Director of MIT Sloan’s Office of International Programs Stuart Krusell
What do the economies of Latin America and China have in common? They are both extremely interdependent on the other for growth.
China purchases a significant percentage of raw materials from Latin America, which are used in the manufacturing of goods. Many of those goods are then sold back to Latin America. This cycle has increased over the last decade, as China’s trade with the region has surged more than 20-fold since 2000. So while they are competitors, they also are trade partners. It’s a slice of globalization that is representative of the larger world.
China and Latin America’s relationship becomes even more intriguing when you consider the geo-political environments of both regions. What is the impact of Brazil’s elections on its trade partnership? Populist rhetoric to keep jobs local and not to be so dependent on China is appealing to many, but what happens to the region’s economy if trade with China decreases? Further, how do the corruption investigations in China impact trade? If China’s GDP is affected, it could mean the country is buying fewer natural resources from Latin America.
A lot of attention has been paid lately to big tech companies buying up smaller firms in billion-dollar deals: In January, Google acquired Nest for $3.2 billion, Facebook purchased mobile message service, WhatsApp, the following month for $19 billion; last week, it acquired virtual reality gaming company, Oculus VR, for $2 billion. There is a lot of discussion about the motives behind these large deals. Some say they are attempts to block competition, while others maintain they are efforts to stay relevant.
I see these deals as a reflection of the uncertainty companies face as they try to identify the next big thing. This is especially true for successful companies like Facebook (FB) and Google (GOOG), which are known for doing what they do tremendously well. They’ve seen similarly successful companies like Kodak struggle as technology moves on, rendering its product obsolete. As a result, companies today are eternally motivated to look outside their current business.
Higher education has hit a wall — particularly the business school. Four issues are upending higher education as it is constituted today:
It is overpriced: While the cost of higher education has skyrocketed, MOOCs (Massive Open Online Courses) have emerged as a game changer, opening doors to an unparalleled democratization of higher education. The marginal costs of online learning are basically zero. And yes, in spite of huge enrollment numbers (often 50,000-80,000 students per class), MOOCs have not yet been able to fully deliver on their high- flying promises. Critics often point to course completion rates–often as little as 5% of the enrollees complete a course–a sign that MOOCs are still evolving.
It is out of touch with the changing market: The old model of higher education worked for a remarkably long period, although not for everyone. Students invested in the pursuit of a career path that almost guaranteed a good income, which then enabled them to swiftly pay back their college loans. Those years are gone. With many industries having moved from the United States to Asia, and with increasing automation in manufacturing and management, many formerly well-paying middle-class jobs no longer exist; they have been replaced by service sector jobs that do not even pay a living wage.
The curriculum is outdated: The intellectual and methodological foundation of business schools is thoroughly outdated. Lectures as a teaching method have been around for more than 2,000 years, and the Harvard case study method for more than 140 years; and yet, they still account for most of what is going on in B-schools today. But what’s worse is that the core curriculum–based on current mainstream economic and management thought–equips students with a mental framework that amplifies our global ecological and socio-economic crises instead of helping to solve them.
A few years ago, we here at MIT Sloan School of Management looked in to launching an MBA track to complement the existing tracks in Finance and Entrepreneurship. We contacted alumni and business professionals to determine what types of skills companies most desired in our MBA graduates. We wanted to find out what the companies’ needs were and where they saw gaps. What we found is perhaps the paradox of today’s global business world: even as markets have become increasingly interconnected and technology enables employees spread all over the globe to easily share knowledge and resources, it’s still hard for large organizations to achieve true interconnectedness that get things done.
The reason is simple. Employees have a natural tendency to be self-contained within their particular business units. Marketing folks mostly talk to other marketing folks; operations people consult other operations people; and the finance team pretty much sticks to itself. This is not necessarily a new problem. Silos comprised of workers with no real connection to each other or even to the outside world is a challenge that many companies face. According to a 2006 survey by McKinsey, the consulting group, only 25 percent of senior executives described their organizations as effective at sharing knowledge across boundaries, yet nearly 80 percent acknowledged that such coordination is critical to growth.
Especially concerning business regulations, critics argue, an inside the Beltway mentality prevails. Only the lobbyists and industry insiders are heard.
I am sensitive to this criticism. Five and half years ago, the United States experienced the worst financial crisis since the Great Depression. In response to the crisis, Congress passed the Dodd Frank Wall Street Reform and Consumer Protection Act. One part of the legislation instructed a financial regulatory agency called the Commodity Futures Trading Commission (CFTC) to write rules that regulate “swaps” — the same derivatives that had been implicated in the financial crisis. As the Chief Economist of the CFTC during 2010-2012, I helped with the rulemaking process.
After leaving the federal government in December 2012 to join MIT Sloan School of Management as a finance professor, I set out to study the work that I and other staff members had done on designing new Wall Street regulations.
My goal was to create a scientific tool to evaluate whether thousands of public comments that were delivered in response to the rules proposed by the CFTC were meaningfully taken into account. I wanted to study how responsive the government is to its constituents. Is the government really for the people?