Nothing Succeeds Like Failure: The Sad History of American Business Schools

A volume in the series

HISTORIES OF AMERICAN EDUCATION

Edited by Jonathan Zimmerman

A list of titles in this series is available at cornellpress.cornell.edu.

NOTHING SUCCEEDS LIKE FAILURE

The Sad History of American Business Schools

STEVEN CONN

CORNELL UNIVERSITY PRESS

ITHACA AND LONDON

For Bruce Kuklick and Mike Zuckerman

Teachers, mentors, friends

CONTENTS

Introduction

1.  The World before (and Shortly after) Wharton

2.  Teach the Children … What?

3.  Dismal Science versus Applied Economics

4.  It’s a White Man’s World

5.  Good in a Crisis?

6.  Same as It Ever Was

Acknowledgments

Notes

Bibliography

Index

INTRODUCTION

The Beast That Ate Campus

Each month when my colleagues and I gather for our faculty meeting we assemble in a slightly cramped seminar room and deposit ourselves into an array of mismatched furniture. Some of us sit in rolling office chairs whose wheels don’t quite roll anymore, but if you get there early enough you might get to sit on the sofa—one whose springs are shot in the middle causing those perched on either end to list gently toward each other. There are two stacks of stackable chairs, and one lucky person can occupy, throne-like, an upholstered wing chair. It is the kind of genteel shabbiness that one might expect to find in a humanities department—four-legged analogues to many of us: rumpled, frayed around the edges, a tad misfit.

As it happens, the furnishings are hand-me-downs from the business school.

In a gesture of environmental responsibility (reuse, recycle!) or in an act of campus charity (alms for the campus impoverished!) the business school’s used furniture wound up in the history department several years ago when their offices were redecorated with newer, better seating. One suspects that no business school bottoms sit on busted springs in any business school couch.

So we joke about this each month among ourselves because it all seems so emblematic of campus dynamics these days, so perfectly apropos. The business school growing ever bigger and ever wealthier while humanities departments shrink and suffer and starve, grateful for the leftovers tossed at us by our business school betters. Furniture as a metaphor for higher education today. I described all this to an old friend who teaches history at the University of Denver. She laughed too and then told me that her entire department, along with other humanities and social science departments, occupy a hand-me-down building. No longer good enough for the business school there, it had been passed on to them after the sparkly new B-school palace had opened and those faculty relocated to what are surely very comfortable new chairs.

The chuckles come with more than a little bitterness, needless to say. Those of us who regard the arts and sciences as the heart of higher education often view the business school with anger, contempt, and envy in varying measure. We, many of us at any rate, are suspicious of the teaching and research that goes on in those increasingly extravagant buildings; we can’t believe how much money these schools attract from alumni donors and corporate partners; and even beyond the equivalently extravagant salaries our peers in the business schools draw each year, we are jealous of all the students who choose their classes rather than ours.

That isn’t new. Students have always flocked to business schools, just as soon as they opened on campuses. And in some sense universities opened them in response to that student demand. By 1900 roughly 20 percent of U.S. college graduates were headed into some sort of business career; 30 percent of those graduating from Harvard, Yale, Columbia, Princeton, and the University of Pennsylvania.¹ Three of those Ivies would open among the earliest business schools; Yale would join them later. (Princeton still has not opened a business school.) If college graduates were choosing the business world, as opposed to the ministry or the law or teaching, then universities felt increasingly compelled to provide them an education for that choice. In 1915, business degrees accounted for 3 percent of the 19,000 bachelors of arts degrees awarded that year. That quadrupled to 12 percent by 1928. By 1950, business degrees constituted roughly 18 percent of all BAs awarded; by 1970 American universities were granting more than 120,000 BAs in business every year.² And by 2018 there were roughly 13,000 business schools on university campuses all over the globe.

Most of all, many of us simply don’t believe that teaching business techniques constitutes the real work universities ought to do. We may not quite believe in the disinterested search for truth the way our predecessors once did, but we bristle at the idea that a university ought to promote profit making as a goal unto itself. I have had English professors at the Faculty Club tell me that the School of Business should not be in the University, recalled Berkeley’s Ewald Grether, who served as dean there in the mid-twentieth century, and he was surely not the only B-school dean to hear such complaints.³ Develop a new cancer treatment drug in a university lab, and no one would argue that the research constitutes a public good; teach students in an upper-division marketing class new ways to sell drugs to consumers more aggressively, and that starts to feel as if the university has become a subsidiary of Big Pharma. That last is not just a hyperbolic hypothetical, as we are learning more and more that the prescription opioid epidemic in the United States began with aggressive and dishonest marketing campaigns. How many of Purdue Pharmaceutical’s pill pushers majored in marketing at some American business school?

This uneasiness is hardly new either. In fact, it has been expressed by various observers almost from the moment business schools started to appear on campuses in the late nineteenth century. In 1918 Thorstein Veblen summed up this animosity when he lacerated business schools in his characteristically caustic way. Unlike other professional schools, Veblen wrote, which may be serviceable to the community at large, the business proficiency inculcated by the schools of commerce has no such serviceability, being directed singly to a facile command of the ways and means of private gain.⁴

Business schools, however, at the outset and then repeatedly across the twentieth century, promised more and better than that. With a college training, future businessmen would learn that private gain was subsidiary to larger social goals, though business schools have always been a little vague about what those goals might be. The keynote speaker at a 1920 Illinois Chamber of Commerce gathering told the assembled businessmen that the modern business man with a university education … will regard business as a public service enterprise, to justify itself, not by profits but by the social service rendered.⁵ People guffawed at that idea then, just as many chuckle at it now.

So my faculty colleagues and I, at universities all over the country, hunker down on our beat-up furniture and stare over at the Oz-like castles built for the business schools. We don’t quite know what goes on behind the curtains, but we are convinced that it isn’t good. We are just as convinced that if they had their way, business schools would simply swallow up everything else on campus. Whether we want to admit it or not, the business schools have triumphed.

In the second half of the nineteenth century, American higher education underwent two nearly simultaneous revolutions in a way and to an extent that no other nation did. Two dates mark this twin transformation as conveniently as any: 1862 and 1876. In 1862, President Abraham Lincoln signed the Land-Grant College Act, known usually as the Morrill Act after its principal author; in 1876, Johns Hopkins University enrolled its first students. Both events are well known, and so I review them only briefly.

Through the Morrill Act, the federal government created a funding mechanism for higher education in each state by ceding federal land to the states for this purpose. The initial formula was straightforward. Each state would be granted thirty thousand acres for each member of Congress from that state, and the state could, in turn, sell, rent, or otherwise use that land to fund higher education. Some states, like Massachusetts and New York, attached their land grant to existing schools—Massachusetts Institute of Technology and Cornell University, respectively. But most opted to build new institutions with the money. Sixty-eight colleges and universities can trace their roots back to the original 1862 Morrill Act; more opened, especially in the South, after the 1890 version of the act.⁶

There is no question that the Morrill Act has been astonishingly successful at providing access to higher education to the kinds of people who, especially in the late nineteenth and early twentieth centuries, would not have been considered college material—what the act called the industrial classes. Whatever small gripes people may offer about it, the Morrill Act stands as among the very greatest efforts of democratization in the history of the nation. Or of any other Western nation—there was no European equivalent to the land-grant university.

Beyond changing the constituency of who got a college degree, the Morrill Act also changed the nature of what could be studied in college. The language of the act stipulated such branches of learning as are related to agriculture and the mechanic arts. The A&M of Texas A&M and Florida A&M. In other words, the Morrill Act wanted to promote college education for future farmers and engineers, and indeed it can be credited with creating those as academic fields in the first place. Practical education for a practical people at a time when higher education was still dominated by denominational colleges, often with the purpose of producing ministers. At the same time, however, this new education was not supposed to neglect other scientific and classical studies that had been at the heart of the liberal arts curriculum since at least the eighteenth century.

At one level, then, the Morrill Act promoted a remarkably expansive view of education, liberal and practical all at once. In this, Justin Morrill, the act’s author, hearkened back to Benjamin Franklin, who believed that students should learn everything that is useful and everything that is ornamental. At another, the Morrill Act embodies a central tension in American education between the liberal and the practical. However easy it might be to pair the useful and the ornamental in theory, in practice the two have often elbowed each other as they cohabitate on campus.

That tension came into sharper focus almost immediately when Johns Hopkins University was opened in 1876. If the land-grant university is a pure product of American egalitarianism, Hopkins represented a European import product. By the mid-nineteenth century a new version of what a university could be had developed in Europe, most especially in Germany.⁷ German universities invented our modern conception of academic research and of graduate training, and after the Civil War a small trickle of Americans who wanted that cutting edge education started making their way to Germany in order to earn a doctorate, a degree not yet readily available in the United States. Hopkins brought that model to the United States and dedicated itself to graduate training. It was built from the ground up to be a research university.

Antebellum colleges, many as I mentioned still tethered to their denominational origins, taught students what was already known. The new, dynamic research university would be a place to discover the things that we didn’t. As late as 1866 Harvard faculty member John Fiske could write that the whole duty of a university was to train the mental faculties of its students so that they might pursue varied and harmonious activity. It should also give students the means of acquiring a thorough elementary knowledge of any given branch of science, art or literature.⁸ But that broad, general—harmonious—education would soon yield to an emphasis on research, specialization, and the professionalization that grew from both. Older colleges—Yale, Penn, Princeton—moved in that direction in the last decades of the nineteenth century. In 1890 Harvard had formalized its graduate programs in a graduate school. By 1900 roughly three hundred doctorates were being granted each year.⁹

Schools of business grew up as part of both the Morrill Act and this new conception of the research university. With the exception of the Tuck School of Business at Dartmouth College, the first collegiate schools of business were attached to some of the most dynamic, ambitious universities of the age: the University of Pennsylvania, the University of Chicago, Berkeley, Harvard, the University of Wisconsin. In fact, the 1868 Organic Act passed by the California legislature creating the University of California specifically includes commerce as an area of instruction for the new university. Business schools, like intercollegiate athletics, are woven into the DNA of modern higher education, and neither is going anywhere. My view that the arts and sciences are the heart of the university, therefore, is merely that: my view. It doesn’t really reflect the history of higher education over the last century and a half.

And at the end of the nineteenth century nothing seemed more urgent than education for business, because business schools arrived on campuses amid another revolution in American life. The rise of industrial capitalism and large-scale corporations transformed the nature of the U.S. economy profoundly, and while the modern university was itself shaped through the philanthropy of those industrialists, business schools connected campus to the world of business even more directly. As Richard Hofstadter and C. DeWitt Hardy noted in 1952, Clearly the emergence of the business school as a flourishing center of specialized training came on the heels of the bureaucratization of American business, which was a well-established trend by 1900.¹⁰

Here then were the two new directions, broadly speaking, in which American higher education ventured after the Civil War: economic utility and social openness; rarified research and the creation of an intellectual elite. Practicality versus purity; educated everyman versus highly trained expert. Of course, the dichotomy I am delineating here was never as clean and stark as I am suggesting. The relationship between knowledge seen as pure and that seen as practical has always been more fluid than that. Americans have always wanted the former to lead to the latter. Indeed, Charles Thwing complained in 1928 that U.S. universities had not quite mastered the German model because the tendency of American methods is to promote the application of scientific truth without a proper acquaintance with the truth itself.¹¹ Still, I think the frictions I’ve laid out here—between teaching what we know and creating new knowledge; between practical education and that which is merely intellectual—remain to this day in U.S. higher education. Even an intellectual as accomplished as Barack Obama once asked why on earth anyone would major in art history.¹² Business schools, perhaps more than any other development on U.S. campuses over the last century or so, are caught in the middle of those tensions and have embodied them from the very start.

Professionalization was perhaps the most significant consequence of trying to square the circle between research and access. The professionalizing impulse began in earnest after the Civil War, and it continues to this day. As a consequence, a whole host of new fields were created that now required a college credential for practitioners. This has been the trajectory of nursing and engineering and teaching. Harvard and Michigan became the first two universities to offer college training for dentists shortly after the Civil War (and Michigan became the first to offer graduate degrees in for that profession in 1980). Now college degrees in dental hygiene have become quite common as have any number of other degrees in subjects that once never required them. Occupational therapy, say, and turf management and optometry. Indeed, one way to tell the story of the American university is to chart the more or less continuous rise of the practical arts on campus and the relative diminution of the traditional liberal arts as a consequence.¹³ In this sense, business schools are absolutely of a piece with the way higher education transformed in the late nineteenth century and on its cutting edge. Medical schools predate the Civil War and so do law schools; history and math and philosophy were all taught at American colleges from the very beginning. Business, therefore, was just one more subject spawned by the proliferation of professionalization unleashed by the modern university, a proliferation that continues apace.

So was agriculture, and the two make an interesting comparison. The Morrill Act, in effect, created the ag school, and plenty of people at the time wondered why farmers would possibly need a college degree. Farmers learned to farm through experience and the accumulated wisdom of traditions passed on, and they had done so for thousands of years. Similar skepticism greeted collegiate business schools—business should be learned through on-the-job experience!—and they have not succeeded in quelling that skepticism. Writing fully seventy years after the first American business school launched, Hofstadter and Hardy observed that business schools are still bedeviled by the problems of whom to teach and what to teach.¹⁴

And yet schools of agriculture have developed into thriving places that marry pure research with practical application—in fields as diverse as botany, genetics, entomology, hydrology, and soil chemistry, among others—in the best combination. Norman Borlaug graduated from the agricultural college at the University of Minnesota in 1937. He finished his career teaching in the ag school at Texas A&M. In between, he developed several new varieties of high-yield, disease-resistant wheat in Mexico, Pakistan, and India that revolutionized food production in those countries. He won a Nobel Peace Prize for his work in 1970.

Business schools, however, cannot make the same claims, either to academic success or to public utility. In my travels through the history of American business schools, the refrain I have heard has been remarkably consistent. In two-part harmony, people on campus seem consistently disappointed with the intellectual integrity and rigor of what constitutes a business education, while business leaders themselves have complained across the decades about the quality of the graduates of those programs. And although business leaders have repeatedly asserted the centrality of the private sector in solving social problems, no one associated with a business school has ever won a Nobel Peace Prize.

In fact, the skepticism and suspicion with which many of us on the more traditionally academic side of campus hold the business schools has existed from the very beginning and has not relented over the years. In 1913, to take one example, Edmund James, the former dean of the Wharton School and by that time president of the University of Illinois, recalled that Penn’s faculty were opposed to the whole purpose of a business school, thinking that the future business man might acquire his education in the so-called commercial college, or he might succeed without any education at all. Thirty years later, things had not improved much. A. L. Prickett, the dean of Indiana University’s business school, in a Delta Pi Epsilon lecture in Chicago, told the crowd, "I do not know a college campus in this country today where the collegiate school of business is completely ‘accepted.’ "¹⁵ Forty years after that, the literary critic and English professor Paul Fussell acidly noted that an "important class divide falls between those who feel veneration before the term executive and those who feel they want to throw up," capturing nicely the disdain with which at least some faculty view the ethos of the business schools.¹⁶

And in the other direction, businessmen and corporate leaders have continually complained about what business schools have taught or have failed to teach. In the mid-1980s, the American Association of Collegiate Schools of Business, funded by a long list of corporations, undertook a study on the state of U.S. business education. The study concluded that members of the corporate world, by and large, are neither highly satisfied nor highly dissatisfied with the quality of university-based management education in this country.¹⁷ Hardly a ringing endorsement of the products coming out of U.S. B-schools.

In this sense, business schools have become the Rodney Dangerfields of American higher education—loud, crass, more than a little buffoonish.¹⁸ They have gotten little respect from the rest of the university and not much from the private sector either. And yet like Dangerfield himself, they keep doing what they do, despite the fact that few people think they do it very well.

In truth, we don’t mix and mingle much. Certainly those of us in the arts and sciences have little understanding of and even less to do with what goes on inside those posh B-school buildings. And business schools don’t have much to do with the rest of us either. As a member of the history department I might teach my classes in the physics building, over in the art building, or indeed anywhere the registrar decides to put me. Business school classes, however, are all taught nowadays in the business school compound itself, lest the business school students (and faculty) have to slum it on other, less well appointed parts of campus. In their history of Harvard’s business school (insufferably smug even by Harvard B-school standards), Thomas McCraw and Jeffrey Cruikshank wrote of one dean that he remained very cautious … about collaborations with other parts of Harvard, let alone other universities. Instead, the real teamwork went on within the confines of Harvard’s business school building itself.¹⁹ After all, if the gods already reside atop Mount Olympus, where else would they want to play?

In this, however, business schools have also tracked the larger trends at American universities. Historians don’t have much professional interaction with our engineering or medical colleagues either. I have never taught a class with anyone in the education school (though at least I teach in that building all the time), nor has anyone there ever invited me to visit one of their classes. Until quite recently, classes at Ohio State University were taught on a quarter schedule, except at the law school, which was on semesters. A fundamentally different rhythm of academic time. Business schools are no different in having become just as siloed—in the current noun-turned-into-verb locution—as every other unit on campus.

While at one level business schools stand as of a piece of the way American universities have grown and evolved since the end of the Civil War, they stand apart from the rest of higher education in three, interconnected ways. First, and I’ve hinted at this already, they have consistently disappointed even their most enthusiastic boosters—failing to develop a definition of professional business education, failing to develop a coherent, intellectually vibrant body of knowledge, unable to agree on what the raison d’être of business schools ought to be—to an extent simply not true of any other academic pursuit.

Despite this, of course, business schools have flourished on U.S. campuses and continue to do so (and this certainly sets them apart from humanities departments and even some social science ones on many campuses right now). I have more to say about that success in chapter 6, but here I want to note a second distinction between business schools and the rest of the university, one that Veblen noticed a hundred years ago. The subtitle of Veblen’s extended meditation on higher learning is A Memorandum on the Conduct of Universities by Business Men.²⁰

The late nineteenth-century revolutions in higher education fostered a change in how universities were funded and governed. Just as private institutions began to seek and accept large sums from the new class of wealthy industrialists, those institutions came to be governed more and more by that same class of businessmen. (Trustees at the new state universities were often political appointees and often politically connected businessmen as a result.) Boards of trustees during the denominational nineteenth century had been populated, fittingly enough, with clergymen.²¹ By the turn of the twentieth century, the ministers were out and businessmen took their seats. The takeover of college boardrooms was complete enough by the First World War that Veblen could write:

It is not simply that experienced businessmen are, on mature reflection, judged to be the safest and most competent trustees of the university’s fiscal interests. The preference appears to be almost wholly impulsive, and a matter of habitual bias. It is due for the greater part to the high esteem currently accorded to men of wealth at large, and especially to wealthy men who have succeeded in business, quite apart from any special capacity shown by such success for the guardianship of any institution of learning.²²

One doesn’t have to be as caustic as Veblen to recognize that, for the businessmen who now presided over higher education, a business school on their campus might hold a special place in their hearts.

Finally, business schools serve as the handmaids to corporate capitalism in the United States in a way that no other campus enterprise does. More to the point, what they teach, and what their students seem to expect, is an uncritical, even incurious approach to that system. Universities as a whole promise that they are places of inquiry and critical thinking, and while they may often fall short of that ideal, the ideal remains. Except at the B-school. The things taught and the way they are taught, Martin Parker has concluded after over twenty years teaching in business schools, mean that the virtues of capitalist market managerialism are told and sold as if there were no other ways of seeing the world.²³ Business schools are the only places on U.S. university campuses that implicitly promise students: no hard questions asked.

So I ask some hard questions in this book. As I realized that I didn’t know much about what went on in the business schools that have been on every campus of which I’ve been a part, I discovered that we don’t know much about their histories either. That isn’t altogether surprising. Histories of institutions can be a bit dull to read—or to write for that matter. A number of the gilt-edged business schools have commissioned their own histories, but these are usually a combination of coffee-table production and hagiography in equal measure. Still, given how ubiquitous business schools have become on campus over the last century and a half, and given that they have always aspired to shape the course of American business and by extension the whole of American society, their history deserves more critical attention.²⁴

This book is not a comprehensive, begin-at-the-beginning, end-at-the-end history of American business schools. That task is too big and too daunting for a single volume, and I am not the historian to undertake it. Instead, this book examines what I see as a set of crucial and largely unasked questions about the role of the American business school and how it has, or has not, changed over time. These pages measure what business schools have aspired to be against what they have, in fact, become.

Chapter 1 does begin at the beginning, though, and asks why educational leaders and businessmen in the United States thought it was a good idea to establish business schools in the first place. The answer often offered at the time was that American business itself had grown so big and complex by the turn of the twentieth century that a new university-level education was now required for the new world of managerial work. As we will see, however, the more powerful rationale was that businessmen wanted the social status and cultural cachet that came with a university degree. Having decided to open collegiate business schools, universities faced a first-order problem: What, exactly, constituted a university-level curriculum in business? Chapter 2 traces the debates over those questions and their implications. The problem of what students should be taught sat at the fault line that defines business schools in the first place. To what extent should students learn academic subjects, and to what extent should they learn what amount to vocational skills useful to their prospective employers? Viewed one way, the entire history of business schools can be described as a pendulum swinging back and forth between these two.²⁵

Whatever else people might think ought to be taught at business schools, everyone agreed that economics should be a core part of the education. Except, as it turned out, the economists. Chapter 3 drills into the unhappy relationship between business education and the developing academic discipline of economics. Chapter 4 examines the question of who has, or hasn’t, gotten access to business education. Periodically, at almost regular intervals, a study appears documenting that women and people of color remain woefully underrepresented in the corporate world, particularly in its upper echelons. There are undoubtedly many reasons for this, but in chapter 4 I reveal the role business schools themselves have played in creating these disparities. Indeed, business schools have not even kept up with medical and law schools in enrolling women and minorities in their programs.²⁶

Whatever the relationship between business and the economy, both have experienced periods of crisis that have had all sorts of ripples throughout American life. Chapter 5 examines how business schools have responded to these crises. Or haven’t. What is striking is how little impact economic downturns have had on the practices of business schools. That was as true during the 1930s as it has been since the financial meltdown that began in 2007. And chapter 6 brings the story to the present to look at what has changed and what has stayed the same in business schools across the United States. On the one hand, the growth of the finance economy since the 1980s has meant that what goes on in business schools has aligned more perfectly with the corporate world than at any other time in the preceding century. Shareholder value became the mantra chanted in classrooms and boardrooms. On the other hand, business schools continue to evade the ethical issues raised in and by the business world, and they have avoided much by way of accountability for what they teach.

I have never fully understood that line from the old Bob Dylan song, there’s no success like failure (Love Minus Zero/No Limit, for those who don’t remember), but in many ways that line sums up the history of U.S. business schools that follows. They have largely failed, even on their own terms, much less on other, broader social ones. For all their bold talk about training tomorrow’s business leaders, as institutions they have largely been followers. In reviewing the course of American business education over the past fifty years, wrote one observer, one is struck by its almost fad-like quality.²⁷ That was in 1957.

Despite their repeated insistence that they are places of innovation, and their mantra-like chanting that they teach outside-the-box thinking, business schools have consistently exhibited a remarkable conformity and sameness. Don’t take my word for it. A study done by the American Association of Collegiate Schools of Business in 1988 found a distressing tendency for schools to avoid the risk of being different.… A ‘cookie cutter mentality’ does not seem to be too strong a term to describe the situation we encountered in a number of schools.²⁸ Finally, while honest people can disagree over whether business is better off for having business schools, the schools have provided scant evidence that Veblen was wrong in 1918. Business schools don’t appear to have done much to transform business into something more noble than mere moneymaking. Indeed, by the late twentieth century, they stopped pretending they could. The story that follows is one of unfilled promises and unmet aspirations across nearly 150 years. Failure, simply put. Yet, take any measure you please, business schools have made a tremendous success of all these accumulated failures.

Chapter 1

THE WORLD BEFORE (AND SHORTLY AFTER) WHARTON

Getting a Business Education in the Nineteenth Century

In the beginning there was Wharton.

Or more properly, the Wharton School of Finance and Economy at the University of Pennsylvania, and when it was founded in 1881 it became the first business school in the United States. All the more than six hundred business schools founded in the nearly century and a half since descend from Wharton. Wharton began and Wharton begat.

The origin story of U.S. business schools is familiar enough and almost folkloric inside that world. Joseph Wharton made a great deal of money in the metals and mining industry in the mid-nineteenth century.