Friday, October 21, 2011

A Chilling Statistic

I opened this morning's edition of the Wall Street Journal to the Money & Investing section to read a chilling set of statistics.

According to an article about MBA program graduates,

"Employers such as banks, hedge funds, investment managers, private equity and venture capital firms hired 39% of job-seeking 2011 graduates at Harvard Business School and the Yale School of Management, 36% at the Stanford Graduate School of Business and 51% at Columbia Business School."

You see, many years ago, I read of similar numbers at a then-hot technology company.

If my memory is correct, Atari had the dubious distinction of hiring a quarter of the Harvard Business School class the year before it went bankrupt. At the time, someone wrote a waggish Journal editorial suggesting using the HBS hiring figures as a sort of early warning indicator for companies or sectors about to implode.

Reading that passage from this morning's Journal piece, I find troubling parallels to that article from around 1980.

First, banks are basically utilities. I don't see MBAs adding much value there. Investment management companies would seem to need new ideas born of experience and judgement, not mostly young, fresh-faced MBAs eager to be the marginal 10K analysts.

Packing more MBAs into venture capital firms, hedge funds and private equity firms seems to be adding capacity to an already over-served group of markets.

I don't have a problem with value being added by astute investing, whether it be via venture capital or private equity placements. Or shrewed investment, either in public or hedge funds. But most new firms in these areas are started by veterans with money. Adding MBAs is adding capacity without much actual initial value.

It would seem, in the current market situation, that at least the US is somewhat over-served by financial service providers. So seeing such large numbers of graduates from the better-ranked business schools flood into the financial sector seems troubling.

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