Chapter 4
Why Business School? Finding Purpose Beyond Profit
My path to Harvard Business School was unconventional. Growing up in England as the son of a parish vicar, business was viewed as "a necessary evil" in my family. At boarding school, I developed a cliched vision of businessmen as "gin-swilling, golf-playing, dull, predictable slaves to money," which persisted through university where I studied classics rather than pursuing vocational training.
My perspective shifted after reading about Sir James Goldsmith, whose adventurous business career seemed nothing like my previous understanding of business. After university, I reluctantly took a job in telemarketing but failed miserably, leading me to journalism instead. My ten-year career in journalism included foreign correspondent postings that took me across the Americas, but eventually, I grew disillusioned with newspaper journalism's declining prospects.
While interviewing Venezuelan billionaire Gustavo Cisneros in his elegantly appointed Upper East Side office, I caught a glimpse of "Harvard MBAs" working in Cisneros's private office. This encounter, along with positive MBA experiences shared by friends, planted the seed that business school might offer me a new path.
After scoring well on the GMAT exam in August 2001, my plans were temporarily derailed by 9/11. The tragedy forced me to confront an existential question: "If everything ended for you right now, would you be happy with the life you have lived?" Though I was rewarded with the position of Paris bureau chief and married my partner Margret, my career dissatisfaction persisted.
I applied to four business schools during Christmas 2003: Harvard, Kellogg, Stanford, and Berkeley's Haas School. Writing honest application essays without guidance, I described leadership experiences from my journalism career, including managing during 9/11 and maintaining impartiality while reporting on Pinochet in Chile.
My Harvard interview was with a corpulent Frenchman who tested my Oxford Classics credentials with questions about Virgil. After receiving my acceptance, I questioned my decision to leave Paris's beauty for business school. The HBS student guide revealed a culture that seemed simultaneously anti-intellectual ("Don't bring books from literature or history classes") yet obsessed with ethics and leadership development.
I wasn't alone in my search for meaning. My classmates divided into two categories: those with clear goals (typically from consulting, banking, or corporations) and those seeking undefined change. Many, like Justin who had worked in public service, came to HBS seeking new career paths without knowing exactly what they wanted.
The story of my great-grandmother, Daw Ma Ma, a Burmese woman who became Burma's largest film distributor after being widowed with nine children, remained a powerful influence. Her business acumen created wealth for the family until Burma's military takeover dismantled her empire. This family history of entrepreneurial success and subsequent loss inspired me to find my own path in business, just as it had been her salvation decades earlier.
Chapter 5
Finance Fundamentals: Understanding the Language of Business
Finance fundamentally concerns valuation-determining an asset's worth by understanding its cash generation. Our first case on Butler Lumber Company revealed how businesses can appear profitable while mismanaging cash flow. We learned the importance of the cash conversion cycle and how companies like Dell mastered it by eliminating inventory and only building computers after receiving payment.
As finance progressed, I discovered that serious investors think as much about risk as reward. While reward is a simple percentage, risk is slippery and complex. We learned to predict future cash flows through educated guesswork, projecting revenues and costs based on reasonable assumptions. Then came the critical step: determining what these future values are worth today using discount rates that reflect risk.
This led us to beta-a measure describing a stock's volatility relative to the market. A beta of 1 means perfect market tracking; higher betas amplify market movements (more risk, more reward); lower betas dampen them (less risk, less reward). Soon classmates were labeling everything as "high-beta" or "low-beta"-from cafeteria choices to career paths. But great investors like Warren Buffett consider beta trivial, focusing instead on fundamentals and seeking alpha-returns that exceed what standard risk measures predict.
Despite all our spreadsheets and calculations, professors ultimately admitted valuation is "an art not a science." My banker classmate Annette confirmed that elaborate valuation models are merely negotiating tools, adjusted to meet clients' desires rather than objective truths. The only reliable tool amid finance's chaos is judgment honed by experience.
As Accounting transitioned from numerical to philosophical, I discovered its impressionistic nature. Eddie taught us to seek economic truth beyond the numbers. We learned that Microsoft's massive cash reserves weren't some accounting trick but reflected Bill Gates' desire to always pay his friends' salaries. Even the "earnings game" that produces artificially smooth quarterly results seemed suspect-what company truly grows without friction?
In Technology and Operations Management, we studied Toyota's revolutionary production system with its focus on eliminating waste through Just-In-Time production and jidoka (making problems immediately visible). The Five Whys and kaizen (continuous improvement) created a culture where nothing is too small to improve. These practical lessons from factory floors resonated more deeply than abstract organizational theory.
By the end of the first semester, I felt I was finally speaking this new language-not fluently, but communicating. My grades were better than expected: ones in TOM and LEAD, twos in Finance, Marketing and FRC. I'd learned about business and myself, though it was strange no longer having a professional identity as a journalist and being among the older students.
Chapter 6
The Career Race: Summer Jobs and Existential Questions
The race for summer jobs began immediately upon returning to campus, with students feeling immense pressure as their internship choices would likely determine their post-HBS careers. The environment bred anxiety among these "insecure overachievers"-a term heard repeatedly at HBS. One student's article about battling depression revealed how the competitive atmosphere could become overwhelming, with the author contemplating suicide three times during first year.
During section lunches, former consultants and investment bankers paradoxically discouraged others from following their paths, describing lives with no work-life balance, cynical cultures, and psychological tolls. Despite these warnings, when recruiting began during "hell week," students stampeded toward these very firms, frantically scheduling interviews and completing applications.
As recruiting intensified, I narrowed my job search to investment management, drawn by reasonable hours and how my journalism background might help analyze companies. I studied Peter Lynch's approach at Fidelity's Magellan Fund and Warren Buffett's investment philosophy. Buffett had visited campus earlier, receiving a standing ovation despite having been rejected by HBS as a young man. During his visit, Buffett spoke candidly about the "Ovarian Lottery"-how success often comes down to luck of birth circumstances. He advised students to find work they loved, noting the main difference between him and them was "I fly differently."
Despite admiring Buffett's diligence and foresight, I saw mutual fund management as offering the perfect balance of low risk and high reward. My friend Justin warned me about my casual approach to job hunting compared to classmates who had meticulously planned their careers. My interviews at investment firms went poorly-one featuring wine-soaked executives trading war stories, another challenging me to value Harvard Business School itself. Both firms rejected me.
My classmates faced similar struggles with career choices. Luis abandoned prestigious corporate opportunities for entrepreneurial work in Madrid. Justin embraced investment banking despite my skepticism. Most dramatically, Annette forfeited her investment bank scholarship worth over $60,000 to pursue her passion in fashion marketing, following her instincts despite others' bafflement.
By the end of the first year, I found myself without a summer job. While classmates sailed off to prestigious internships, I stood metaphorically on the bank, uncomfortable with the standard formula. If I wasn't following the typical MBA path, why was I there? Could I really take the education but pursue business on my own terms rather than becoming "yet another corporate MBA"? My solution was to pursue a long-held ambition-writing a novel. Each day I worked at the Boston Public Library, completing a first draft by summer's end while supporting my pregnant wife and amusing our son Augie.
Chapter 7
Ethical Dilemmas in the Business World
Business ethics takes center stage in the second semester alongside strategy, negotiations, entrepreneurship, and macroeconomics. Despite producing notorious figures like Enron's Jeff Skilling, HBS introduced Leadership and Corporate Accountability (LCA) to help students develop moral compasses. Professor Badaracco, described as "owlish" with a cushy academic lifestyle, guided students through ethical frameworks dividing corporate responsibilities into economic, legal and ethical categories.
The course generated division between those who saw it as a waste of time and those who embraced ethical discussions. The class debated whether business is fundamentally a bluffing game like poker or requires higher ethical standards, with passionate arguments from both "ethical jihadists" and pragmatists. During one class debate on business ethics, half championed shareholder interests while others advocated corporate social responsibility. Professor Badaracco concluded the answer lay somewhere between.
During this course, HBS faced its own ethical dilemma when applicants accessed their admission status through a website vulnerability. The administration revoked admission offers, but most students disagreed with this harsh response. Only the "ethical jihadists" supported the administration's decision. Dean Clark defended the policy in The Harbus, calling the behavior "unethical at best," while student Aaron Bigbee argued the punishment was excessive for a minor ethical misstep that many current students might have committed themselves.
The negotiations course, taught by former Blackstone founder James Sebenius, covered negotiation fundamentals, beginning with ethics-distinguishing between acceptable bluffing and unethical misrepresentation-and introducing three negotiator types: poker players, idealists, and pragmatists. Students learned crucial concepts like BATNA (best alternative to negotiated agreement) and ZOPA (zone of possible agreement). Sebenius emphasized mapping all parties' interests rather than focusing solely on one's position, adopting a three-dimensional perspective, and "going to the balcony" when negotiations stall.
Private equity and hedge funds raised additional ethical questions about the social role of companies. The private equity model involved acquiring companies, loading them with debt, extracting management fees that often exceed the original investment, then ruthlessly cutting costs-stripping headquarters, gutting health plans, firing loyal employees-all to service crushing interest payments. This "accelerated capitalism" allowed investors to make fortunes while remaining detached from the human consequences of their actions, unlike factory owners who face workers daily.
When visiting private equity titans like David Rubenstein of Carlyle Group and Steve Schwarzman of Blackstone came to campus, they advised students to "be a principal or decision maker, not a service provider," noting that with money comes freedom. Schwarzman emphasized the pain of entrepreneurship, revealing it took nineteen meetings to secure his first investor, but maintained some people are simply "constant winners in the game of life."
Chapter 8
Strategy and Leadership: The Core of the HBS Experience
Strategy forms the core of HBS's general management program-teaching students to be good generals who marshal resources to create and capture maximum value, rather than merely specialized functionaries. Professor Felix Oberholzer-Gee, a Swiss academic with practical business experience, brought worldly wisdom to Harvard's prized strategy department.
We learned that strategy isn't about operational efficiency but about making superior returns over time. A beautifully run restaurant might fail financially while grubby fast-food franchises make millions. The key is picking the right industry-pharmaceuticals, tech, financial services, discount retail, and oil consistently outperform while airlines struggle.
Michael Porter's five forces framework (barriers to entry, supplier power, customer power, substitutes, and rivalry) explains why some businesses flourish while others flounder despite quality operations. Additional forces include complements and government regulation. Competitive advantage comes either through cost leadership or differentiation (vertical or horizontal), with the nightmare scenario being "stuck in the middle" with neither advantage.
Building sustainable advantage requires developing integrated, mutually reinforcing activities that competitors can't easily replicate. Companies like Walmart succeed through the integration of frugal culture, rural locations, limited advertising, stellar logistics, supplier relationships, and technology. The goal is creating a flywheel effect where success builds on itself-like Procter & Gamble's scale advantages in toothpaste production or Apple's iPod ecosystem.
In the second year, I took Michael Porter's Microeconomics of Competitiveness course. Porter, Harvard's sole business school "guru," had risen to become one of Harvard's seventeen University Professors and was ranked by The Times of London as the world's most important business thinker. Beyond his early work on corporate strategy, Porter now applied his analytical frameworks to entire countries and regions, from Libya's economic regeneration to America's healthcare system.
Porter's course examined economic development at local, regional, and national levels using his "diamond" framework to assess competitive environments. Porter emphasized that the fundamental unit of competitiveness was not individual companies but "clusters"-interconnected institutions like Wall Street's ecosystem of firms, universities, lawyers, and regulatory bodies. His approach applied rigorous business thinking to seemingly hopeless situations like post-genocide Rwanda, developing strategies for scientific education and lightweight exports to bypass dangerous land routes.
Jan Rivkin's Advanced Competitive Strategy course visualized strategy as a mountain range where each peak represented different strategic outcomes of varying heights. The course focused on developing integrated options by analyzing costs, willingness to pay, and connections between business functions. Rivkin emphasized both gut instinct and rigorous analysis, studying how companies like Sears and IBM transformed their businesses during crises. He advised students to understand operations thoroughly while maintaining "intellectual restlessness paired with grounded competence" to become effective strategists.
Chapter 9
The Second Year: Freedom and Future Planning
The second year at HBS offered freedom of choice after the rigid first-year curriculum. Students selected elective courses using a computer algorithm that matched preferences, following one of three strategies: deepening knowledge in a specific area, addressing weaknesses, or simply choosing the easiest courses with convenient schedules.
My second son, Hugo, was born on September 6th, the day before the elective curriculum began. Despite this momentous family event, I was back in class the next morning at 8:30 for Entrepreneurial Marketing, struggling to recall the case I'd read days earlier as Professor Lassiter "came at us like a jet of cold water," immediately reimmersing students in the HBS mindset with challenging questions about business growth potential.
Professor Lassiter emphasized that entrepreneurship was more than a job-it was a way of thinking and living. Despite financial uncertainty, it offered control over one's time and life. His practical advice included finding a place to live and joining a "world-class tribe," demonstrating how companies like Cascade Communications spawned eleven successful startups. He stressed building reputation and deep networks rather than constantly changing careers, noting that "you really don't know what you're doing until you've done it a couple of times." Most importantly, he affirmed that "the coolest thing in the world was to be in love, to be together, and to see your kids grow up"-validating the entrepreneurial path as one that could balance professional ambition with personal fulfillment.
The second year brought freedom from section constraints but exposed students to a more aggressive academic environment. In International Financial Management, a clique of Indian students returning to private equity jobs dominated discussions, scorning European business practices when Professor Desai mentioned Nestle executives enjoying wine with lunch. This reflected a broader anti-European sentiment on campus, with General Electric CEO Jeff Immelt having previously remarked that Europeans believe "companies aren't supposed to make money."
The Dynamic Markets class was uniquely structured around trading performance rather than participation or exams. Taught by professors Josh Coval and Erik Stafford, it centered on "the law of one price"-the principle that identical goods must have identical prices in efficient markets. Students learned arbitrage strategies, risk assessment, and probability calculations similar to those used by former Treasury Secretary Robert Rubin. Though I performed well with my partner Chad, the experience left me questioning whether traders truly deserved their outsized rewards, feeling that "clever capital was outwitting honest labor, not sharing in an efficient market."
Chapter 10
Life After Harvard: The Real Test Begins
By mid-January of the second year, with graduation approaching, I still hadn't figured out my career path despite the careers service claiming it was "the greatest job market they had ever seen." While classmates fielded multiple offers, I remained uncertain about wanting a traditional MBA job, scanning job listings that all seemed to want banking or consulting experience. Corporate recruiting events left me depressed, particularly one from a publishing company whose representatives spoke lifelessly about "passion" while describing mundane work.
Despite my self-disgust, I applied to McKinsey, rationalizing that I "could not come out of HBS with nothing." My interviews at the Doubletree Hotel consisted of solving business cases about a failing drugstore and an investment fund with lower margins. In the second interview, I failed to follow protocol by not asking for "a moment" to think. The McKinsey partner eventually admitted he "hated" HBS himself, calling it intellectually inferior to his Harvard undergraduate experience. After some casual conversation, the partner called that evening to reject me-a decision I readily accepted.
I also pursued opportunities at Google, applying for a position marketing their Book Search initiative-their controversial effort to digitize all the world's books. The position matched my background in publishing and would involve mediating between libraries, publishers, authors, and readers. After eleven interviews across the country, I realized I was completely wrong for the sales position they were considering me for and withdrew my application, purging Google from my computer and making Yahoo my default search engine.
As graduation approached, we confronted the existential questions our education couldn't answer: Who are we? Why are we doing this with our lives? How much will ever be enough? In our final section class, Felix discussed Peter Drucker's "Managing Oneself." Drucker argued that in a knowledge economy, we must manage our own careers, focus on strengths, and develop meaningful lives outside work. The most provocative question came from a future bond trader: "How will we know how much is enough?" Responses ranged from work-life balance to financial independence, but the great existential questions remained unanswered.
I achieved the dubious distinction of being the only person in my section without a job offer. A clear hierarchy had emerged: "finance studs" headed to private equity and hedge funds topped the list, followed by investment bankers and consultants, then tech company recruits. Together, finance, consulting, and major tech firms claimed 69% of our class.
Graduation was literally a washout, with rain turning Baker Lawn into a soggy mess. At Class Day, student speaker P.J. Kim offered three pieces of wisdom, including "comparison is the death of happiness"-advice that resonated deeply with me after constantly measuring myself against classmates. Treasury Secretary Hank Paulson advised us to resist short-termism, find suitable careers, maintain our moral compass, and balance work with personal life.
Chapter 11
The Real Value of an MBA: Reflections and Critiques
A year after graduation, I reconnected with classmates to assess the value of our MBA experience. Oleg, running multiplex cinemas in St. Petersburg, enthusiastically shared his discovery that popcorn margins were an astonishing 2000%, revealing the business was less about movies than concessions. The most valuable lesson he learned was humility: "you never should consider yourself the smartest guy in the room." He now applied HBS lessons regularly in his business: "We saw a lot of businesses from the inside, so business doesn't seem like rocket science anymore."
Meeting Cedric for lunch in Manhattan, I discovered many classmates had already left their first jobs. "HBS is a factory for unhappy people," Cedric observed. "We have so many choices, and yet so few people seem happy about that. It just makes them anxious." Nate, working at a struggling biotech firm, valued the confidence HBS instilled: "I have a right to be wherever I am." Yet he criticized the school's financial obsession, noting how every successful visitor confessed personal failures: "Not one of them could say, 'my family was a smashing success.'" Despite these warnings, our classmates pursued wealth over balance.
Our class statistics revealed the overwhelming financial focus: 42% entered financial services, 21% consulting, with only 3% choosing nonprofit work. The median first-year compensation was $138,125, with banking analyst Ray Soifer noting our class's financial sector choices signaled an impending market crash.
After graduation, I struggled to find direction in New York. Following a film production company's interest in my second-year paper on film distribution, I was hired to raise corporate sponsorships and handle distribution for their documentaries. When I told my grandfather, he laughed, noting I'd picked up the entrepreneurial thread from my Burmese great-grandmother, who had distributed American films in Rangoon decades earlier-a family tradition unexpectedly continued.
Looking back, I'm glad I attended HBS. Business is no longer a closed world to me. I gained the prestigious brand, alumni network, and business language. I learned risk management, strategic planning, capital allocation, and multiple-option decision making. Most importantly, I gained the confidence every HBS graduate mentions-emerging unintimidated by business and its practitioners.
If I were dean for a day, I'd make five changes: First, bar professors without business experience from teaching entrepreneurship. Second, overhaul finance education to be more technically rigorous. Third, eliminate grades entirely, trusting that properly selected students would remain focused without them. Fourth, commission cases on the proper scope of business practice. Finally, I'd change the mission statement-HBS doesn't need to "educate leaders who make a difference" but should simply teach business management, diluting perceptions of graduates as a megalomaniacal elite.
Shortly after this book was first published in July 2008, the global economy cratered. Throughout this crisis, Harvard Business School alumni occupied key leadership positions-as President, Treasury Secretary, SEC head, and bank CEOs. This raises an obvious question: what exactly had Harvard been teaching them? The narrow thinking, greed, disinterest in politics, contempt for the non-business world, and complete unwillingness to accept responsibility for mistakes should have unsettled everyone.
Two and a half years after graduation, my happiest classmates are those who took unconventional paths-joining traditional corporations rather than financial firms, nonprofits instead of consultancies, small entrepreneurial ventures rather than tech giants. These weren't easy choices when 40% of our class went into financial services in 2006. As for me, I'm approaching the life I described in my first semester LEAD class-living in the countryside outside New York, writing from a home office overlooking a garden, still married with two growing sons. My MBA has helped me live without an employer and given me control over my time-which may be the greatest lesson Harvard Business School has to offer.
