THE POST-BUBBLE CURRICULUM
THE POST-BUBBLE CURRICULUM
The Mortage Meltdown MBA
What should business students learn from the ongoing real estate and credit market meltdown? Deans of top schools offer some suggestions
The mortgage market collapse, the real estate slump, and the ongoing debt crisis unfortunately are providing a slew of "teachable moments" for business schools. Examining what went wrong, why, and how future business managers can avoid the mistakes that led to the bursting of the mortgage bubble and the resulting financial chaos are likely to be MBA curriculum points for years to come, joining such events as the Great Depression and the tech-bubble collapse.
"There won't be a top-notch business school that won't find a way to work this in," says Paul Portney, dean of the Eller College of Management at the University of Arizona.
Business schools are already incorporating the recent financial events into ongoing courses. BusinessWeek asked a dozen b-school deans to suggest some of the courses offered at their schools that should be a basic part of a post-bubble curriculum, both for MBAs and undergraduates, to help students understand the failures in the system and how they might be avoided in the future. Here's what they said.
The Post-Bubble Curriculum
For business schools, the subprime meltdown has become a can't-avoid classroom topic-at least for now
by Phil Mintz
B-Schools
* The Best Undergrad B-Schools
* Poets, Painters, and Portfolio Managers
* Promises to Myself
* The Post-Bubble Curriculum
* Studying Students' Reaction to Chance
Story Tools
* post a comment
* e-mail this story
* print this story
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Educators call them "teachable moments," and whether the students are in third grade or grad school the idea is the same-to draw lessons from real-world events. The subprime mortgage meltdown and the ongoing shocks to the global economy have created a multibillion-dollar teachable moment in business schools, where students dissect exactly what happened and the lessons that can be drawn to prevent similar economic earthquakes.
Indeed, the problems that began with the implosion of the subprime market were being flagged by some business school researchers several years before financial institutions started reporting extensive writeoffs of subprime mortgages in 2007. But as the effects of the crisis continue to spread, terms such as CDOs and SIVs have become part of the lexicon in many mainstream business school courses covering such areas as real estate finance, ethics, and fixed-income securities.
For instance, at Washington University in St. Louis, a graduate-level real estate finance course used a case study on how sophisticated debt instruments magnified the effects of the subprime crisis. Meanwhile, MBA students at Miami University's Farmer School of Business examined Countrywide Financial's (CFC) fire sale merger with Bank of America (BAC) as part of their enterprise risk management studies.
For the short term, at least, the subprime meltdown and debt crisis are going to be one of the hot topics for discussion in MBA and undergrad business courses, according to business school deans and other academics. But it will take the full unwinding and some historical perspective to see whether the crisis will permanently change the business school curriculum.
"I'm not sure whether or not new courses will be created," says Paul Portney, dean of the Eller Graduate School of Management at the University of Arizona. "But in the credit risk modeling class there's no question that the examples would be drawn exactly from what we've seen the past couple of years. There won't be a top-notch business school that won't find a way to work this in."
Live and Learn
At Eller, the impulse to use the real estate meltdown as a classroom subject is heightened because the market downturn has hit Arizona, which has had a huge spurt of second-home and retirement home development, especially hard, Portney says. "There's no question this has gotten our attention. There were a lot of people who should have known better."
Undergraduate programs are also finding study material in the financial mess. At the University of Colorado in Boulder, for instance, topics discussed in a course called "Business Applications of Social Responsibility" include the question of a company's responsibility to protect consumers from themselves, Dennis Ahlburg, dean of Colorado's Leeds School of Business, said in an e-mail. "The course discusses the case brought against McDonald's by two youths blaming the high fat content and calories in the company's menu for their extreme obesity," Ahlburg said. "The issue is the same as a mortgage broker or bank executive facing pressures to offer home buyers loans they may or may not be able to afford."
James Jiambalvo, dean of the Michael G. Foster School of Business at the University of Washington, says that while a number of the school's MBA courses are incorporating material relating to issues surrounding the subprime debacle, he's doubtful it will become a permanent staple of the curriculum. "It's topical, to be honest," Jiambalvo says. "If in your finance class you're talking about bubbles, this will go down in the list of bubbles. It's a good reminder that with markets there's a big psychological aspect. Unfortunately there's always some ethical scandal that makes a great case."
Meanwhile, Miami-Farmer Dean Roger Jenkins says he's surprised more schools aren't revamping their programs to include issues brought up by the subprime crisis. "I've been to a few deans' meetings and I haven't seen this create the urgency among my counterparts I'd expect."
The Housing Crisis: Another Bullet Point
Indeed, it's possible the subprime meltdown will fall into the category of events such as the Enron collapse and the tech market meltdown as bullet points to larger issues. "The subprime debacle is the latest in a long line of market events where prices have deviated from fundamentals," University of Wisconsin-Madison School of Business Dean Michael Knetter commented in an e-mail. "No doubt there will be some episodes like this in the future, no matter what is taught in business schools. Our goal is to produce graduates not only able to anticipate such events but to protect against them."
Rakesh Khurana, associate professor of business administration at Harvard Business School and the author of a recently published book critical of management education, says it's not clear how the issues raised by the subprime crisis will be framed in the curriculum. "We don't even have theories to describe this," Khurana says.
If past experience is a guide, Khurana adds, much of the discussion about the housing bubble will be shunted into business ethics courses, which he thinks is the wrong place. The lessons should be incorporated into financial control courses such as accounting and organizational behavior, and discussions about how short-term incentives-misguided ones in Khurana's view-affect people's risk-taking behavior.
But Khurana doesn't sound confident the subprime debacle will in itself prompt self-reflection at business schools. "Historically, the one moment that caused a reexamination of business schools was in the 1930s with the Great Depression. There was a great amount of hand-wringing and self-examination because of the financial chicanery that underlay the banking and insurance areas," he says. "That was the last sustained self-examination…that's no longer part of the discourse."
Mintz is BusinessWeek.com's B-schools channel editor in New York .
http://www.businessweek.com/bschools/content/feb2008/bs20080224_898798_page_2.htm
The Mortage Meltdown MBA
What should business students learn from the ongoing real estate and credit market meltdown? Deans of top schools offer some suggestions
The mortgage market collapse, the real estate slump, and the ongoing debt crisis unfortunately are providing a slew of "teachable moments" for business schools. Examining what went wrong, why, and how future business managers can avoid the mistakes that led to the bursting of the mortgage bubble and the resulting financial chaos are likely to be MBA curriculum points for years to come, joining such events as the Great Depression and the tech-bubble collapse.
"There won't be a top-notch business school that won't find a way to work this in," says Paul Portney, dean of the Eller College of Management at the University of Arizona.
Business schools are already incorporating the recent financial events into ongoing courses. BusinessWeek asked a dozen b-school deans to suggest some of the courses offered at their schools that should be a basic part of a post-bubble curriculum, both for MBAs and undergraduates, to help students understand the failures in the system and how they might be avoided in the future. Here's what they said.
The Post-Bubble Curriculum
For business schools, the subprime meltdown has become a can't-avoid classroom topic-at least for now
by Phil Mintz
B-Schools
* The Best Undergrad B-Schools
* Poets, Painters, and Portfolio Managers
* Promises to Myself
* The Post-Bubble Curriculum
* Studying Students' Reaction to Chance
Story Tools
* post a comment
* e-mail this story
* print this story
* order a reprint
* digg this
* save to del.icio.us
* View Slide Show
Educators call them "teachable moments," and whether the students are in third grade or grad school the idea is the same-to draw lessons from real-world events. The subprime mortgage meltdown and the ongoing shocks to the global economy have created a multibillion-dollar teachable moment in business schools, where students dissect exactly what happened and the lessons that can be drawn to prevent similar economic earthquakes.
Indeed, the problems that began with the implosion of the subprime market were being flagged by some business school researchers several years before financial institutions started reporting extensive writeoffs of subprime mortgages in 2007. But as the effects of the crisis continue to spread, terms such as CDOs and SIVs have become part of the lexicon in many mainstream business school courses covering such areas as real estate finance, ethics, and fixed-income securities.
For instance, at Washington University in St. Louis, a graduate-level real estate finance course used a case study on how sophisticated debt instruments magnified the effects of the subprime crisis. Meanwhile, MBA students at Miami University's Farmer School of Business examined Countrywide Financial's (CFC) fire sale merger with Bank of America (BAC) as part of their enterprise risk management studies.
For the short term, at least, the subprime meltdown and debt crisis are going to be one of the hot topics for discussion in MBA and undergrad business courses, according to business school deans and other academics. But it will take the full unwinding and some historical perspective to see whether the crisis will permanently change the business school curriculum.
"I'm not sure whether or not new courses will be created," says Paul Portney, dean of the Eller Graduate School of Management at the University of Arizona. "But in the credit risk modeling class there's no question that the examples would be drawn exactly from what we've seen the past couple of years. There won't be a top-notch business school that won't find a way to work this in."
Live and Learn
At Eller, the impulse to use the real estate meltdown as a classroom subject is heightened because the market downturn has hit Arizona, which has had a huge spurt of second-home and retirement home development, especially hard, Portney says. "There's no question this has gotten our attention. There were a lot of people who should have known better."
Undergraduate programs are also finding study material in the financial mess. At the University of Colorado in Boulder, for instance, topics discussed in a course called "Business Applications of Social Responsibility" include the question of a company's responsibility to protect consumers from themselves, Dennis Ahlburg, dean of Colorado's Leeds School of Business, said in an e-mail. "The course discusses the case brought against McDonald's by two youths blaming the high fat content and calories in the company's menu for their extreme obesity," Ahlburg said. "The issue is the same as a mortgage broker or bank executive facing pressures to offer home buyers loans they may or may not be able to afford."
James Jiambalvo, dean of the Michael G. Foster School of Business at the University of Washington, says that while a number of the school's MBA courses are incorporating material relating to issues surrounding the subprime debacle, he's doubtful it will become a permanent staple of the curriculum. "It's topical, to be honest," Jiambalvo says. "If in your finance class you're talking about bubbles, this will go down in the list of bubbles. It's a good reminder that with markets there's a big psychological aspect. Unfortunately there's always some ethical scandal that makes a great case."
Meanwhile, Miami-Farmer Dean Roger Jenkins says he's surprised more schools aren't revamping their programs to include issues brought up by the subprime crisis. "I've been to a few deans' meetings and I haven't seen this create the urgency among my counterparts I'd expect."
The Housing Crisis: Another Bullet Point
Indeed, it's possible the subprime meltdown will fall into the category of events such as the Enron collapse and the tech market meltdown as bullet points to larger issues. "The subprime debacle is the latest in a long line of market events where prices have deviated from fundamentals," University of Wisconsin-Madison School of Business Dean Michael Knetter commented in an e-mail. "No doubt there will be some episodes like this in the future, no matter what is taught in business schools. Our goal is to produce graduates not only able to anticipate such events but to protect against them."
Rakesh Khurana, associate professor of business administration at Harvard Business School and the author of a recently published book critical of management education, says it's not clear how the issues raised by the subprime crisis will be framed in the curriculum. "We don't even have theories to describe this," Khurana says.
If past experience is a guide, Khurana adds, much of the discussion about the housing bubble will be shunted into business ethics courses, which he thinks is the wrong place. The lessons should be incorporated into financial control courses such as accounting and organizational behavior, and discussions about how short-term incentives-misguided ones in Khurana's view-affect people's risk-taking behavior.
But Khurana doesn't sound confident the subprime debacle will in itself prompt self-reflection at business schools. "Historically, the one moment that caused a reexamination of business schools was in the 1930s with the Great Depression. There was a great amount of hand-wringing and self-examination because of the financial chicanery that underlay the banking and insurance areas," he says. "That was the last sustained self-examination…that's no longer part of the discourse."
Mintz is BusinessWeek.com's B-schools channel editor in New York .
http://www.businessweek.com/bschools/content/feb2008/bs20080224_898798_page_2.htm