Even when the subject of American auto unions—antilabor’s favorite bogeyman—comes up, it’s hard to see just how unions are the source of American competitive failure. In 2010, writes the New York Times’ Nicholas Kristof, German autoworkers earned $67 per hour in salary and benefits, almost double their American counterparts’ $34. And yet that year German carmakers produced more than twice as many cars as the United States, and were highly profitable to boot. “It’s too glib to say that the problem in the American sector was just unions,” writes Kristof. Too glib for some, perhaps, but not too glib for the Harvard Business School.
19
The Class the Dollars Fell On: The ’49ers
The list of HBS graduates who have gone on to extremely successful careers in business is so long that it boggles the mind. In the School’s early years, those success stories were fewer and farther between, in part because it took a few decades to even get to a meaningful number of graduates, but also because a few significant external factors, including the Depression and the war, intervened. For the class of 1949, however, things were a little different. They were talented, to be sure, but their subsequent careers also serve as the ultimate demonstration of one of the oldest truths of success in any business, anywhere, in any era: Timing is everything.
In 1949, faith in rational, analytic American management was at an all-time high, practically axiomatic. It had won the war and it would win the peace. And if business schools’ output was still modest—just 3,900 MBAs were awarded in 1949—their contribution to American management thinking and talent was no longer in question. And in 1949, “business school” still pretty much meant the Harvard Business School. One in six MBAs earned that year were at HBS, and nearly half of the MBAs already working had come from the School. However, for the ’49ers, as they came to be called, their timing wasn’t really about what had come before. It was about what came after: They began their careers at the dawn of the greatest peacetime economic boom the world had ever seen.
Roman philosopher Seneca the Younger is credited with saying that luck is what happens when preparation meets opportunity. But to simply call the ’49ers lucky would be to deny them the credit they deserve. Arguably the most successful class of MBAs, anywhere, ever, they were already so accomplished by the time of their twenty-fifth reunion in 1974 that Fortune dubbed them “the class the dollars fell on.” (West Point of Capitalism, indeed: The nickname was a nod to West Point’s class of 1915, many of whom—including Dwight D. Eisenhower—had gone on to become generals, earning them the sobriquet “the class the stars fell on.”)
Even among HBS classes, the number of ultrasuccessful ’49ers stands out, so much so that two books have been written about them, Laurence Shames’s The Big Time (1986) and David Callahan’s Kindred Spirits (2002). Both books do a fine job of detailing the almost unbelievable range of success stories that emerged from just one class of MBAs, but they part ways when it comes to the reasons for that success. Shames tackles the question seriously; Callahan not so much. Shames sees Seneca’s convergence, with exquisite timing meeting the preparation offered by an MBA—“the most single-minded and efficient motion toward the juiciest possible niche in whatever version of business happens to be most in fashion at the time.”1 Callahan, on the other hand, pulls a Chester Barnard. While conceding good timing, he nevertheless attributes practically everything to the integrity, humility, values, and “leadership” of the ’49ers. And who convinced him that was the case? Who else? The ’49ers themselves.
To be sure, the ’49ers were nothing like the MBA lemmings of the 1980s. In 1985, nearly 28 percent of HBS grads went straight to Wall Street. In 1949, less than 1 percent—just six men—did.2 It wasn’t that they didn’t go to New York—more than one hundred of them did—but far more of them went into marketing than finance. Why? Because marketing was one of those niches that were getting juicier by the minute. The advertising industry, which counted $650 million in billings in 1948, exploded right alongside postwar consumerism—both as cause and effect—reaching $12 billion by 1960. In 1949, packaged goods giant Lever Brothers hired as many HBS grads as Wall Street did.
In time, the ’49ers scaled the pinnacles of so many niches that to list them would be akin to making a list of every important industry in America. Among the standouts: Peter McColough (chairman of Xerox), James Burke (chairman of Johnson & Johnson), Marvin Traub (CEO of Blooming-dale’s), Bill Ruane (founder of the Sequoia Fund), Tom Murphy (chairman of Capital Cities/ABC), Vince Gregory (chairman of Rohm and Haas), Frank Mayers (chairman of Bristol-Myers), and John Shad (vice chairman of E. F. Hutton, later chairman of the Securities and Exchange Commission). Even if many of them had come from America’s successful class—one in seven had a father who was a CEO, versus just one in twenty-five whose father was a blue-collar worker—they still left their parents in their wake.
With all due respect to David Callahan and the ’49ers, attributing all of that success to personal values is about as insightful as explaining a sports team’s championship season as the result of good teamwork. It’s not that it’s not true, but that it’s not true enough. Consider, for example, the fact of the war. Eighty-six percent of ’49ers were veterans, and they’d given an average of thirty-four months—nearly three years—to the war.3 There’s no question that a value system forged in that kind of cauldron resonates for the rest of one’s life, but there’s another, less sentimental side to having served for that long: Business school students tend to be people in a hurry to get things done, and when you’ve just been waylaid for three years, your sense of urgency is only going to be more acute. In 1948, 98 percent of students finished the two-year program, a dramatic improvement from prewar levels that hovered just over 50 percent.4
There’s that, and the fact that the MBA program had been suspended between 1942 and 1946. If you were applying in 1947, as the ’49ers were, you were competing against several years’ backlog of applicants. The main way HBS whittled those numbers down was through a thirty-minute interview. What did they look for in that face-to-face? Donald David called it “seriousness of purpose.”5 Shames uses other words to say the same thing: “confidence, certainty, the kind of quick, aggressive poise that the B School couldn’t teach.”6 Whatever it was, to get accepted to HBS in 1947, you had to have more of it than most of the other people in one of the largest pools of applicants—nearly 2,5007—the School had ever seen. Or, as Shames puts it, “The Business School would make successes of the guys who didn’t need the Business School to succeed.”8
(He makes a nontrivial point. One of the most challenging things about gauging the influence of HBS—or any business school—on its graduates’ careers is that unlike, say, doctors, none of them needed to go to graduate school in order to succeed. Even HBS doesn’t claim to create leaders but to “educate” them, a tacit acknowledgment of that fact. Or, as University of Michigan management professor Jerry Davis puts it, “If you bring in motivated people, it doesn’t really matter what you do in the classroom. It’s a selection effect. They will still be captains of industry even if all you do is feed them cotton candy for two years. And they’ll still have nice teeth.”9)
Once admitted, the ’49ers had no doubt about the role that society was going to expect them to play. Conrad Jones, who went on to become a senior partner at Booz, Allen & Hamilton, spelled it out for a classmate who’d expressed concern about elitism at HBS. “[I]t doesn’t bother you at all that we’re treated as an elite,” Jones replied. “What bothers you is that we’re not the elite you thought we were going to be. You thought we were going to be the intellectual elite. Well, we’re not. We’re not the hereditary elite, and we’re certainly not the artistic or creative elite. What we’re being groomed as is the competent elite. Get used to it . . . we’re being trained to be the guys who stay sober at the party. We’re being handed the tools to get out there and run things.”10
Overstatement? More like understatement: By 1986, 45 percent of the 652 men who graduated i
n 1949 were either CEOs or chief operating officers of the companies they worked for.11 How did they get there? If each story is a different one, there was one thing (other than their being HBS grads) that was the same: their timing. Between 1950 and 1955, more than three million new employees claimed a paycheck, creating “a situation that stood the classical organizational period on its head: weirdly but undeniably, there suddenly seemed to be more room at the top of the system than at the bottom.”12 HBS economic historian Alfred Chandler described the graduating ’49ers’ prospects simply: “There was not a comparable class, in terms of coming in on the brink of such opportunity and prosperity, in all of American history.”13 Thanks to the GI Bill, too, few members of the class had any debt upon graduation.
That’s not to say they didn’t take chances on their way to the top. Tom Murphy, one of the legends of broadcast television, left a cushy job at Lever Brothers in 1954 to join a small TV-and-radio station in Albany, New York. Murphy later described the explosion of advertising monies thrown at TV and radio as a “royalty on the gross national product.”14 He was right, and he started collecting royalties before most. In 1984, the then chief of Capital Cities somehow managed to raise $3.5 billion to finance a purchase of ABC without anyone hearing about it, pulling off the largest non-oil-company acquisition in history.
Peter McColough took a 50 percent pay cut when he left a job as vice president of sales in Philadelphia to take a job at Rochester, New York–based Haloid, a manufacturer of industrial photocopiers. Named president in 1966, McColough helped guide the company—later renamed Xerox—as it exploded from $40 million in sales in 1960 to $7 billion by 1979. Marvin Traub took risks of a decidedly non-HBS sort, betting on unknown designers with names like Calvin Klein on his way to turning Bloomingdale’s into a $500-million-a-year “citadel of conspicuous consumption.”
The economic tailwinds were so strong, mind you, that nearly all the ’49ers’ careers picked up speed in short order. America’s GDP doubled between 1950 and 1960, from $500 billion to $1 trillion. By the time of their tenth reunion in 1959, twenty-nine of the ’49ers were already worth a million dollars or more, a remarkable feat considering that their median salary was just $14,000.15
When it came to evaluating their own successes in retrospect, of course, the macro factors were downplayed in favor of more personal ones. When James Burke, the future chairman of Johnson & Johnson, recalled being summoned into the office of Robert Johnson Jr. to account for $865,000 spent on a failed product, his memory of the event has “Case Study Hero” written all over it. “Are you the one who just cost us all that money?” Johnson asked. Burke nodded. “Well, I just want to congratulate you,” Johnson said. “If you are making mistakes, that means you are making decisions and taking risks. And we won’t grow unless you take risks.”16
(One of the favorite adages of the MBA crowd is that failure actually equals success, up to a point. A seemingly harmless sentiment, it’s also as hollow as most company credos and notably absent when those who might take heart from it need it most—say, during a corporate bankruptcy. It’s also an aphorism that could only be dreamed up by white men with connections to capital, that slice of society best positioned to fail successfully. The updated Silicon Valley spin on it, fast failure, offers an expeditious day trip into the land of personal growth.)
But were the ’49ers, as a whole, really risk takers in the truest sense of the word? The whole point of bigness, one can argue, is to reduce risk. And if you set aside outliers like Murphy and McColough, the ’49ers were fairly risk-averse: as of 1959, a full 25 percent of them were working for companies with 10,000 employees or more. “The typical ’49er [was] untrue to his daydreams,” writes Shames, “[having] embedded himself in the belly of an organization whose destiny was separate from and larger than his own.”
Risk and reward are supposed to move in opposite directions, but in the 1950s, you could increase your reward even as you were reducing your risk. By 1969, ’49ers working for companies with 20,000 or more employees were earning nearly 50 percent more than those working for companies employing 50 or fewer.17 “We liked to think of ourselves as adventurers,” ’49er Ned Dewey later recalled, “but come on—we were a bunch of twenty-five-year-olds out of the Army, full of bluster but mainly just wanting a paycheck. And Harvard liked to think of itself as where the action was, a breeding ground for people who’d really make a difference, but come on again—in fact it was a finishing school for GM. So who is kidding who here?”18
Because of their control over giant markets, large firms like Johnson & Johnson can tolerate a degree of uncertainty that would destroy smaller competitors. By the early 1970s, in fact, there were eighty-eight companies under the J&J umbrella.19 At the same time that they decried government interference, companies were more than happy to socialize their own risks by having government underwrite highly speculative research efforts in technology, aviation, and medical research. The “development of the modern business enterprise can be understood only as a comprehensive effort to reduce risk,” wrote economist John Kenneth Galbraith, who was also a notable dissenter from the prevailing opinion that government efforts to provide security for the broader public—via unemployment compensation or Social Security, to name just two—were contrary to the national ethos.20
Even a few ’49ers thought so. In 1968, Roger Sonnabend, who had taken the reins of his family’s hotel business (later renamed Sonesta International Hotels), signed on as regional chairman of the National Alliance of Businessmen, a rare corporate partner in Lyndon Johnson’s War on Poverty, and he explained his reasons in terms his fellow HBS grads could understand. “Social responsibility—and expanding profitability—are not intrinsically at odds with one another,” he said. “Quite the contrary—they are two faces of the same coin.”21 If the majority of those associated with HBS never stopped insisting that what was good for business was good for America, Sonnabend saw it the other way around, arguing that “what is best for America is best for business.”22
When David Callahan writes that the ’49ers “laid the groundwork for the great boom of the 1990s,” he has a point, but only insomuch as the ’39ers, ’29ers, and ’19ers did, too. Every generation leaves at least a few positive changes in its wake. But the ’49ers also laid the groundwork for the great bust of the 1970s and the me-first ugliness of the 1980s. While they were busy overestimating their role as saviors of the free world, you see, they were busy underestimating the competitive threat posed by slowly recovering countries such as Germany and Japan, which weren’t so busy telling themselves how wonderful—how right—they were.
The ’49ers were so convinced of their righteousness, Laurence Shames recalled in 2014, that they said a lot of things to him that they really shouldn’t have said. (He’s right: The Big Time stands apart from most HBS-related books in the candor of its on-the-record quotes, quite the achievement for the former ethics columnist for Esquire with an admitted less-than-average interest in business.) “They were so accustomed to being sucked up to by the business press and to always being presented in a hagiographic light,” he said, “that they didn’t realize that someone in my position, trying to do an honest job, might have anything less than glowing to say about them or HBS.”23
Shames, who’d expected the CEOs and chairmen among the ’49ers to be too busy to spare more than fifteen minutes or so, said the opposite was true. “It turned out, especially when it came to the chairmen, that they had nothing but time,” he said. “I’d walk into these huge offices, with stunning mahogany desks that had nothing on them but a picture of their wife and kids. They had nothing to do, and once they started talking, I couldn’t get them to stop.”24
His experience points to another crucial turning point in the story of HBS, during which the self-image of the MBA disconnected itself from its once-ambitious but now almost embarrassingly modest pretension toward professionalism. The professional, after all, was just a servant by another name, whereas the businessman (and b
y extension, the MBA) was no one’s servant: He was America’s king. To question his motives was to question the republic itself. Alert to the change in its readers’ self-regard, Fortune magazine likewise began a shift that hasn’t yet reached its conclusion a half-century later, away from covering business for its own sake and toward matters of interest to the imperial executive, whether that be international relations or the art of inspiring people through layoffs.
In time, a handful of ’49ers found themselves sliding down the back end of the postwar boom as quickly as they had scaled it, but for the first few decades of their careers, things went so well that the national press took to checking in with them every five years just to marvel at how they’d ascended to ever-higher peaks. When Peter McColough was named CEO of Xerox in 1968 at the age of forty-six, he was almost ten years younger than the average American CEO.25 So many other ’49ers ended up with the same title that in 1990, Fortune referred to their fortieth reunion as “The CEO’s Ball.”
20
A Decade in Review: 1940–1949
When HBS reopened its doors to new MBA candidates in February 1946, it took the opportunity to announce its latest overhaul of the first-year curriculum. The entire year was described as a single course, Elements of Administration, an acknowledgment, according to Dean Donald David, that “many of the problems of business administration are not found in watertight compartments.”1 The School also added a handful of new second-year courses reflective of changes in the economy, including Investment Management, and Problems of New Enterprises.
Even as HBS continued to insist that it maintained the highest of admissions standards, the fact was that MBAs still weren’t the sharpest knives in the graduate school drawer: A mid-1950s survey revealed that business students scored below the average for all graduate and professional students on standardized tests. The faculty didn’t see that as reason to cut them any slack, however—students’ reading load was estimated at six hours a night, with weekends sliced right in two because written reports were due at 9 p.m. on Saturday.
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