home watching tv and wondering why the headhunters don´t call anymore.

Sitting next to those former corporate stars would be three other types of clearly distinct groups of students: 1) the typical MBA candidate that never fails to show up (27-28 years old, decent resume, ambitious, hungry), 2) youngish junior professionals who in fear that they may get fired in such unpredictable economy choose to take initiative and fly to the comforting safety of the university life, 3) high-flying undergraduates who would rather get the MBA thing over with now than risk facing an impossibly unfriendly job market for yet-to-prove-valuable rookies. All of those three groups are going to be very demanding when it comes to securing a very good job upon graduation. Group 1 because that´s how that group has always been. Group 2 because they gave up a monthly paycheck and because they thought they were walking into a better career in exchange. Group 3 because they think very highly of themselves and have never experienced failure. Needless to say, the older erstwhile Masters of the Universe won´t be content with meager post-MBA wages either.

B-schools are then going to be overpopulated and to present a student mix that is potentially explosive. I contend that things could get really ugly and this time typically-complacent deans may have a hard time finding a place to hide. Why am I so alarmist? Because I think that a lot of those students are probably not going to find jobs once they get their MBA crown, that´s why. Or at least not the kind of jobs that someone borrowing in excess of $100,000 and irresistibly enchanted by the promises emanating from the glossy brochures expects. A lot of those guys and gals are not going to get what MBAs got for the two decades prior (the sign-on bonus, the first-class plane ride, the six-figures package, the rosy future), and they are not going to like it one bit. And they may be loud about it.

I taught at a highly-ranked B-school during 2004-2007. My students were of good quality, but year after year the complaints were the same: they couldn´t get truly glamorous jobs (the kind that all top MBAs were getting around the globe back in those sensationally prosperous days). The best that most could hope for appeared to be to get some job, any job at all, that at least would let them repay their hefty student loans. So I wonder, what about these days? If those MBAs had a hard time when times were impossibly rosy, imagine now. Sometimes I picture students rioting and tearing down the school amid screams of "where´s my Goldman job! where´s my McKinsey job!"

Of course, the potential backlash that B-schools may face in this job-lite environment is compounded by the facts that the institutions themselves share some blame for the financial mayhem in the first place, and that the structure that, generally, dominates them (a fifty-year old status quo) is rotten to the core. B-schools are completely dominated by theory and theoreticians, bent on embracing failed and lethal dogmas. The credit crisis (largely caused by flawed mathematical models let loose) has shown how irresponsibly antisocial it is to peddle the quantitative snakeoil. Yet B-schools show no signs of abating their analytical practices, no real atonement, no true repentance.

If you were a current MBA student, witnessing how the expensive diploma can´t deliver corporate heaven and seeing how your professors keep teaching and promoting failed deleterious dictums, how would you react? Possibly not amicably. Who knows, we may yet witness a popular mutiny that unleashes the radical transformative revolution that B-schools should have voluntarily embarked on a long time ago.

Comments

[drymartini1]

If you are going to get an MBA get it from preferably from top 5 (or at worst top 15). Otherwise dont pay 50-100 grand for that education. its not worth it.

A lot of business schools do not even have that much prevalent campus placements. If you have to go out to open market again to get your job after you did your MBA, you did it in the wrong university.

The only right way to do your MBA is do it where you get hired before you graduate (either through alumni networking connections, peer-to-peer networking connections or straight campus placements).

Business school is not meant to learn as much as to hone your networking skills and build up the rolodex that should serve you through your lifetime. its not about coursework or professors. period.

But what do i know. I have not been to any business school though.

[DiogenesOfAlaska]

You're probably not surprised if I tell you that I dislike bragging about one's ignorance.

[allthings]

I think we are dancing around something here. What exactly are they teaching in business school that is applicable to the real world? Is it more like a fraternity? Hiring managers will hire a nobody who has an MBA from the right business school instead of a nobody with 5 years experience??

I have a friend who has an MBA with no experience and wouldn't even be let in the door for an interview. I suspect because it was not from the 'right' school.

MBAs cost BIG bucks, but what do you get for it?

[KillTheMessenger]

"MBAs cost BIG bucks, but what do you get for it?"

In the real world you will get big laughs for it. Professionally managed companies hire by experience, not by educational institution. Having said that, there can be differences. A EE engineering student from MIT can get much better access to tool chains and real world project work than someone who takes the exact same courses at a small university or college in the MidWest which has limited resources. There is a difference between talking about designing a VLSI chip in theory and actually getting to design one because you have the money and connections in the department to make the silicon.

Business school is no different. If your business school gives you the connections into the real world, e.g. VCs, large banks, Wall Street etc.., you will profit. If all it does is to give you the theoretical knowledge, whatever that might be, you are better off with a civil engineering degree. They will always have to pave roads somewhere or excavate for a new structure... and you will not depend on knowing the right big shot.

[PlanetKansas]

I tell my students to double major the liberal arts and an accounting degree, an unbeatable combination for the future job market.

Businesses need to hire people that can identify and solve problems, and have the tools to be able to speak, write and communicate their solutions. My experience is that Liberal Arts majors have the best creative thinking and communication abilities and a much broader toolbox than a mere b-school graduate. This was so in the 1950-1960s, when any Bachelors degree was a desirable commodity for hire. The MBA is too limited in scope, creative thinking and ethical problem solving is what business really needs.

Second point, accounting and a CPA is a much overlooked B-School program with almost guaranteed job prospects. The degree requires much more effort and discipline than an MBA, and is in as much demand as nursing and engineering.

The best way to learn a business is to work in it, not study it in books,.

[DiogenesOfAlaska]

If loads of people used to be highly paid bankers and now find themselves in the position to earn an MBA degree because that's the best option available to them, then what exactly is your question?

For, if this is so, it means that people could be highly paid bankers without even having the knowledge provided by an MBA - which is very modest when it comes to elaborate quantitative instruments.

You still seem to think that there's something wrong with people from quantitative sciences being around in these markets. Did you ever check the hypothesis that it is the ignorance and the blindness among managers that has created the crisis, not the math skills?

I'm not saying you can't be blind when you're a mathematician. You certainly can. But where do you take the connection from? It doesn't exist. The crisis is the result of poor judgement. You can find poor judgement among those who should know better and among those who had no chance to know better and among those who did know better.

Make your pick. But be careful what you wish for.

[KillTheMessenger]

I think it is important to point out that almost all quantitative analysts in the business world are mathematicians, physicists, chemists (like a friend of mine) or from other hard sciences. And no, it is not easy to fool any of those. In hard sciences the very first thing you learn is to do multiple tests on everything you observe or predict with a calculation. The prevailing methodology is "if it looks too good to be true, it always is".

Having said that, hard scientist can not prevent others from using perfectly correct models in "gigo" mode... and that's usually what happens. I have been there when supervisors without science background where basically asking "So what do you have to plug into the model to get X out...?". And you could tell that nobody felt the slightest discomfort with that, except for the modeler, of course, who was cringing...

:-)

[DiogenesOfAlaska]

That's certainly not very far from my experience.

Which raises the question: is it possible for an economy to tolerate this?

Of course there has been similar stuff going on for centuries. But the question is: if the livelihood and wealth and life-time spent at work of hundreds of millions depend on it, then does it really make a lot of sense to grant that amount of 'discretion' to supervisors and managers?

Or should they learn a thing or two instead?