The ‘Barbarian’ At Harvard Business School’s Gate

You also seem to lay some blame at least for the 2008-2010 implosion of the economy at the hands of the Harvard Business School. Is that really fair?

I think so. Consider the misguided attempt on the part of graduate business schools to gain academic respectability through ‘scientific rigor.’ We can all process the equations of macroeconomic theory. But  they took their desire to model things too far, to the human level. When you get to the level that Jensen is operating at, it sounds like a physics experiment and it’s not.

People are not equations. And don’t even get me started on his insistence that 100 years of research in economics have shown that ‘in the absence of externalities,’ selfishness on the part of individuals somehow all adds up to a  wondrous world for all. I don’t give a shit about what your theory says in the abstract. In the last 100 years, inequality in the U.S.  started ridiculously high, then got impressively low, and then boomeranged back to being high again.  I don’t think the model is working. And it’s because reality is far more complex than the basic algebra that economics professors love to hide behind. If you bring in people who insist on taking a hard position, like Jensen, it will turn out wrong. Like everything in life, the answer is not on either end of a spectrum, it is somewhere in between.

While Jensen’s ideas may have been stamped out of Harvard, the bigger issue is that the damage is done. The pressure to meet your numbers as a corporate executive is as high as it has ever been. So while they may be talking about stakeholders vs. shareholders agian, they are just talking because you still have to meet your numbers.

McArthur does come off as a villain of sorts in your book. Obviously, your view of him is colored by his decision to bring Jensen to the school. But what about the totality of his decisions as dean?

I would say that of all the deans my sense of McArthur’s stewardship of the school was the laziest. By lazy I don’t mean he didn’t do a lot of things, but lazy because he didn’t think through what he did. At the very least, he didn’t seem to be thinking them through using any sort of prism that wasn’t about bringing in more and more money for the school. (Former SEC Chairman and HBS alum) John Shad’s donation to ethics was the biggest single donation to the creation of ethical instruction in history. I think he kind of whiffed on that. The school did not do a good enough job at providing a sense of values to the masters of the universe they trained. They didn’t have a full course on ethics until 2003 or something. In the last 30 years, it would seem that the seriousness with which they have approached the ethical issue has gone in the right direction but I don’t know of an institution taking 100 years to try to figure out how to do something like that.

So do you think the world would have been better off if the Harvard Business School didn’t exist?

No. I think the school has done some wonderful things. It helped establish the era of American manufacturing prowess. It helped to codify management. The faculty there has come up with some revolutionary ideas, including the need for and use of venture capital. So they have had an amazing positive influence on this country and on the world. I don’t think the world is worse off for their having been created. I think the tragedy is that they let it get away from them and the rest of us. There is a better version of the world with them in it than the one we currently live in.

There are way too many instances in the history of HBS where money dominated the decisions in a way that it shouldn’t have. i think i know why that is. When I was at Goldman Sachs after Wharton, I quickly realized when I was there that I like money just as much as anybody else does but I don’t want the product of my life to be money. I didn’t want to go to work and think about money as part of my day job so i made a decision to leave it. But for those who work there, money can quickly become the most important thing to you. If what you’re selling is money, in other words, then you come to put a higher premium on it than most other people would.

At HBS, the product isn’t money per se but it is close. When you spend all your time thinking about money, you obviously become more vulnerable to decisions where money is overemphasized. Harvard itself claims it is not all about money. But when your own actions demonstrate that ‘oh no, it might be about money,’ then you have failed everyone.

What’s in your book that might be interesting to people who may want to go to Harvard Business School?

My discussion of the case method could prove very valuable. I have no doubt that its impact is long lasting on students, but it also has some risks associated with it. If you are an MBA student, money is seductive, and if you’re not careful, it can warp the way you start to think about things. The case method can facilitate that. One of the reasons I left Wall Street after two years is that I doubted I would leave after the third year. There was just too much money.

What’s your take on the current students at Harvard?

Clearly, the makeup of the curriculum is shifting in a Millennial direction. It’s more progressive with considerations other than finance. I think there is optimism on that front. And they have obviously pushed the school toward a more entrepreneurial orientation. There is a clear desire of people to work for themselves and not for large organizations anymore.

How do you think your book will be received by HBS stakeholders?

When Derek Bok had the audacity to suggest they could do a few things better in the 80s, the reaction can only be described as disproportionate. I would not be surprised by an outright dismissal and condemnation of the entire project. But if you speak to individual people, including people on the faculty who are afraid to say something out loud, everyone there thinks there are ways the school could be doing things that might be better than the current approach. One professor was outraged that the school denied me access to their archives. I am sure it is going to be painted as something approaching a takedown which it is not. It is critical but it is critically constructive. They may not like the tone but you can’t do anything about that.

I want to say that this is not a takedown. HBS has the power to do good. I’m not advocating for the abolishment of the school. I am commending them for their positive contributions to the world as we know it, criticizing them for their negative ones, and chastising them to stay focused. In no way would I want to suggest that everyone associated with this school is of like mind.

What do you make of Jodi Kantor’s criticism that the school’s culture brought to the fore significant gender equity issues?

I do agree with Kantor that the school’s solutions to its gender problems were too quick and too superficial. When Dean Nitin Norhia went on Charlie Rose, he first claimed that unequal treatment of women wasn’t just a problem at HBS. It was a societal one. But then he claimed to have eradicated it at HBS in just a few short years. They did nothing of the sort. All they did was put an additional person in the room to help the professors do something that they’d seemed incapable of previously, which was keeping track of strong class participation by women. That doesn’t sound like a solution to the problem to me. It sounds like an adjustment for it after the fact.

And then you had Professor Frances Frei coming out and insisting that HBS was leading the world on gender equality. Oh my God. How could you possibly say that just after you’ve been busted in the 21st century for having utterly failed to treat your female students and faculty the same way you treat your men? But they are so self-congratulatory. Their relentless claims to trail blazing are so funny as to be hilarious.

Arguably the most famous HBS professor of our generation is Michael Porter. What do you think of his contributions?

I make the point in the book that given his outsized presence and success, hw perry much serves as an example of the best and worst of what HBS has to offer. He has the widest latitude that any professor has ever had there. He clearly brought some new thinking into HBS and some rigor. He is obviously a brilliant guy who helped changed the way people think about strategy. At the same time, Michael Porter’s conception of the theory of the firm as being in competition with everything around it at all times may not be the greatest contribution of what the point of a firm is. Antagonism is built into his model. Some of Porter’s decisions as a consultant also make you wonder about their sense of values and money. The work of his consulting firm, Monitor, for Libya was shameful.

But I think there are more shameful things than that., Take professor Bill George and his cherished idea of authentic leadership. It is so offensive as to be mind blowing. What were you teaching before you added the word authentic to it? The idea that this is a new and improved version of leadership means that you were actually teaching something else before. Shame on you if that was the case. But that’s a problem at HBS. They do a lot of mind-numbingly obvious stuff.

We look to our institutions to help us navigate and improve on our collective lot. They are letting us down on that front and they don’t need to. You can be wealthy and seek accomplishment and social benefit all at the same time. It’s not that hard.