13 ms·

It boggles my mind, given the big money involved, why so many people continue to bet huge sums of cash on the proven short-term penny-wise/pound-foolish idiocy

by api 13y ago

It boggles my mind, given the big money involved, why so many people continue to bet huge sums of cash on the proven short-term penny-wise/pound-foolish idiocy of MBA-think. I mean sure-- if your company is under cash flow pressure you have to pinch pennies. You have no choice. Spreadsheet says so, and spreadsheet's the boss. But if you're not, you should be investing and thinking long term cause the other guys probably aren't. I've seen a related phenomenon in the startup world. Watched it, front row seat. I did a stint in startup-tech-focused business consulting. If you have a top-ten MBA and connections you can raise millions of dollars, set fire to it like the Joker in Batman Begins, and then raise millions of dollars again, serially. They were basically cargo cultists, mindlessly imitating the words, phrases, and superficial behaviors of supposedly-successful people and businesses. But there was no higher-order conceptual thinking beneath the surface-- no "there" there. They had no plan and no plan on how to acquire a plan. They got the money and then did a kind of mindless MBA rain dance until the money was gone. Then they'd raise more. I watched them do shit like destroy products that big customers had money in hand ready to pay for when they were inches away from release. I mean a done product, ready to go, and better than anything else in its market. A product that they owned and had already paid to develop. The rationale was always some kind of MBA newspeak blather. I can't even remember it since my mind filters out sounds that imitate language but lack conceptual content. Otherwise I risk wasting a synapse. But what do I know? I went to a po-dunk Midwestern state school, so what looks obviously stupid to me is maybe genius. I'm not saying I definitely could have done better, but I do think my probability of failure would have been <= to theirs. But there is no way in hell I could get what they got. Not a chance. I saw people try with better credentials than me and who were probably much smarter, but they lacked whatever special magic blessing the cargo cult guys had. I'm convinced its pure cronyism and ass-covering. I guess nobody ever got fired for losing their clients' money to a Harvard or MIT Sloan MBA. Nobody with a degree like that could be at fault. It has to be the employees (I've seen really good people get blamed for following stupid orders several times), bad market timing, etc.

threeseed 13y ago
> I'm convinced its pure cronyism and ass-covering. I'm convinced it's not. Betting on the long term at the expense of the short term is incredibly hard. Even the smartest people in the world will panic (and in some cases pivot) when doubts start to creep into their mind. I am sure all of us have been in a similar situation. It's always easy to judge from the outside but on the inside those decisions are tough, lonely, scary and rarely to do with just covering your own ass.
- api 13y ago
  I'd believe you if the folks I'm recalling had a good track record of having built successful businesses, or if their thinking struck me as... well... thinking, rather than cargo cultism. I know what it looks like when a person is thinking -- even fallaciously or sloppily, but still rubbing neurons together -- and I know what it looks like when a person is bullshitting to give the appearance of thought when they really have nothing at all going on upstairs. Buzzwords divorced from meaning and used without proper context are a dead giveaway for cargo-cult thinking. Now granted, I know far more about programming than business. I can spot a cargo cult programmer after three sentences. In business it takes me a lot longer, maybe 6-12 months of working with someone. But by then if I've watched the cargo cultism long enough I can be pretty sure that's what I'm seeing, and I stop giving the benefit of the doubt. Sometimes when someone repeatedly seems like an intellectual impostor, it's because they are. "Even the smartest people in the world will panic (and in some cases pivot) when doubts start to creep into their mind." I think that's a lame excuse. Maybe my expectations are irrational, but I expect the kind of people who get millions or tens of millions of dollars to experiment with to be fighter pilots, not bus drivers. And if you wreck the ten million dollar plane, you don't get to fly another right away. Someone else gets a turn. I also expect them to be smarter than me. When I talk to them I should have the feeling I've talked to an intellectual superior, not an impostoring dumbass. It downright offends me to see the American middle class collapsing and people with no jobs while this shit goes on. If you're an entrepreneur, you're a working stiff too. Your job is to create value, and probably jobs, by building new businesses. When ordinary working stiffs screw up they get passed over or fired. When these guys screw up they get promoted -- or at least endless second chances. I think what it boils down to is credentialism and cronyism rather than performance-based investing. If I were an investor I would split my odds between two areas: taking a chance on newbies, and investing in people with proven track records. But I would not repeatedly invest in people with poor track records just because their resume says "MIT Sloan School of Business." Yeah, it's a rant. You're talking to a war veteran here. I also earned these war stories in the Boston metro area, and have heard a fair number from a friend in New York. I've been told that this problem is worse on the East Coast due to the absolute worship of ivy league degrees and in-group connections there. The West Coast is more meritocratically-focused. Never lived or worked there, but the culture I've seen in the West supports that notion.
Anderkent 13y ago
Whenever you see theoretically smart people acting in stupid ways you should consider incentives before deeming them idiots. The prioritization of short term benefits is an obvious consequence of reward schemes that judge you based on yearly performance. There is little reason to invest in things that help the company long term if your pay depends on short-to-medium term results, unless you think your company might be going down and are fighting for job security.
- api 13y ago
  True to some extent, but over time fields with deeply perverse incentives end up driving away smart people. Smart people see perverse incentives and think "that field would suck," and run away. Large sums of money can draw them in sometimes. But then they generally do the job for a while, stuff their pockets, and then leave. People don't stick around with enthusiasm at a lame party.
asandweech 13y ago
I'm pretty sure he burns the money in The Dark Knight, not Batman Begins.
alooPotato 13y ago
Who says this has anything to do with money? I thing the decision is more about a new strategy - focus instead of experimentation. Personally I think this makes sense. 20% time was great when you're a small company trying to see what works. When you're a big company, you usually get disrupted because you lost focus.
- nine_k 13y ago
  To my mind, it's exactly the other way around. When you're small, you need a source of revenue quickly, or you'll die. You don't have a luxury to experiment too much, you have to build one thing that works. When you're a huge company and have untold millions in cash, you can afford experimentation. In fact, you have to, because your revenue source is probably finite and you have to find another before the current source dries up. This is why Google dived into mobile phones, self-driving cars, home entertainment, renewable energy, Internet providing, consumer cloud computing, goods delivery, etc. Some of the experiments became huge successes (see Android), some failed (see the long list of closed projects), some are too immature to judge (e.g. self-driving cars). It just looks that experimentation is now locked at a thinner top exec level, while 'simple engineers' are not expected to do too much of it. Which is, of course, a pity.
  - api 13y ago
    Dead on. When you're huge and cash-flush, you have the luxury of really innovating in truly hard areas. This luxury is damn hard to obtain in a short-term gerbil-wheel economy like ours. Once you have it, throwing it away is like setting fire to a house as soon as you've paid off the mortgage or crashing your new luxury car as soon as you drive it off the lot. It is abysmally stupid and short-sighted. Investors should call for the heads of people who do this, literally. As in on a pike. People think innovation comes from startups, but in reality it doesn't. Not because startups aren't smart and agile, but because they don't have the resources. When I say innovation, I mean innovation. I don't mean application of existing innovations to new market areas or problem spaces. Startups excel at that. But you'll never see a scrappy basement startup whip out a self-driving car, an artificial lung printed from a 3d printer, an orbit-capable reusable rocket, augmented reality goggles with a complete software stack, etc. Not unless the parts for those things already exist and can simply be combined in a novel way to yield a result in less than a year. If you're big and cash flush, you can do what nobody else can do (except other monsters like you). You can do this. http://matt.might.net/articles/phd-school-in-pictures/ http://matt.might.net/articles/phd-school-in-pictures/ That dent gets you a Ph.D, but if you do it for something of high economic value it gets you early entry into a market nobody else can enter because they don't know how. If you do it, you've now created a piece of value that you can do one of many things with. You can feed it into your more short-term product-dev branches and do things nobody else can compete with, you can license it, or you can use it to pump up the prestige of your company in ways no advertising can. "Holy crap! A self-driving car! And it really works. I mean, there it is, on the road, and it's driving better than I am and getting around faster than I am! I'm going to move all my business's hosting to Google Apps, cause they obviously have the smartest people on the planet..." I do have the sense though -- and keep in mind I am an outsider -- that there might have been some "ADD" issues with Google's 20% policy as it was implemented. But I don't think the solution is to ditch it. The solution is to focus it, to try to get people to spend their 20% time pushing harder into deeper and more difficult areas instead of whipping out hacks. Maybe incentivize more people to work together more formally on 20% projects over longer spans of time, and incentivize them to tackle things that are very difficult... things only a big elephant can do instead of things a scrappy startup could do.
hga 13y ago
These sorts of stunts also damage the company's and ecosystem's reputation. Its hard enough to get big customers to give startups a chance anyway (and I remember reading that big company buy in is one of the biggest issues in the U.K. startup scene, which I'm sure is not unique).
deelowe 13y ago
I don't think the decision had anything to do with money. It's part of the whole "more wood behind fewer arrows" initiative. Essentially, a defrag. 20% time was seen as having created too much fragmentation with little benefit. Gmail was the only major success to come from the program. Also, Google has a separate team for working on skunk works style projects.
- samatman 13y ago
  Metaphor is not reality, but that metaphor is terrible. I'm an archer: you want as many arrows as fit in the quiver, and as far as more wood, well, we've switched to carbon fiber shafts for a reason. When you shoot an arrow, velocity gets you to your target, and velocity penetrates it too. Extra weight is a literal drag.
  - DigitalJack 13y ago
    Go the other way. You could have 500 arrows made with toothpicks or 5 traditionals.
    - samatman 13y ago
      Our modern "arrow" is essentially a field point expelled via explosion at incredible velocity. It's a bad metaphor.
- voidlogic 13y ago
  >Gmail was the only major success to come from the program. Adsense, Go? I'm sure there are others too...
  - deelowe 13y ago
    I don't think adsense has done very well. Does Go generate revenue?
    - mattw1810 13y ago
Spooky23 13y ago
From a management perspective, you're forgetting about the obvious: the less than productive people. The benefit of giving employees no- or few-strings attached time to work on whatever is clear. Things like GMail, Apple 1, etc. The "cost" is that people are doing things that don't necessarily contribute to the bottom line -- for every GMail, there are 1,000 low-impact ideas. When your ability to make money hand over fist starts to get challenged, it is difficult to continue giving people free reign, especially when your competitors focus on cost, cost, cost. HP was a great place that made oodles of money selling tank-like PCs (among many other things) that cost $3k. But then Dell came along, invested $0 in R&D and started cleaning HP's PC clock. Bell Labs was engineer/scientist nirvana, then the AT&T monopoly went away. The other issue in big companies is that as people with direct connections to the business start losing control, the bureaucrats (well intentioned as they are) start moving in, and they worry about things that the engineers/etc didn't really care about. They are passionate about you using the appropriate powerpoint template, and will speak to your supervisor if you don't comply!
- JabavuAdams 13y ago
  Re: productive people. We have this notion of the 10x producer, but the real problem is high variability within the same person's work. I know productivity superstars, but if you catch them on the wrong day or at the wrong time, they look like lazy bums. Over a year, they're extremely productive. On any given day, they may look like they're wasting time. This property of conceptual work is at the core of a lot of culture clash with people who have more predictable work-comes-in, work-product-goes-out flows.
  - varelse 13y ago
    1,000x yes! My productivity comes in intense bursts of effort, with quiescent periods of research and reflection between them (or what looks like goofing off to rigidly process-oriented sorts). Combine that variability with mandatory daily scrum meetings and it makes me want to figuratively slit my wrists.
    - ryanbrunner 13y ago
mathattack 13y ago
I wouldn't blame this on MBA-think. The folks doing it at Google aren't MBAs, and the 3M/Google/HP approach is treated as a positive case study. It's an issue of central control versus decentralized organization, and where the company thinks innovation will come from. One could also argue you get a short term price bump too.
- dagw 13y ago
  I wouldn't blame this on MBA-think. The folks doing it at Google aren't MBAs An MBA is neither necessary nor sufficient to suffer from MBA-think.
wslh 13y ago
It boggles my mind, given the big money involved, why so many people continue to bet huge sums of cash on the proven short-term penny-wise/pound-foolish idiocy of MBA-think. This is the con of being a public company: a lot of cynicism. Imagine that you have inside information that Blackberry will revolutionize the mobile market, you will put money in their stocks and may be move on fast once it increases significantly the price. Yes, value investing is very interesting but how many daily transactions are based on this thinking? I think there was a lot of bias in favor of public companies and now we are realizing that staying private may be the best option if you think long term and don't want to deal with massive conflict of interest.
- api 13y ago
  I've had a speculation for a while that this is why Google, Apple, and many other tech giants like to keep their stock float small and thus their stock price per share very high. I wonder if it's a way of trying to select for longer-term investors. ???
  - wslh 13y ago
    I am not sure because you can own half of an stock. For example if you invest in ETFs you don't an integer number of stocks.
    - dscb 13y ago
      The shares of stock in an EFT are controlled by an independent group. Essentially you are buying shares of someone else's shares.
      - wslh 13y ago
        But this is a way to operate on fractional stocks. Can you elaborate on "api" original speculation?
JPKab 13y ago
You are sooooo right on with this. The top-10 MBA cult is awful. These are usually those people you knew in high school/college who were excellent at studying for and passing tests. Excellent at getting great grades on projects. Excellent at everything except building ANYTHING. I think that the people who are best at building things that people want don't want to get an MBA. They instead choose to spend their time building a business, a piece of software, a piece of hardware, whatever. People are good at what they love to do. MBA people love to go to school and get pieces of paper that say "pay me I'm smart." As a data guy, I have to go in and deal with these assholes all the time. I have hard numbers, they have hand-wavey MBA speak bullshit. It is probably the hardest thing we data people have to deal with: criticism from the "trusted advisors" who, due to the cognitive dissonance suffered by the executives who pay them loads of cash, are deemed to be intelligent when they really aren't. After all, what executive wants to admit that the man or woman he has been paying high 6 figures to advise him for months is actually a talented actor/mimic at best and an idiot at worst??
- gaius 13y ago
  When we say a child is talented, we usually mean they are a good learner. When we say an adult is talented, we mean they are a good doer. But these are actually two different axes.
  - AnonJ 13y ago
    I don't really believe there is such a great divide. In a greater probability most of those who are "genius" in childhood will continuously perform better when they become adults, in all fields including "doing" things. Sure there are some prodigies who turn out to be quite useless in real-world scenarios, but those are really few, IMO.
    - mcculley 13y ago
      Unfortunately I have encountered the opposite. I have worked with plenty of folks who were good at learning and very poor at getting things done. Furthermore, I think that constantly being praised during childhood for being smart did them harm as it made them underestimate the value of tenacity.
Graham24 13y ago
Side Issue: do Americans really say "penny-wise/pound-foolish"? I'd have thought it'd been dollar. And what exactly is a po-dunk school when it's at home?
- erichocean 13y ago
  > do Americans really say "penny-wise/pound-foolish"? Yes.
- api 13y ago
  (1) Yes (2) A po-dunk school is any school not on the coasts and not in the top ten, possibly excluding a small number of top-tier schools in "flyover country." (*) Flyover country is the large area you fly over when traveling between, say, Boston and San Francisco.
- mindcrime 13y ago
  do Americans really say "penny-wise/pound-foolish"? Absolutely.
- dragonwriter 13y ago
  > do Americans really say "penny-wise/pound-foolish"? Yes, as well as the similarly anglocentric (but somewhat oppposite in perspective) aphorism: "Look after the pennies, and the pounds will look after themselves."
DigitalJack 13y ago
" I went to a po-dunk Midwestern state school" You went to Mizzou too?
- api 13y ago
  Worse. The University of Cincinnati.
  - BillyMaize 13y ago
    Ouch! UC Comp Sci graduate here, whats wrong with UC?
    - api 13y ago
      Nothing. It was great, and the profs were excellent. But it's not on the coasts so it might as well be from somewhere that ends in -stan. :)
      - protomyth 13y ago
        Could be from University of North Dakota, who got the pleasure (early 90's) of being told by Microsoft that they only hired our graduates for Tech Support because we had a nice accent and worked hard (being, of course, all farmer's kids). Oh, well, at least I had low debt (few $K, paid off easily) even though I got screwed on scholarships by my high school.
bane 13y ago
> I watched them do shit like destroy products that big customers had money in hand ready to pay for when they were inches away from release. I'm watching friends in two different, reasonably large consulting companies (~700-1000 employees) suffer as their respective companies go through the consulting version of this kind of MBA suicide. In one case the company even decided to change their name and go through a rebranding. Some examples of the idiocy at work - The rebranded company's schtick is to hire staff with advanced degrees (PhD preferred and multiple Masters) and at least 10 years of industry experience and charge bongo bucks for renting them out to do high-end but not necessarily mind-blowing work. Something like 80% of their contract staff has a PhD. Due to economic reasons they lost a couple medium-sized contracts. Their response was to lay off half of the PhD employees in the company because they were too expensive to keep around while they looked for new work. even ones who were already working on a contract and making money for the company. This meant that they also had to cancel at least 3 more medium-sized contracts and a handful of smaller ones because they eliminated the staff who were working on them At one point they also had two CTOs (because if one is good, two look even better) until they came to their senses and laid one of them off. - At the other consulting firm, a similar pattern, tightening customer budgets meant that they decided to replace staff already on contract with cheaper, less experience, all new staff to pump up the profitability score on the spreadsheet. (they'd already laid off all of the idle staff not on contract, so without winning new business, some MBA thought that this was the best way to increase the numbers and get another bonus) But now they've let go all of the people in the firm who had experience doing the work, sometimes decades of experience. And now there are no mentors, no experienced hands, nobody. The quality of the consulting work rapidly went down resulting in the loss of 2 contracts and senior positions that they'd normally fill from within required them to go outside of the firm for. Both of these firms are in death spirals and all of the people that could help them pull out of it were fired. At one company I used to work for, I also saw my leadership completely lose their minds and fire off all of the development staff, thinking we could coast with a new sales team and the product we had and pull ourselves into profitability. They also turned down trying to fill out profitable professional services contracts we had with staff because the margins were lower than selling new licenses. I also brought them significant new work in a different line of business where it was decided to turn it down because we didn't want to have to deal with low paid temp staff because "temp workers get paid more than their worth to their temp agencies".
ssharp 13y ago
> proven short-term penny-wise/pound-foolish idiocy of MBA-think. This is a completely unjust attack. Quite frankly, I have no idea what "MBA-think" even is. You make an assumption that an MBA making a bad decision is making a bad decision because they have an MBA. That doesn't pass the test. Would the same person make the same decision even without the MBA? I always seem to get sensitive over the general MBA hate expressed at HN. As someone who spent years in web development before getting an MBA, I completely fail to connect to any of the insults typically thrown at MBA's on here. I certainly don't recall a class where we learned it's best to destroy 20% time. I don't recall ever being indoctrinated to the type of business thinking that is negatively attributed to MBA's. I recall getting an education on things like finance, economics, marketing, strategy, operations, etc. that weren't covered in my undergraduate technical degree. I appreciate the developer-oriented aspects of software startups and Hacker News and I'm certain that many people have encountered assholes who happen to hold MBA degrees. I'm certain the degree attracts certain segments, I clearly had some as classmates, but attributing every business decision you disagree with as MBA-think is not a good approach. This just seems like taking shots at a fuzzy construct for sake of taking shots and I'm not sure what value it adds to the discussion. I'd rather see legitimate reasons why removing 20% time is a bad idea for Google's operations.
- api 13y ago
  You're correct that there are smart MBAs, so it might be a bit unfair that "MBA" has become shorthand for something else. But it's not without cause. It's a stereotype with some basis in reality. The key distinguishing factor to me of MBA-think is a combination of posturing with credentials and cargo cult thinking. The essence of this thought pattern consists of thinking divorced from real-world referents. A strikingly similar cognitive anti-pattern can be found in the humanities, by the way. http://en.wikipedia.org/wiki/Sokal_affair http://en.wikipedia.org/wiki/Sokal_affair I wonder if this is because business borrowed something rather toxic from the post-1970s "postmodern" intellectual meltdown of the humanities? The worst kind of MBAbabble that I've endured over the years reminds me very much of postmodern literary criticism in its vapid, posturing use of language to hide the fact that the speaker is not actually saying anything. "Supercalifragilisticexpalidocious! If you say it loud enough you'll always sound precocious!" A closely related cognitive anti-pattern in computer programming leads to "architecture astronautism," premature generalization, and over-engineering: http://www.codinghorror.com/blog/2004/12/it-came-from-planet-architecture.html http://www.codinghorror.com/blog/2004/12/it-came-from-planet... In stereotypical MBA-think you have people reasoning about businesses without reasoning about the business -- about what the business actually physically does in the real world. So you see something similar to the cargo-cultish application of design patterns in programming. A management practice will be applied because it worked once in business X, but it's being applied to a business with wildly different characteristics. At no point is an attempt made to actually walk the halls, talk to the boots on the ground, actually ascertain the concrete nature of the business one is managing in order to tie one's thinking to reality. Finally, there's the ugly aspect: all of this is posturing to justify unjustly high compensation relative to the people who do real work. Back to programming, I have run into "enterprise architects" who do not know what they're doing and who make more than the people in the organization who do. What they do know how to do is how to sound impressive. Back to the humanities, it's sort of transparent to me that postmodern psychobabble is a similar sort of impostiture to hide the fact that the people in question are supposed to be cultural vanguards but in reality have less to say than the street graffiti artists who tag up their buildings at night. Personally I'd fire the humanities people and then hang out in the bushes at 2am and offer the clever social critics with spray paint cans a job. Elon Musk is a great example of someone at the absolute opposite end of the spectrum from stereotypical MBA-think. He's not Tony Stark. He's not superhuman. What he does do is get his hands dirty. When he founded SpaceX he actually taught himself some bona fide rocket science so he would know what the hell he was talking about. He did a similar thing with Tesla, actually dove into some of the hard problems of electric car design himself so he'd have a clue. I'm sure he spends most of his days doing managerial things and raising money like any executive, but the fact that he's gotten grease on his hands means that when he reasons about his businesses he's reasoning about his businesses and not about abstractions divorced from reality. His astonishing success at building businesses doing some of the hardest things one could possibly choose to build a business doing can be chalked up, IMHO, almost entirely to the fact that he is a smart guy reasoning about things instead of reasoning about hypothetical things. He does not confuse the map with the territory.
tmoertel 13y ago
> It boggles my mind, given the big money involved, why so many people continue to bet huge sums of cash on the proven short-term penny-wise/pound-foolish idiocy of MBA-think. A lot of this "idiocy" is in fact rational (if unethical) behavior. At many large companies, upper management is rewarded for short-term gains. In response, these managers adopt strategies that produce short-term gains. If these gains can be boosted by risking the company's future, that too is a rational trade-off: The managers will be long gone when the company falls into decline, but in the meantime they will have collected a lot of pumped-up bonuses. When people are paid today to burn tomorrow, why are we surprised that they reach for the matches?
- dragonwriter 13y ago
  > A lot of this "idiocy" is in fact rational behavior. At many large companies, upper management is rewarded for short-term gains. The fact that microoptimizations that are harmful to the company in a broader perspective are rational on the part of individual mid-level managers working within the incentive framework provided by upper management, doesn't mean they aren't idiocy on the part of the upper management responsible for creating the incentive framework. In fact, that means they are idiocy on the part of upper management.
  - tmoertel 13y ago
    I guess that conclusion would depend on whether the upper managers expected to better off (a) by staying at the same company for life or (b) by pumping the short-term returns and then using them as a shortcut to a better position at some other company, where the long-term consequences won't be felt.
    - ishansharma 13y ago
      Well, from what I have seen about the business people, their preferred method is b. Since by going to some other company, they can get higher salary, usually higher than the raise they'd be getting.
craigyk 13y ago
MBAs are just trained to optimize around the the current maximum in the "energy" landscape. These maxima are all too often not the best in the landscape, or even worse, can vanish over time as the landscape changes. MBAs are like a gradient optimization algorithm without any simulated annealing process.
- epo 13y ago
  > MBAs are just trained to optimize around the the current maximum in the "energy" landscape. These maxima are all too often not the best in the landscape, or even worse, can vanish over time as the landscape changes. > MBAs are like a gradient optimization algorithm without any simulated annealing process. Now that is content-free babble. If you are a bot, more work is needed. If you are a human, you should be ashamed of yourself.
  - wtracy 13y ago
    He attempted to explain why MBA behaviour is rational using the language of hill climbing algorithms: http://en.wikipedia.org/wiki/Hill_climbing http://en.wikipedia.org/wiki/Hill_climbing He didn't express any big new insights, but there was an honest attempt to impart information behind that post.
therandomguy 13y ago
MBA has nothing to do with bad decisions. Bad decision makers make bad decisions.
medell 13y ago
Two years ago I was in Colombia and had lunch with 4 late twenties MIT MBA students interning in Medellin. One was ex-Google, one was a consultant at the Big 4. They'd been there for a week, and told me they hadn't seen any of the city. After work they'd go to the gym or drive their rented car to a restaurant recommended by colleagues. Taxis were a max $3 if you live anywhere in the core, which they did. On a walk to a restaurant famous for mondongo, we had to cross a 4 lane street. It was 9pm with no traffic and after waiting awhile I noticed the crossing signal didn't go off. I looked both ways with no car in sight and started walking, looking back expecting them to follow. They all stood there awkwardly, with no cars and no other pedestrians, for another 30 seconds, waiting for the walk signal to turn on, while I watched them from the other side. The signal never changed. They were scared of the city. Anyone who has been to Medellin in the past few years knows there is little to fear. Not all MBA's are like this, but this group just didn't get it. I realize this is more about travel fears than business smarts, but there is something to be said for people that can adapt and embrace new environments.
phreanix 13y ago
It sounds more ego-driven and self centric to me. Is that what MBA programs teach you? To be completely focused on your own solutions that you are dismissing everyone else's?
tomkarlo 13y ago
This is a story about Google, which is still led by its technical founders (who are also huge equity holders with a long-term interest) and who don't have MBAs? If 20% is getting killed, it's getting killed because Larry Page wants it dead.
bsdetector 13y ago
> I mean sure-- if your company is under cash flow pressure you have to pinch pennies. You have no choice. Google's per-ad revenue was down 6% last year. Ads are 95% of their revenue. They have huge data to see trends. Just because Google is still profitable doesn't mean that they aren't seeing a near future of red ink. Say per-ad revenue goes down 10% next year with the same costs and their profit goes from $10 billion-ish down to $5 billion. And if this decrease is a trend? Competition from iAd and Bing Ads, smaller screens that are harder to advertize on, and so on. It's easy to see a near future Google that has to spam ads or make huge cuts to remain profitable.
- e12e 13y ago
  Well, so they still have lots of money, and quite a lot of time to do something about it. It sounds like their core business is loosing to competitors, and their solution is to keep the old product (the one that they believe is failing) and cut research?
  - TheLegace 13y ago
    Sounds like Microsoft doesn't it. And I'd argue with more and more accessible technologies these behemoths won't have the luxury of "lots of time". And hopefully the large sums of money will mean less.
redschell 13y ago
I don't think that the MBA is so important that it could be blamed for so many ills in the world of work, but I do think there are two fatal flaws with the modern MBA: Demography and intent. 1.) Demography: Who is the ideal MBA candidate? From what I've gathered, the historical answer would be: "Someone from outside a business education about to move into a business role." So, of course, your average MBA is going to be someone who studied Biology or Mechanical Engineering as an undergrad, right? Well, they're in there, but they're surrounded by people who studied Business and Economics as undergraduates, often from elite schools! What could a Wharton undergrad possible gain from a Wharton MBA? Social proof? A two-year vacation? It's unsettling, and it leads to the second problem. 2.) Intent: What sort of work is the MBA cut out for? Well, they're masters of administrating businesses, so...management? Nope. Consulting and banking. Like lemmings, they go right off the cliff into these fields. All of them. Even the ones who came in there looking to simply move up the ladder in their chosen field, like biotech or energy, will feel pressured into becoming some sort of banker or consultant. So, the MBA ends up becoming a launching pad for people outside of consulting and banking to get in, and for people on the inside to move up. I don't know how business schools would go about rectifying these flaws. Even if they were to shut out business types, that second flaw is so deeply ingrained in the b-school ethos that anyone seeking to be a better manager in their original field would likely be derided by his or her peers as an underachiever. Interestingly enough, I hear the Executive MBA is a far better experience, simply because the students are too far along in their careers to make a pivot into something else. They're just there to get better. And maybe for the two-year vacation thing as well.
sytelus 13y ago
Companies like Google are not limited by money, they are limited by available people. There are only 1.3 million professional software developers in US. Make it 2 million to account for immigrable developers. Now you want to hire top 1% of the best of the best. How many can you hire? It's not money limitation, it's people limitation. About MBAs, I don't think changes at Google is because of MBA-invasion. Most of the changes we see today at Google are actually directly influenced by Steve Jobs. When Larry Page became CEO, he requested mentoring meeting with Jobs which he surprisingly granted even though he was very angry about Android. The strongest point Jobs made to Larry was that company should do only 5 things and do it very well (paraphrase). Larry took this to heart and realized Google was extremely fragmented with lots of small undirected efforts going no where. Rest is the history... It's debatable if Google's old model was better than new one. Personally I think the best thing for a company is to keep continuous balance between two extremes. Historically, companies starts believing in one end, drift there and then realize that it's too much then drift towards another end.

by api 13y ago

threeseed 13y ago

> I'm convinced its pure cronyism and ass-covering. I'm convinced it's not. Betting on the long term at the expense of the short term is incredibly hard. Even the smartest people in the world will panic (and in some cases pivot) when doubts start to creep into their mind. I am sure all of us have been in a similar situation. It's always easy to judge from the outside but on the inside those decisions are tough, lonely, scary and rarely to do with just covering your own ass.

api 13y ago
I'd believe you if the folks I'm recalling had a good track record of having built successful businesses, or if their thinking struck me as... well... thinking, rather than cargo cultism. I know what it looks like when a person is thinking -- even fallaciously or sloppily, but still rubbing neurons together -- and I know what it looks like when a person is bullshitting to give the appearance of thought when they really have nothing at all going on upstairs. Buzzwords divorced from meaning and used without proper context are a dead giveaway for cargo-cult thinking. Now granted, I know far more about programming than business. I can spot a cargo cult programmer after three sentences. In business it takes me a lot longer, maybe 6-12 months of working with someone. But by then if I've watched the cargo cultism long enough I can be pretty sure that's what I'm seeing, and I stop giving the benefit of the doubt. Sometimes when someone repeatedly seems like an intellectual impostor, it's because they are. "Even the smartest people in the world will panic (and in some cases pivot) when doubts start to creep into their mind." I think that's a lame excuse. Maybe my expectations are irrational, but I expect the kind of people who get millions or tens of millions of dollars to experiment with to be fighter pilots, not bus drivers. And if you wreck the ten million dollar plane, you don't get to fly another right away. Someone else gets a turn. I also expect them to be smarter than me. When I talk to them I should have the feeling I've talked to an intellectual superior, not an impostoring dumbass. It downright offends me to see the American middle class collapsing and people with no jobs while this shit goes on. If you're an entrepreneur, you're a working stiff too. Your job is to create value, and probably jobs, by building new businesses. When ordinary working stiffs screw up they get passed over or fired. When these guys screw up they get promoted -- or at least endless second chances. I think what it boils down to is credentialism and cronyism rather than performance-based investing. If I were an investor I would split my odds between two areas: taking a chance on newbies, and investing in people with proven track records. But I would not repeatedly invest in people with poor track records just because their resume says "MIT Sloan School of Business." Yeah, it's a rant. You're talking to a war veteran here. I also earned these war stories in the Boston metro area, and have heard a fair number from a friend in New York. I've been told that this problem is worse on the East Coast due to the absolute worship of ivy league degrees and in-group connections there. The West Coast is more meritocratically-focused. Never lived or worked there, but the culture I've seen in the West supports that notion.

Anderkent 13y ago

Whenever you see theoretically smart people acting in stupid ways you should consider incentives before deeming them idiots. The prioritization of short term benefits is an obvious consequence of reward schemes that judge you based on yearly performance. There is little reason to invest in things that help the company long term if your pay depends on short-to-medium term results, unless you think your company might be going down and are fighting for job security.

api 13y ago
True to some extent, but over time fields with deeply perverse incentives end up driving away smart people. Smart people see perverse incentives and think "that field would suck," and run away. Large sums of money can draw them in sometimes. But then they generally do the job for a while, stuff their pockets, and then leave. People don't stick around with enthusiasm at a lame party.

asandweech 13y ago

I'm pretty sure he burns the money in The Dark Knight, not Batman Begins.

alooPotato 13y ago

Who says this has anything to do with money? I thing the decision is more about a new strategy - focus instead of experimentation. Personally I think this makes sense. 20% time was great when you're a small company trying to see what works. When you're a big company, you usually get disrupted because you lost focus.

nine_k 13y ago
To my mind, it's exactly the other way around. When you're small, you need a source of revenue quickly, or you'll die. You don't have a luxury to experiment too much, you have to build one thing that works. When you're a huge company and have untold millions in cash, you can afford experimentation. In fact, you have to, because your revenue source is probably finite and you have to find another before the current source dries up. This is why Google dived into mobile phones, self-driving cars, home entertainment, renewable energy, Internet providing, consumer cloud computing, goods delivery, etc. Some of the experiments became huge successes (see Android), some failed (see the long list of closed projects), some are too immature to judge (e.g. self-driving cars). It just looks that experimentation is now locked at a thinner top exec level, while 'simple engineers' are not expected to do too much of it. Which is, of course, a pity.
- api 13y ago
  Dead on. When you're huge and cash-flush, you have the luxury of really innovating in truly hard areas. This luxury is damn hard to obtain in a short-term gerbil-wheel economy like ours. Once you have it, throwing it away is like setting fire to a house as soon as you've paid off the mortgage or crashing your new luxury car as soon as you drive it off the lot. It is abysmally stupid and short-sighted. Investors should call for the heads of people who do this, literally. As in on a pike. People think innovation comes from startups, but in reality it doesn't. Not because startups aren't smart and agile, but because they don't have the resources. When I say innovation, I mean innovation. I don't mean application of existing innovations to new market areas or problem spaces. Startups excel at that. But you'll never see a scrappy basement startup whip out a self-driving car, an artificial lung printed from a 3d printer, an orbit-capable reusable rocket, augmented reality goggles with a complete software stack, etc. Not unless the parts for those things already exist and can simply be combined in a novel way to yield a result in less than a year. If you're big and cash flush, you can do what nobody else can do (except other monsters like you). You can do this. http://matt.might.net/articles/phd-school-in-pictures/ http://matt.might.net/articles/phd-school-in-pictures/ That dent gets you a Ph.D, but if you do it for something of high economic value it gets you early entry into a market nobody else can enter because they don't know how. If you do it, you've now created a piece of value that you can do one of many things with. You can feed it into your more short-term product-dev branches and do things nobody else can compete with, you can license it, or you can use it to pump up the prestige of your company in ways no advertising can. "Holy crap! A self-driving car! And it really works. I mean, there it is, on the road, and it's driving better than I am and getting around faster than I am! I'm going to move all my business's hosting to Google Apps, cause they obviously have the smartest people on the planet..." I do have the sense though -- and keep in mind I am an outsider -- that there might have been some "ADD" issues with Google's 20% policy as it was implemented. But I don't think the solution is to ditch it. The solution is to focus it, to try to get people to spend their 20% time pushing harder into deeper and more difficult areas instead of whipping out hacks. Maybe incentivize more people to work together more formally on 20% projects over longer spans of time, and incentivize them to tackle things that are very difficult... things only a big elephant can do instead of things a scrappy startup could do.

hga 13y ago

These sorts of stunts also damage the company's and ecosystem's reputation. Its hard enough to get big customers to give startups a chance anyway (and I remember reading that big company buy in is one of the biggest issues in the U.K. startup scene, which I'm sure is not unique).

deelowe 13y ago

I don't think the decision had anything to do with money. It's part of the whole "more wood behind fewer arrows" initiative. Essentially, a defrag. 20% time was seen as having created too much fragmentation with little benefit. Gmail was the only major success to come from the program. Also, Google has a separate team for working on skunk works style projects.

samatman 13y ago
Metaphor is not reality, but that metaphor is terrible. I'm an archer: you want as many arrows as fit in the quiver, and as far as more wood, well, we've switched to carbon fiber shafts for a reason. When you shoot an arrow, velocity gets you to your target, and velocity penetrates it too. Extra weight is a literal drag.
- DigitalJack 13y ago
  Go the other way. You could have 500 arrows made with toothpicks or 5 traditionals.
  - samatman 13y ago
    Our modern "arrow" is essentially a field point expelled via explosion at incredible velocity. It's a bad metaphor.
voidlogic 13y ago
>Gmail was the only major success to come from the program. Adsense, Go? I'm sure there are others too...
- deelowe 13y ago
  I don't think adsense has done very well. Does Go generate revenue?
  - mattw1810 13y ago

Spooky23 13y ago

From a management perspective, you're forgetting about the obvious: the less than productive people. The benefit of giving employees no- or few-strings attached time to work on whatever is clear. Things like GMail, Apple 1, etc. The "cost" is that people are doing things that don't necessarily contribute to the bottom line -- for every GMail, there are 1,000 low-impact ideas. When your ability to make money hand over fist starts to get challenged, it is difficult to continue giving people free reign, especially when your competitors focus on cost, cost, cost. HP was a great place that made oodles of money selling tank-like PCs (among many other things) that cost $3k. But then Dell came along, invested $0 in R&D and started cleaning HP's PC clock. Bell Labs was engineer/scientist nirvana, then the AT&T monopoly went away. The other issue in big companies is that as people with direct connections to the business start losing control, the bureaucrats (well intentioned as they are) start moving in, and they worry about things that the engineers/etc didn't really care about. They are passionate about you using the appropriate powerpoint template, and will speak to your supervisor if you don't comply!

JabavuAdams 13y ago
Re: productive people. We have this notion of the 10x producer, but the real problem is high variability within the same person's work. I know productivity superstars, but if you catch them on the wrong day or at the wrong time, they look like lazy bums. Over a year, they're extremely productive. On any given day, they may look like they're wasting time. This property of conceptual work is at the core of a lot of culture clash with people who have more predictable work-comes-in, work-product-goes-out flows.
- varelse 13y ago
  1,000x yes! My productivity comes in intense bursts of effort, with quiescent periods of research and reflection between them (or what looks like goofing off to rigidly process-oriented sorts). Combine that variability with mandatory daily scrum meetings and it makes me want to figuratively slit my wrists.
  - ryanbrunner 13y ago

mathattack 13y ago

I wouldn't blame this on MBA-think. The folks doing it at Google aren't MBAs, and the 3M/Google/HP approach is treated as a positive case study. It's an issue of central control versus decentralized organization, and where the company thinks innovation will come from. One could also argue you get a short term price bump too.

dagw 13y ago
I wouldn't blame this on MBA-think. The folks doing it at Google aren't MBAs An MBA is neither necessary nor sufficient to suffer from MBA-think.

wslh 13y ago

It boggles my mind, given the big money involved, why so many people continue to bet huge sums of cash on the proven short-term penny-wise/pound-foolish idiocy of MBA-think. This is the con of being a public company: a lot of cynicism. Imagine that you have inside information that Blackberry will revolutionize the mobile market, you will put money in their stocks and may be move on fast once it increases significantly the price. Yes, value investing is very interesting but how many daily transactions are based on this thinking? I think there was a lot of bias in favor of public companies and now we are realizing that staying private may be the best option if you think long term and don't want to deal with massive conflict of interest.

api 13y ago
I've had a speculation for a while that this is why Google, Apple, and many other tech giants like to keep their stock float small and thus their stock price per share very high. I wonder if it's a way of trying to select for longer-term investors. ???
- wslh 13y ago
  I am not sure because you can own half of an stock. For example if you invest in ETFs you don't an integer number of stocks.
  - dscb 13y ago
    The shares of stock in an EFT are controlled by an independent group. Essentially you are buying shares of someone else's shares.
    - wslh 13y ago
      But this is a way to operate on fractional stocks. Can you elaborate on "api" original speculation?

JPKab 13y ago

You are sooooo right on with this. The top-10 MBA cult is awful. These are usually those people you knew in high school/college who were excellent at studying for and passing tests. Excellent at getting great grades on projects. Excellent at everything except building ANYTHING. I think that the people who are best at building things that people want don't want to get an MBA. They instead choose to spend their time building a business, a piece of software, a piece of hardware, whatever. People are good at what they love to do. MBA people love to go to school and get pieces of paper that say "pay me I'm smart." As a data guy, I have to go in and deal with these assholes all the time. I have hard numbers, they have hand-wavey MBA speak bullshit. It is probably the hardest thing we data people have to deal with: criticism from the "trusted advisors" who, due to the cognitive dissonance suffered by the executives who pay them loads of cash, are deemed to be intelligent when they really aren't. After all, what executive wants to admit that the man or woman he has been paying high 6 figures to advise him for months is actually a talented actor/mimic at best and an idiot at worst??

gaius 13y ago
When we say a child is talented, we usually mean they are a good learner. When we say an adult is talented, we mean they are a good doer. But these are actually two different axes.
- AnonJ 13y ago
  I don't really believe there is such a great divide. In a greater probability most of those who are "genius" in childhood will continuously perform better when they become adults, in all fields including "doing" things. Sure there are some prodigies who turn out to be quite useless in real-world scenarios, but those are really few, IMO.
  - mcculley 13y ago
    Unfortunately I have encountered the opposite. I have worked with plenty of folks who were good at learning and very poor at getting things done. Furthermore, I think that constantly being praised during childhood for being smart did them harm as it made them underestimate the value of tenacity.

Graham24 13y ago

Side Issue: do Americans really say "penny-wise/pound-foolish"? I'd have thought it'd been dollar. And what exactly is a po-dunk school when it's at home?

erichocean 13y ago
> do Americans really say "penny-wise/pound-foolish"? Yes.
api 13y ago
(1) Yes (2) A po-dunk school is any school not on the coasts and not in the top ten, possibly excluding a small number of top-tier schools in "flyover country." (*) Flyover country is the large area you fly over when traveling between, say, Boston and San Francisco.
mindcrime 13y ago
do Americans really say "penny-wise/pound-foolish"? Absolutely.
dragonwriter 13y ago
> do Americans really say "penny-wise/pound-foolish"? Yes, as well as the similarly anglocentric (but somewhat oppposite in perspective) aphorism: "Look after the pennies, and the pounds will look after themselves."

DigitalJack 13y ago

" I went to a po-dunk Midwestern state school" You went to Mizzou too?

api 13y ago
Worse. The University of Cincinnati.
- BillyMaize 13y ago
  Ouch! UC Comp Sci graduate here, whats wrong with UC?
  - api 13y ago
    Nothing. It was great, and the profs were excellent. But it's not on the coasts so it might as well be from somewhere that ends in -stan. :)
    - protomyth 13y ago
      Could be from University of North Dakota, who got the pleasure (early 90's) of being told by Microsoft that they only hired our graduates for Tech Support because we had a nice accent and worked hard (being, of course, all farmer's kids). Oh, well, at least I had low debt (few $K, paid off easily) even though I got screwed on scholarships by my high school.

bane 13y ago

> I watched them do shit like destroy products that big customers had money in hand ready to pay for when they were inches away from release. I'm watching friends in two different, reasonably large consulting companies (~700-1000 employees) suffer as their respective companies go through the consulting version of this kind of MBA suicide. In one case the company even decided to change their name and go through a rebranding. Some examples of the idiocy at work - The rebranded company's schtick is to hire staff with advanced degrees (PhD preferred and multiple Masters) and at least 10 years of industry experience and charge bongo bucks for renting them out to do high-end but not necessarily mind-blowing work. Something like 80% of their contract staff has a PhD. Due to economic reasons they lost a couple medium-sized contracts. Their response was to lay off half of the PhD employees in the company because they were too expensive to keep around while they looked for new work. even ones who were already working on a contract and making money for the company. This meant that they also had to cancel at least 3 more medium-sized contracts and a handful of smaller ones because they eliminated the staff who were working on them At one point they also had two CTOs (because if one is good, two look even better) until they came to their senses and laid one of them off. - At the other consulting firm, a similar pattern, tightening customer budgets meant that they decided to replace staff already on contract with cheaper, less experience, all new staff to pump up the profitability score on the spreadsheet. (they'd already laid off all of the idle staff not on contract, so without winning new business, some MBA thought that this was the best way to increase the numbers and get another bonus) But now they've let go all of the people in the firm who had experience doing the work, sometimes decades of experience. And now there are no mentors, no experienced hands, nobody. The quality of the consulting work rapidly went down resulting in the loss of 2 contracts and senior positions that they'd normally fill from within required them to go outside of the firm for. Both of these firms are in death spirals and all of the people that could help them pull out of it were fired. At one company I used to work for, I also saw my leadership completely lose their minds and fire off all of the development staff, thinking we could coast with a new sales team and the product we had and pull ourselves into profitability. They also turned down trying to fill out profitable professional services contracts we had with staff because the margins were lower than selling new licenses. I also brought them significant new work in a different line of business where it was decided to turn it down because we didn't want to have to deal with low paid temp staff because "temp workers get paid more than their worth to their temp agencies".

ssharp 13y ago

> proven short-term penny-wise/pound-foolish idiocy of MBA-think. This is a completely unjust attack. Quite frankly, I have no idea what "MBA-think" even is. You make an assumption that an MBA making a bad decision is making a bad decision because they have an MBA. That doesn't pass the test. Would the same person make the same decision even without the MBA? I always seem to get sensitive over the general MBA hate expressed at HN. As someone who spent years in web development before getting an MBA, I completely fail to connect to any of the insults typically thrown at MBA's on here. I certainly don't recall a class where we learned it's best to destroy 20% time. I don't recall ever being indoctrinated to the type of business thinking that is negatively attributed to MBA's. I recall getting an education on things like finance, economics, marketing, strategy, operations, etc. that weren't covered in my undergraduate technical degree. I appreciate the developer-oriented aspects of software startups and Hacker News and I'm certain that many people have encountered assholes who happen to hold MBA degrees. I'm certain the degree attracts certain segments, I clearly had some as classmates, but attributing every business decision you disagree with as MBA-think is not a good approach. This just seems like taking shots at a fuzzy construct for sake of taking shots and I'm not sure what value it adds to the discussion. I'd rather see legitimate reasons why removing 20% time is a bad idea for Google's operations.

api 13y ago
You're correct that there are smart MBAs, so it might be a bit unfair that "MBA" has become shorthand for something else. But it's not without cause. It's a stereotype with some basis in reality. The key distinguishing factor to me of MBA-think is a combination of posturing with credentials and cargo cult thinking. The essence of this thought pattern consists of thinking divorced from real-world referents. A strikingly similar cognitive anti-pattern can be found in the humanities, by the way. http://en.wikipedia.org/wiki/Sokal_affair http://en.wikipedia.org/wiki/Sokal_affair I wonder if this is because business borrowed something rather toxic from the post-1970s "postmodern" intellectual meltdown of the humanities? The worst kind of MBAbabble that I've endured over the years reminds me very much of postmodern literary criticism in its vapid, posturing use of language to hide the fact that the speaker is not actually saying anything. "Supercalifragilisticexpalidocious! If you say it loud enough you'll always sound precocious!" A closely related cognitive anti-pattern in computer programming leads to "architecture astronautism," premature generalization, and over-engineering: http://www.codinghorror.com/blog/2004/12/it-came-from-planet-architecture.html http://www.codinghorror.com/blog/2004/12/it-came-from-planet... In stereotypical MBA-think you have people reasoning about businesses without reasoning about the business -- about what the business actually physically does in the real world. So you see something similar to the cargo-cultish application of design patterns in programming. A management practice will be applied because it worked once in business X, but it's being applied to a business with wildly different characteristics. At no point is an attempt made to actually walk the halls, talk to the boots on the ground, actually ascertain the concrete nature of the business one is managing in order to tie one's thinking to reality. Finally, there's the ugly aspect: all of this is posturing to justify unjustly high compensation relative to the people who do real work. Back to programming, I have run into "enterprise architects" who do not know what they're doing and who make more than the people in the organization who do. What they do know how to do is how to sound impressive. Back to the humanities, it's sort of transparent to me that postmodern psychobabble is a similar sort of impostiture to hide the fact that the people in question are supposed to be cultural vanguards but in reality have less to say than the street graffiti artists who tag up their buildings at night. Personally I'd fire the humanities people and then hang out in the bushes at 2am and offer the clever social critics with spray paint cans a job. Elon Musk is a great example of someone at the absolute opposite end of the spectrum from stereotypical MBA-think. He's not Tony Stark. He's not superhuman. What he does do is get his hands dirty. When he founded SpaceX he actually taught himself some bona fide rocket science so he would know what the hell he was talking about. He did a similar thing with Tesla, actually dove into some of the hard problems of electric car design himself so he'd have a clue. I'm sure he spends most of his days doing managerial things and raising money like any executive, but the fact that he's gotten grease on his hands means that when he reasons about his businesses he's reasoning about his businesses and not about abstractions divorced from reality. His astonishing success at building businesses doing some of the hardest things one could possibly choose to build a business doing can be chalked up, IMHO, almost entirely to the fact that he is a smart guy reasoning about things instead of reasoning about hypothetical things. He does not confuse the map with the territory.

tmoertel 13y ago

> It boggles my mind, given the big money involved, why so many people continue to bet huge sums of cash on the proven short-term penny-wise/pound-foolish idiocy of MBA-think. A lot of this "idiocy" is in fact rational (if unethical) behavior. At many large companies, upper management is rewarded for short-term gains. In response, these managers adopt strategies that produce short-term gains. If these gains can be boosted by risking the company's future, that too is a rational trade-off: The managers will be long gone when the company falls into decline, but in the meantime they will have collected a lot of pumped-up bonuses. When people are paid today to burn tomorrow, why are we surprised that they reach for the matches?

dragonwriter 13y ago
> A lot of this "idiocy" is in fact rational behavior. At many large companies, upper management is rewarded for short-term gains. The fact that microoptimizations that are harmful to the company in a broader perspective are rational on the part of individual mid-level managers working within the incentive framework provided by upper management, doesn't mean they aren't idiocy on the part of the upper management responsible for creating the incentive framework. In fact, that means they are idiocy on the part of upper management.
- tmoertel 13y ago
  I guess that conclusion would depend on whether the upper managers expected to better off (a) by staying at the same company for life or (b) by pumping the short-term returns and then using them as a shortcut to a better position at some other company, where the long-term consequences won't be felt.
  - ishansharma 13y ago
    Well, from what I have seen about the business people, their preferred method is b. Since by going to some other company, they can get higher salary, usually higher than the raise they'd be getting.

craigyk 13y ago

MBAs are just trained to optimize around the the current maximum in the "energy" landscape. These maxima are all too often not the best in the landscape, or even worse, can vanish over time as the landscape changes. MBAs are like a gradient optimization algorithm without any simulated annealing process.

epo 13y ago
> MBAs are just trained to optimize around the the current maximum in the "energy" landscape. These maxima are all too often not the best in the landscape, or even worse, can vanish over time as the landscape changes. > MBAs are like a gradient optimization algorithm without any simulated annealing process. Now that is content-free babble. If you are a bot, more work is needed. If you are a human, you should be ashamed of yourself.
- wtracy 13y ago
  He attempted to explain why MBA behaviour is rational using the language of hill climbing algorithms: http://en.wikipedia.org/wiki/Hill_climbing http://en.wikipedia.org/wiki/Hill_climbing He didn't express any big new insights, but there was an honest attempt to impart information behind that post.

therandomguy 13y ago

MBA has nothing to do with bad decisions. Bad decision makers make bad decisions.

medell 13y ago

Two years ago I was in Colombia and had lunch with 4 late twenties MIT MBA students interning in Medellin. One was ex-Google, one was a consultant at the Big 4. They'd been there for a week, and told me they hadn't seen any of the city. After work they'd go to the gym or drive their rented car to a restaurant recommended by colleagues. Taxis were a max $3 if you live anywhere in the core, which they did. On a walk to a restaurant famous for mondongo, we had to cross a 4 lane street. It was 9pm with no traffic and after waiting awhile I noticed the crossing signal didn't go off. I looked both ways with no car in sight and started walking, looking back expecting them to follow. They all stood there awkwardly, with no cars and no other pedestrians, for another 30 seconds, waiting for the walk signal to turn on, while I watched them from the other side. The signal never changed. They were scared of the city. Anyone who has been to Medellin in the past few years knows there is little to fear. Not all MBA's are like this, but this group just didn't get it. I realize this is more about travel fears than business smarts, but there is something to be said for people that can adapt and embrace new environments.

phreanix 13y ago

It sounds more ego-driven and self centric to me. Is that what MBA programs teach you? To be completely focused on your own solutions that you are dismissing everyone else's?

tomkarlo 13y ago

This is a story about Google, which is still led by its technical founders (who are also huge equity holders with a long-term interest) and who don't have MBAs? If 20% is getting killed, it's getting killed because Larry Page wants it dead.

bsdetector 13y ago

> I mean sure-- if your company is under cash flow pressure you have to pinch pennies. You have no choice. Google's per-ad revenue was down 6% last year. Ads are 95% of their revenue. They have huge data to see trends. Just because Google is still profitable doesn't mean that they aren't seeing a near future of red ink. Say per-ad revenue goes down 10% next year with the same costs and their profit goes from $10 billion-ish down to $5 billion. And if this decrease is a trend? Competition from iAd and Bing Ads, smaller screens that are harder to advertize on, and so on. It's easy to see a near future Google that has to spam ads or make huge cuts to remain profitable.

e12e 13y ago
Well, so they still have lots of money, and quite a lot of time to do something about it. It sounds like their core business is loosing to competitors, and their solution is to keep the old product (the one that they believe is failing) and cut research?
- TheLegace 13y ago
  Sounds like Microsoft doesn't it. And I'd argue with more and more accessible technologies these behemoths won't have the luxury of "lots of time". And hopefully the large sums of money will mean less.

redschell 13y ago

I don't think that the MBA is so important that it could be blamed for so many ills in the world of work, but I do think there are two fatal flaws with the modern MBA: Demography and intent. 1.) Demography: Who is the ideal MBA candidate? From what I've gathered, the historical answer would be: "Someone from outside a business education about to move into a business role." So, of course, your average MBA is going to be someone who studied Biology or Mechanical Engineering as an undergrad, right? Well, they're in there, but they're surrounded by people who studied Business and Economics as undergraduates, often from elite schools! What could a Wharton undergrad possible gain from a Wharton MBA? Social proof? A two-year vacation? It's unsettling, and it leads to the second problem. 2.) Intent: What sort of work is the MBA cut out for? Well, they're masters of administrating businesses, so...management? Nope. Consulting and banking. Like lemmings, they go right off the cliff into these fields. All of them. Even the ones who came in there looking to simply move up the ladder in their chosen field, like biotech or energy, will feel pressured into becoming some sort of banker or consultant. So, the MBA ends up becoming a launching pad for people outside of consulting and banking to get in, and for people on the inside to move up. I don't know how business schools would go about rectifying these flaws. Even if they were to shut out business types, that second flaw is so deeply ingrained in the b-school ethos that anyone seeking to be a better manager in their original field would likely be derided by his or her peers as an underachiever. Interestingly enough, I hear the Executive MBA is a far better experience, simply because the students are too far along in their careers to make a pivot into something else. They're just there to get better. And maybe for the two-year vacation thing as well.

sytelus 13y ago

Companies like Google are not limited by money, they are limited by available people. There are only 1.3 million professional software developers in US. Make it 2 million to account for immigrable developers. Now you want to hire top 1% of the best of the best. How many can you hire? It's not money limitation, it's people limitation. About MBAs, I don't think changes at Google is because of MBA-invasion. Most of the changes we see today at Google are actually directly influenced by Steve Jobs. When Larry Page became CEO, he requested mentoring meeting with Jobs which he surprisingly granted even though he was very angry about Android. The strongest point Jobs made to Larry was that company should do only 5 things and do it very well (paraphrase). Larry took this to heart and realized Google was extremely fragmented with lots of small undirected efforts going no where. Rest is the history... It's debatable if Google's old model was better than new one. Personally I think the best thing for a company is to keep continuous balance between two extremes. Historically, companies starts believing in one end, drift there and then realize that it's too much then drift towards another end.