I noticed this as well, but it took a blog post in The Washington Monthly to crystallize it in my mind.
The Washington Monthly – Political Animal – The secret of Costco’s success revealed! (hint: no MBAs need apply)
â€¦ Costco does not hire business school graduatesâ€”thanks to another idiosyncrasy meant to preserve its distinct company culture. It cultivates employees who work the floor in its warehouses and sponsors them through graduate school. Seventy percent of its warehouse managers started at the company by pushing carts and ringing cash registers.
Those sentences speak volumes. They tell you that Costco is a company that values its own hard-won experience over trendy B-school subjects like management theory and Econ 101 abstractions. They’ve found a formula that works and they’re not going to mess with it. I’ve long found the typical B-school curriculum to be problematic. On the one hand, you have management â€œtheory,â€ which frequently is not well-supported by rigorous research, and might be characterized as more theological than anything else â€” Tom Frank has often been insightful about the ideological function served by this kind of business literature.
Then, on the other hand, you have B-school economics. One of the great sins about economics as a university subject is that, particularly at the introductory and intermediate levels where people are most likely to study it, the econ that gets taught tends to be almost entirely theoretical, not empirical. Few economists understand how businesses work, because few of them have actually bothered to ask businesspeople how they make business decisions. Instead, they make assumptions. But even assumptions that seem highly plausible in theory can turn out to be wildly off-base in fact.
Getting back to Costco: the abstract theorizing that MBA students learn in microeconomics courses often has little relevance to practical business situations. The simplified textbook models teach the lesson that policies like unions and the minimum wage are inefficient and wrong â€” that message comes through loud and clear. Economics as it’s taught in most American colleges today more or less encourages poor labor practices.