The Golden Passport
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But Vietnam wasn’t an exercise in management. It was an ideological war against an inscrutable enemy. And it was in this context, as secretary of war, that McNamara failed. It wasn’t for lack of analysis. As Karnow points out, no conflict in history had ever been studied in such detail while it was still being waged. But it was studied poorly. When he made his first of many trips to Vietnam in May 1962, McNamara concluded after spending two days in the country that “every quantitative measurement . . . shows that we are winning the war.”21 Colin Powell recalls serving as a lieutenant in Vietnam when McNamara’s “analytic measurements that were to dominate American thinking about Vietnam were just coming into vogue.” His reaction: “Measure it and it has meaning. Measure it and it is real. Yet nothing I had witnessed . . . indicated we were beating the Viet Cong. Beating them? Most of the time we could not even find them. McNamara’s slide-rule commandos had devised precise indices to measure the unmeasurable.”22
America’s misadventures in Vietnam are not the subject of this book. But the ways that Robert McNamara compounded those misadventures produced such a spectacular failure that they serve to stand not just as a repudiation of a strategy during war, but of the entire way of thinking upon which they were based.
The idea that management is a highly transferable skill is one of them. While he did manage to cross the chasm between a for-profit enterprise and the “nonprofit” objectives of the Pentagon when he insisted that rational analysis be used despite there being no comparable “bottom line” to speak of—no clear-cut return on investment or profit—that early success surely blinded him to his future failure when it came to actual soldiers fighting an actual war. McNamara’s “system” didn’t take account of unquantifiable things like morale or courage (of either side) in combat. As John Byrne says, McNamara “brought a measuring stick to a war.” Worse yet, American officers simply started playing games with body counts in order to present him with the data he was seeking. McNamara wasn’t the first to place his faith in the ability of statistics to predict human behavior; more than a century before, in 1860, the British economist Nassau William Senior had proclaimed that “the most remarkable results of the statistician’s labors are those which show that the human will obey laws nearly as certain as those which regulate matter.”23 But the intervening century did nothing to change the fact that it wasn’t true.
When the point of your graduate education is to create the appearance of knowing what you’re talking about, it can be quite difficult to admit when you are wrong, whether that’s to oneself or to others. “The solution for one day became the solution for many,” writes Byrne. “Locked into this pattern, they kept reapplying the same techniques, unable to adapt, unable to admit mistakes—even when their world had changed.”24 McNamara later claimed that he hadn’t spoken up earlier about the reality in Vietnam because of loyalty to the president. But that’s harder to believe than the simpler explanation, that he didn’t speak up earlier because he couldn’t admit that his “system” had failed.
When he finally left the Pentagon in 1968, that system was already being “derided for its relentless focus on what could be measured rather than what actually needed to be understood.”25 Said the New York Times in 1995, when McNamara’s book In Retrospect: The Tragedy and Lessons of Vietnam finally came close to admitting as much: “Comes now Robert McNamara with the announcement that he has in the fullness of time grasped the realities that seemed apparent to millions of Americans throughout the Vietnam War.” As HBS professor Abraham Zaleznik observed, “[By] virtue of his background, experience, and intellect [McNamara] was unprepared for the demands of the Cabinet post he assumed. An unquestionably bright and talented man, he was forced into a position requiring on the job education in areas where he was unprepared intellectually, and perhaps more seriously, emotionally. But by disposition, prior training, and the desire for power, [he] was ill-equipped for the learning this new job required.”
One thing McNamara did learn during his time in government was that Thomas Wolfe was right: You can’t go home again. When the end was near in 1967, he reached out to see if Henry Ford II might consider making him president of the Ford Foundation. Ford’s dismissive reply: “I could make him president of the Ford Foundation, but then it wouldn’t be the Ford Foundation any longer; it would be the McNamara Foundation.”26 When Lyndon Johnson showed McNamara the door in 1968, he softened the blow by arranging for McNamara to become president of the World Bank, an ironic position for a man coming off the job of heading the largest war machine in history. He immediately proclaimed an organizational “crisis” and hired McKinsey & Company to fix it.27
Peter Cohen, who entered HBS in the fall of 1968, wrote The Gospel According to the Harvard Business School, in which he recalls an accounting professor proudly telling the class about how a colleague had adapted the accountant’s notion of the “flow of funds” to the flow of people, in a war. To gauge people flow, the class was told, all you needed was two columns. The first, “Sources of People,” indicated where they had come from. The second, “Applications of People,” listed where they’d been sent. “Presumably,” writes Cohen, “when the ‘Applications’ exceeded the ‘Sources,’ the department had to ask for more Americans to make up the difference.” Continuing, Cohen recalls that “[i]t was a very peculiar example because, on one hand, you couldn’t avoid a flattering sense of your own importance, from being allowed to share with this man an experience the consequences of which are far more lasting and inalterable than anything most of us are ever likely to do. On the other hand, there was this feeling of bewilderment that the lives of so many men should add up to no more than two simple columns.”28
The late Robert Bellah, an influential sociologist and moral philosopher, points to flaws in rational choice theory, which originated at the RAND Corporation, found support from the Ford Foundation, and an enthusiastic practitioner in Robert McNamara, as the sources of McNamara’s failure. The theory, which assumes that social life can be explained as the outcome of rational choices by individual actors, found an early foothold in economics with Kenneth Arrow’s 1951 book, Social Choice and Individual Values, and it remains the dominant economic idea at the University of Chicago. But the theory didn’t come from economics departments. It originated at the RAND Corporation in response to the desire of policy makers to mathematically model the decisions the Soviet Union might make during the Cold War.
But even in that context, argued Bellah, it had a fatal flaw. It wasn’t that most of our decisions can’t be “modeled” per se—most can—but the fact that not all of our decisions can. “For a theory that claims to be total, the existence of exceptions is fatal,” wrote Bellah. “They are particularly so when the decisions the theory cannot explain turn out not to be minor cases of unexplained variance, but decisions critical to the understanding of human action.”29 That can be a huge problem when you place every bet you have on that theory proving true. McNamara’s mistake was in not understanding that the North Vietnamese would not behave as rational actors are supposed to behave.
If the Ford Motor Company was the closest you could come to a pure large-scale empirical test of the HBS ethos, then Vietnam was the second. At Ford, it worked and then it backfired. In Vietnam, it failed spectacularly. When Ford ran into trouble, mind you, it wasn’t because the whole idea of the Ford Motor Company was no longer workable; it was simply a failure of management to plan and adapt. Vietnam was a different story, less a failure of technique than of conception. McNamara’s tenure in Washington served as a stark counterpoint to the widely held view at HBS (and elsewhere) that MBAs should be running more than companies—that they should be running civilization itself. Brilliant men can run companies; but society needs more than that—it needs wisdom, the one thing that the Harvard Business School has never really figured out how to package and sell, no matter how hard they have tried.
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The Case Against the Case Method
Harvard Business School h
as never been shy about expressing its love of the case method. On the current page of the School’s website describing it, they leave no doubt: “Simply put, we believe the case method is the best way to prepare students for the challenges of leadership.”1 One of those challenges: learning how to make decisions “complete with the constraints and incomplete information found in real business issues.” A case study might ask you to imagine, for example, that you were the dean of a business school in the 1920s and you were trying to decide whether to go “all in” on a novel pedagogical approach that spanned both research and teaching and that was going to cost you an unknown—but surely significant—amount of money. What would you have done?
Wallace Donham went for it. In retrospect, his decision was made on the basis of incomplete information, at least as far as his estimates of the ongoing cost were concerned. Both he and his colleagues saw the necessary investment in the collection of cases as a finite and manageable thing—specifically, he thought it would be a “temporary endeavor—perhaps of two or three years’ duration—which would largely cease after enough cases had been collected.”2 Given that the School has long since concluded that it is actually a permanent endeavor, Donham’s fateful decision serves as another lesson about business—even the most revered and thoughtful leaders occasionally have no idea what they’re talking about.
It was obvious early on that the benefits of the case method would be holistic in nature, of value not just to the students but to the professors, the School, and the business community itself. The School realized, correctly, that asking the faculty to collect and write the cases would further their ambition of producing research relevant to business practitioners. Their bet that teaching via the case method would go a long way to avoiding the deadening rigidity of more static lecture-based approaches also proved correct.
What Donham did not anticipate was that the collection and writing of cases would prove such a successful method of indoctrinating new faculty that the notion that “enough” cases could ever be collected would be jettisoned. And while he was aware that the School might be able to defray some of the costs of its case collection by selling cases or casebooks to other schools, he had no idea just how big those ancillary revenues would become: In 2014, the School sold 12 million cases for a total of $30 million. With about 4,000 customers worldwide, HBS has such a dominant share of the market for cases—about 80 percent—that even its closest competitors among elite schools see no sense in competing straight-on. Some forty business schools work with HBS to produce and distribute co-branded cases instead of going it alone.3
By the end of Donham’s tenure, case research, in particular, had a dual purpose—to develop new insights and to indoctrinate new faculty—and what had originally been seen as optional eventually became a required part of the job. The School began tracking the number of faculty dedicated to case research, and in 1956 set an explicit goal of one-third of faculty engaged in case development each year. Impressed with their own efforts, they also began keeping a running total of cases collected—the tally crossed 20,000 sometime in the mid-1950s—even though it was obvious that with each passing year, the oldest cases became less relevant, if not obsolete. In 1966, research expenditures at HBS topped $1 million for the first time, most of which went to the collection of cases, although that was defrayed by $200,000 in sales of cases themselves. (Unlike law schools, whose raw material for cases is prepared by court reporters, HBS’s faculty are their own reporters.)
The School’s tight connection with the Ford Foundation has already been noted, but one aspect of that relationship that relates to cases bears further mention. In 1957, HBS somehow managed to convince the foundation to give $120,000 toward the development of a clearinghouse for case materials. It’s one thing to solicit funds to help you conduct research; it’s another thing entirely to solicit funds to help you sell that research. Ostensibly a national program—an intercollegiate case bibliography published that year included contributions from thirty-two schools—it was still dominated by HBS. When more than three million pages of case material sold in 1959, Dean Stanley Teele remarked that it was “gratifying to report that a goodly proportion of these cases represents directly the influence of our Faculty members and alumni.”4 (By that point, the administration had made a habit of describing the commercial aspect of the case program in more high-minded terms. Said Donham in 1939: “[We] have no desire to make this School a mere storehouse of knowledge. Rather, we are eager to disseminate by all appropriate means whatever knowledge is acquired.”5 Including, obviously, selling it.)
At some point along the way, the path to tenure at HBS was redirected right through the case method, and faculty had to prove themselves capable teachers—or at least writers—of cases. Some of the School’s most revered professors have been “gurus” of the case method, the first of which was C. Roland Christensen. Christensen, who joined the faculty in 1946, had already made his bones as a member of the Business Policy group and its work on business strategy alongside Edmund Learned and Kenneth Andrews. But in 1968, Dean George P. Baker asked him to cochair a program to help other HBS professors improve their teaching abilities.
The rest of Christensen’s career was spent not so much teaching via the case method as teaching how to teach via the case method, including writing the books Teaching and the Case Method and Education for Judgment: The Artistry of Discussion Leadership. (He wasn’t the only one. Andrews had already published The Case Method of Teaching Human Relations and Administration and Malcolm McNair and Anita Hersum had edited The Case Method at the Harvard Business School.) Christensen also taught how to teach via cases to various other faculties at Harvard, including the medical school, the law school, the Graduate School of Education, and the School of Public Health.
Where the wholesale embrace of the case method gets a little complicated, at least for faculty, is when Harvard professors who are denied tenure end up having to seek work elsewhere. No other business schools in the world save two—the University of Western Ontario’s Ivey Business School and the University of Virginia’s Darden School of Business—have put anywhere near the emphasis on case writing and teaching over traditional scholarly output as HBS. Because of that, departing faculty find themselves in a situation that is very un-Harvard when seeking a new gig: They’re not very much in demand. Or at least not as much in demand as a professor from Harvard Law School would be. Despite the outsize reputation that HBS has had almost since the very beginning, in fact, the very first ranking of business schools, published by MBA Magazine in 1974 (yes, it existed) put Stanford ahead of Harvard, in large part because of the schools’ different research methods.6 While HBS is perennially in the top five of any rankings, an equally perennial dismissive attitude toward case-based research by faculty at other schools has prevented what might otherwise have been a lock on the number one spot.
While the original businessmen lecturers at HBS offered first-person recollections, today’s MBA students rarely come into contact with the actual executives featured in cases, and even when they do, it’s generally only when the latter is a guest in class and not the presenter of the actual case. That is, at least in part, due to Harvard’s insistence that teaching via cases doesn’t reach maximum effectiveness unless the School’s own homegrown faculty is leading the discussion. That raises an idea for a case study itself: “How to Build an Echo Chamber.” Have the majority of your third-hand retellings written by a faculty trained not just in writing cases from a particular perspective—one with heroic CEOs making courageous decisions—but with a broader worldview that has been nurtured in a sealed bubble in Cambridge for more than a century.
Former HBS insider David Ewing refers in his book Inside the Harvard Business School to the School’s “golden rule—its belief that wisdom cannot be told and its insistence on making students think while not trying to tell them what to think.”7 It’s a nice little motto, perfectly indicative of the School’s infatuation with its case teaching technique, but
there’s a problem with it: The School is telling them what to think, whether they realize that they’re doing it or not. For one, cases tend to be sanitized versions of corporate (and CEO) heroism, the business school version of the Great Man Theory. It’s a rare HBS case that lays out for all to see an example of sheer ineptitude at the company being profiled. And why is that? Because the School gives companies the opportunity to veto any case that’s not to their liking. That’s called positive bias, and it’s not desirable, no matter what the context. And even within a case where a positive outcome does merit study, there is the fact of spin, the suggestion that executives knew more than they did at the time, and that lucky decisions were actually brilliant ones.
But it goes even deeper than that. In their paper “The Harvard Business School Story: Avoiding Knowledge by Being Relevant,” Ianna Contardo and Robin Wensley argue that the School’s obsession with making its cases relevant to practitioners has had the effect of “imprisoning” the knowledge they presume to create in a “reciprocal interaction with best practices,” which has resulted in a “homogenous, standardized mode of explanation about ‘what business is/should be about.’”8 And that has kept the School from tackling the most important issues of all, such as “questioning the underlying assumptions sustaining managerialism or acknowledging problems that may subvert the dominant capitalist system.”