This crisis proved that Business Schools and Finance Universities are worthless?

[Rabbitone]

I retired 3 years ago as a banking manager in IT to trade full time. One meeting from the wild era in banking stuck in my head all these years. It tells an interesting story I never forgot.

I was sitting in back of a large project meeting in the late 2000 in the newly formed BankOne. All of top department heads in the bank were jammed ear-to-ear into a large conference room in Chicago. The B school boys had just laid out their case on a big project that would give above average returns and revamp BankOne into a star bank. As part of their presentation they had slammed the previous group of new banking wiz kids who had proposed the project with spectacular returns but with marked hirer risk.

After listening patiently for more than 45 minutes to the B-school boys Jamie Dimon stood up and addressed the assembled managers saying “You guys don’t get it. This is the real world. That B-school crap does not fly in the real world…..We either make the profit the board and share holders demand or we lose our jobs…”

 

[sjfan]

Quote from crgarcia:

This crisis proved that Business Schools and Finance/Economy Universities are worthless?

Tell me - what do you think is taught in a decent biz school/econ/finance program? what are the actual courses? do you know - or are you just talking?

When the space shuttle blew up, does it mean engineering programs are worthless?

 

[Cutten]

Quote from college_trad3r:

There are 2 things this crisis has made clear and that is that the following statements have been disproved:

Efficient Market Theory dictates the market is efficient

Traders provide better price discovery

Both FALSE

How is the latter false. The ONLY people predicting this crisis were traders, speculators, and a few economic forecasters. Politicians, businessmen, corporate employees, regulators, the man in the street - they were all asleep on the job. The only thing this crisis has proved is that most people are dumb and good traders are smarter at financial forecasting.

 

[huh]

Quote from ScapGF:

Not really, in my respectfully humble view. This demonstrates that it only takes a few people with enough power and greed to ruin it for everyone else. Been happening since the beginning of time.

Think about it, the individuals who are most in the wrong had monetary incentives and golden parachutes out the wazoo. People do a lot of crazy things for money and often times care little about the consequeces to others.

Bingo! Why would you ever trust anybody with your money if they get millions of dollars if the stock price goes up and if they take dumb risks and lose your money then they get millions of dollars and early retirement. The only thing this crisis has showed is that people with nothing to lose (either make millions or screw up and make a couple million less and retire early) will make very bad decisions with your money.....so I can't really say that I'd knock business schools because I think EVERY CEO in EVERY industry will screw you over if they have nothing to lose.

But thats my own personal distrust of "smart rich people" that have not invented anything.

 

[bozwood]

just proves that agency theory is alive and well.

in addition, read some history as this type of stuff has been going on for centuries and more.

business school isn't worthless, however human nature is just as strong as ever and trumps everything usually.

 

[adrock1795]

Maybe it tells us that everything taught in schools are just theories that work best in the past situations, that changing a variable in the problem completely changes the answer.

 

[Eddiefl]

Quote from crgarcia:

This crisis proved that Business Schools and Finance/Economy Universities are worthless?

Wrong, if i was funding a new start up. Do you think i would hire you or a guy from Ivy League with MBA, that knows, supply/demand/ROI, invisible hand, management skills, all around very knowledgable.

think about that.

MAny companies are still doing very well, healthcare, pharma, biotech, industrial, retail, and thier CEO have top notch biz degrees.

EF

 

[Anaconda]

Quote from ScapGF:

The idiots at the tops of the banks completely ignored risk management and now we see exactly what happens when you do that...a major blowup.

If you honestly believe that the heads of the banks simply ignored risk management and did not think correctly, then you are the idiot.

At the end of the day, they collected massive salaries & bonuses as the crisis was brewing. Once it happened, they have trillions of dollars being given to their companies at the expense of the taxpayer (you included, I'm assuming). Meanwhile you make fun of them, while they are taking those funds, stockpiling them, paying themselves money, hosting corporate functions. Who really is the idiot?

They definitely won't teach you this stuff in business school. Well, they don't teach you much of anything that is truly useful in business.

 

[Charlie_Sheen]

Gross generalizations are no good.


Some MBAs learn their lessons well and apply them. Others don't.


The following is a case study of an MBA who did seem to learn a thing or two.

John Alfred Paulson (born December 14, 1955) is an American hedge fund manager based in New York City.

Paulson received his BS in Finance from New York University’s College of Business and Public Administration, where he graduated first in his class, and an *** MBA from Harvard Business School ***, where he was awarded the designation of Baker Scholar, the school's top academic honor, for graduating in the top 5%.[1] He is President of Paulson & Co., Inc., New York.

Under his direction, Paulson & Co has capitalized on the problems in the foreclosure and Mortgage Backed Securities (MBS) markets.

Paulson is #78 on the Forbes 400 list of wealthiest Americans[8] and is worth approximately 4.5 billion dollars.

------

On the other hand there is Jeffrey Skilling - the Enron mastermind. He is also a Harvard MBA. His body of work is less impressive.


B-School is just a place to get some knowledge / ideas / contacts. What you do with them is up to you.

It isn't like joining a cult or anything ...


For the record - issues concerning diversification / risk mgt. / group think /
agency / etc. / are all addressed at the major b-schools.

 

[fhl]

Quote from ScapGF:

The idiots at the tops of the banks completely ignored risk management

no, they had models which were wrong

it is the millions of citizens who bought homes that can no longer pay their mortgages who completely ignored risk management


why is it that when a bank blows up everyone seems to think that they are idiots and rogues, but when a household blows up ( that is what you would call it when they can't pay their mortgage, isn't it?) they are a victim?