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Business & Society with Senthil Nathan
Inspiring and thought-provoking conversations with eminent thinkers and sustainability leaders about business in society. Hosted by Senthil Nathan, Chief Executive of Fairtrade Australia New Zealand.
Business & Society with Senthil Nathan
#25 Rethinking Management Education: From Shareholders to Society with Andrew Hoffman
What happens when business schools continue teaching the same shareholder capitalism model that's driving our planet toward environmental collapse and social inequality? Professor Andy Hoffman, holding joint appointments at University of Michigan's Ross School of Business and School for Environment and Sustainability, takes us on a profound journey examining the broken state of business education and its potential for transformation.
Business schools were originally conceived to teach commerce leaders to serve society—similar to how we train doctors for the public good. But today's curriculum focuses narrowly on maximizing shareholder returns while merely adding elective sustainability courses that fail to address fundamental issues. Professor Hoffman challenges this approach, arguing that business education must evolve to prepare students not just for financial success but for meaningful careers addressing our most pressing challenges.
The most powerful insight from our conversation comes when Professor Hoffman asks what legacy today's business leaders want to leave. Will your obituary celebrate your contribution to society or simply your accumulation of wealth? This question crystallizes why business education matters so deeply. Students increasingly seek purpose, not just profit, and business schools must rise to meet this changing mindset.
Professor Hoffman's multidisciplinary perspective reveals how true innovation happens at the intersection of fields—not within siloed business disciplines. He encourages students to break free from prescribed paths, designing their own education by attending lectures outside their departments, organizing conferences, and pursuing independent studies. The market, Professor Hoffman reminds us, is the most powerful orienting force on Earth. By redirecting it toward addressing climate change and inequality, we unlock its transformative potential.
Ready to rethink how business can serve society? Listen now and discover how your career might contribute to solving our greatest challenges rather than perpetuating them. What kind of leader will you choose to become?
Link to Prof Hoffman's latest book: Business School and the Noble Purpose of the Market: Correcting the Systemic Failures of Shareholder Capitalism
Please visit our website, www.businessandsociety.net, for more inspiration.
Welcome to the podcast. I am your host, Senthil. Today we delve into the pivotal role of business schools in shaping the future of leadership and corporate responsibility. Business schools develop the leaders who manage organizations with significant societal influence, and there is much debate about their co-mission. Is it to create wealth, or should it also address the environmental and social challenges that arise from capitalism? To explore this question, I'm excited to have Andy Hoffman with us.
Senthil:Andy is the Holcim Professor of Sustainable Enterprise at the University of Michigan, holding joint appointments in both the Stephen M Ross School of Business and the School for Environment and Sustainability. Andy is a prolific scholar with over 100 articles and book chapters, as well as 19 books translated into six languages. We'll discuss some of the key ideas from his scholarship and his latest book, Business School and the Noble Purpose of the Market: Correcting the Systemic Failures of Shareholder Capitalism, from Stanford University Press. In this book, he emphasize the need to evolve business school curricula from the narrow focus on shareholder profits to a broader mission that prepares students to run business with a purpose that enhances our lives. So join us as we unpack these crucial insights and envision the future of business education. Andy, thank you so much for joining me today.
Andy:Oh, it's, a pleasure.
Senthil:One of the things when I looked at your bio which got my attention is you hold this unique professorship between School of Management and School of Environment and Sustainability. Quickly take us through what led you to this path and what's the story behind it.
Andy:Well, there's actually. Surprisingly, there's three endowed chairs at the University of Michigan that have that joint appointment. The University of Michigan, the Ross School of Business and the School for Environment and Sustainability started something called the Erb Institute back in the mid-1990s that brought together the two schools, so there's a dual degree program where students can get both degrees in three years and they have three endowed chairs that focus on these issues. So that's why I took the job at Michigan. They were very far ahead on these issues when people were just starting to get started.
Senthil:Right, we'll talk about business schools, but did that shape your thinking? Because one of the key arguments you make in your book and work is business school should not operate in silos. It should be a combination of multiple disciplines. Is this idea you had already in mind before moving into this role, or you evolved?
Andy:I've always been multidisciplinary. My PhD is a dual degree between engineering and business, which made it a little slow start. I had to do a postdoc at Northwestern to sort of get my business school legitimacy. But I think that and I also I worked for about eight or nine years before getting the PhD. So that gave me a very firm grounding in empirical issues that were more important to me than theoretical. And when you focus on the issue, the disciplines become less central. The problems aren't defined by the disciplines. The problems, the different disciplines, come together to understand the problems.
Senthil:Great. Let's talk about business schools and I want to segment this conversation into three business education, students and faculties, and job markets. But before we get into that, what is the story of business schools? And help us understand what is business education.
Andy:Well, that's a very broad question. Business schools in the United States started in the early 1900s. There's a wonderful book by Rakesh Khurana at Harvard, called From Higher Aims to Hired Hands, where he tracks their evolution and when they were first proposed, universities said no, this isn't an area of academic inquiry. And they pressed and said no, we're going to teach the titans of industry how to lead commerce and service to society. Khurana's conclusion at the end of the book is that we've missed that mandate, we've gone from higher aims to hired hands for more skill shops, access to a network, and not really focused on those higher ideals of business which in the early incarnation, the education of business leaders was more akin to how we train doctors to serve society, and we don't do that anymore and I feel very strongly we need to get that back.
Senthil:And you argue business schools are broken and that the education is not rising to the challenge. Why do you say that?
Andy:Well, right now, capitalism is struggling. Some markers of that are in the environmental domain. We have the planetary boundaries which are being surpassed, whether it's climate change or species extinction, nitrogen and phosphorus in the natural environment, freshwater availability these are all caused by the system of capitalism that we have right now. There's also problems in the social domain, as measured by wealth or income inequality, and even by some economic measures. This era of shareholder capitalism, which we've had since the 70s and 80s, is starting to struggle under its own weight.
Andy:The problem is, business schools are still teaching that same model, and so when they do start to focus on issues, for example, like climate change, they create an elective and drop it into a curriculum that still focuses on things like the sole purpose of the corporation is to make money for the shareholder. Government has a limited role in the market. Efficiency is always good. People are inherently selfish. Nature only has value as a resource for our supply chains and consumption. All these are embedded within the curriculum. So dropping an elective into a curriculum that really hasn't changed in decades, it just won't work, and it's a sign of its lack of evolution and innovation, as the world around it has evolved, and so I think our students are starting to press and saying this is not the education that is useful or needed for 21st century challenges and we want something different.
Senthil:Right. So you argue that business schools need to bring a sense of meaning and purpose more centrally into the curriculum and help students determine how to direct the purpose towards both leading business and serving society. Are subjects like sustainability fits into this?
Andy:I'm thinking more broadly. I think the challenge right now is to start to examine what is the form of capitalism that will come out of the variant we have right now to start to serve society's needs. And what is the role of business in society? I just spent a year at Harvard and their Institute for the Study of Business and Global Society. That, to me, is the question. And then, what is the role of business and global society? That, to me, is the question. And then, what is the role of business leader in leading those businesses?
Andy:And right now, business education focuses a lot on the how of business and gives very little attention to the why of business. Why are we doing this? What is the real value here? And that can lead towards a whole host of questions that can reorient what we do.
Andy:For example, is the purpose of the corporation to make money for the shareholder? Well, actually, if you go back to the mid-1900s, peter Drucker said the purpose of the corporation is to identify and serve a market. How well it does that is measured by profits. I am not here to say that money doesn't matter or profits don't matter, but when you put the cart before the horse, when you focus on profits and shareholder profits and I would add, a particular kind of shareholder who's very short-term focused.
Andy:Then things start to go awry and you can take a look at Boeing, for example, a company that was well-known for making high quality products, had a culture where people could challenge what was going on to try and make the company better, and then they merged with the McDonnell Douglas, they started focusing on quarterly returns, they started outsourcing a lot of manufacturing and planes started to fail. And that is a sign of what happens when you put the cart before the horse. And an interesting indictment of the MBA and that whole story is that when Boeing started to look for a new CEO, the CEO of one of its big customers, Emirates Airlines, made a statement saying I don't want to see another MBA in that position. I want to see an engineer who knows how to build airplanes. So I think that says something to what we're doing.
Senthil:The two issues you pick up out of the impact of Shareholder capitalism is climate change and economic inequality. Why did you prioritize these two issues?
Andy:Well, I think they're markers. Both of those issues are not externalities, they're not unintended consequences. They're the product of the market doing what it was designed to do. I mean, Thomas Piketty made that very clear on the inequality front in his book. Capital and um the the environment is something that affects us all and affects the next generation. So these are just symptoms of systems breakdowns. And to fix systems breakdowns you have to fix the system that caused it. And I do want to stress this is not a call for socialism, it is not an anti-capitalist argument.
Andy:The Financial Times wrote a really nice review of the book. I was very pleased with it, except the title. It said Hoffman is looking for the anti-capitalist business school. That's not what I'm talking about at all. I'm talking about amending and adjusting and reorienting capitalism for the times we're in. One of the things I'm calling for in the book is for us to teach students to be stewards of the market, to understand the domain in which they will practice their craft.
Andy:I teach a course on reexamining capitalism and we read Adam Smith, we read Karl Marx, we read Joseph Schumpeter I can go down the list to give students an understanding of what was capitalism originally intended. How has it evolved? What are the multiple forms out there? It's enlightening to them, and I open the class by asking my students can you define capitalism? And they struggle, and I think this is a really important data point. They struggle and this generation is also a generation that's becoming disenfranchised with capitalism and yet they're struggling to define it. So I want students to come out of business school and run successful businesses, but also have a role and a mindset. They need to maintain the integrity of the system, of the market, of capitalism, in order to make sure it continues to work well, and to do that, we need a deeper understanding of capitalism itself.
Senthil:Interesting. You cited the Financial Times review. Honestly, when I was reading the book I found it a bit radical, not on the ideas, but coming from a business school professor of the leading business schools in the world. Why do we see it that way? Is it because we have this specific frame of mind about business schools?
Andy:Well, I mean they wrote that it was an anti-capitalist calling for an anti-capitalist business school. I don't know, I have to talk. You know, whenever there's a news story, you have the story and then someone makes the title and that's nice clickbait, it will get people's attention. The institute that I was at at Harvard, the Institute for Study of Business and Global Society the New York Times did a story on it and again the title was the Anti-Capitalists Come to Harvard. And that's not what this is about. Anyone who cares about the systems, the institutions of which they're a part, whether that's government or academia or religion, and calls for ways to improve its deficiencies, that's not anti, that's pro. That's caring about the institution enough to want to devote time and energy to help it to be its best. And that's what I'm trying to do.
Andy:And that, I would add. I think our students are there. I think our students are way ahead of us. They do see these problems and they want a business education that doesn't sweep them under the rug and um and and brings them front and center. So, because they are, they are the, they inherit the world we're going to give them and these are problems within it. I I hear talks by professors. I give them too and and there's always a question, it it's an inevitable question Are you optimistic? And the answer is always the same oh, yes, I'm optimistic, because the next generation of business leaders, the students today, they're interested in this, they'll solve it. And it frustrates me becasue.. Next question should be and what are you doing to help them address that? And the answer is very little. Dropping an elective into a curriculum that hasn't changed in 30 or 40 years. It's not going to fix the problem.
Senthil:Are such titles like anti-capitalism in a way, a praise to your work, because your book amply shows that capitalism as a model is failing.
Andy:But I also start by saying it's done amazing things for us. The last hundred years. Capitalism has done amazing things for us in terms of food availability, safety, the buildings we live and work in, the clothes we wear, the drugs, the healthcare system all these things come from the market and, importantly, the market can fix these problems.
Andy:The market has to fix these problems or they won't be fixed. And the market is the most powerful orienting force on earth. It is the most powerful entity within it. If we can turn the power of that market towards addressing the challenges of the 21st century through the market, that is our only hope for solving these kinds of problems.
Senthil:And one of the defining qualities of your work is you say leadership is a calling. You say business's core purpose is to serve the society rather than enriching a specific segment of shareholders. How easy is to sell this idea to your students and your peers?
Andy:You know, I think again, the idea of a calling or a vocation really resonates with students today. When I was their age, it really wasn't there. You know, when I you know my father a job. He cared about his job, he was proud of his job, but the most important thing he's doing is bringing money home to put food on the table. And today's students are looking for something more. And so the idea of a calling or a vocation it's language I deliberately used in some of the programs I'm running at the University of Michigan, and the prior book is Management as a Calling.
Andy:If you can connect to something deeper in what you're doing, you know, and it will make all the difference in having a meaningful career, a satisfying career, a long career that will be successful not only in terms of money but also in terms of personal purpose and meaning satisfaction in life. And again, I see students who want to go there, they want to drive there, and it's an idea that started into, I think, and maybe it's just because I'm holding a hammer everything looks like a nail. But you know, like what's the new book? Moral Ambition? Bregman wrote it. He also wrote Humankind , really pointing out the idea that you know you can do a job and it can be meaningful or not, it's your choice. Why not make it meaningful? It'll make for a much more satisfying life.
Senthil:Tell us, Andy, you teach a number of students from many parts of the world. Why do students come to business school?
Andy:Obviously, you can't have one answer for all students, but certainly when I started teaching in business schools 30 years ago, students who want to make a difference in the world didn't come to business school, or most didn't. They went to schools of government and non-profit management. And today I'm seeing more and more students coming to business school. They want to be successful financially, they want to be secure, but they also want to make a difference in the world and they see the power of business to do it. And it's not just at Ross, it's across the board. Students are coming to business schools now with a different sensibility Not all Again, it's a diverse population, but a significant number, a critical mass, is coming to business schools and seeing the power of business and want to steer it in a direction, towards serving society.
Senthil:Do you see any specific issues they care about?
Andy:Oh yeah, I mean I run a program called Management is Calling, where I take about 40, 50 students on retreat out into the woods and guide them through exercises to discern their calling in management. And I do ask them what do you care about? Inequality, whether it's income or wealth or gender or racial, is very important. Environmental issues, climate change is very important, but then also a lot of them connect that with business. So whether it's bringing those issues into finance or accounting, supply chains is really interesting to students. And it's interesting also because you know I've been doing this for a long time to watch which sectors draw students. When I first started at Michigan, uh, 20 years ago, most students didn't want to go into the auto sector. They saw it as a dinosaur just stuck. And now they do. Their auto sector is really exciting. Um, agriculture has become very interesting to students. A lot of students want to go into sustainable agriculture. So it changes and evolves over time, but those are some of the issues I'm seeing right now that really draw students' attention.
Senthil:Right. I want to read a quote from your book. I found it a little controversial. Compared to their peers in other fields, business students are often found to adopt a more instrumentally rational approach to management ethics. This mindset leads to increased dishonesty in academic pursuits, stemming from the rise in egocentric behavior, and one assumes that increased dishonesty likely continues into their professional life. Tell us more about this idea.
Andy:I believe that's a quote from an academic paper, but historically, surveys and analysis of the students that go to business school tend to skew more towards what's called the dark triad narcissism, psychopathy and Machiavellianism. And then research has also shown that a two-year business degree makes them become more selfish and more self-monitoring. They care more what people think of them, and I see that when it comes time for when they're getting jobs, they're comparing themselves to each other largely around salary. That becomes a big defining moniker. But again, in more recent years, there's a new sensibility starting to come in, and so I juxtapose that to say that that has traditionally been what business school students look like, and now it's changing. But I think the curriculum is still serving that past model and certainly the stereotypes are still there.
Andy:Business is just about money. Well, actually it's not. Entrepreneurship is not just about money. Find me an entrepreneur whose goal is simply to make money, and I'm willing to bet you're not going to find a very successful one. Entrepreneurship is a very creative act. They want to develop something that people need and, of course, want to buy, but they have to develop the product that people need. They have to focus on people's wants first, and there's a very creative dimension to it, a very exciting dimension to it. That can be very satisfying when you produce something that serves a need in society. Again, going back to Peter Drucker identify and serve a market. To do that you have to understand what does the market want and provide it. And there's where the fun of business really starts to kick in to see people find value in what you do.
Andy:Before I was a professor, I was a house builder. I was a custom home builder. In many ways my job wasn't to build a home. That may sound strange. My job was to help the client realize their dream. If I didn't have that emphasis, I would have failed as a custom home builder because, yes, there would be a structure when it's done, but if it didn't serve what the customer wanted, I would have failed. I had to work very closely and understand what the customer wanted, often times not even being able to articulate or use the language to say what they want, but trying to discern what it is they're seeking, what is their ultimate objective. That's the real pleasure of business. I enjoyed the physicality of building a house, but I enjoyed serving the client more.
Senthil:Isn't it a similar kind of language we hear from most businesses today? They claim one thing or another with wider purpose. Do you think it's not translating down to executives?
Andy:I think that it's become clear to businesses that there are certain words that have now emerged. Topic purpose has really taken off and businesses see that their future employees care about purpose, so they start pitching it Come here, we'll help you fulfill your purpose. Some of them are real and some of them are not, and so my advice to students is buyer beware, take a good hard look to make sure that there's actually something to back up those statements. And again, another interesting thing about this demographic right now is the whole idea of conscious quitting or quiet quitting, of leaving companies when they feel like this is not serving what I got into this in the first place yeah, it's a nice salary, but this isn't what I want to do with my life. And they will leave, and so you can fool them for a little while, but some of them will leave and those that stay, chances are they're going to question the sincerity of the company, because that's always the danger here.
Andy:And business schools fall into this too, I would add. Business schools will market themselves. We're about positive business, we're about purposeful business. They will market that, and then students come. Or a company markets that and employees come, and then they see or a company markets that and employees come and then they see that this is just window dressing and either they will leave or they will stay, but they will become cynical. You fooled me on that. You're hypocritical. You're not honest. Why should I believe you on anything else? And that can be terribly destructive to the culture.
Senthil:And you talked about curriculum a few times. Let's suppose I'm a student walking into a business school. How can I design a curriculum that I want? Let's assume I'm a purpose-driven student. Getting into the school, there are so many checks and balances that these are the mandatory course you have to take. Then there are a few options to choose electives. So if I'm a student, how can I break out of this? There's no way at all, right.
Andy:Well, no, I wouldn't agree that. There's no way at all. But you have to become. You know, forewarned is forearmed. So the first thing is do your homework before you arrive. Any students who are listening right now, here's my advice Do your homework before you arrive, because the moment you get there you're going to get thrown onto a treadmill and it's going to be very hard to think, to strategize, to plan. So do your homework beforehand.
Andy:You are right, there's a certain number of required classes. Check to see if there are ways to opt out of them. If there are some classes, there may be a qualifying exam. If you demonstrate a certain proficiency in accounting, for example, can you opt out of the accounting core. Start to look at that. Look at the electives that are available, not just in the business school, but how many electives can you take in other schools around the university?
Andy:If you can come to the University of Michigan, you've got a great business school. You've got 17 other schools. Are there classes in public policy and engineering, in the school for environment? And then don't stop there, because your education is not just the classes you take, not just the classes you take. There are seminars, there are colloquia. Get out there and find lecture series. Go hear people. Immerse yourself A lot of the education. I think the best education you get in university is in between classes. It's that extra stuff. Look around for clubs, join clubs. Go further. You can organize a conference. You can start calling up people, important people, saying I'm at the Ross School of Business or the Johnson School of Business, you name it, and I want to put together a conference on this topic. Would you be interested in participating?
Andy:And the odds of us saying yes are not zero and they're not 100%, but they're strong. People in business do like to engage with business students and you will build your network. You will learn. You are now teaching yourself. Knock on faculty doors, propose an independent study. An independent study is a wonderful opportunity to learn something that you want to learn that no one's teaching you.
Andy:I had a student just do an independent study where she developed a business plan for starting her own coaching consulting firm. Now she doesn't plan to trigger that for like five or six, maybe 10 years out, but she took this opportunity and she was able to call people and say I'm a student at the University of Michigan, I know you're a professional coach. I'd like to talk to you about how you did that, they say yes. If she waited till later and said you know, I'm about to become a coach your competitor and I'd like to do this, they may be less likely to take the call. So all I'm saying is innovate, improvise, figure out, because you are being dropped into a resource-rich environment. Eat everything up, suck everything up that's around you.
Andy:Because I also think one unfortunate and damaging element of business education today is it overemphasizes the social. It's a party, for goodness sake, and you know what Beer tastes just as good in Ann Arbor as it does in whatever city you're living in. Don't waste too much time on that. Of course you want to be social. Of course you want to have fun, but don't let that distract you, because you leave
Andy:ou look back a year or two. You don't want to say I wish I'd done X, and I'm 100% sure no one is going to look back and say I wish I drank more beer. No one's going to say that. They will say I wish I'd taken a course on this. I wish I'd found the professor who did that. I wish I'd started an independent study or organized a conference on why this is the way you use the education to your fullest advantage. There's a wonderful quote from Mark Twain. He says I never let schooling get in the way of my education. Thank you, wonderful quote indeed.
Senthil:Thank you for that. Another culture that's promoted across business school students are expected to have quantitative powers. What are your thoughts on emphasis on numbers?
Andy:I mean we listen to numbers. Numbers have the power to convince. Numbers are powerful and numbers can deceive, numbers can distract. To be able to boil a complex issue or a complex concept down to a single number, it really can blind you to some of the deeper issues. Take share price, for example. I mean, does that one number sort of give you a clear idea of all the business fundamentals, of what that company is doing, how it's doing well?
Senthil:No.
Andy:Anyone who just runs their company based on that number is going to miss so many other things. GDP. GDP is one number that's supposed to measure national economic health. It leads us astray. There's plenty of critiques about GDP, and so the idea of crunching the numbers has as its root... Take something really rich and complex and boil it down to one simple number. You will lose so much in the process. So I'm not saying numbers don't matter. We only manage what we measure. That is true, unfortunately. But capture the complexity and the nuance of the issues around the numbers. Recognize where the numbers are missing something you know Nicolas Sarkozy, when he was president of France, commissioned Joseph Stiglitz and Amartya Sen to write a report on how can we amend GDP to get a clearer picture of national economic health.
Andy:It's a really interesting report of what is wrong with GDP and in fact, the gentleman, the economist, who developed GDP, he warned don't use this as a measure, a singular measure, of national economic health. That's not what it's for. It's one number on a dashboard. But look at other stuff. But we like simple answers and simple numbers. Give us simple answers and they can lead us astray.
Senthil:Andy, you acknowledge in your book that your generation was the first to learn about climate change and to watch income inequality reach extraordinary levels. But you also acknowledge that you failed to take the actions necessary to address these systemic problems. But you're very hopeful about the current generation of students in building a better future. So what has shifted from your time to now?
Andy:Well, the word hope is a very important one there, because I didn't use the word optimism. To me, optimism is looking at the odds, saying they're in my favor, I'm going to do something, and knowing exactly what's going to happen, where we're going to go. Hope is saying I don't know what the odds are, I'm going to do it anyway. Hope is a verb, and so we have to have hope, and so can the market shift. Am I optimistic that's going to happen? I'm not so sure. Am I hopeful that's going to happen? That means I'm going to roll up my sleeves and try and make it so that it is where I'm at and that's where I want our students to be, Because there are many questions we don't know the answers to. Can you have a sustainable economy based on consumption? Can you have sustainable consumption? I don't know the answer to that question. There's a Gordian knot that we're going to have to crack. Let's tackle it, and so many others. So am I hopeful that, as we start down this path, we'll find the answers to the tricky questions we're facing? Yes, but can I say for sure it's going to happen? No, I can't predict the future. So I am hopeful because I think that people are.
Andy:I mean this generation. There are certain issues they're done with. They don't question climate change. They don't question climate change. I mean the science is very clear here. My generation still does. They don't question gay marriage. Many of my generation still do. There are many issues where this generation is saying you guys can debate the truth of the problem. We're seeing it already playing out and we want to do something about it. And that's step one. Now we have to give them the tools to do something about it.
Senthil:Well, talk us through about faculties. It seems you're unhappy with the primary metric of achievement, which is the academic research published in prestigious journals .
Andy:The reward system in academia is one of the forces for inertia. I am rewarded to get tenure and then my annual review. It's typically around three things. Professors evaluate on three things research, teaching and service. And I can tell you it's research with a capital R, teaching with a small t, service with an infinitesimal s, and that research is in academic journals.
Andy:And we have a hierarchy of academic journals. There's the Financial Times 50, the FT50, and some schools have smaller lists, and these are journals that people in business have never heard of, much less read. And these are journals that people in business have never heard of much less read Administrative Science Quarterly. Academy of Management Journal. Academy of Management Review, organization of Science. Have you heard of any of these? You haven't and most people in business haven't. And they are written for academics. They are written so that other people will cite them.
Andy:I am measured by my citation counts, by my H-index, which is a measure for not just citation counts but who is citing who? Are you in central conversations? This is a very internal inside baseball metric that in many ways is disconnected from real world issues. These journals are driven by theoretical questions. The language we use is opaque, the prose is turgid. Business people really won't go there for business knowledge and this is not unique to business schools, by the way, most lawyers won't go to the law review that law professors publish in and again, the insularity of the academic world. So I feel very strongly that academics need to get out of the ivory tower more. They need to bring their work out into the real world. Some of it can't, some of it can't be translated, but some of it can, and business people aren't going to come to us for our research. We need to bring it to them, and that means we need to find ways to write in spaces that they'll find. Use a language they can understand. I mean it's like being multilingual Speak at business conferences. These kinds of things are important.
Andy:And just to cap off this point, I mean the book that I just wrote. It was really written for my students. That really doesn't register that highly on my annual review, because what they care about is are you writing for other academics? Now, I'm a tenured [unclear] professor, so I really don't care. The beauty of being a full professor is you can define the role any way you want. And I'm not saying go out and play golf, I'm saying be the kind of professor and I want the term public intellectual stars to come in. I want my work to matter in the real world and that's what I've been doing and I want to see other professors do that. In
Andy:the book.... I have a call I want to see more professors act like elders and stop focusing on their own metrics and their own success and start focusing on the institutions through which the next generation will come up, whether it's students or future faculty. That's what I'm focusing on now and I really feel very strongly that when I come to the end of my days and look back and say, did I live a good life as an academic? It's not going to be my citation count and my H index and my number of academic publications that's going to give me a measure of that success. Its gonna be did I touch my students. Did I influence the way people think? Did I change the way people do business? That's the metric that's going to matter. And again, we talked earlier about crunching the numbers. That citation count, that H-index, is crunching the numbers. It won't nearly capture the complexity of the impact a professor can have on a young student's life and I think too many professors have missed that point.
Senthil:That's interesting, Andy. Look, one thing I found very unique in this book is you wrote to the students directly, you speak to them. That's very different, very influential, at least for the target audience you wrote the book for.
Andy:The audience is students, but it's also faculty and administrators who can actually change higher ed. But it is for the next generation of business leaders, and that's our students and alumni, I would add, by the way, too.
Senthil:Let's suppose a student graduates from a school and goes to a job market. Let's see two archetypes here. One is this purpose-driven person. The other one is like the candidate who's ready for a consulting job or a finance job. Let's not fool ourselves that many of the students' dream or the market's demand is for the later category. Is that correct ?
Andy:Yeah, that's fair. Yeah, I wouldn't create that split. There are some people that go into finance and consulting for truly honorable reasons. I mean, you can have a very satisfying career, you can have a very impactful career in finance and consulting. I just I think students need to be aware that they're channeled in that direction from business school. Because the salaries are the highest there, the stature and status that comes with it. Our rankings go up. Starting salary is a metric in the rankings. The better question is why did you choose that path, and did you actually choose it, or are you just going with the flow?
Andy:There's an organizational psychologist named Herbert Shepard and he has this paper and he opens with a really nice metaphor that I've used with my students many times. He says are you a cormorant? Now, a cormorant is a bird that's really good at catching fish. The fisherman knows it, puts a band around its neck and a rope around its foot and throws it into the water. The bird comes back with a fish. The fisherman takes it, throws it back in the water. All day. The fish does what he's really good at. The bird does what he's really good at, but for the fisherman's purposes, not for the bird's own purposes, so you may be really good at something. Are you fulfilling your destiny, your purpose, or are you fulfilling somebody else's? Maybe you're satisfied with that, because maybe your purpose is to provide for your family, whether it's your immediate family or your extended family, I mean, business school is a great opportunity for people to move up in the economic ladder. I'm not going to deny that Everybody's situation is different. I just want people to be thoughtful about why they're doing what they're doing and not just sort of get moved along.
Andy:David Foster Wallace gave a commencement address at Kenyon College. You can look it up. The title of it is This is Water. And he opens with a story of these two young fish. They're swimming along and they pass an older fish coming the other way and the older fish says, hey, guys, enjoy the water. And keeps on swimming. And a couple of feet later one of the young fish turns to the other and says what's water? And the metaphor is that if you're in an environment and you don't understand it, if you're in water and you don't know what water is, you will conform. And so understanding the environment in business school that it is channeling you towards consulting and finance, make sure that's what you want for your own reasons and not just go with the flow. Don't just be a cormorant.
Senthil:Excellent, Andy, From this conversation and reading your work, it's very evident that you acknowledge the benefits of capitalism. You say they did great things unprecedented economic growth, human prosperity, etc. The one piece you're critical about repeatedly is shareholder capitalism. What is the future of shareholder capitalism?
Andy:That's a great question and one of those questions I don't fully know the answer to. There are multiple dimensions to it. One of them is what is the purpose of the firm? Is it just to make money for the shareholder or is it something more? The Business Roundtable, the World Economic Forum, Blackrock have all tried to redefine corporate purpose. There are very legitimate criticisms of each one of those, but to my mind, I don't care.
Andy:The door has been opened, the question has been asked and we as business professors, we as business schools and students as future practitioners, should engage the question. There are other questions that go with it. What is the role of government in the market? What is the role of business and policymaking In pure firms or shareholder capitalism? We want the government as small as possible. Is that feasible, or is that even the right question? We have this debate now. It's around stale binaries it's conservative versus liberal, it's around stale binaries, it's conservative versus liberal, it's Keynesian versus neoclassical, it's more versus less and we need to have a better conversation over what is the right role of government, what is the right role of the market.
Andy:Mariana Mazzucato has been writing a lot and speaking a lot about this that the government is in the market. The cell phone you have in your pocket would not have been possible without government-funded research at the basic level. Companies won't do that work. So there is a place for government in the innovation cycle. There is a place for government in setting guardrails within the market. I think most economists would agree that the market will not reach a fair equilibrium without some kind of government regulation to sort of set some boundaries of what companies can and cannot do, should and should not do. These are the kind of questions we should ask to say what is the future of capitalism, post-shareholder capitalism?
Andy:And I would add, by the way, that I do teach this course again Re-Examining Capitalism, and one of the classes is around the different variants of capitalism around the world. And my students' minds are blown when they start to learn about Nordic capitalism, learn about the kind of safety net it provides, the kind of culture that supports it. I mean there's fair questions of whether that could work in the United States because we're such an individualistic society, but certainly in places like Norway, denmark, sweden, it's much more communitarian. Then they're also blown away at the tax rate because you have to have money to support this. And then I blow their mind a little further to show that before Ronald Reagan, tax rates for the top income brackets in this country were up over 70% and they're brain fries. They didn't know that was possible.
Andy:Our students have only known one variant of capitalism. We need to change that. We need to expose them to the possibilities of others. Joseph Stiglitz has a nice metaphor. He says what we're doing right now is practicing exploitive capitalism. I know the system's broken, I don't care, it's not my problem. I'm going to take what's from me and I'll let someone else deal with the problems. If we keep going down that path and we keep producing students that think that way we're doomed.
Senthil:Let's take a minute and discuss about the various economic models that are around the world. I like the story of the Denmark Prime Minister you covered in your book, who once said that Americans often think of us as a socialist economy, but we are very much a free market economy, so, leaving the shareholder capitalism aside, you also stated examples from countries like India and China, where various pursuits of business models and leadership is emerging. Do you see this convergence of thinking about how businesses should be run?
Andy:I don't think that we're going to come up with just one variant globally. Different countries have different needs, different economies have different needs. You know, in some of the early climate talks, the Prime Minister of India said hey, we're just trying to provide basic sanitation, clean water, food for our people. Don't ask us to reduce our carbon emissions just yet. So it was a fair point. And so what kind of a market works in different contexts? The Western business model has been the dominant model for decades. I think there's a fair question of whether that dominance is being challenged. Certainly, you just have to open the newspapers today and see that there are questions about the continued reliance on the American business model, the American business model. And so what does the future hold is a very good question. And again, if we're not asking this question in business schools, holy smokes, are we leaving our students blind to a major, We're going through a major shift right now.
Andy:It was in some ways inevitable. You know, after World War II we were the strongest country standing. We dominated global markets. It was only a matter of time before those countries that were decimated by World War II and others around the world started to rise up and rival the American model. That was inevitable. The rise of China, the rise of India as global powers, global economic powers it was inevitable, as well as the resurgence of Japan and the European economies and then it seems what's happening now in the present administration is jumbling up the set of institutions by which we interact. I'm not so sure it's going to come out leaving the United States dominant or not. I mean, I think that one thing about creating chaos is you can't predict what the outcome is going to be, and I don't think anyone really has a clear idea of where this is going to lead.
Senthil:And it also seems that you know, for issues like geopolitics or climate change there is no win win solutions
Andy:Climate change or income inequality is that we just drop an elective into the curriculum. The second is that the curriculum is really driven by the win-win. You know so climate change All you got to do is come up with another widget. Problem solved, you get rich. Everyone's going to live happily ever after. It's a win-win.
Andy:I'm being facetious, but I will address climate change. Tomorrow. I'll go buy an electric car, put solar cells on my roof, problem solved. It's not that simple, and anyone who thinks that the transition out of a fossil fuel dominated economy into something else is going to happen merely by the introduction of windmills and solar cells I just don't think it's that simple, and so we do have to have some very careful conversations about how we're going to do this, because, at the end of the day, regulation is going to be necessary to steer the economy. All these companies that talk about reducing their carbon footprint that's great, but what's the most important thing they can do to address climate change? Stop obstructing the development of climate policies and start supporting them, whether that's through their own actions or through that of their trade associations. You know what they do in the political arena to steer the market. That's going to require some very difficult conversations and very difficult decisions over how to transition the economy in a fair and just way. You can't just turn off the spigots tomorrow for oil. It has to be a planned and carefully orchestrated process that doesn't leave people behind, that doesn't leave economic damage that can't be in any way rectified. This could be done very badly, but it has to require some conversation of some win-lose scenarios and if we don't engage them on our own terms, they will be imposed upon us. There are interesting studies I'm picturing one in my head right now from Brookings looking at the impact on GDP in the United States and around the world from climate change by the end of the century. And there are some major swaths of this country and other countries that are going to take a massive hit from the impacts of climate change, and we're already seeing them In this country.
Andy:Insurance rates, property insurance rates are going up very, very quickly, and it's not just for the big sensational events the tornadoes, the hurricanes, the wildfires. It's also for things what are called secondary perils, just normal events that have become more frequent and more severe, like massive rainstorms that cause flash flooding. We now talk about atmospheric rivers. Insurance companies are just looking at the numbers and the numbers don't look good. And if you want to talk about impact on the economy, talk about insurance companies raising rates, raising deductibles or withdrawing from markets altogether.
Andy:If they withdraw, you can't get a mortgage. If you can't get a mortgage, the real estate market takes a hit. If the real estate market takes a hit, the economy takes a hit. Insurance is like the canary in the coal mine and it's happening. It's happening now and I think that sooner or later we have to wake up to this and say we have to have a serious conversation about how we're going to deal with this. And it's not just going to happen from the quote-unquote magic of the market. It's going to require some carefully deliberate conversations over some win-lose scenarios, and we don't touch those in business school.
Senthil:And let's move to the last section. We call it as How I did it. These are three personal questions. I ask all my guests to learn from their lives and experiences. How do you handle conflicting views or setbacks?
Andy:I mean like conflicting views in my own head or setbacks in my own head, or
Senthil:when somebody disagrees with you presents a different perspective, how do you usually approach them?
Senthil:What's your framework of thinking?
Andy:I tend to approach this like a Socratic professor and try and drive a discussion of the deeper issues or concerns that are behind that. I've taught negotiations and you talk about interests, not positions. You disagree with me. Let's go deeper. What are the foundations for that? And also recognizing. You know this is important. This is an important lesson for me and it was a hard one.
Andy:Some of my early work has looked at why do people reject the science of climate change? And that made me a lightning rod for attacks. I actually have a folder for hate mail because of this work and it was very pointed personal hate mail and it stung. When I first started getting it, I didn't know what to do with it and then someone gave me a quote and he attributed it to Winston Churchill. And although I haven't been able to verify, it said if you're not offending anyone, you never took a stand. And that really helped because if you're saying something important and you're challenging how people think you should expect blowback, you should expect pushback. That is actually a good thing. It's not a bad thing. It's a good thing because it means that you are making people think. The worst thing is, you say something and people go oh, that's nice.
Andy:Let's go have a beer, I mean, then no one's paying attention.
Senthil:So that kind of pushback, that kind of challenge, I've learned to accept as a marker that you're saying something important and accept what comes with it. What would be your advice for business leaders of today?
Andy:In the context of the political chaos we have right now, or just in general,
Senthil:it could be anything.
Senthil:You know, there are multiple things happening, from politics to climate change, to inequality. If you say that look, these are one or two things every business leader should keep in mind, what are they?
Andy:Well, you know I'm reacting in real time, so I may have a different answer after I've thought about this, but one thing I might bring in is what kind of legacy do you want to leave? What do you want your children and grandchildren to remember you by? I am always intrigued by business leaders who really start to think differently when they start to face their mortality, or start to think differently about their legacy. There's an amazing video out there of John Doerr from Kleiner Perkins and he's talking about having a conversation with his daughter and his daughter just laid into him and said your generation made this mess. She was talking about climate change, your generation should fix it. And he recalls that story and tears come to his eyes. There's legacy, and so you can also think about you know, like Ray Anderson at Interface, he started to think about what's my legacy? It's a company I'm very proud of, but it's a company that's making these carpets that will never decay in the environment and it was just an epiphany for him. That's not the legacy I want to leave. There's the famous story of Alfred Nobel. There was a newspaper that thought he had died and wrote an obituary for him. And it wasn't a nice obituary because he had invented dynamite. He was the doctor of destruction and he was horrified by this and that's why he started the Nobel Prize. So think about your legacy, think about what you're going to leave behind in his broad sense, and I assure you that will take you to a domain that's more than about money and more than about the shareholder, but providing real value to real people.
Andy:And when I run this program, Management is a Calling.... There are a series of exercises I put the students through, and the one I survey them, and so I survey it always comes back. This is the one they find most impactful. I tell them and your listeners can do this too is take the year you were born. If you're male, add 79. If you're female, add 81. That is statistically the year you were born. If you're male, at 79, if you're female, at 81, that is statistically the year you will die. What will your obituary say? Where will it be written? What would you like it to say? And the students find that tremendously powerful. So the idea. And I actually have a lecturer come in, this woman who is a self-described death doula, Maura McInerney, and she takes people, students, through an exercise, the death archetypes exercise, saying that how you view death reflects how you view life, and I think that's really interesting.
Senthil:Interesting. One book you recommend to our listeners
Andy:I really love the book, the Overstory. It really brings in some really nice ways of thinking about the natural world.
Andy:A book that was formative for me in a younger day is Blindness by Jose Saramago, and it's a story of a society where you go blind if you get this disease and if you come near somebody, you go blind too. And so society gets steered and they put everybody in a building and they just leave food at the door and they're on their own. And he adds one more interesting wrinkle where one woman who's married to her husband she doesn't go blind for some reason, but she pretends she does so that she can stay with her husband. And the story is all about what happens inside the building, what kind of a social structure forms. And it's a metaphor for what happens in society if the institutions break down, and we've had some examples of that COVID or certainly 9-11 in this country.
Andy:I have friends that were just grounded in cities. They didn't know anybody and had to figure out a way. And how do people react? And did they come together or did they become selfish? It's a really important and interesting question of who we are as a species, so that's one that was really impactful for me growing up.
Senthil:Excellent, Andy. What a pleasure talking to you today and knowing more about you.
Andy:Your questions were very, very good and it was fun to examine my thinking through your eyes. I really appreciated that.
Senthil:Thank you, Andy. Thank you so much for tuning and listening to our podcast today. When you get a chance, please do not forget to leave a rating and review of this podcast and feel free to write to me if you have any thoughts or comments or what kind of episodes you'd love to hear in the future. Thank you,