The article concludes with these paragraphs:
For those on the outside looking in, business school, with its cachet in the job market, is an enticing reprieve. But not just any reprieve will do, according to Elliott, who said his 401(k) investments lost 20 percent of their value since the market collapsed.
A lower-tier business school, he said, may not be worth the tuition. "You have to think about the cost-benefit ratio," he said.
Can't help but thinking, don't we presently have an MBA President? And didn't he get that MBA from Hahvahd?
And aren't the banking, brokerage and insurance industries in whole whale of a lot money woes from low cash flows the over-valuation of credit default swaps and deregulation of a raft of financial product weapons of mass destruction?
And weren't many of those money woes self-inflicted ... by ... gasp ... MBA's from such prestigious institutions as "The Chicago School", Hahvahd, Yale, Stanford, etc etc
Would the curriculum at one of the "low-tiered" business schools be much different from what inferentially would be a high-tiered business school?
Might one entertain the possibility that all these MBA factories have contributed and mightily so to the present financial meltdown? The Enron scandal? Long-Term Capital Management?
Long Term Capital Management (LTCM) was a hedge fund located in Greenwich, Connecticut. The founders included two Nobel Prize-winning economists, Myron Scholes and Robert C. Merton. Scholes and Merton, among other things, developed along with the late Fischer Black, the Black-Scholes formula for option pricing. LTCM also included as guiding spirit John Meriwether, a former vice chairman of Salomon Brothers and famous bond trader. David Mullins, a former vice chairman of the Board of Governors of the Federal Reserve System was also part of the LTCM team. Also several important arbitrage analysts from Salomon Brothers joined LTCM. Eric Rosenfeld left Harvard University to join LTCM. It was a very elite group.
The idea behind LTCM was quite simple to articulate but not necessarily that easy to implement. LTCM was to look for arbitrage opportunities in markets using computers, massive databases and the insights of top level theorists. These opportunities arose when markets deviated from normal patterns and [were] likely to re-adjust to the normal patterns. By creating hedged portfolios the risks could be reduced to low levels. According to the model developed by Merton the risk could be reduced to zero, but in practice some of the crucial assumptions of Merton's model did not hold so the risk of the hedged portfolios was not really zero, as subsequent events proved...
Long-Term Capital Management (LTCM) was the management arm of a hedge fund that operated from its founding in 1993 to its liquidation in early 2000. It went through a period of spectacular success from 1994 to early 1998. In August of 1998 Russia defaulted on its debt and the financial markets came unraveled. Historical regularities that had prevailed failed to hold and LTCM which had bet on those regularities nearly went bankrupt. It was saved only by the Federal Reserve Bank of New York sponsoring a bailout of LTCM by its creditor banks. The Fed justified its intervention on the basis of the potential of the failure of LTCM precipitating a financial crisis and the creditor banks were enticed into extending credit to LTCM because their financial losses in a general financial crisis could well be more than what they stood to lose if LTCM defaulted on its loans.
An old actuarial joke says:
That's all very well in practice.
But, will it work in theory?
Okay, so the supposedly best and brightest minds of the times thought they could "function like a giant vacuum cleaner sucking up nickles that everyone else had overlooked."
It worked spectacularly, for a while. And then, it almost all came undone. The conclusion that THE RISK COULD BE REDUCED TO ZERO was valid only under flawed and eventually failing assumptions.
Did anyone ever take note?
Yes indeed. In 1997, Molly Ivins was NOT bedazzled by Allan Greenspan.
[O]ur economy is in the hands of Greenspan, a former member of that fat-head Ayn Rand's inner circle and a man who believes that S&Ls, banks and Wall Street should be free from all regulation. You will not read this in the Establishment press, which (in Robert Sherrill's phrase) "slobbers" on Greenspan, but based on his record, the man is a fool. Starting with the infamously idiotic "Whip Inflation Now" campaign of the 1970s, Greenspan has contributed to almost every economic unpleasantness of the past 24 years.
He helped defeat Jerry Ford by advising the poor man to reduce government spending in the middle of a recession. With unemployment at 8 percent and the economy in the worst recession in 14 years, Greenspan blithely denied that there was a recession. He helped defeat Jerry Ford by advising the poor man to reduce government spending in the middle of a recession. With unemployment at 8 percent and the economy in the worst recession in 14 years, Greenspan blithely denied that there was a recession.
Both Kevin Phillips and William Greider have dissected Greenspan's performance as the Reagan-appointed head of the National Commission on Social Security Reform in 1981. And what a performance that was: a $200 billion tax increase, which was was hopelessly regressive and (in Phillips' words) "a slick use of Social Security dollars to reduce pressures for a higher top income tax rate." Following his pattern of the 1970s, Greenspan again took us into a recession in 1990 and then ignored it, causing untold damage.
He has continued his winning ways in the Clinton administration. In 1992, the deal was that if Clinton lowered the deficit, Greenspan would lower interest rates. Clinton lowered the deficit significantly, and Greenspan proceeded to raise interest rates seven times (per The Nation, March 11, 1996). He was back to his old tricks last week, bumping interest rates to benefit banks and bondholders.
Whatever honchos is learning in business school, the results have ultimately proven to be disastrous.