From the very beginning, the Harvard Business School (HBS) treated Duff McDonald as a barbarian at the gate. A veteran journalist and author, McDonald first approached the school about cooperating with him on a book in late February of 2013. But the guardians of HBS’ history, myths and truths quickly slammed the door shut, preventing access to all administrators, staff and faculty, even the school’s own historical archives.

The school, says McDonald, rebuffed at least a half dozen requests for cooperation, though the author was able to visit the Harvard Business School campus on four occasions. Now, more than three years later, McDonald’s The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite will be published by Harper Business on 25 April. As the lengthy title suggests, HBS stakeholders aren’t likely to enjoy what they will read in the book’s formidable 672 pages.

McDonald’s conclusion is that the Harvard Business School has abysmally failed the goal of its founders who sought “the multiplication of men who will handle their current business problems in socially constructive ways.” While HBS graduates tend to be very good at whatever they do, McDonald claims, that is rarely the doing of good.

Readers will ‘come away with a stench of affluent decadence’

Instead, believes the author who spent two and one-half years reporting and writing The Golden Passport, HBS is an institution that promotes money, greed and immorality above society’s needs, a school whose teachings are complicit in the moral failings of Western capitalism. It is the most critical work on HBS since the publication of the New York Times’ bestseller Ahead of the Curve by Philip Delves Broughton who chronicled his two-year experience as an MBA at the school.

Among those who offer up promotional blurbs is none other than consumer advocate and anti-capitalist Ralph Nader. After reading the book, Nader came away with this assessment: “HBS, while alert to shaping the latest management techniques, is largely indifferent to the ongoing corporate crime wave and other criminogenic behaviour and externalities corrosive of fundamental civic values and economic equities. Readers can bury their noses in this prodigious tome and come away with a stench of affluent decadence.”

Unlike Ahead of the Curve, The Golden Passport is more a history of the school and its influence than it is an immersion in the HBS student experience. The early reviews praise the book for being a massively detailed history of Harvard Business School since its founding in 1908. “Exploring how Harvard Business School became a ticket to the highest echelons of money, power, and influence,” writes a reviewer for Publishers Weekly, “McDonald chronicles the school’s history in an irreverent, cynical, and frequently funny expose of its pretensions…refreshingly substitutes skepticism for reverence, questioning the limits of business education and of capitalism in general.” On the other hand, another critic at Kirkus Reviews called the book “a tome that alternates between a useful expose and a slog — best for HBS alumni and business historians.”

Why does Michael Jensen still have a job?

What most troubles the author is what he perceives as the unwillingness of the school to address economic inequality in teaching MBAs or to emphasise the greater social responsibility of a business. McDonald, who had written a history of McKinsey & Co. before this latest project, reserves some of his harshest criticism for former Dean John McArthur, who led the school from 1980 to 1995, and tenured finance professor Michael Jensen, who retired from HBS’ active faculty in 2000.

In the book and an excerpt in Newsweek, he assaults McArthur for his decision to hire Jensen from the University of Rochester, where he already had held an endowed chair, and he condemns the professor for his unbridled promotion of the idea that companies should be run to achieve maximum shareholder value, with little regard for its responsibilties to employees, customers or community. “In the 1980s, HBS had abandoned its mission of trying to educate an enlightened managerial class,” writes McDonald. “Instead, it threw its lot in with Wall Street as it was dismantling the edifice of American industry HBS had helped build. HBS had nurtured the professional manager from his birth and then helped to kill him.”

At one point, McDonald openly wonders why Jensen, who earned both his MBA and PhD at the University of Chicago and joined the full-time faculty at HBS in 1985, ever had a job. A course developed by Jensen — The Coordination and Control of Markets and Organisations — was designed “to make students more ‘tough-minded’ and shift them from the ‘stakeholder model’ of organizational purpose,” writes the author. It became one of the most popular electives at the school. All of this had, in McDonald’s view, a profound impact on management thinking. He points out that recent studies by the Aspen Institute show that when students enter business school, they believe that the purpose of a corporation is to produce goods and services for the benefit of society. When they graduate, they believe that it is to maximise shareholder value.

“What did Michael Jensen achieve, in the end?” asks McDonald. “He helped a generation of businesspeople lower its opinion of itself and give in to its baser motives. For all his economic equations and insistence on the testability and refutability of the logic of his opinion — and it was just that, an opinion — he released CEOs, institutional investors and Wall Streeters from the obligation of considering anything but their own narrow wants and needs.”

‘Dean McAruther thought that hiring Jensen would bring in donations from Wall Street’

He notes that when William Lazonick, now a professor of economics at the University of Massachusetts, publicly challenged Jensen’s ideas, sparks flew. “Jensen was king of the hill, and he objected to me…daring to question him,” Lazonick told McDonald. “He was livid that he had been set up in front of all his colleagues to be critiqued by an outsider. He told [HBS professor Thomas] McCraw not to invite me back, and I wasn’t…for another 17 years. Have no doubt about it, the most powerful man at HBS in the early 1990s was Michael Jensen….

“Almost immediately after they hired [Jensen], shareholder value ideology quickly took a dominant position at HBS, even though, from their own experience, the vast majority of faculty members did not believe it. But there was absolutely zero critique. Even from those who should have known better…there wasn’t a peep. It’s quite sad. Both [Harvard President] Derek Bok and [HBS Dean] John McArthur should have known better, but they went out of their way to recruit Jensen,” says Lazonick. “I asked a member of the faculty who is actually still there about it, and he said that McArthur thought that’s where the money was, and hiring Jensen would bring in donations from Wall Street.”

McDonald certainly wasn’t predisposed to this view. He earned his undergraduate degree in finance at the University of Pennsylvania’s Wharton School and was then recruited to Goldman Sachs, quitting after a two-year stint to become a full-time journalist.

In an interview with Poets&Quants, McDonald explains how his book came about and how he came to some highly provocative conclusions about the impact —both good and bad — that Harvard Business School has had on business and society.

So why did you decide to write about the Harvard Business School?

I was having dinner with someone when The Firm (his book on McKinsey & Co.) came out and I said to him, ‘I don’t know what to do next.’ He said, ‘Isn’t it obvious?’ And I replied, ‘Not to me.’ He looked at me and said, ‘Harvard Business School. Close the circle.’ When I heard it, it instantly made sense to me. I don’t think there could have been any book that I would have been more ready to write than this one given the previous two books. It was all cumulative.

But why now?

One of the things that people miss in their discussion of Donald Trump is it gets centered on the crazy stuff. The reason the electorate was open to taking a flyer on such an outlier of a candidate was because of the handling of the economy by the people that had been charge of it. I’m talking about MBAs. HBS played a huge role in getting us to where we are today.

Were you surprised that HBS decided not to cooperate with you?

When I sold the book to Harper Collins in late 2013, I told them that we could do it with or without the school’s cooperation. It didn’t matter. It’s a worthwhile project, either way. I put the first feelers out to HBS in late February of 2014 and set up a meeting on campus about six weeks later. It did not give me a whole lot of optimism. I also wrote a letter to the dean, but he didn’t respond to it.

When I came up to campus, they were fairly curt with me. And the reason wasn’t a mystery: Jodi Kantor’s piece in the New York Times on gender equity had come out in late 2013 and they were still stinging from that clearly. I think they were wary of any outside inquiries. We talked about my idea for the book and I said I would approach it the same way as The Firm, nominally as a history of school but also as a broader look on the impact and influence of the MBA in general. Overall, the discussion gave me the sense that the odds weren’t great. For one, they asked me to write another letter to the dean. I asked them what they thought I should put in it that I hadn’t already said in the first one. But the face was, they felt betrayed by Jodi Kantor. I told them to contact McKinsey to see if they felt the same way after they decided to cooperate with me. After that, it took another six weeks to get them to decide, and they finally said we decided no, we are not talking to you at all.

Did anyone at HBS explain the reason for that decision?

Not really. I got a sense that their experience with Jodi Kantor had left such a bad taste in their mouth and that whatever it was they concluded about me didn’t sway them back into a more welcoming attitude.

Duff, what was your original intent with the book?

When I started I was under the mistaken impression that business schools had a philosophical point of view around capitalism. I had no idea what it might be but I was operating under the impression that business schools would have explicit views around around capitalism, similar to the different schools of economics. So when I started I actually thought the first thing I would do was wrap my arms around that. I came to the belated realisation that is wasn’t the case – they all just sort of assumed capitalism, without too much question about it and had simply moved on to the question of how to optimize one’s own place in it.

Ultimately, what I was looking for — just like with McKinsey — was that HBS was a foundational and influential institution in modern management and business education. My question to myself was what is the nature of that influence? I had some people say it would have been better if you started your book where you end your book, that it’s today’s influence that matters, but I love the history of it all.. I was more fascinated with how this changed over time. My ultimate goal was to speak to a lay reader. I’m sure business historians or people involved in the business school world may or may not find something in here that is interesting. But I wanted to speak to my mother or a friend who didn’t go to business school and doesn’t read The Wall Street Journal.

And what were your big impressions as you began to research the book?

I did not know the extent of the military connection with HBS, in particular how the school helped the US in World War Two. While it wasn’t surprising in the sense that I never would have believed it, I had never been exposed to the idea. The fact that HBS played a significant role was news to me. That was one thing.

The other thing I didn’t realise was just how complete and total the school’s embrace of the case method really is. I went to Wharton as an undergraduate with a specialty in finance so the bulk of my business courses were in finance and were about allocation models and discounted cash flows. While I know you learn those as well at Harvard, I knew the case method was their differentiator. But I had no idea how complete and important the school’s embrace of that method was to both itself and its teaching and also the way its graduates go about making their way into the world. I had simply assumed it was just another way of being taught something in school. I had no idea of how deep and important the case method was to everything about the place. That was a revelation.

And I’m sure you are aware of the past criticism of the case method, often heard from Canadian academic Henry Mintzberg.

Yes, Mintzberg thinks it is absurd. But I interviewed two dozen of the most prominent currently sitting CEOs in the world today, including Stephen Schwarzman (of the Blackstone Group) and Jaime Dimon (of JPMorgan Chase). To a man, they gave the case study method credit for the way they think. It definitely leaves an imprint and a very positive one. They all talk about how it increased the effectiveness of problem solving in a way that sets them apart from others.

I never sat through a case teaching class. It sounds far more interesting than a typical lecture, but I also think it has a bunch of downsides to it. One is a positive bias because they (HBS) let the subjects of cases tell the story they want to be told. And there is a selection bias as well and there is a risk of the cult of the CEO. There are some money issues there, too. The school is dependent on corporate donations to support the case research process itself. You can get yourself into a tangle there about what money can do. While I admire the idea of insisting that students understand that it’s not about what your answer is, it’s about how well thought out and articulated your answer is, that leaves you open to an immoral underbelly to your teachings. The leap from there is not the ‘right answer’ in the class – which is used to encourage students to speak and not be terrified. It can make people blind to the fact that in many life situations some answers are absolutely more right than others.

Many readers will think you have written a negative book about HBS. Have you?

Is this a critical book about HBS? Sure. But am I anti-business school? No. Am I anti-wealth? No. Am I anti-greed? Well, greed is pregnant with its own connotations but as long as that greed doesn’t result in something that is illegal or immoral I don’t care if some people want money more than others do. What bothers me is hypocrisy. I think this is a story of a squandered opportunity. I think I’ve written a book of constructive criticism. Some people who read it will want to simply conclude that it’s nothing more than a cynical attack but that is not what it is.

What really bothered me was that the founding members had an idea in mind of what HBS could and should be. The school’s original role in American business would be to help improve itself by creating a more enlightened group of business people. They failed at that, not for lack of trying. And then, in the 1980s with the hiring of Michael Jensen, they basically threw in the towel and said fuck it, let’s go for the money.

The second thing that bothered me is their insistence that they have always and continue to meet their higher goal of educating leaders who make a positive difference in the world. That is complete bullshit. The net result has pushed the influence of the school away from what it could have been and toward what it shouldn’t be. They had the chance to be important to capitalism and what they are is important to themselves. Instead, the school went the path of least resistance and took the money. At the end of the 1970s, they had a couple of choices and by hiring Jensen they picked the most lucrative one and the wrong one. In Jensen, McArthur was hunting big game and he got exactly what he expected.

John A Byrne

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