This is Part II to an unplanned series of posts where I talked about what I actually learned as a result of studying different things in college (you can find Part I: Engineering, here, and Part III: Liberal Arts, here).

I don’t remember the exact words she used, but a friend asked me why I was studying business. She was going through her own “crisis” (her words, not mine) and wondering, as one frequently does in college, what she was doing with her life and why she was studying what she was.

Here’s the thing: if I had to drop all majors but one, I’d keep business. There’s no hesitation with that decision; there’s no doubt in my mind that it’d be the right call. Business is the Madison to my Peter; engineering is Hannah Ann; liberal arts is one of the girls that got sent home the first night of the season that no one really remembers (fine, that’s an exaggeration, but the relative order is correct). I’ve already written about what I’ve learned from studying engineering, which is why I think I ought to write the “business student’s manifesto” or whatever.

My hypotheses are basically as follows:

1. Immediately after graduation, engineering and computer science majors have the “sexiest” jobs.

2. The best manager creates far, far more incremental value over an average manager than the best engineer does over an average engineer.

3. Long-term, most (though not all) jobs turn into general-management.

4. If you want to be a good manager, the top skills are all management, marketing, and finance related. That said, deep knowledge in management is rewarded more than deep knowledge in marketing or finance. It’s still unclear to me where in the hierarchy this applies.

Time to unpack that.

business students don’t win out of the gate

The simple fact of the matter is that most of the jobs that people idolize (at least, in my circles) are all in Silicon Valley. Sure, the consultants and investment bankers have prestige and long-term growth prospects, but compare them to the entry-level engineers and technologists in Silicon Valley and it’s painfully evident how bad the work-life balance is, how much comparatively less they’re paid (to be clear, everyone’s still earning a ton of money, beyond the $75,000-ish happiness saturation point), and how much less society glorifies the role. Seriously, I know several people whose signing bonuses in tech are higher than the starting salary consultants make. 12 months of my work is worth monetarily less than my friend e-signing a PDF.

I’ve personally felt some regret and FOMO for not being in CS in the past. Silicon Valley is hyped up throughout college and society; it’s where the people changing the world and reshaping society are. No one is debating whether BCG and McKinsey and Bain have too much power in the world without regulatory oversight; Steve Jobs wasn’t an investment banker and I doubt Elon is making Tesla and SpaceX what they are by making slide decks; the most valuable non-government public companies in the world are Apple, Microsoft, Alphabet, Amazon, Facebook, and Alibaba.

My point is that if you’re picking a major solely based on what the job market is like fresh out of college, you’re probably not going to pick something in the business school. After all, CS and EE majors usually prefer to do engineering than consulting right out of college [1].

above-average managers create more value than above-average engineers

We have some smart friends, and then we have the smart friends. I’ll assume that the productive value of A (who’s 99th percentile as an engineer) is twice that of B (who’s a perfectly competent-but-average engineer). So the “incremental value” of A, in my mind, is +1, since the role at the company would have gotten filled by someone, and it’s against that baseline of performance that I want to measure against.

In contrast, however, let’s suppose that you’re two levels above the base in a hierarchical organization where everyone leads 10 people. That is, you have 10 people reporting to you, and each of those 10 people in turn manage teams of 10. You have 110 people underneath you, and the person above you has 1,110 people that depend on her. What’s the incremetal value of someone who’s such a good manager that she can get 10% more out of those underneath her? It’s +11 for her, and +111 for the person above her. Now, there are a lot of assumptions built into that. For one, such a rigid hierarchical organization isn’t likely to exact in that mathematical ideal form (and if one did, would I want to work there in the first place?). Beyond that, I doubt that it’s possible for you alone to get 10% more from everyone at every level below you. Nevertheless, I believe in the power of leadership-by-example to inspire people, and I bet that good managers are also improving the skills (management or otherwise) of those around them. In any scenario, above-average managers, in my mind, create more incremental value than above-average engineers.

As a few asides, people (I hypothesize) have a range of abilities that they can reach, and I really do believe it’s possible to turn people into better managers. I also worry about naming this section, as taking it at face value isn’t going to lead to the right conclusion.

There’s a counterargument to be made that in engineering through-and-through organizations where engineering is the value add, engineering prowess is what really matters. After all, Tesla is making cars that are far-and-away better than anything Volkswagen, Jaguar, Mercedes, etc. are putting out. Nevertheless, I’ll still assert that good managers (whether they come from engineering or business backgrounds) are crucial to letting the battery and powertrain engineers do their job well without encumbrances.

most* jobs turn into management

The head of tax for a large firm is going to stay technical. The person in charge of engineering is going to remain more on the technical side than, say, the CEO. The general counsel is going to need to maintain his legal edge.

What about everyone else? My bet is that as you move further up the organization chart, people spend more and more of their day to day on management tasks. Obviously, this isn’t something that I can say I know from personal experience - I’m 22 and have never held a full-time job before. But this was a question I asked a few people (the former CFO/CIO of Intel, the guy in charge of strategy for the Salesforce platform), and they all seem to indicate that the general sentiment was (unfortunately?) correct.

a business education teaches the skills you’ll actually use

My impression is that most of a manager’s time is spent on meetings and leadership, strategy, and making decisions (usually involving, to some extent or another, some financial consideration). To that extent, then, the most relevant skills are all management (meetings and leadership), marketing (strategy), and finance related (evaluating decisions in the context of risk/reward). All three components are crucial to performance. A manager that’s great at rallying the troops and setting strategy but constantly makes poor financial decisions isn’t likely to steer the boat in the right direction long-term.

I hypothesize that deep knowledge in management is rewarded more than deep knowledge in marketing or finance. Good leadership that brings out the best in those around you and inspires the team is probably (in my mind, at least) the most important characteristic of a manager. To the extent that a leader truly understands how to do that, I’d imagine that one could compensate for relative weaknesses in strategy-setting (by relying on other, competent people to aid in that process) and decision making (again, by doing the same). To be clear, I’m saying that someone whose skillset places him/her in the 99th/75th/75th percentile on management/marketing/finance skills is probably going to do better than someone in the 75th/75th/99th or 75th/99th/75th percentiles.

It’s still unclear to me where in the hierarchy all of this applies. Does it apply throughout the organization, all the way up to the C-suite? Where exactly does it start - is there even a clear, defined threshold for where management skills rapidly increase in value? I’m not sure, but presumably there’s a zone in the org chart where this general sentiment is most applicable.

why not just get an mba?

Going back to the original context of how this all started - two undergraduates talking about why they’re studying business - I think the best counterargument to studying business at an undergraduate level is the MBA. After all, if a manager’s impact only scales with the number of people under him or her, and you don’t start off in charge of anyone, then why bother learning things so early in the game? I think that this is totally fair. An MBA teaches you the important things just as you start to actually move into higher-level roles; it also frees up time at the undergraduate level to study other things.

The question for me, then, is why I choose to continue pursuing my undergraduate business education, instead of dropping it to focus more heavily on engineering or liberal arts or just enjoying life. I could try rationalizing it by saying that I really enjoy the classes (which is true), that I really enjoy the people I’ve met through my business major (which is also true), or that there’s value in learning now and re-learning later (which I bet is more right than wrong). The real reason probably has to do with sunk cost and ego, though.

I’m still thinking about this - if y’all have thoughts, please send them my way. I’m sure there’s stuff I’m missing or haven’t thought about.

[1] This doesn’t really prove my point, but it does help it. The people with the option to pick between engineering and consulting, by and large, pick engineering.

Update 1: Theory vs. Practice

“…I think good leadership comes from practicing being a leader, i.e. working on problems where you're having to be a part of a team and/or manage others… business school is one way to practice these scenarios, but IMO it's one of the less effective ways”

My friend Neil sent what’s written above to me (and a ton more, but the above part summarizes the most important part of the counterargument), and I think he’s mostly right. One doesn’t learn to code by staring at a textbook all day; at some point, you’ll have to fire up PyCharm or IntelliJ and write a HelloWorld program.

While I’ve noted that business school classes tend to incorporate more group projects (as opposed to fewer such projects in my engineering or liberal arts classes), there are certainly numerous opportunities in college for someone to join an organization and act as a leader (alternatively, startup land is always available).

The real benefit, I think, comes from the idea that combining theory with practice yields superior results. Without theory, it’s certainly possible for one to achieve solid results: it’s unlikely that one needs to study theory to become a great tennis player, I can become a pretty decent chef through trial-and-error without attending Le Cordon Bleu. But theory certainly has some value; I view it as an accelerant of learning. Without having taking a management class, I would have (hopefully) figured out, at some point or another, that my highly-extroverted personality tends to dominate the team’s thoughts, and that unless I actively seek out others’ opinions I’m reducing the quality of the discussion.

Indeed, the notion that “practice makes perfect” isn’t exactly true. Practice doesn’t make perfect, it makes habits. If I consistently do something inefficiently, I’m cementing a less-than-ideal habit into my mind: imagine using VLOOKUP() instead of INDEX(MATCH()) because you don’t know better - I don’t have to; I did it for years.

My defense of “business school isn’t the best way to learn management skills” is essentially: “sure, but it provides a useful foundation in theory that needs to be reinforced in practice”.

To be clear (and Neil made these points also), it’s easier to acquire business skills on-the-job by reading a book than it is to learn engineering concepts. There’s also a higher opportunity cost to learning business over engineering, due again to the crazy starting salaries available to CS/EE majors:

“Thus if you could only pick 1 major, it seems more logical to me to pick engineering over business. But that's not to say business is useless or anything; it's more that the bang-for-buck / opportunity cost seems to be better”

Neil and I agree: both skillsets are important. We differ on which major we’d keep if we had to give the others up - I’m glad that that’s just a hypothetical.