Ahead of the Curve Read online

  Table of Contents

  Title Page

  Copyright Page

  Dedication

  Epigraph

  PREFACE

  Chapter One - LET’S GET RETARDED

  Chapter Two - STARTING OVER

  Chapter Three - A PLACE APART

  Chapter Four - RIDING THE BOOZE LUGE

  Chapter Five - WHO AM I?

  Chapter Six - FORMIN’, STORMIN’, NORMIN’, PERFORMIN’

  Chapter Seven - TO BETA AND BEYOND

  Chapter Eight - THE RISK MASTER

  Chapter Nine - INSECURE OVERACHIEVERS

  Chapter Ten - ETHICAL JIHADISTS

  Chapter Eleven - EXTREME LEVERAGE

  Chapter Twelve - CHASING THE CURVE

  Chapter Thirteen - BIG HAIRY GOALS

  Chapter Fourteen - “WATCHING MY CHILDREN GROW LONGER”

  Chapter Fifteen - GRADUATION

  Chapter Sixteen - A FACTORY FOR UNHAPPY PEOPLE

  Acknowledgements

  About the Author

  THE PENGUIN PRESS

  Published by the Penguin Group

  Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, U.S.A. Penguin Group (Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario, Canada M4P 2Y3 (a division of Pearson Penguin Canada Inc.) Penguin Books Ltd, 80 Strand, London WC2R 0RL, England • Penguin Ireland, 25 St. Stephen’s Green, Dublin 2, Ireland (a division of Penguin Books Ltd) Penguin Books Australia Ltd, 250 Camberwell Road, Camberwell, Victoria 3124, Australia (a division of Pearson Australia Group Pty Ltd) • Penguin Books India Pvt Ltd, 11 Community Centre, Panchsheel Park, New Delhi-110 017, India • Penguin Group (NZ), 67 Apollo Drive, Rosedale, North Shore 0632, New Zealand (a division of Pearson New Zealand Ltd) • Penguin Books (South Africa) (Pty) Ltd, 24 Sturdee Avenue, Rosebank, Johannesburg 2196, South Africa

  Penguin Books Ltd, Registered Offices:

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  First published in 2008 by The Penguin Press,

  a member of Penguin Group (USA) Inc.

  Copyright © Philip Delves Broughton, 2008

  All rights reserved

  Excerpt from “The Riskmaster,” lyrics by Tim Draper. Used by permission of Tim Draper.

  Library of Congress Cataloging-in-Publication Data

  Broughton, Philip Delves.

  The curve : two years at Harvard Business School / Philip Delves Broughton

  p. cm.

  Includes index.

  eISBN : 978-1-4406-2962-4

  1. Harvard Business School. 2. Business education—Massachusetts. 3. Business students—Massachusetts. 4. Management—Study and teaching (Higher)—Massachusetts. I. Title.

  HF1131.H4B76 2008

  650.071’.17444—dc22

  2007042746

  Printed in the United States of America

  10 9 8 7 6 5 4 3 2 1

  Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book.

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  For Margret

  There are two types of education. One should teach us how to make a living and the other how to live.

  —JOHN ADAMS

  PREFACE

  I did not go to Harvard Business School planning to write a book about the experience. In fact, after ten years as a journalist, I went there to recover from writing, to stop looking at the world around me as a source of potential stories. I wanted to learn about business in order to gain control of my own financial fate and, more important, my time. I was tired of living at the end of a cell phone, prey to an employer’s demands. A master’s in business administration, I hoped, would be my path to greater knowledge about the workings of the world and broader choices about the life I might lead.

  I say this only to make clear that this book was never intended as an inside raid. In many ways, I loved my two years at Harvard. My classmates were smart and considerate. The faculty was, for the most part, inspiring and committed. The facilities and the speakers who came to spend time with us were quite extraordinary. As a catbird seat for viewing capitalism, there is no better place. For me, and everyone I knew, Harvard changed the view of our futures and the possibilities available to us through business.

  But it was an intense time, far more intense than I’d ever imagined. The work load, especially in the first few weeks, was crushing as we struggled to learn the functional areas of business, finance, accounting, operations, marketing, and organizational behavior. As the months passed, the pressure to find jobs, the “right” jobs, became a separate education in itself, beyond what occurred in the classroom.

  This book is my attempt to describe my experience and that of my classmates in this cauldron of capitalism. Reading through the diary I kept during my two years there, I was surprised by the emotions the experience drew out of me. I had expected a more neutral time at business school, a period of study and preparation for a different career. Instead, we MBA students spent much of our time discussing our ambitions and the kinds of lives we wanted for ourselves and our families. This debate looms large in the book, alongside accounts of what we learned in class, what the many famous speakers said, and how we went about deciding what to do for work. To have the opportunity to study at Harvard Business School is a great gift. Any gripes, criticisms, or anxieties I express should be taken for what they are: high-class problems.

  In 1960, five thousand MBAs graduated from American universities. In 2000, the number had risen to a hundred thousand. The MBA course now comes in all kinds of flavors. There is the classic two-year, full-time residential course, which I took. But you can now study for an MBA part-time, online, at night, or in multiple international locations. Where capitalism goes, the MBA follows. The number of MBA applicants in the Middle East, China, and India is soaring. Survey after survey has shown that MBAs tend to receive higher salaries and better jobs. Those three precious letters have become a calling card, and in some cases a requirement, for success in business.

  While I attended Harvard Business School (HBS, as I shall often refer to it), between 2004 and 2006, the school’s alumni included the president of the United States, the secretary of the U.S. Treasury, the president of the World Bank, the mayor of New York City, not to mention the CEOs of General Electric, Goldman Sachs, and Procter and Gamble. HBS alumni filled 20 percent of the top three jobs at the Fortune 500 companies. The newly fashionable private equity and hedge fund industries were stacked with Harvard MBAs, who were received like gods when they returned to campus. It was daunting and thrilling to join such a powerful lineage.

  The school believes that the kind of leadership required to succeed in business can also be applied to other spheres—politics, education, health care, the arts. I did not come from a business background and instinctively resisted this notion that businesspeople should be running everything. It was a question that came up repeatedly over the next two years, and it cuts to why a book on the Harvard MBA should be of interest to a broader audience than those who either have an MBA or are considering getting one. The language, practices, and leadership styles taught in the MBA course affect all of us. Business
schools no longer produce just business leaders. MBAs determine the lives many of us will lead, the hours we work, the vacations we get, the culture we consume, the health care we receive, and the education provided to our children. Since 2000, the Harvard MBA in the Oval Office has made decisions of global and historical consequence. In short, the MBA, its content, and the network of people who hold it, matter. And it has ambitions to matter even more.

  Finally, this book is just one person’s view. No single MBA could ever be representative of the nine hundred students in the Harvard Business School class of 2006. Everything in this book occurred as I describe it. But I have altered the names and changed details to conceal the identities of some of my fellow students. I did this for two reasons. The first was privacy. The Harvard Business School classroom is a safe learning environment, a place to experiment and make mistakes. My classmates did not know that one day I would write a book about our experiences. While my own embarrassments and humiliations fill this book, theirs are their own concern. The second reason for concealing some identities is that it allows me to describe what we went through with greater honesty than if I had to worry about the reputations of people I like and admire. The professors, since their role as teachers is a public one, appear as they were, as do the speakers who came to campus. My intention in combining these approaches is to give as accurate a picture of my time at HBS as possible.

  When my class graduated in June 2006, we received an open letter from the dean of the school, Jay Light. “As you join other HBS alumni around the world,” he wrote, “I hope you’ll stay connected to the School and continue to share your thoughts and perspectives on your years here.” Here are mine.

  Chapter One

  LET’S GET RETARDED

  Well, don’t we all feel like jumping to the end of the world sometimes?

  —MICK JAGGER

  “I don’t know what you think of Philip, but right now, for you, he’s just Philip.”

  The dean of Harvard Business School and ninety of my classmates were looking straight toward me. At that very moment, I was trying to corral a collapsing chicken salad sandwich and looking very “just Philip” indeed. We were a few weeks into the MBA course, and Dean Kim Clark had come to our classroom this lunchtime to introduce himself and take questions. He was a gaunt, devout Mormon in his late fifties who spoke with the authority of the prophets, quiet but commanding.

  “When I first came into this classroom as a young professor to teach, there was a guy called Jack sitting there. He’s now Jack Brennan, head of Vanguard. Over there was a former Dartmouth football player, Jeff. Jeff Immelt is now the chief executive of General Electric. Over there was Donna, Donna Dubinsky who became the CEO of Palm.”

  A switch seemed to have been flipped in our windowless basement classroom. You could feel the hum of ambition. Ninety students in five rows arranged in a horseshoe facing the blackboard, all of them, even the one now licking mayonnaise and chicken off his pencil, thinking: Will I be the one they mention in twenty-five years? Will a future dean address the class of 2031 saying, “In that seat was Susan. She was shy of speaking in class but now she’s running the largest hedge fund in the world. Tom over there became CEO of Google. And Philip. Well. How many billions should one man have?”

  We were all looking at each other, wondering.

  I first set foot on the campus of Harvard Business School one sultry evening in August 2004. My wife, Margret, and our one-year-old son, Augie, were staying in New York until our possessions arrived from France, where we had been living for the previous two and a half years. I knew no one at the school among the students or on the faculty. For the first time in a decade, I had neither an employer nor a job title and no monthly paycheck. Around two hundred students with little or no background in business had been summoned early to the business school for a course formally known as Analytics, less formally as Math Camp. The goal was to bring us up to speed with the remaining seven hundred members of our class who would arrive in three weeks. They, the school assumed, had spent enough time over the past few years handcuffed to their laptops churning out financial models and corporate PowerPoint presentations to know the basics. We, on the other hand, would have to undergo a compressed version of the first-year course known as the RC, the required curriculum. We would be introduced to the HBS case method of teaching and, it was hoped, be less intimidated when the first year proper began.

  After registering, I was given a folder containing the case studies for the first week and told to report in fifteen minutes to a conference room in Spangler, the vast neo-Georgian building that forms the heart of the campus, to meet my study group. I went outside into the treacly warmth, found a bench close to the tennis courts, pulled out the first of hundreds of cases I would soon confront, and began to read. The entire HBS curriculum is made of case studies, business situations drawn from real life. The question you are expected to answer in each one is: What would you do? There are no right or wrong answers to these problems. In many cases the actions taken by the case protagonists turn out to be disastrous. The only thing that matters is how you think about the problems, how you deal with the paucity of information, the uncertainty. The hope is that long after the minutiae of accounting or bond pricing have faded to a blur, you will be left with a distinctive way of thinking and making decisions. Cases are written by members of the faculty and can range in length from a couple of pages to more than thirty. They generally include a dramatic narrative that sets up the situation, an analysis of the business under discussion, and several pages of exhibits, charts, tables, pictures, and any additional text required to illustrate the problem. My first case began: “Once upon a time many, many years ago, there lived a feudal landlord in a small province of Western Europe. The landlord, Baron Coburg, lived in a castle high on a hill. He was responsible for the well-being of many peasants who occupied the lands surrounding his castle.”

  The baron had two peasants, Ivan and Frederick, whom he ordered to farm two different plots of land. He gave them seed, fertilizer, and oxen, but told them to lease a plow from Feyador the plow-maker. They returned a year later with different amounts of wheat, their oxen a year older, and their plows in different states of disrepair. The case concluded: “After they had taken their leave, the baron began to contemplate what had happened. ‘Yes,’ he thought, ‘they did well, but I wonder which one did better?’ ”

  It was an accounting case, and the challenge was to help the baron answer his question by drawing up income statements and balance sheets for the two farms. Why any medieval baron given the choice between rape and plunder and bookkeeping might choose the latter beat me. But this was Harvard Business School, where even the medieval barons were different. On one of the tennis courts in front of me, two students were just beginning their warm-up. One wore a blue bandanna, the other no shirt. They began to hit, gently at first, each standing a few feet from the net, knocking the ball back and forth. I paused to watch them, hypnotized by their metronomic hitting. Slowly they worked their way deeper into each half of the court, their arms whipping through the air, the ball dropping closer and closer to the baseline. I wondered how many hours had gone into training those perfect forehands, that unerring focus on the ball traveling through the air. Within the rectangle of the court, everything was happening exactly as it should. I tucked my case study back in the folder and made my way to Spangler to meet my study group.

  Sitting around a large blue table were two military veterans, a former employee of the New York City mayor’s office, a Taiwanese management consultant, and a very nervous blond woman, freshly sprung from a Boston mutual fund company. The vets seemed too big for the room, their biceps bursting out of skin-tight T-shirts, while the blonde seemed terrified and small. The New Yorker, Justin, it turned out, had grown up a few blocks from my wife. All of them, it became clear as we set to work on the baron, knew far more about business than I. They had flipped open their laptops and were ready to go. Before arriving at Harvard, I had
only ever used one of the programs in Microsoft Office. That was Word. I had never opened the spreadsheet program, Excel, or the presentation program, PowerPoint. For the first few days, I decided I would stick with my trusty pencil and paper and focus on what was being said, rather than try to master new software. J. P. Morgan, after all, had never had Excel and he used to run most of the U.S. economy. I looked back at the baron’s problem. It didn’t seem that complicated: a couple of bushels here, a couple there, fertilizer, oxen, plows that undergo some wear and tear, and an exploitative feudal landlord.

  “Ivan,” I volunteered after a few moments. Everyone looked up. “Ivan’s the better farmer.” I quickly explained my calculation.

  “You forgot to depreciate the oxen,” said Jake, an ex-marine.

  I went back to work. “Frederick,” I said a moment later.

  “Did you put the full value of Ivan’s plow under ‘cost of goods sold’?” asked Jake. At this point, I decided to shut up. My entire knowledge of accounting came down to my assigned summer reading. What with having to move from Europe and everything, this reading had been skimpier than I had hoped.

  “Is the baron the equity holder or a lender?” inquired Jon. He had just returned from leading combat teams into terrorized areas of Baghdad. He seemed by far the least anxious in the room. “And does anyone get charged for depleting the land with fertilizer?”

  For the next hour, I scribbled away while the same handful of numbers chattered in my head like garbled code. “Twenty pounds of fertilizer are worth two bushels of wheat, an ox valued at forty bushels with ten years’ worth of work in him works for a year. Ivan still owes Feyador for the plow . . .” The numbers kept shifting beneath me. First Ivan was the better farmer, producing two thirds of a bushel more per acre than Frederick. Then Frederick nudged ahead by five sixths. It was like one of those children’s puzzles where you roll balls around a flat surface trying to get them to stay in holes, and just when you think you have all six in, the first one rolls out again.