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,however,
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"

I wrote an opinion piece for the new BusinessWeek, which is now available online and in the current print version of the magazine.  The graphic in the magazine is above — it is pretty graphic!   They seem to be calling it The Peter Principle Lives, although the PDF of the final I saw was called "In Praise of Simple Competence."  In any event, the argument is that our collective lust for extreme levels of performance led to all kinds of incompetence and cheating — think Bernie Madoff and Barry Bonds. And the pressure to create a false illusion of superstardom contributed to the meltdown; notably, reasonable and relatively safe returns weren't good enough for financial service firms and their shareholders, so they rolled the dice in dangerous ways that were another kind of incompetence.  I argue that  perhaps one path out of the current mess is a return to the celebration of simple competence. As I say in the piece, this notion was inspired by The Peter Principle, which I took as a plea for simple competence.

 It was really fun to write, but the process of cutting it down to 800 words or so was painful — although having great editors helps. As I wrote earlier in the week, BusinessWeek has also published the foreword that I wrote to the new edition of The Peter Principle online, which you can get here.

P.S. This basis of some of the ideas in the opinion piece are in this post, also called In Praise of Simple Competence.

As I wrote earlier in the week, there is quite a debate going over at the Harvard Business Review website about whether business schools are to blame for the meltdown.  There are 50 comments, nearly all thoughtful.  After reading them and thinking about it more, I guess where I am at is that, yes, the question of whether business schools are to blame is kind of silly — they are just one part of a bigger system that needs overall repair.  But I tilted further toward believing they are part of the problem after first reading a long and rather pompous defense of business schools (which seems to accept no responsibility at all) from "Professor Sir Andrew Likierman,"  Dean of the London Business School and then a response from from Robin Humphreys, who described himself as a non-MBA with 40 years of experience. Sir Andrew rambles on, but here is the key part for understanding Humphreys' response:

As to where our graduates go – it is true that a high proportion of
them in recent years have gone into investment banking. There is a very
simple explanation for this: investment banks were paying the most to
attract the best talent. That, too was part of the normal operation of
the market cycle – and it is now correcting itself. Business schools will continue to attract talent and continue to
train people to be better managers. They will continue to be places
where a wide variety of ideas are generated. They should not be
convenient scapegoats for today’s financial problems.

Here is Humphreys' reaction:

Andrew Likierman makes the point that the investment banks were
paying the most to attract the best talent. The 'talent' churned out by
business schools is rather like the 'talent' responsible for the
British economy over the past 12 years. It has an extremely narrow
focus on "the numbers" to the exclusion of all other metrics of
organisational performance and a similar belief that the numbers are
all that matters. Talk to the vast majority of MBA graduates of any
business school about the relevance of managing and leading people to
achieve outcomes and a blank look descends over their faces. They don't
do people, as they cannot be measured in black & white terms; it's
all grey.

As for the ethical perspective, why are we surprised about the
levels of greed that have been seen in the pursuit of "the numbers"?
People at work do what they believe they are measured on and what they
believe they are rewarded for. It's like night following day – no
surprise at all.

If you read Sir Andrew's comment, on the surface, it all seems completely reasonable in some ways, but the thing disturbs me is a complete refusal to accept any responsibility  at all– it is an argument for inaction (or perhaps impotence, another way to read it is that it is an argument that business schools are powerless pawns in the marketplace).  Regardless, it is an absolute refusal to accept even a tiny bit of responsibility for the problem,– and thus, by implication to accept even a tiny bit of responsibility for changing things.   I am reminded of the F.M. Cornford's 1908 classic book (which I have blogged about before and you can get free online) Microcosmographia Academica.  Cornford has a lovely line about academic politics: "There is only one argument for doing something; the rest are arguments for
doing nothing."   In the great tradition of academic politics, Sir Andrew offers us an argument for doing nothing.  In this vein, Cornford offers many arguments for doing nothing, but perhaps the one that applies best to Sir Andrew is "The Principle of the Wedge," which Cornford explains is "you should not act justly now
for fear of raising expectations that you may act still more justly in the
future — expectations which you are afraid you will not have the courage
to satisfy."  

Also, Sir Andrew makes seems to present business schools as places where many ideas float around and none really rule roost.  As I will be writing later in the HBR discussion,although business schools do have many different disciplines,  the top dog is usually economics and the often not very implicit assumption that economics in its rawest form — unbridled selfish self-interest — is how human beings will and can behave.  And even if we could stop them from their selfish pursuits, it would be a bad idea. There are other voices in all business schools, but this is usually the one that is the loudest and most powerful.

Check out the rest of the debate, it is fascinating.