The author is director of the Marshall Institute at the London School of Economics and was previously director of the MBA program at the University of Oxford.
Rishi Sunak is the first person of color to become British Prime Minister, the first Hindu and the richest Prime Minister of modern times. He is also, significantly, the first to hold an MBA.
Sunak studied philosophy, politics and economics at Oxford, like so many prominent British politicians. But it was his time at the Stanford Graduate School of Business — where he met his wife and was drilled into the intricacies of competitive advantage and the capital pricing model — that sets him apart from his peers.
The Stanford Graduate School of Business sits in the heart of Silicon Valley, where Romanesque architecture, sunshine, and social liberalism combine with libertarian, free-market ideas and a fundamental belief in the redemptive power of technology. It covers both suit-and-tie corporatism and t-shirt-sandal activism. Entrepreneurial enthusiasm and techno-utopianism create an exciting environment for business schools. Two years in brutally competitive Palo Alto changes more than the way people dress.
Amid Rodin’s sculptures on campus, Sunak will have absorbed Milton Friedman’s doctrine of shareholder primacy, Michael Porter’s “five forces” framework for understanding how industries work, so-called Monte Carlo simulations, the innovator’s dilemma and emphasis on spreadsheets – all flavored with Silicon Valley’s distinctive worldview of “moving fast and breaking things”. He graduated in 2006, the year Twitter was founded. The financial crisis hadn’t happened, so MBAs hadn’t yet been blamed for causing it. It is also the year of the founding of TOMS shoes, which offered a pair of shoes to a child in need for each pair purchased, the very model of the social enterprise of Silicon Valley.
The MBA has arguably been the most influential degree of the past 50 years. She brought a systematic discipline to practices hitherto ad hoc and little formalized, and a serious analytical rigor on the start-up, financing, management and consulting of companies. It built a bridge between research in disparate disciplines and gave us a framework to talk about business, competition, innovation and investment.
But recently, the MBA’s influence has shown signs of waning. The traditionally high return on investment for around a quarter of a million students worldwide enrolled in such programs is coming under scrutiny in the face of rising tuition fees, while those running the programs have begun to question their methods. What if shareholders weren’t the only people we should care about? What if markets do not allocate resources optimally for social justice? What if the business isn’t the most useful unit of analysis to get things done? What if political reality was not captured or expressed by a spreadsheet?
What does it mean to have an MBA as a Prime Minister? Sunak’s education at Stanford allows him to handle numbers and present his vision. It can assess the net present value. It includes organizational behavior and market segmentation. But will all of this help when the rational expectations of MBA orthodoxy collide with politics and events?
In his political career to date, Sunak has shown both TOMS shoes and Friedmanian instincts. The UK furlough scheme and ‘eating out to help’, which he introduced as Chancellor under Boris Johnson, were TOMS, almost Keynesian. The austerity measures he is now considering suggest otherwise. And MBAs are very good at reducing costs. Economist Daron Acemoglu has suggested that employees of companies run by MBA graduates see their wages plummet over a five-year period. Markets and owners like it. Employees probably don’t.
Having an MBA in charge is reassuring if you consider the nation as a business. But critics of these programs point to overconfidence, ethical failings, and a lack of real analytical or empirical evidence for widely adopted strategies. They lament an excessive focus on learning from case studies, a lack of emphasis on soft skills, an overreliance on business acquisitions rather than productivity improvements, and a narrow focus on shareholder value.
Business school admissions departments often call their students either “poets” or “quants.” Poets are usually trained in the humanities and uncomfortable with spreadsheets and assessment exercises. Quants are highly digitized, often with a first degree in engineering. Poets are comfortable with what Keats called “the uncertainties, the mysteries [and] doubts”. Quants are good for regression analysis. Poets sing, while quants count. Boris Johnson was a poet with a degree in classics. He campaigned in poetry and tried to rule in poetry Britain’s new prime minister can clearly count, as his campaign has been conducted almost entirely in prose. But does Sunak’s MBA allow him to sing too?