Roger Martin of the Rotman School of Management is pretty disturbed by the current state of business education. He quotes the Economist, in which a writer recently accused business education of producing “jargon spewing economic vandals”. This, he says, is true. But he and others are working on new models for education. “And that’s all because the students don’t want to be jargon spewing economic vandals.”
Business leaders deserve an education that’s broad, deep and dynamic. They tend to get an education that’s shallow, narrow and static. The biggest problem is that the education is disconnected from the real world. He offers the examples of the Nobel-winning Black-Shoales option pricing equation. It’s designed to price the short term call option for a specific type of European stock. It’s now being used – badly – for a completely different set of problems. That’s our fault – we’re not doing a good job of connecting education to real-world conditions. Too often, we offer students a set of existing tools, and we spend less than 5% of our time encouraging the development of new solutions.
“It’s much easier to teach finance if you assume that people are rational, profit-maximizing economic actors – it makes the math much easier.” But it doesn’t work this way – people have emotions, they’re not profit-maximizing. You need to get fuzzier and less declarative about what people ought to be.
In this new model of business education, the capstone course for the first year is on model building, with a strong emphasis on the limits and limitations of models. The goal is to create students who can ask their professors “when do these models break down?” The desire to build models that are more complex and more fuzzy means that it’s possible to bring in environmental factors and other real-world factors. This can lead towards an education that’s dynamic, not static, one that goes beyond teaching students to choose amongst options.
Students love this method, he tells us, and corporations are thrilled to hire these students. The opportunity is tremendous. 22% of all American undergrads and 28% of American grad students are engaged in business education. If we could get this right, we’d have a transformative force for the future of innovation.