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Everything I Learned In MBA School Was Wrong
Shout Bits Blog ^ | 08/15/11 | Shout Bits

Posted on 08/15/2011 10:26:23 AM PDT by Shout Bits

To some, a MBA is a yardstick of business acumen or a launch pad for great accomplishments. While graduate students are expected to exercise increased independent and critical thought, the amount of leftist indoctrination that goes unchallenged is startling. In nearly every department, the MBA curriculum has got it wrong.

Keynesianism:

MBA programs teach that government spending and expansive monetary policy stimulates GDP expansion. Keynesian formulas suggest that recessions can be cured by stimulus spending and money supply growth. Stimulus ‘primes the pump’ of the economy. Well, no, stimulus has never worked, but MBA professors fail to mention this, as they also fail to mention other economists like Hayek, Taylor, and Hazlitt whose theories refute Keynes.

Keynesian stimulus does not work for two real world reasons: 1. When the government stimulates, it almost always procures things nobody needs or wants. The government spends based on political favoritism, and those items are unlikely to stimulate further productive economic activity (e.g. bridge to nowhere); and 2. People don’t measure their wellbeing by GDP growth, they measure their wellbeing by prosperity. The fact that Pres. Obama’s stimulus grew the public sector component of GDP did nothing for regular Americans. People do not really want more money; they really want things like food, houses, cars, and TVs. Stimulus is largely busywork that creates nothing, especially in the short term, to increase real prosperity. Paul Krugman’s recent ludicrous endorsement of government spending on alien invasion preparedness as a way to grow the economy is the perfect example of Keynesianism’s fatal flaw.

Currency Devaluation:

MBA programs teach the IMF mantra that when a country has a trade deficit, or it can’t pay its obligations, it should devalue its currency. The theory posits that after a devaluation, the troubled country’s exports will be more competitive, imports less competitive, and soverign debt more affordable. As Argentina and every other test case has shown, this never works. MBA professors cite a ‘J-Curve’ effect whereby devaluation causes the opposite of its stated goals in the short term, but as consumption and production shift, the devalued economy will reach a balance. The J-Curve must take a long time, because devalued economies continue to suffer for a long time.

Devaluation does not work because, as with Keynes, people do not want money, they want goods. No magic wand increases the real efficiency of a labor force. Further, when a government inflates its currency (devaluation), it makes foreign capital formation less attractive. Without capital formation, modern economies cannot grow, and real prosperity becomes impossible. Currency devaluations are just a form of surprise inflation, which is stealing from those who save to pay off government debt. Only an ivory tower academic can think that is the path to prosperity.

Union Management Partnerships:

MBA academics are big on labor partnerships. True to their socialist instincts, they can’t believe that unions are bad for business. They laud each effort to find a new way to harmonize union and shareholder interests. In the real world, these partnerships never work. UAL gave its unions ownership and board seats, and GM’s Saturn division gave unions decision authorities, but both of these experiments failed, resulting in bankruptcy. The steadily declining private sector union ranks prove that unions cause business failure wherever they take root, otherwise businesses would be inviting unions to form and their ranks would be growing. There is no aligning union and shareholder objectives; shareholders seek to avoid Ch. 11 bankruptcy at all costs, while unions see Ch. 11 as at most a temporary setback.

Efficient Markey Hypothesis:

MBA professors hate Wall Street traders because academics think that what they do is impossible. The religion of MBA finance professors is that the markets are efficient (i.e. their prices always reflect true value and that without inside information nobody can make a supernormal profit). Securities’ prices fall along a line that sets their price relative to their risk, so stock picking is a waste of time.

Shout Bits apologizes for the following obscure references, but every assumption underlying the efficient market hypothesis is wrong. Investors are not objectively rational; their decisions are based on needs other than risk adjusted return. Stocks’ returns are not a random walk; returns are auto-correlated. Stock returns’ correlations are not constant; in times of extreme gains or losses, correlations increase. Likewise, betas are not constant and are difficult to predict. Every foundation of the efficient market hypothesis is bunk. The efficient market hypothesis is a classic example of MBA professors living within their walls of assumptions and formulas while those less constrained by theory make a killing.

The list of MBA fallacies goes on (e.g. more regulation creates more safety, the green movement and its economy, strategic reorganization creates value, Japan’s model of government / private partnerships). Of course a lot of smart people earn their MBAs, but they would have been smart without them. As with liberal arts BAs, the hidden price for expanding minds at an MBA program is the indoctrination into left wing and academic fantasies that have no use in the real world. The best business education is getting one’s teeth kicked in by tough competitors who know their trade and know how to win. That is a lesson that no MBA program can teach.


TOPICS: Education; Politics
KEYWORDS: government; mba; stimulus
Visit www.shoutbits.com for formatting, links, and citations.
1 posted on 08/15/2011 10:26:26 AM PDT by Shout Bits
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To: Shout Bits

Saying YOUR MBA curriculum/professors were leftists does not mean that ALL MBA programs teach that hogwash.


2 posted on 08/15/2011 10:33:58 AM PDT by cowtowney
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To: Shout Bits

“MBA professors hate Wall Street traders because academics think that what they do is impossible. The religion of MBA finance professors is that the markets are efficient (i.e. their prices always reflect true value and that without inside information nobody can make a supernormal profit). Securities’ prices fall along a line that sets their price relative to their risk, so stock picking is a waste of time.”

I will tell you why this is wrong. The market price reflects the collective opinion of all those buying and selling securities, and 50% of them are below average in analyzing information and predicting what will happen in the future. They are smarter than the general population, but they still have their own bell curve.


3 posted on 08/15/2011 10:43:14 AM PDT by proxy_user
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To: Shout Bits

My brother got his MBA in the 80’s from Stanford. He has been an absolute failure in everything he has done since then. After 3 failed business and 2 divorces, he had to move home w mommy and daddy when he was 57. His wife kicked him out when she found him playing w guns in the basement. He is now 63 and working on biz no 4.


4 posted on 08/15/2011 10:43:26 AM PDT by DownInFlames
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To: Shout Bits

Dick Brooks learned how to pack his golden parachute getting his MBA.

Yes that was really out of left field. But I really hate the guy.


5 posted on 08/15/2011 10:51:21 AM PDT by hadaclueonce ("Endeavor to persevere.")
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To: Shout Bits

There are some left wing MBA professor out there. Fortunately my MBA was from a strictly Austrian School program. Webster University, campuses throughout the world.

Two lessons that should be learned in MBA programs:

1. Follow the money.
2. Start your own business.

If those two lessons are not taught, the MBA is crap.

There is no reason to go through an MBA just to end up as someone else’s minion.


6 posted on 08/15/2011 10:53:51 AM PDT by texmexis best
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46 Days And FR Is Still Short Of Its Goal

We Are In A Fight For Our Republic

Are You In Or Are You Out?

Support Free Republic

7 posted on 08/15/2011 11:05:49 AM PDT by DJ MacWoW (America! The wolves are here! What will you do?)
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To: Shout Bits

“Keynesian formulas suggest that recessions can be cured by stimulus spending and money supply growth. Stimulus ‘primes the pump’ of the economy.”

That stupid model assumes there is money in the economy that isn’t being spent and that if the government takes it and spends it the pump gets primed. It never takes into account why money is not being spent and if the government spends it why additional money would follow if it wasn’t in the first place.


8 posted on 08/15/2011 11:07:24 AM PDT by CodeToad (Islam needs to be banned in the US and treated as a criminal enterprise.)
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To: Shout Bits

Cool and insightful.

Still, can you expound on the J-curve and the effects, short, medium and long term of currency devaluations?


9 posted on 08/15/2011 11:11:01 AM PDT by bvw
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To: Shout Bits
I was kinda hoping that MBA programs would include some practical info such as how to make out an effective business plan, higher level accounting practices, overview of how to run effective HR/Marketing/Sales, etc. departments.

All of that should be relatively non-controversial.

10 posted on 08/15/2011 11:15:54 AM PDT by who_would_fardels_bear
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To: DownInFlames

Well, if he was playing with his gun in the basement I could understand.

I clean my pistol in the basement, but that is as much play time anything gets down there.


11 posted on 08/15/2011 11:17:38 AM PDT by Vermont Lt (George Lopez is the black hole of funny. Nothing funny can escape his suck.)
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To: DownInFlames

So can we conclude that based on your brother being a screwup and getting his MBA that all MBAs are screwups? Or getting an MBA will lead to people being losers? Or what can we learn from your experience?

That one person in thousands will end up being a screwup no matter what they study?


12 posted on 08/15/2011 11:25:17 AM PDT by cowtowney
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To: who_would_fardels_bear

That’s what my MBA program taught. We had full semesters on marketing, HR, and even program management. There was a tiny bit of background on Keynes (along with Smith, Marx, and various ethical philosophers), but it wasn’t a major part of the program.

There was nothing about labor partnerships. A fair portion of the curriculum did focus on international business and corporations though.

This article was nothing like my experience in business school. Oh, and I graduated early this year, so my experience is current.


13 posted on 08/15/2011 11:30:54 AM PDT by Velvet_Jones
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To: cowtowney
I teach in an MBA program at a major University and am proud to say, the approach the OP describes is not the one we use at all.

While we do discuss Keynesian Economics, we emphasize the Austrian School.

Likewise, we discuss labor - management partnerships, but analyze their strengths and weaknesses relative to union avoidance and union suppression strategies.

Sounds like the OP made a bad decision on where to go for the MBA. There are much better options out there if people are willing to look around and become informed.

14 posted on 08/15/2011 11:35:18 AM PDT by comebacknewt (Sheesh. Go away and stay away Newt.)
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To: DownInFlames

Re: biz #4 — Maybe he took advice from my old coach, “Men, we’re going to keep running that play til we get it right”.

But then maybe retired Florida State coach Bobby Bowden’s comment might apply to him: “Son, you’ve got a good engine, but your hands aren’t on the steering wheel.”


15 posted on 08/15/2011 11:36:57 AM PDT by miele man
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To: comebacknewt

I agree
People will spend hours and hours picking out their next MacBook or car but way less picking out a $100,000 graduate program


16 posted on 08/15/2011 11:40:43 AM PDT by cowtowney
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To: Shout Bits

‘Twasn’t all that long ago when on Wall Street, MBA meant the dunderheads who made loans to Mexico, Brazil and Argentina.


17 posted on 08/15/2011 1:13:12 PM PDT by Roccus (Obama & Holder LLP, Procurers of fine arms to the most discerning drug lords (202) 456-1414)
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To: DownInFlames

My Mom got her MBA from Stanford too, and her class mate was Condi Rice. She had her share of lefty profs who thought so highly of themselves and couldn’t believe a certified CGA could out-think them in simple economics.


18 posted on 08/15/2011 1:20:46 PM PDT by max americana (FUBO NATION 2012 FK BARAK)
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To: bvw

Still, can you expound on the J-curve and the effects, short, medium and long term of currency devaluations?

The J-Curve in this instance explains that people’s consumption patterns will not change quickly for many items. For example, if the US$ fell by half to the Euro, BMWs would become uncompetitive. Still, until someone started making BMW like cars in the US, people would continue to buy them, even thought the price had doubled. For the short term, the BMW trade deficit would go up due to the devaluation, but the J-Curve theory suggests that eventually, BMW-equivalent cars would be made in the US and the trade imbalance would disappear.

It is an elegant and logical theory that does not actually work out.


19 posted on 08/15/2011 1:54:19 PM PDT by Shout Bits
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To: bvw

Still, can you expound on the J-curve and the effects, short, medium and long term of currency devaluations?

The J-Curve in this instance explains that people’s consumption patterns will not change quickly for many items. For example, if the US$ fell by half to the Euro, BMWs would become uncompetitive. Still, until someone started making BMW like cars in the US, people would continue to buy them, even thought the price had doubled. For the short term, the BMW trade deficit would go up due to the devaluation, but the J-Curve theory suggests that eventually, BMW-equivalent cars would be made in the US and the trade imbalance would disappear.

It is an elegant and logical theory that does not actually work out.


20 posted on 08/15/2011 1:54:47 PM PDT by Shout Bits
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To: Shout Bits
I see you majored in blog pimping.
21 posted on 08/15/2011 2:29:36 PM PDT by starlifter (Pullum sapit)
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To: cowtowney

I loved, loved, LOVED my MBA studies.

It was life changing for me since I had taken almost zero business courses in undergrad. The business philosophy courses were mind boggling. It was a new look for me into the world as was everything else in the program.

I wish my studies could have gone on forever; but sadly it came time to graduate.

By the way, if one is going for one’s MBA, it is recommended one goes out into the workforce for at least 5 years before tackling the MBA. It has to do with gathering experience to then apply that experience, or experiences, to one’s studies and bringing them to the classroom to share.

This is one of the things that made my classes so awesome. It was the personal experiences folks brought to class and shared.

My professors were top notch. (Except for the one who is doing slammer time in Florida. He was our Business “Ethics” professor. His “ethics” got him put in jail. My older brother and I can’t stop laughing every time his name comes up.)


22 posted on 08/15/2011 2:41:06 PM PDT by Gatún(CraigIsaMangoTreeLawyer)
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To: miele man
Maybe he took advice from my old coach, “Men, we’re going to keep running that play til we get it right”.

That is the Einsteinien Approach. Trying the same thing over and over hoping for a different result. Or maybe now we could call it the Obama approach. Anyway, don't we learn ANYTHING from history? Seems not.

23 posted on 08/15/2011 2:48:04 PM PDT by mc5cents
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To: comebacknewt

Thank you for your comments.

Please read my post #22.


24 posted on 08/15/2011 2:53:50 PM PDT by Gatún(CraigIsaMangoTreeLawyer)
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To: Gatún(CraigIsaMangoTreeLawyer)
By the way, if one is going for one’s MBA, it is recommended one goes out into the workforce for at least 5 years before tackling the MBA. It has to do with gathering experience to then apply that experience, or experiences, to one’s studies and bringing them to the classroom to share.

An good example of bringing business experience to class can be found here.

25 posted on 08/15/2011 3:03:59 PM PDT by mc5cents
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To: mc5cents

Thank you.

Totally hysterical but true.

And this is the point…. Roger Dangerfield brought into the classroom reason, smarts, and experience; but the professor couldn’t handle reality.

Brilliant indeed!!!

I loved it!!! It makes a strong point.


26 posted on 08/15/2011 3:34:54 PM PDT by Gatún(CraigIsaMangoTreeLawyer)
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To: Shout Bits
I will not hire an MBA holder. It is a debilitating degree now.
27 posted on 08/15/2011 3:38:53 PM PDT by mad_as_he$$
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To: who_would_fardels_bear; Shout Bits
I was kinda hoping that MBA programs would include some practical info such as how to make out an effective business plan, higher level accounting practices, overview of how to run effective HR/Marketing/Sales, etc. departments.

Save your money.

The Ten-Day MBA.

Good book, I recommend it.

Cheers!

28 posted on 08/15/2011 4:11:25 PM PDT by grey_whiskers (The opinions are solely those of the author and are subject to change without notice.)
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To: who_would_fardels_bear; Shout Bits
I was kinda hoping that MBA programs would include some practical info such as how to make out an effective business plan, higher level accounting practices, overview of how to run effective HR/Marketing/Sales, etc. departments.

Save your money.

The Ten-Day MBA.

Good book, I recommend it.

Cheers!

29 posted on 08/15/2011 4:49:43 PM PDT by grey_whiskers (The opinions are solely those of the author and are subject to change without notice.)
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To: Vermont Lt

It was pointed at his head.


30 posted on 08/17/2011 7:34:55 AM PDT by DownInFlames
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