Adonis Diaries

Posts Tagged ‘financial crash

MBA mania: Introspection

After the latest financial crash, MBA graduates are having hard time finding jobs:  Banks, financial institutions, and financial consulting firms have realized that they need graduates in fields that produce added values.

Wall Street has put to pasture over 250,000 MBA employees since 2007.  The US business schools used to graduate over 150,000 MBA degree holders per year before the crash, and the trend is reversing.  More than half these graduates were foreigners who invested over $80,000 (of family wealth).

For example, India is spending over $4 billions a year for Indian students going after graduate studies in the USA and England universities.  Renowned MBA schools are re-structuring their programs and hiring new teams to re-thinking what is needed for the market.  Re-thinking MBA programs was long due; it is better late than never.

I was once, long time ago, enrolled in a PhD program in Industrial engineering.   There were not enough graduate Human Factors courses in the PhD program: the human factors field was not well developed as the other industrial engineering specialties, and the university lacked enough qualified professors in that field.

I was lucky to complement my course requirements in many other departments that offered me new perspectives and approaches to the human element in all these artificial man-made systems.

I enrolled in a couple of graduate courses in the Psychology department and I felt at home; my heart got set on the cognitive aspect of human capabilities and limitations (functions of the brain) instead of the physical aspects (known as Ergonomics and the modeling of the human body).  Thus, I ended up taking courses in various departments such as marketing, business, economics, education and others departments to fulfill the required number of graduate credit-hours.

I had taken many courses with various statistical modeling and software analysis programs frequently used in marketing, business, psychology and econometrics.

Once, I had audited and did all the homework and exams for the Pascal programming language course in the psychology department because I could not afford to pay tuition; professor Getty gave me credits the next semester when I paid for the course without having to attend it.  I was hooked to the cognitive field in Human Factors but my adviser would have none to do with cognition for my dissertation because he was not interested in such a field, and it was not in his line of business of forensic safety.

This post is meant to explaining a few of the graduate courses in business that I suppose are required for an MBA program.

The marketing course was basically a higher statistical course involving a dozen statistical models or experimental designs appropriate to marketing products and investigating customers preferences and the like targets.  It was so broad and so intense that I felt at a loss for the first two weeks.  I doubt that these kinds of courses are offered in most business school: I think Dr. Hughes was a perfectionist, wanted to cover everything under the sun in a single course, and she never tired of pressing us to work harder.

The graduate accounting course was a let down; I was crest fallen.  I expected that this is going to be an interesting introduction to the business field but I soon discovered that accounting is basically knowing the laws, rules, and regulations of how to understand and prepare accounting sheets.  The regulations were so unfair, illogical, and obtuse that it made me angry to satisfying them just to pass the course.

Accounting is a compromise field among the members of the accounting order and the multinational institutions in order to cover up unfair practices.  I learned to comprehend and interpret balance sheet and working fund and what companies are asked to publish for their shareholders and government requirements.

I learned that the most important parts in accounting information are the notes written in the tiniest characters accompanying the sheets, like the ones you find in legal contracts.  The notes tell the real story of the difficulties and problems of a company such as legal liabilities, court investigations, high short-term debts, court litigation with the high officials in the administration…

I had a graduate course in economics (not econometrics such as applied in operations research models)  The professor was an acclaimed consultant; which means companies extend grants for a project and then the university takes 50% for overhead (research facilities, electricity…).  The adviser appoint or hire a graduate student to do the project, then the advisor write up the project (or the graduate student) and the advisor gets all the honor and publications.

This professor told us many interesting anecdotes and encouraged us to compute three dozens of ratios (data extracted from balance sheets and working fund statesman) in order to interpret correctly the state of affairs of a business.

There were two major problems with these exercises:

First, it is assumed that companies publish correct and honest information (as if accounting is not fraught with rules made to fill huge loopholes) or if the government cared to investigate properly the millions of balance sheets.

Second, these exercises were not based on good comprehension of which ratios mattered or correlated. For example, if several ratios (variables) highly correlated (positively or negatively) then, we better select one or two of these ratios as representatives of a trend to be included in a model.

Fact is, most of variables do not correlate (you cannot give a rational code name) and they are the most important to investigate because they are the catalysts or hidden forces in any trend (which is not done).

I have been told that in serious MBA programs students are handed lists of at least six books to be read per week and then to be summarized.

I wonder if “fast reading” is one of the criteria to be admitted in such programs.  I think skimming a book gives the illusion of understanding:  reflecting, analyzing, and interpreting require slow and focused reading that is time consuming.

MBA graduates from US universities increased from 21,500 in 1970 to over 150,000 in 2007 and then the financial crash wiped out that devilish trend.  Universities in the US are re-structuring their MBA programs and hiring new deans and new teams to recapture this cow cash niche.  Students in MBA programs used to invest over $80,000 (their families money) so that 50% of them could be recruited by Wall Street financial institutions and financial consulting firms.  Fortunately, Wall Street sent to pasture over 240,000 of salaried personel in order to get busy producing something more useful.

Harvard Business School enjoys over $two billions in reserves from various donations and is investing just two millions on developing new programs and hiring a new team for the business department; Nitin Nohria is the new boss.  Kellogg School of Northwestern University has also hired a new team.  Other universities are following suit such as Judge School of Cambridge, Ross School of Michigan University, and the Booth School in Chicago University.  Booth School was renamed after the Booth family disbursed over $270 millions.

So what kind of reforms these business schools have in mind?  Probably, first, dusting off the skeletal of theoretical books and theories that were abandonned, sending students abroad for a couple of semesters to branches in India, Singapore, Dubai, Malasia in order to get an hand on real business trading for global economics (thus, increasing the cost to graduating); offering more international persepectives on how business is done, increasing the ratio of teacher/studients in classrooms, and spending a lot on advertisements, especially, woowing the university of Jiao Tong of Shanghai and the Times Higher Education Supplement (THES) to better classification of top universities in the world.  Anyway, programs are dictated by the highest donators; thus, if you want accurate knowledge of the next strategy in MBA schools then, your best investigative sources are those institutions extending largess to the business schools.

What MBA students learn?  First, a superficial understanding of the laws, rules, and regulations governing the financial trade business; second, memorizing the code name of three dozens financial ratios extracted from balance sheets, and working funds statements; and third, learning a few tricks for generating financial tools to scamming clients of their hard earned wealth.  Usually, professors do not teach:  they hand out list of books to read (around half a dozen per week) demand summaries of what it was supposedly read.  I doubt that reflection, analysis , and interpretations are asked in these summaries: How could students find time to think seriously?

The International Monetary Fund (IMF) failed in its mission; (Mar. 27, 2010)

After 30 years of successive wrong decisions, decisions based on ideology and not on economics, that

1. weakened the developing States and reduced them to further poverty and famine;

2. decisions that destabilized world economy and lead to the global financial crash…

This International Monetary Fund (IMF) is still refusing to evaluate its ideological economic policies and account for modern economics theories that have

1. demonstrated the total inadequacy of market mechanisms and

2.  financial forces working independently of State interventions and benefiting the upper classes

3.  failing to come to the rescue of the poorer classes and reducing chronic employment.

The IMF has failed in its objectives.

Its mission was supposed to tackle two global economic problems: first, engaging world economic stability and second, aiding developing countries to healthier transition into economic globalization.

The IMF thought that it was doing the right thing for over 30 years:  It stuck staunchly to an archaic economic theory of market forces taking care of fluctuations and inefficient decisions.

The IMF went further to feeling comfortable in the position that poverty and joblessness are not within its mission: they were the World Bank (WB) mission of carrying these functions toward the less fortunate classes!

In fact, the IMF adopted this slogan: “What is good for the financial community in diagnosing healthy world economy is necessarily an excellent stability factor for globalization.”

This incomprehensible laziness of the IMF economists to studying, evaluating, and analyzing economic structural singularities of developing countries, led to strengthening the notion that world market forces is the best solution for hazardous economic investments.

John Keynes theorized that when market mechanisms are not challenged by States and that market forces work unperturbed, it is inevitable that chronic collective joblessness follow.  Keynes stated that, even singular developed nation economic decisions, affect global economic stability: what one State import in product and services many other States are exporting them.

Keynes reflected that in financial crashes many needy economies will be unable to borrow liquidity to stimulating their solvable economies to either finance spending deficits or compensating for tax income reduction.

Indeed, many solvable States went down for lack of international lending policies.

Thus, Keynes was the economics guru who demanded the establishment of an international monetary fund with mission to extending liquidity to maintain a certain level of full employment that will sustain global economic stability.

The IMF policy makers functioned contrary to Keynes’ economic theory and mission, and the IMF relied on the archaic market dynamics and refused to have any faith on the interventions of States institutions.   This ideology is a blatant irony since the IMF is supposed to be a public institution, but it is acting and behaving as if transparency in decision, management, and administration, is none of its concern or demanded to be submitted to restrictions.

For three decades, the IMF has been pressuring developing states to adopting stringent restrictive economic policies that never suited world economic stability. The successive failures never incited the IMF into revising its economic ideology and make sense of all those incoherent concepts that led to humongous errors and deeper poverty.

For example, during the last three decades, world finance considered exchange rates as one of other commodities, such as product and services.  Thus, exchange rates were to be flexible to accommodate market forces. That was a great wise idea; what the IMF did?

The IMF considered that exchange rate is one commodity that should be maintained at any cost by pumping billions of dollars in pure expenses for no benefit to real economy. Contrary to its market ideology, the IMF excluded exchange rate from market mechanism tool to stabilizing a failing economy.

Usually, it is excessive pessimism after a euphoric phase that drives speculative capitals to be withdrawn in economically solvable States.  Speculative investment is the disease to be treated and an overvalued exchange rate is just one of the symptoms.

The ideology of the IMF did its best to greatly facilitating speculative influx of capitals, and when difficulties arise, to pumping more liquidity in order to maintain the previous exchange rate to the benefit of the multinational financial speculators.

Consequently, the disease is aggravated by this unilateral vision of who should be the prime beneficiary; it has never been the developing States.

For three decades, the developing States have been paying interest on IMF loans simply to enrich multinational speculators by maintaining high exchange rates.  Otherwise, speculators would have desisted if developing States were not pressured to maintaining their exchange rates.

When a private company fails to pay interests on wrong investment decisions, it just declares bankruptcy.  The IMF refuses the developing States to declaring bankruptcy because the multinational financial speculators have to benefit from their faulty loaning decisions.

For example, Russia slapped the IMF in 1998 and defaulted on its external debts; two years later, the multinationals were back investing in Russia.  Thus, liquidity pumped by the IMF at high interest rates into bankrupt States ends up in the pocket of the speculators at the detriment of stringent social conditions of the needy classes.

The gain amassed by speculators, as a group, basically amount to a State financial and economic loss as a government and society at large.  The IMF has in fact been encouraging financial speculators for over 30 years!

Consequently, the other incoherence in the IMF mission is the lack of viable diagnostic tools.  The economists hired by the IMF get worried with balance of payment deficits but barely care how the money was used and where it ended.

The IMF has been extending funds to developing countries in order to salvage companies of the developed States, which made very bad investment decisions.  Multinationals had not to worry about examining closely their faulty policies or had any incentives to reform since the IMF is established principally to come to their rescue.

When States enjoy surplus export balances it is at the expense of excess import balances in other States.  If imports are of the luxury-kind items then desisting extending financial loans on luxury items should take care of the imbalance.

The IMF ideology states: “Once a State reaches a pessimistic speculative mood, the neighboring States will inevitably suffer by disease contamination.”  The coherent economic theory of Keynes reflected as follow: “A State will reduce imports which will hurt neighboring economies.

How did the IMF interpret that relationship? 

The IMF responds by forcing neighboring States to drastic austerity policies in order to avoid “contagion!”  Thus, an entire region such as South East Asia, had to crumble after Thailand. Oil demands and other basic products were cut down which generated reduction in brute oil demands and prices; the waves of panic spread thousands of miles away.  Russia was affected by reduced oil prices and not by any mysterious links related to investors’ confidence.

So far, after the latest financial crash, the IMF was forced to re-examine its economic ideology and to reform its governance.  The IMF is encouraging developing States to control and manage the flux of speculative investments and discourage any investment that does not benefit real economy.

What is needed is that the IMF funds institutions, particularly in developing countries, can identify, control, and manage external investments and offer developing countries the availability of instant information and intelligence on economic and financial activities to be able to compete with the elite multinationals.

The European Union (EU): Modern Europe leading human rights; (Nov. 10, 2009)

 

The previous post “European Union (EU) describes Modern Europe” covered a few statistics and then a short description of the EU administrative and legislative institutions. This follow up post will cover what is working, then analyzing what need to be ironed out, and then how the world community is expecting modern Europe to lead.

The 27 European States forming the EU counts 6 States among the twenty leading economy in the world.  By deceasing rank we have USA, China, Japan, India, Germany, Russia, Britain, France, Brazil, Italy, Mexico, Spain, South Korea, Canada, Indonesia, Turkey, Iran, Australia, Taiwan, and the Netherlands. Actually, those six European economies constitute about 90% of the EU in economy and in populations.

As a block, the economy of the EU may surpass the USA with a twist: the three largest industrial multinationals in every sector are US.  For example, in aeronautics we have United Technology, Boeing, and Lockheed Martin; in medical materials we have Medtronic, United Health, and Alcon; in Medias we have Walt Disney, News Corporation, and Comcast; in pharmaceutical/biotechnology we have Johnson & Johnson, and Pfizer; in informatics we have Microsoft, IBM, and Google.  Besides, the US is the first military power in technology, Navy, Bombers, and aircraft carriers.  The EU is totally dependent on oil and gas energies imported from Russia and elsewhere.  France has adopted a policy of being sufficient in electricity via nuclear energy (60% of the total of France production of energy).  Denmark is 25% sufficient in Aeolian technology and Germany about 15%.

The EU is facing problems. First, the “community vision” is eroding: the decade after the fall of the Berlin Wall and disintegration of the Soviet Union sent the wrong message of jumping in the band wagon of US globalization; thus, the well to do citizens wanted to get rich fast by emulating liberal capitalism. Individualism overshadowed the need to resume a common culture of developing institutions that are trained to work toward the common interest and be reformed to keeping the EU spirit intact in human rights and human dignity.

Second, the fall of the Berlin Wall in 1989 took Europe by surprise.  The euphoric undertaking of uniting East Germany quickly exhausted West Germany with the multitude of social, economic and political problems of this unification and captured most of Germany’s resources and time and prevented it to ponder on the EU necessities.  The opportunity to deepen European consciousness for reformed institutions to expanding eastward was missed.

Third, the EU was discussing the two possibilities: either the strengthening the current union for the longer term expansion or hastily absorbing the many eastern European newly independent States.  The political decision was to go ahead and allowing these tiny states to adhere to the union.  I think that this was the appropriate decision because new States had to root their future into a tangible alliance or fall back into past habit, inclinations, and culture; thus, forming close alliances with Russia. The EU was the appropriate framework for ethnic communication and more democratic realization of social aspirations.  The problem is that these tiny States feel that they should aspire to the same standard of living in no times.  The latest financial crash has left al these States in bankrupt conditions and it is up to the rich EU States to salvage this predicament.  Maybe this fact should remind the EU that not all States should enjoy the same rights until they can show the same capability to shouldering responsibilities.

 

The actual challenges are many. First, there is a political space to reconstruct:  The budget of the EU institutions is merely 1% of the gross GNP while States allocate over 30% to re-distribute to collectivities, social protection, and welfare. The richer States are not that inclined to contribute heavily to the social stability of the poorer EU State members. Second, the EU has unified its currency (it overcame the States’ monopolies to issuing paper money) but is lacking a unified economic government.  For example, the EU lacks common public spaces, no political party or organization has been created or formed to focus on specific EU interests, and the EU Parliament has no power to raise taxes to finance common policies.  So far, the government chiefs are wary of relinquishing their interstates legitimacy and power.

As a block, the EU is still unable to challenge the US on crimes against humanity committed by the US and Israel;  it is fully cooperating with the US on taking Israel off the hook in the UN for daily crimes against human dignity, rights, and apartheid policies in the West bank and Gaza. There are a few States in the EU that are showing trends to opposing Israel’s apartheid practices and boycotting its products grown and manufactured in the occupied West Bank; it is the people in these States who have set the stage for human rights and dignity reversal toward the Palestinian endemic plight since 1948.

 

The world community is on its toes: will the EU refresh its initial objective of “community vision” or will it relapse in petty interstates interest of monopolies and idiosyncrasies?  We need the EU to be the caldron of community communication among ethnicities, languages, and cultures. We need the EU to be the social and political testing ground for viable alternatives in vision, institutions, ecological human survival, human rights and dignity. We need the EU to invent new reasons to living together and reducing man inequality.

The European Union is the most striking political and social achievement in the 20th century.  The backbones of most of the UN peace keeping forces around the world are European contingents; the EU is the highest contributor in humanitarian budgets and for reforming obsolete public institutions in the under-developed States. The EU needs a refresher community vision and the world community should raise its voices and aid Europe in its endeavors.


adonis49

adonis49

adonis49

July 2020
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