The Business Model’s Time-Bomb

American society is buying the so-called business model lock, stock, and barrel… and almost no one seems to understand the long-term costs, both to the economy and to society.

Effectively, the business model states that present-day costs and prices should determine all decisions… and that model works, at least partially, for business, but only in the short term.  Unfortunately, it works even less effectively in areas of society where costs and values can’t be accurately determined and quantified, or where the true costs and prices may not be apparent for years.  In addition, it’s being applied in areas where costs and prices don’t reflect actual societal requirements.

Underlying this application is the two-pronged belief that (1) resources and skills that are in short supply currently should command higher prices or (2) people with skills to generate more income are more valuable than those whose skills generate less income. 

As an example, because teachers don’t generate income directly, they’re low-paid compared to other professionals, and most ambitious students with great talent for teaching don’t consider it.  This results in lower standards for teachers, and that makes taxpayers even less likely to support higher pay… and the cycle continues. Yet society has a far greater need for good teachers than good hedge fund managers, but the “business model” rewards hedge fund managers, even bad ones, far, far, more than it does teachers, simply because there are more teachers out there.

Along the same lines, more and more often, pundits and politicians are demanding that college students major in “marketable” subjects, especially science, technology, engineering, and mathematical fields, because that’s “where the money is.”  There are more than a few problems with this approach, the first being that not all students have aptitudes for those fields.  The second problem is that overemphasizing these fields will lead to an oversupply of people with those skills and unemployment in such areas – and this is already happening in some engineering fields. High-paying fields don’t always stay that way, as witness computer programming. The third problem is that it encourages bright students who have greater aptitudes in other fields to study fields they may not like and will not do as well in, which is a loss for both the student and society. The fourth problem is that the social and economic conditions will change in the future so that the business “needs” of today may well not be those of tomorrow… when society will be short of expertise in other fields.  The fifth and possibly most important difficulty is the underlying assumption that what a student studies in college will be the only field in which he or she works – when the experience of the past thirty years has shown that the majority of workers change fields at least several times and that this trend is increasing.  Yet applying the business model to higher education essentially emphasizes near-term vocational skills over longer-term critical thinking and problem-solving skills.

For all the problems involved with using the “business model,” it is still applied almost everywhere, from the financial world, where it encourages rampant speculation over solid growth, to government, where federal expenditures on research are now continually cut on the grounds of no immediate benefit, to the pharmaceutical industry, where “large pharma” slashes basic research and tries to buy smaller companies with new products,  to the commercial power industry, which continues to fight cleaner ways of generating power in an effort to retain higher profit and dirtier coal-fired power stations for higher short-term profits… and well beyond.

So just why do politicians, educators, and citizens literally buy into a model that’s so flawed in its own field?  Because business assures them that it’s good, of course.

2 thoughts on “The Business Model’s Time-Bomb”

  1. Elizabeth A. Mancz says:

    This is particularly the case when you consider the value of the traditional liberal arts education, which emphasizes skills in critical reading and thinking which can prove valuable in many professions/jobs. But we are told by businesses that this type of education, which also provides a broad base of knowledge, is valueless because it does not teach specific skills. Studies have shown that people with a liberal arts education value their education more and more as time goes on and they see how it helps them adapt to a changing job market. But society seems willing to ignore what we know in favor of chasing quick solutions and what we think is easy wealth.

  2. Brian K says:

    In Canada, too. But changing the emphasis to a business-like model is over half a century old:

    “…History use to be part of the expected training of a public servant. But then the Glassco Commission’s (The Royal Commission on Government Organization, 1960) emphasis on businesslike government and the glossy appeal of social science as a systematic tool of social betterment, as embodied in entities like the Rand Corporation, led our governments to adopt to the notion of public servants and ministers alike as possessing a fully transferrable [sic], technical toolkit of administrative skills unrelated to knowledge of a particular policy area.
    The result has been a harmful loss of institutional memory, awareness of options and understanding of how policy evolves.”

    John Robson, “Stumbling Into Medicare”, The Dorchester Review, Volume 3 Number 1, Summer 2013, pg. 37.

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