Friday, January 14, 2011

The irrationality of the IIMs/Indians

Adam Smith's "invisible hand" theory suggests that, in a free market, demand finds the most economically viable supply that satisfies it qualitatively and quantitatively, and prices get determined based on that; that a free market is the game of "survival of the fittest". I'm sure IIMs teach these Macro-economic-101s to the eager minds that fill their classrooms every year. But what is put on display may make Mr. Smith turn in his grave.

I was bemused to find that IIM Ranchi has recently announced that it would only consider candidates scoring above 99.5 percentile in CAT 2010 for admissions into its PGP program commencing 2011. One doesn't need the Minerva squatting in his head to guess that in a free market, a demand for the top half-percentile share of candidates is one a 1-year-old, fledgling institute can ill-afford to make. Where is the “invisible hand”?

Let's look into the dynamics of the game. The institute can "afford the luxury" of calling for the creme-de-la-creme of young Indian minds not because it stands shoulder-to-shoulder with any of the other institutes (in India or abroad) in terms of research prowess, industrial/international exposure or quality of its staff/curricula. I'm not saying that it is bad on these but just that the jury is still out on them. After all, it is yet to produce its first output. Rather, it is just because it is blessed with the ubiquitous 3-letter acronym that 6 other predecessors have been blessed with - I-I-M.

How different is this from the dynastic politics that we’re so used to in India. We vote for people because of their names, surnames, affiliations to people with surnames, etc. We impute quality. We seldom see their merit. Is the case of IIM Ranchi (or for that matter the other ones that make irrationally exuberant demands) very different? Why do students mindlessly flock these institutes? Do they research before they apply? (A 101 for applying to b-schools).

So what does the average CAT-taker use to determine the institutes he applies to? I could think of only one simple business concept – economies of scale. It costs the applicant the same 1500 rupees or thereabouts for the application form whether he applies to 1 IIM or all. Makes sense to apply for all in that case, doesn’t it? The mantra that IIM Ranchi and all the new IIMsfollow is very simple. Take a process. Never bother how cranky/empty it is. See that you have extremely good input. Even if the input passes through your process rather undisturbed in any sense, they’ll come out as good outputs because started out with the good ones in the first place (Ever wondered why companies at IIMs prefer freshers that “they” can train instead of preferring experienced industry people with a new, acquired business outlook?)

No wonder those simple ticks that a CAT-taker makes with his pencil on the form translates to such monstrous cut-offs. No wonder IIMs get 400-500 applications for every seat on offer while Harvard gets around 13. No wonder a set of institutes with mediocre research grants, astonishingly few research-hungry staff and just-about-ok infrastructure can pass off as national champions. No wonder Indians fall for names instead of the quality that lies within. No wonder India votes for families and surnames.


krishna said...

Man this is f**king brilliant..

Anonymous said...

Wow.......what a co-incidence....just a couple of days ago, I was having a chat on the same lines with a friend. Couldn't agree with you more!!

Avinash Akshay

Shubhankar said...

Well for one I am pretty sure you havent been up to date with MBA admissions... as a student of this new b school ..I m in total support if IIM Ranchi has the highest CAT cutoff .. lets not forget the college has to live up to the IIM brand name in terms of both input and output.. Please try researching a lot more before you actually try commenting abt any institute on the basis of CAT cutoff

Krishnan said...

@Shubhankar. Thanks for your comment. Your words, "lets not forget the college has to live up to the IIM brand in terms of both input and output", says it all. The causality is reversed! An institute doesn't take brilliant people because it has a brand name. It "builds" the brand to deserve such students. Well. That was what the blog was about :)

Shubhankar said...

Ok so what do you expect the college to do ? take in people who flunk the cat ? the reason why I mentioned that you arent in touch with B school admissions... is that these days IIMs like I, K, L, B, S only take in candidates with great past acads ? Gold medalists are fought for even though they may land up with less than 90 percentile in CAT...What sense does that make ? Arent these IIMs more at fault that one which just merits those who score well in CAT ? Read this and you shall have a fair idea of what I am talking about :
PS Also read the comments the aspirants post, m sorry to say its easy to preach and tough to practise !

Krishnan said...

@Shubhankar: What is "flunking" the CAT? A person who is in the 99th percentile can also consider himself "flunked" if there aren't enough seats to get him in. College seats are a matter of demand and supply and I don't think you or me can term a person to have "flunked" CAT. I expect any college to give to society the people who'd change it and THEN grab the rights to reserve the entry into its hallowed doors based on merit; not the other way around.

I don't see any take-aways from the interview you posted. As for his comments on diversity, if you think that you're diluting your college's reputation by taking in diverse people, then I think you got your basics wrong. Next time, in your marketing class, imagine what'd be the CPs be like if you've got an ex-marketing person sitting next to you who has done something very similar to what is being discussed in the case. But yeah, the Ivy leagues which had built a tradition of carefully "sewing" a class of students from diversified backgrounds should learn from your director, or that the new set of IIMs are targeting 2-4 years experienced guys who cannot be differentiated much apart from their apti test scores (aka CAT).

I understand that you are extremely proud of your college because you fought your way into it through sheer merit. You feel you should have the bragging rights & that the insti should, from day 1 "automatically inherit" the IIM legacy. I also understand that you cannot take anything against your ingrained thought. I will sound revolting. :)

Shubhankar said...

Never has it been mentioned that diversity is not welcome at IIM R, but sacrificing the same for the sake of merit.. that is where the problem is..and just to let you know the first batch was fairly diverse with 50 percent freshers and 50 percent work ex guys, students from not only IITs but colleges like SRCC , St. Xavier's Mumbai being around. The only aspect wherein we failed to have a diverse batch was the gender aspect, 1 girl in batch of 44.

I still fail to understand why we should not have bragging rights, we got there through merit like any other student did in IIM A or IIM C.. Why the fuss if a good student joins a new promising B school ? Lets not forget many faculty members as well as recruiters too get attracted by the IIM tag as you call it !

Krishnan said...

"and just to let you know the first batch was fairly diverse with 50 percent freshers and 50 percent work ex guys, students from not only IITs but colleges like SRCC , St. Xavier's Mumbai"

I think I don't need to respond. Thanks :)

Kapila said...

Mr Krishnan, I fail to understand what point you are trying to make. Pl elaborate what IIM Ranchi or any new kid should do to make itself a better institute?. Take any " flunked" but hugely talented student and make him a better Manager?. Tell me how it will chose " 50 'deserving but flunked'among 2 Lakh candidates?". By the way its "Micro economics" at play here and not your "Macro eco 101". figure it out. you are just plain "jealous" about brand "IIM".