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Harvard’s Capitalist Experiment
The university struggled to define what a school of business should teach. What is the knowledge required for success?
December 1987 | Volume 38, Issue 8
Villains are important, and an institution that supplies us with villains performs an essential service. Take the Harvard Business School. Others may scoff, but I am prepared to believe that the Harvard Business School is responsible for everything that has gone wrong in American life in the past thirty years, from the decline of the automobile industry to the cancellation of “Captain Kangaroo.”
Imagine my excitement, then, when I learned that the Harvard Business School Press planned to publish a major new history of the school. Of course, I approach the writing of any column in a spirit of perfect objectivity, but even before I had read one word of it, I knew that Jeffrey L. Cruikshank’s A Delicate Experiment: The Harvard Business School 1908–1945 would give me a chance to indulge in a pair of eternally popular pastimes, M.B.A. bashing and Harvard bashing. How delightful!
Alas, Cruikshank’s book has made a wreck of my plans. I learned a lot from it, and it left me wanting to share what I had learned. Bashing easy targets can be fun, but facts come first.
One striking fact of the twentieth century is the rise of the formally educated businessman. In 1900 only 6.3 percent of America’s seventeen-year-olds graduated from high school. Of the prominent businessmen listed in the 1900 edition of Who’s Who in America, 84 percent had not been educated beyond high school.
A college education, many businessmen and writers of the nineteenth century believed, made men unfit for business. In an article published in Cosmopolitan in 1894, Edward Bok, the editor in chief of The Ladies’Home Journal and the grandfather of the current president of Harvard, noted that few men with college degrees had reached the top ranks of the New York business community. Elsewhere Andrew Carnegie explained why: “The prize-takers have too many years the start of the [college] graduate;…While the college student has been learning a little about the barbarous and petty squabbles of a far-distant past…the future captain of industry is hotly engaged in the school of experience, obtaining the very knowledge required for his future triumphs.”
But the knowledge required for business success was changing. In 1881 the industrialist Joseph Wharton, a leading figure in the history of the Bethlehem Steel Company, gave the University of Pennsylvania a hundred thousand dollars to endow a school whose purpose would be to provide “young men of inherited intellect, means, and refinement” with “correct instruction in the knowledge and in the arts of modern Finance and Economy.” Wharton’s gift led to the establishment of the Wharton School of Finance and Economy, the first collegiate school of business in the United States.
Though founded in 1881, the Wharton School did not offer a graduate program in business until 1921. Meanwhile, in 1908, Harvard had gone into the business of training business leaders, and from the beginning it had gone into it on the graduate level.
We forget that institutions have to be invented. More than a decade of discussion led to the establishment of Harvard’s business school, and Cruikshank, letting us eavesdrop, does a wonderful job of bringing alive this period. In the process of institutional invention, a key document was a letter written in 1907 by A. Lawrence Lowell, then a professor of government and later (1909 to 1933) the president of the university.
“I have very little sympathy,” Lowell wrote, “with the argument we hear so often, that we ought to have a school of such and such at Harvard, because someone else has it. On the contrary, I think that we had better do things that nobody else does; but we had better do them under the conditions that will be most likely to ensure success.”
This is the true voice of Harvard pride (“we had better do things that nobody else does”), combined with the true voice of Harvard prudence (“but we had better do them under the conditions that will…ensure success”). Lowell goes on to make a crucial recommendation: “I think we could learn a great deal from the most successful of our professional schools; that is, the Law School. Its success is, I think, due very largely to the fact that it takes men without any previous requirements, save a liberal education in any field, and then teaches them law, not jurisprudence; and it has been coming across my mind that if we are to have a successful school of business we must do the same thing. We must take men without regard to what they have studied in college, and we must teach them business, not political economy.”
But what did it mean to teach business? Should the new school offer specialized training across a range of industries—one program in railroad management, a second in banking, a third in the manufacture of widgets? “I suppose in a hundred years from now,” one member of the early faculty complained, “we will have a professor of egg marketing, cabbage marketing, etc.”
No, specialization was not the answer. Should the school focus on the major functions of business enterprise—accounting, marketing, production, finance? That seemed to make sense, but what would unify the curriculum?
Slowly, through a process of trial and error, an answer emerged. The school was, after all, a graduate school of business administration. The administrative perspective—the perspective of the general manager, “who is not and cannot be a specialist but who must make use of specialists at all times”—became the thread that provided unity.
At the same time that it strugglec Early courses resembled graduate seminars and encouraged an attitude of excessive detachment. The school’s students, one observer complained, “wouldn’t recognize a problem if they saw one.”
Harvard’s solution was to develop a business version of the “case method” that had worked so well at the Harvard Law School. Through cases that reflect the “infuriating limitations of real situations,” to quote one of the publications Harvard now sends to prospective students, the case method “obliges the students to confront unruly, intractable reality,” and thus “helps convert an aptitude for management to a capacity for management.”
Besides deciding what to teach and how to teach it, the early leaders of the Business School needed to ensure its physical survival—that is, they needed to raise funds. To the rescue came George F. Baker, the eighty-four-year-old chairman of the First National Bank of New York.
A close associate of J. P. Morgan, Baker was known as the “Sphinx of Wall Street,” for reasons that became clear when, in 1923, at eighty-three, he gave the second interview of his life. “Business men of America should reduce their talk twothirds,” he told the reporter. “Everyone should reduce his talk. There is rarely ever a reason good enough for anybody to talk.”
At least once in his life, Baker succeeded in reducing another man to silence. In 1924, when a fund raiser from the Business School met with him in the hope of obtaining a gift of one million dollars, Baker said: “I have lost interest in the idea of giving a million dollars.…And I don’t care to give a half a million, either…but if by giving five million dollars I could have the privilege of building the whole School, I should like to do it.” Harvard let him do it.
During World War II the Business School shut down its M.B.A. program, but the expertise of the faculty did not go unused. Harvard was chosen to organize an Army Air Forces (AAF) Statistical School, responsible for training AAF statistical officers.
Using infuriatingly real situations, Harvard obliges the student to confront unruly, intractable reality.
The AAF statistical control system was widely praised, and statistical control techniques became common inside and outside business after the war, thanks in part to the career of one bright young member of the “Stat School” faculty, Robert S. McNamara, who went on to be the president of the Ford Motor Company and the Secretary of Defense under Presidents Kennedy and Johnson.
A second important initiative in this period was an experimental course in “War Production Training,” sponsored by the War Manpower Commission. The course aimed to train men between the ages of thirty-five and sixty for supervisory positions in war-related industries. Out of this “retreads” program came, after the war, Harvard’s Advanced Man- agement Program for executives in midcareer—the result, Cruikshank notes, of a climate that encouraged the Business School faculty to “think entrepreneurially about its teaching, research, and publishing activities.” Today mid-career executive education exceeds M.B.A. tuition as a source of revenue for the Business School.
Though his history stops in 1945, Cruikshank gives a sketch of the explosive growth that has taken place since then. The number of M.B.A. programs in the country rose from 50 in 1950 to 650 in 1985; the annual number of M.B.A. graduates rose from 4,300 to 70,000. Harvard granted 7,757 graduate business degrees between 1908 and 1945; today it grants about 700 annually.
But the change is not merely a matter of numbers. In the 1950s the typical M.B.A. class at Harvard was “exclusively male and almost entirely white.” Today about a quarter of Harvard’s M.B.A. students are women, and 11 percent represent minorities. “To alumni, to senior faculty members, and to others in longstanding relationships with the School,” Cruikshank writes, “this purposeful adjustment of the student mix constituted the most striking postwar change” at the Business School.
“We are trying a great, but, I think, delicate experiment,” A. Lawrence Lowell wrote before the first class, twentyfour full-time students, arrived to see what Harvard could teach them about business. As Cruikshank tells it, the story of that delicate experiment is the story of a “pragmatic and protean institution” that has developed through a process of “repeated institutional reinvention.” Lavishly and lovingly illustrated, beautifully designed, ably written, A Delicate Experiment offers a clear account of an important subject: the building of a bastion of capitalism.
The book sells, I should add, for $110. Alumni of the Harvard Business School will have no trouble affording it. As for the rest of us—well, if the price invites a bit of M.B.A. bashing, Harvard has only itself to blame.