The auto industry is actually a terrific proxy for a trend toward short-term, myopically balance-sheet-driven management that has infected American business. In the first half of the 20th century, industrial giants like Ford, General Electric, AT&T and many others were extremely consumer-focused. They spent most of their time and money using new technologies to create the best possible products and services, regardless of development cost. The idea was, if you build it better, the customers will come. And they did.I'm no real fan of MBAs, but I find the Bob Lutz story to have limitations. His beefs are coming from a pure car enthusiast, but much of the problem the Big Three had was ignoring the demand for well-built small cars after the oil crisis, not a very big concern for pure car guys like Lutz. They didn't think people would stop buying American cars, no matter how poorly they were built. They had a long period of overcoming poisoned labor-management relations, while they didn't improve quality while they could. The MBAs contributed to the problem, but the inertia of a giant organization prevented necessary changes when they could be effective.
The pendulum began to swing in the postwar era, when Harvard Business School grad Robert McNamara and his "whiz kids" became famous for using mathematical modeling, game theory and complex statistical analysis for the Army Air Corps, doing things like improving fuel-transport times and scheduling more-efficient bombing raids. McNamara, who later became president of Ford, brought extreme number crunching to the business world, and soon the idea that "if you can measure it, you can manage it" took hold — and no wonder. By the late 1970s, M.B.A.s were flourishing, and engineers were relegated to the geek back rooms. (See why you should still go to college.)
Monday, July 18, 2011
MBAs And American Decline
Time, via Ritholtz:
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The distinction between the engineers and the accountants at the car companies is actually just a microcosm for the battle between Wall Street and Main Street on the national scale. In fact there is a well-established body of thought that claims the great economic questions always boil down to the conflict between the Producers and the Predators. In this world view, MBAs are merely trained hireling of the Predators sent into harvest the richest created by the engineers and production workers.
ReplyDeleteNow whether Bob Lutz is a good example of a "car guy" with many layers of Producer virtue, I am not so sure either. (Dodge Viper, anyone?) For that title, I would choose Donald Petersen at Ford during the 1980s. But Lutz may still have the last laugh. He greenlighted the Chevy Volt when it became clear to him that this was going to ensure his industrial immortality. And while there is a bunch of tweaking to do with the balance between battery pack and engine size, I believe the Volt may just prove Lutz correct in his belief that extended range electric is the way to go. Notice, Motor Trend has agreed with him.
I agree with you about the MBAs, except I'd probably use strip mine instead of harvest.
ReplyDeleteI think the Viper is a good example of what I picture as the Bob Lutz kind of project. I mean, the guy owns a fighter jet, for crying out loud. Peterson does appear to be a more practical production individual.
As for the Volt, I could use a vehicle with a 60 mile range for my driving probably 80-90% of the time, I'm just skeptical about the battery cost and life. It would be a good way to balance the load on the grid at night, though.
I agree—strip mining is such a better description of what Predators do than harvesting.
ReplyDeleteFor an example of what I really feel about the harvest see:
http://www.youtube.com/watch?v=44ujv4HHz4A