2011-06-02

Specialization of Trade vs. Compartmentalization of Knowledge

It seems to me that one of the greatest challenges we face in the modern world is the competing priorities of breadth versus depth of knowledge.

Our daily lives and micro- and macro-economic systems have become increasingly specialized for centuries. This specialization of trade has been an economic boon, and is a natural and welcome economic fact. As technology becomes progressively more highly developed, the number of people who possess the knowledge to maintain and improve upon that technology becomes smaller. This was as true of ancient people making fishing nets as it is of software developers and nuclear engineers today.

So it should go without saying that if we want society to continue to progress, we can expect ever-more-pervasive specialization of trade. All is well in the world, and aprioristic praxeological reasoning triumphs again, right?

One problem: We can all regale captive audiences with stories from our own personal work experience involving more-senior staff knowing less about actual practical work than more-junior staff, and the inefficiencies that result. The fact of the matter is (and this is pretty logical), the less management understands what's happening at the ground floor, the more inefficiently the firm operates.

Yet management, too, is a specialization of trade. It involves a very specific and very real skill set; Not every great programmer, for example, will turn out to be a great manager of teams of programmers. This is certainly why large organizations hire managers directly out of business school, rather than promoting from, say, the IT department. Thus, we end up with exactly what we see today: armies of young MBAs hired directly into upper level positions simply by virtue of the fact that they have a self-described "management skill set," presumably acquired via their MBA programs.

This is a real question though: Are all these MBAs actually earning their keep? Do we need these folks, or would we be better off cultivating junior staff and grooming them for management?

To me, the answer comes from how much you think a manager needs to know about ground-level operations. Do we need average Joes who are management specialists - much like average Joes who are accounting specialists - or do we need geniuses who are capable of very in-depth knowledge across the full spectrum of company operations?

In my view, we need the geniuses. This ensures a meritocratic workplace that rewards the very best employees and places corporate decision making in their hands. It also prevents silly shortcuts like MBAs. No one should be allowed to make million-dollar decisions just because they went to business school. Decision making power should come from demonstrated knowledge and expertise, that is, if we're interested in good decisions and positive outcomes.

In many ways, the current economic dip is emblematic of the problems associated with relying on MBAs for company expertise. So what's ahead for us? More of the same, or a return to meritocracy?