Discussion: How scientifically sound are MBAs?

I taught advanced English at the MBA level at one of Europe's most prestigious MBA programs and another prep course for a different well known MBA program. When I started the unit on market vocabulary I found that they couldn't explain what a publicly traded company was (towards the end of their MBA specialising in management and finance). I basically had to teach them both English and the fundamentals of economics, business and finance.

When I taught a unit on global warming and its effect on business...my students (most of them from Latin America) were sceptical that there was any evidence of global warming and they refused to do any research on it (I would have failed them for that but I was not effectively able to fail my student. I had to give them a second and third try. By then I realised I would be testing and retesting them (without extra compensation) until they passed. So I just passed them even though they barely studied or spoke English. They still couldn't explain what a share was and how it is publicly traded after teaching it three times in three different ways.

They had no idea what exactly an economic model was. The believed that investing in stocks was a very safe investment. They believed that chance plays almost no role in business and investing success. They believed that economic models (even though they couldn't tell me anything about it) was all the "evidence" one needed to justify any theory (the ones they agreed with such as full on pure free market capitalism).

Many of their teachers were CEOs of successful companies. The teachers did not use many sources of academic standard nor did they critically analyse much of their sources and "evidence" (let alone teach them how to critically analyse anything).

Some of the textbooks were OK in terms of university level material with chapters on how to objectively analyse theories, models, evidence etc. however those chapters were skipped.

Judging by conversations I've had with other students who have done MBA programs ... I have my serious doubts that MBA programs are scientifically sound. Good luck finding any funding to properly investigate this.

I'm a student at a top-ranked MBA program, and I spoke to caffemacchiavelli about this article. I agree with a lot of his points, and don't want to add too much right now since I'm in my first year and haven't fully had time to process and organize my thoughts around these complicated issues. However, I have a few points I'd like to make in response to people's comments:

• Lumifer: Quality of people is different, but quality of education may not be that different at a top 10 school.

• MattG: If you're in the Boston area and want to sit in on an MBA class, PM me. At my school, any MBA student can bring visitors into the class. And if you want to visit another school, just contact the admissions office and tell them you're interested in applying and would like to see what a class is like, they let people sit in all the time.

• christopherj: I disagree that business is primarily a zero-sum game, there are a lot of strategies where you increase the size of the market and share benefits with customers (blue ocean strategy), employees (efficiency wages/Fordism), or even competitors (defining and creating new markets). E.g., a company my friend works for helps their competitor with safety issues, because bad press for their competitor would reflect poorly on their entire industry.

• Aussiekas: It's true that MBA's as not useful for pursuing a PhD in business, and I think you're right that this is evidence against their educational value. At my school, they used to make the PhD students take MBA classes -- now it's optional, and PhD students I've spoken to say they like taking MBA classes to see how MBA's think, rather than for getting any educational value out of it. However, if you keep in mind that most of the value comes from the social experience/network, then it's not a case of the MBA being a ripoff that doesn't create value. As for whether the schools make money on the MBA programs, I can say that at my school, the MBA program actually loses money, and is subsidized by executive education (which is ridiculously profitable). Also the school makes money when its rich alums donate.

I've been reading LessWrong for a while and know a lot of people in the community, but this is my first time posting, so if I'm out of sync with any of the norms here, please PM me and let me know.

distance-learning MBA

I think there's a lot of overgeneralization going on here.

In my subjective opinion, MBA programs are divided into three fairly different groups.

Group one is the top ten (give or take a few) programs (Harvard, Wharton, Stanford, etc.). Your peers are generally smart people and your chances of getting a good job once you graduate are excellent.

Group two is the rest of the accredited programs. To throw in some of my own overgeneralization, these are more or less useless. They can be useful for people who know precisely what they are doing there -- e.g. one guy I knew was an engineer who, his company said, needed an MBA to be promoted up, so he went and got one, and got promoted -- but are not good as education.

Group three is the non-accredited programs including all the online and correspondence courses. They are just useless and a waste of time and money.

As usual, YMMV.

I have very little knowledge of what an MBA syllabus consists of. Can you give some concrete examples of what you're talking about?

A huge chunk of an MBA'a job is to play a hostile asymmetric game against their employees (where their productivity has somewhere between negative value and positive sentimental value to them and their wages have negative value to you), and an approximately zero sum game against competitors, and a more neutral zero sum game against their customers trading quality and advertizing for price. These sorts of games are complicated and winning strategies change as the playing field evolves and your opponents change tactics. A working strategy could quite legitimately be described as "it simply works, don't ask why" because no one has quite figured out why. And different strategies will work better or fail miserably depending on who the other players are.

What wasn't mentioned here, but in passing so far, is the economic benefit to the university for running the programs. I have read about how these prestigious universities offering these coursework only masters degrees, of all types, do not even accept the degree as part of their PhD program. Say you went to Harvard and did a thesis based masters in business instead, then you'd be a shoe-in for the PhD program. But the coursework style Masters programs, including MBAs, are not useful for that purpose. This shows that the universities tacitly acknowledge that no useful academic knowledge has been imparted in their coursework masters programs. Ref. article here--> http://chronicle.com/article/Those-Master-s-Degree/146105/

Mind you, I'm only using this as a metric of value by the university of its own programs. I am not advocating some superiority of the PhD in the field of business where it has little known utility to me. I am attempting to bring across the point that the university's have found a way to sell degrees to make money and like any sales job the product is over-hyped; particularly in the case of the MBA offering a significantly improved level of knowledge, skill, or practical benefit in the workforce or entrepreneurial space.

When analysing the benefits and losses to businesses and students, it is important to remember the other players involved. The loan companies who often fund these students make money on interest and the universities make money as spectators and service providers to the possibly zero sum game of having an MBA for businesses or individuals. I try to use a simple tool of follow the money to see what comes up. If businesses and individuals are receiving only a questionable benefit, then I could considering it a cultural artefact with inertia or look for other parties who benefit, or more third alternatives.

Cheers!

As far as I'm aware, MBA's are completely uncorrelated to entrepreneurial success, and only slightly correlated to earnings in similar job positions, but can be highly correlated to actually getting the job in certain fields.

I don't have any studies I can find in my Evernote, so this is from memory, but I believe this is what you'll find if you consult the literature.

If you're going to be an entrepreneur, you could save some money by self-studying, which is exactly what myself and eeuuah are doing. Let me know if you're interested in joining our little study group.

One of the great wonders of Jaynes is that he starts with a problem, not axiomatic mathematics.

I'm also starting to understand why so many entrepreneurs are dismissive of MBAs

Entrepreneurs don't have to signal to themselves how smart and capable they are. However, for a white shoe management consultant firm, recruiting MBAs from target schools is just a routine filter, and not dismissed at all.

For the sake of completeness, the two best counter-arguments I've heard so far (IRL):

1) MBAs are useful as a baseline business sanity tool, so you can get a decent employee to a point where they'll understand the basic vocabulary of a lot of different disciplines. For instance, they'll have a rough picture of what segmenting and targeting a market means, even if they won't know how to use it in practice, let alone compete with a junior marketer. Someone who's already read a bunch of stuff and managed a business isn't going to learn as much and might be disappointed by how close to common sense everything is.

2) MBAs teach you how to maneuver the minefield of the large company, where the decision-making process is complicated by personal alliances, office politics and employee/boss conflicts. To an entrepreneur, this will seem unreasonably complicated ("Why don't you just walk in a straight line?"), but someone having to deal with a fair share of Dilbert-esque behavior, additional ammunition, whether business lingo or complex models, might come in handy.

I should also note that I'm the only one with a largely critical view and that the rest of my tutor group is quite happy with the program.

I read somewhere that the MBA, when it was originally debuted at Harvard in the 20's, was originally intended for the people who were going to be the CEO's of like the top 10 or 20 companies in the US: i.e., a genuinely tiny elite.

But like all degree programs, the MBA has suffered from educational inflation and has thus lost its original intended purpose. The idea that every mid-level manager needs an MBA is silly and wasteful.

See also MFA in Creative Writing... :-/

I've read a couple of papers by Nicholas Bloom on operational management. I don't know if this material is covered in business school, but it could be because it sounds like it is (a) book-learning and (b) pretty general, such as keep the floor clear. In particular, he ran a randomized controlled experiment (ar) of consulting advice for Indian firms and it was pretty valuable. Presumably he chose Indian firms because they aren't already following this advice (ar) (OB).