The Golden Passport

by Duff McDonald

  For his part, Riesman homed in on the emergence of a newly dominant cultural type that he called “other-directed”—a growing portion of the American population that knew themselves not by reference to their own inner compass but by reference to everyone else around them. In a consumption-based economy, for many Americans that boiled down to where they worked and what they earned and bought. Being focused on what others were thinking and doing made for a very compliant workforce, but it also threatened individuals’ ability to know themselves. And it was happening at HBS, too: ’49er Roger Sonnabend later said that while the School did give him confidence, it had somehow managed to do so without a coincident increase in self-knowledge: “I didn’t learn about myself. There was nothing at the business school to compel me to look at my own needs, to find what kind of person I was. There was nothing to develop my creativity.”10

  To make his point, Riesman contrasted a previous era’s popular diversion—Alexandre Dumas’s The Count of Monte Cristo, which asked readers to take a thousand-page journey of inner discovery along with its hero—with those popular in the late 1940s, the comic book and radio drama. Because neither placed any real demands on the reader/listener during tales of near-effortless victory, the point was no longer the journey, but simply the fact of winning itself. Likewise the era’s breakout format on television: the quiz show. The reader/viewer had been reduced to not much more than a consumer of other people’s victories.11

  If a desire to fit in made for a more malleable workforce, such shapeshifting also threatened to turn business into pageantry, with an executive class more interested in manipulating public opinion than anything else. On that point, Riesman also noted how the American industrial machine had somehow landed on a way to feed itself by eating itself: “The desire of businessmen to be well thought of has led to the irony that each time a professor writes a book attacking business, even if almost nobody reads it, he creates jobs in industry for his students in public relations, trade association work, and market research!”12

  Most of all, though, Riesman raised a question that still merits being raised today: Why had the American people accepted the fallacy invented by Elton Mayo—that there really was joy and meaning to be found in the jobs of modern industrialism—as well as its outgrowth, the notion that any hostility toward it was a threat not just to “production” but to the safety of the nation itself? There was an obvious reason HBS and its ilk were pushing it: That idea—that without work we would be lost—reinforced the notion of the executive as a moral leader. But as to the rest of America? By the 1960s, Hollywood was ready to once again hold its mirror up to America and let it have a look at what it had become.

  Consider the protagonist of Billy Wilder’s 1960 film, The Apartment. In it, the glamorousness of Larrabee has been replaced by a “Kafkaesque nightmare”13 known as Consolidated Life. Jack Lemmon’s C. C. Baxter provides narration: “I work on the 19th floor. Ordinary policy department, premium accounting division, Section W, desk number 861. . . . I’ve been with Consolidated for 3 years and 10 months, and my take-home pay is $94.70 a week. The hours in our department are 8:50 to 5:20. They are staggered by floors so that 16 elevators can handle 31,259 employees without a serious traffic jam.”

  The executive corollary to The Apartment was Sloan Wilson’s 1955 bestselling novel, The Man in the Gray Flannel Suit, which was made into a movie the next year staring Gregory Peck. By 1962, even HBS graduates at places like McKinsey & Company were having second thoughts. That year, the consultants gently mocked their own workplace conformity by publishing The Consultants’ Coloring Book, in which every color suggested was either black or gray.

  “Organization Man traded the surface indications of his individuality for a secure place in the corporate cocoon,”14 writes Jack Beatty in Colossus: How the Corporation Changed America. That had two significant implications for the Harvard Business School. The first was obvious: Its longtime strategy of training men in the successful navigation of administrative bureaucracies was about to pay off, big-time. The second: The clear triumph of Riesman’s “other-directed” personality in the corporate realm would tilt HBS recruiting even farther away from independent thinkers and toward “team players,” those eager beavers who have best learned how to follow orders and execute plays. “No question, the need for business graduates springs from the economy’s huge appetite for ‘anticipatory socialized’ young people,” says management historian J.-C. Spender. “Consequently, there has never been much interest in quantifying the real costs and benefits, even if that were possible, because it is more about maintaining and developing an institutionalized infrastructure for a new variety of democratic capitalism.”15

  Spender is referring to a significant milestone in the history of management thought. When the Central Intelligence Agency and the forces of capitalist propaganda effectively emasculated the business schools in the years after World War II, forcing a conservative mindset—both political and intellectual—down the throats not just of academia but of an entire country, there were two possible futures ahead for the academy. Either they could shake off the intellectual conservatism as Hollywood proved itself capable of doing, and as one might likewise expect from a great university, or they could simply concede on matters of huge import, including any and all discussions of the morality of democratic capitalism and its central economic institution, the firm. Which path did they take? They put on their Company Man suits and did what the boss told them to do. Why? Because when executives say they want to hire people with “sound judgment,” they mean that they want people who see the world just as they do. That works, to a point. And then it doesn’t.

  22

  The Power Elite

  If there was any lingering doubt about who was calling the shots in America in the 1950s, it was erased when sociologist C. Wright Mills published The Power Elite, a fine-grained rumination on the various types of “power” in midcentury America—and the intersections thereof. With its cross-sectional view of elites of the corporate, military, political, celebrity, and social register sort, the 1956 work was both timely and timeless, a progenitor of every “power list” that has followed it, from Vanity Fair’s New Establishment to Forbes’s Most Powerful People.

  Correctly described at the time as “an uneven blend of journalism, sociology, and moral indignation,”1 it was also a ripping read, chock-full of socioeconomic insight and revealing statistics. Mills took dead aim at (but clearly did not kill) the canard of the “ownership society”—the notion that because millions of Americans owned stocks, we were all in it together. The much-publicized fact that 6.5 million people—just under 7 percent of all adults—owned stocks at the time, Mills pointed out, was utterly misleading, given that 42 percent of all corporate dividends went to just one-tenth of 1 percent of them.2

  While he explicitly denied pushing a conspiracy theory—his power elite arrived in their positions not through plotting, but through birth or having availed themselves of “institutional forces” more adeptly than the rest of us—Mills did provide the fodder for those who would theorize when he laid out the extensive personal relationships that had been forged both between various elites (CEOs, generals, politicians) and within individual elites themselves. “Would it not be strange . . . if in a country so devoted to private property and where so much of it is now piled up,” he wrote, “and in an atmosphere which in the last fifty years has often been quite hostile, where men of economic means also possess, we are continually told, the greatest administrative and managerial ability in the world—would it not be strange if they did not consolidate themselves, but merely drifted along, doing the best they could, merely responding to day-to-day attacks upon them?”3

  One way they were doing so, Mills argued, was through the construction of “an elaborate network of interlocking directorships” between corporations. That some people sat on more boards than others, and some others made reciprocal board appointments, was true then and remains true today. In 1950, for example
, Winthrop W. Aldrich, a member of HBS’s Visiting Committee, sat on the boards of four of the twenty-five largest corporations in the country: Chase National Bank, AT&T, New York Central Railroad, and Metropolitan Life Insurance. All told, 105 of the 556 board seats of the top twenty-five companies were held by 48 men. That was a simple fact; whether there was anything nefarious going on as a result of that overlap is unclear. Well-connected people, after all, are . . . well-connected people.

  Wright also neglected to seriously consider the possibility that his elites were acting as Wallace Donham would have them do—for the betterment of us all. When Wharton professor Michael Useem studied the same phenomenon in 1984, defining the “inner circle” as those sitting on two or more corporate boards, he considered the “business scan” that resulted from it—the ability to consider the world more broadly than one did from the perspective of one’s own employer—a good thing.

  Truth be told, even the most pointed critics of corporate power point to the 1950s as a time of relative balance—the economic power grab was mitigated by an acceptance (if grudging) of a growing state, of the needs of labor, and even the concerns of the broader community itself. Considered in that light, the network could just as easily be seen as a catalyst for peer pressure as it was for plotting a corporate takeover of the republic.

  Theoretical overreaches aside, Mills was utterly correct about a few things. The first was that during their never-ending orgy of self-congratulation, America’s corporate rich tended to downplay (or completely ignore) the fact that much of “the private industrial development of the U.S. [had] been underwritten by outright gifts out of the people’s domain”4—free land for railroads, paved roads for automobiles, mineral rights for miners, a telephone monopoly for AT&T.

  Another: his observation that by midcentury, a new player had successfully (and dramatically) muscled his way into the upper reaches of the elite—the professional manager. “[They] are powerful men, rather new men of power,” he wrote, “but upon what basis does their power rest? They are not the owners of the corporate properties, and yet they run the corporate show. . . . Have not these chief executives carried through a silent revolution, a managerial revolution from the top. . . ?”5 Mills then singled out HBS as a “favorite” among those schools “employed” by corporations to “arrange . . . curricula for the managers of tomorrow.”6 Having obtained their power, in other words, they were now consolidating it. It was a complete system, a feedback loop, the perfect expression of which happened in 1957, the year after his book was released. That’s when Procter & Gamble named its new CEO: Howard Morgens, HBS class of 1933.

  Procter & Gamble has been an enthusiastic recruiter at HBS for decades. It has even had two Harvard MBAs as chief executive, Morgens and A. G. Lafley, who was in the top job not once but twice—from 2000 to 2009 and from 2013 to 2015. In the 1960s, the company even convinced HBS to prescreen its job candidates’ resumes, a favor one P&G recruiting veteran said made its recruiting “fifty percent more effective.”7 The School has published so many case studies on the company that one might reasonably wonder if HBS has its own office at P&G headquarters in Cincinnati.

  Unlike today’s MBAs, who tend to enter the giant conglomerate as brand managers or financial analysts, Morgens started at the bottom, as a junior salesman selling Ivory Soap to Indians in New Mexico for $150 a month.8 But he stood out almost immediately, and in 1934 was summoned to Cincinnati to work in the national advertising department. One early project he was instrumental in developing—the creation of an in-house television production company—gave birth to the “soap” opera Guiding Light. Morgens was named vice president of advertising in 1948, a member of the company’s board in 1950, and president in 1957.

  Morgens’s tenure at the helm of P&G from 1957 to 1974 includes so many highlights that to detail them all would require its own book. Under his leadership, the company developed a number of staggeringly successful in-house products (Crest toothpaste, Pringles potato chips, Pampers diapers) while acquiring several more (Charmin toilet paper, Folgers coffee, Clorox bleach). Whatever their origin, the key to Morgens’s success was what they did with them: Procter & Gamble is one of the greatest consumer marketers of all time, spending more on advertising in some years than any other company on the planet. When he took over, P&G’s sales were $1.2 billion. When he stepped down? $4.9 billion.9

  Membership in the power elite wasn’t just about one’s day job, of course.

  You had to sit on other companies’ boards. Over the years, Morgens served on those of General Motors, Morgan Guaranty Trust, Owens-Corning Fiberglas, and Standard Oil. (At one point, P&G had six HBS grads on its board.) You had to have personal connections in Washington, too—Morgens was named president of P&G when his mentor, Neil McElroy, left to become Eisenhower’s secretary of defense. When the ’49ers got together for informal reunions in the 1950s and ’60s, one place they did so was at the Greenbrier in West Virginia, a six-thousand-acre resort frequented by Eisenhower and also the location of a secret relocation center for Congress during the Cold War. Jack Lanahan, the owner, let them use the Presidential Suite, which took up two floors of one wing of the hotel and included seven bedrooms and a formal dining room.10

  You needed to be an advocate not just for your own company, but for business itself. Morgens helped found the Business Roundtable—a probusiness public policy group—in 1972.

  You had to know how to talk the talk. Shortly after being named chief of P&G, Morgens told the New York Times that the nation needed more . . . people like him: “We shall need more managers, particularly managers with greater breadth and ability. We shall need them in government, education, medical centers, and business.”11

  (The battles of the New Deal had impressed upon managers the need to coordinate their political activities,12 and Donald David spent some of his post-HBS career doing just that. In 1957, he was elected chairman of the Committee for Economic Development, a lobbying group focused on the intersection of business and public policy. Championed by Fortune for its work promoting a vision of the corporation’s social utility, the CED was also deeply tied into the nation’s less visible power structure as described by Wright.)

  You had to be active in community affairs. Morgens was a member of the board of governors of the American Red Cross, the board of trustees of the American Museum of Natural History, and a director of the Cincinnati Reds baseball team. However, concern for the community only goes so far. In the late 1960s, P&G initially pushed back against public concern over the water pollution caused by phosphates in the industry’s soap products, before backing down and agreeing to at least reduce them. “We recognize that the public wants phosphates out of laundry detergents and we intend to take them out,” said Morgens in 1970. “Our job is to make certain that we remove them as rapidly as we can do in a thoroughly reasonable manner. This we are doing.”13 But were they, really? Fifty years later, the company finally finished the job Morgens had promised, trumpeting it as a “win-win” at the time, although some critics suggested the 2014 announcement was motivated as much by the rising cost of phosphate as it was by environmental concerns that they’d known about for half a century.14

  Finally, you had to make serious cash. In 1967, Morgens’s salary of $325,00015 put him near the head of the corporate pack.

  He wasn’t the only HBS grad out in front. Stanley Marcus, who had attended the School for one year in the 1920s, had taken the helm of luxury retailer Neiman Marcus in the 1950s. Roy Ash (’47) bought Litton Industries with Charles “Tex” Thornton in 1953, spent the decade turning it into a conglomerate, and was named president in 1961. Robert McDermott (’50) was named by President Eisenhower to be the dean of the U.S. Air Force Academy in 1959. The thirty-nine-year-old, promoted to brigadier general at the time of his appointment, was the youngest general on active duty at the time. In 1968, he took over as CEO of USAA, an insurance company primarily serving the military community. The list goes on and on and on.

  A
sk any MBA: What happens when you finally convince people that your product is worth buying? Does the selling get any easier? No, it doesn’t. Because that’s when the copycats arrive. In 1955–56, there were 138 institutions in the country offering MBAs. By 1960–61, just five years later, that number had nearly doubled, to 207. Fifteen years after that, in 1975–76, it had doubled again, to 428.16 (And again, to more than 900 by the end of the century. But that’s getting ahead of the story.17)

  The spread of business education was a reflection of the fact that American business was hitting on all cylinders in the 1950s and 1960s. A nation tired of war embraced consumerism, and debt carried by individuals nearly doubled between 1950 and 1955, from $58.7 billion to $110.6 billion.18 From the beginning of World War II through 1973, real per capita gross national product (GNP) grew 3 percent a year, nearly triple the rate between 1890 and World War II. Meanwhile, the U.S. population exploded, growing by half between 1945 and 1973, and the peacetime federal budget soared as Washington wove its way into everyday American life. As far as the economy was concerned, the nation’s big companies just kept getting bigger, stepping over or around any obstacles in their way. When the Celler-Kefauver Act of 1950 prohibited corporations from merging with competitors in the same industry, for example, managers chased growth by acquiring unrelated businesses. In 1929, just 15 percent of the largest one hundred firms in the country were diversified. By 1960, the proportion was 60 percent.