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On Oct. 2, Michael Moore's new movie, Capitalism—A Love Story, spooled out in theaters nationwide. Like most of Moore's films, it will likely do well—spectacularly so for a documentary. It will also likely stoke the Main Street sentiment that Wall Street is a den of iniquity, or something worse.
How did this schism come about? Just where did Wall Street go wrong? It's popular to blame misaligned incentives, lack of regulation, or just plain greed. Those would be conveniently simple explanations: We could just fix incentives, regulate more, and prosecute the guilty.
The truth is, sadly, more complex, but it boils down to this. Harvard Business School (Harvard Full-Time MBA Profile) is to blame. Not solely and specifically HBS, but HBS as representative of business's best thinking and the preferred finishing school for the American System of Free Enterprise. Our best and brightest did it.
Harvard Business School led the charge away from an approach to business centered in relationships and commerce, and toward one rooted in markets and competition. They promised us competitive advantage and efficiency. They delivered.
But those benefits came at a cost. The cost included a Hobbesian view of business—nasty, brutish, and every man for himself—and a rejection of the idea that ultimately we're all in this together. Which is precisely what we do not need at this time of increasing global interdependence.
How did this happen?
In 2006, I attended my 30th reunion at Harvard Business School. A few things had visibly changed.
In the mid 70s, HBS viewed itself, and was viewed by others, as graduating leaders of industry. Management consulting and investment banking together were the "hot" new segments, but still employed only about a quarter of total new graduates (a proportion that roughly doubled over the next few decades).
The curriculum had a limited number of courses; the faculty, many with significant business experience, took pride in cross-referencing concepts across courses.
Most cases (remember, HBS uses the case method) personalized the manager's role. They'd begin with, "As Joe gulped down his first coffee, he pondered the situation of…" and ended with, "What should Joe do? What would you do?""
For three cases a day, five days a week, for two years, this was the intensely pragmatic approach HBS taught us: What is the problem, and what should Joe/you do about it?
Today, HBS offers many more courses. There is less cross-referencing—the experience is less integrated. Faculty are more likely to be professional academics—fewer have degrees in business, and they are less likely to have business experience.
But most interestingly, Joe is reportedly gone from the cases. In his place? Structural analyses of competitive dynamics, and business redesign through markets and outsourcing.
Joe's absence reflects the two major intellectual trends of our (business) time: a view of strategy as competition (think "sustainable competitive advantage") and a view of business as optimizing systems (think business process re-engineering and outsourcing). The competitive view literally redefined suppliers and customers as sub-categories of competitors—we learned to compete with our customers. The process view replaced markets with organizations—we now outsource human resources in the name of efficiency (and, tellingly, speak of employees as "human capital").
Harvard Business School was a leader in the New Strategy thinking, and a significant participant in Business Process movement. This view of business is less about commerce, more about competition; less about managers, more about management; less about relationships, more about systems and processes. In this worldview, "business ethics" is an oxymoron; not because of bad behavior, but because ethics can't even exist apart from some notion of a "relationship" to something or someone else. Subordinating everything to shareholder value is, literally, anti-ethical.
One example is the mortgage industry. It was completely redesigned since the 1980s along good HBS guidelines—to maximize efficiency, lower costs, and increase liquidity. Collateral damage: no relationships, skewed incentives, incompetent regulation, and greed run amok.
Meanwhile, the world is moving in precisely the opposite direction. The salient fact of business nowadays is that it's all connected. In a connected world, a focus on competitive relationships is no longer useful. What we need is connectivity, trust, and collaboration. And it starts with the way we think. Which means Harvard and other business schools have a huge obligation to correct their teachings.
HBS needs to teach less competitive differentiation and more collaborative value-adding; less how to win supply chain negotiations and more how everyone gains by operating as collaborators; less about transactions, more about relationships; less about winning individually, and more about jointly succeeding.
Where's a good place to start? We could do worse than to bring back Joe.