The Future of the MBA

The high-value decision maker of the future has to be conceived, prototyped, nurtured. In a word—designed

by Mihnea Moldoveanu

Mihnea Moldoveanu

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The 'MBA phenomenon' has come under heavy fire of late. According to Henry Mintzberg, MBAs are not managers, and any program that treats its outputs as such is a fraud. More subtly, the late Sumantra Ghosal admonished that the focus of business academics on simple-minded theories that assume all human behavior is self-interested has turned these theories into self-fulfilling prophecies, and MBA programs into producers of cognitive misers who make their own dismal predictions come true.

Jeffrey Pfeffer has focused his ire on the loss of professional focus, discipline, and ethics within MBA programs, and the resulting rampant, sometimes hedonistic, and often self-defeatingly narrow pursuit of self-interest of MBA-trained managers, while Warren Bennis and Jim O'Toole argue that MBA faculties pursue research untethered from practice and are unlikely to yield insights for future practitioners.

Are we at the beginning of the end of the 'MBA bubble'? You would not know it from looking at the data. Through economic ups and downs, the MBA has grown and prospered. Its current market value is taken by some to be a testament to its resilience and future success. Every year, 135,000 graduates are turned loose in North America from the benches of accredited MBA programs with an institutional stamp on their résumé that suggests they have somehow 'mastered' business administration.

A Much-Needed Selection Machine

Demand for the degree is growing, and supply of 'raw inputs' is steady, as the intellectual pedigrees of the applicants are not significantly lower than they were 10 years ago. The critics seem to be arguing with success itself—generally a losing proposition. Yet their insights are surprisingly resilient and hard to refute. What is going on? Here is my take: The markets recognize what is useful about the MBA, but not—yet—what is counterproductive about it.

What is useful is the following: The MBA is a much-needed selection machine which comes on top of the selection machines called high school, college, and a two- or three-year work assignment. Like all selection machines, the MBA works best because it is based on a clearly defined selection criterion, which is twofold. It selects for general intelligence and conscientiousness, not for lateral or divergent thinking, moral development, or epistemological sophistication, as we do yet know how to measure these.

It selects for qualities that are 'machine-like' enough that we can design reliable tests for their existence. This selection function is worth a lot to recruiters who pay top dollar for graduates who were making less than half of their entry-level wages when they entered the MBA, worth, in fact, almost exactly the value that the MBA industry as a whole appropriates from the market. Does this mean that the MBA's critics are self-deceived Cassandras?

Staring into the Ingenuity Gap

No—they are definitely onto something. The algorithmic skills that the MBA selects for will decrease in relative value as we go from the Age of Information to the Age of Interpretation, where information is free, knowledge is cheap, and intelligence is not merely a cognitive trait. The 'code of business talk' that the MBA imprints on myriad minds is increasingly accessible and decreasingly valuable in and of itself. Pricing options, calculating the weighted average cost of capital, and mechanically ploughing through 'five forces' analyses are increasingly low-value-added activities, as are the pure optimization exercises involved in mapping out efficient supply chains. Increasingly, these tasks will be sub-contractible to young workers with laptops and WiMax modems sitting in Chennai, Bucharest, and Shanghai, which is when the brunt of the critics' arguments will hit home for business schools.

What will we sell them when the algorithmic skills we are now teaching will be available at zero marginal cost? What will we be selecting for when the preeminent source of value will be the skills involved in defining values rather than those involved in calculating the best means to achieve accepted values? What Tom Homer Dixon has called the ingenuity gap will stare the MBA industry in the face with the force with which it now eyes the world of business. Can you select for or develop ingenuity? They shall be asked, and be unable to answer; they will shrug and fall away.

Realizing Truth Is Not Equivalent to Certainty

Why is this coming chasm not accounted for by those infallible Turing Machines called markets? Markets do not create values, they assign dollars to already-created values. They compute, but cannot imagine. The high-value decision-maker of the future—the one that will bridge the ingenuity gap that lies between the Age of Information and the Age of Interpretation to create supernormal profits, has to be conceived, prototyped, and nurtured. In a word—designed.

These thinkers will be big- and nimble-minded enough to reason coherently about radically different cultural, metaphysical, technical, disciplinary, linguistic, and methodological perspectives; and tough-minded enough to take constructive, positive action in the face of radical inconsistency and incongruity among perspectives; to stare the future in the eyes even after realizing truth is not equivalent to certainty—and to think about the world while thinking about thinking about the world at the same time, having realized that all thoughts are fallible, but thinking itself is priceless.

So the critics are right, the MBA is in crisis—because it selects for and cultivates traits and skills that are increasingly vacuous and superfluous. The markets are right in that the dominance-hierarchies and markets of today need one more selection engine. Out of this tension arises the opportunity for designing the thinker of the future. Let the design work begin.

Mihnea Moldoveanu is associate professor and director of the Desautels Centre for Integrative Thinking at the University of Toronto's Rotman School of Management. He is co-author, with Roger Martin, of The Future of the MBA: Designing the Thinker of the Future (Oxford University Press, 2008). .