That is the title of the essay I published this morning at HBR's Great Debate about business schools. I argue that one cause of the greed that is reinforced by many business schools is that economists and their assumptions usually rule roost: Many economists teach and believe that humans are selfish and greedy. For example, one of the most influential theorists is Oliver Williamson. Here is a quote from one of his papers:
"Transaction
cost economics also subscribes to bounded rationality. Rather,
than work out of a myopic setup, transaction cost economics assumes that many economic
actors (especially within organizations) are capable of and engage in
foresight.Such
takes on special importance when coupled with the assumption that economic
actors engage
not merely in simple self-interest seeking but also engage in self-interest
seeking with guile."
The word guile means "treacherous cunning, skillfull deceit." Drawing on a paper that Fabrizo Ferraro, Jeff Pfeffer, and I published a few years back, I argue that traveling through life with this assumption has powerful effects. If you believe that people are entirely out for themselves, will lie and cheat to get what they want, and are hardwired that way, then you would be a fool to act otherwise yourself. But — if you believe (as much research shows) that self-interest is a norm that can is stronger in some groups than others, and takes different forms in different groups than others, than this means that being a greedy selfish liar isn't our fate as human-beings, but is a consequence of the social group were are in, or how we are "primed" by what is going on around us.
One small way that business schools can contribute to the greed problem is to teach students — especially in economics classes — that self-interest with guile is a norm, as is self-interest with grace and concern about others. Indeed, I think that an interesting comparison here might be the internal norms at the now defunct Merrill Lynch versus Goldman-Sachs. I have had Stanford students tell me for decades that Merrill is (or was) fundamentally dog eat dog world to live in and there is no incentive for helping coworkers and you get ahead by ignoring them, doing your work, and occasionally sticking a knife in their back. Beyond my gossip, check out this little column by Dan and Chip Heath and Paul Stiles book Riding the Bull. Indeed, as former customer of Merrill, I saw this in small way, where every interaction we had with our stockbroker was aimed at creating churn rather than doing things in ur best interest — and we were constantly getting screwed by unexpected and hidden fees… all these behaviors are consistent with norms about treating insiders and insiders in a way that is consistent with "self-interest with guile." In contrast, although Goldman-Sachs isn't perfect, they operate under a drastically different set of norms, where although yes, the profit motive is there as it should be, there are very strong norms for being responsive to colleagues, sharing information. for telling the absolute truth, for what I might call "self-interest with grace and concern for others." A comparison of the assumptions made in these two firms, and the impact on practices and actions, could be most instructive for MBAs.
It is interesting that Steve Kerr — former chief learning officer of Goldman — is arguing that business schools don't matter much, but what really matters is what happens in companies. That may be true, but perhaps he would agree with me that whether a company's practices and actions are (implicitly) based on "self-interest with guile" versus "self-interest with grace and concern for others" has a huge impact, and more generally, the assumptions that leaders and followers make about human nature have a huge impact on everything from hiring and firing practices, to incentive and promotion schemes, to whether or not people are truthful or deceitful during interactions with customers.
P.S. The paper I am basing this on is co-authored with Fabrizio Ferraro and Jeffrey Pfeffer: "Economic language and assumptions: How theory can become self-fulfilling, Academy of Management Review, 30:8-24"
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