Gratitude for Slow Food

“Man ist, was man isst.” — German proverb.

“You are what you eat” is a slogan that socialists around the world used to highlight the class differences in society: if you ate bad food, you were part of the lower classes; if you consumed the good stuff, you were obviously rich. The problem is that what Americans eat is no longer a great distinction of economic class: nutritionists remind us that we all don’t eat very well. The 99% and 1% at least have that much in common. The Thanksgiving Day feast at my house prompts two reflections:

· In regard to what to eat, we have an immense range of choices, some of them wonderful. The issue is this: are we making wise and informed choices?

· Too much of the debates about eating is focused on the what. Thanksgiving reminds us to focus as well on the how of eating—particularly the how of preparation.

Maybe the German proverb should read, “You are how you eat.” Or better yet, “you are how you prepare what you eat.” I think that the how of eating and preparing food is an overlooked and often misunderstood source of difference and lifestyle in the human experience.

What You Eat

If you have not connected with the critique of modern American eating, see Michael Pollan in his classic lecture about his book, The Omnivore’s Dilemma. America enjoys the highest per-capita income in the world and yet the highest rates of obesity and other eating-related threats to our health. We are a fast-food nation. Increasingly, we outsource our cooking to restaurants and producers of packaged goods. An alternative, advocated by the chef, Alice Waters, is the slow food movement that favors locally-produced and seasonal foods—as the founder of a leading restaurant, Chez Panisse, and writer of numerous cookbooks, she has popularized this new approach to cooking and eating. Even the Abbott Center Dining Room at the Darden School emphasizes environmentally sustainable food production and the sourcing of locally-grown foods.

Returning to Thomas Jefferson’s vision of a pastoral society where each family grows (or barters for) what each eats is too big of a stretch. “Industrial food” produced by Big Agribusiness and consumer foods corporations brings a richer diet at lower cost to a broader population than ever in history. Corporations get it: I’ve had conversations with CEOs of firms as diverse as Pepsico, Whole Foods, and Cargill that persuaded me they are keenly concerned with nutrition and wellness for consumers. Jacques Diouf, Director-General of the UN’s Food and Agriculture Organization reports that global food production will have to double by 2050 in order to feed a growing population and that mass production methods at distant farms will be indispensable to feed everyone. Still, low cost and convenience make it too easy for us to eat badly. The primary problem is with the choices we make.

How We Eat

So much of the nutrition of professional people is outsourced to restaurants, corporate cafeterias, TV dinners, processed foods, vending machine snacks, etc. Given the extent of my travels, I eat a lot of that kind of food. Preparing your own feast on Thanksgiving (or any other day) reconnects you with the process of creating the food you eat.

On Thanksgiving Day I’m grateful for the experience of preparing a feast. I feel connected to the ingredients of the meal. The house is filled with tantalizing aromas. Generally, I’m more present with the aims and enjoyment of the day. Then, too, there is the fellowship involved in preparing the meal: at our house, a big feast is inevitably a team-based exercise, lubricated with age-appropriate beverages. You work up an appetite across the day that is successfully slaked when the feast is consumed. This is literal slow food: it takes all day to prepare and a few hours to consume (with a walk outdoors to punctuate the meal.) In all, it is a great day.

This brings to mind the movie, Mostly Martha, about a compulsive and rigid chef at an expensive restaurant—for her, eating is all about “what.” She gets rave reviews about the dishes she prepares, but at a high cost of ruining personal relationships. Then she assumes responsibility for an eight-year old girl and hires an Italian sous-chef, both of whom teach her to lighten up and focus on the “how” of food preparation and eating. You are not simply what you eat; you are how you prepare and consume your food.

In Gratitude

Nothing beats home cooking. I’m grateful that Thanksgiving gets me back to the good stuff. The folksinger, David Holt, says it best in his song, “Slowfood”:

Everybody’s busy, runnin’ like crazy

Workin’ two jobs, on the go.

Eatin’ fast food from little foam containers,

I need a big bowl of somethin’ cooked slow.

Spend my life out on the highway

Eatin’airport and hotel food.

Always lookin’ for some good home cookin’

Just make me something that tastes like it should.

Slow food, come and get it

Slow food, all you can hold

Slow food, feeds the body

I need slow food to feed my soul.

The Legacy of Steve Jobs

The death of Steve Jobs on October 5th proved to be of such moment that it eclipsed headlines about wars, politics, and economics. The outpouring of grief rivaled the passing of Princess Diana, the assassinations of world leaders, and the loss of Edison and Einstein. Emotions surged because Jobs was so closely identified with techno-cool, the marriage of design and engineering. But cool and technology have short half-lives. There is more to the memory of Steve Jobs, that he heralded a new mind-set, that he was a secular messenger of the New Millennium. To Google on the words, “Steve Jobs prophet” summons up close to three million citations.

Why does Steve Jobs warrant our exaltation? Those whom we exalt today become the templates for our children, who watch and listen for useful examples for their own lives. For those of us who lead and teach, it is important to be caught up in positive examples. Was Steve Jobs a prophet? Did Jobs leave a business legacy that is both durable and original?

Perhaps, though not in ways that the cultural adulation might warrant. He was a complex guy who grew up in a nontraditional path: an adopted child, a college drop-out, an experimenter with drugs and Buddhism—all of this was the fertile soil of a nonconformist. What makes a dramatic personal tale perhaps obscures some valuable lessons about strategy and leadership drawn from Jobs’s career.

Jobs focused relentlessly on the experience of the end-user of a product. He was not trained as an engineer but he became an effective advocate for the intuitive use of engineered products. The vaulting popularity of Apple’s products is testament to their ease of use, delight, and sense of discovery of ways in which technology can enrich one’s life. This focus on the customer’s experience is a leading attribute shared by a range of high-performing firms in the global economy. A Fellow at the Darden School, Jim Gilmore, and Joseph Pine discuss the huge significance of this focus in their book, The Experience Economy. Jobs was one of the premier practitioners of focus, not merely on the customer, but on the customer’s experience.

Jobs was a champion for design. In most manufacturing companies there is a relentless competition among proponents of low cost, high efficiency, and winsomeness of a product. Corporate infighting and bureaucracy often grind the artful product ideas down to utilitarian size, worthy of the old Soviet Union. But a new school of thought suggests that all really worthy innovations gain their start through processes of design thinking. These processes tackle difficult problems by combining empathy, creativity, and rationality. Rationality gets you low cost and high efficiency; empathy and creativity help to ensure the winsomeness of the product. Business Schools are now adapting their curricula to include instruction in design thinking. My colleague, Professor Jeanne Liedtka, and Tim Ogilvie, offer more discussion of design thinking in their new book, Designing for Growth.

Jobs was a pro-active leader of consumer sentiment. One hears a great deal about how companies must listen to the market and respond to consumer wants. This leads to a reactive stance on product design. Also, a classic riff on capitalism is that it depends on selling consumers goods that they don’t really need, such as static-free socks or cheese-flavored pet food. Steve Jobs took a different view. In a famous statement, he said, “people don’t know what they want until you show it to them.” Jobs spawned a range of new products to test and spark the interest of consumers. Some products failed (the Apple III, and the Lisa, for instance). Jobs was willing to take risks in order to educate the consumer and ultimately find out what the consumer wanted.

Another lesson regards the sense of mortality with which Jobs regarded his own life. In his famous graduation speech at Stanford University in 2005, he told the students to “remember that you are going to die” and therefore have nothing to lose. This liberating mortality encouraged the students to stay hungry, be foolish, take risks, and fail often. He claimed not to be motivated by the love of money—indeed, his salary from Apple was $1.00 per year (plus stock options)—and he said that he did not want to be the richest man in the cemetery. But what is unusual is that this same sense of mortality did not prompt him with a spirit of philanthropy that would create a legacy like Rhodes, Carnegie, Ford, Rockefeller, and others.

Perhaps the memory of Steve Jobs will give license to incivility in professional life. Every prominent person has detractors. Jobs has more than a few who described him as: “despotic jerk,” “imperious,” “strong-willed contrarian,” “arrogant,” “combustible genius,” “control freak,” “abrasive,” “unapologetic brutality,” “temperamental,” “mouthy,” “tyrannical,” and “a great man, not a nice man.” Does successful innovation demand business leaders who behave this way? Is this an icon our students and children should emulate? I think not.

Steve Jobs casted a very long shadow. He was not a prophet or messenger; he was a do-er, someone who implemented his own visions. He was a heroic figure, like a character out of an Ayn Rand novel. A tough guy who bent technology to human uses, not vice versa. In him, some fault lines ran deep. We should remember him for his virtues and adopt styles of leadership that avoid his flaws.

Reading to be a Full Person

“Reading maketh a full man, conference a ready man, and writing an exact man.” –Francis Bacon

A great university experience is all about becoming a “full person.” The American holiday season is approaching, and is a time for reflection, learning, and giving gifts. Reading is at the nexus of all of these good activities. By “reading,” I mean an effort more substantial than taking a glance at tweets, email, or Facebook pages. Good reading engages an argument of some kind, an argument that takes a while to unfold. Such reading deepens or challenges one’s point of view and often entails a surprise. The problem is that we don’t do enough serious reading. We’re awash in snippets of arguments, word-bites, and opinions that have no grounding in the facts.

How do you get the real gain out of reading?

1. Find a quiet time a place to read each day. Give a gift to yourself; even 20 minutes will do.

2. Watch your diet. A lot of junk reading will dull your mind. Read the healthy stuff.

3. Stay current. Read at least one daily newspaper a day—online or in print. You should learn to read a newspaper in 10 minutes, if pressed for time. If you’ve got more time, read the paper more thoroughly as a way to deepen your social awareness. In his forthcoming book, Coming Apart, Charles Murray argues that strata of American society are losing touch with each other. Do your part to stay in touch with how others live.

4. Start by following your interests and then branch out. Suppose you like finance: branch into psychology and risky behavior. Suppose you’re a partner in a big firm with lots of politics: read Machiavelli and the history of Renaissance Italy. Suppose you’re a public servant concerned with balancing the budget: read about the fall of Rome.

5. Read for depth and breadth. Set a goal for yourself to drill into a topic or set of ideas. Build a list of the best books in that area and work through them. But give yourself a breather regularly by leaping into some unrelated field.

6. Read a lot.

I read for 20-60 minutes a day, usually drawn from time at the start and end of the day. And I carry a book and periodicals in my briefcase all the time—the inevitable waiting moments while traveling become time for me to read. A lifetime project of mine is to read the best biographies of all the US Presidents, in chronological order. I’m up to Abraham Lincoln, who may be the President about whom the most books have been written—I’ve been branching out into a range of related studies about Lincoln and his time. Each day I read (or at least scan) four newspapers: New York Times, Wall Street Journal, Financial Times, and Charlottesville Daily Progress. As you can imagine, there is quite an overlap in the news content among these papers; but I value seeing how the editors treat the news and how the editorials and op-eds vary. I follow about a dozen blogs focused on investing, economics, and public policy. And I read the Economist, New Yorker, and Foreign Affairs as they arrive. My diet of serious reading is leavened with novels by Sara Paretsky, David Baldacci, Patricia Cornwell, and Charlottesville’s own John Grisham. In all, I’ve read 42 books in the past 12 months.

One of the regular questions I get is “what are you reading?” Last year, I began to spell out my top recommendations (see here). Continuing my annual recap, what follows are my “best bet” recommendations from the books I read over the past year:

1. Joshua Wolf Shenk, Lincoln’s Melancholy: How Depression Challenged a President and Fueled his Greatness. If you think mental illness is only for followers, think again. This is an excellent discussion of depression at the top and how it contributes to a style of leadership.

2. Howe and Strauss, The Fourth Turning. An exhausting presentation of a theory that America is entering a period of decline and extreme turbulence owing to a historical cycle of change. I seriously doubt the conclusions the authors reach, owing to their selective use of facts and historical analogies. Yet I recommend it as a stimulating representative of “declinist” writings. Sure to challenge your comfortable optimism.

3. Manfred Kets de Vries, Happiness Factor. I had the pleasure of teaching this book in a small seminar last winter. It is a succinct summary of research and writings on human happiness. Are you happy? Maybe the pursuit of happiness is not the best pursuit in life. Read this, and think further.

4. Matt Ridley, The Rational Optimist. A good pairing with #2. I mentioned this book last year as an item I was reading. Well I finished it and am glad to have done so. Well-written and buoyantly optimistic about the future. In the middle of all the other stuff we’ve endured this year, a book like this is a useful companion.

5. Sloan Wilson, The Man in the Gray Flannel Suit. A classic novel that every business student (and alum) should read. Conveys the story of a business executive who decides to chart a different course in the face of a strongly conformist corporate culture.

6. James M. McPherson, Tried by War. A book about Lincoln’s leadership of the Federal side of the Civil War. He matured into a genuine general manager. Simply excellent. A must-read.

7. Kim MacQuarrie, Last Days of the Incas. I read this while hiking in the Peruvian Andes. A very well written history of the Spanish conquest of the Incan Empire.  A bloodthirsty story; highly improbable that anyone would have survived.  In the wake of the conquest, the Inca civilization simply vanished, a startling outcome.

8. Laura Hillenbrand, Unbroken: A World War II Story of Survival, Resilience, and Redemption. A heroic story of leadership and the will to live in the face of extreme hardship.

9. Daniel Howe, What Hath God Wrought. A history of the United States from 1815 to 1848. If you think US politics are difficult today, look at what happened then.

10. Peter Sims, Little Bets: How Breakthrough Ideas Emerge From Small Discoveries. A delightful and provocative reading about the origin of innovation. It features the research of Darden colleague Saras Sarasvathy. Highly recommended.

11. Patrick Howie, The Evolution of Revolutions: How we Create, Shape, and React to Change. A good complement to item #10; a macro view of change and waves of innovation.

12. Jon Krakauer, Into the Wild. A gripping story of a college graduate who progressively stepped out of society—and died from naiveté and romanticism. I read this while hiking in Alaska. Big message: don’t assume that nature is forgiving.

13. T. Harry Williams, Lincoln and His Generals. A classic in the field and an excellent complement to #6. This is a carefully-researched illustration of the challenges a senior leader faces in managing a group of talented direct reports.

14. Edward Hess and Kim S. Cameron, Leading with Values: Positivity, Virtue, and High Performance. A book of readings co-edited by Darden colleague Ed Hess that helps to link corporate high performance to a positive and virtuous leadership style. In the age of the “toxic boss,” this book is a welcome antidote.

15. George Tenet, At the Center of the Storm. Tenet served as Director of the US Central Intelligence Agency up to and during 9/11, the invasion of Iraq, and search for weapons of mass destruction. The book is a memoir of his tenure at the CIA and the origins of the WMD debacle. A very well-written perspective on the response of government leaders to the rise of global terrorist activity.  I interviewed Tenet on stage at Darden’s recent University of Virginia Investing Conference.  He impressed everyone as a forthright and compelling judge of international trends and threats.

But Steve Jobs Didn’t Go to B-School…

 

In the past few weeks, I’ve had several conversations in which a prospective applicant said something like this:

“Are business schools really worth it? Mark Zuckerberg (Facebook), Steve Jobs (Apple), Bill Gates (Microsoft), Sergey Brin/Larry Page (Google) didn’t go to business school. If you want to start a company just do it! B-school turns you into a big corporate type and deadens the entrepreneurial spirit. Just hang out in Silicon Valley or one of the other rich entrepreneurial ecosystems and learn how to start companies there. Who ever heard of a company being started in B-school?”

And so on. Perhaps you’ve said or heard some of the same things—often at a lunch table or beer bash, loudly enough to gather a number of listeners. The combination of selective facts and romantic brio seem to make this an irresistible argument. But what is not acknowledged offers a compelling argument to go to business school if you want to start and grow a company.

The applicant’s first error is to lump all b-schools together. A task force that I recently chaired reported that some 12,600 institutions in the world award degrees in business. Ninety percent of these are unaccredited and largely unknown. Of the ten percent, a subset is selective, meaning that they admit less than half of the applicants. The accredited and selective schools tend to be better endowed, to have stronger alumni networks, more prominent faculty, and attract stronger students. And then within this subset are schools that have strong resources for entrepreneurs. For instance, Darden has one of the strongest centers for entrepreneurship and innovation—the Batten Institute—which operates a small business incubator, arranges venture internships, supports a range of courses, hosts conferences and competitions, and is the nexus of a network of entrepreneurs and venture investors. Our incubator has started some 60 companies and counting. Just this week, Princeton Review and Entrepreneurship Magazine ranked Darden #3 among the top 50 graduate entrepreneurship programs in the U.S. Schools like ours serve entrepreneurs very well. To paint all b-schools with the same brush is to deal in stereotypes. Don’t make that mistake.

The applicant’s second error is to generalize from a small sample of special cases. It is fun to summon up the names of a few famous and successful entrepreneurs, but are these representative of the whole population? For each case, it is possible to offer a counterexample of entrepreneurs with MBA degrees. Frank Batten founded the Weather Channel; Phil Knight co-founded Nike; Scott McNealy co-founded Sun Microsystems; Henri Termeer grew Genzyme from fledgling to major biotech firm; Meg Whitman grew eBay from a tiny startup to an online behemoth; Warren Buffett grew Berkshire Hathaway from a small failed textile manufacturer into a major conglomerate.

Plainly, one should not assume that entrepreneurship is only associated with founding a company. We know that many of the same qualities are associated with growing a company. Why should we expect entrepreneurs to toil only in fledging startups? Large companies, seeking to rejuvenate their cultures, want to hire people with entrepreneurial spirit. At Darden and its peers, most MBA graduates are hired by mature firms, but this does not mean that they are not entrepreneurs in fact or spirit.

Yet another error is to imply that once you work for a big company, you’ll always do so. In my MBA graduating class, about 95% of the students went to work for the S&P500 firms or equivalent upon graduation; by our 20th reunion, only a small fraction remained there. Among Darden alumni, I observe that by the 10th or 15th year after graduating, many alums will have made the leap to a small startup, a family-held firm, a firm they have bought, or a small professional services firm—these alums usually wind up in senior leadership positions, which affirms Darden’s strength in producing general managers. And they are also entrepreneurs.

Most of all, I challenge the applicant’s suggestion that “hanging out” or “just doing it” are always and everywhere more developing than a business education. Such arguments are variations on the virtues of the “school of hard knocks.” Mind you, I have enormous respect for experience as a teacher. But the school of hard knocks is loaded with, well, really hard knocks. The failure rate of small business startups is quite high. Census data suggest that about half of all startups are still alive after three years, and only 29% after 10 years. In that time, you can burn through a great deal of effort, relationships, and money (usually gained from family and friends). For every knockout success like Steve Jobs, there are hundreds of thousands of small business failures each year.

A great B-school education won’t guarantee success, but should improve the odds. It will accelerate your growth, compressing years of hard knocks insights into a short time. It will build your business acumen and help you understand the pitfalls and risks on which other businesses have foundered. It will leaven your romanticism about entrepreneurship with a very practical grasp of what it takes to succeed in business. Perhaps most importantly, a business education will disabuse you of the notion that entrepreneurial success is a matter of the great lone individual, the genius, the maverick like Jobs/Gates/Brin or whoever else you idolize. Instead, b-school will teach you that entrepreneurial success is substantially about teamwork, networks, and business relationships; success is not about opportunism but about living into a purpose for your life with intentionality and integrity.

Philippe Sommer, Darden’s Director of Entrepreneurship Programs says,

“If you know you want to be an entrepreneur you are already in a different place than many who come to business school. Entrepreneurs come from families that are entrepreneurial! Is it in the genes? No, it is the observation of the experience. These folks have seen the pros and cons of being an entrepreneur and understand that the failure of the venture is not the failure of the entrepreneur. If this is not your background, then it is incredibly scary to think about being an entrepreneur. Many of the students in our MBA program did not understand what are the real benefits and risks of being entrepreneurial. That is one of the things an entrepreneurship program like ours will teach you. You may find you love being entrepreneurial and now have an option in life you might not otherwise have had. I often say I don’t teach “entrepreneurship,” I teach “self knowledge.” We have many students who come to our program having started a business and sometime succeeded quite well and other times failed. What they all realize is if they had known more about how to run a business they would have avoided many of the mistakes they made. That’s a pretty good reason to get an MBA. After all if Mark Zuckerberg had started his business in business school he might have avoided the stupid things he did to his partners and not spent the rest of his career litigating with them and in the end paying them to correct his mistakes.”

Should you go to b-school or head off into the entrepreneurial ecosystem? I’ll let you decide, but you should consider some questions first. Do you have a clear business idea, including clarity about the product/service, the customer, the suppliers, and the investors? Do you have the grubstake of cash to sustain you through a long spell? Are you so impatient to get going that you can’t bear the thought of organized learning? If the answers to these questions are “yes,” then get going and good luck. But for most twenty-somethings I encounter, the answers are pretty hedged. They are eager to learn and glad to have the help of teachers and mentors. They hanker for more than they’ve been doing and want to have an impact with their lives. But they are still searching for the spark, the big idea, the project into which they can channel their energies. For them, B-school makes good sense. You decide.

The Political Cycle: Pay Close Attention

“An election is coming.  Universal peace is declared, and the foxes have a sincere interest in prolonging the lives of the poultry.”  George Eliot.

“Politicians and diapers should be changed frequently and all for the same reason.”  José Maria de Eça de Queiroz.

“Win or lose, we go shopping after the election.” Imelda Marcos.

“We have a Presidential election coming up and the big problem, of course, is that someone will win.” Barry Crimmins.

Comments like these indicate that the voting public greets elections with not a little irony. Caution might be a better sentiment. In the next 15 months, the global business community faces a wave of elections that could potentially change the investing landscape. The nature of these changes is the focus of the next annual University of Virginia Investing Conference, “The Political Cycle, Political Change, and Investing,” forthcoming on November 10-11. The program features a worthy lineup of speakers, including George Tenet, the former Director of Central Intelligence for the United States Central Intelligence Agency, Peter Fisher, former Under Secretary of the U.S. Treasury, Tom Keene, editor at large for Bloomberg News, Vincent Reinhart, Chief U.S. Economist for Morgan Stanley, and ten others. The aim of this year’s conference is to explore the impact of political change on the investing climate for equities, fixed income securities, commodities, real estate, and other asset classes. There will be plenty to discuss.

Why is 2012 Significant?

Like it or not, government policies affect investment returns. Therefore, changes in rulers and their policies bear close scrutiny. The year ahead will be noteworthy. According to ElectionGuide, 26 countries will elect a head of state in 2012. As the following figure shows, 20 to 40 countries elect heads of state in a typical year. What sets 2012 apart is the number of elections in economically significant countries: United States, China, Russia, France, Mexico, India, Korea, and Turkey. When you aggregate the Gross Domestic Products (GDP) of those G20 countries facing elections, they account for about 60% of the world GDP in 2012, much more than in recent years.

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In this graph, the three peaks of GDP of those G20 countries facing elections (2004, 2008, 2012) are associated with the Presidential elections in the United States, the largest economy in the world. But the peak in 2012 is an extreme outlier, owing to the convergence of elections in several large countries.

In addition to the volume of significant elections coming up, we have the special intensity of the issues on the table. The elephant in the room is the fact that for many countries, this is the first major election cycle since the onset of the Global Financial Crisis and Great Recession. Judging from street demonstrations and the rise of populist movements in various countries, the voters are Very Angry. This alone generates more than a little uncertainty regarding government policy changes and investment climate ahead.

Then too, local conditions promise to add more theatre to the electoral process.

· United States. President Barack Obama has some of the lowest approval ratings in opinion polls, beaten only by the lower approval ratings of the U.S. Congress.

· China. What may look like a very orderly election process is being fought out intensively at the municipal level right now. The Communist Party is divided into camps that favor (a) continuation of the liberalization of the economy and culture or (b) stasis. Similar divisions are occurring around military and foreign policies.

· France will hold the election of its next President next spring. Like Obama in the U.S., Nicholas Sarkozy is lagging in the opinion polls, suggesting that France might again have a socialist President.

· Japan has just elected its fifth Prime Minister in five years, political turmoil dwarfed only by the tsunami and meltdown at Fukushima. Given the steadily revolving door, it is very hard to handicap the nature and effectiveness of any economic recovery policy that might be enacted.

· Venezuela has not held meaningfully free elections in a long while. But if the illness of Hugo Chavez worsens, Venezuela could experience an unexpected change in policy.

· Middle East. The Jasmine Revolution is rewriting the conventional wisdom about that region’s political trends, growth, and oil production. Iran is bankrolling a range of terror and military efforts, including the development of nuclear weapons. Israel is suddenly feeling more vulnerable.

I could go on and on, but you get the picture. Interesting times, no?

So What?

Your investment returns may be in for a bumpy ride. Research finds strong associations between the political cycle and macroeconomic conditions, investment returns, and business behavior.

· Variations in monetary policy and government fiscal restraint. Kenneth Rogoff wrote in 1990, “During election years, governments at all levels often engage in a consumption binge in which taxes are cut, transfers are raised, and government spending is distorted toward projects with high immediate visibility.” This thesis has a legendary heritage, reaching back to Karl Marx’s Communist Manifesto, published in 1867. Investment manager, Jeremy Grantham, is a prominent analyst of the political cycles in fiscal and monetary policy. He wrote, “Nowhere is this power [of the Fed] more clearly revealed than in the ease with which it can move asset prices, particularly stock prices, and nowhere is this revealed more clearly than in Year 3 of the Presidential Cycle.” A four-year U.S. stock market cycle associated with the timing of Presidential elections seems to have become a part of the investment landscape since the mid-twentieth century.

· Variations in policies owing to shifts from left to right and back again. Parties on the left tend to favor full employment. Parties on the right tend to favor inflation fighting. In America, markets tend to rise higher under Democratic rather than Republican Presidential administrations.

· Variations in corporate investing. In a recent study, Art Durnev wrote, “Election uncertainty leads to inefficient capital allocation, reducing company performance.”

What next?

The dominant question is whether the regularities of the political cycle will obtain in 2012. Sir John Templeton said that the four most dangerous words in investing are, “This time it’s different.” Yet there is plenty to argue that 2012 may indeed depart from historical patterns: the world remains in the grip of low growth following the Global Financial Crisis and Great Recession; households and consumers are reducing spending to repay debt; central banks are pursuing stimulative monetary policies and probably cannot push further; governments face enormous debt burdens and are reluctant to borrow-and-spend to stimulate their economies. From the perspective of economic history, this is a dramatic moment.

Come to the University of Virginia Investing Conference to hear what some well-informed experts and canny investment managers have to say about this situation.

In This Economy, Not a Time to Quit

“You’re sick of the game” Well now, that’s a shame.
You’re young and you’re brave and you’re bright.
”You’ve had a raw deal.” I know — but don’t squeal.
Buck up, do your damnedest, and fight.
It’s the plugging away that will win you the day.
So don’t be a piker old pard!
Just draw on your grit. It’s so easy to quit.
It’s the keeping-your-chin-up that’s hard.
— Excerpt from Robert Service, “The Quitter.”

I’ve just returned from Alaska, where I was hiking around fjords and glacier fields. I got to reflecting on the economic booms that advanced the 49th state, such as the Klondike Gold Rush (1896-1899). The stories of Jack London and poems of Robert Service shed a great deal of light on the erratic behavior fostered by the boom and the subsequent bust. Among these, Robert Service was especially critical of the dilettante prospector, the person who gave up too easily in the face of harsh climate, hard work, and uncertain results. Service’s critique is as relevant today as then — especially so for MBA summer interns and recent MBA graduates.

The economic climate right now feels like one of those turning points from prosperity to adversity. Most astute observers of this summer’s economic bailout of Greece by the European Union doubt that it did much more than defer a major reckoning for all of Europe. In the U.S., it is hard to find many enthusiasts for the deal in favor of Congress’s debt ceiling deal. Standard & Poor’s just downgraded the creditworthiness of U.S. debt. Economic growth is anemic. Equity market indexes are down materially in a short space of time. Unemployment remains stubbornly high. I recite all of this as prelude to an admonition to current MBA students and recent graduates: now is no time to play the dilettante. The job market for your skills may be softening. Be earnest about what you do. Make a commitment to a company and trust that such commitment will be repaid.

For summer interns, this means finishing the summer on a high. I’ve written about the need to be very intentional if you want to get an offer of permanent employment (see this and this). The dilettante will be coy with the summer employer, waiting to be wooed. Or the dilettante may feel a modicum of disappointment: the city, the employer, or the jobs aren’t so cool after all. There’s nothing specifically wrong. It’s just that the high expectations weren’t fulfilled. The perfect becomes the enemy of the good. Imagining how one might say “yes” to an offer of employment becomes very hard. Saying ‘no’ to possibilities amounts to what Robert Service would call a “quitter.”

Similarly the recent MBA graduate may have become intoxicated by the nascent recovery of 2010 to believe that job-hopping is back in fashion. Top B-schools are observing a rise in reneging by their grads on job offers and a cavalier attitude toward employers. I have advised MBA graduates to take the long view and avoid the job-hopping that gives CEOs and Chief Talent Officers the fits.(See my blog posting on the five-year hitch.) Most graduates do hang in there. Data from our surveys of Darden graduates show that about half of our grads remain with their first employer at the four-year mark after graduation. Among the half who changed, a minority were motivated by extenuating circumstances (got married; didn’t get a visa; industry-wide layoffs, etc.) The majority who changed did so for better “fit,” better situation, or more compensation. I am in favor of talent going where it is wanted and rewarded. But a recovering economy and certain booming industries (such as health care, energy, and high technology) make it easy to gain an inflated sense of self-worth. Especially in today’s worsening environment, I am concerned about the job-hopping that is motivated by the same dilettantism that Robert Service condemned.

Here’s a hypothetical example. A company successfully woos an MBA and moves this person a very long distance to the headquarters. MBA shows up for work, registers as an employee, and begins the settling-in process. Then, MBA abruptly quits, a matter of days or weeks into the job. No apology. No repayment of expenses. No extenuating circumstances. No particular empathy for the company; the company’s talent development plans are interrupted and may necessitate a re-entry into the job market. Perhaps all along, MBA had been angling for a job offer from another company in the same industry in the same city and finally got the nod.

Reneging on an employment agreement reflects very bad judgment. This MBA negotiated in bad faith with the employer and defaulted on an implicit contract to provide labor in return for salary, benefits, moving expenses, and a range of other set-up costs. In the long run, most markets are reasonably efficient. What goes around comes around. This person will face a reckoning sooner or later and it won’t be pretty. The MBA assumes that markets and firms have no memory (but they do!) And the MBA’s new position (granting a minor pay raise or better title) may be gained with a loss of seniority only to find himself 3-6 months later dealing with a LIFO situation – yes, “last in first out” – when layoffs occur. In this very uncertain labor market, we’ve been encouraging people to make a move only after careful consideration of the prospect and comparison of all their fit factors.

Alaska affords distance and great perspective on big headlines and errant behavior. Boom-bust cycles draw in the opportunists and dilettantes during the booms and wash them away in the busts. Those left standing had staying power derived from a very different attitude about careers, service to employers, and ultimate purpose. The economy that is emerging now will reward the earnest people and penalize the dilettantes. Plot your career steps accordingly.

Brinksmanship: Crazy Like a Fox

“The best swordsman in the world doesn’t need to fear the second best swordsman in the world; no, the person for him to be afraid of is some ignorant antagonist who has never had a sword in his hand before; he doesn’t do the thing he ought to do, and so the expert isn’t prepared for him; he does the thing he ought not to do; and it often catches the expert out and ends him on the spot.”

- Mark Twain, A Connecticut Yankee in King Arthur’s Court

The negotiation deadlock over the Federal debt limit will make a worthy subject for business school cases. Indeed, the scenario is not unknown to business practitioners: two sides come together to negotiate the resolution of some problem; both sides are adamant and a deadlock forms; a deadline looms after which failing to come to terms, both sides will be worse off. To aficionados of bargaining, watching this is high entertainment. It’s certainly highly instructive for students and practitioners of business.

Lesson 1: in any negotiation, there are at least three sets of discussions going on: the talks between the two sides, and then the talks within each side. Read the media closely and you will sense the pressure that the Progressive wing of the Democratic Party, and the Tea Party are bringing to bear on the negotiators. This pressure has influence because the leaders of both parties are already looking toward the 2012 elections.

Lesson 2: Deadlines have the virtue of concentrating the mind. August 2nd is a deadline, a “brink.” We’ve had no end of experts declare how awful the consequences will be if Congress does not raise the ceiling by the deadline, August 2nd. One of the most frequent questions I’m asked these days regards the consequences if Congress doesn’t raise the ceiling. It won’t be pretty, though there are some worthy arguments to the contrary. I’m less worried by the possible short-term reaction by government creditors, employees, etc. and more by the potential failure to deal with the twin problems of high unemployment and high government indebtedness—it will be hard to resolve both simultaneously.

Lesson 3: it can be rational to push the conflict to the brink. Threatening to do the irrational thing can help to budge your counterparty off of a deeply entrenched position. But it risks the worst-case outcome and produces a great deal of anxiety. Most game theorists argue that this tactic should be used sparingly. John Foster Dulles invented the term, “brinksmanship,” during the Cold War to signify a strategy of being willing to go to the brink of hot war in order for the U.S. to achieve its foreign policy objectives. John F. Kennedy practiced this with the Cuban Missile Crisis—and it worked.

Lesson 4: Know your counterparty. The debt ceiling negotiators are professional politicians; they cut deals for a living. One might assume that they could rationally reach an agreement. Less well-known are the freshmen Congressmen elected on the Tea Party tide and the Progressives on whom Obama will depend for re-election—both of these groups are really lighting up the media. This is intentional reputation-building aimed at motivating the other side to change its position. To budge the other side and to give your own negotiators a stiffer spine, it may help to have backers who seem a little bit crazy. Crazy counterparties are less willing to play by the rules and reach a conventional outcome. As Mark Twain noted, “the ignorant antagonist…doesn’t do the thing he ought to do.”

The textbook solution for dealing with stalemates is to find a way to push back the deadline, change the players, change the rules of the game and constraints, and/or change the value-added. Reading the news reports closely, one sees manifestations of all of these.

The big problem with brinksmanship is that it is easy to lose sight of what really matters: national security and financial soundness can get lost in the noise of rattling sabers or pre-election posturing. Let’s hope that today’s brinksmen and women keep their eyes on the real goals. If we cannot cut government spending at a time like this, when will we ever have the resolve to do so? On the other hand, it seems unlikely that we’ll reduce debt without higher taxes.

Having a Vocation, a Purpose, a Calling

Here are the remarks to Darden’s Class of 2011 that I gave at the graduation ceremony.

At this time of year, friends, family, and professors tend to ask the annoying question, “Have you got a job?”  You probably resisted answering it for as long as you could.  But they persisted: “Have you got a job?” 

The full-time students left a job, spent 21 months at Darden, and are on the launch pad back into professional life.  It is natural for acquaintances to ask, “Have you got a job?”  MBA for Exec students find this a relevant question too: most if not all have a job and yet aspire for more.  They came to Darden to reach higher.  For them, the whispered question is, “Are you set for your next job?”

Well, I’m here to tell you all something extremely important, that a mentor of mine, Peter Gomes, used to say: by “job” we don’t mean simply something that gives you a salary.  We really mean: “Do you have a purpose?  Do you have a calling?  Do you have a vocation?”  I want to suggest to you that whether or not you have a job, everyone has a vocation and that vocation is to live a life that is worth living. 

Michael Novak wrote that business can be a “calling,” something more than just a job.  He said, “Business is a demanding vocation, and one is not good at it just by being in it, or even by making piles of money.  The bottom line of a calling is measured by pain, learning, and grace.  Having a good year in financial terms is hard enough; having a good year in fulfilling one’s calling means passing tests that are a lot more rewarding…Doing anything as a calling—especially doing something quite difficult—is a lot more fulfilling than merely drifting.”   John D. Rockefeller said that if your only goal is to become rich, you will never achieve it.  A calling is about impact in the world.  It is about service to someone.  Quite often, it is fulfilled in a non-obvious place, rather different from the herd of fashion and conventional thinking.  A vocation is not necessarily easy, costless, or convenient.

A vocation isn’t just about money, power, or fame.  We have Darden graduates who garnered all of these, but did so as a consequence of a calling to delight customers, invent new products, or build vibrant organizations.  Some have jobs at the very top of their field where their service as leaders is prominent and impactful.   Others served a calling in equally important, but less obvious, ways. 

•    Trammel Summers, a graduate of the Class of 2009, an excellent student, declined a job offer with the top firm in his field, in order to work close to home here in the South, so that he could help to care for his brother who suffered a brain injury.
•    Christine Shim of the Class of 2004 left her investment banking job to work for a year at a fraction of the banking salary with Michele Rhee, who dramatically restructured the Washington, D.C. public school system. 
•    Lee Murray of the Class of 1985 pursued a business career.  She had some ideas about how her city could be run better.  So she ran for Mayor.  After her successful election, she brought new processes and controls that served the city well.  
•    Finally, two Darden graduates of the Class of 2009, Chip Ransler and Manoj Sinha, founded a firm that commercialized new technology to generate electricity from agricultural by-products.  Their successful entrepreneurship brings electricity to poor villages in India and harnesses a vision of renewable energy.  

I can offer many other examples of Darden alums who chose their jobs out of a sense of vocation.  You should too.  That is my advice to you at this commencement of the rest of your life. 

Your time at Darden has had a lot to say about vocations and living a life that is worth living.   For instance, a definition of the life that is worth living will vary across people and across time.  We should respect the diversity of such views as we engage with co-workers and members of a community.  Your learning teams have been a microcosm of such diversity.

And your time at Darden probably has affirmed that the definition of vocation isn’t a fixed idea—it will vary as you grow through time.  I’ll wager that your 21 months at Darden are proof positive of this.  If vocation varies as you grow, you must listen carefully and continuously for the vocation to which you are called.

A vocation is not some abstraction that you put in a box somewhere and look at from time to time.  It should be with you every day and affect even the smallest decisions.  Your conception of a vocation will drive choices, in the moment, in real time, in a way that is meaningful.  For this reason, all the tools that we teach you at Darden come together in a strategic way when you have a purpose, a vocation, a calling.

In the wake of the subprime crisis, we heard fresh attacks on capitalism, many of them centered around the sense of alienation of people from the work they do.  The way to withstand such alienation and to reflect thoughtfully on the extraordinary economic promise of capitalism is to live and work with purpose. 

The mission of the Darden School is to improve society by developing principled leaders for the world of practical affairs.  We believe that living with purpose is an essential ingredient of having impact as a leader and achieving happiness for yourself and those around you.  Helen Keller said, “Many persons have a wrong idea of what constitutes true happiness. It is not attained through self-gratification but through fidelity to a worthy purpose.”

Do you have a job?  That’s not the right question.  Do you have a vocation, a calling, a purpose?  Only you can answer that.  As your Dean, my final admonition to you is to search for, and live, that purpose in all you do.

Godspeed to you.  And thank you.

An Academical Village that Transforms Students

“I was trained as a decision analyst and game theorist. … but I never really used the techniques of game theory—concepts and ideas, yes, but techniques, no–in my roles as negotiator and director. …Simple, back-of-the-envelope analysis was all that seemed appropriate. I was constantly impressed with the limitations of iterative, back-and-forth, gamelike thinking. I could try to be systematic, thoughtful, and analytic, but the "others" I negotiated with always seemed to have intricate, hidden agendas. … They certainly weren’t satisfying the prescriptive ideals of "rational economic man."…I had to balance scientific integrity with political reality. … I played the role of a mediator, in some the role of an arbitrator….I learned about different national negotiating styles, and above all about the importance of timing: one had to keep a fluid agenda and wait for the propitious time to introduce a contentious issue. I learned that even the Soviets are not monolithic and that they occasionally change their minds. I learned how difficult it is to accomplish anything substantial in open meetings when each side has to go on record for the people back home. I learned that money comes from different pockets and that five million dollars taken from the left pocket of a country might be easier to get than five thousand dollars from the right pocket. I learned that if you wait long enough, someone on the other side will vaguely propose what you want, and that it’s easier to open negotiations that way. I learned the need of others to feel that they are part of the inner circle. I learned that "gentlemen’s agreements" that are not documented are fragile; that a party may be sincere about such an agreement when made, but that they may not be able to withstand internal pressures from objectors at home; and that because negotiators are embarrassed when they have to back away from promises made, they often become more amenable to other compromises. I learned that the boisterous atmosphere of an Austrian tavern often does far more to establish a proper ambience for negotiations than does a sedate cocktail party or dinner.
        — Howard Raiffa

With these words, Raiffa, a brilliant scholar in the field of bargaining and negotiating, introduced his masterwork in the subject, The Art and Science of Negotiation. What struck me was his blend of analytical rigor combined with his humanity as a student of managerial behavior.  The learnings that he summarizes in the quotation above suggest that the education of a rigorous leader should go well beyond the mastery of analytics.  Mind you, he is not saying that the analytics don’t matter, for indeed they are necessary for the preparation of great professionals.  But they just aren’t sufficient. It is not enough for schools simply to emphasize objective knowledge (“know what.”)  Schools should focus on “know how” (which is tacit knowledge, learned in collaboration with others.)  And a certain amount of Raiffa’s reflections entail a capacity to “say why”—these are capabilities to listen, influence, build relationships, navigate through diversity, and so on.  Darden’s high engagement teaching really delivers “know what,” “know how,” and “say why.”

A few weeks ago, I attended a confab at a gathering of Deans and CEOs to discuss what business schools should do differently in the wake of the Subprime Crisis.  During dinner, a Prominent Former CEO leaned across the table and wagged his finger at me saying, “You universities are dinosaurs.  Look at all the lectures being put online; the digitization of textbooks; the rise of online degree programs.  All of the schools that are identified by a place will be superseded by the digital medium.  You are sunk!”

A hush fell on the dinner.  Everyone’s eyes turned to me, the object of Prominent Former CEO’s rant.

“The changes you describe are all happening, and Darden is implementing some of them—for instance, I blog and tweet,” I replied.  “But an important exception challenges your conclusion.”  Even the waiters started lingering with ears cocked to the reply.

“The digital medium efficiently disseminates facts and theories—the digitization of lectures and textbooks emphasizes that.  And it is showing some promise for building mastery of the mechanics of business (how the two sides of a balance sheet do balance) or competitive logic through games of various kinds.  I agree that the Internet will disintermediate the transmission of objective knowledge.”  A smile began to appear on Prominent’s face.

Then I motioned to everyone in the room: “But I‘m willing to bet that each of us here was transformed in an important way by an in-person encounter with someone else.”  I offered some examples of what and who those encounters might have been about:

•    A piano teacher, who over the course of many lessons chided, prodded, corrected, and complimented you to achieve a degree of mastery over that complicated instrument.  The point was not just to hit the right key, but to play with feeling and personal interpretation.
•    A coach who showed you how to swing a tennis racquet and then guided you to put spin on the ball, vary the strength of the return, and aim.  At times, the coach held your arm and showed you where to position your feet.  Through engagement with the coach, you became a decent tennis player.
•    A friend, teacher, psychiatrist, or religious adviser who talked you through a deep personal crisis.  The ability of the other person to read you totally was a key ingredient in your recovery.
•    A manager gave you some difficult feedback early in your career and did so in a way that was empathetic and motivated new behavior.  The face-to-face meeting was a powerful event that not only made you a better businessperson, but also became a model for dealings with your own employees.
•    You learned to cook with the help of a more-experienced friend.  Through repeated meals, you gained insights about how touch, taste, and appearance indicated a dish that was ready to serve.

I said, “Each of these transformations entails some kind of learning: can it be gained online?  I doubt it if the online education is solitary and passive: watch this video, read that text.  The focus of much online learning today is objective knowledge (that is “know what” stuff such as names, dates, formulas, etc.)  And didactic online teaching demands relatively little focused attention: you can zone in or out as the spirit moves you.”

“Transformations that build business leaders are not solo or passive.  They are socially engaging and actively experiential.  Equally important, they build mastery that goes well beyond objective knowledge—they convey tacit knowledge (the “know how” stuff such as communicating, managing a process, building a team, and so on.)  They augment social skills, tact, and emotional self-awareness.  Not least, they strengthen self-confidence, courage, and wisdom. They require that you be present, here and now, to win these kinds of attributes.”

“Darden’s high engagement approach, for instance, actively shapes the experience of students to promote interaction that builds these attributes.  For that reason, I believe that our school and the few others that take a similar philosophy, will not merely survive, but will prosper.  Indeed, the serious challenge to higher education is not the superabundance of information, but the paucity of wisdom.”

With that, I stopped and looked at Prominent Former CEO.  Everyone else did too.  He seemed to blush, and said, “Well…I didn’t mean it that way!”  Everyone chuckled and the conversation moved on.

In the weeks since then, I’ve reflected on the exchange: in what way did he mean that universities are sunk?  The digital realm is really impressive.  I do think that bricks-and-mortar universities will increasingly revert to the online medium for the transmission of objective knowledge and some skills.  But I doubt a similar turn for schools that build the kinds of transformational attributes I described.

The Internet seems likely to hasten the segmentation of the enormous field of management education (over 13,000 degree-granting institutions world-wide).  Those that purvey the rote learning of names, dates, formulas, definitions, facts, and so on will need to go digital or shrink.    Those that focus on the transformation of the student with deeper attributes will need to incorporate what digital technology can offer, but will do well to focus on high-engagement learning, much of which will remain face-to-face.

In founding the University of Virginia, Thomas Jefferson aspired to establish an “academical village,” not merely a collection of buildings and books, but a genuine intellectual community where students, faculty, and staff would engage one another to promote enlightenment.  Today we know that there is not just one model of academic village: some are high-engagement in-person villages like Darden; others are digital villages created with the help of new social media.  The former affords the transformational attributes.  The latter will excel at conveying objective knowledge. What kind of academical village do you want to inhabit?  It depends on what you want to learn and how you want to grow.  As the saying goes, “you pays your money and you takes your choice.”.

Howard Raiffa was prescient: A big challenge in the development of managerial leadership is to get well beyond the mastery of objective knowledge and into tacit knowledge, that is the stuff by which leaders lead.  Pushing objective knowledge through digital pipes only gets you so far.  The larger gains to be made come from experiences that are transformational and focus on attributes such as leadership and communication.   Darden is positioned to do just that.

Letter with an Imperfect Address

“Teaching is like sending a letter with an imperfect address.  You never know where or when the message will arrive.”  — C. Roland Christenson.

Christenson, a mentor of mine, passed away years ago; but lives on in my memory for wisdom such as this.  A recent experience would prompt me to modify it to say, “You never know when or where the message will be sent or delivered.”  This modification speaks to the choices teachers make and to the role of chance and serendipity.  Consider the experience I had last month.

It began with an email in October from Christina Feng, a teacher at Martin Luther King High School at 65th and Amsterdam in New York City.  She wrote,

“Dear Dean Bruner,

I’m a Teach For America alumna teaching high school business, economics, and government to disadvantaged, at-risk 12th graders. I love what I do, and this year, to better facilitate my students’ understanding of the business world, I am having my students run a boutique mergers and acquisitions advisory firm. We are just in the beginning stages of our work, but we are getting very into it.  I am writing to see if we could welcome you as a guest in our classroom…I want to show my students that they deserve the attention of talented and successful people like yourself, and that they too, can enter the world of finance, no matter what their own personal backgrounds may be.  I look forward to your thoughts.

All the best,
Christina Feng

P.S. I’m requesting funding through Donorschoose for a class set of your book, "Deals from Hell." Any and all help spreading the word would be appreciated!”

Christina’s invitation grabbed my attention.  First, helping disadvantaged kids finish high school has to be a national priority.  Failure to get a diploma is a key predictor of adult poverty.  [For more on poverty and its drivers, see, Creating an Opportunity Society, by Ron Haskins and Isabel Sawhill.]  I’ve done my share of criticizing K-12 education in the U.S.—so, I thought that this might be an opportunity to lend a hand and at least learn more. 

Second, I was surprised by Christina Feng’s audacity.  Running a simulation of an M&A advisory boutique with a group of disadvantaged kids?  Assigning them to read my book Deals from Hell, which is clearly written at a collegiate level?  Asking me to fly to New York, teach, and fly home?  Plainly, her “knock and the door will open” attitude contradicted some widespread (and often wrong) characterizations of public school teachers.

Third, it sounded like fun.  Christina has a lot of energy for her students—indeed, she is a nuclear stockpile.  I like the company of such people and don’t mind picking up some spare radiation.  Would it be humanly possible to teach anything meaningful about M&A in a 90-minute class to 12th-graders?   One disability of all “experts” as teachers is that they know too much.  I can talk for hours about the technicalities of M&A.   The challenge to speak plainly and concisely is a wonderful opportunity to grow.

Therefore, on February 16th, I found myself in Christina’s classroom.  I had suggested that we teach by the discussion method rather than by lecture.  I shared with her some merger negotiation exercises that we use at Darden.   She offered to develop a new simulation, based on the hypothetical acquisition of the New York Times (NYT) by Google. 

Simulations are complicated and take a long time to develop.  But Christina pulled it off.  She developed a narrative for the companies and the negotiations.  And she directed her students to some online sources of data.  She formed the students into three bargaining “worlds” where each world consisted of one team representing Google and the other representing NYT.  And she set aside plenty of time for the students to prepare for the negotiations and then to bargain.  Finally, she had the students read a few chapters from Deals from Hell (one copy for each student, kindly donated by my publisher, John Wiley & Sons.)  Thus, when I walked into her class, the students were pretty well steeped in the exercise and ready to talk about their experience.

After introducing ourselves to each other, I went from world to world, asking the students to describe the negotiations and their result.  All three worlds reached agreement.  The work in each world showed reasonable analytics (mainly based on P/E ratios) and strategic thinking.  Especially interesting was the fact that in two worlds, the buyer (Google) agreed to a price that exceeded its reservation or “walk-away” price.  I probed.  We learned that the seller, NYT, “anchored” the negotiations by quoting a very high asking price at the outset.  This led to more questions about how human behavior (both the strategic kind and the unintended kind) can influence negotiation outcomes.  With the analytics and the behavioral considerations in mind, we began to consolidate an image of M&A as a very messy, risk-prone affair.  As we discussed the risks in the Google/NYT combination, the students asked me about the Deals from Hell.  This gave a natural segue into closing comments about success and failure in M&A and about the students’ future.

As a coda to my class, I urged the students to finish high school, get the diploma, and go as far as they can up the educational ladder.  If they are assured of graduating, I urged them to help someone who is faltering.  I said that there is a very strong correlation between educational achievement and economic welfare.  One example I mentioned was the evidence contained in the following graph (provided by the folks at Calculated Risk.)   It shows a clear association between unemployment and level of education attained. 

image

I urged the students to get more education: vocational school to learn a trade; an associates degree at a community college; and/or a four-year bachelor’s degree.  I said that money should not hold the students back—there are sources of loans and financial aid.  The intellectual challenge should not hold them back—there are tutors, advisors, and other sources of support that can help.   Time should not hold them back—it is possible to find part-time educational programs.  Sure, it is hard work.  But there is no free lunch.  If you want to make a better life for yourself, you must make the investment.  I said that now is the time in their lives to reach for the brass ring: don’t wait. 

The students applauded.  Many of them asked me to autograph Deals from Hell, (catnip to an author).   Afterward, Christina and I went to a quick lunch—she insisted on paying for my salad; I insisted back; she insisted harder.  We said goodbye; I hustled back to the airport to catch the plane home.  But like the aftermath of any good case discussion, the process of reflection for me continues.

This felt like time well-spent.  I helped to deliver a message consistent with Darden’s values about reflective learning, excellence, hard work, and diversity to a group of high school students at a moment when they are looking for role models and wrestling with their futures.  I think we actually succeeded in conveying some important ideas about M&A.  And it was a great deal of fun.  Check out this photo: these kids have personality.  (So does Christina, at the extreme right.)

image

The ultimate test of the worth of a class is whether students learned something important.  I’ll never know for sure; this is the existential uncertainty of any teacher.  As my mentor said, it’s hard to know when and where the message will arrive—and as I would add, it’s hard to know precisely what messages were sent.   When it comes to promoting learning, how you are teaching can be as important as what.  It sure seems to me that the simulation and class discussion really nailed a how.  I saw a wonderful high school teacher who thought deliberately and audaciously about a variety of ways to send important messages.  Christina Feng is an inspiration and gives me hope for the future of public K-12 education in the United States.

And to the students in Christina Feng’s class: YOU RULE!