Ahead of the Curve (22 page)

“Are you kidding?” she said. “This is what you get to do every day? You get chief executives beamed in from China to take your questions? It was amazing.” Sometimes I needed to be reminded how lucky we were.

One morning in January I decided to spring for parking on campus. After five months of taking the bus or driving and then spending fifteen minutes cruising around Allston looking for a spot, I thought it was time to treat myself. The previous night, Margret and I had finally cracked and ordered takeout from a very fancy Chinese restaurant on Massachusetts Avenue. We needed a break from the hairshirt life. However good it was for our souls to step off the bourgeois ladder we were on in Paris and return to the stringencies of student life, it was equally good to say to hell with it once in a while. Sesame chicken and dan-dan noodles had never tasted so good.

So there I was cruising onto campus in my $2,000 used Toyota, unfoldinga five-dollar bill and handing it to the attendant, feeling for all the world like a big-spending Russian oligarch. The roads were covered in ice and slush, and I was looking forward to a briefer-than-usual exposure to the Boston winter, a quick dash from the car park to Spangler and perhaps one of those croissants stuffed with bacon and eggs that Cedric scarfed down every day between classes.

Once I got to the garage, I found a space on the third story—but not before passing the most extraordinary assemblage of student transport I had ever seen. Ascending the ramp of the car park, they went, roughly, BMW, Lexus, BMW, BMW, Mini Cooper, Lexus SUV, BMW, Porsche, Lincoln Navigator, BMW, and on and on. Finally I found the lower-rent district. There was Betsy, Bob’s ten-year-old Saturn, which he’d told me on a ride home, stroking the plastic dashboard with pride, had done more than 130,000 miles. I also spied an olive-green Chevy Lumina, which belonged to a former submarine captain in the section. “No one likes to buy these cars secondhand because they are only driven by old people,” he told me. “But that means you get a lot of car for a lower price. And old people tend to look after their cars much better.” I was developing a soft spot for the ex-military guys. They were refreshingly sane.

In the Spangler cafeteria, I found one of my section mates, Vivek, lingering as usual by the coffee station. He couldn’t decide whether to go for a latte today. Aside from knowing everything a man should know about finance, Vivek also happened to know everything about cars. Everything. He knew torque ratios on a Honda Accord as well as the interior specs of a McLaren super car. He knew prices, speeds, RPMs, detailing history. You almost felt bad asking him for advice on buying a car—it was like asking Einstein to help you with long division—but he loved any opportunity to talk cars. He went about your problem like a clinician, diagnosing your situation, personality, and budget and then delivering his answer. “You should take a look at the Acura range” or “The Korean cars aren’t quite there yet. But give them a couple of years.”

“Have you seen the cars in the garage?” I asked him that morning.

“Yes.” Vivek only ever answered the specific question you asked him.

“Well, how come I’m driving a two-thousand-dollar Toyota and everyone else has a BMW?”

“Lots of people buy them when they get into HBS and want to get financial aid.”

“What?”

“Once you get accepted by HBS, you want to clear out your bank account so that you get more financial aid.”

“I’m sorry, I’m not getting this. You buy a BMW to get financial aid?”

“When you list your assets in the financial aid application, you don’t have to mention your car, but you do have to list any savings or property. So you buy a car for twenty thousand dollars, maybe you get an extra twenty thousand dollars in financial aid, so basically HBS buys you a BMW. If you hadn’t bought the car, you’d have to pay the twenty thousand dollars out of your savings.”

“But don’t they check this kind of thing? I thought that if you were caught lying on your financial aid form, you could risk losing your place.”

“But this isn’t lying. Nor is taking all your money and parking it with your parents while you apply for financial aid.”

“So your personal accounts look empty.”

“Right.”

“This is unbelievable. How many people do this?”

“Everyone coming from Wall Street knows about this. And the consulting firms. It doesn’t always work. But lots of people try it.” In its brochure, HBS said that roughly half the class received financial aid and that the average financial aid package was worth $10,000 per year. I knew that some, like Bob, had received much more, but the man had four children and had flown the Stealth bomber. He deserved it. I had received $3,000 in my first year. Probably what I deserved. But the idea of these twenty-five-year-old Wall Street jerks fiddling with their financial aid forms, with the connivance of their parents and the local BMW dealerships, ruined my morning.

No matter how hard it tries, business can never escape the fact that it is the practice of potentially thieving, treacherous, lying human beings. Its challenge is in reining in the thieving, treachery, and deceit sufficiently that the entire edifice of business and society does not dissolve into a medieval vision of hell. Harvard Business School has produced its fair share of ne’er-do-wells. Of the class of 1985, who graduated into one of the great stock market booms, sixty-five were prosecuted for securities violations. The most recent, and spectacular, HBS blowup was Jeff Skilling, the CEO of Enron. In the late 1990s, a job at Enron was one of the most coveted gigs for a graduating MBA. When Skilling visited HBS, he was greeted as a hero, given standing ovations and hotly pursued by professors wanting to write fawning cases about him and his marvelous money-making machine. Beneath him, inside Enron, were scores of other Harvard MBAs built in his mold. When everything was going well, they were geniuses. When it all collapsed and Skilling went to jail, the reputation of the school and its graduates suffered.

In 2003, a class called Leadership and Corporate Accountability was introduced into the required curriculum to allow students to discuss the perils of chasing dollars down ethical sewers. Here was the time to access the moral compass I had read about all those months ago and which had been going haywire with so much talk of money and power. Our guide was an owlish professor called Joseph Badaracco. He had been a Rhodes Scholar at Oxford, had obtained both his MBA and doctorate at the business school, and had carved out a well-padded niche for himself as a business ethicist. For a couple of weeks each year, he taught in Japan, which provided him with that extra layer of financial comfort all academics crave. He was certainly a change from all the hard-charging, weight-lifting, marathon-running types at the school. His shoulders sloped, he wore rubber soled shoes, and he looked as if he would much rather be dozing in a library or fishing on some quiet New England lake. He prided himself on the leisurely life of the tenured Harvard academic. If our last class of the week with him took place on a Thursday morning, he’d smile and rub his hands together and make a point of telling us that his weekend began the moment class ended. He gave the impression that teaching ethics at a business school was one of the cushiest jobs in the world.

Before LCA began, it was the subject of considerable scorn. For the hard-core financiers, it was precious time taken away from studying derivative structures. For the aspiring entrepreneurs, it had nothing to do with creativity or cash flow. The only ones who looked forward to it were the wafflers, the isolated individuals who loved to just talk and talk about nothing in particular and who one day soon will be coming to destroy a company near you. Bo loved the course for his own particular reason. It required very little work. The cases tended to be short, with no numbers to run. They could easily be dealt with lying in bed or in front of a basketball game.

Harvard’s response to skeptics who did not believe that ethics had a place at business school was expressed by an HBS professor, Tom Piper, in a book called
Can Ethics Be Taught?
“We reject this assertion emphatically,” he wrote. “These students are at a critical stage in the development of their perceptions about capitalism, business practice, leadership, and the appropriate resolution of ethical dilemmas in business. This is a period for inquiry and reflection . . . Extended time is necessary to develop sufficient strength and sophistication to acknowledge the presence of ethical dilemmas, to imagine what could be, to recognize explicitly avoidable and unavoidable harms. It takes time to develop tough-minded individuals with the courage to act.” Badaracco had written his own book on business ethics, called
Defining Moments: When Managers Must Choose Between Right and Right
. The title was intended to describe the twilight zone in which most ethical decisions exist. “Life-defining moments,” he warned us, “do not come labeled.” Consequently, we had to be girded for these moments at every turn, forging our characters and morality in everything we did.

The key framework for LCA divided the responsibilities of corporate leaders into three categories: economic, legal, and ethical. We had to meet criteria in all three categories if we were to satisfy our short- and long-term financial responsibilities without breaking the law or hating ourselves. We began by learning that the U.S. courts take the idea of fiduciary responsibility very seriously indeed. Even the slightest breach of trust with an investor or financial partner would be stamped on. We were given the equation M × F = D. This means that a decision by a court (D) is the product of the legal model (M) and the pertinent facts (F).

The first real dispute in class flared up during a discussion of bluffing in business. In 1968, the
Harvard Business Review
published an article by Albert Z. Carr titled “Is Business Bluffing Ethical?” It generated a slew of critical letters. Carr compared business to poker, in which bluffing, short of outright cheating, was a perfectly legitimate activity. He said that many successful businesspeople lived by one set of ethical standards in their private lives and a quite different set in their professional lives. The explanation, he said, was that they perceived business not as an arena for peacock-like displays of high ethical standards, but as a game with specific rules. Knowing that you could win the game of business playing all manner of tricks that you would never inflict on your spouse, children, or friends made for a calm, unstressed, uncomplicated life. But to some, it seemed to be an acknowledgment that business was fundamentally unethical.

Behind me, Joe, a keen poker player and ex-potato chip salesman, harrumphed his approval of Carr. Across the room, Lisa was seething. She had spent her entire life in Louisville, Kentucky, from school all the way into a job marketing household detergent. Whenever an ethical dilemma came up, she was always the first to raise her hand to say that what was most important was “doing the right thing,” whatever the cost. If you were in rural China trying to get a factory built, you should under no circumstances whatsoever offer a bribe, whatever the local norms, because bribery was just wrong. No excuse for it. If you were in Nigeria drilling for oil, there was no excuse for not turning over all of your profits to the locals who accused you of capitalist exploitation. There was no argument to be had about the cost of economic development. You had to do what was right. If you found out hackers had broken into your credit card system but had stolen nothing, you must tell all your customers
immediately.
There was no excuse for sitting on the information. You had to be honest, and the market would reward you. And even if the market didn’t reward you, you could sleep well at night knowing you had done the right thing. Nurtured in the bosom of a vast American corporation, she had descended upon us a full-blown ethical jihadist.

“If you employ people, and their jobs depend on you, you can’t treat your business like it’s poker,” she said, drilling her finger into her desk. “If people find out what you’re doing they’ll never trust you again.”

Joe shot back: “But if you’re a good poker player, you don’t explain your bluffs. You play them in order to win over the long term. In business, you’d be insane to be completely open about everything you’re doing. You have to keep some secrets, and the way you keep them secret sometimes is by bluffing. You’re not lying or breaking the law or cheating people out of money. You’re protecting what’s yours from other people who are playing the game the same way. If you didn’t bluff you’d just lose again and again.”

Eric, a former advertising executive, chimed in: “I think it’s about what you’re comfortable with. I mean if you’re happy to bluff, lie, whatever you want to call it, in one area of your life, you’re probably going to do it in other areas, too. If you’re happy with that, then fine, you have to live with the consequences. But surely you can find aspects of business where people aren’t playing these kinds of games.”

“Where?” said Joe.

“I don’t know,” said Eric. “Nonprofits, maybe.”

Badaracco was clearly enjoying this. He said that the executives who come for courses at HBS love debating this question. It goes to the heart of everything they do. Every advertisement their companies put out slightly exaggerating the quality of their product, every machine they build that is specifically designed to break down one day after the warranty expires, every sales pledge they make knowing they will have to scramble to find the spare capacity to fulfill it—everyone in business is basically bullshitting his way through, finding a way, saying yes before he is ready, overpromising, underhyping, anything just to get by. Call it bluffing or anything else you like, but the environment is not kind to the honest man.

When I was a journalist, I often had to deal with public relations firms. I wondered if they existed because the media had become so diverse, complicated, and malicious, or because companies were populated by individuals who had lost the capacity to talk in plain English. Each side, of course, blames the other, while the PR pros reap the fees. One of my editors used to compare PR professionals to the kind of adaptor plugs you buy at the airport so you can use your electric razor overseas. The corporate titan these days, so competent and brilliant in so many ways, can relate to the great unwashed who watch television or read the press only when plugged into a mediating flack. This discussion of bluffing cut to the heart of it. The business class had become so used to the rules and language of its own particular game—the bluffing, the subterfuge—that it seemed to have lost sight of the honesty, plain speaking, and plain dealing that non-businesspeople expected in human transactions. When a business leader spoke of “off balance sheet accounting,” was he aware that most non-businesspeople immediately thought “fraud”? Or was it such a given in the business world that you did not call your fellow business-class citizens out on their euphemisms? Weren’t we all bluffing, after all?