Huff and puff brought the economic house down

 
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By Christian Nielsen

How the Mr Bigs and their biglettes unwittingly (or not) brought down the world’s economies – and the hotly contested prize for ‘America’s worst investor’.

5 October 2009

Two stories in The Economist have more in common than perhaps the magazine intended. One, accusing the MBA factories of doing little to mend their habit of churning out ever-smarter greedy buggers. The other, announcing a Golden Raspberry-inspired prize for the worst small investor in the United States.

I’ll deal with the MBAs first. But before starting, I must confess to having a Belgian derivative of this certificate. It never did me any good, bar an excuse to stay in the country. But the Mr Bigs of MBAs – I’m talking about the likes of London Business School, Harvard Business School (HBS) and others on the yearly ‘best MBA’ courses list – deliver a cohort of big achievers year on year, at a not inconsiderable cost to the students or their organisations.

These Mr Bigs and their biglettes have done sweet f-all to mend their Gekko-esque educational model moulded round the mantra that “greed is good for everyone, especially me”.

The bankers have, at least in principle, been stripped of their pinstripes and, if France gets its way, their future fiduciary roar as well. But until I read this trumpeting repost by Schumpeter (‘The pedagogy of the privileged’), I hadn’t considered the degree of culpability that the elite education machine should perhaps also bear. He says these institutions of learning have been “churning out jargon-spewing economic vandals”, the likes that lined the executive tables of such feted organisations as Enron, Lehman Brothers and half of the Wall Street walkers now offering good CV and an ego-massage to anyone who‘ll now listen.

Yes, blueprints for betterment have been drawn up by some of these fine establishments, The Economist says, but little has emerged of note. No, wait, HBS has introduced a voluntary pledge “to serve the greater good” and a group of Harvard students have set up an oath of “responsible value creation”, according to BusinessWeek’s website.

(Makes you wonder  if that ‘greater good’ is of the kind you would hear espoused at a GOP rally: ‘make shit loads of profit and let the rest take care of itself’. Sound familiar?)

So, if the bankers are going to be made to pay – just a little, and even that isn’t a given because, like a mugging, as the economy starts to show signs of improving, it’s easier to forget the trauma – why not the manufacturers of the greed-is-good method of wealth creation?

Perhaps business schools could start teaching history as well, it was suggested, to remind graduates that the laws of gravity work for money markets too. Taking a knife to the climate of “boosterism” – puffing up the models and methods of certain businesses, people or consultancies – prevailing at some business schools was also put forward as an antidote to acolyte-building academia.

“Business schools need to make more room for people who are willing to bite the hands that feed them: to prick business bubbles, expose management fads and generally rough up the most feted managers,” Schumpeter concluded.

Perhaps we need a matrix to help explain this. Any bright MBA grads want to help us out with that?

Spurious connection

I’m going to make another confession; I didn’t really have a strong ’connector’ for this second story. It just sounded like a really fun idea to highlight: the folly of investment-envy and the slavish adherence to the sort of MBA-inspired confidence that drove people to think they were on to a winning investment strategy for ever.

With some careful analysis, you could probably make a fair case for one relating to the other, but I don’t have the smarts for that – my MBA was a bottom-shelf affair.

The deadline to apply for the ignominious title of ‘America’s worst investor’, the contest organised by Hedgeable.com, is 12 October. Don’t miss this train too! With no shortage of contenders, this is an admirable effort to poke the wounds of this year’s economic fiasco, and perhaps in doing so, remind us that even smart people can make some dumb decisions.

Read Reuters Blogs for some commentaries on how some small and medium-sized American hedge funds and asset managers got their clients (a lot of them retirees) in the hock with exotic derivatives.

Watch this space for expert commentary and sharp(ish) analysis on the winning losers.

Side note: Chronikler would be happy to publicise any effort to set up a ‘Europe’s worst investor’ prize. The Americans are offering the winners – I mean losers – trips to Rome, Las Vegas and Iceland, all home to decent collapse some time in the last 2000 years. Perhaps the European winners could win a trip to Wall Street or the City. Just a thought.

©Christian Nielsen. All rights reserved

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