The Golden Passport

by Duff McDonald

  Harvard naturally decided to deemphasize the above, and explained their eventual decision with arguments that ranged from the civic to the religious, the intellectual, and the academic. Indeed, Eliot’s first serious notion of how to respond to the changing times showcased his disdain for private enterprise; he contemplated, rather, the formation of a school of diplomacy and government modeled on the École Libre des Sciences Politiques in Paris. The appropriate ambition for a business-minded Harvard graduate, in other words, was to engage in business in the public sphere, not the private one. The idea was that HBS would be a force for good, consistent with academia’s joint historical aims of developing expertise and a commitment to positive social change. An early candidate for the name of the School: the Graduate School of Public Service and Commerce.15 Both President Theodore Roosevelt and Senator Henry Cabot Lodge signaled their support of the idea in writing.16

  Eliot voiced this idea to Harvard professor of history Archibald Cary Coolidge in 1898, and the idea bounced around Harvard for nearly a decade before taking more definite shape in 1906—with an added wrinkle. That year, Harvard’s Division of History and Political Science formed a committee to investigate the feasibility of establishing a separate school of “public and private business.” Members of the faculty had voiced concern about a lack of demand for Eliot’s exclusive focus on diplomacy and public service, and decided to investigate the addition of courses on private business “to help support” the effort. They were right—demand for an education in private business did and continues to far outstrip demand for an education in the diplomatic arts.

  A significant document in the prehistory of the School is a January 1907 letter from government professor A. Lawrence Lowell to Professor Frank W. Taussig. Taussig was a Harvard man through and through: a member of Harvard College’s class of 1879, he later worked as Eliot’s secretary while pursuing a PhD in economics before becoming an assistant professor in 1886. Named a full professor in 1892, he was a force in both his field and in administrative matters of Harvard until his death in 1940, at which point he was known as the “grand old man” of the university’s economics department.17 In his letter, Lowell argued that a school aimed at professional training for public service was doomed to failure by lack of demand, whereas a school aimed at professional training for private business had no limits to its potential. The argument fell on sympathetic ears, and by mid-1907, Eliot’s conception of a two-pronged approach to business education had been jettisoned. What hadn’t: the self-congratulatory rationale for training men for public service. Combining the two, Harvard founded a school of private business and cloaked it in the idealism of public service.

  When current HBS dean Nitin Nohria was being interviewed by Charlie Rose in January 2015, he said, as if reminding his interviewer of an accepted fact, that “business is the greatest force for good in society.” That’s the kind of thing they say at HBS these days. But in 1908, the idea that business bestows its gifts not just on the businessman but on everything he touches had not yet become Western capitalist dogma. The tenor of those times required an appeal to loftier ideals. Forget about Harvard’s competitive position and the desires of students. The way Harvard saw it, their efforts were for the good of everyone: Concerned that the rise of industrial America was corrupting its democratic soul, Harvard proposed that business was the answer to the problem, not its cause. It was a brazen appropriation of high ideals for slightly less high purposes, and it wouldn’t be the last instance of such. The School has made a century-long habit of insisting that it is doing one thing when it is quite clear to all involved that it is doing something else.

  By the latter half of the first decade of the 1900s, Eliot had also become convinced of the wonderful intellectual odyssey presented by a career in business, and decided that Harvard could arm fledgling businessmen with the right mental framework for their journey. How had he arrived at such a conclusion? By noticing that more than half of recent Harvard College graduates had gone into business. And why had they done so? “The explanation of that new phenomenon is that business in its upper walks has become a highly intellectual calling,” he told the Harvard Club of Connecticut in February 1908, “requiring knowledge of languages, economics, industrial organization, and commercial law, and wide reading concerning the resources and habits of the different nations.”18 Harvard graduates weren’t stooping to careers in business, his thinking went; business was elevating itself into the realm of Harvard graduates.

  This line of thinking exposes two fundamentals about how Harvard sees itself. In the first instance, Eliot clearly could not countenance the notion that Harvard graduates were entering business for pecuniary reasons alone. They were Harvard graduates, after all, so their primary motivation had to have been intellectual. In the second, Eliot’s implicit argument—that a thing is not yet a thing until Harvard has deemed it so—is a tradition that continues to this day. To wit: HBS professors consider a survey of Harvard MBAs sufficient “research” when seeking insight into questions of national importance.19 But others hadn’t needed to see the writing on Harvard’s ivy-covered walls to come to the same conclusion decades before Eliot finally did. After the Civil War, Robert E. Lee, then president of what became Washington and Lee University, had proposed a business curriculum that included “commercial history, law, and technology; mathematics of accounts, exchange, insurance, and interest; English language and correspondence; plus modern languages.”20 (He died before it could be implemented.)

  But Lee hadn’t used the term calling. And if business were a “calling,” with all the sacred connotations that entailed, then the education of businessmen could itself be seen as a moral pursuit. And that sentiment had Harvard written all over it. Harvard’s opportunity, as Eliot and others saw it, was “to teach not merely how to run a business, but also how a business should be run.”1 (A vocation, perhaps, but one with a moral dimension.)22 Within limits, of course. As former HBS faculty member Michel Anteby points out, “[Eliot] saw it almost as a civilizing project. As long as you were white and not Irish, at that time, you could join the elite, but you just didn’t fully know yet what being part of the elite meant. So these . . . elite business schools . . . started off in the US to try to teach these new members of this group to learn the codes of conduct.”23

  Lowell’s 1907 letter to Taussig holds a special place in the hearts of HBS historians, because suggestions made therein became decisions, and because Lowell, who became president of the university upon Eliot’s retirement in 1909, was for his entire career a supporter of HBS in the face of hostility from both within and without the university. Importantly, he argued that Harvard must “teach [students] business, not political economy”—that it should be more of a professional school than an academic one. This was a very American inclination—favoring the practical over the philosophical—and to this day, HBS takes great pride in favoring relevance over rigor when it comes to its teachings. They can thank Lowell for tilting the balance in that direction. That said, the decision also set the fledgling enterprise on a collision course not only with those at Harvard who would look down their noses at a vocational school (even if it were dressed up in Harvard finery) but with many in the university’s Department of Economics as well.

  In another letter, to Eliot, Lowell referred to the whole initiative as “a great but . . . delicate experiment.” Later generations were so taken with the term that they titled the School’s authorized history of the first half century of its existence A Delicate Experiment. But the notion that Harvard was engaged in such a thing in 1907, as if they were alone in a laboratory, doing something no one else had thought of, is simply untrue. There was already a school teaching business at the graduate level—at Tuck. And they’d been experimenting at Wharton for nearly thirty years at that point. Conducting an experiment for the very first time is the stuff of leadership; conducting one that someone else has already done isn’t quite so delicate.

  In 1957, HBS dean Stanley Teele acknow
ledged that the School’s decades-long insistence on stressing that it was the first graduate school of business “has seemed strained to many.” Indeed it had. But to Teele, the decision had resulted in nothing less than a horrible future narrowly averted. “Had the founders decided that to manage business enterprises one need not have a liberal education,” he wrote, “what followed might well have been a quite different story.”24 Or it might not have been. We’ll never know, will we?

  In any event, Harvard wasn’t going to place third after Wharton and Tuck, and they saw their opportunity to be first to offer business solely at the graduate level. And thus its eventual name: the Harvard Graduate School of Business Administration. Tuck bestowed a master of commercial science degree. Harvard offered a master of business administration. Despite the public’s wholehearted embrace of science at the time, it was the term MBA that stuck. Harvard Corporation made the decision official with a vote on March 30, 1908. And that was that.

  So 1908 marked a significant turning point, for the study of business at Harvard and beyond. Harvard had groomed America’s historical elite and it would henceforth groom the leaders of its future as well—businessmen. As it had done with the founding of its schools of law and medicine, the School made the argument that classroom teaching was superior to apprenticeship, and that “commercial practices, and the philosophies that underpinned them, [could be] elevated to the same sort of level as other academic disciplines.”25 Just what those practices and philosophies were was a question as yet unanswered, but the feeling was that they could be, and that elevation would follow. This was Harvard, after all. Everything about the place was elevated.

  Whatever their stated or unstated goals, the fact of the matter was that HBS was founded, more or less, on a hunch: By joining a nascent effort to attach to management the same trappings that gave the professions their authority—science and the research university—the nation’s most prestigious university was betting that it could help legitimize the emerging managerial class. Per Lowell himself, they hoped to raise “the oldest of the arts” into the “youngest of the professions.” Along with other trailblazers, HBS dragged business training out of the vocational realm and into the professional one—and in doing so, helped cement the foundation of managerial authority in America and beyond.

  Many years later, Charles Eliot rendered his own judgment on the merits of not just HBS but of Harvard’s professional schools as a whole: “To this day there are many Harvard Bachelors of Arts who hold that graduates of Harvard professional schools cannot be considered to be genuine sons of Harvard, and do not yet see that the service Harvard University renders to the country through its graduate professional schools is greater than that it renders through Harvard College proper.” More than a century after its founding, the university-based business school has become one of the most influential and successful institutions in America. Harvard might not have been the first, but it quickly became the most dominant, and it has never relinquished that position.

  2

  A Search for Mission and Method: Edwin Gay

  Once the decision was made to establish a business school at Harvard, the next step was to select its inaugural dean. The dean would be responsible for helping to raise funds, establishing a curriculum, and recruiting faculty and students. Not only that, he would also take on the burden of justifying the School’s existence to critics both inside and outside the university. Given the obvious challenges, it wasn’t exactly a job that had the most qualified candidates fighting over it.

  The first dean of Harvard Business School wasn’t Eliot’s first choice, but he turned out to be a providential, if unconventional, one nonetheless: Edwin Gay, a “wiry and energetic” young professor of medieval economic history and acting chairman of Harvard’s economics department. Gay had zero business experience, and couldn’t even count many businessmen among his circle of friends. But he had recently returned from a twelve-year stay in Europe—he’d earned his PhD in economic history in Berlin in 1902—where he had worked under Gustav von Schmoller, the founder of the “younger German Historical School” of economics who had spent much of his career focused on the development of economic and social policy to address the challenges of industrialization and urbanization. According to biographer Herbert Heaton, Schmoller had convinced Gay of the possibility of bringing “economics into close interrelation with psychology, ethics, history, and political science to produce a real science of society . . . that the economic order must be regarded as only one integral part of the entire social life and, as such, was to be evaluated from an ethical point of view.”1

  Born in Detroit and raised in Wisconsin, Gay and his siblings spent their pre–high school years in Europe because, as HBS history has it, his father’s “financial success had enabled him [to do so].”2 At the time, anyone who could afford their children a European education was almost obliged to do so. The irony of that education: Edwin Gay leaned on it to help found an institution that later had the world flocking to the United States for its schooling—not the other way around—for the next century and more.

  As dean of HBS from 1908 to 1919, Gay laid the groundwork for everything that was to come. Of course, one precedent had already been set—Harvard’s tendency to describe its own involvement in business education (and by extension, business itself) as a more noble pursuit than the naysayers would have it. Gay carried that torch faithfully, defining business as the “activity of making things to sell at a profit—decently.”3

  In those days, this wasn’t anyone else’s definition of business. It was merely the definition of business as Harvard would have it conducted. At the time, American big business didn’t have a reputation for doing much of anything decently, and was the subject of constant “muckraking” in the press. While no one could deny the advancements in quality of life brought about by the relentless advance of American commerce, many were concerned that the national character was becoming distorted, in which the means to an end—money—was becoming the end in itself. In 1907, Harvard philosopher William James pointedly expressed the sentiment when he bemoaned “the moral flabbiness born of the exclusive worship of the bitch-goddess SUCCESS. That—with the squalid cash interpretation put on the word success—is our national disease.”4

  As prominent a personage as Theodore Roosevelt regularly made frequent and biting reference to the self-interestedness of many American businessmen. Even in 1907, during his second term as president, Roosevelt hadn’t reined in the criticism, referring that year to “certain malefactors of great wealth.”

  So the School took as a large part of its mission “developing a heightened sense of responsibility among businessmen.”5 How would it do that? By attempting to elevate managerial occupations into the realm of the established professions. It was an ambitious goal, and one complicated by the fact that it wasn’t the most auspicious time to mount a campaign to raise the estimation of businessmen in the eyes of the general public. The years 1893 to 1897 had proven the deepest and most traumatic period of economic distress in American history.6 A decade later, 1907 delivered a severe business crisis. The next year, as Gay scrambled to position the School for a fall 1908 opening, a nationwide recession was flirting with an upgrade to a full-blown depression. And even if Americans have long shown themselves capable of tolerating great disparities in wealth and income, in 1896 social scientist Charles B. Spaur had floated an estimate that couldn’t help but raise an eyebrow or two: by his calculations, 1 percent of the population owned more than half the national wealth, whereas the bottom 44 percent of families owned just 1.2 percent.7

  There was another issue: The legitimacy of the established professions was built upon stronger foundations than seemed to be available for business. At the time, few questioned the rationale for graduate instruction in medicine or law—both required a mastery of specific technical knowledge. But it was more than that: Professions also demanded adherence to codes of conduct such as the Hippocratic Oath and an ideal of service. No
such things existed in the world of business, and there were serious questions as to whether they ever would. There was also the question of social standing. If the sight of a doctor elicited an immediate show of respect, the businessman of the time was more likely to elicit a snort of contempt. Just ask Dorothy Parker. But even Harvard is vulnerable to the wish’s predilection to be father to the thought, and it saw professionalism where it did not yet exist, confident that it could fill in the blanks.

  There was also the question of whether businessmen were even desirous of professional elevation. They weren’t exactly holding rallies on Harvard Yard for the right to mingle with more refined sorts. Andrew Carnegie had famously said that he didn’t know a single successful businessman who’d been a college graduate. The historian Frederick Lewis Allen summarized the mainstream reaction of businessmen themselves to the opportunity Harvard and others had seen fit to extend to them: “Business, a profession! What an innocent notion! Business was a rough-and-tumble battle between men whose first concern was to look out for number one, and the very idea of professors being able to prepare men for it was nonsense. As a matter of fact, many a tough-fibered tycoon of those days was dubious even about employing college graduates, whom he regarded as toplofty, impractical fellows who had to unlearn a lot before they were fit for the business arena.”8