There are so many ways to look at what’s happened in the US economy over the past year. But I think the best way is to look at how unequal the recovery has been. The growing income gap was apparent before the recession. But the nature of the government’s approach, and the extraordinary behavior of the banks has only exacerbated it. It goes to the heart of why the behavior of Goldman Sachs and the other banks still feasting on cheap government backed debt is so unpleasant.
To take Goldman. It has raised $21 billion of capital by issuing debt insured by the government – on the principle that this money would help stimulate the broader economy. Goldman gets to borrow cheaply, courtesy of the US government, then invest to make healthy returns. It then uses these returns to pay its employees and stock-holders. Has any of this helped unglue the credit markets for ordinary Americans? Hardly. Has it helped Goldman? Yes. Tremendously. Anyone able to borrow cheaply and invest over the past year would have done exceedingly well.
Meanwhile, small businesses and employees have been left to go to hell. This article in the New York Times about the rise in teenage runaways over the past two years is especially galling. Of the $787 billion stimulus plan approved earlier this year, $1.5 billion is going to homeless problems. That’s less than Warren Buffett will make on the Goldman investment he made last year.
I know exactly what Goldman’s supporters will say. Come on. You can’t blame us for everything that ails this country. No. But one can blame them for contributing mightily to the social and economic discordance everyone beyond Wall Street can feel. One can blame them for shoving their own interests to the top of the government’s to-do list, using their Washington muscle and bogus threats about the collapse of the entire economic system, then lining their own pockets.
Goldman, J.P.Morgan et al. have made the economy feel like a zero-sum game. Their actions have consequences which ripple down to the very lowest levels of society. During boom times, this seems less obvious. But at times like these, when borrowing, even for the US government, is so tough, it’s glaringly apparent that the money Wall Street has is money the teen runaways and homeless don’t have.
Go on, Goldman. Do something about it.
Last week, I travelled to Barcelona to address a group of b-school admissions officers gathered by GMAC, the testing organization. My topic was: Why Business Should be Taught More Like an Art and Less Like a Science
The gist is that business schools would attract a far broader range of applicants if they didn’t present their subject as an outgrowth of economics, and more as one based on creative/psychological/behavioral studies. Of course, the core subjects like finance have to be taught, but it’s a question of emphasis. If you present it as heavily quantitative/scientific, you get quants/scientists/engineers. When the truth is business probably 50-50 art-science.
One thing several of the admissions officers said was, yes, fine, we agree, but what subject would you drop? I said it was about emphasis. Imagine you were crafting a business education today, from scratch. What would you regard as essential. If you start from the position that we have x number of accounting professors and x strategy professors and they must be employed, you’ll never get any change.
Two days later, I spoke as part of a debate at the Said school. The motion was Are MBAs best positioned to lead us out of the financial crisis. I was opposing. Naturally. I believe the debate’s going to be posted on iTunes, so as soon as I get the link, I’ll put it here.
Since the summer, I’ve been writing a regular column for the London Evening Standard about work/life issues. It appears every Monday in a section called Trends. You can read them all here.
During my two years at HBS, I spent roughly $24,000 on health insurance for myself and my family. Living in Europe before, my healthcare was paid for as part of my taxes. Single students at American universities can expect to pay between $5000 and $10,000 over the course of a two year MBA. For my money, I had access to the great Harvard medical system, and my wife had a child, so we got some of our money’s worth. But this is just one of the many extra costs of doing an MBA in America and is worth considering. Good piece by Nicholas Kristol in the NY Times today suggesting that Congress should forego its own lavish health insurance scheme if it can’t figure out a way to get insurance to the millions of Americans who don’t have it.
I did an interview last year which I think answers many of the questions I receive via email . If there are other questions, please do comment and ask and I’ll be happy to answer them. I’ve received hundreds of emails since publishing Ahead of the Curve/What They Teach You at Harvard Business School, many asking variations of similar questions. Should I get an MBA? Is it worth it? What will I learn? What are b-schools looking for from applicants? Over the next few days, I’ll post some of the answers I give. But this interview’s a good place to start.
Next week I’m off to Barcelona to talk to a conference organized by GMAC – the folks who do the standardized tests for graduate schools. The title of my talk is “Why business should be taught more like an art and less like a science.” I hope to post the content of my talk once it’s done.