How to Regrow the US Economy: Fire All the MBAs

What do we need to do to grow the US economy again? Fire the MBAs, and let engineers run the show.

That's what Bob Lutz, the former Vice Chairman of General Motors, suggested. He noted that American companies started to lose its way when the MBAs took over from the engineers:

The auto industry is actually a terrific proxy for a trend toward short-term, myopically balance-sheet-driven management that has infected American business. In the first half of the 20th century, industrial giants like Ford, General Electric, AT&T and many others were extremely consumer-focused. They spent most of their time and money using new technologies to create the best possible products and services, regardless of development cost. The idea was, if you build it better, the customers will come. And they did.

The pendulum began to swing in the postwar era, when Harvard Business School grad Robert McNamara and his "whiz kids" became famous for using mathematical modeling, game theory and complex statistical analysis for the Army Air Corps, doing things like improving fuel-transport times and scheduling more-efficient bombing raids. McNamara, who later became president of Ford, brought extreme number crunching to the business world, and soon the idea that "if you can measure it, you can manage it" took hold — and no wonder. By the late 1970s, M.B.A.s were flourishing, and engineers were relegated to the geek back rooms.

This is not to say that the Whiz Kidding of American business yielded no positives; things like the hyperefficient FedEx logistical hubs and the entire consulting industry were born out of it. But ultimately, moving numbers around can do only so much. Over the long haul, you've got to invent or improve real products and services to grow.

Rana Foroohar of TIME Magazine has the article: Link (Illustration: Harry Campbell)

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"The accountants have convinced businesses to rely on Option 2 for too long."

No the accountants did not most likely it was the consumers and marketing.

When I was in high school I worked in a seasonal department. During the summers we sold this 36" round table and 4 chairs for $30. If you got a full summer out of those I would be shocked. For $10 more you could get the same size set but witha table and chairs that were far better. Yet for every 1 of the $40 set we sold we would set 10 of the $30.

I like Lutz but he has forgotten something. Accountants do not tell you what you need to do, they tell you what you did, Marketing or Finance generally tell you want to do.
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The model adapted at a company that I used to work at was "cheaper, faster, good enough". This is the sad truth for many companies nowadays and why so many products don't stand the test of time like they used to. Partially, it is the fault of consumers that want value over quality and really, the pendulum has swung towards value in this country in this time and age. We want more things at a cheaper price and go for the quick bargain rather than look for things that will gain value in the long run.
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Two options on the extension cord scenario: 1) Build the best possible extension cord for $X (materials & labor included) that customers will buy by the handfuls because they're so well-made or 2) Build the cheapest possible functioning cord that we can sell for the highest profit.

The accountants have convinced businesses to rely on Option 2 for too long.
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First they had to convince you that communism was evil and that corporatism was your savior. Then they convinced you that we could all be managers if we outsourced all labor. Their numerical tricks fooled them all; a country that doesn't produce any goods through labor is a bankrupt country. Currently the managerial class in developed nations like the United States is estimated to be as high as 50% of the population. That's half of all "workers" not producing anything. Of course it can't go on forever, the number fudging is just a way to steal capital from the labor class and future generations.

If I follow Marx economics correctly; all real wealth is generated through labour, but only productive labour, management is not productive labour. It is merely asset management. Bloated managerial salaries cannot help matters.
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