Put the Blame on HBS
Duff McDonald has written a very long
(672 pages in the print edition) minutia filled anti-American business and
anti-Harvard Business School screed. For the most part he believes that
American business can’t do almost anything right and he places the blame on the
“West Point of Capitalism,” the Harvard Business School for practically
everything that is wrong with America.
He doesn’t like the managerial
capitalism of the 1950s that ran aground in the 1970s and the shareholder
capitalism that began to evolve in the 1980s. What he would prefer is some
broad version of “stakeholder” capitalism that protects the environment and
combats income inequality, but my question is whether business is the vehicle
to do that. My guess is that if business tried as it did minimally in the late
1960s he would use the leftist pejorative term “corporate liberalism.”
The villain of his piece is finance
professor Michael Jensen who laid the intellectual foundations for shareholder
capitalism in the late 1970s. Out of this flows leveraged buyouts, mass layoffs
and the philosophy of short-termism with respect to the undo focus of corporate
management on meeting quarterly earnings expectations. He however conveniently
ignores such successful corporations as Amazon, Google and Berkshire-Hathaway
who invested for the long run and mightily succeeded.
McDonald is highly critical of HBS’ case
method of instruction which by its very nature lacks real theoretical
underpinnings. That is true, but the case method is useful in organizing how to
think about very real business problems. It also leads to superb teaching. He
admits that pretty much every professor at HBS is a great teacher, a skill that
is lacking at other business schools.
He does favorably mention Harvard
professor General Georges Doroit who was an expert on logistics and went on to
found the venture capital industry in the early 1950s with his American
Research and Development. He also singles out for praise Arthur Rock who was one
of the earliest venture capitalists in Silicon Valley.
In the interests of full disclosure I
have an MBA, not from Harvard, and taught MBAs. As a professor I used
discussion of formal finance theory with an occasional case study in corporate
finance. Indeed in the most case intensive course I taught, I so inspired one
student that many years later he endowed a teaching award in my name. As a
result it is hard for me to get too worked up about McDonald’s criticism of the
case method.
With McDonald continually in the attack
mode his book makes for a very difficult read so I would recommend readers to
find better things to do with their time.
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