Three things taught incorrectly in business school
Wednesday, August 21, 2013Having graduated college nearly six years now its interesting to look back at some of my underlying assumptions and teachings. There are three that I think anyone would agree are consistently applied at schools all over the United States (and perhaps the world) and I find myself disagreeing with them more and more lately.
Business success is achieved through gaining market share
Nearly every class (accounting, finance, marketing, management) assumed that gaining market share was one of the primary goals of doing business. You couldn’t be successful if you only had 1% of the market. Yet, Apple aimed for 1% of the mobile phone market and has ended up somewhere around 10%, claiming nearly all of the profits in the industry (alongside Samsung). They didn’t need a majority and they didn’t even aim high, yet they’ve changed the world and the industry as we know it.
Market share is important in some businesses, but not all. The world is smaller than it was 30 years ago and we have more knowledge, more choice, and products and services are more accessible to more people now. Solving interesting problems, maximizing profits, giving back to the community are also worthy primary goals.
Corporations are created to maximize stockholder value
Nearly every course revolved around public corporations. Which means we learned a lot about stock prices, options, voting rights, legal contracts and so on. I now start to realize, we were also taught a primary goal of a company is to maximize stockholder value. In many cases, stocks are a great way to incentivize management and employees. They’re also a great way to raise money to catapult a company to a new level. But, in most of those cases the idea on the surface is to enrich someone else.
I feel this detracts from one of the main reasons you’re in business: the customer. You create widgets to solve a need for a customer. But we treat that as a means to an end: creating a huge company with tons of stockholders that demand the price to go up. If they start to distract from the creation of good widgets there may be side effects: cheaper quality, externalities such as added pollution, worse customer service, reduced employee retention, and so on.
Sustainability comes last
The final semester of our college careers — after many of us already have a job lined up, after grades fade away — we were mandated to take a course on ethics and sustainability. We were taught how important it is to be ethical and do the right thing (and what does ethics mean?). We learned ways to build sustainable businesses through case studies and explored theory around doing the right thing. Though, it was as if, after three or four years, we were unfairly asked to reapply all the things we just learned (gain market share, maximize stockholder value) with a new filter that largely contradicted those points.
The Patagonia’s and Apple’s of the world were interesting to explore, but it would’ve been more useful to see them upfront and realize how to build sustainable and ethical business practices throughout our college semesters, not as an afterthought near the end.
I think this is important to step back and think about, critically, because these assumptions have been the foundation for many decisions and approaches to my (and many others’, I’m sure) first few years of “work”. I can’t help but think this is why we see a lot of the issues led by greed: predatory lending, the mortgage crisis, bank collapses, aluminum price fixing, labor issues, and so on.
There’s a place for these lessons but I think they’ve overlooked the virtues and values so many of us espouse.