Integrity and Trust in 2014

The story is told that Theodore Roosevelt was searching for lost cattle one day when he came upon some of his ranch hands about to brand some unbranded strays. Roosevelt pointed out that they weren’t on his own ranchland; they were on his neighbor’s. The rule was that the unbranded stray cattle had to be on your land for you to brand them as yours—without that rule, neighbors would steal from each other. The ranch hands probably replied that no one would know the difference and that they had worked hard enough to find these strays; they wanted to get the branding done and call it a day. They pulled the “TR” brands from the fire and were poised to mark the cows as Roosevelt’s. But Roosevelt fired the ranch hands on the spot. He said, “Anybody who would steal for me would steal from me.” For Roosevelt (and most of us), the ability to trust someone is closely knitted to his or her integrity, as demonstrated in words and actions.

The year, 2013, served up some amazing examples of what Roosevelt worried about: the LIBOR scandal, SAC Capital Advisors and insider trading, Serge Dassault and vote buying, Lance Armstrong and the doping scandal, and Toronto Mayor Rob Ford, for example. These seem like life imitating art: aspects of these cases are reflected in The Wolf of Wall Street, a new movie based on the memoir of Jordan Belfort, who founded a high-pressure brokerage firm in the 1980s and was eventually sent to jail. It’s a story of villainy, brutality, theft, betrayal, fraud, and exploitation, a tragic illustration of how businesses and their leaders can go way way off track. As Roosevelt might say, a great deal of stealing went on, both for and from. (I agree with critic, Joe Morgenstern, that, “I couldn’t wait for the hollow spectacle to end.” It is a memorable tragedy submerged beneath three hours of Martin Scorsese’s overwhelmingly graphic display, meant to titillate, not instruct.)

Most people recoil from the thought of working in Jordan Belfort’s kind of environment. We want to be proud of our place of work. Fortunately, the business world offers a host of counterexamples, companies that talk openly about the importance of ethical behavior and then walk the talk. You can find examples of these companies in published lists of trustworthy companies at Forbes/Audit Integrity, Ethisphere, and at Trust Across America (TAA). Two companies led by Darden alums rank in the top ten in the latest TAA listing: Tom Watjen (D’81) is the CEO of Unum Group; John Strangfeld (D’77) is the CEO of Prudential Financial. And many other Darden alums create trustworthy environments, be they leaders of a company, a division, or a small team. Warren Buffett annually reminds employees at Berkshire Hathaway how vitally important are ethics and integrity in all they do. He wrote, “We can afford to lose money. We can afford to lose a lot of money. But we cannot afford to lose one shred of our reputation. Make sure everything you do can be reported on the front page of your local newspaper written by an unfriendly, but intelligent reporter.”

Implications for Business Schools

Schools have a role in producing a business society of our aspirations, mainly through the caliber of people they graduate. A great education should consist of growth in knowledge, skills, and character. Some people would suppose that b-school should just be about knowledge and skills. Wrong. To build a society of trust and integrity, we must talk openly about values and expectations. Unless we want a society of Jordan Belforts, we should aim to shape the character of our students. Education is manifestly a moral activity. But in Excellence without a Soul, Harry R. Lewis, a former Dean of Harvard College, wrote that universities have drifted into a rather technocratic and narrow sense of mission:

… you will see plenty of talk about the world’s problems, about the pursuit of knowledge, about hard work and success. Rarely will you hear more than bromides about personal strength, integrity, kindness, cooperation, compassion, and how to leave the world a better place than you found it. The greater the university, the more intent it is on competitive success in the marketplace of faculty, students, and research money. And the less likely it is to talk seriously to students about their development into people of good character who will know that they owe something to society for the privileged education they have received. (Page xiv).

The alternative is to give real emphasis to character development, a strengthening of attributes such as integrity, empathy, work ethic, social awareness, and emotional intelligence. This emphasis should be at the core, not the periphery of the curriculum. And it should offer a compelling view of how faculty and staff members should engage with students. I was granted a vision of this by one of my own mentors in graduate school, Professor C. Roland Christensen. He wrote,

I believe that teaching is a moral act. I believe that what my students become is as important as what they learn. The endpoint of teaching is as much human as intellectual growth. Where qualities of persona are as central as qualities of mind—as is true in all professional education—we must engage the whole being of students so that they become open and receptive to multiple levels of understanding. And we must engage our whole selves as well. I teach not only what I know, but what I am. (“Every Student Teaches,” pgs. 116-117.)

Ultimately, schools should model what it means to be a community of trust and integrity. For better or worse, schools serve as powerful examples for their students. Simply by modeling positive attributes, they help to build graduates of whom they can be proud.

Our Approach at Darden

Every school is a work in progress. To be a community of integrity is not a once-and-done decision, but is the result of thousands of choices made every day. I don’t claim that everyone at Darden makes these choices perfectly. But it seems easy for us to talk openly about character, integrity and trust. We have a student-run Honor Code that the faculty respect. We offer a required and graded course on Business Ethics, along with numerous electives. We have an expectation that the faculty will not shrink from exploring ethical dilemmas no matter what one’s field of teaching might be. Our centers and faculty in business ethics are thought-leaders in scholarship and curriculum development. We share expectations that create a community of trust. The Darden Mission Statement commits us to “developing and inspiring responsible leaders.” Darden’s Statement of Norms says that “We act with integrity: we do what we say.” The Board of Visitors of the University endorsed the University Code of Ethics. It states that, “We do not condone dishonesty in any form by anyone.”

The Darden Community rallies behind the values embedded in the Mission, Norms, and Code for at least three reasons:

  • We want to create a sustainable legacy for Darden. To incorporate ethics into our workplace mindset is to think about the kind of community that we would like to live in, and that succeeding generations will inherit.

  • Ethical behavior builds trust and dividends of trust are valuable.The foremost dividend is an unimpeachable reputation. Equally important, ethics and trust build strong teams and strong leadership. Stronger teams and leaders result in more agile and creative responses to problems. Ethical behavior contributes to the strength of teams and leadership by aligning employees around shared values, and building confidence and loyalty.

  • Darden can’t afford the costs of doing otherwise. We cannot afford to lose one shred of our reputation; we cannot afford to lose one talented member of our community, applicant, or corporate partner over an ethical lapse; and we cannot afford to lose our self-confidence and self-respect.

Annually at the start of the calendar year, I ask the faculty, staff, and students to reaffirm our vision and our commitment to walk the talk—and I do so again, here in January, 2014. We expect each other to manage, study, lead, and work with integrity. This entails three commitments:

First, at a personal level, make a commitment to go the extra mile for what’s right.  Mahatma Gandhi said, “You must be the change you want to see in the world.”    If we want a community of trust and integrity, we must live that vision.

Second, encourage others around you to do what’s right. We are not an “anything goes” community. We have mutual expectations for exemplary behavior. No number of messages from the Dean can match the impact of peer expectations. A community is only as strong as its most vulnerable link. Help those who may be headed in the wrong direction. Speak up for our values.

Third, if you see something, say something. Silence implies consent. The UVA Honor System provides representatives with whom students and professors can share their concerns on a confidential basis. Similarly, faculty and staff members can share concerns with senior leaders, me, Brad Holland, University Ombudsman (434- 924-7819,, and/or Barbara Deily, Chief Audit Executive of the University (434-924-4110, The mark of a good organization is not that it never has ethical lapses, but rather what it does about them. At Darden we must get the facts and take appropriate action as fast as possible.


A visitor at one of Darden’s admissions events once challenged me: “Dean you talk and blog so much about integrity…does Darden have an ethics problem?” I replied, “I like to think that we don’t have an ethics problem precisely because we do talk and blog about integrity.” Perhaps something I said resonated with him: he applied, was admitted, graduated, and now spreads the word about Darden. High-performance organizations take integrity seriously—they talk about it regularly, often starting with the CEO. It is never too early or late to talk about integrity. People get distracted, confused, or forgetful. We can all use conversational reminders about what is important. Darden is, and aspires to remain, a high-performance organization; for us, striving to be a community of integrity is not an afterthought; it is where that high performance starts from.

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2013 Book Recommendations

“I cannot live without books.” (Thomas Jefferson to John Adams, June 10, 1815)

This is my annual moment to channel UVA’s founder, Thomas Jefferson: Read more books! Effective leaders are sponges for new ideas and self-instruction. Therefore, anyone who aspires to make a difference in the world should read widely as a foundation for her or his growth in leadership. Blogs, newspapers, and magazines are important too (for my current reading of these, see this); but books are essential. In books, you gain a fuller development of an author’s argument, more detail and evidence, and most important, a greater chance for serendipity and the connect-the-dots “Aha!” in which you create new meaning. Give yourself a break: read a book. Here are some books that rocked my world over the past 12 months.

Since the Global Financial Crisis in 2008, pundits, provocateurs and politicians have argued that the world has changed in some fundamental way and will never be the same again. The implication is that we need to shed our old assumptions and get with the “new normal.” I’ve blogged about this in 2013 (see this, this, and this). Tyler Cowen’s, The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, is a well-written and closely-argued assertion that America’s Golden Age (roughly 1945-1970) is gone. Since the 1600s, America has enjoyed the “low-hanging fruit” of free land, immigrant labor, and transformational technologies. He says that now we can only look forward to lower rates of growth and social mobility. I’m not entirely convinced that the future is as bad as he sees it. Just when conventional wisdom throws in the towel, growth picks up—the late 1970s are one example. Still, The Great Stagnation is a very stimulating read.

Stephen Greenblatt’s, The Swerve: How the World Became Modern, claims that the Renaissance began with the discovery in 1406 of On the Nature of Things, by Lucretius, a Roman poet-philosopher. Lucretius advanced ideas such as the theory of the atom, heliocentrism, free will, and atheism. Greenblatt argues that the steady dissemination of Lucretius cracked the stranglehold of feudalism and Church dogma and triggered a new wave of scientific inquiry, political upheaval, the Reformation, cultural liberalization, the Enlightenment, and the Declaration of Independence. At the close of the book, Greenblatt links the ideas of Lucretius to Thomas Jefferson. In short, modernity began with the rediscovery of Lucretius and the ideas he articulated. That’s a sweeping claim, which I wish Greenblatt had anchored in a host of research on other forces that promoted the swerve to modernity (new technology, exploration, climate change, etc.) But the book is a very well-written brief for culture and the humanities as forces for change. Very relevant to business leaders who may be wondering about the impetus for some future “swerve”.

Two books challenge conventional wisdom on the causes and nature of the Great Depression—highly relevant to shaping our critical perspective on the problem of slow economic growth today.   Robert Higgs, Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity argues that the length and depth of the Great Depression were caused by under-investment by the private sector, which in turn was caused by uncertainty about the government’s new regulatory regime. Through the 1930s, President Franklin Roosevelt rolled out waves of new regulations, new taxes, and red tape; and business leaders hunkered down in confusion. Higgs writes, “The insufficiency of private investment from 1935 through 1940 reflected a pervasive uncertainty among investors about the security of their property rights in their capital and its prospective returns. This uncertainty arose, especially, though not exclusively, from the character of the actions of the federal government and the nature of the Roosevelt administration.” This account of the Great Depression gives rather little attention to other possible causes or the possible benefits of government intervention. But there’s a plausible argument to be made that regime uncertainty is an important cause of relatively low investment in new plant and equipment today.  This next book is extremely well argued and documented, though to the lay reader it will seem technical and wonkish, a hard slog; but if you give the book the time and attention it deserves, you will be well-rewarded. Alexander J. Field’s, A Great Leap Forward: 1930s Depression and U.S. Economic Growth presents the astonishing claim that the 1930s in America were an episode of great innovation and advancement in productivity. Field wrote, “It was not principally the Second World War that laid the foundation for postwar prosperity. It was technological progress across a broad frontier of the American economy during the 1930s. Because of the Depression’s place in both the popular and academic imagination and the repeated and justifiable emphasis on output that wasn’t produced, income that wasn’t earned, and expenditure that didn’t take place, it will seem startling to propose the view that the years 1929-1941 were, in the aggregate, the most technologically progressive of any comparable period in economic history. This hypothesis entails two primary claims: first, during this period businesses and government contractors implemented or adopted on a more widespread basis a wide range of new technologies and practices, resulting in the highest rate of peacetime peak-to-peak total factor productivity growth in the century, and second, the Depression years produced advances that replenished and expanded the stock of unexploited or only partially exploited techniques, thus providing the basis for much of the labor and total factor productivity improvement in the 1950s and 1960s.” I cited this book in my webinar, “Desperately Seeking Growth” and challenged the audience to consider whether and where during the recent economic malaise technological advance was laying the foundation for future growth.

The U.S. has actually had at least three economic depressions: the “Great Depression” (1929-1940), the “Long Depression” (1872-1879) and a depression that lasted from 1837 to about 1848. When conventional wisdom thinks of economic depression, it summons up the 1930s. Yet the other two depressions were whoppers as well. Alasdair Roberts’ America’s First Great Depression: Economic Crisis and Political Disorder after the Panic of 1837 gives an excellent account of the awful wreckage—and of the recovery unaided by government pump-priming and fueled by the California gold strike. To learn more about the “Long Depression,” I recommend 1877: America’s Year of Living Violently by Michael Bellesiles. By focusing on the nadir of that depression, the author weaves an extraordinary story of violent labor strikes, extreme poverty, and social strain. These two books give a sobering reminder that the stresses associated with our Global Financial Crisis and Great Recession are the rule, not the exception, of economic calamities. Severe economic inequality prompted the rise of organized labor after 1877. The Tea Party and Occupy Wall Street echo the surge of various populist movements. The rise of Golden Dawn in Greece recalls the rise of the Nazis in the 1930s and of racist and anti-immigrant parties in American depressions. As Mark Twain said, “History may not repeat itself, but it rhymes.”

My UVA colleague, Professor Gary Gallagher, once told me, “You cannot fully understand America today without learning American history of the 19th Century.” For instance, America was the world’s high-growth emerging economy during the so-called “Gilded Age,” the 35 years following the Civil War. The economic expansion of those years laid the foundation for America’s economic leadership in the 20th Century. It is also true that those years give a picture of what “unfettered capitalism” looks like: buoyant, turbulent, and Darwinian. In pursuit of insights about this era, you should tuck into American Colossus: The Triumph of Capitalism 1865-1900 by H.W. Brands. The book spares no criticism of people (Morgan, Carnegie, Rockefeller, and Ford) or events. But Brands concludes, “The capitalist revolution was in many ways the best thing ever to befall the ordinary people of America.”

One of the intellectual giants of the late 19th Century in America was William James, a professor at Harvard. He was a physician, one of the founders of the field of psychology, and a philosopher, associated with the pragmatist school. A year ago, I read James’ Varieties of Religious Experience—his notion of the person “born again” through a faith experience is a foundational example of interpretive psychology. This led me to acquaint myself with the author. So I turned to Robert D. Richardson’s William James: In the Maelstrom of American Modernism. Richardson argues that William James was part of the tipping point of intellectual culture from Victorianism into modernism. This is an outstanding example of deep biography: very well-written and documented.

Another party to the tipping point of modernity at the close of the 19th Century would be Albert Einstein. Walter Isaacson’s Einstein is a highly readable biography (I’m a fan of Isaacson’s and also recommend his biography Steve Jobs.) Having discovered the theory of relativity in his twenties, Einstein struggled the rest of his life with fame, and the effort to link the various theories of physics into a General Field Theory. His struggle is a worthy reminder to business leaders about the difficulties of scientific discovery and of the personalities that engender them.

I enjoyed Good Prose: the Art of Nonfiction; Stories and Advice from a Lifetime of Writing and Editing by Tracy Kidder and Richard Todd for their brilliant perspectives on memoirs, narratives and essays. This book is essentially a dialog between Kidder and his long-standing editor, Richard Todd. For instance, this: “Self-exploration, including confession, almost always involves other people. Some of them are bound to be offended by an honest memoir. But the good and honest memoir is neither revenge nor self-justification, neither self-celebration nor self-abnegation. It is a record of learning. Memoirs, by definition, look backward. They are one response to Kierkegaard’s dilemma that life can only be understood backward but must be lived forward.” I’ve enjoyed Tracy Kidder’s writing ever since reading his Soul of a New Machine over 30 years ago—and I recommend that book too.

Last year, I recommended Personal Memoirs by President Ulysses S. Grant. He stands as one of the more problematic American Presidents. On one hand, he was a brilliant general, who brought the Civil War to conclusion. Grant’s philosophy of battle was straightforward: “Find out where your enemy is. Get at him as soon as you can. Strike him as hard as you can and as often as you can, and keep moving on.” On the other hand, his Presidency was marred by corruption among his associates. In the periodic rankings of Presidents, Grant would typically wind up in the basement. But in recent years, historians have reassessed the man and his impact arriving at a more positive conclusion. This year, I read two very good biographies of Grant—simultaneously. I did this to gain insights not only about Grant, but also about the craft of historians and biographers: what details should be included? How should the story be told? And ultimately, what is the historian’s judgment and on what is it based? Grant, a leader of many strengths and dark psychological complexity is an excellent study for anyone interested in how one learns and wields leadership. I highly recommend both biographies: Jean Edward Smith’s, Grant, and H.W. Brands’, The Man Who Saved the Union: Ulysses Grant in War and Peace.

Civilian control of the military is fertile territory for thinking about effective governance and qualities of leadership: how should general managers lead technical experts?  The Generals: American Military Command from WWII to Today by Thomas Ricks is a very good starting point. Ricks argues that America’s great wartime Presidents frequently cashiered generals who failed to deliver results. But starting with the Vietnam War, Presidents grew lax and general command became an entitlement for years in service. Ricks is unstinting in his damnation of incompetents or praise for great leaders. His profile of Marine General Chesty Puller and the heroic stand at Chosun Reservoir in the Korean War is inspiring. Ricks’ conclusions about generals are highly relevant for business leaders: “Having adaptive, flexible military leaders who also are energetic, determined, cooperative, and trustworthy is probably more important now than it has been at any time…Tolerance of below-average performance has a corrosive effect on the quality of leadership…carry out a cultural shift that enables (the organization) to embrace accountability, rather than shun it…We also should reward commanders who cultivate and maintain cultures in which their subordinates feel free to exercise initiative and speak their minds freely… abide by the belief that the lives of soldiers are more important than the careers of officers—and that winning wars is more important than either.”

Vigilance, attention to detail, meddlesomeness, critical thinking, urgency, and fearless challenge to common assumptions—these and other qualities stand out as distinguishing excellent wartime civilian leaders. Martin Gilbert’s Winston Churchill’s War Leadership, profiles a civilian leader who infuriated the top brass with his pushiness into areas they deemed their special province of expertise. Elliot Cohen’s, Supreme Command: Soldiers, Statesmen, and Leadership in Wartime, affirms this portrait of Churchill and adds chapters on other exemplary wartime civilian leaders, including Abraham Lincoln, Georges Clemenceau, and David Ben-Gurion. This book challenges the conventional thinking that civilian leaders should set policy goals and leave it to the military leaders to implement. The profile of these four leaders is highly relevant to enterprise leadership in the private sector. Cohen wrote, “Extreme circumstances…enable us to see more clearly what great leaders do and of what they are made. If one wishes to study the finest steel, best to search for the hottest furnace.”

Defense procurement in peacetime may seem like an unlikely venue in which to consider leadership. But it illustrates that leadership is not just about command; it must also be about policy, process, and politics. In a farewell address in 1959, President Eisenhower warned against the rise of the military-industrial complex—today, we think of it as the “iron triangle” of interdependence of interests among the Pentagon, Congress, and defense contractors. James Ledbetter’s Unwarranted Influence: Dwight D. Eisenhower and the Military-Industrial Complex, will persuade the reader that Presidential control of military procurement is incredibly difficult. The politics, process, and policy of defense procurement as they affect leadership are especially relevant today, in the face of budget cuts in the Federal Government. I wish that the author had addressed the geopolitical implications of maintaining America’s status as the sole superpower. Maintaining the industrial base necessary to support the defense posture of the country is “table stakes” for hegemony. If there’s a better way to organize and control defense production, Ledbetter doesn’t say. Still, I recommend the book as a stimulus for business leaders to consider the impact of complicated currents of interest at the interface of the public and private sectors.

The humor columnist, Dave Barry, once wrote, “The world is full of strange phenomena that cannot be explained by the laws of logic or science. Dennis Rodman is only one example.” Business offers others. As an assignment in our student seminar this fall, we read Barbarians at the Gate: The Fall of RJR Nabisco, by Bryan Burrough and John Helyar. It’s a “must read” for novices in Mergers and Acquisitions. The book recounts the bidding war to control RJR Nabisco in 1990. I have used the story to teach concepts in the area of auctions and negotiations as well as a host of behavioral phenomena, such as deal frenzy. Barbarians reads like a gripping soap opera—again, Dave Barry said, “you can’t make this stuff up.” I have heard that some protagonists denied having said some of the things attributed to them in the book. But even as fiction, the book reminds business professionals that a toxic mix of incentives and emotions can lead to nasty behavior: deception, power plays, betrayal, venality, and self-dealing. I’m sometimes asked by business schools should teach ethics. This book shows that even late-age adults can use ethical reminders. As the Renaissance maps of the world would indicate about distant regions, the book tells us, “here be dragons.”

I read The Old Man and the Sea by Ernest Hemingway in connection with a visit to Cuba. The book captures the atmosphere there and tells a remarkable story of determination by an unlucky old fisherman who is suddenly faced with reeling in the biggest catch of his life. The moral of the story is best summed up by this quotation: “But man is not made for defeat,” he said. “A man can be destroyed but not defeated.” Hemingway was deemed past his peak when he wrote the book; yet Old Man and the Sea was instrumental in him winning the 1954 Nobel Prize in Literature. A quick and inspiring read.

Bonus Recommendation: This evening, I saw the movie, The Book Thief. It considers the value of books and writing in the context of the rise and fall of Nazi Germany. Strong story and excellent acting. I recommend it.

Department of “Huh?” Yesterday, the Wall Street Journal reported that “adults are gobbling up books aimed at middle-schoolers.” Good enough if such books are the likes of Huckleberry Finn and Grapes of Wrath. But teeny romance novels and such don’t give a very high return on reading. As I’ve advised in each of my annual book recommendations, don’t read junk. There is so much good material to read; life is short. Start with the best.

I hope these recommendations are helpful. Read and enjoy. Better yet, read and grow as a leader.


2013: A Turning Point for Investors?

On November 14-15 (this Thursday and Friday) Darden will host the sixth annual University of Virginia Investing Conference (UVIC). As we get ready to welcome the world-class speakers and participants, we look forward to insights on a range of questions relevant to investors, business executives, faculty, and students.

Over the years we have enjoyed robust attendance at the conference. Participants tell us that they seek fresh ideas from speakers about current conditions and the future outlook. And participants gain opportunities to network at our receptions and breaks. An important role that universities play is to convene and debate differing perspectives. Every year, the financial markets offer fresh puzzles, which means that each new conference holds fresh insights for decision-makers. We welcome the several hundred registrants who will come to our Grounds—a few walk-in places remain for the procrastinator.

Here are some focal questions for speakers and participants at this year’s conference.

1. Is 2013 a pivot-point or a head-fake? In the graph that follows, you see the level of the S&P500 Index and the yield on the 10-year Treasury Bond at each of the dates of our UVIC. At UVIC 2012, the speakers were especially down-beat about the future of investing. But something remarkable happened in equities in 2013: the S&P500 Index returned to levels last seen before the Global Financial Crisis. Note also that yields on 10-year Treasury bonds edged upward, probably in anticipation of the Fed’s “tapering” away from quantitative easing. Are these results for 2013 just aberrations, or are they the beginning of a trend?


2. Is the market’s current buoyancy rooted in reality? Think of Twitter’s recent blow-out IPO. In 2013, Michael Dell took his namesake company private for $24.4 billion; Warren Buffett bought H.J. Heinz for $23 billion; Publicis and Omnicom announced a merger at $35.1 billion; and Verizon bought out Vodaphone’s share of a joint venture for $130 billion. What do these players see in the fundamentals that the rest of us may not be seeing? The glaring dampener to any assertion about the market’s rise are the following graphs, which show that the recovery of jobs from the recent recession is agonizingly deeper and slower than any post-WWII recession.



3. Is the economy in a financial “bubble” again? The concept of a market “bubble” is gaining currency again. In previous posts I have written about bubble “mentions” (see this, this, this, and this). Our speakers will be well-suited to comment on bubble concerns.

4. Whether or not the financial markets are pivoting, what will be the attractive sectors and industries for the foreseeable future? In contrast to earlier UVICs, we have asked our speakers not only to sober us up with the harsh reality of the day, but also to suggest where might be the opportunities to earn positive returns in this environment. Accordingly, we are convening sessions on specific sectors, including energy, technology, and alternative assets.

These questions bespeak fundamental issues about asset allocation, stock picking, and risk management. The speakers will be most enlightening. Join us.

Guest Speakers Will Include:

Keynote Addresses:

Endowment Panel:

  • Larry Kochard, Chief Executive Officer and Chief Investment Officer, UVIMCO
  • Donald W. Lindsey, Chief Investment Officer, The George Washington University
  • Scott Malpass, Vice President and Chief Investment Officer, University of Notre Dame
  • D. Ellen Shuman, Former Vice President and Chief Investment Officer, Carnegie Corporation

Energy Panel:

Technology Panel:

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Why study business and economic history?

“Mr. Ford replied that he did not believe in history, that history was of the past and had no bearing upon the present and that, there being nothing to be learned from it, history need not be studied nor considered. The American Revolution he refused to have touched upon, saying that the Revolution was " tradition," that he did not believe in tradition.” New York Times, May 15, 1916.

“I don’t know much about history, and I wouldn’t give a nickel for all the history in the world. It means nothing to me. History is more or less bunk. It’s tradition. We don’t want tradition. We want to live in the present, and the only history that is worth a tinker’s damn is the history that we make today.” – Henry Ford, Chicago Tribune, May 25, 1916.

Is history “bunk”? Henry Ford’s famous comment was not just a casual afterthought. He made similar statements to the press at least two other times, on June 6, 1916, and October 28, 1921, when he dispensed with the qualifiers and simply said, “history is bunk.” It is ironic that by 1916, Ford was 52 years old and had lived long enough to accumulate plenty of personal history. Not known for mild opinions, Ford was also known for isolationist, pacifist, racist, anti-semitic, and conspiracy theory views. Along with “that huge Mississippi of falsehood called history,” (Matthew Arnold), “live for the moment,” (Monster Magnet), and “history will teach us nothing,” (Sting), “history is bunk” stands as one of the convenient justifications for myopic thinking. Why study history? In particular, why should business students and practitioners study business and economic history?

Popular thinking suggests that what has happened before is likely to happen again and that therefore knowledge of history can prepare you for what’s coming, much like wearing seatbelts in a car. Mark Twain held that “History may not repeat itself, but it does rhyme.” Some people who live long enough claim to have a sense of déjà vu: “Uh oh, these economic conditions feel familiarly like a recession.” To the extent that history repeats or rhymes, the lessons from one episode may be relevant to the next. The philosopher, George Santayana, asserted that, “when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it.” But the sheer variability of human experience over time challenges the notion that history truly repeats or rhymes. We need a better reason to study business and economic history.

Our view is that an understanding of context is vital to an understanding of the present and an outlook on the future—and context to a significant degree is history. Studying history provides a better understanding of how the present evolved out of the past and how the future is in a process of evolving out of the present. This ability to learn from the past is a foundational skill and requires business leaders to make sense of the context of problems and opportunities facing the organization. In the words of John Maynard Keynes, understanding context requires the leader to “…contemplate the particular in terms of the general” because a model or methodology that may have worked very well in some historical context, might fail in today’s framework. Thus, it would be foolhardy to define “context” as just the present moment. Instead, everything we know about the present context is shaped hugely by history, that is, how we got to the present.

In their book, In Their Time: The Greatest Business Leaders of the 20th Century, Nitin Nohria and Anthony Mayo point to the role of contextual intelligence as a means of understanding great business leaders. They discovered that there was a co-evolutionary relationship between the actions of business leaders and the contextual landscape in which they operated; each influenced and shaped the other. The environmental factors that they highlight—demographic shifts, technological breakthroughs, government regulations, geopolitical forces, labor movements and societal norms—coalesce to create a contextual framework for business and society. Within each decade of the twentieth century, these factors ebbed and flowed, coalescing in unique combinations. A business executive‘s ability to make sense of his or her contextual framework and harness its power often made the difference between success and failure.

Why should a current (or prospective) business leader study history? Knowing business history is important for the development of business leaders. History builds a capacity to assess any context. It widens the leader’s frame of reference. It yields insights into the development of the global economy, of industry structures, and of business strategies. It illuminates government-business relations, technology, corporate culture and business ethics. And it strengthens the capacity to anticipate what might be coming over the horizon or around the corner. Quite simply, history builds a frame of reference for the leader to understand the world.

Toward the end of his life, Henry Ford moderated his views on history. In response to his widely quoted 1916 interview in the Chicago Tribune, that newspaper called him an “anarchist.” He sued for libel. The court found for the plaintiff, but awarded him only six cents in damages. In court, he had been publicly humiliated for his lack of formal education, which prompted him to reflect on the possible lessons of history.

He later confessed, “As a young man, I was very interested in how people lived in earlier times; how they got from place to place, lighted their homes, cooked their meals and so on. So I went to the history books. Well, I could find out all about kings and presidents; but I could learn nothing of their everyday lives. So I decided that history is bunk…I am going to start up a museum and give people a true picture of the development of the country. That is the only history that is worth observing, that you can preserve in itself. We’re going to build a museum that is going to show industrial history, and it won’t be bunk.” With that, he founded the Henry Ford Museum and Greenfield Village in Dearborn, Michigan, one of the best repositories of industrial history in the world.

This article was co-authored by Robert Bruner, Dean of the Darden School of Business, and Rohan Poojara, a second-year student at Darden. The two of us are engaged in a business history reading seminar this year along with eight other students and two other instructors.


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A Halloween Reflection on Spooks, Uncertainty, and Exams

Gregory (Scotland Yard detective): “Is there any other point to which you would wish to draw my attention?”

Holmes: “To the curious incident of the dog in the night-time.”

Gregory: “The dog did nothing in the night-time.”

Holmes: “That was the curious incident.”

- A. Conan Doyle, “The Silver Blaze”

Our first-year MBA students are facing a battery of exams this week. I chatted with one student who is concerned about Decision Analysis and was going in for some tutoring. Always a good idea to ask for help when you need it. I wished her great success. Exams are a form of assessment; they give you feedback on what you know. The meaning you make of the results is often more important than the results themselves. Let me explain.

This morning, I attended a meeting in which Michael Morell, the recently-retired Deputy Director of the CIA, spoke. He described at some length the operation to find Osama Bin Laden. It took nine years of arduous sleuthing. A breakthrough occurred with the identification of Bin Laden’s likely courier, Abu Ahmed. Tracking Ahmed’s movements led the CIA to a compound in Abbottabad, Pakistan, that seemed unusual for its large size relative to the rest of the neighborhood, the high walls, barbed wire, and extensive security. It also seemed odd that the inhabitants didn’t socialize: the children didn’t go to school; the compound had no phone or internet connection; the compound burned its own garbage unlike the neighbors who set theirs out for collection. On the strength of assessment of these and other facts, the CIA recommended an operation to seize Bin Laden, whom they believed was inside. The President approved; and on May 2, 2011, Navy SEALs took Bin Laden.

What is interesting about this story is that the CIA had no certainty. (See the italicized words in the preceding paragraph.) It’s a story quite like the classic Sherlock Holmes yarn, The Silver Blaze, in which Holmes deduces that the theft of a race horse was an inside job because of the silence of a watch-dog. Like the dog that didn’t bark in the night-time, the CIA deduced Bin Laden’s presence by what was not happening around the compound.

The problem is that Sherlock Holmes enjoys a degree of intellectual certainty, unlike the CIA. For instance, one of the stark events of the last decade was the CIA’s inference of the presence of weapons of mass destruction (WMD) in Iraq. A couple of years ago, a Darden conference hosted George Tenet, former Director of Central Intelligence, who discussed the WMD finding. Tenet had been quoted in 2002 as saying that the evidence provided a “slam-dunk case“ that there were WMDs in Iraq. This became a pillar of justification for the subsequent invasion of Iraq. When no WMDs were found, Congress investigated. At our conference, Tenet denied that he had offered certainty about WMDs and said that his phrase, “slam-dunk case,“ and the CIA’s evidence had been conflated by others in the Executive Branch to justify the invasion. Congressional investigators seemed to agree: Senator Bob Graham said, “The administration wasn’t using intelligence to inform their judgment; they were using intelligence as part of a public relations campaign to justify their judgment.“

So, today I asked Michael Morell what the CIA had learned from the WMD episode and how that contributed to the seizure of Bin Laden. He said that the WMD episode “triggered a revolution in intelligence. We’ve learned that we must not only discuss our assessments of evidence and our recommendations. We must also discuss our confidence in our assessments and recommendations. We say four things:

  1. Here’s what we found.
  2. Here’s what we recommend.
  3. Here’s how confident we are.
  4. Here’s why we’re that confident.“

This struck me as useful advice for business professionals—and business students. Decision-makers know relatively little with any certainty. As a general manager of a relatively small enterprise (400 employees, 800 students, 14,000 alumni), my days are filled with advice from others, much of it unsolicited and delivered with strong assertion. Yet it is interesting how the emphasis melts a bit when I ask,

  • What is your evidence? What do you infer from the evidence? (This corresponds to Morell’s “Here’s what we found.“)
  • Specifically, what do you recommend? Why does this dominate other possible courses of action? How well does your assessment support your recommendation? What are the risks associated with your proposal and any alternatives? What if we took no action at all?
  • How confident are you about your assessment and recommendation?
  • What basis do you have for that confidence? These last two questions usually lay bare the depth and breadth of the recommender’s thinking.

Confidence is hugely important to leadership. The awful WMD episode is a stark reminder of the need to probe one’s confidence as part of a decision-making discipline. By “confidence“ I refer not to the buoyant enthusiasm of the promoter or salesperson. Rather, as the Oxford English Dictionary suggests, confidence entails a belief in yourself and others, a sense of trust, and/or a grasp of predictability. Here’s where statistics and data analysis come in handy. Quantitative methods can help us assess uncertainty, build a confidence interval around our expectations, and thus help us make wiser decisions. Darden teaches data analysis because belief in oneself and others, trust, predictability, and wisdom are crucial to the development of business leaders.

To my friend, the First Year student who is uncertain going into her Decision Analysis exam: how confident are you about your uncertainty? Do you know what you don’t know? If you’re not very confident, go back and review; isolate those ideas that confuse you and dog them until you get them. Build your confidence. Hang in there. And trust the process.

And take a few minutes to enjoy Halloween.

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‘What were they thinking?’ And Other Questions For A Prize Committee

“despite the deserving nature of this year’s selection, a growing number of Nobel watchers say the (Peace) prize is damaged. They fear recent honorees…reflect a prestige-tarnishing politicization of the award.”Jochen Bittner, New York Times, Oct. 11, 2013.

“the peace prize…has had a decidedly mixed track record. Recently, it’s been awarded, for example, to Barack Obama, exactly for what it’s not clear (we hope it’s not for his tireless work for the cause of world peace through his drone attacks and kill orders). It’s been awarded to Ellen Johnson Sirleaf, the Liberian president previously implicated and indicted for her involvement with Charles Taylor’s rebellion and crimes against humanity by the Liberian Truth and Reconciliation Committee .”Daron Acemoglu and James Robinson October 17, 2012.

“the integrity of [the Nobel Prize in Literature] has come under question in Sweden. Göran Malmqvist, a sinologist and member of the Swedish Academy, was instrumental in Mo’s selection, lobbying the academy to recognize the Chinese writer and providing Swedish translations of the writer’s work to other members of the academy. Now he stands to benefit financially from those translations. According to a report by Swedish Television, Malmqvist will provide his translations to a Swedish publisher for publication. And according to the head of that publishing company, Tranan, because of the intense interest on Mo’s work as a result of his Nobel win Malmqvist will likely be able to name his own price. “Elias Groll, October 18, 2012.

The Nobel Prizes have incredibly high brand cachet. Yet in recent years, have drawn increasing criticism. Choosing prizewinners well is not easy work and is fraught with extraordinary challenges. And no matter who is the chosen prizewinner, someone somewhere is bound to be upset with the decision. But the recent controversies over the Nobel Prizes seem noisier and more substantive than usual. What were the prize committees thinking? The more important question is, ’How were they thinking?” The Nobel committees are notably mum. But the possible answers hold some important lessons for leaders (and followers). Here is my gallery of rogues and red flags.

The invitation. An industry group with an anodyne name, such as ’The Society for the Organization of Associations,” appeals to you to serve on its prize committee. You’re an outsider to the industry. Such invitations are tempting because they invariably aim to recognize excellence in some dimension of leadership or business practice. Plus, there may be the opportunity for some interesting networking and a free meal or two. Right at the get-go, it is important to ask why they want your advice, and whether they will listen to it. If they are deaf, your reputation will have been ’rented” for the occasion.

Mission drift. You must start with a clear understanding (and endorsement) of the mission of the organization and of the prize. If it is a serious prize and therefore worth your time and effort, it can’t be about gratifying some important person or making some people feel good. The prize must have a purpose. Beware that some members of the committee may want to ’make a statement” about some new development in the field by granting the prize in a way that may have little or nothing to do with its mission. Be very careful about statement-making. Stick to the mission or quit.

Information asymmetry and the in-group phenomenon. As an outsider to the field, you probably don’t know as much about the industry and its members as do the insiders. Worse, the insiders know one-another reasonably well. They probably know the hierarchy of status among the insiders, can anticipate their agendas and read subtle signals. This asymmetry creates an eerie feeling, like a novice gets at a Las Vegas poker table. As Warren Buffett said, ’If you don’t know who is the fool in a deal, it’s you.”

Candor and integrity. Members of the committee must be free to say what they think, but within the bounds of objectivity and while avoiding partisan advocacy. Much like corporate boards of directors, the members of a prize committee have a fiduciary obligation to the mission of the prize and its sponsoring organization. The rule should be to leave one’s private agenda outside. You must have confidence in the integrity of everyone on the committee to faithfully observe the mission of the prize.

Veneer of objectivity and diligence. Many prize processes begin with some scheme of nominations from the field. Then the staff gathers information and packages it into a beautiful three-ring binder. Members of the committee are expected to study the documents and then send in a preliminary vote indicating an evaluation based on the written materials alone. This will take a weekend or several evenings of your work. Then the meeting of the committee may entail two or more rounds of voting in which the finalists are selected. This is followed by lengthy discussion, where things get really interesting—and influential. So influential that one wonders why they bothered with the processes of data-gathering and voting in the first place.

Strategic voting. Elaborate selection systems and the existence of an in-group tend to prompt strategic behavior. In one case, each member of the committee had points that could be spread out across more than one nominee. Comments in the discussion revealed that members had voted in ways that anticipated the voting of other members.

Payback. You know that the prize is in trouble when the committee members convey a sense of entitlement or payback to someone. ’Last year we gave the award to XXX. This year it’s YYY’s turn.” See my comments about mission.

Defining achievement down, and conflict avoidance. People on the committee may seem eager to converge on an agreeable outcome rather than serve the mission of the award or observe the selection criteria. This is understandable given the amount of homework and lengthy deliberative process. Someone may say, ’don’t let the perfect be the enemy of the good” as a way of justifying some consensus choice. But a prize is a prize, which the Oxford English Dictionary defines as ’a thing given as a reward to the winner of a competition or in recognition of an outstanding achievement…something of great value that is worth struggling to achieve.” The prize committee should always remember it has an alternative to a mediocre recipient: granting no prize at all.

The ’gotcha” moment. At a tipping point in the deliberations, a member of the committee may reveal an acquaintance with a nominee. In one instance, the nominee was criticized for unspecified behavior unbecoming the values of the sponsoring organization. No laws had been broken. But the say-so of this prominent person sent murmurs through the committee. No one went onto the Internet to check the facts. Nor did this trigger a reputation review of all the other nominees. This particular nominee sank from finalist to oblivion on the assertions of one member of the committee.

The personal testimonial. The polar opposite to a ’gotcha,” is a glowing reference provided by an influential member of the committee. This reference will typically derive from a personal acquaintance (work/family/community) that is not available to other members of the committee. The effect may be to vault a nominee who had not been a serious contender for the prize before this endorsement into finalist status. If you hear much of this kind of talk, you should wonder how representative is the committee of the sponsoring organization’s membership: has the prize committee been ’stacked”?

In a hurry. Research on negotiation behavior reveals that granting any conflict-ridden discussion more time tends to yield more thoughtful outcomes. Haste makes waste.

If you don’t think these deviances are likely, think again. See for instance, any number of movies and books that illustrate the behavioral foundations of group decisions. One of my favorites is the movie, Twelve Angry Men. See also, the writings of Irving Janis, on ’groupthink” and the Bay of Pigs invasion—his book, Groupthink: Psychological Studies of Policy Decisions and Fiascos is a classic.

Reflecting on the controversies about prizes, what should one consider before leading or joining a prize committee?

  1. Does the prize itself embrace values that matter to you? Do you care enough about these values to be able to speak up in the face of total opposition by the rest of the committee? ’Be good and you will be lonely,” said Mark Twain. If all else fails and you get used, you must be able to look at the statement that the prize makes. We give prizes to lift up values in society.
  2. Are the criteria for awarding the prize clearly stated? Do these criteria reflect the values in point #1? Mushy criteria produce mushy results.
  3. Do you trust the chair of the committee to adhere to the mission of the prize and the organization?
  4. Can the award criteria be measured objectively? Can data be gathered to compute these metrics?
  5. What, exactly, is the deliberative process like? How much time is available for discussion? A system of preliminary and final voting helps to concentrate the mind of the committee. But discussion before final voting is very influential. A good committee chair will try to avoid ’bandwagon” thinking. Thus, a material break between discussion and final voting is a very good strategy.
  6. What due diligence research is performed on the nominees? These days, reporters and the public at large will almost certainly scan the Internet upon the announcement of the prizewinner. The prize sponsor should assiduously avoid ’gotcha” discoveries by the public after the announcement—or by individual committee members during deliberations. This requires very thorough research in advance.
  7. Who will be on the prize committee? Are they equally familiar with the sponsoring organization and its aims? Does it look like the committee is dominated by an in-group? Do they have your confidence for objective and critical thinking?
  8. Why, exactly, have you been invited to serve on the prize committee?

If a prize has lost the confidence of the public, my advice is to suspend it for a couple of years and then resume with a completely new committee and processes. Many prizes acquire a franchise and cadence of their own, which will discourage this solution—this kind of path dependency is a contributor to the decline of the prize.

You ought to serve on prize committees. The world needs your perspective and objectivity. Like jury duty, this is the price to pay for a civilized society. But beware that the well-intentioned and exalted prizes can go astray, less because of the ’why” and more because of the ’how” of their selection.

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The Case For International Students

“Travel is fatal to prejudice, bigotry, and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome, charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one’s lifetime.”

Mark Twain,  Innocents Abroad, 1869.

Swept into the miasma of debates over U.S. immigration policy are those who visit the U.S. legitimately, particularly international students. Just as some claim that immigration denies jobs to U.S. citizens, some argue that international students deny places in our colleges and universities to U.S. citizens. If so, then why should we recruit and make accommodations for these students? In particular, why should Darden do this? The short answer is that it sustains our educational mission, it is sound economics, and it is consistent with America’s highest values. Let me explain.

An Overview

At the outset, you must understand that contrary to the claims of the staunchest nativists, attendance by international students hardly constitutes a tidal wave. In the 2011-12 academic year, international students were 3.7% of all students enrolled in U.S. institutions of higher education. [1] In 2012-13, international students comprised 14.2% of all students enrolled in U.S. B-schools. [2]

Since 2002, the volume of people sitting for the Graduate Management Admission Test (GMAT) in the U.S. has declined 15%; all demographic indications are that this trend will continue. However, the volume of international test-takers has more than offset this decline. For instance, Asian GMAT examinees increased 11% over the last five years. Darden saw a 21% increase in international applications this year with just a 1% increase in domestic applications. Student mobility is rising. [3] No surprise: as markets liberalize and aspirations rise, applications by international students (particularly from the emerging economies) have increased to offset the declining application volume from the U.S.

“But,” you may ask, “why should they want to come to the U.S.?” There are over 13,000 institutions in the world that award degrees in business. [4] Applicants enjoy an enormous range of choice. The appeal of American schools is summarized in one word: quality. A passel of metrics point to the prominence of U.S. higher education, including the count of Nobel Laureates, the Shanghai Jiao Tong research rankings, and international b-school league tables. Applicants take notice. The market for university degrees is fairly efficient.

America’s higher education of international students lifts the economy. A recent report estimated that international students contribute $29.8 billion to the U.S. economy—of that, about 28% or $8.4 billion is supported by U.S. sources, but that still leaves a very healthy $21.4 billion net contribution to America’s GDP. [5] A report by NAFSA found that “more than 60% of all international students receive the majority of their funds from personal and family sources. When other sources of foreign funding are included, such as assistance from their home country governments or universities, over 70% of all international students’ primary funding comes from sources outside of the United States.” [6] And this estimate of net benefits probably understates the contribution of foreign students to the U.S. economy because it ignores so-called “multiplier effects”—an increase in GDP greater than the initial spending.

The U.S. has been running consistent deficits in the balance of trade since 1980, owing to large imports of oil and consumer goods. These trade deficits spawned a plethora of problems including a weakening dollar, inflation, flows of “hot money,” capital market volatility, and disputes with trading partners. Educating international students helps to stem the trade deficits–it’s an export of educational services and a smart trade strategy for offsetting what we buy from the world. As one of my colleagues says, “Other countries sell us cars and we train their leaders – which one of these seems like the smarter strategy?”

Virginia is no stranger to these benefits. The NAFSA study reported that in 2012, 15,169 international students contributed $406 million to Virginia’s economy. In 2012, the University of Virginia hosted 2,141 international students, the third highest in the Commonwealth, after Virginia Tech and George Mason Universities. [7] Virginia runs an annual foreign trade deficit of about $3.5 billion. [8] A U.S. Commerce Department report declared “Exports support jobs for Virginia’s workers…Exports sustain thousands of Virginia businesses…Foreign investment creates jobs in Virginia….Virginia depends on world markets.” [9]

The current Governor of Virginia, Robert F. McDonnell, has been a vocal advocate of international outreach. Recently, he said, “In this market, it is mandatory that we continue to expand the presence of international companies in the Commonwealth, as well as explore new export opportunities. That is how we will continue to create good jobs for the citizens of Virginia” (March 7, 2013). Early in his term as Governor, he said, “Over the past six years, 49 percent of new capital investment of projects worked by Virginia has come from international companies. International companies help us create jobs for our citizens and strengthen and diversify Virginia’s economy” (June 10, 2010).

Another Governor of Virginia, Thomas Jefferson, (also our third President, second Vice President, and first Secretary of State) learned from his sojourns outside of the U.S. and actively promoted international engagement, trade, and the exchange of new ideas and technologies. In founding the University of Virginia, he envisioned “…an establishment which I contemplate as the future bulwark of the human mind in this hemisphere” [10] —not county, state, or nation, but hemisphere. From the beginning, he sought a global presence.

International Students at Darden

This brings us to Darden’s place in all this. We recently enrolled Darden’s newest full time MBA graduating class (2015) from 37 countries. And 37% of the 2015s were born outside of the U.S. In the 2012-13 academic year 33% of all Darden students were international (I dislike “foreign” because of its association with a host of prejudices). The vast majority of the top 100 global business schools report international percentages at similar or higher levels.

What motivates Darden to recruit an internationally-diverse class of students?

  • It is right for the students. I challenge any parent: given what you know about the trends in the global economy, would you be satisfied to have your child educated only with people of your own country? The professional world into which American and international students will graduate requires managers and leaders who are globally confident and competent. One learns so much about navigating across borders from studying with internationally-diverse classmates. Our best American applicants demand an internationally diverse classroom and network. They know that the future will require both understanding of and cooperation with other nations.
  • It is right for the companies who recruit our students. Darden’s corporate partners actively look to hire our international students. No wonder. Our analysis shows that the top 15 corporate non-financial recruiters at Darden report an average of 45% of their revenues originating outside of the U.S. America’s business economy is not an island unto itself; it is hugely dependent on global trade. American firms of all sizes must look beyond our borders. Some 46.6% of the sales of the S&P500 companies originate internationally. [11]
  • It is right for our society. International students contribute much more than the measures of student spending indicate. They promote global awareness among American students. They spur innovation and creativity (diversity does this generally). They found companies and create jobs here. Generally, international students carry values that are quite consistent with the heritage of America. These students are optimists, pioneers, and risk-takers who leave their familiar lands, languages, and cultures to strive for a better life. They are drawn to the American Dream as much as many Americans—and the international students help to sustain that dream. Since Darden is financially self-sufficient, it delivers these benefits to society without funding from taxpayers or the University.
  • It can help the native countries of our international students. America spends 1% of its Federal budget on foreign aid and humanitarian assistance. Educating international students is a high-impact complement to such aid. As the saying goes, “Give a man a fish, and he will eat for a day. Teach a man to fish, and he will eat for a lifetime.”
  • It is right for Darden. Our vision for Darden is succinct: “World-class impact and stature.” Our Mission calls us to “improve the world by developing and inspiring responsible leaders and by advancing knowledge.” We want to make a positive impact in the world. Educating international students helps us fulfill our Mission and Vision.

Darden actively supports the aspirations of international students. In 2009, the market for loans to international students froze because of the Global Financial Crisis. International first-year students at Darden were stranded by the freeze because they were unable to finance the second year of their MBA studies. We responded by developing a custom loan program for them. Lending to international students has still not thawed. Darden continues to collaborate with a lender, Discover’s Custom Loan Program. Around two-thirds of our international students [12] borrow some amount under this program—and when they do so, they still have plenty of their own capital at stake because this program limits borrowing to less than the full cost of attendance. Since 2009, Darden’s experience with this custom loan program has been good.

I tell any applicant that borrowing to finance one’s education should be a last resort. Draw down one’s savings: in a previous post I gave evidence that investing in your own human capital yields one of the highest returns you can earn. Next, you should lean on family, friends, spouse’s employment, part-time employment, crowd funding—whatever. Borrowing should be a last resort. We formally counsel international students about the implications of their borrowing, and of the consequences of a failure to service their obligations in timely fashion. The penalties of default are not pretty: damage to credit history, legal exposure, and loss of self-respect.

But in the absence of such a loan program or other sources of financing, Darden would be accessible only to the socio-economic elites in other countries. We want to attract to Darden excellent students regardless of their financial capabilities. This loan program promotes access by the global brightest and best.


I have not seen any rigorous research that affirms the premise with which this post began, that enrollment of international students displaces domestic students. It could be that there is enough slack capacity in American higher education to accommodate all prospective domestic and international students. The premise warrants research—the folks who assert the premise should show proof. But suppose that the premise is true. Then we must make tradeoffs. This post has sketched some of the benefits of educating the international student. And I think those benefits warrant recruiting a globally-diverse class of students.

In 1869, Mark Twain traveled abroad and discovered the benefits that travel can bestow–Darden does a lot to engage our students with the world beyond America. But Twain’s insights apply equally in reverse. Those who host international students win the liberalizing benefits of the inbound travelers. Twain said that these benefits include the acquisition of “broad, wholesome, charitable views.” But our experience at Darden shows that the list of benefits could be extended considerably to include such attributes as keener appreciation for the challenges and opportunities of global engagement; greater global confidence and competence; and quite simply, more “street smarts.” The Darden Community gains a lot from its international students, alumni, faculty, and staff members. Let us celebrate them.

  1. “Open doors: Fast Facts” at []
  2. Source: Association for the Advancement of Collegiate Schools of Business. []
  3. A task force of business school Deans that I chaired produced a report, Globalization of Management Education (AACSB, 2011), which showed that the mobility of students, teachers, and whole institutions is already high and rising still. We are seeing stunning growth of cross-border partnerships among business schools, the development of curricula on globalization, and a serious deepening of the respect for cross-border differences. The world is not “flat;” it is “curved.” Differences in culture, laws, geography, and economies mean that we must produce a new generation of leaders who can navigate through those differences. []
  4. []
  5. “The U.S. support percentage includes funding from a U.S. college or university, the U.S. Government, a U.S. private sponsor or current employment.” From “Economic Impact of International Students,” prepared by the NAFSA Association of International Educators. It is available online at . []
  6. ibid. []
  7. “Open Doors Fact Sheet—Virginia” Institute of International Education, 2012. []
  8. Virginia export data is from U.S. International Trade Administration, Tradestats Express, State Exports Data, Global Patterns of a State’s Exports, , viewed on August 2, 2013. Virginia import data is from U.S. International Trade Administration, “Global Patterns of a State’s Imports,” (Accessed from , viewed on August 2, 2013). []
  9. “Virginia: Exports, Jobs, and Foreign Investment” International Trade Administration, U.S. Department of Commerce, July 2013. []
  10. []
  11. “S&P500 Foreign Sales Edge Up,” Insights, McGraw Hill Financial, Summer 2013, p. 15. []
  12. Discover’s Custom Loan Program is open to domestic students as well. To my knowledge, no domestic students have used this program because of the availability of private and government loans in the U.S. on better terms. []

The Social Contract and Learning at Darden

I welcomed the Class of 2015 to Darden on August 23rd. Here is what I said (approximately, subject to fallible recall):

By now, you’ve been welcomed many times and told how special you are and how you made the right decision to come to Darden. All of that is true. But I’m not going to go on about that.

Instead, let me tell you a story. Once upon a time there were two close competitors. They were similar in virtually all respects: upbringing, natural strengths, environment, etc. But after they reached maturity, their careers diverged at first by a little, then by a lot. One grew in success, prominence and prosperity; the other languished despite repeated attempts to juice up performance with steroids of one kind or another. Scholars who studied the two were puzzled to explain why one succeeded and the other didn’t. Eventually, they settled on an explanation that to this day is influential—they said it was due to differences in the social contract. You see, this story is not about individuals; it is about nations. A social contract defines the ways in which people cooperate for mutual benefit.

The field of development economics is replete with pairwise comparisons that point to the huge impact that institutions, laws, and customs—the tangible manifestations of the social contract—make. Think about the comparison of the two Koreas; the former East and West Germany; Cuba versus Puerto Rico and so on. The social contract is a big determinant of prosperity, not only of nations, but also of the individuals within them.

I bring you that simple story to motivate your reflections on the social contract at Darden: what’s the deal in the classroom among students and between students and faculty members? What should you ask of your professors? What should your professors ask of you? How should students engage with each other? These are frankly tough questions. But the answers to these questions are what make this school truly distinctive and make your time here so transformational.

Why are you spending your time like this? I have spoken with thousands of students over the years, to ask why they came to Darden. Their replies prompt me to say that you’re here because in your personal agenda, it is the top priority; the highest-return investment you can make; the big enchilada. You’re here because there are lessons to learn here that you cannot learn elsewhere. This isn’t just getting information (names, dates, formulas)—you can get that stuff online and usually for free; you’re here to get something more. And that’s why I think you’ve made the right decision to come here and why I think it is the most important thing you can do with your life for the next 21 months. If you will engage with faculty, staff, and each other in certain ways, you will learn a new way of learning, a way that is sharply different from the conventional experiences you’ve had before, a way that will rock your world, and a way that will guide you for all time. That new way of learning is the focus of the social contract at Darden.

The new way of learning entails discovering things for yourself; making sense out of ambiguous business situations and usually conflicting bits of information. Life poses a host of questions and very few answers. Getting on with life means figuring things out for your self, making your own meaning about things. Accordingly, the way we teach is by helping students learn on their own. We do so not by giving answers, but by asking questions. How we teach is what we teach. This is an incredibly powerful approach and is as old as Confucius, Buddha, Socrates, Jesus, Hillel, and Mohammed. Learning takes place when you find out for yourself. Professors are there to question, challenge, nudge, probe, and excite you. When a student asked Socrates a question, Socrates usually replied with a question. Darden’s professors are likely to do so too. This will frustrate you; it will exhaust you; and it will stretch you. All of this is strengthening you for your unique destiny.

Thomas Jefferson founded this University because, in part, he wanted to advance “useful knowledge.” Like him, American culture tends to be practical, entrepreneurial, and prone to experiment with ideas. It is a culture of perpetual ferment. Americans tend not to enshrine knowledge and theories. The body of knowledge is changing at a rapid rate. What matters is mastering a method of finding out and keeping up. The process of relentless questioning and discussion teaches you this method.

The social contract at Darden requires that you trust the process. Trust that the questioning by the faculty is leading you somewhere. They want to help. And you came to study with the world’s best teachers. So, form a relationship with them that feeds your development. Don’t look for grandiose speeches, easy answers, or compliments; look for wise and candid feedback. Accept and admire professors who demand your very best. By the way, each and every one of you is capable of excellent work, so don’t doubt for a minute that you can give the faculty what amounts to “the very best.”

Another implication of the social contract at Darden has to do with mindfulness. Once, I was at a Las Vegas casino, where I was doing some scholarly research. There, hanging over the roulette table was a sign that said, “You must be present to win.” You must be present to win. This meant that you could not place your bets and then leave the table to get a drink or see a friend, and return later to pick up your winnings. You had to be present when the winnings were declared, in order to get them. So it is at Darden. You must be present to win.

What does “being present” mean? It means being mindful: self-aware of your state of mind and your impact on others. And it means being socially aware of what’s going on around you. You can’t “zone out” and get the rich transformational experience that Darden offers. Mindfulness is one of the top attributes of high-performing leaders. So this is good practice for your future. When I describe Darden as a “high touch” community, I’m referring to a community where students, faculty, and staff are present and engaged actively in the learning process. Being present is part of the social contract at Darden.

Learning at Darden isn’t a solo experience. If you don’t understand something, don’t be afraid to ask another student. And if you have mastered a subject, go out of your way to help others. Being present and engaging one another means doing your assignments not just for yourself but for the sake of your learning team; it means coming to class prepared and participating in discussions; it means supporting the Honor Code, being active in clubs, and lending leadership when our community needs it.

If you are present and engaged, you’ll discover quickly that Darden is a very diverse community. Diversity matters a lot to us because it promotes great learning experiences; it prepares you for the world you are entering; it creates a richer intellectual environment; it creates a community that our recruiters, alumni, and public expect; and it helps to fulfill our mission, to develop and inspire responsible leaders. A community that values diversity needs you to embrace diversity.

Get out of your comfort zone. Find some classmates who are very different from yourself—a different race, nationality, sexual orientation, or gender for instance—and make a serious effort to see the world through their eyes. Befriend those people. Share the Darden experience with them.

If you find yourself drawn constantly to a few classmates just like yourself, you aren’t really present. If you don’t test your assumptions about people different from yourself, you aren’t really present. If at the end of two years, your comfort zone is no larger than it is today, you have not been really present.

The social contract at Darden calls you to perform with Honor. The Honor Code at UVA is very serious. We expect your work on tests and papers to be an independent demonstration of your mastery unless you explicitly acknowledge the contributions of others. The Honor Code helps to create a community of trust in which virtually all exams are given on a take-home basis. Do not lie, cheat, steal, or plagiarize. Violations at Darden have been rare but when they occur, the consequence is expulsion. Don’t even think about testing the limits.

Unlike many other schools and universities you may know, Darden is not an ivory tower, an isolated academic world. We actively engage the profession of business; you will interact with our alums; we bring thousands of executives to grounds here each year; we immerse you in interactions with companies and executives. Darden is part of one of the great research universities of the world. And we live in one of the most desirable cities.

I ask you to assume that in dealing with those companies, communities, and people, you are always on stage. The impressions about Darden flow from the slightest actions of yours. All of us depend on the actions of each other. You are Darden’s brand. The social contract at Darden asks you to live the brand.

In conclusion, you’re here to transform yourselves. And you’ve come to the right place. Take these two years to find your true vocation, to shape a vision, and to learn the tools and concepts to enable you to have impact in the world. Sustain the social contract and you will fulfill the promise I made for a truly transformational experience:

1. Put on a new way of learning: self-discovery.

2. Trust the process.

3. Be present.

4. Embrace diversity.

5. Work with Honor.

6. Live the brand.

I wish you the very best in your time here at Darden!

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The Problem with Piece-Wise Learning

I got it one piece at a time
And it didn’t cost me a dime
You’ll know it’s me when I come through your town
I’m gonna ride around in style
I’m gonna drive everybody wild
‘Cause I’ll have the only one there is around.

- Johnny Cash, “One Piece At A Time”

I’ve heard some talk lately about how technology will disaggregate higher education. The vision is that the likes of Khan Academy and Coursera will allow students to pick and choose courses and learning experiences to construct their own higher education—thus, it is asked, “why do we need colleges, universities, and dedicated faculties?” The Valhalla of limitless choice and student-driven learning presages an education built “piece-wise:” a little of this and a little of that pulled from a vast smorgasbord of providers at little or no cost to the student. What could possibly be wrong with that?

Johnny Cash’s classic song gives us the answer; but more about that in a moment. At issue here is the value of structure and system in higher education, such as distributional requirements, a major, special fields, a final essay, and the value of advising and student support. All these elements promote breadth and depth. A great education has a comprehensive vision about what an educated person should be or be able to do. At the heart of this comprehensive vision should be a commitment to systematic learning: one should know a little about a lot (breadth) and in one or more areas, should know a lot about a little (depth).

A piece-wise education doesn’t prepare you for life, and especially for professional life. You don’t stay long enough in one field to gain some deep insights. And you don’t gain the systematic breadth to help you connect dots across different disciplines. The partner in charge of recruiting for a leading management consulting firm once told me that he finds liberally-trained graduates “so much more interesting:” able to express themselves well, able to talk on many subjects, more creative, more self-confident in uncertain contexts, and so on. But there is more…

· A piece-wise education can be less than the sum of its parts. There is a very strong synergy among fields and subjects. An understanding of economics benefits from knowledge of math; an understanding of politics benefits from knowledge of economics; finance benefits from accounting; marketing benefits from psychology and anthropology; and so on. But this can work in reverse too: piece-wise learning might generate misunderstanding of related fields and a tendency to generalize from a very narrow knowledge base. As the saying goes, to a small child with a hammer, everything looks like a nail. Do we want medical doctors who know everything about pharmacology and nothing of surgery? Do we want pilots who know avionics but not aerodynamics? Do we want bankers who know all about financial engineering but not about ethics? Solutions to problems come from what you know. To the piece-wise educated, solutions to problems can seem deceptively simple. The danger is that those same people will make decisions on which our lives depend.

· You don’t know what you don’t know. A great education should cast daylight sufficiently far to instill respect for the sheer immensity of knowledge and of the pell-mell pace with which it is expanding. With piece-wise learning, you will see as far as your personal horizon, with no ken of what lies beyond. What the world needs is leaders who have a vision that spans great distances, who have the wisdom to call for help because they have an inkling that they don’t know it all, and who have the capability to talk with experts in a probing and critical way. (See my earlier post, “Why do we need academic degrees?)

· You must own it; they won’t. The bland assurances of any provider—be it a college, non-profit university, a for-profit, or free online service—won’t protect you against getting a piece-wise education. You must want the systematic breadth and depth in order to get it. The failure of some schools to provide a more systematic education is saddening and inconsistent with their mission to society. Some schools under-invest in advising, tutoring, mentoring, and career counseling. In those settings, you’re faced with a choice: chart your own systematic breadth and depth, or risk piece-wise confusion, frustration, and ultimate exit. The 64% dropout rate at for-profit universities is quite high and dwarfed only by the 90% dropout rate for Massive Open Online Courses (MOOCs).

· Too much dessert and not enough broccoli. Students who simply follow their appetites will eventually find some educational candy: courses that may gratify an immediate interest but don’t really build one’s capabilities. Like a healthy diet, a great education consists of a balance of intellectual nutrition. Piece-wise learning can stoke the kind of consumerism that we see at the local food mall, producing the educational equivalent of obesity, hypertension, and bad teeth. Eat your vegetables. They are good for you. Trust me.

Or, trust Johnny Cash. His song, “One Piece At A Time,” tells the story of a worker on a Cadillac assembly line who yearns to own one of those cars. So, he swipes parts over the course of 20 years, to the point where he is able to put together his own Caddy. Because the models kept changing year-to-year, the resulting car was a mish-mash:

Now, up to now my plan went all right
‘Til we tried to put it all together one night
And that’s when we noticed that something was definitely wrong….

The back end looked kinda funny too
But we put it together and when we got thru
Well, that’s when we noticed that we only had one tail-fin

About that time my wife walked out
And I could see in her eyes that she had her doubts
But she opened the door and said "Honey, take me for a spin."
So we drove up town just to get the tags
And I headed her right on down main drag
I could hear everybody laughin’ for blocks around

Johnny Cash’s song is a cautionary tale for piece-wise learners. It reminds us why structure matters: it promotes breadth, depth, and consistency of the pieces of learning that will form a whole greater than the sum of the parts.

Let me be clear that there may be a role for piece-wise learning for almost everyone. It could be that you want to fill a gap in your understanding that remains from a formal degree program. Or maybe the world has changed since you got your degree and you need a “tune up” in your knowledge to stay relevant. Or you got a promotion that takes you out of your comfort zone and you need some targeted learning to prepare you for the next level. For instance, non-degree executive education programs are enormously valuable in filling such needs. But my point is that piece-wise learning is a complement, not a substitute, for a broad and deep systematic program of study.

My advice to students anywhere is to consider the great importance of systematic learning. Think critically about the system of study offered at any particular school. Commit yourselves to as rigorous a course of studies as you can stand; ask for thoughtful and wise advice about selecting courses; aim for breadth and depth; and eat your vegetables. When in doubt, listen to Johnny Cash’s song.

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Advice to the Summer Intern: Making a Graceful Exit

For our students with summer internships, the end is in view. MBA programs resume soon. Interns will work for just a few more weeks, and then return to school. Thus, it’s the annual moment for me to offer some advice to interns about to finish their summer jobs.

Most summer interns want a full-time offer. In recent years, about 60% of interns from Darden have received offers of permanent employment from their summer jobs. As my previous posts show, there is a range of things one can do to improve the odds of getting an offer:

A. Actually ask for the job. Too many summer interns simply don’t “close the sale” (see this.)

B. Become known. “Lean in,” in Sheryl Sandberg’s parlance. Too many summer interns lean back and fade out (see this.)

C. Finish at a sprint; don’t coast to the end. Research suggests that the most recent perceptions are very influential to decision-makers. Even if you’re finished with your summer project, walk around and volunteer to help anyone else (see this.)

D. Quell any sense of entitlement; you must earn the offer. In most settings, arrogance damages, rather than strengthens, career prospects (see this.)

No doubt, such offers bring huge relief to the student: regardless of the recruiting dance in the year ahead, you’ve got a backstop.

But what about the others who came back without an offer? Here’s some advice for you.

1. Take stock and get grounded. I would guess that most interns who didn’t get an offer aren’t totally surprised. If you are surprised, that’s an even more important reason to get grounded. Maybe the business was in trouble and cutting back on hiring. Or it was an insane product, a toxic boss, or the Customer from Hell. Or maybe it was an accident: you dropped a bowl of hollandaise in the CEO’s lap at the annual meeting. Or perhaps it was the most simple of all: you just aren’t cut out for that kind of work. Before you leave, it is important to get candid feedback, even though it may be difficult to ask for and receive it. If you don’t, you’ll always wonder. And the absence of insights may hamper your ability to plan the next steps.

2. Take the high road. Don’t weep, pout, plead, or bargain aggressively. Under no circumstances, should you slam the door on the way out. To the extent you can, make a lap around the business from the executives to your supervisor, to your peers, and the administrative assistants: “Thank you for the opportunity to work with you. I wish it had worked out; perhaps our paths will cross again; I’d be glad to stay in touch. And best of luck to you going forward.” A gift of a box of cookies or chocolates for that co-worker who made an extra effort to help you is a grand gesture. The high road exit expresses grace, dignity, and self-confidence. If you stay in the same industry, you may well run into your co-workers again; the high road exit actually gives you a “bridge” with which to resume a conversation. And occasionally, the high road prompts a reversal: weeks later you may get a call “Um…we’ve changed our mind; would you work for us?”

3. Get perspective. Talk through the experience with a mentor, your partner, or wise friends. The key questions should be “What happened?” “Why did that job matter to you?” “What can you learn from this?” and “What’s Next?” A coach or career counselor can lend even more structure to the reflective process. Getting perspective is important for your peace of mind. And it may help you to answer questions from friends and other employers about why you didn’t get an offer from your internship.

4. Find acceptance: it is what it is. Move on. Later you may well conclude that it was a blessing in disguise. And never forget that your worth is infinitely greater than any offer, job title, or paycheck.

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