March 18, 2009
B-Schools’ Role in This Crisis? A Case of Collective Responsibility… ?
Well, here we are again. Smack in the middle of a seemingly endless spiral of corporate failures, abuses, and huge economic losses that span the globe. Before jumping to simplistic conclusions, can we all agree that there is enough blame to go around? We may go through another Bretton Woods system, or a complete trashing of the new Mark to Market (M to M) accounting system. There will be some hard adjustments as the financial world searches for some new platform of global financial asset valuation and stability. It cannot be what today’s market’s last sale (M to M) will be… that just cannot prevail.
The role of business schools in where we have come from? Some would deny any role that b-schools have played into this mess. Let’s be honest, folks, there has been a role, and here is what it has been… in the best East Coast USA b-schools, where this all started, for decades, finance professors have taught wealth creation go-go. The method has been to show their brilliance and superior qualities by creating financial vehicles in the laboratories of financial engineering. Fissile material for Main Street. Short selling, high-leverage speculation, CDO bundling of real estate assets, M to M accounting, derivatives, and of all things, the “synthetic bond market”. This is all new stuff since I was in b-school in the sixties. And I was in a very good one. Yet everything, or nearly everything that has been done is “within the laws” of the United States and its states within.
At the risk of mentioning the unmentionable… the doctrine of “collective responsibility”, defined by Wikipedia as a belief that individuals may be held responsible for others’ actions by tolerating, ignoring, or harboring them without active collaboration. This doctrine is very powerful and invokes emotion… it is after all what governments use at a time of war to define the battlefield. So now, faculty members from several large and very, very prestigious business schools have shared the deep concern that they now are being queried and pursued in non-friendly ways about their role in the business school establishment and the link to the Wall Street collapse. “Our professional legacy is on the line”, exclaimed a faculty friend from one of America’s top five b- schools! Many of us as individual professional academics decry and deny this link as it concerns our own personal professional activities. Most of us have had nothing to do at all with the criminal element or the irrationally exuberant finance professors who created the monsters. But, did any of us publicly disassociate ourselves or disclaim our institutions? Likely not, we fit the definition of collective responsibility as a culture of business school leaders and leading academics. The most culpable are the very leaders from the b-schools that are the laboratories for Wall Street itself. The producers of the fissile materials.
So, where does the deepest and most corrupt value lie? Now watch this. We all teach and the world all accept that we must learn to outsmart our competitors. That is what competitive intelligence is all about… intuition and tenacity. But some faculty have, in their attempt to show brilliance and vigor, gone the next seemingly logical step in their teaching and influence… outsmart the customer and now outsmart the investor. What seems like straight line logic has become the middle level Wall Street breeder ground for a complete historical financial shakedown and huge backlash.
B-schools are not at all completely nor even hugely to blame, but for prominent professors and Deans and b-school leaders to deny any connection is wrong. It would be like allowing nuclear scientists to create fissile new substances in a laboratory with no concern for the use and care or oversight of the impact of their work. When the managers of those labs are responsible, they will not deny their reality.
To impose creeds or signed moral oaths to b-students to be “good citizens” is shallow. The best and worst criminals would so sign! It is also a false promise to hang our emphasis on the new paradigm of “green” or “CSR” or “sustainable economy leaders”… that would be to turn b-schools into public policy institutes of political correctness. To give up the teaching of b-ethics is not a solution, though all the Wall Street crooks came through those classes too. So what’s up, doc, for the Dean or b-school leader to do?
We acknowledge we are producing people (our graduates) for the world of business. We cannot deny or minimize the importance of our finance laboratories and the messaging (particularly the wealth creation for “me” theme) that faculty are using to shape the next generation of entrants to business. There is absolutely no b-school cure, no “off the hook” excuse. We have a responsibility to have active, open, intellectual debate and discussion of these issues, in our classrooms, in our hallways, on our whiteboards, on our blogs.
I think it is something about challenging the false logic that outsmarting the competitor means it is also OK to outsmart the investor. So what have the ivory tower finance wizards and their Wall Street prodigy proven in these decades of their “brilliance” and cleverness? Were they trying to vie with lawyers for the smartest kids in town label? If so, and maybe, then it has brought us all down several notches compared to where we could have been. As the renowned astrophysicist, Jeffrey Bennett, has observed, our civilization’s accumulation of knowledge has far outpaced our civilization’s ability to apply that knowledge in beneficial ways for us and our children. If that can be the central challenge of an astronomer, why can it not be our challenge in the business world too? Financial laboratories are dealing with fissile material. Financial laboratories exist in b-schools. We (b-schools) produce people for the world of business. Do I need say anything more?
The challenge of this education is immense. It is absolutely not centered in a show of brilliance or extreme cleverness or institutional ego. It also must provide practical education for the hard working, non-spoiled, average students, who need summer job, part time work, engagement to get their education paid for. I worked in steel mills summers and waited tables in the Ivy League to help get through. I was a graduate assistant to the max every semester of my graduate education. This all brought huge rewards. You don’t have to have as “gritty” an experience as I did, but consider the central role of hard work, and what non-Wall Street thinking possibilities may be for b-students… it gives some fresh horizons and whole new meaning to the idea of a b-school! We are also here to help our students create their dream and career concept for the long distant future if we can. This will almost inevitably bring us back to our central role in creating greater wealth through creating leadership seekers and entrepreneurs… wealth is not the strategy, but rather the outcome. The strategy is to create real and new things, to build the skills and awareness to do so, and to be a laboratory for that, not a breeding ground for faculty and students to go out and spread the financial fissile material that may fall into the wrong hands…
Dr. Michael McManus
President
