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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)


I have a 2005 Jeep Liberty. I bought it because it is one of the rare ones with a Diesel engine, only 10,500 being made in the whole run for 2005 and 2006.

The engine is great. It is a four cylinder turbocharged 2.8 liter from Detroit Diesel Motori. It is the engine used in European Jeeps where Diesel is more popular.

The downside to this Chrysler product is engineering by accountants.

This is the only modern car I know of that does not have a sending unit (electric fuel pump) in the tank. The accountants left it out to save money.

A few years back the ball joints in all Libertys were replaced under warranty. A very big expense to Chrysler caused by an accountant who decided to use smaller than engineer specified ball joints.

There's more but, that gets tedious and boring. Suffice it to say I have a neat Diesel engine with a bunch of Chrysler parts - all selected by accountants - loosely attached. My job is to keep up with the maintenance as the Chrysler parts fall off.
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Having worked at companies where the heads of Finance somehow managed to convince people to let them run the show and call the shots - it can be a recipe for disaster. Decisions are made with no regard to quality of products and services, and no thought of customers or heaven forbid, the employees.

Being in that finance department, I found myself getting into a lot of arguments with my supervisors.

There's a reason I'm not in that line of work anymore.

Oh, and Fred - I have a Jeep, too. I wish Chrysler would spin them off into an independent company...
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I like Lutz but having engineers run everything just means nothing gets done. I have had the joy of watching an engineer end up in finance. I asked him what he thought after his first year, his answer was:
"I told everybody that things would be different when I was in finance, we wouldn't do things on the cheap, we wouldn't do things the accounting way, only best for everything. It wasn't till the 6th month that I realized I was agreeing with the accountants all the time because I realized that we cannot always do everything the best way because if we did we wouldn't be able to stay in business. Now there are times when we really do need to do things the engineering way but just not for most things."

I veiw it as a team, engineers come up with wonderful ideas and accountants tell them if those ideas can feed them. For example the $100,000 Zafirro Iridium razor is an engineers razor, only the best. The Gillette Fusion ProGlide is the accountant's, good enough to get the job done even if it needs upkeep from time to time, cheap enough to still allow you to eat and in the end vastly more cost effective.
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Only one job title needed:

Philosopher King

See: Steve Jobs.

You can have your Design+Engineering cake and make enough to eat, too.

You just need someone strong enough to kick the crap out of the old False Paradigms.
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The problem isn't MBAs, the problem is public companies who are judged based on short-term, quarterly results. Blow your product (whether it be software or hardware or auto parts) out the door on the 31st for 25% less than you could sell a day later just to hit your monthly/quarterly/yearly numbers. Then repeat the process all over again next month/quarter/year.
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@DennisL,
I agree completely. People use to invest in companies for the long haul. You wanted stable companies that always grew. Now, it is all about pumping up stock value not matter what happens, then dump and move on to the next.

Sure, investors want to make a return, but one day they will be sitting in a board room going "where are all those companies we use to invest in?" and the answer will be "You consumed them all, there aren't any more."
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"Then there's something fundamentally wrong with your business model, and you don't attract decent customers."

Really? I am looking over a parking lot, I see no Rolls or Maybach. I am 100% sure that the desk and chair I am use are not top of the line, since I have better at home and I didn't buy the best. I know the PC I am using is the base of the model range. In fact it would be a safe bet to say that nothing in the building I am in is the best there is for whatever it is.

If you asked an engineer to build you the best extension cord you would probably end up with something that was made of platinum wrapped in Gore-Tex and Kevlar (I have no idea but I have been told those 3 items would a better cord). Given the current cost of those 3 items a 6' cord would run you somewhere around $5000. If I was in the business of making extension cords and I was making the best my business would have failed prior to selling my first product.
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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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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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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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"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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