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I was asked to be the keynote speaker recently for an important conference at Rutgers Business School on the future of business education. I thought it would be helpful for business school leadership and students and for recruiters of business school graduates to recap my message in this Playing to Win/Practitioner Insights (PTW/PI) piece. It is called The Future[s] of Business Education: Two Strategy Paths. And as always, you can find all the previous PTW/PI here.
Audience participation
The conference attendees were mainly U.S. business school deans and other senior faculty members. The array of deans was quite impressive with deans from leading schools including Cornell, Goizueta, Haas, Kellogg, Stern, Ross, Tepper, Tuck, and Wharton.
I started with a bit of audience participation by asking all tenure stream academics from business schools to stand up. I then asked them to sit down if their school has in its MBA program a required statistics course that provides instruction on how to make an inference from a sample to the universe from which the sample is drawn. As I expected, 100% of the audience sat down. That is now completely standard fare.
I asked them to stand back up and then to sit down if their school seeks to convince MBA students that they should make their decisions based on rigorous data analysis. Again, as I expected, 100% sat down.
So, I got confirmation that business education universally teaches students both how to make inferences from data and that they should make data-based decisions.
Making inferences from data
I then dove into making inferences from data. As I have pointed out many times before and recently at Nudgestock in London, statistics teaches students that the only legitimate way to make an inference to the universe from which a sample is drawn is to ensure that the sample is representative.
You can’t ask a sample of men what they want in their Electric Vehicle (EV) and infer what consumers want in their EV because men are not representative of all consumers. The same would hold for a sample of women or young consumers or east coast consumers. Statistics teaches that you can legitimately use a sample of men only if you are trying to determine what male EV buyers want—because that sample is representative of the universe. In addition, the sample must be big enough to be statistically significant.
However, it is important to realize that 100% of all data that we use in such statistical analysis is from the past. We never have data from the future.
Hence, when we use data analysis to tell us what to do, we are implicitly assuming that the future is identical to the past. Otherwise, the sample wouldn’t be representative and business school statistics class tells us that we shouldn’t be using it. Yet our marketing, strategy, finance, operations, and HR classes tell students to make decisions based on rigorous data analysis.
The Aristotelian distinction
I then explained the Aristotelian distinction about which I have written before. Greek philosopher Aristotle was the father of science and his Analytica Posteriora the most important work in the history of science. While he created the scientific method, which was formalized in the Scientific Revolution 2000 years later, he did not prescribe its use everywhere.
He made a critical distinction between two parts of the world. In one part, things cannot be other than they are. For example, anywhere on the earth’s surface, gravity has always and will always cause objects to accelerate toward the ground at 32 feet/second2—because when it comes to gravity, things cannot be other than they are. But when it comes to smartphones, there were zero in the world in 1999 and probably (the estimates are all over the place) over seven billion now. Smartphones exist in the part of the world where things can be other than they are. That world changed dramatically with the introduction of the BlackBerry in 2000 and has changed pretty much every year since.
Aristotle did more than make this distinction. He encouraged the use of his scientific method in the part of the world where things cannot be other than they are but warned against ever using it in the part of the world where things can be other than they are. The father of science was crystal clear and modern-day statisticians would affirm his logic. In essence, he was warning against the use of unrepresentative samples.
For business educators this calls for an assessment of the degree to which business is in the cannot part or the can part of the world. The whole business obsession with VUCA (i.e., volatility, uncertainty, complexity, and ambiguity) suggests businesspeople see the future of business as constantly shifting—i.e., can, not cannot. Of course, there are exceptions. Plastic cools at a certain rate in an injection molding machine. But that phenomenon represents a tiny, tiny fraction of the business world. Consumers change, competitors change, technology changes, regulations change, and so on. The future is routinely different than the past.
The business school schism
Therein lies the fundamental business school schism. Business schools teach two things that can’t coexist in business. Businesspeople live in a world in which the future is routinely different than the past. But they are educated—and universally so as demonstrated by my audience participation—to use methods appropriate only for a world in which the future is identical to the past.
This leaves business school students with a choice. On one hand, they can ignore their business education, but that begs the question: why spend time and money on something that you subsequently ignore? On the other hand, they can embrace their education and become terribly flawed technocrats—following the analysis despite its inherent logical inconsistency.
I think they are choosing a bit of both. On one hand, they are actually doing more than ignoring their business education: they are skipping it entirely, especially at the MBA level. I pointed out in a 2013 speech at the Academy of Management that U.S. students applying to U.S. MBA programs was in secular decline and from what I can see, the decline has continued. On the other hand, the MBA is still the second biggest volume graduate degree in America (after one-year Master of Education—which has a built-in demand because teachers get an automatic salary bump with one). So, many are still embracing it.
Two strategy paths
This leaves two strategy paths for business schools. On one hand, they can keep teaching fundamentally flawed, logically inconsistent content and watch business education continue to decline for two reasons. First, many prospective students will take a pass on business education because they don’t want to be trained to be data technocrats. Second, the business world has only a limited appetite for absorbing data technocrats.
On the other hand, they can do what I recommended in my speech. That is to teach the Aristotelian distinction and equip students to follow Aristotle’s instruction in the part of the world that can be other than it is, which is the dominant part of business. That entails teaching business students to imagine possibilities and to understand the logic of possibilities well enough to choose the one for which the most compelling argument can be made—which means focusing more on developing students’ logic capabilities than their analytical prowess.
The business school reaction
Sadly, I don’t come out of the conference feeling that business education will choose the second path. In business education (and probably any other kind of tertiary education), when convention is challenged it is attacked, which is what Thomas Kuhn described in The Structure of Scientific Revolutions—and it is exactly what happened at the end of my talk. The first audience question wasn’t a question; it was an assertion from a dean (don’t know who he was but I think he said his name was Bruce): “That was a lot of arm-waving.”
My immediate reaction, which I verbalized, was that this was why I was delighted to have left the academy six years ago and haven’t thought a single day about going back. This is what the academy does. When it doesn’t like something because it challenges convention, somebody takes responsibility for launching an attack. And since they know behavioral economics, they know that the rest of the audience will anchor on the attack, and the challenger will be destroyed by brute force. Childish but true.
I didn’t take the bait and instead of defending, I simply asked what in my talk constituted “arm-waving?” He didn’t like that much and mumbled around for a while then asked me to put up slide 13 and pointed to the second point and said I hadn’t explained it much. So, not explaining one point on one slide as thoroughly as he wished meant that the entire talk could be dismissed as “arm-waving.” Suffice it to say, he didn’t get the satisfaction he was looking for—and I think I can give myself credit for not eviscerating him. Twenty years ago, I would have. But I realize now that this is theater, and he was just playing his assigned role.
Since the designated attack dog hadn’t succeeded, the rest of the audience questions were mild and not unfriendly. But I am quite convinced that nothing is going to change on this front. Business schools will continue to teach the schism—though perhaps they will do it more sheepishly.
Practitioner insights
Paradigms die hard—per Kuhn. The paradigm of business education teaching students to make rigorous data-based decisions is well entrenched—super well-entrenched. The standard approach of the people who depend on the continuation of the dominant paradigm is to fight any attempt to challenge it—whether they have any useful argument or not. That is where business education is today—and it isn’t going to change from within.
My advice then is for two kinds of practitioners—business school students (prospective or actual), and companies that recruit from business schools.
For students, lower your expectations, though it is a bit different for undergraduate business versus MBA education.
For undergrads, you will pick up a language system for business and learn some useful business concepts. One way or another, you will have to do that—and this is one plausible way. But protect yourself. Understand that they are teaching across a schism, and it doesn’t make sense. Just ignore them. You can’t be a useful businessperson making rigorous data-based decisions the way it will be taught to you.
For MBAs, think carefully. Your opportunity costs are much higher than for undergrads in business because the average full-time MBA has 4–5 years of business experience—and they give up two years of an already attractive salary to take a full-time MBA. You share some of the undergrad reasons for attending, but at a far higher opportunity cost. Many of you should take a pass. This isn’t an institution that is learning and getting better. It is entrenched in an agenda that isn’t helpful to the world—or you.
For employers, it makes sense to recruit there. The biggest value of business education programs is selectivity. It is hard to get into a quality business program, so the schools have presorted for you. The second value, in the case of MBAs, is commitment due to the high opportunity cost they pay. They must have high commitment to personal improvement to incur the out-of-pocket and opportunity costs to get their education. So, it is a high-value cohort from which to recruit.
But you need to recognize that you will have to deprogram many of them who will graduate believing that they need to make all their decisions entirely based on rigorous data analysis—because that is what they are taught. You will have to deprogram them for them to be useful to you. But if you understand that and have a system for deprograming, you will get human capital that it is worth recruiting.
