Why study business and economic history?

By Bob Bruner-

“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.