
How Harvard Business School Has Reshaped American Capitalism - prostoalex
https://www.nytimes.com/2017/04/24/books/review/golden-passport-duff-mcdonald.html?smid=fb-nytimes&smtyp=cur&smvar=wknd&_r=0
======
ropeladder
Whenever I hear critiques of MBAs I think of this anecdote from a paper [1] by
Yanis Varoufakis:

 _In the parlance of signaling theory these [MBA] transcripts are known as
screening devices. One personnel manager (of a financial services company)
explained this to me candidly: “I have no doubt that economics courses, MBAs,
etc. teach nothing I need my employees to know. If anything I need to
reprogram them on the job. The courses they have taken encourage bad
thinking.” “But then,” I asked, “why do you prefer to hire college graduates?”
“Because,” he answered matter of factly, “if these kids were willing (and
able) to pay large sums of money in fees; if they submitted boring assignment
after boring assignment without fail, and did not complain vigorously in the
process; then there is a good chance that they are the kind of people who will
appeal to my customers and do as they are told.”_

[1] [https://www.yanisvaroufakis.eu/wp-
content/uploads/2017/02/ag...](https://www.yanisvaroufakis.eu/wp-
content/uploads/2017/02/against-equaltiy-published-version.pdf)

~~~
hellofunk
This is true of college degrees in general, lots of companies in various
industries require proof of a bachelor's degree, regardless of what the
subject matter was, because it shows an ability to stick to a goal and get
something done, despite the actual quality or enjoyment of the work.

~~~
ntsplnkv2
Spend tens of thousands of dollars, go into significant debt, just to prove
you can "stick to a goal."

I can't be the only one who sees a problem with this. It's either a lie or a
poor reflection on our society.

~~~
merpnderp
"Significant debt" being on average about the price of a low end car. And
"prove you can stick to a goal" being a massive increase in lifetime earnings
over those without a college degree.

I can't be the only person who sees how fair and progressive this is? It's a
wonderful reflection on our society.

~~~
ntsplnkv2
[http://money.cnn.com/2016/10/18/pf/college/average-
student-l...](http://money.cnn.com/2016/10/18/pf/college/average-student-loan-
debt/)

Average debt for 2015 grads is 30k. That is not a low end car.

> And "prove you can stick to a goal" being a massive increase in lifetime
> earnings over those without a college degree.

Going to college is not the only way you can prove you stick to a goal, which
according to the OP, is the only purpose of college. This is an immense waste
of resources, all so that a company can take a little less risk when hiring
someone, if at all. And college is such a business today that academic
integrity is an afterthought, the degree is continually losing its value.

> I can't be the only person who sees how fair and progressive this is? It's a
> wonderful reflection on our society.

There is no need for sarcasm here. Either way, it doesn't follow from your
argument that it is fair and progressive.

~~~
merpnderp
It took just a few moments to find out if $30K is actually fair and
progressive. College grads average around $30K more per year in compensation
than high school grads. These degrees are already highly subsidized. So tax
payers, including those with only high school degrees, are paying for people
to become educated and thus make more money, with the hope that some sort of
trickle down economics will make it better for those without college degrees.
I'd tongue in cheek call this highly regressive.

~~~
ntsplnkv2
> It took just a few moments to find out if $30K is actually fair and
> progressive.

This is a false comparison. 30k is average DEBT they have-not the total cost
of college education. Add many more tens of thousands-just so a company can
take a little less risk, according to OP.

The reason we have subsidies is because businesses now want a degree, for no
good reason, as evidenced by the OP. Because more people, who can't afford it,
need college degrees, the government stepped in to provide that, with loans,
which they make money on, and grants, which they hope to be paid for by future
taxes. That doesn't account for all of the growth in tuition prices, rather,
the demand does. Demand has skyrocketed because college grads make more. Since
demand has skyrocketed, the supply of college grads has substantially
increased-commoditizing the college degree, which benefits businesses because
now they can pay less for a college grad. That's the bottom line.

The problem is more nuanced than just cost and salary. The fact is to make
good salary college wasn't necessary decades ago. Now it is. So before what
you got for free, now costs tens of thousands of dollars. How that is
"progressive" is foreign to me.

~~~
merpnderp
Funny, I just realized my error and came here to correct it and saw you'd
already done it. Hah, thanks. And I sympathize with the point about jobs
paying more in the past without a degree, but I believe that the premise of
the article is also wrong - that college degree confer no benefit to the
company other than proving individuals can grind through boring tasks.
Although to be fair, I got a CS/Math degree in 2.5 years, and I don't know
that I've held a job where I couldn't have learned most of the programming
required in a few months on the job. And I've never needed a lick of the math
I so painfully learned. So maybe jobs actually requiring degrees are fewer and
farer between than I realized.

------
Animats
The classical model of capitalism is that profits are a side effect of some
socially beneficial activity. But today, "maximizing shareholder value" as a
goal has been so well optimized that it often no longer requires doing
anything useful. This led to such strange situations as 40% of US corporate
profits coming from financial activities. (That ended in 2008.) There's still
the hedge fund industry, which is a net lose for its customers but a huge win
for its operators.

The Harvard Business School helped develop the theory, and the policy
thinking, that made this possible. Short-term capital gains are not heavily
taxed, for example. Both Bill Gates and Warren Buffett have said they should
be. That policy, which favors financial maneuvering, is so well entrenched
that it's not even discussed politically any more.

~~~
lr4444lr
_The classical model of capitalism is that profits are a side effect of some
socially beneficial activity_

No, the "invisible hand" as stated by Adam Smith, which is presumably what you
mean, states the EXACT opposite causality order.

~~~
ue_
What is meant by the invisible hand, and what did Smith say about it? I see
this a lot, but I'm not sure what it means when I see it.

There are others with different views of capitalism, such as Marxian
economists, Proudhon, neo-Ricardians, post-Keynesians etc. Marxian economists
in particular with interesting things to say about the origin of profit,
alienation, commodity fetishism and classes within capitalism.

~~~
dsacco
"The invisible hand" is a notion that Adam Smith wrote about that essentially
captures the idea of social benefits being an emergent consequence of self-
interested parties engaging in the markets together.

You can read more about it here, including the (exactly three) specific
passages in which Smith used the term:
[https://en.m.wikipedia.org/wiki/Invisible_hand#Other_uses_of...](https://en.m.wikipedia.org/wiki/Invisible_hand#Other_uses_of_the_phrase_by_Smith)

The specific point of the phrase is that the individuals produce a net benefit
to society through _no intention of their own_ , it just happens to be a happy
side effect of their work.

EDIT: Don't shoot the messenger, people.

~~~
ue_
How is this any different to "trickle down" on a large scale? If you encourage
capitalistic self-interest enough, it will create benefit? Why not just create
the benefit directly instead of going the roundabout way of having people act
in their own self-interest, fostering mean-spirited relationships between
people, competition instead of cooperation and general wastage of resources?

But perhaps there are other laws within capitalism. The law of value, for
instance, which its recognition by capitalists and relative ignorance of it by
wage labourers leads to Marx's theory of surplus value - this is the side
effect of this self-interested activity of labour.

~~~
TeMPOraL
> _If you encourage capitalistic self-interest enough, it will create benefit?
> Why not just create the benefit directly instead of going the roundabout way
> of having people act in their own self-interest, fostering mean-spirited
> relationships between people, competition instead of cooperation and general
> wastage of resources?_

The idea is that this "roundabout" way is in fact more _natural_ to
individuals. People want to actively take care of themselves and their
families first - you may say that "capitalistic self-interest" is actually
rooted in our biology. Some forms of market economy seem to be the _default_ ,
"lowest-energy-state" form of human self-organization. It has an added benefit
of being heavily self-regulating through feedback loops implicit everywhere in
trade.

Now, it would be wrong to pretend it all worked out perfectly and everyone is
happy. It didn't and people aren't happy. Yet capitalism has the neat quality
of aligning with a lot of basic human needs[0], and that's why while seemingly
"roundabout", it's still[1] much easier than top-down management of social
goodness.

\--

[0] - _Perceived_ autonomy would be another one of such needs.

[1] - I do wonder if in an interconnected reality of "information age" we
couldn't pull off central management driven by algorithms. Someone on HN
pointed out to me though that this would still lose an important feedback
channel, namely preferences of customers as expressed by purchasing decisions.

~~~
codydh
> _you may say that "capitalistic self-interest" is actually rooted in our
> biology._

I hold such deep issue with this. Sure, there's an aspect to all living beings
that they "self-preserve." But you seem to be implying here that it's part of
_human nature_ to be primarily self-interested, and if that's a correct
assumption, it's one I believe to be deeply incorrect.

We can look around and see people acting in self-interested ways all of the
time, but we can also see people doing lots of benevolent, good, supportive
things for other people. In addition, it's no surprise many people go around
day-to-day acting this way, given that they live in a system which encourages
(née requires) them to do so.

Just because people can conform and act within a system, does not mean it is
part of their nature. A system that actively encouraged and promoted the
common good and communal caring among individuals would likely produce more of
that behavior as well. Just because we see one type of behavior or another is
not enough to decide that it's human nature.

~~~
TeMPOraL
The way I see it: in general, people seem to form groups and care more about
people in those groups than about those outside. What groups people form in
their mind seems to be a pretty individual thing, depedent on the way one sees
themselves in the world, but there are always groups and they always seem to
be ordered.

That doesn't mean people don't give a shit about anything outside their
closest clique! It only means that groups have different _relative_ importance
to an individual; for instance, when your family member is sick, you might
temporarily stop attending the soup kitchen and spend that time helping the
sick kin.

My point is that such "ordering of care" is part of our firmware, and because
capitalism is compatible with that, it's easy to implement by humans - in the
same way the basic concept of private property seems to be also a part of our
firmware, and more extreme parts of communism being incompatible with that
meant people started to work against the system.

Basically, if your system aligns well with natural tendencies of humans, it's
easier to make it work. Corollary to that is that you should design your
systems to work with natural tendencies of humans, instead of trying to change
those tendencies directly.

~~~
codydh
Points taken. And I agree that we should design systems to work with the
natural tendencies of humans. But we can do better than (and I'm being
reductive here) capitalism's current "eventually everything will optimize out
even if poor people starve to death because they weren't born with money." In
fact, I'd argue that 'modern' capitalism really is only activating a small
portion of human nature (that is, the self-interested part), and shielding us
from those aspects of us that are caring for others and concerned for other
human beings. When we put everything from the value of private jets to food,
water, and healthcare on the same value metric (money), and then tell people
that whatever amount of money they have is indicative of what they are worth,
it's no wonder we as a society wind up treating people as objects instead of
human beings.

Anecdotally, the US is a nation with more than enough food and shelter for all
its inhabitants. Yet many people live on the streets, often because they were
born into poverty. This goes against most people's "firmware." Yet capitalism
takes no account of that part of human nature (I'd argue those parts that make
us 'better than animals.').

~~~
TeMPOraL
I agree with your points here, and I'm not endorsing more capitalism as a
solution to problems of current capitalism. I was only answering the question
"why such roundabout way" by pointing out that, when viewed through the lens
of human nature, it's actually a pretty direct way.

Though honestly, it's also easy to forget all the benefits capitalism brought
us when criticizing it, and IMO it's worth to have them in mind when
discussing alternatives.

------
drawkbox
The modern MBA is so efficient that is has optimized out research and
development and many times the building part, which leads back to r&d. This is
great for short-term and the upper end, bad long-term and for the core
product. A big part of the equation missing today is longer term consumer
strength i.e. wages, community impact, continue self-disruption/research etc.

Startups usually do most of the r&d now, and once it gets to small/mid level
and "the process" comes in, the bizdevs take over after it is usually already
an established product and r&d mostly completed. Depending on the balance of
that takeover it either kills the product, slowly bleeds it, or if the focus
is still on product then sometimes a super growth engine.

Companies that can keep a focus on r&d, building and changing markets while
being very efficient are key. Usually these are engineer led (Amazon, Tesla,
Google etc)

~~~
IBM
Google is an example of the failure of being engineer led in my opinion. I
think it's led to Google having institutional ADD and has left them with
countless failed products and others that have been neglected for years (has
anyone worked on Google Finance in the past 5 years? Probably not).

A lot of successful Google products were acquired (Android, YouTube) and
others were able to leverage their dominance in search. But we also saw that
approach fail when the entire company was directed at trying to beat Facebook.
It infiltrated all their existing properties and employees were directly
incentivized with compensation linked to the success of Google+. And yet all
of that wasn't able to overcome Facebook's network effect. The go-to Google
strategy for creating a hit product failed (and it also explains why they seem
to fail at anything that has network effects or requires consumer affinity and
brand: 8 messengers and countless failed hardware products).

Google stands a good chance of being the next Xerox PARC: good at science
projects and technology, but destined to see others capitalize on it.

And it makes sense if you think about it. Google's origin story was 2 PhDs
coming up with better technology in a market that was already defined and a
business model that was already understood. They applied that technology well,
but it was only possible because of the openness of the web. It feels very
much right place, right time.

~~~
sh87
My view is that Google is insanely good at products that demand performance at
scale. Google search, YouTube, Google Docs, Google Maps, Gmail, and anything
that supplements their usage Android, Chrome. Their failures like Google+,
Google Glass indicate a product-market misfit than a result of being engineer
led. An engineer (software related) is no less fit to lead a tech firm than a
doctor is fit to lead a Medical service facility than a musician leading a
record company than a sportsman managing a sport team than a chef leading a
restaurant.

Sure it could be the next Xerox PARC, but the next Apple (following the bad
metaphor) will very likely be a division of Google itself.

And finally, if anything, Google's ability to kill products that it does not
think valuable, is what keeps it innovating, exploring and yet not be a
dinosaur search company. (I do miss Google Reader though. Did they really have
to kill it so bad ? )

~~~
smhost
Isn't Google amorphous by design? I thought Google was supposed to exist
everywhere hidden in plain sight, and its many products are just the
interfaces it uses to connect to us. At least that's the impression I got from
listening to Schmidt all these years talk about how Google can go anywhere and
be anything it wants to be.

------
DelaneyM
I have a Harvard MBA ('14, sec C), and where this whole argument falls apart
for me is the idea of "The Golden Ticket". The author is confusing correlation
with causation.

My MBA has had virtually no effect on my opportunities or employability. Heck,
as an engineer and entrepreneur, it has probably done more harm than good.
This is a consistent experience - with the exception of (perhaps) the military
and overseas students folks tend to go back to their previous career track and
trajectory.

Furthermore it's not really a very transformative experience. The ideals,
priorities and abilities students bring to the program are generally the ones
they leave with.

What HBS does well, above all else, is act as a filter. They really do a
remarkable job at admissions, putting together a group of folks who are likely
(by nature or nurture) to go on to have an outsized impact on the world.

~~~
freyir
> _My MBA has had virtually no effect on my opportunities or employability...
> What HBD does well, above all else, is act as a filter. "_

And you don't think employers realize this? You don't think this pre-screening
process impacts their judgement when looking at job candidates?

The top management consultancies, the top investment banks and private equity
groups are full of HBS grads. You think they all would have got these jobs
without going through the HBS process, networking with their peers and alumni
who end up working for these same companies, interning, and getting the HBS
seal of approval?

You refer to yourself as an engineer. That might be why HBS didn't help _your_
employability. But if you don't think it helped others, you're dreaming.

~~~
DelaneyM
> The top management consultancies, the top investment banks and private
> equity groups are full of HBS grads. You think they all would have got these
> jobs without going through the HBS process, networking with their peers and
> alumni who end up working for these same companies, interning, and getting
> the HBS seal of approval?

Well yeah, absolutely. HBS is full of analysts and consultants from those
firms and institutions taking a pit stop on their way to partner.

I find it fascinating how many people here are eager to tell me I don't know
what I'm talking about when I'm the one with firsthand experience..

~~~
gerpsh
Let's take a specific example. For grad school, I went to a university with a
generally well regarded MBA program, which drew on-campus recruiting from MBB.
The recruiting process for MBA students was short recruiter interview -> case
interviews. Non-MBA students interested in positions at MBB had it a bit
different: in between the recruiter interview and the case interviews was an
extremely difficult written exam designed to test the candidate's "reasoning"
ability. A couple of my (pretty smart) classmates tried to prepare for these
exams and eventually took them, failing miserably. They both reported that it
was the hardest test they ever took. Both ended up at second-tier consulting
firms.

Let's get more general and rigorous. Kellogg Business School professor Lauren
Rivera studies the effects of educational credentials on employment
opportunity. Her research confirms that educational pedigree is the single
most important factor for gaining employment in elite positions in finance,
consulting, and law, with the implication that your education is an indication
of your social class, and your comfort in the upper echelons of society. [Link
to her work]
([http://www.kellogg.northwestern.edu/faculty/directory/rivera...](http://www.kellogg.northwestern.edu/faculty/directory/rivera_lauren.aspx#research))

I would say it's bit ignorant to say that a Harvard MBA has no effect on
employability or opportunity.

~~~
DelaneyM
Comparing MBAs' & undergrads' experiences is specious, at best. And if you're
comparing other graduate students against MBAs, the recruiting process for MBB
is exactly the same. (source: I did my time at McKinsey, the 'M' in MBB.)

Regarding Prof. Rivera's study, I'm curious whether it attempts to separate
causation & correlation. At HBS, the number of ex-MBB consultants in the
program is roughly equal to the number who leave into MBB - many swap out and
in, but the figures are in the same range. Does she account for that?

Also, any analysis which groups JDs & MBAs together is 100% flawed. Those two
may have similar prestige, but wildly different career progressions.

~~~
gerpsh
> Comparing MBAs' & undergrads' experiences is specious, at best. And if
> you're comparing other graduate students against MBAs, the recruiting
> process for MBB is exactly the same. (source: I did my time at McKinsey, the
> 'M' in MBB.)

I'm talking about other graduate students, and (at least in this example) the
recruiting process is NOT the same. It didn't matter if you were getting a
master's in basket weaving or a PhD in physics, you were required to take the
test, again at least at this particular university. MBAs were spared the test
and went straight to the normal interview process. Also, had you not done an
elite MBA, what do you think your path to McKinsey would have consisted of?

> Regarding Prof. Rivera's study, I'm curious whether it attempts to separate
> causation & correlation. At HBS, the number of ex-MBB consultants in the
> program is roughly equal to the number who leave into MBB - many swap out
> and in, but the figures are in the same range. Does she account for that?

Prof. Rivera's research consists of multiple related studies whose findings
confirm that, regardless of skills and relevant experience, the most important
factor in hiring for elite firms in business and law are educational pedigree,
creating a discrepancy in opportunity for those that get an elite education
and those that don't. She accomplishes this through ethnographic research on
the recruitment practices of the firms.

> Also, any analysis which groups JDs & MBAs together is 100% flawed. Those
> two may have similar prestige, but wildly different career progressions.

I disagree in this context. The point of her research is that careers which
tend to lead to powerful positions in society are practically closed off to
those that don't have elite educations. If you want get into high finance or
MBB consulting or BigLaw, it behooves you to attend an elite university, and
while you're there, do as the Romans do. Prof. Rivera's research is _really_
interesting, you should check it out.

------
sah2ed
Prof. Michael Jensen's higly-cited 1976 paper [0] identified the principal-
agent problem [1] then argued that a company's sole purpose is to maximize
shareholder value. This thinking is what gradually led to the now widespread
obsession with stock prices and short-term results.

Short-termism is harmful.

Jack Welch said it best in a Financial Times [1] interview:

 _“On the face of it, shareholder value is the dumbest idea in the world.
Shareholder value is a result, not a strategy… your main constituencies are
your employees, your customers and your products. Managers and investors
should not set share price increases as their overarching goal. … Short-term
profits should be allied with an increase in the long-term value of a
company.”_

[0] Theory of the firm: Managerial behavior, agency costs and ownership
structure,
[http://www.sciencedirect.com/science/article/pii/0304405X769...](http://www.sciencedirect.com/science/article/pii/0304405X7690026X)

[1]
[https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...](https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem)

[2] [http://www.ft.com/intl/cms/s/0/294ff1f2-0f27-11de-
ba10-00007...](http://www.ft.com/intl/cms/s/0/294ff1f2-0f27-11de-
ba10-0000779fd2ac.html#axzz1eiLpL2PZ)

------
hackuser
> [Professor Michael Jensen] advocated an "agency" theory of management in
> which management's sole duty was to maximize shareholder value. This upended
> the long-held "stakeholder" model, in which management was seen as having
> broader obligations to a corporation’s workers, customers and communities.

It's interesting how that theory has filtered into public consciousness. My
sense is that the public doesn't grasp it as one theory among many
possibilities, but as a law of nature (a pattern I see for many ideas - people
lack perspective that the theory is one of many possibilities, and different
concepts were popular before and others will be popular later). You can read
people using agency theory, thought not by that name, on HN regularly.

Consider how amazing that is: An academic comes up with a theory, and
eventually tens of millions (or more) are repeating it. Is it marketed? Even
if it is, many or most of the people repeating it probably have no idea of the
marketing. Is it part of an intentional political propaganda campaign? I know
other popular ideas successfully pushed on the public this way (one I know of
in particular is the "death tax", and I've observed others where the talking
points frame and effectively end the discussion).

What incredible power. Is it random? Can it be directed and controlled? Who
knows how and who is doing it? I know political groups do it to an extent, as
I said, but I don't know their range or accuracy, so to speak.

~~~
tikhonj
Nautilus had a great article a while back on how things get popular[1]: it's
more a function of social networks than of the things themselves. The research
detailed in the article looked at music specifically, but I think the idea
generalizes to most anything including hard-to-falsify academic theories.

[http://nautil.us/issue/5/fame/homo-narrativus-and-the-
troubl...](http://nautil.us/issue/5/fame/homo-narrativus-and-the-trouble-with-
fame)

------
chrispeel
Clayton Christensen, Harvard Business School prof, has promoted a tax
structure that has much lower taxes on investments that last multiple years
(say 5), and higher taxes on short-term investment (less than a year) as a way
to incentivize long-term R&D. I like this as a mechanism to change the way
MBAs think about profit and investment. I.e., as something that I'd love to
see more at Harvard get behind.

~~~
IIIIIIIIIIII
I'm not sure that would help much. I think the risks and uncertainties of
long-term R&D increase much faster than any tax incentive can compensate for.
My favorite story is the (real) history of Silicon Valley. I once thought that
was a proof for what private enterprise can accomplish. Turns out that SV is
actually based on the unrestrained spending on R&D (of borrowed money, of
course) by government during WWII. [0]

Private enterprise wants a level of certainty, long-term or not. Tax
incentives don't reduce the uncertainty. I doubt that money is the major
constraint. Look at some major corporations basically "swimming" in money, and
they also should be able to borrow easily (and cheaply) at this time.

[0]
[https://www.youtube.com/watch?v=ZTC_RxWN_xo](https://www.youtube.com/watch?v=ZTC_RxWN_xo)

------
cookiecaper
I am admittedly out of my depth here, but I want to make a quick comment about
something I've noticed from HBR publications (which claim to be primarily from
HBS professors).

Typically, they strike me as the most stereotypically "academic" writings that
I regularly run across. Meaning they are working hard to maintain an
appearance of rigor and neutrality, but spend a great deal of time and effort
squinting and straining to produce an outcome that aligns with their intended
philosophy and desired conclusions. There is just so much output that is naive
and tone-deaf to what's experienced on the ground in the white-collar world.
While you can arrange some battery of numbers to support almost any case
("there are lies, damned lies, and statistics"), it doesn't change the
efficacy or practicality of some of the things they end up
endorsing/suggesting.

This is not a universal or blanket condemnation, as I do follow HBR precisely
because sometimes their output is interesting or valuable. But many times it's
clearly the result of a bubble.

One of the most offensive habits of academia is to elevate people to
professorships almost straight out of school, despite these people having
virtually zero real experience practicing the art they claim to know how to
teach. This is particularly offensive when it comes to fields where the art is
a crucial part of the application, like business and law -- which, afaik, are
two fields where these farcical elevations happen routinely.

------
lordnacho
What do people really think about business school degrees? To me there seems
to be a large disconnect between what we think of the person who takes one
(ambitious, hard-working) and what he is taught there (basically nothing).

I went to business school as part of my degree at a top UK institution. They
have 1 year MBAs so the joint school people got a fair taste of what the MBAs
did.

And let me tell you, as half engineers nobody was impressed. Is this really
what they do? Read a bunch of stories about Betamax or various Japanese firms,
and extract lessons from that? That's not even a rigorous history course.

As to what the overall effect is, it just appears there is a class of firms
who are fearful of hiring the wrong people, so they hire a brand name. These
people are more likely to get into such firms, but it's not clear at all
anything from the course is used there in a way that is more than superficial.

Have they damaged society by being too focused on short term gains? Well, it's
not just Harvard and MBAs that went that way in the 1980s. Society as a whole
did, too.

~~~
manuelflara
Several friends who have done MBAs have all told me the same thing: When you
do an MBA, you pay for two things. First, for the network of alumni. Second,
for the badge in your resume. In both cases, obviously the more prestigious
the school, the better (and more expensive). Since that's what would carry
more weight as a brand name (i.e. Harvard) and also richer / more influential
people will attend as alumni, thus those personal connections being more
valuable. Recently I heard about some MBAs called "Executive MBA" or something
like that, which were basically shorter (1 year) and more expensive. They
justified this by saying they were targeted at people already on the
workforce, usually in management, who wanted to move up, and would really
appreciate 1 year titles instead of 2 years. But again, it's for the same
reason. More expensive title => "Wealthier" alumni => Looks better on your
resume. And to top it off, you just have to spend a year "studying".

~~~
sirtaj
This almost sounds like a finishing school for corporate courtiers.

------
chx
What underlines this, I think at least, is the fundamental failure of
_representative_ democracy: if the representatives can gain larger personal
wealth especially on the long run by electing rules that concentrate wealth
they will do so. This will work, alas, even without any corruption -- when
they leave their post they will be able to get compensated for participating
in the "system" and they know this. Because a Business School can only corrupt
society if regulation lets that happen.

Breaking this up is not easy. I believe liquid (or delegative) democracy is
the road forward. It is very interesting that the early Soviets before the
Bolsheviks took over were pretty much this.
[http://www.ditext.com/voline/89.html](http://www.ditext.com/voline/89.html)
But the time was not right for that -- now everyone has the means to
communicate in their pocket so perhaps it's time now.

------
cs702
It's so easy to criticize Harvard Business School (HBS). Outsiders -- and
insiders -- have been doing it for decades now, this book being the latest
example. The Web is littered with accounts of spoiled Harvard MBAs full of hot
air who have done stupid things.

Yet the school somehow continues to churn out an impressive number of people
who rise to the top in extremely competitive fields, from Michael Bloomberg to
Ray Dalio to Mitt Romney to Sheryl Sandberg, to name just a few.[1]

How does _THAT_ happen?

My take is that over time HBS has evolved a process for identifying and
attracting a disproportionate number of people with that kind of potential.
Speaking from personal experience, I know and/or interact regularly with a
good number of HBS grads. While some of them are indeed full of hot air, a
surprising number are truly impressive individuals who are not only thoughtful
and likable, but also capable of "running through walls" to achieve their
goals.

[1]
[https://en.wikipedia.org/wiki/Harvard_Business_School#Notabl...](https://en.wikipedia.org/wiki/Harvard_Business_School#Notable_alumni)

~~~
pessimizer
Or it allows you to hobnob with extremely wealthy people and make connections
with them.

------
drdrey
What does a university do with a $32.7 billion endowment?

~~~
21echoes
Invests it, and runs the university on the returns. Assuming a 4% yearly rate
of return, then that's around $1.5B a year in money available for operating
expenses. As a point of comparison, Facebook spends ~10x that (~$15B), Uber
spends ~2x that ($3B), etc. Harvard obviously has additional revenue streams,
but there you go.

~~~
jldugger
Comparing tech firm operational costs to universities is a bit ridiculous --
Facebook runs multiple private datacenters globally. Most universities get by
with a dozen clustered on campus serving administrative, educational and
research objectives. It also serves more or less the planet, whereas the
Harvards and Berkeleys of the world exist to serve a few dozen thousand at at
time.

$1.5B pays for quite a bit of research. Or, more accurately, a lot of real
estate speculation for the board of trustees to play.

~~~
21echoes
Of course! The point was to put the number next to a number known by the
typical HN reader, not to imply the businesses were at all similar.

> Most universities get by with a dozen clustered on campus serving
> administrative, educational and research objectives

... A dozen what?

~~~
narsil
> > Most universities get by with a dozen clustered on campus serving
> administrative, educational and research objectives > > ... A dozen what?

Looks like GP meant "a dozen data-centers", to compare the costs.

~~~
21echoes
I figured that, but I wanted to give the chance at clarification, because we
were mainly discussing operational expenses, and there's no way data centers
even clears 1% of the cost of running Harvard

------
ssivark
On the same note, here's some research on the impact of Harvard MBAs as CEOs:
[http://www.mintzberg.org/blog/mbas-as-
ceos](http://www.mintzberg.org/blog/mbas-as-ceos)

> _" A decade after its publication in 1990, I looked at a book called Inside
> the Harvard Business School, by David Ewing, long an insider. (The first
> line was “The Harvard Business School is probably the most powerful private
> institution in the world.”) The book listed 19 Harvard alumni who “had made
> it to the top”—the school’s superstars as of 1990. My attention was drawn to
> a few of them who would not have been on that list after 1990 [...] So
> Joseph Lampel and I studied the post-1990 records of all 19. How did they
> do? In a word, badly."_

------
Communitivity
It was explained to me once that it wasn't Harvard Business School that was
responsible for the decline of capitalism, but Wharton. That the two
represented two very different approaches to people. Harvard supposedly taught
to value employees and customers as people, and to strive for social good as a
primary goal. Wharton supposedly taught to treat employees and customers as
renewable resources, dehumanizing them, and to strive for profits and
shareholder value as the only goals. The source was biased to old-school ivy
league, but someone I trust. I've never attended either school.

~~~
ryanwaggoner
Wharton is old-school Ivy League. You probably know this, but just from the
way you worded it, wasn't clear.

------
whack
I'm sympathetic to arguments that MBAs, particularly at elite institutions,
mostly benefit the graduate and not the company that employs him. I read an
interesting study recently that made this claim by comparing the stock-returns
of companies led by Harvard MBAs vs the market as a whole. Sure, the study is
no smoking gun, but it's on the right track.

In contrast, the entire book reads like a series of anecdotes. And given that
Harvard-MBA recruits the best and most ambitious students who go on to occupy
numerous positions of power, you can always find a harvard MBA scapegoat
behind every business failure that ever occurs. I don't see how this proves
anything about the quality of Harvard-MBAs, other than the fact that they
aren't perfect supermen. One could use this exact same line of reasoning and
"evidence" in order to claim that white men are the cause of all problems in
America.

------
ryanalam
HBS now has courses like Building Sustainable Cities and Reimagining
Capitalism, both courses created in response to what I presume is student
interest in subjects beyond the profit maximization motive.

Outside of a few courses and a few class discussions within each course that
are centered in exploring social value, the overwhelming majority of the
experience requires students to check their social mindsets at the door and
think like stewards of shareholder value.

One of the saddest parts about the HBS classroom is its reliance on student
participation and student-led learning. While this is an effective way of
training students to assert their opinions, I have seen several circumstances
in which groupthink and conformist pressure keeps the "social" viewpoint at
the margins of the in-class discussion. HBS just isn't the place for
critically thinking about anything other than profit and loss.

Edit: grammar

------
jtraffic
These kinds of narratives are _so_ appealing, but they are so very difficult
to justify.

Harvard has monumental cachet, and 2008 is still an interesting topic. So it
makes for a super interesting argument to suggest that Harvard is somehow
responsible for 2008. But _come on_. This is simplistic, to say the very
least.

This kind of narrative reminds me of when people "explain" why Apple under
Steve Jobs was so successful. It's safe to theorize in that case because we
can't rerun history and do experiments. 2008 is the same way.

------
jonmc12
It does seem like Jensen was key in evangelizing ideas that tied executive
compensation to stock performance. This even led to a 1993 IRS rule [1]. Here
"value" was clearly shareholder value; the dollar value of stock.

Then, in 2000, on the verge of the Enron collapse, Jensen offered an updated
theory - "Value Maximization and the Corporate Objective Function" [2]. Here,
he suggested that the definition of "value" perhaps needed to evolve, and
consider stakeholders. However, I'm not sure this later work had the impact of
changing executive compensation, or corporate decision-making, probably just
created debate.

Probably feels something like not being able to fix a bug in production..

"Undeniably one of the most influential business theorists of modern times, he
(Michael Jensen) advocated an “agency” theory of management in which
management’s sole duty was to maximize shareholder value. This upended the
long-held “stakeholder” model, in which management was seen as having broader
obligations to a corporation’s workers, customers and communities."

Wikipedia [1]: "After Jensen and Murphy (1990), Congress passed a law, making
it cost effective to pay executives in equity. As a result, executives had a
financial incentive to focus their efforts on increasing stock price. In the
short run, some executives even manipulated accounting numbers (e.g., Enron,
Global Crossing) to achieve this goal"

HBS '00 [3]: Jensen, new theory of Enlightened Value Maximization: "We must
give people enough structure to understand what maximizing value means so that
they can be guided by it and therefore have a chance to actually achieve it.
They must be turned on by the vision or the strategy in the sense that it taps
into some human desire or passion of their own—for example, a desire to build
the world’s best automobile or to create a film or play that will move people
for centuries. All this can be not only consistent with value seeking, but a
major contributor to it.

And this brings us up against the limits of value maximization per se. Value
seeking tells an organization and its participants how their success in
achieving a vision or in implementing a strategy will be assessed. But value
maximizing or value seeking says nothing about how to create a superior vision
or strategy. Nor does it tell employees or managers how to find or establish
initiatives or ventures that create value. It only tells them how we will
measure success in their activity."

[1]
[https://en.wikipedia.org/wiki/Michael_C._Jensen](https://en.wikipedia.org/wiki/Michael_C._Jensen)
[2]
[http://www.hbs.edu/faculty/Publication%20Files/00-058_f2896b...](http://www.hbs.edu/faculty/Publication%20Files/00-058_f2896ba9-f272-40ca-
aa8d-a7645f43a3a9.pdf) [3] [http://hbswk.hbs.edu/item/value-maximization-and-
stakeholder...](http://hbswk.hbs.edu/item/value-maximization-and-stakeholder-
theory)

------
holografix
"France’s prestigious “Grandes Écoles” — not H.B.S. — appear to have generated
a disproportionate number of the financial engineers who unwittingly helped
cause the crisis.)". Wow... just wow.

------
kfkhalili
Read Chomsky and weep.

~~~
flyingfences
I'll read Chomsky's work as a linguist. As for his economic and political
writings, I'm going to pretend that they don't exist until he pulls his head
out of his ass and stops excusing genocide.

------
Jedd
I thoroughly enjoy John Ralston Saul -- he popped up on HN a while back[1]. A
Canadian philospher with a GSOH - what's not to love?

From his Doubter's Companion (highly recommended) - an occasionally acerbic
description of many things - comes this definitive entry under Chicago /
Harvard School of Economics:

> A great centre of contemporary SCHOLASTICISM. The economists working there
> and produced by it are as important to the stagnation of useful thought as
> the Schoolmen of the University of Paris were at the height of the Middle
> Ages.

> Like that of the Paris scholastics, their mastery of highly complex
> rhetorical details obscures a great void at the centre of their argument.
> They also share a tactical genius for exporting their conceptual definitions
> to less important centres around the world. The result is a pleasing
> symphony of international echoes imitating their calculations and cadences
> and so confirming their correctness, even when their policies bring economic
> disaster. The percussion section of Chicago’s orchestra is the Nobel
> committee for economics. Each golden medal is like another congratulatory
> parchment presented at the end of an elaborate theological debate.

> But what of content? There isn’t much. What of Friedrich Hayek and Milton
> Friedman? These minor Thomists preach little more than inevitability and so
> counsel passivity.

> What they call libertarian economics is a remarkable revenge of the
> scholastics on the men of the Enlightenment, who had theoretically destroyed
> them. Peel away the tangle of intellectual leaves from the Chicago School
> and what remains is a great clockmaker god who has set the world ticking.
> But the conclusion of the Enlightenment was that god’s indifference left
> humans free to organize the world as they wished. Chicago has so deformed
> this idea as to invert it. The great clock has been turned into an absolute,
> all-encompassing system. Better than an ideology, the world is its own
> absolute economic truth. We must remain passive before its majesty.

> This is a denial of Western experience. It is nonsense which simply comforts
> the power slipping increasingly into the corporatist structures.

> Strategic thinking can save a great deal of time wasted over tactics. A
> large number of America’s economic problems, and those of the West, could be
> solved by shutting down the Chicago School of Economics.

> This would not prevent the academics employed there from preaching their
> essentially anti-social and amoral doctrines. They would be gathered up with
> delight by the hundreds of imitation Chicago Schools. The purpose of closure
> would be simply to disentangle a tendentious ideology from its unassailable
> position within contemporary power structures. The same sort of liberating
> shock treatment was applied to European civilization in 1723 when the
> Society of Jesus (Jesuits) was disbanded. The effect was to set free the
> ideas of the Enlightenment.

[1]
[https://news.ycombinator.com/item?id=10139144](https://news.ycombinator.com/item?id=10139144)

------
pella
one solution for the "...the Moral Failure of the MBA Elite " \- part:

[https://en.wikipedia.org/wiki/MBA_Oath](https://en.wikipedia.org/wiki/MBA_Oath)

"MBA Oath (short version)"

 _" As a manager, my purpose is to serve the greater good by bringing people
and resources together to create value that no single individual can create
alone. Therefore I will seek a course that enhances the value my enterprise
can create for society over the long term. I recognize my decisions can have
far-reaching consequences that affect the well-being of individuals inside and
outside my enterprise, today and in the future. As I reconcile the interests
of different constituencies, I will face choices that are not easy for me and
others.

Therefore I promise:

-I will act with utmost integrity and pursue my work in an ethical manner.

-I will safeguard the interests of my shareholders, co-workers, customers and the society in which we operate.

-I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.

-I will understand and uphold, both in letter and in spirit, the laws and contracts governing my own conduct and that of my enterprise.

-I will take responsibility for my actions, and I will represent the performance and risks of my enterprise accurately and honestly.

-I will develop both myself and other managers under my supervision so that the profession continues to grow and contribute to the well-being of society.

-I will strive to create sustainable economic, social, and environmental prosperity worldwide.

-I will be accountable to my peers and they will be accountable to me for living by this oath.

-This oath I make freely, and upon my honor."_

more:

\- [http://mbaoath.org/](http://mbaoath.org/)

\- [https://hbr.org/2009/06/why-we-created-the-mba-
oath](https://hbr.org/2009/06/why-we-created-the-mba-oath)

\- FT:"Is the MBA oath still relevant?" 2015
[https://www.ft.com/content/e853f5a2-fe41-11e4-8efb-00144feab...](https://www.ft.com/content/e853f5a2-fe41-11e4-8efb-00144feabdc0)

\- debate: "Why MBAs should not sign the Harvard Business School oath"?
[http://knowledge.insead.edu/leadership-management/why-
mbas-s...](http://knowledge.insead.edu/leadership-management/why-mbas-should-
not-sign-the-harvard-business-school-oath-1444)

or alterative suggestions from the "debate":

 _" I pledge to maximise the wealth of the people who pay my salary, i.e. the
shareholders, unless the shareholders tell me in advance that they want me to
do something else. I will do my best to learn how to do this by taking the
relevant courses"_

~~~
kesselvon
Oaths don't really mean much if there's no recourse to not following them

------
trumpmirror
The failing New York Times failed to point out the author of the critique,
James Stewart, is a Harvard grad himself. Hardly an unbiased article. No
conflict-of-interest disclosure. Many half-truths and disingenuous statements
in defense of Harvard.

Sad.

------
supremesaboteur
> junk-bond-induced takeover mania and resulting scandals of the 1980s; the
> corporate scandals of the 2000s; the egregious increase in the pay gap
> between chief executives and ordinary employees; the real estate mortgage
> bubble and ensuing financial crisis; even the election of Donald Trump

Just leave out the part about President Trump. Plenty of people like him.

> Harvard has obsessively pursued money, sending a disproportionate number of
> its graduates to consulting firms

I assume the students are the ones pursuing money

> An obsession with stock prices and short-term results was the motive for
> many of the accounting scandals of the 2000s

Was it ? I thought it was unscrupulous people doing accounting fraud and
information asymmetry between shareholders and executives.

> McDonald insists he isn’t “anti-business-school” (he attended Wharton), nor
> is he “anti-wealth.

But just a few sentences above :

> McDonald notes that in 1992, the C.E.O.s of Fortune 500 firms made an
> average of $2.7 million a year. By 2000, the average was $14 million.

> It’s a shame that some of them didn’t see the looming disaster and sound an
> alarm

Some did and made a lot of money from shorting these bonds. Only when it
became possible to short these bonds that the bubble finally collapsed and the
money went to fund more useful ventures.

> lay a part in helping more people who think about business rediscover a
> purpose other than profit

A better solution would be to ensure more information symmetry ( even through
government action ) and having more ambitious people in regulatory agencies.
'Pitting ambition against ambition' ( to use a Madison quote ) is a system
that has historically worked very well to curb these types of predatory
behavior

