America’s dete­ri­o­ra­tion as a leader in the engi­neer­ing and man­u­fac­tur­ing fields can be attrib­uted largely to the fail­ings of the elite busi­ness schools, sug­gests Noam Scheiber, Rhodes Scholar and senior edi­tor at The New Repub­lic.

Busi­ness school grad­u­ates are now edu­cated toward high paid finan­cial ser­vices jobs, lead­ing grad­u­ally to an “era of man­age­ment by the num­bers”. Exec­u­tives are now more adept at buy­ing and sell­ing assets than run­ning indus­trial com­pa­nies, and this pre­oc­cu­pa­tion with ROR has resulted in “a [reluc­tance] to invest heav­ily in the devel­op­ment of new man­u­fac­tur­ing processes”.

Since 1965, the per­cent­age of grad­u­ates of highly-ranked busi­ness schools who go into con­sult­ing and finan­cial ser­vices has dou­bled, from about one-third to about two-thirds. And while some of these con­sul­tants and financiers end up in the man­u­fac­tur­ing sec­tor, in some respects that’s the prob­lem. Har­vard busi­ness pro­fes­sor Rakesh Khu­rana, with whom I dis­cussed these ques­tions at length, observes that most of GM’s top exec­u­tives in recent decades hailed from a finance rather than an oper­a­tions back­ground. […] These exec­u­tives were fre­quently numb to the sorts of inno­va­tions that enable high-quality pro­duc­tion at low cost.

[…] In their land­mark Har­vard Busi­ness Review arti­cle from 1980, “Man­ag­ing Our Way to Eco­nomic Decline,” Robert Hayes and William Aber­nathy pointed out that the con­glom­er­ate struc­ture forced man­agers to think of their firms as a col­lec­tion of finan­cial assets, where the goal was to allo­cate cap­i­tal effi­ciently, rather than as mak­ers of spe­cific prod­ucts, where the goal was to max­i­mize qual­ity and long-term mar­ket share.

via Arts and Let­ters Daily