In a remarkably shoddy example of anti-market propaganda emanating from the Nottingham Business School, the Economist runs a screed that starts out with the debatable but reasonable premise that business leaders exaggerate their omniscience. It somehow ends up with the unsupported conclusion that business schools should abandon economics, finance, and the pursuit of profit for the cant trio of “sustainability,” “social responsibility,” and “leadership for all not for the few.”
The crude equivocating shifts from intellectual humility to moral humility to altruism would qualify for an F in any class on composition, much less philosophy. The vague assertions about “business excess” (entirely unsupported or even defined), the implicit attribution of these excesses to the teachings of business schools (ditto), and the wild leap at the end (replacing business school education with an agora-like setting in which sophists mingle with scientists and philosophers with philistines to figure out what are “social needs”), all conduce to a massive loss of reader brain cells per sentence. This article might be useful as a sort of mine detector–anyone who finds it congenial is best separated from responsibility for educating or commenting on business or economic issues.
This is sobering: The looming student loan bubble – Almost half of all student borrowers were not making payments. 1 out of 4 in debt repayment past due on student debt.: “The looming student loan bubble – Almost half of all student borrowers were not making payments. 1 out of 4 in debt repayment past due on student debt.”
By now, you may be getting sick of reading articles and blog posts about the crisis in higher education. This post is different. It proposes an explanation of why students have been willing to pay more and more for undergraduate and professional degrees at the same time that these degrees are becoming both less scarce and more dumbed down. And that explanation rests on a simple and plausible economic hypothesis.
If you want to see just where the MBA business may soon be heading, read this – just in from Balkinization (HT: Instapundit): The Law School Crunch Is Here–Finances and Quality to Suffer. New numbers released by LSAC show applicants to law school for 2012 are down in every region of the US vs. previous year, with the majority experiencing drops of 15%-20%. Enrollment is also dropping – 2012 may see the lowest enrollments since the 1990s (from 52,000 enrolled in accredited programs two years ago to a possible 43,000 this year). With such a precipitous enrollment drop comes low quality students and severe financial difficulties. The bad news is that even at these low numbers, the number of graduates far outstrips the number of available jobs. Tamanaha estimates the equilibrium number of first year enrollments to be around 35,000. The good news is hard to find.
The law school industry appears to lead its b-school counterpart by a few years. Many of the trends affecting law schools – the most salient being the discouraging cost/benefit ratio facing prospective students – are also affecting graduate business schools. The lag between the two may be due to the fact that, for law schools, the immediate value of a law degree is much more transparent. One cannot be a lawyer without a law degree and the only purpose in having a law degree is to become a lawyer. When the bottom falls out of the market for lawyers, one would expect it to fall out of the market for law education in short order. Since MBAs are, ostensibly, useful in any business endeavor, the connection between the education and practitioner markets is less obvious.
That said, business schools face other challenges. For example, law schools still provide an important certification function and, as such, have presumably retained a requisite level of educational content. This maintains their position as a necessary link in the professional chain. Business school educational content, on the other hand, has been on a downward glide path ever since the advent of Business Week surveys in the late 80s (and the Northwestern response innovation to treat students as “customers”). With no objective certification requirement, b-schools have been free to dumb down the education, admit large numbers of questionably-qualified-but-able-to-write-a-check students, and increase activities that have little to do with learning (e.g., social networking). Simultaneously, we see the stirrings of competition from untraditional sources, such as high quality schools in Europe, China and India (previously a growth segment of the domestic MBA education market), free online courses from top schools such as MIT and Stanford, and alternative forms of education (such as E[enstitute]‘s apprenticeship approach). These differences suggest that the bottom, when we hit it, may be worse than that for law schools.
During a discussion of these developments the other day, a young colleague objected to (what he interpreted as) my Cassandra-like apocalypticism on this topic. The objection was misplaced. I do believe the market for MBAs is going to get a lot tougher in the near- to mid-term – perhaps catastrophically so for programs outside the first tier. In the long-term, however, the turbulence is going to force our institutions … wait, I mean us, the faculties … to revise our business and educational models to compete effectively. The reason to start thinking about the bad-news scenarios now is to prepare. So, when the crunch comes, clear-thinking colleagues can step up to implement successful responses. In my judgment, the market for business education is going to become much more fragmented and diversified. This strikes me as a good thing, with one winning strategy being to take the research-education link and its attending certification role seriously once again. And, that, in my opinion, would be a wonderful development.
This is the answer to those who think we will keep our research-based MBAs above water by making the curriculum more “relevant in the real world” … by which people seem to mean sacrificing academic content for: external projects with business sponsors, “living” case studies, 1st summer internships, support services for personal grooming, etc. As I have long argued, research faculty are not efficient providers of substitute “real world” experiences.
Apropos this discussion, last week, E[nstitute] launched in NYC by founders Kane Sarhan and Shaila Ittycheria. The idea is to pick up promising candidates with a high school diploma and put them through a two-year apprenticeship program mentored by some of NYC’s top entrepreneurs. Impressive.
And, it isn’t just business schools this program threatens — in a recent article, Brad Mcarty, editor at Insider points out, “… the average public university (in the US) will set you back nearly $80,000 for a 4-year program. And a private school will cost in excess of $150,000. At the end of that time, you have a bellybutton,” he writes. “Oh sure, you might have a piece of paper that says you have a Bachelor of Science or Art degree but what you actually have is something that has become so ubiquitous that it’s really not worth much more than the lint inside your own navel.”
That’s strong stuff and, sadly, uncomfortably close to the truth. Moreover, it speaks to strong potential demand for apprenticeship-style entrepreneurship programs like the one mentioned above. Personally, I think it’s terrific. The existence of programs like this create more value at the society level. From the b-school foxhole, they also force research-based MBA providers to think more carefully about what, if any, comparative advantage we have vis the many non-traditional competitors we now see invading our industry.
Hint: the answer will have to involve our research. This is what we do. And, contrary to the whining and hand-wringing of so many traditional MBA providers, teaching young people cutting-edge general principles (i.e., research-based knowledge) has substantial market value. We just stopped doing it a couple of decades ago.