Do MBAs harm the economy?

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 contributed to, or caused,  the financial crisis.

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 – You Tube

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55 Responses to “Do MBAs harm the economy?”

  1. Leora Says:

    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. catarinaalexon Says:

    Seems we are of the same opinion, Leora. Personally agree with what The Economist and Bloomberg BusinessWeek concluded i.e. 50-50 if it makes a difference. Having said that todays teenagers who intend to make a career in business will need at least and MBA, if not a Phd.

  3. Andrew Brandt Says:

    A degree confers knowledge, which is good. You often have to teach yourself wisdom, which is harder. Thanks for the post.
    My recent post The Frugal Parson On Zenware for Writers, Part 2

  4. catarinaalexon Says:

    Yes, Andrew it does. But greed outmaneuvered wisdom when it comes to the MBAs who were one reason for the recent financial meltdown.

  5. yearwoodcom Says:

    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.

  6. catarinaalexon Says:

    Agree with you Debra. However, the whole point of the discussion was that some MBAs and their faulty calculations played a part in the recent financial meltdown. So some of them were harmful, in fact lethal, to the world economy:-). But you cannot tar all MBAs with the same brush.

    If you have teenage children who wants to persue a career in business they need at least an MBA. A Phd would be better since there is inflation in education.

  7. keepupweb Says:

    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.
    My recent post Friday Finds for Weekend Reading – WP Security & Best Website Awards

  8. Doreen Pendgracs Says:

    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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  9. Susan Oakes Says:

    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.
    My recent post How To Attract Customers In A Crowded Market

  10. becc03 Says:

    I agree with Leora's comment above. I have tried to expand on that thought, but she said it so well.
    My recent post Eye Popping!

  11. Jeannette Paladino Says:

    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.
    My recent post There’s No Second Chance to Make a First Impression on Social Media

  12. Ashley F Says:

    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.
    My recent post So you need some tools to work on those images?

  13. catarinaalexon Says:

    Seems we are of the same opinion Sherryl. And so are the people who took place in the debate and the findings of Bloomberg/BusinessWeek. It's 50-50. Great example of what goes on where your husband works.

  14. catarinaalexon Says:

    Seems you agree with the conclusion of The Economist debate, Doreen. Good points you make.

  15. catarinaalexon Says:

    OK, have taken note that you agree with Leora, Rebecca.

  16. catarinaalexon Says:

    Susan, seems we all agree with the conclusion of The Economist debate. But with the inflation we now have in education having one is a must. An odd thing is that in many developing countries MBAs don't write a thesis. It's just like taking a bachelor degree, which decreases the value of it.

  17. catarinaalexon Says:

    Exactly Jeannette. However according to Bloomberg BusinessWeek out of the top 10 CEOs 50% have MBAs.

  18. catarinaalexon Says:

    In other words Ashley you more or less agree with the conclusion The Economist debate came to.

  19. Kurt Rieger Says:

    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.

  20. GuyW Says:

    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.

  21. catarinaalexon Says:

    Good points, Kurt. There is inflation in education and teenagers today will need minimum an MBA to succeed. But, as you point out, to quote the book title: "What they don't teach you at Harvard Business School" can be as important. Seems you agree with the conclusions of the debate.

  22. catarinaalexon Says:

    Agree with you Guy. And it seems we all, more or less, agree with the conclusions of the debate The Economist held.

  23. Geek Girl Says:

    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.
    My recent post Motivational Monday Quote: 4/29

  24. catarinaalexon Says:

    Cheryl, it seems to me that we all agree. Not just amongst ourselves but with the conclusion of the debate The Economist held.

  25. patweber Says:

    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.
    My recent post Are You Aware Of The Hold Labels Like Introvert Have On You?

  26. Mary Slagel Says:

    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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  27. catarinaalexon Says:

    That's true Mary. Being over qualified works against you. So you have to decide what you want to do and then, if necessary get more education.

  28. catarinaalexon Says:

    OK Pat, so you are of the opinion that MBAs are good for the economy. First one so far. Let's see if we get someone anti MBAs as well?:-)

  29. boomeresq Says:

    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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  30. catarinaalexon Says:

    Suzanne, don't know if you noticed but Sherryl talked about the opposite in her comment. People with MBAs are hired to do all kinds of things they don't understand simply because they have an MBA. Where Sherryl's husband works it has been disastrous. It's also odd that it works the way you describe with your friends husband. MBAs don't teach you management or leadership. But getting one promotes a person to an executive position.

    If you have teenage children who wish to succeed in businesss they need minimum an MBA. A Phd would be much better.

  31. findingourwaynow Says:

    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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  32. catarinaalexon Says:

    Yes Susan. Almost all of us seem to agree on that.

  33. Kelly Wade Says:

    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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  34. catarinaalexon Says:

    True Kelly and it's making it even worse on the job front. The depression the world is in will go on for a long time. So most of them will have to start their own business in order to support themselves. They don't need an MBA for that and, above all, they certainly don't need the debt they are running up.

    In the Gulf they like PAs to top management to have MBAs:-) And they get them. It's crazy…

  35. patweber Says:

    Not at all Catarina. I am of the opinion that it doesn't matter one hoot whether you have an MBA or not, to be good for the economy. That's absolute nonsense.

    To clarify, PEOPLE whether they have MBAs or not, are the good for the economy when they act with integrity, honesty and other morally guiding principles.

    Hope that is clarifying.

    My recent post Are You Aware Of The Hold Labels Like Introvert Have On You?

  36. Radu Says:

    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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  37. Kurt Rieger Says:

    Hi Catarina
    There is one gap in our education, the gap between operating-divisions and the supply chain. To identify this gap, took years in operations (32 years) and the supply chain (20 year) a mountain of experience, the last gathered by choice, to determine why 'software failure statistics' are so bad today. Only 2% do software work as specified, in automation software 80% are attributable to the ops-group. My research found, there are 22competency groups in the life-cycle of which the ops-group has 5 – I postulate for another two groups within the ops-groups, to enable them to better manage the life-cycle of the overall business. I also spent many years in corporate governance, the advent of high tech business solutions, existing OHSEQ&L regulations are flawed and cost a fortune to maintain. The issue facing any MBA course is the lack of evidence to support change. This can only be achieved through maturity based on evidence.
    Hope this helps in this dialog
    Cheers Kurt

  38. catarinaalexon Says:

    Exactly Pat. That's the conclusion of The Economist debate and Bloomberg BusinessWeek. Some MBAs are good for the economy, some are not. Like with any other category of people.

  39. catarinaalexon Says:

    Don't have any experience of the gap between operating divisions and the supply chain, Kurt. Interesting points you make.

  40. Jessica Says:

    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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  41. JeriWB Says:

    Anyone straight out of any type of degree program should be subject to a solid mentoring program.
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  42. Josh A. Says:

    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.

  43. catarinaalexon Says:

    Good point Jessica that above all applies to the United States. But it's becoming like that in the whole world because it's a phenomena that has been exported from America to the rest of the world.

  44. catarinaalexon Says:

    True, Jeri.

  45. catarinaalexon Says:

    Good points, Josh. The combination of degrees and experience is definitely the best option.

  46. catarinaalexon Says:

    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.

  47. @artyyah Says:

    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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  48. catarinaalexon Says:

    You know Alamanach, all human beings perceive reality in different ways. Who's right and who's wrong?:-) That's all I got in your comment. If you want you can send another one.

  49. catarinaalexon Says:

    AK, MBA students did contribute to the economic crash. But wasn't greed behind the faulty calculations and their superiors ignoring the mistakes?:-)

  50. Dorilinda Ramírez Says:

    You are right. I have an MBA and i can tell…that companies are recruitingnewbies to be trained while we wait the usual letter: you are overqualify. It seems as if having too much experience or expertise in your field of knowledge is somehow terrifying. How awfull.

  51. Dorilinda Ramírez Says:

    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.

  52. Kurt Rieger Says:

    Hi Catarina
    Many case studies from two/three perspectives
    Operators contract to principle contractor and principle to subcontractor. As well as operators to subcontractor (build own operate transfer BOOT ) contract. Succeeded in getting the company I worked for to rescind a $50 million 15 year maintenance contract on the basis of liquidate damages (a long story, took 6 month and much soul searching on my part)

    Ops to principle, provides a window into the behaviour of the operations group through their documentation. I always look up the corporate governance page of the operations group,on the web, never seen it as part of a contract (is it necessary? May be from a special conditions of contract viewpoint) that is where it should start, ??? I learned it does not and this is where today's complexity starts.

    I got involved with a group trying to shortcut the processes to list on the stock market, spent 5 years looking at corp. governance and have training notes as to what would help the Board protect itself from red face in the public arena. (BP)

    This is all small fry, the real issue is sustainability in 10, 20 years…. 2050, the status quo will lead to unthinkable consequences.

    How did I do it, you may ask, through pain, physical and emotional the last 20 years by choice in the supply chain. I deliberately avoided project director, they deal with politics, I chose QA and insisted on compliance with contract conditions, this gave me the window ( under secrecy agreement) to learn organisational behaviour, and had to solve problems of all kinds, my learning from other's mistakes.

    Right now I am writing 'my book' about sustainability (all my case studies) a techno writing a psycho book, I must be crazy? It's painful but necessary. It will take me, I think 12 month, but I will succeed, no doubt, may need help from an organisational psychologist, in good time.
    The principle finding is that it takes a team of specialist tied together to give the CEO the connectivity to have organisational leadership, a learning organisation etc,
    Thanks for the opportunity to share with you
    PS I coauthored 'The Corporate Wolf Pack' about leadership training for today worldview with food for thought at the end. I published some 20 articles, now that I read them I think how arrogant some may seem without the case studies, now is the time to make amends.
    Happy to share more if you wish.

  53. catarinaalexon Says:

    You are right, Dorilinda.

  54. catarinaalexon Says:

    That's sensible, Dorilinda. Experience is vital.

  55. catarinaalexon Says:

    Well put, Radu.

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