A. Masters in Business Administration books are obsolete.
Unfortunately, the business world has changed rapidly between 2004 — 2014. The books and knowledge gathered over decades of assembly line businesses which required great operational and process efficiency do not hold true anymore. For e.g. Market research over iteration is emphasized in marketing 101, while 21st century product marketing mantra in zukerbergs words “if you are not breaking things, you are not moving fast enough”. Or try and find the term “Network effect” in good old Kotler. I doubt it.
Uber through 10x innovation is worth $19 billion — worth more than the entire transportation industry which is run by MBA suits tinkering for small inefficiencies. Operations/process or in the general parlance middle line management is more than 80% of MBA course ( i.e. managing the difference between top-line vs. bottom-line — the bread and better of MBAs, consultants and other suits) is not going to help survival in today’s innovative economy. It tells how to manage existing companies working in existing markets, it doesn’t teach you much on what makes today’s most valuable companies — Apple, Google, Facebook, Amazon, Uber, Snapchat, Instagram etc. — none of them are run by MBA’s — Ok! Tim cook is an MBA (he is also an engineer though)— but everyone knows it’s still Steve Job’s Apple. This is unlike GE, Pepsi, Coca-Cola, Unilever etc. the poster companies of 1980’s — which were run by MBAs.
Brings to my second point..
B. MBA as a degree and science (if you can call it that) is a hangover from 20th century.
From 1950’s — 2000, much of the corporate world’s expansion was in economies of scale and launching something slightly better, cheaper or newer than your competition. Automobiles didn’t change much till Tesla (we only see american brands be replaced with Asian ones as market segment shifted to smaller cars), or distribution didn’t change much till Amazon, taxi rides didn’t change much till Uber/Lyft, hotels didn’t change much till AirBnB, and soon transportation industries will be hit by 3D printing. Why transport large bulky things if I can print it. So MBA was tailor made for a world bygone— where top-lines expanded by finding new segments, bottom lines expanded by creating economies of scale and fighting price wars with competition and so on.
Look at how fast new companies today get 1 million users and some even 100 million users. In the previous economy costs kept rising and you kept needing more people to expand — hence the need to manage and management. Today, costs keep going lower ( look at your hard disks costs or cost you pay for your phone per GB it has in RAM), businesses expansion doesn’t put the same demand on hiring (Whatsapp was only 55 people serving 450 million customers when the deal was done) and the millennial have different working style than our parents — we believe in T shirts at workplace, Work from Home options, flexi—times, connected devices, collaborating through tools like Yammer and Asana through our cellphones.[ please don’t argue that I am giving technology company examples — just how industrialization changed the way we lived and societies functioned 200 years ago — the same shift is happening — Tesla might be the start of end of oil dependence, SpaceX might just disrupt real estate, 3D printing may change transport and drones might change logistics firms, health apps change pharma and on demand retail might challenge legacy companies with distribution advantages]
So in effect, you are learning something which made sense from 1950–2000. People are realizing it.
C. The applicants are disappearing — so is the demand for it.
Lets look at GMAT applicants in USA over the last few years. 23% decline from 2012 to 2013 in test taking applicants. GMAT numbers declined across the world by a staggering 16% i.e. 1/6 of the applicants did not take the test compared to earlier year. That’s massive and as developing world catches up with trends in developed world — we will see a more rapid drop.
If we take a 5 yr period, decline in USA is more than 30% from 130,000 students to 90,000 students. The other big market for MBA is India — a country with its own version of GMAT called CAT. CAT and MBA was seen as the ride for the middle class of India to a good lifestyle that an MBA degree brought with it (even your dowry rate goes us significantly post this degree). CAT applications declined from a peak of 290,000 in 2008 to a mere 205,000 in 2011. 85,000 drop in applicants while the no. of colleges offering MBA increased from 1700 to 3400 — talk about being in a declining market and for MBA institutes which make such a bad management decision, why would anyone want to study business from them?
But the question that bothers me the most is what do they teach exactly. Being an MBA (amongst the toppers that too) — I have often wondered this question — what real skill do we have?
D. MBA is not a skill — its a decision making framework.
Amongst the many skills MBAs process is the ability to work 100 hour weeks and superior framework to make decisions. Unfortunately two trends take these advantages away from them.
Trend 1: Data is powering decisions more than ever and therefore the scope of human decision making is getting limited. Of coarse, it will always exist in abundance as AI cannot solve all problems but merely complement human abilities. But this force of data and algorithms is limiting the landscape of human decision making. FedEx no longer needs route mapping by humans, Retailers use complex recommendation algorithms to understand consumption patterns and baskets rather than human logic.
Human decision making will always be there — but scope of it is not increasing in business as data prevails plus data scientists and engineers seem better equipped with the skills to make decisions in this new landscape than MBAs.
Trend 2: Super specialization
We live in a world where super specialized people are getting more and more valued in the corporate hiring framework. Its an increasing trend while hiring generalists is a decreasing trend.
E. Its not cool anymore, bro!
True that! When Peter Theil says that one of the people we never invest in silicon valley is the MBA types — he uses “MBA” as a negative stereotype. Larry page did the same in pre-IPO Google when he summoned all the 25 MBAs Google had in the team and fired them. His contention was MBAs spoil the hacker mindsets of his engineering teams — and MBAs should not exist in his company. Most big VCs today clearly advocate that MBA in suits are the CEOs tech companies should never hire — ever. And with increased MBA institutes across the world in 1990’s and 2000’s — the no. of MBAs is just way too many and their value increasingly uncertain. Supply > demand and therefore the cool quotient is declining by the day.
Disclaimer: I did an MBA 6 years ago, I was lucky to get in to college at 20 and graduate by 22. So I had the rest of 20’s to unlearn bullshitting and learn creating. I suggest you skip that MBA. Seriously, skip it!
Also, I am pro learning business — but all I am saying is MBA doesn’t teach you business of the 21st century at all. Join a start-up to learn business.
More from Rishabh Gupta:
23 things I will tell my 21 year old self.
On the CEO’s shelf | 11 must read books for an Entrepreneur.
7 reasons why Twitter is the ‘Entrepreneur’s Social Network’ and not Facebook.