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Crisis Casts Shadow Over Summit

On the weekend building up to Columbus Day, HBS students took off to remote locales ranging from Puerto Rico to London to San Francisco. The HBS turkey herself also seemed to have taken the weekend off and was nowhere to be seen. Yet back at the WestPoint of Capitalism, hundreds of staff and vendors transformed the campus in preparation for a grand affair of magnificent proportion: the Centennial Global Business Summit.

Throughout the weekend, HBS staff members scurried about, making sure everything was in place for the big day. Vendors displayed Crimson-colored flowers at the entrances to Bloomberg and lined HBS’s walkways with pumpkins and pillar candles enclosed in glass vases.

For several weeks prior, an immense crane built a quasi-convention center dubbed the Pavilion which would seat nearly 2,000 HBS alumni. Even by HBS standards, the Centennial Global Business Summit was an impressive undertaking.

The event sold-out in minutes with tickets priced at $1,500 (students received a discounted rate at $750 a pop) and brought together what Dean Light conceded was the “largest and best group we have ever assembled.” This was a big deal – a really, really big deal.

Yet there was one thing that HBS did not and could not plan for, one thing that no speaker was entirely prepared to address: the financial meltdown of 2008. Not a single person in attendance (nor HBS for that matter) clearly predicted the dramatic events of the prior weeks, including the collapse of storied investment banks, the liquidity crunch that paralyzed markets, the government bailout of Fannie/Freddie/AIG, the failure of numerous banks, the U.S. taxpayer-funded rescue plan of $700B, and the trillions of dollars of wealth lost in markets throughout the world.

Indeed, a glance at the schedule of the conference reveals intellectual pursuit of topics such as 21st century leadership, globalization and the social contract, the future of market capitalism and entrepreneurship. As worthwhile as these topics may be, they took a backseat to the looming question on everyone’s mind: How did we fail to accurately predict the financial crisis and what should our response be?

With the financial crisis at the forefront, the conference began in full force as Dean Light introduced the 2008 HBS Alumni Achievement Award recipients, four fascinating individuals that represent the very best of HBS alumni: John Doerr (MBA ’76), Partner at Kleiner Perkins Caufield & Byers; Jeffrey Immelt (MBA ’82), Chairman and CEO of General Electric; Anand Mahindra (MBA ’81), Vice-Chairman and Managing Director, Mahindra & Mahindra Ltd; Meg Whitman (MBA ’79), former President and CEO, Ebay, Inc; James Wolfensohn (MBA ’59), former President of the World Bank.

Impressive as these five individuals may seem, they represented only 5 of nearly 200 speakers and panelists, each completely impressive in his or her own right. The speaker list included household names such as Bill Gates but also individuals such as Wendy Kopp, the founder and CEO of Teach for America. It makes you wonder whether another business school (or institution in general) could convene such an accomplished group of people together at one time. Perhaps the World Economic Forum or the United Nations, but in the business of gathering business elites, HBS exists in a league of its own.

Even business elites, however, disagree on the severity of the current crisis, as evidenced by the HBS Alumni Award Recipient panel. Immelt was quite optimistic of the current situation, saying, “this is a great time to pour it on.” Others, however, were less optimistic. Doerr cautioned that the current crisis could take our focus away from larger issues such as the energy and resulting environmental crisis. At one point, Doerr proclaimed, “You can bail out the economy but you can’t bail out the environment.” Wolfensohn was also quite bearish, broadly questioning the “validity of the assets in our financial system.”

Charlie Rose, host of The Charlie Rose Show, skillfully navigated the discussion, shifting the focus from the economy to the interface between business and government.
As the conversation shifted to the current political environment and the role of business in policymaking, some tension became apparent as Whitman and Immelt were pitted against Doerr. Whitman serves as a policy advisor to the McCain campaign and Immelt confessed that he was a “lifelong Republican.” Doerr, on the other hand, has been a vocal supporter of the Democratic Party in California.

After being asked for the ‘international perspective,’ Mahindra stated, “A choice of Obama would somehow signify the finest that America has to offer,” drawing enthusiastic applause from the crowd. In a shocking statement, Mahindra also voiced his opinion that professional schools were not necessarily the end all and be all, stating, “the real strength of America is in the liberal arts,” referring to our younger colleagues at the College.
To be sure, this was a brave statement to make in front of an audience full of HBS graduates. But the Summit was about challenging – not necessarily reaffirming – beliefs.

Following the leadership panel, the conference quickly shifted to issues of sustainability and humanitarian need. In an informal question and answer session with Bill Gates, a relaxed Professor Emeritus James Cash probed Gates on his foundation and global work.

Gates elaborated on the foundation’s work in global health, global development and U.S. education. The question of using business as a force for the greater good of humanity would come up time and time again – in panels, keynotes and plenary sessions.

In the afternoon, the renown and charismatic Professor Niall Ferguson took command of the stage, delivering a riveting talk on the past and future of globalization. Professor Ferguson declared that “globalization has happened before” and that “history has a longer memory than we do,” as he compared the U.S. in 2008 to the British empire a hundred years ago.
In addressing the current financial crisis, Professor Ferguson referred to Joseph Schumpeter’s theory of “creative destruction” leaving the audience with Schumpeter’s belief that the “process of creative destruction is the essential fact about capitalism.”

Professor Ferguson’s broad perspective of time was further enhanced by Drew Faust, the President of Harvard University. Also a historian, President Faust delivered a talk in which she used the parable of Three Stone Cutters to challenge the business school to see “how one’s stone cutting is inescapably part of a larger project.”

This appeal is appropriately timed given the Allston Initiative which has broken ground immediately across the street from HBS. In the next 100 years, HBS will in fact transition from its current isolated position to become the very center of Harvard University.

The last major theme evolved around the “future of market capitalism.” The often controversial but brilliant Larry Summers took center stage to discuss capitalism and the challenges which currently threat its existence. Formerly the Treasury Secretary and President of Harvard, Professor Summers stated that in the future, capitalism would be challenged to deliver more prosperity and distribute this prosperity in a way that is both fair and legitimate. Without creating more prosperity and finding a better way to distribute it, the authority and legitimacy of capitalism will come into question. Finally, Summers stated that capitalism in the United States is influenced by the fact that America’s stature around the world has been significantly eroded.

Professor Summers quite poignantly challenged participants to create “new and more creative approaches to make sure the system works for everybody.” Unfortunately, America must do this in a world where she no longer represents the dominant military, moral or economic force. Professor Summers mentioned Guantanamo Bay, Abu Ghraib and Katrina as recent instances when America’s stature has been challenged.

As the conference drew to a close, I found myself stumbling on the very questions posed at its very beginning:

Who will lead? Where do new ideas come from? What lessons can we learn from the past? What price are we paying for prosperity? Can business really change the world? Whose responsibility is it?
These are significant and important questions, but in the midst of the current financial crisis, they seemed to have taken a backseat. Ironically, this was the same position HBS found itself during its inauguration in 1908, which occurred just months after the Banker’s Panic of 1907. At that time, HBS ushered in a new era of management education whilst trying to make sense of a significant financial crisis that crippled markets and banks.
In the same way HBS’s founding grappled with the Banker’s Panic, the Centennial Global Business Summit struggled to make sense of the financial crisis of 2008. Out of the discussions and dialogue, clarify emerged in two areas. First, we cannot predict the future no matter how hard we try. As Professor Ferguson stated, events that models would predict every 10,000 years happened “every day for three days in a row.”

Second, HBS is not and should not be the only answer. We do not exist in a vacuum but live in a interconnected and complicated world with various stakeholders including foreign governments, policymakers, the global poor, NGOs, etc.

Whilst leadership may possess many of the same characteristics today as it did 100 years ago, the actors have undoubtedly changed, thus requiring new tools and approaches to face the unpredictable challenges of our generation.
Determining exactly what these tools and approaches are will be the challenge facing HBS in its next 100 years.

More information on the summit is available at http://www.hbs.edu/centennial/businesssummit/.

October 20, 2008
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