No CEOs in the Obama Cabinet
In President Barack Obama’s Cabinet, there is a Nobel Prize winner, a former mayor, and a veteran CIA agent. Surrounding him in the White House West Wing are a former four-star general, one of the nation’s most eminent economists, and a handful of this generation’s most talented political operatives.
There are no former CEOs in the Obama Cabinet. And among the people who make up his daily inner circle, there is only a dollop or two of top-level private sector experience.
And that is a problem, how?
We all admire entrepreneurs who start businesses that sell something useful and become rich. Some of them are great inventors like Edison or Eastman; more recently, the founders of Google. Others are friends of inventors whose ideas they were able to bring to fruition, like Bill Gates or Steven Jobs. Still others are just savvy business people who saw an opportunity: Bloomberg would be a recent example. Even ruthless robber barons like Rockefeller, Carnergie or Stanford made their mark through philanthropy.
But in the last several decades, after the maturing of the American economy, corporate bureaucrats became the most important people in this country. The better ones worked their up from some technical job in engineering or are savvy salesmen or marketeers. But many others started their careers with an MBA, and have done nothing but manage other people. Every university has started a Management School to take advantage of the mushrooming demand for business degrees.
You can slog through difficult math and physics courses for four years and more years of graduate education to become an engineer. And then compete with excellent engineers from India and China who are paid a fraction of what a hairdresser in America makes. If you are really clever, you will instead take a degree in some easy major, then get an MBA in a year. You will start your career as that engineer’s boss.
No doubt there is such a thing as a great manager. And you can argue that a good manager is as valuable as ten engineers. But something really got out of whack in America in the Reagan-Bush-Clinton-Bush years. The average CEO is now paid 350 times the average worker. Financial engineering became more lucrative than real engineering.
The same corporate titans who were driving the American economy into the ditch became trustees of Universities and Museums. They then appointed specialists in bankruptcy law and corporate takeovers as University Presidents. And they in turn started business schools everywhere, feeding the cycle. Even the small Catholic Liberal Arts college in my town has a business school now. They are talking about starting an undergraduate degree in business, a BBA: why spend four years learning psychology or film studies when you can get straight to the point? Kind of like the guys who want to teach string theory to undergraduate physics majors.
Post-MBA programs are also thriving. General Electric, which was started by Thomas Edison, used to be known for its great engineering wizardry. They made jet engines, nuclear submarines, microwave ovens. They still make these things, but what they are known for is their three sigma management training program. It has gotten to the point where being three standard deviations away from the mean is not enough: there are now six sigma and nine sigma programs. The idea is not only that their graduates are trained to manage highly selective business processes, but that they are themselves three sigma or six sigma away from the average human beings they are managing.
Assuming a normal distribution, three sigma is statistical jargon for .27 percent of the population, while six sigma would be 2 parts per billion. In other words, out of the six billion people on Earth, only about twelve would truly qualify as in the six sigma range. Nine sigma is total bullshit, just a slogan trying to build on the fame of six sigma. Yes, there already is twelve sigma management. Apparently, it starts where six sigma leaves off.
If being six sigma is not enough, you can get further training to become a six sigma Black Belt. After that there is Master Black Belt, Green Belt, Gold Belt, Leather Belt, Felt Belt and so on. Inflation of titles in the corporate world (Chief Procurement Officer manages the world’s oldest profession?) extends to the world of consultants and educators. Professional networking sites like linkedin.com are now full of these six sigma Black Belts with no useful skills desperately seeking gainful employment. The saddest part is that these are the people recommending the unemployed engineers, their former underlings, also looking for work on the same sites.
Exactly what magic do you learn at these business schools? Can you really run a paint company and not know anything about the chemicals that go into paint? When Fuji was eating their lunch back in the nineties, the MBAs running Kodak could not figure out that the future was in digital photography. You did not need to know much engineering to see that the exponentially decreasing cost of memory chips will make film obsolete. I was horrified when a colleague, an excellent physicist, expressed admiration for the clever guys who were charging California a King’s ransom for electricity. This was a year before Enron imploded, in an early sign of the catastrophe to come. It is not that I was better informed about Enron: I just recoiled at people who milk the system this way because of the simple Indian village values with which I was brought up.
If China is the factory floor of the twenty-first century and India the customer service center, the US is the executive suite. It could have worked, except that the executives are overpaid and under-informed. And if we were a much smaller country. How can 300 million people be executives? The current economic crisis is not just about financial markets: there is something fundamentally wrong with the value system that rewards management- and incompetent management at that- so much more than technical skills. Universities are no better managed. I could tell you stories.
So, Obama knows he has to change the country. Not only through his executive orders and the legislation he signs. Also by selecting people with actual knowledge into his Cabinet. A physicist as Secretary of Energy- why didn’t anyone think of that till now? And a Nobel Prize winner at that.
The whole world watches and emulates the President of the US. When he moves a bust of Churchill out of the Oval Office, that is a message about his values. When he honors Stevie Wonder, that is a message too. By not having a Carly Fiorina, Jack Welch or Mitt Romney in his cabinet, Obama is sending out a message as well.
Stephen Hess, a senior fellow emeritus at the Brookings Institution:
It tells us a lot about Barack Obama, that these executives are just not part of his most inner circle. There’s always been a place in government for these people who come from the business world, whether at Commerce, Defense, Treasury or on the White House staff. But suddenly they’re not there.
Get used to it, Dr. Hess.
When unemployment rises people go back to school to get more skills. Many are tempted to get an MBA, the crack-cocaine of graduate degrees. Before you try it, consider the following argument:
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