In their 2009 article, “The Roots of the Global Financial Crisis Are In Our Business Schools,” Robert A. Giacclone and Donald T. Wargo argue that graduate level business schools share much of the responsibility for the reckless behavior that led to the 2007-08 financial crisis. More specifically, the authors take issue with what they construe to be a “toxic” culture of greed in the leading business schools in the United States, which imbue students with philosophies of “determinism” and “materialism,” indoctrinate them into the “cult of profit maximization,” and inculcate a view of human nature as being “totally self-interested.” As the authors have it, impressionable graduate students are told by ruthless instructors that their place in the world is to pursue profit at the disregard of all other considerations, and these students go forth in the world to become business leaders and engage in selfish and risk-taking behaviors that cause problems for the rest of the world economy. Giacclone and Wargo ultimately conclude that the solution to the corruption that they see throughout the American business world is to begin teaching MBA students the values of “professionalism” and “human virtue.” All of the propositions that Giacclone and Wargo make in their article sound admirable; however, it seems myopic and reductionistic to proclaim that deeply-ingrained dysfunctions within American society can somehow be cured through a moral redemption of the nation’s business schools.
Throughout the article, Giacclone and Wargo make the constant refrain that business schools are partially to blame for the economic crisis, due to their emphasis on risk-taking and the pursuit of profit, as well as their failure to teach MBA students that it is also important to “play nice.” For the authors, business school teaches students the “worst values” of American society, which are greed and individualism, and that, moreover, many MBA students graduate with symptoms of “psychological disorders” such as anxiety, depression, and personality disorders. For the authors, the manifestations of these skewed social values and psychological disorders cause business school graduates to engage in reckless, antisocial behavior when they find employment on Wall Street. The authors even go so far as to compare the acquisition of money to drug addiction. Giacclone and Wargo argue that earning a profit has neurochemical effects in the brain similar to that of ingesting alcohol, cocaine, or heroin. Thusly, in the author’s view, the people responsible for the global financial collapse were (and are) pursuing money simply for money’s sake. These individuals, according to the authors, are not interested in money for its instrumental sake, but they simply want it just to have it.
While Giacclone and Wargo make several excellent points, there are multiple problems with their argument. First, the authors treat MBA students as impressionable “tabulae rasae” whose personalities and psyches are malleable, and completely susceptible to the whims of unethical business school instructors. As far as I am aware, most MBA students are in their mid-twenties, at the very least, when they begin business school; many MBA students are even older than this, as they decided to pursue “real-world” careers for an interim before returning to school. To state that people who are anywhere between 25-45 years of age, and have been able to navigate the competitive graduate school admissions process successfully, are unable to think for themselves and are empty vessels that can be filled with corrupt philosophies is downright insulting and belittling. While I am not arguing that the American business world is a hotbed of morality and wisdom, it seems fairly simplistic and illogical to claim that business school students enter the graduate school classroom as innocent angels and emerge with psyches that have been twisted by the evil professors.
With regards to unethical behavior at the upper echelons of the financial industry, is it not more likely that this profession attracts a certain personality type, one that is more prone to “bending the rules” and pursuing self-interests at the expense of social considerations? Indeed, Giacclone and Wargo make a vague reference to this possibility when they cite studies which observe that, at the undergraduate level, business majors are far more likely to report having cheated in school than students in any other major. As people in the United States are generally free to choose any major and professional path that they wish, is it entirely outside the realm of possibility that the undergraduate business major, the MBA, and professions in finance simply attract a certain personality type who values expediency over ethics? In many ways, it appears to me that Giacclone and Wargo completely forgo this possibility, and would instead prefer to lay all the blame for a corrupt American business culture squarely on business schools. While the business schools do have a responsibility to teach ethical behavior and professionalism, there is only so much they can do if they are working with students who simply lack the psychological framework to behave as “virtuous” citizens.
That being stated, Giacclone and Wargo do make a very good point with regards to the transformation of business schools, and the American university system in general, to a “customer service” or student-oriented model. When students are construed of as being “customers” and not “students,” the instructional model will invariably morph into one that simply teaches them the skills they need to “get ahead,” rather than inculcating the values of “good citizenship.” Indeed, this seems to be what has taken place, in large part, at many business schools across the nation in recent decades. Students often pay tuition fees in the tens of thousands of dollars (or more) in order to receive the credentials they need in order to get high-paying jobs, and they expect a return on their investment. Unfortunately, the present-day American business world is not necessarily looking for new graduates who exhibit the “virtues” of “patience” and “prudence,” but rather those who have the skills and expertise to deliver tangible results in a short period of time. Thus, the business schools are under considerable pressure to produce graduates with these qualities, as they themselves are profit-driven businesses. As soon as the business schools’ job placement percentages begin to visibly decline, so will the numbers of new applications, and with that, tuition dollars and profit.
Herein lies another problem with the argument of Giacclone and Wargo. Is it correct to view American business schools as the manufacturers of “poor virtues” and corruption, or are they simply symptomatic of larger social dysfunctions presently afoot in American society? Towards the conclusion of their article, the authors observe that the “values of business schools permeate the larger culture,” however, it seems to me that it is the other way around. After all, is it reasonable to conclude that a “Materialistic Value Orientation,” a “pessimistic view of human nature,” and “excessive greed,” are qualities exclusive to MBA holders and to the business community writ large? Quite honestly, when Giacclone and Wargo condemn these aspects of American business culture, it seemed to me that they were speaking of American culture more generally. After all, the people who graduate from business school tend to come from a very specific segment of American society, and they tend to remain within these closed social circles for the remainder of their lives. Further, MBA graduates typically go to work in the fields of business and finance, and thus, it is hard to argue that they have an oversized impact on American culture. The business schools are thus teaching “American” values, rather than corrupt “business” values that are somehow permeating the American cultural landscape and turning the citizenry into “money junkies.”
Giacclone and Wargo are most persuasive when they note that the social sciences have a tendency to produce “self-fulfilling prophecies.” To put it succinctly, when business schools tech their students that the highest ideal in life is to make money, then they will produce graduates who enter the professional world and enact that ideal. However, again, this is largely a “chicken and the egg” dilemma. As it seems, the people who self-select into business majors and into MBA programs tend to be individuals who value expediency and self-enrichment over more altruistic pursuits. As American popular culture is rife with depictions of business culture such as the feature films “Wall Street,” and “The Wolf of Wall Street,” it is hard to imagine any person who wants to work to “make the world a better place” or who would prefer to not work for profit choosing the business career path. Thus, I think it is difficult to place the blame for the financial crisis solely on the business schools. MBA programs are often two years in length (or even less, depending on the program), and that is hardly enough time to change an adult individual’s personality entirely. While the solutions proposed by the authors—teaching MBA students the values of “professionalism” and business ethics—are good ones, a better solution is increased regulation. After all, financial professionals need to focus on doing their jobs, and sometimes that involves taking the most expedient, not necessarily the most ethical, route.