The Golden Passport

by Duff McDonald

  The official history of HBS goes into excruciating detail about the flurry of coordinated efforts to warm the notoriously taciturn Baker to the idea of a major financial contribution. But that’s only natural, because they eventually resulted in the most important deal in the history of a school full of faculty and students obsessed with the doing of deals. Melvin Copeland, apparently unaware of the irony of describing a man who gave $5 million as part of an agreement that a school be named after him as someone “of great modesty,” trotted out the following unlikely transcript of a conversation between Lawrence and Baker from Lawrence’s own memoirs:

  “Bishop, I have been thinking over the matter of the Business School,” Baker said. “I have lost interest in your suggestion that I should give the first million. I am not going to give it or half a million either. . . . If, however, by giving five million dollars I could have the privilege of building the whole School, I should like to do it. If it were one of several such schools or an old story, I should not care to do it, but my life has been given to business, and I should like to found the first Graduate School, and give a new start to better business standards. I want to do it alone. Do you think Harvard will let me?”2

  A more likely exchange, suggested by Gabriel Abend, author of The Moral Background: An Inquiry into the History of Business Ethics, is much briefer: “Here’s your bloody check—will you stop harassing me now?”3 Whatever the case, Baker had what Eliot had referred to as “monumental purposes” on the brain; he’d dreamt of building a bridge over the Hudson River in the area where the George Washington Bridge now stands, but the War Department had stymied his efforts. And so when HBS presented him with another shot at immortality, he took it. Henceforth, the name of the School would be the Harvard University Graduate School of Business Administration, George F. Baker Foundation.

  Some immortality lasts longer than others, though. In 2015, with the announcement that hedge fund manager John Paulson (’80) had given $400 million to the university’s School of Engineering and Applied Sciences, which changed its name to the Harvard John A. Paulson School of Engineering and Applied Sciences, a reporter from Boston.com asked HBS spokesman Jim Aisner if HBS’s name was also for sale. “For us, this is not in the cards,” Aisner replied. “Harvard Business School is a brand that’s been around for quite some time.”4

  Plans for a campus across the Charles River from the rest of Harvard accelerated on the heels of Baker’s contribution. Details of the planning, competing architectural bids, and the years of additional stress that being a master builder in addition to being dean put on Donham are documented in Jeffrey Cruikshank’s A Delicate Experiment, and don’t merit repeating here, save for a few. One: The School spent $40,000 on the architectural competition alone, making it one of the most expensive in history. Two: The winning architects were McKim, Mead & White, hardly a surprise given that the firm had already designed several buildings for Harvard (including its stadium, on the same side of the Charles as HBS) as well as the New York home of Baker’s friend J. P. Morgan. Three: Construction proceeded at a breakneck pace, given the desire that the octogenarian Baker be alive to see the completed campus.

  And he was. Sixteen months after the first steam shovel coughed to life on June 2, 1925, 750 students moved into five new residence halls in September 1926. A sixth dormitory, Baker Library, and Morgan Hall (the administrative offices) took a few more months, and the Dean’s House wasn’t completed until 1929. On June 4, 1927, four thousand people congregated in the courtyard in front of the School’s new library, including such business luminaries as J. P. Morgan and Thomas Lamont, Owen Young and Gerald Swope of General Electric, Herbert Straus of R. H. Macy, and James Simpson of Marshall Field.

  The encomiums flowed liberally. Said Donham: “Mr. Baker, on behalf of the Faculty of Business Administration and especially on my own behalf, may I thank you from the bottom of our hearts for the opportunity and for the deeply felt responsibility you have placed on us, and may we renew once again the pledge we know you wish from us—that we will, so far as lies within our capacities, advance the intellectual and ethical basis of this new profession of business, thereby fulfilling your generous gifts and carrying on, as lesser men may, your lifelong example.”5 Owen Young, the chairman of General Electric, took on the requisite role of describing the School’s mission in “sacred, almost religious” terms when he predicted that it “will do its utmost to guard against an illiterate ministry of business when our present ministers shall lie in the dust.”6 Young also noted that with the ascension of business as the major social force in America, above both church and state, it was a fine time to clarify its social responsibilities.

  There were, of course, dissenting opinions, such as that ventured by literary critic John Jay Chapman, who used an invitation to speak at a 1924 Harvard Business Review dinner to ridicule the School to its face:

  Do you gentlemen seriously believe that you can accept Wall Street’s money and be clear of Wall Street’s influence? You are idealists, indeed! It used to be thought an abuse for the plutocrat to subsidize a chair in a college and put a bit in the mouth of learning. But since business is now discovered to be a profession, such practices are perfectly all right.

  My friends, the truth is that business is not a profession; and no amount of rhetoric and no expenditure in circulars can make it into a profession. This fact stands like a sharp-pointed, deep-seated rock in mid-channel, and against this rock Harvard is steering her craft—or raft. . . . I can imagine a man practicing medicine or law or architecture or engineering out of sheer love for the thing. But I cannot imagine a man’s running a business at a loss. It wouldn’t be business. A School of Business means a school where you learn to make money.

  You couldn’t find a man in the whole world more divested of the peculiar virtues that cause the regular professions to be revered than our American prominent business man. Then why should we “accord” him the dignity and respect due to these professions? Give him something else! Give him a medal with a picture of himself and of his pile; give him praise for benefactions, for benevolence, for courage, mother wit, good luck. But don’t play upon the accordion of his vanity and ignorance by according him the dignity and respect due to other things.7

  Whether HBS has ever succeeded in imbuing in its students a true sense of civic responsibility—or even had the capacity to do so—remains an open question. One thing it certainly did do, however, was guard against an insolvent ministry of business: Fifteen years later, Donham noted that the dormitories and cash endowment that came as part of the Baker bequest still constituted more than half of the School’s income-bearing resources.

  While the footprint has been greatly expanded in the ninety-some years since its original construction, the Baker bequest still forms the heart of a thirty-four-acre campus of unparalleled beauty and grandeur, one that set the standard for all business school campuses that followed.

  Built in Georgian Revival–style architecture, with red brick and white-painted trim, Morgan Hall (named after Baker’s friend J. P. Morgan at his request) and the grandiose Baker Library hark back to the nation’s origins. The Library, in particular, with its distinctive bell tower and six imposing three-story columns, gives off an air of permanence, although attempts to describe its cavernous interior can cause a writer to suffer metaphoric convulsions. In the space of three paragraphs, Peter Cohen, HBS graduate and author of The Gospel According to the Harvard Business School, compares it to a drained swimming pool, a bus terminal, a football field, a tennis court, a prison, and heaven. “Lauded and respected by some as an expression of inalterable truths,” writes Cohen, “it has become a weird monument to another generation’s illusions.”8 Aldrich Hall, with its horseshoe-shaped classrooms, built with funds donated by John D. Rockefeller Jr., came later.

  Harvard Business School is proud of its library. As it should be. Its historical collections contain the most comprehensive collection of materials on business and industry in the world, d
ating from the fifteenth century to the present day. According to the School’s website, the collections include “manuscripts, rare books, pamphlets, broadsides, photographs, prints, advertising ephemera, and corporate reports.”

  In its early days—before the Baker building had even been built—the library served as a physical expression of the School’s—in particular, Wallace Donham’s—desire for respectability. In his 1922–23 report to the president of the university, Donham included a separate discussion of the entire effort for the first time, and he did so for the following two decades. At that time, it consisted of 31,000 volumes, and Donham wrote of an effort to scour secondhand bookstores for business books of historical value. Over the next year, it grew by 20 percent, to 37,700 volumes, with new contributors including Goldman Sachs, the New York Public Library, and consultants Scovell, Wellington & Company. In 1924–25, the School arranged with the newly chartered Business Historical Society to make the HBS library the depository for its own collections.

  In 1928–29, the family of the late senator Nelson W. Aldrich donated his personal library of finance to the School. In 1930–31, J. P. Morgan handed over a cache of rare railroad documents. Of course, the history of business and economics in America only went back so far. If the Baker Library was going to be a true contender in the global history of business, it had to broaden its collecting horizons. In 1929, Donham had a once-in-a-lifetime opportunity to do so.

  Herbert Somerton Foxwell, a retired professor of the University of London, had managed over the course of his career to build one of the world’s most impressive collections of early business and economic literature not just once, but twice. He’d sold his first one in 1901. Twenty-six years later, at the age of seventy-nine, he’d built his second and was prepared to sell again, but not until he’d died. Two years of negotiations followed, and in 1929, Donham committed to purchase the collection upon Foxwell’s death for a price between $100,000 and $125,000.

  No matter that Donham didn’t have that kind of money on hand in 1929; like so many other Americans infected with the animal spirits of the time, he took a look at the School’s improving fortunes and extrapolated a future in which they continued along the same path. Enrollment topped 1,000 students for the first time that year, and HBS had been showing healthy operating surpluses for some time.

  Not to mention the prize! The Foxwell collection, which included works on economic thought from the 1500s through the 1920s, was considered one of the three outstanding economic libraries in the world. Among other things, it included Bude’s 1522 Latin Treatise on Coinage, a first edition of Malthus, and weekly reports of the London Stock Exchange between 1820 and 1860. It was, in short, the kind of collection that could burnish the School’s respectability at a time when other academics—at Harvard and elsewhere—still looked down their noses at the idea of higher education in business in the first place.

  Foxwell hung on until 1936, though, when conditions both inside and outside the School had taken a dramatic turn for the worse. Enrollment was down nearly 30 percent from its peak in 1931, and tuition with it, and the School was facing the possibility of an operating loss in 1936–37. Donham suddenly had to raise more than $100,000 at the worst possible moment, for a purchase that even the most ardent bibliophile might find hard to defend at a time of national economic despair. His savior came in the form of Claude W. Kress, a member of HBS’s Visiting Committee since 1929. Kress, whose nationwide chain of art deco five-and-dime stores was flourishing during the Depression, stepped up not just with the $100,000 cost of acquisition but another $50,000 to build a special room within Baker to house it. The Kress Library of Business and Economics opened in 1938.

  The same year that the Foxwell collection made its way across the Atlantic, former HBS professor Homer Vanderblue donated his five-hundred-volume collection of the writings of Adam Smith, which included nearly every known edition of Smith’s Wealth of Nations from the first printing in 1776 to the present, as well as translations in Chinese, French, Russian, and Spanish. “It can be said without fear of contravention that no other library possesses such a collection of the works of the ‘father of political economy,’” Donham wrote at the time. The next year, he was confident enough to describe Baker as “the outstanding library of business and economics in the world.”

  At Baker’s suggestion, most of the dormitories and instructors’ houses were named after secretaries of the Treasury—Alexander Hamilton, Albert Gallatin, Salmon Chase, Hugh McCulloch, John Sherman, Carter Glass, and Andrew Mellon. While Baker obviously saw himself and his friend Morgan as public servants of a sort, only one HBS grad has actually gone on to serve as Treasury secretary—Hank Paulson, the former CEO of Goldman Sachs who served under President George W. Bush. (Sheryl Sandberg, COO of Facebook, came close, serving as chief of staff to Bill Clinton’s Treasury secretary Larry Summers.)

  The McKim, Mead & White plan resulted in a campus built in a huddle, not opened up to the outside, but rather turned inward, an architectural metaphor for the still closely huddled denizens of a School accustomed to receiving periodic and sharp criticism, including from across the Charles River itself. But in between those buildings are quite likely the most carefully tended grounds on any campus, anywhere, complete with Japanese barberry, white fringe trees, and yellowwood. (A running joke has it that even the squirrels are regularly shampooed.) And it’s quiet: All shipping and receiving takes place at a centralized location on the edge of campus, with incoming and outgoing packages dispatched through a warren of underground tunnels so as to not disturb the idyllic contemplation of money and markets above.

  One highlight, added only recently, in 1992:9 In the three-story atrium of Morgan Hall, visitors find a gigantic and colorful Byzantine mosaic of the Greek sea goddess Tethys surrounded by different species of fish. The fourth-century mosaic, which once lined the bottom of a public bath in Antioch, Roman Syria, was excavated in 1938 and spent time in an outdoor courtyard in Washington, D.C.’s Dumbarton Oaks before finding its way to HBS in 1989. In what is perhaps the only true architectural misfire in the century of HBS’s existence, an interfaith chapel, complete with enclosed water garden, cost $75 million and was completed in 1992.

  “Business schools like to give the impression of age-old permanence and wisdom,” write the authors of Gravy Training: Inside the Business of Business Schools. “They have a penchant for old buildings. They like ivy and lawns.”10 HBS already had plenty of all three in the 1920s, and it has plenty of all three today. The School spends upwards of $10 million a year on maintenance and renovations, and as its prominence has grown within Harvard University, the center of gravity of Harvard itself has moved across the Charles River toward it. When I say prominence, I mean money, and there’s no question that HBS serves as the financial heart of Harvard itself at this point. As the Harvard campus steadily expands deeper into Allston, on HBS’s side of the Charles River, HBS is moving ever closer to being the geographic heart of the Harvard campus as well.

  8

  Doctor Who? Elton Mayo

  The list of people who have passed through the halls of the Harvard Business School and gone on to build enduring institutions is a lengthy one, peppered with the likes of Tom Murphy of ABC, Stephen Schwarzman of Blackstone, and Thomas Stemberg of Staples. The list of those revealed as frauds is much shorter, with Enron’s Jeff Skilling most prominent among them. But the list of those who managed both at once—to build an enduring institution on top of a foundation of intellectual fraud—is the shortest one of all, with a membership of just one: “Doctor” Elton Mayo.

  Born in Adelaide, Australia, in 1880, the eldest son of George Gibbes Mayo, a civil engineer, and his wife, Henrietta, Elton Mayo failed out of three medical schools (the University of Adelaide, the University of Edinburgh, and St. George’s Hospital, London) before finally earning a bachelor’s degree at the University of Adelaide as he was approaching thirty. A short-lived gig as a lecturer in philosophy at the University of Queensland
followed, along with the opportunity for the wannabe doctor to offer psychiatric counseling to victims of shell shock from World War I. Even an unlicensed psychiatrist can only cause so much trouble administering to individual veterans, and if Mayo had been satisfied with that role, his name would have been lost to history. But he fancied himself both a therapist and a social theorist, with a remedy he intended to dispense to the entire planet.

  The logic at the core of Mayo’s theories started in a sensible place. Like any astute observer, he’d noticed that most workers struggled to find meaning in the routinized tasks of the modern industrial enterprise. He was alarmed, too, by the escalating conflicts between capital and labor. As he should have been. In just a single year, 1919, some four million workers went on strike in the United States.1 In June of that same year, anarchists set off eight bombs simultaneously in eight U.S. cities; others were mailed to the likes of J. P. Morgan Jr. and John D. Rockefeller. The resulting panic led to the Red Scare of 1919–20. If the Progressives had sought to overhaul the political system of the United States, there suddenly seemed to be a small but growing contingent that was more interested in overthrowing it. So the Australian was by no means alone in his concern.

  But that’s where things started to get interesting. To Mayo, worker unrest was analogous to war neurosis—psychopathological in origin, not the result of poor wages or working conditions. While those mental wounds were the fault of society, to Mayo their manifestation was at least partly self-inflicted, the result of stepping on the land mines of workplace democracy (that is, unions, collective bargaining) in an imaginary war between capital and labor. The real war, Mayo argued, was between each man and himself, a battle against “anomie” and “the hidden fires of mental uncontrol.”