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Why Study Business History?

By Bob Bruner-

“The past is never dead.  The past is not even past.”

–William Faulkner, Requiem for a Nun

 

Faulkner’s words have come to me repeatedly over the past year.  Journalists, pundits, and webinar hosts have sought my views on the correspondence of recent events to earlier pandemics, earlier financial crashes and rebounds, earlier waves of unemployment, and so on.  Their interest affirms the salience of history to making sense of the present day.  Without history, one loses perspective and falls prey to the danger that Roger Kimball warns of: “the engulfing rust of presentism[1], that voracious temporal despotism whose chief liability is always to lure us into a hall of distorting mirrors in which tiny objects loom large while those of greater importance vanish in a consuming distance.”[2]

The past is sticky, always with us whether we acknowledge it or note.  Those who have been changed by events are most aware of how history matters.  Returning veterans who carry the damage of war; adults who grew up poor or in broken homes; people who suffered harassment or discrimination—these and many others know that the past is very present.  These people are wiser about the ways of the world and about human experience.  Fortunately, there are ways to acquire wisdom of the world without suffering and trauma.

Thus it is that I teach courses in business, economic, and political history at Darden and University of Virginia.  I quote Faulkner at the beginning of a course and ask students what it means—and I quote him again at the end of the course and ask again.  The difference in answers tells me that they have grown in understanding who they are today because of events that happened in the past, perhaps the long past.  Economist Michel de Vroey said, “To know who we are, we need to know where we come from.”[3]

To practical business people, study of the past can seem like a waste of time. In 1916, Henry Ford famously said, “History is bunk.  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.”[4]  Ford later recanted and devoted himself to business history.[5]   Nevertheless, modern culture still retains a bias toward presentism.

I argue that the modern leader of business or government needs to understand history (and more specifically business history) for several reasons:

1. Change is recurrent but memories are short.  “History may not repeat itself, but it does rhyme,” Mark Twain supposedly said.  And perhaps people prefer to forget earlier lessons and/or reinvent them as if new for all time.  Thus, what has been learned in the past tends to get lost.  Shortly after the financial crises of the 1890s, Yale professor William Graham Sumner wrote,

“The effects of the financial catastrophe through which the country had passed in the previous period were seen in legislation for perhaps a decade, but then they were gradually forgotten.  The literature of this subject for fifty years had repeated the same inferences, lessons, and warning; but all the doctrines of currency have to be learned over again apparently every ten or fifteen years, if indeed they are ever learned at all.  From the landing of the first settlers at Massachusetts Bay until today, the country has never enjoyed ten years of peace, rest, and security, with an established and satisfactory system of currency.”[6]

I don’t believe that history repeats itself in any predictable way.  But studying history is a way to anticipate a rhyme from the past.

2. Feed your imagination, readiness, and humility. One objection to studying business history is that it keeps changing, just one damn episode after another.  Given the changes over time, it is alleged, one cannot draw any enduring lessons.  Nevertheless, history outlines broad patterns that are extraordinarily important to remember.  History tells you to stay alert, straighten up, and fly right.  If at the end of studying history you aren’t concerned, then you haven’t been paying attention.  History develops humility and critical thinking about the present and the possible routes by which the future arrives.  Peggy Noonan wrote,

“History is an antidote to the hubris of the present.  We think everything we have, do and think is the ultimate, the best.  We should never look down on those of the past and say they should have known better.  What do you think they will be saying about us in the future?  They’re going to be saying we should have known better.”[7]

3. Build “macro-intelligence,” the ability to make sense of big developments in the world around you.  In simple terms, macro-intelligence is the ability to “connect the dots” from many sources into a coherent interpretation of what is happening.  An understanding of context is vital to an understanding of the present.  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.  This course can help you build your own “long view.”

4. Lead better.  The study of the history of crises can help develop the next generation of leaders.  In the 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 showed that the times shape leaders and leaders shape their times.  They concluded that a leader’s ability to make sense of his or her context and harness its power often made the difference between success and failure.

Respect history.  To do so doesn’t discount the present or ignore the future.  It enhances your ability to perform in them.

 

…For more on this subject, a blog post by my sometime co-author, Scott Miller at Yale, hits the mark.  See “The Importance of Teaching History in Business Schools“.

 

[1] “Presentism” is a bias toward interpreting the past in terms of current-day values, norms, concepts, and culture. This bias distorts our understanding of the gravity of events, decisions, and leadership problems. Presentists tend to write history in ways to justify their current-day perspectives.  To prevent this bias, one must depict the past in its historical context and, where necessary, openly acknowledge one’s biases toward present-day interpretations.

[2] Roger Kimball, “Notes & Comments,” The New Criterion, December 2020, page 1.

[3] De Vroey, Michel, A History of Macroeconomics from Keynes to Lucas, Cambridge University Press, 2016. Page 1.

[4] Henry Ford, Chicago Tribune, May 25, 1916.

[5] 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.

[6] William Graham Sumner (1896), A History of Banking in All the Leading Nations,  Vol. 1, New York: Journal of Commerce and Commercial Bulletin, page 415.

[7] Peggy Noonan, “Why History Will Repay Your Love,” Wall Street Journal, May 27-28, 2017, page A13.