Do MBAs harm the economy?

MBA, The Economist, Catarina Alexon, Catarina's World

No, it’s not a joke. The Economist were debating if the economy would be better off without MBAs. Have some fun and watch, or rather read, this short video on opinions voiced in their recent debate:

The video speaks for itself and looks at both sides of the coin.

Needless to say the debate took place because MBAs are blamed for calculating financial instruments that contribute to, or cause,  financial crisises.

Bloomberg Businessweek made a survey to find out if MBAs make better CEOs. They found that roughly 40 percent of the S&P 500 chief executives have MBAs. Half of the top 10 CEOs had MBAs. In other words their findings are on par with what The Economist debate concluded about MBAs.

Do you agree with the The Economist and Bloomberg Businessweek that it’s 50-50 if an MBA makes a difference or not? Or are you of the opinion that MBAs are good for the economy? Or do they harm it? Would we have avoided the recent financial crash if MBAs had not made faulty calculations? Or would it have happened anyway? Maybe a bit later? Should companies keep a close eye on MBA students straight out of university to avoid faulty calculations? Or should they be allowed to be as innovative as possible? 

Video: EconomistMagazine – Picture: Fabio Aro 

73 responses

  1. I can't really comment on the role of MBAs, but it does seem that there were some unethical choices made in the recent financial crisis. How to hire knowledgeable people who are more ethical and won't play the system – I don't know.

    Certainly one gets knowledge from management experience that one can't get from school, but the better MBA's usually have work experience as well.
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  2. A degree confers knowledge, which is good. You often have to teach yourself wisdom, which is harder. Thanks for the post.
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  3. No, MBA's don't harm the economy. An MBA is not going to teach good leadership or ethics, but then no degree will. If it is a requirement for a job, then as Lenora points out, it's because decision makers are bad at selecting appropriate candidates. Requiring an MBA is a simple way to get rid of many applicants. I may be biased, but it seems to me that a degree in sociology or psychology may be a more useful tool for motivating large workforces towards better productivity.

  4. Catarina,
    I don’t believe we can blame the financial crash on MBAs but on the other hand, I do feel the degree itself is overvalued. Too often, people are hired simply because they have that piece of paper. I believe both of us are in agreement that while management skills may be teachable, true leadership can’t be taught.

    This entire discussion reminds me of the situation that my husband is currently in. He’s a teamster truck driver who is “dispatched” by people who have degrees but have absolutely no experience in the trucking industry. It’s actually laughable to hear some of the scenarios that occur because the person(s) in charge of logistics doesn’t have a basic understanding of the task at hand. It costs the company a lot of money but management either is blind to the fact or are simply complying to rules that have been put in place. This goes on all of the time in all sorts of industries.
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  5. I think that education is important, and that MBA's or PhD's have value. BUT … they cannot teach people how to connect with other people. I think that much of the skills it takes to be a good leader or CEO must be learned on the job, and must be inherent in our personalities. Some of us are born leaders, and will lead well regardless of formal education. Others … no matter how much education they acquire, will not make good leaders as they lack insight into the dynamics of human nature. So I guess I would say that in many instances, MBA's are indeed contributing to some of the problems that have occurred in the recent economic meltdown.
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  6. I think it is a case of it depends and just because some had MBAs and were involved in the crisis seems to me leaning towards generalising. I think part of the problem is in some universities there is still the focus on the academic and not enough on the practical side of business. I do agree with your comment to Leora, that today they require a MBA. Years ago it was a bachelor degree, then a masters degree.
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  7. I agree with Leora's comment above. I have tried to expand on that thought, but she said it so well.
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  8. In the U.S. where you get your MBA is more a predictor of success that simply earning the degree. Note that the top 10 CEO's are mainly Ivy League graduates. If you don't graduate from a top MBA program your chances of being hired at a good company are greatly diminished. The biggest and best companies only hire from the biggest and best MBA programs. So it's sort of a self-fulfilling prophecy that these elite MBA graduates have a greater chance of success because once they join a company they receive special treatment and training. There are thousands of MBAs from mid- to low-level programs that are working in jobs that don't require an MBA because their MBA didn't open the gates to careers that these colleges promise in all their promotional literature.
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  9. I think education itself is often overrated. Having done it myself, and now working in completely different areas I question my 5 years of study sometimes. Not only that, I see so many successful people with little or no further education. Of course we all need some knowledge, but universities and the like are often obsessed with exams and tutorials and forget the real world. MBAs seem to be the latest manifestation of this idea – you must study to get further in life. I think we are all seeing the power of the web as an equalizer and it is gaining momentum.
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  10. Hi all
    I studied part time to gain 3 degrees, used non of it in proactive, but without them I could not do what I do today. I went out into industry's to do qualitative research why business critical software only works for 2% as ordered? And why 80% of automation software failures are attributable to the owner?
    It made me wonder, education is at least 10 years behind the technology explosion and hence corporations have become the educators of what they need, does the MBA suffer of the same consequences, it appears from the discussion that is the case, but there is more , ask BP about outsourcing their risk with respect to the Mexican Oil well and spill disaster.
    There are thousands of disasters which can be traced back to organisations and educations inability to keep up with the rate of change. We need to start to think differently to survive.

  11. Hi Catarina – personally, I believe there is no substitute for experience. An MBA can teach theory, but practical work experience is where you learn the real lessons… I don't believe one can blame MBAs for the crash any more than blaming those that don't have MBAs.

    In my opinion, the real cause of the crash was the increasing focus on short-term results from businesses, driven by analysts and investor expectations. Businesses tried to respond to keep their share prices moving upwards and it inevitably crashed.

    If businesses were measured by longer-term criteria, we'd all be in a much healthier place – MBAs or no MBAs.

  12. There is always value in education. The problem is placing too much value on one degree versus someone with a vast amount of experience. I think there is plenty of blame to go around. I agree with most of the comments already made.
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  13. Well my first thought was, "Gosh do I mention that I have an MBA?" So there you have that. As I thought about the points in this video for me it became a sillier and sillier discussion. I saw at least one comment that validated my own opinion.

    Saying that MBAs harm the economy is a labeling issue. In my experiences it reminds me of one of the recent accusations that – if we didn't have brainstorming in companies then introverts could contribute more. I'm not referring to the author Susan Cain's assertion that as the west moved toward more of an extroverted society the introverts lost their power.

    This is a labeling problem. It's the PEOPLE who have the MBAs and their integrity, honesty, work-ethic. They could have been people with or without MBAs.

    Put the paintbrush away.
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  14. I've always been for further education and the belief in going on to another school for another degree once I graduated college, but I have actually been warned against it recently. Depending on the job you are looking for, PhDs and MBAs can actually over qualify you for a job and leave you unemployed when it was meant to advance you so I agree with the 50-50.
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  15. Many of the best (i.e. Ivy League) MBA programs prefer to admit people who have had some experience out in the world post BA first. There are also “executive MBA” programs that are intensive year round programs that meet one weekend a month and virtually the rest of the time. The participants are usually already working in some aspect of the business world and need the MBA credential to move up. For example, my friend’s husband was working in sales with an electrical engineering degree for a firm that sells electrical plants for large buildings and complexes. Adding an MBA (from a Wharton executive MBA program) was a boost to his career and provided his company with an executive with boots on the ground and professional experience in their field.

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  16. Like it is with all things, it all depends on the individual. MBA or not, it the thoughts are unvalidated and without a measure of common sense it has a good possibility of failing or causing issues. I guess what I'm saying is it really doesn't matter. It's the reasoning and method used in whatever is being measured or monitored. Just my thoughts. 🙂
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  17. SO many people are choosing to go back to school these days because of the increase of competition in the workplace as well as the hopes that in the time they go back to school the economy and job market may improve. Right now, I'm content with being done with undergrad and not having homework or papers to write.
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  18. Well i don't have an MBA (but i plan to get one). I think it matters only as much as the people who owns it. If he can learn something from it then you can say it count for something. If the bearer is a slow minded guy then it's a complete waste of money!
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  19. I think what the real problem is, is that society is constantly comparing people with degrees to those without, those with work experience and those without, those with MBA's and so on. When you're going for a job, the person with the MBA is going to get it no matter what and THAT is just wrong! This idea pushes many young people to get their MBA when in all actuality they would have been just fine without it.
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  20. Anyone straight out of any type of degree program should be subject to a solid mentoring program.
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  21. I think individuals should not look to an MBA or any degree as a way "in" or for a advantage in this current job market. If you apply business logic to this and assume the increase in degrees merely sets the new minimum requirements for a job. Then in fact, it no longer provides a competitive advantage. The cost to obtain a degree and an entry level position could in fact cancel each other out. However if you look to a degree or MBA as a way to move forward and grow, it then becomes a part of your personal strategy. The degree is not the solution to the problem, it is one stage in the process to reaching one's goals. Combing many years of work experience along with ongoing education is the key to constantly evolving industries and markets.

  22. Maybe Alamanach, but never-the-less the top publication The Economist started such a debate. The reason, from what I understand, is because MBA student calculated the financial instruments that contributed to the economic collapse. In other words their calculations didn't work out the way they should. All because of greed but taking an MBA didn't enable them to make correct calculations. Interesting, isn't it? Look at the recent faulty calculations made by two Harvard professors that have been used as arguments for implementing austerity. In other words, should we pay attention to what academics calculate when it comes to economics? For more information about the reason behind, please contact The Economist.

  23. There was certainly a flurry of MBA's in the 90's , but it seems a bit far fetched to blame the economic downturn on that. Hiring individuals purely on academic credentials alone without any work experience seems over indulgent to me, so it comes down to individuals on both sides of the hiring platform. Finding the best people to surround yourself is one of the key choices and potential mistakes a CEO can make. You can't blame a newbie for being put in a position she wasn't capable of fulfilling.
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  24. No matter how many MBA's you have if you don't have the leadership combined with inherent personality insights of human nature and vast knowledge of your career in multiple facets. I rather recruit a professional with multiple experiences , suitable for my expectations of a job well done; than an MBA or a PHD without the multiple day to day fulfilling experiences that come along with your career.

  25. This is an interesting premise. I think that perhaps too much value has been placed on the MBA as a credential. Experience, common sense, and integrity matter are important. Someone with solid experience can benefit from an MBA, but if that is one’s only qualification for leadership the disconnect between book learning and real life experience is likely to cause some problems. Blaming the economic meltdown on MBAs may be going a bit far. I think greed and unethical decisions need to be considered.

  26. It makes sense to me for companies to keep a close eye on MBA students straight out of university, while still encouraging them to be as innovative as possible. As Leora says, I can’t comment on the role of MBA’s. The need for ethics over greed, however, is a job requirement that supercedes the MBA credential. MBA’s can be optional. Ethnics never!

  27. Catarina, basically the first two commenters – even though one supported the motion and the one opposed the motion – agreed on the same thing. The first commenter stated that “management is a craft rooted in experience – the second one stated that a well-functioning MBA program can accelerate students on the path to leadership, especially those who HAVE HAD SIGNIFANT WORK EXPERIENCE. Both feel the experience is important. When it comes right down to it, I think the second way – education with work experience – would promote the best leadership.

  28. Unfortunately graduates only tend to have qualifications – head knowledge. Theory alone cannot carry you. I discovered this myself after graduating.

    MBA students can contribute to companies but they also need to balance their studies with work based learning. The two go hand in hand. Yes, I do believe graduates need to be guided and mentored by those more experienced.

  29. Haha. What the world needs is more liberal arts majors. (I majored in history.) Seriously I think people who go straight through from undergraduate school to MBA come out equipped to do pretty much nothing On the other hand I think the MBA is a valuable addition for people who get some business experience and then go back to school.

  30. I think management assumes that a MBA education is the best. But in actually, you need to specialize in a specific area which means you may not know other things. So I believe it shouldn’t be a factor of a person has an MBA or not. I am probably the minority here. I think it is the easy way out to hire someone just because of their education. Google has their own demographic that tells them if a person would do well in their company, but that’s not saying that it is foolproof either. As a leader, you need to determine what qualifications you require for each position. It may be tough to figure it out, but it is necessary. Thanks for sharing this video, I never saw it before.

  31. What an interesting conversation. My favorite line is "MBAs do not make the world a better place by simply existing." Maybe I'm missing something, but even if it's true that the typical MBA program needs to be changed or updated, it still seems to me the accountability factor for placing inexperienced people in positions of power and authority lies firmly at the feet of the corporations and their hiring policies rather than higher education.
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  32. There is always value in education, but not sure if it is more valuable than many years of experience . Somethings you just can’t learn in a classroom, you have to learn from experience. As it is with most things in life though, it all depends on the individual.

  33. It is a debate. I think the question is not if they hurt or benefit the economy, or the business. Rather, I think it does not matter in the long term.
    The economy, and a smaller degree, businesses is a crap shot. You try to anticipate what is going on, and adjust for it. With a world economy, this becomes nearly impossible. There are minor adjustments, and predictions you can do, but overall, you cannot predict what will occur in another part of the world, and how the rest of the world will respond to it.
    Also, the attitude of gathering wealth, and more wealth, has infected the entire business community. Instead of building a strong company, it is now make the stocks bigger. Our economy, now adjusts to the stock market, not the strength of companies. This causes an inflated economy, that when it falls, it crashes.
    Thanks for sharing this wonderful insightful post with us.

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