April 2002

Don't complain that MBA students are wrong when they consider business school research irrelevant!

How often have I heard my colleagues complain that MBA students show not enough intellectual interest? That MBA students are dangerous, because they cannot tell the difference between "real" research by "real" professors and pseudo-research by fake adjuncts and lecturers. That business schools are suffering from a race to the bottom, in which research is sacrificed to teaching. That deep research is by nature inaccessible, sometimes even to faculty members in other departments. That the pressure is to "dumb down" both the curriculum and our research.

The sad fact is that we, the business school research faculty, are primarily the ones at fault. Aside from vague assertions in our lectures that academic research from thirty years ago is exactly what students are being taught today, we make almost no effort to explain to our students why academic research is important. Is it any surprise that students become hostile to academic research? In fact, it is almost remarkable how these same students often very much appreciate top-notch professors who engage them.

The fact is that even we professors are sometimes ourselves hostile even to work by our colleagues in other areas. Aside from the occasional newspaper piece on our research (which oddly seems to please many research faculty tremendously), as a community, we have shown no effort to communicate our research to outsiders. Is it any surprise then that outsiders show little interest or outright hostility?

I believe that most academic research in business schools should not only be accessible to the average faculty member in the business school, but even to the average MBA student. I am not suggesting "dumbing" down the papers and/or eliminating jargon. Although this may be a good idea in many cases, too, it is not even necessary.

It should be possible to explain most business research in less than 10 minutes to a smart outsider: What is the underlying question? Why is the question interesting? What is the answer? Why do we need further research on this subject? Posed in this fashion, this is somewhat of a cross between how we would explain our research on the job market to colleagues unfamiliar with it, and how we would explain it to an intelligent news reporter.

I also firmly believe that if answering these questions is impossible for research, it should be done in a department outside a school of management. Now, some of my colleagues may object that such a litmus test would have prevented a lot of great research in the past, especially research of a more mathematical nature, but I do not agree. Let's try to answer these questions in 2 minutes with the most famous technical paper, Black and Scholes:

What is the underlying question?

There are equity option securities which allow their buyers to purchase equities in the future at a prespecified price. For example, an option may allow its holders to ask the original seller of the option to purchase IBM shares at $50 a piece over 3 months. In exchange, the seller of the option gets cash today. The question is, how much cash should the seller receive from the buyer for this right.

Why is the question interesting?

Option markets are very active. Every day, the newspaper is full of option prices. You can use B-S to judge whether these prices are reasonable. If you can price options more accurately than anyone else, you can make a ton of money buying options that are for sale at prices that are too cheap.

What is the answer?

The B-S answer is a mathematical formula that tells its users what the price of an option is. This option price is related to how long the option is valid (longer is better!), at what price the stock can be purchased (lower is better), at what price the actual stock price is trading today (higher is better), to how much the stock price is moving around (give a binomial example), and to the interest rate.

Why do we need further research on the subject?

Although the B-S formula does a pretty good job on pricing options, it is not perfect. It would be very profitable to find more accurate methods. There are also many other options, each with slightly different option features. Many of these require a slightly different formula.

I do not think that offering such a description was too painful or required any compromise in the basic meaning of the research---and it definitely required no compromise in the intellectual depth in the original paper. It would be easy to extend this description. For example, one could show the formula, or describe the principle of replication.

So what am I proposing? We need to bring current research back into the classrom, and in a fashion that students recognize the source and find it exciting (and not simply the source of more exam questions). Although this should be done in each and every lecture, it is not an easy thing to rearrange one's curriculum to reflect a changed state of mind. So, I want to propose a patch: In every core course, we should reserve the last lecture to describe the current research at our own university. Why this research is exciting. Why students should care. Why faculty cares.

When I give this lecture (which incidentally takes me minimal preparation), I simply describe each of my colleagues' research in about 5 to 10 minutes. Most students are fascinated, and this lecture receives my highest ratings (which may however only reflect my otherwise poor teaching). Students begin to feel involved---a feeling that otherwise only adjuncts and lecturers seem to evoke. It would be even better if we were to actively engage MBA students in our research, too, but this is obviously not as easy to accomplish in every research agenda. The cost of doing the single one lecture is modest, in contrast.

And why am I writing this piece? I am asking other research faculty to join me in this endaveour, because there are positive externalities. We, as the research faculty at top research institutions, need to recapture the hearts and minds of our students. We need to begin reestablishing our emphasis on academic research, something that we seem to have lost in the wake of business school rankings and newspaper descriptions, student interviewing activities, class teaching ratings that are usually primarily "liking" ratings, and lecturers who sometimes seem to students as being better able to help them find jobs better than academics. The students will not be upset: they will thank us!

Please, plan the last lecture in every core course to describe local research!