Diatribes of Jay: How Business Schools Helped Ruin America, and What to do About it

[For the consequences of the years of top-level ignorance and incompetence we face, click here. For President Trump’s six-month report card, click here. For comment on our weak Yankee defense against information warfare, click here. For some popular recent posts, click on the links below:

Introduction: where hope lies in our capitalist society
The dark side of American business
The failure of antitrust or competition law to contain the damage
How business schools brought us to our current pass
Conclusion
Ignorance and Incompetence: the Big Risks

Introduction: where hope lies in our capitalist society

We Yanks now live in an extraordinarily negative time. We have a president who has willfully abandoned all the conventions of tact, diplomacy, delicacy, finesse and politesse that have characterized our best pols and diplomats from time immemorial. He tells police not to be nice to people arrested on suspicion of being criminals, even before they are charged, let alone convicted, of any crime. In his campaign, he encouraged his fans to beat up minorities and protestors, and he continues, at times, to do so. His new but quickly dismissed spokesman made news with a tirade so profane that our “hot” media (TV and radio) refused to repeat it verbatim. Then the president himself fired the chief of staff who was the object of the tirade.

And what are our president’s policies? Stop or retard market-based energy transition and go back to coal. Ban Muslims from entry into our nation. Fire scientists who credit and fear global warming and take down their websites. Bash China and the open trade that have brought hundreds of millions of Chinese and Asians out of crushing poverty. Bash Mexico and Central America for being unable to stop millions of desperate people from seeking a better life by crossing our borders illegally. Bash NATO and encourage the Russian Bear because our allies in Europe don’t pay as much for NATO as we think they should. Dilute the weak financial rules that help avert a quick repeat of the Crash of 2008. And now we are faced with the delicate and existential problems of what to do about the Russian goon who put our own goon in the White House, and whether to take out the Korean goon who threatens our Western Seaboard with nuclear missiles.

Is there anything positive in all of this? If you can see it, dear reader, you’ve sharper eyes than mine.

In one of his earliest and best speeches as a presidential candidate, President Obama laid down a good benchmark for testing America’s foreign policy. When a hapless foreigner caught in a desperate situation looks up and sees a helicopter with our Yankee symbols hovering overhead, does he feel hope or fear? When the world sees Donald Trump in the White House, does it feel hope or fear? Do you have to ask?

You might think this essay is about politics. But it’s not. It’s about business and business people. Why? Because, with the Trump Administration dead in the water and its vaunted infrastructure program only an idle and maybe unattainable dream, the sole ray of hope coming out of America today is coming from business. Innovative business.

Elon Musk just sold his first thirty Tesla Model 3’s. His sleek, simple and affordable electric cars promise an energy revolution that can help save our planet from cooking and keep us in our individual vehicles. Personal cars have defined American life and personal freedom for about a century: the wind in one’s hair while rushing down an open highway is an American icon more valued than apple pie. Now we can have the wind in our hair and alternative energy, too.

Another Musk venture is his SpaceX project, which promises a different kind of hope. If we can learn to reuse our rockets and so make space travel affordable, we can spread our seed across the solar system, and some day around the galaxy. Privately funded, privately managed spacecraft will colonize outer space just as our Conestoga wagons once spread over our sparsely-populated terrestrial continent.

A second business leader who gave us all hope was Steve Jobs. An opera about him (an opera!) just had its world premiere in Santa Fe. It tells the life story of this driven and tortured genius—a visionary, perfectionist and tyrannical son-of-a-bitch melded together in the same body and mind. At the end of his day he had put a powerful and flexible computer in almost everyone’s pocket or purse. Each of those computers is infinitely more capable than the two-refrigerator-sized computer I used to manage data from field seismology in the 1970s.

The title of the opera says it all: “The (R)evolution of Steve Jobs.” It has been a peaceful, hopeful revolution, not a bloody one like the Russian or French ones. And it’s still going on, under the leadership of Apple CEO Tim Cook. It’s a revolution wrought by American business, American capitalism at its best.

Then there are the Internet guys: Jeff Bezos of Amazon, Larry Page and Sergey Brin of Google, and Mark Zuckerberg of Facebook. They didn’t invent the Internet. They were just kids when our government released its once-secret software protocols for general and commercial use, jump-starting the World Wide Web.

But these business visionaries made the Internet accessible to individuals, and quickly and cheaply so. Amazon lets us shop for everything from books and video to tools and shoes, with useful user reviews, from the convenience of our desks. Google allows us to search, in seconds, through a global mass of data already orders of magnitude larger than all the paper libraries in human history put together. Facebook was the first widely successful program that made the Internet’s most unique communication capability—many-to-many transmission—accessible for popular use. In this sense Zuckerberg can be said to have “invented” social media.

Social media have had their ups and downs. They have fought tyrants in Russia and throughout the Arab world, deposing Mubarak in Egypt, but the ultimate results in Egypt and elsewhere seem to have been stronger tyrannies. (Tunisia appears to be an exception but is teetering on the brink.) Clever demagogues have also exploited them to to push politics ever further rightward, in America, in Russia, and in Europe. And Putin has exploited them to help put our very own Nero in the White House.

But if we ignore, for a moment, these negative consequences, we reach a startling conclusion: the only hope coming out of America at the moment is coming from business. No one but his true-believing “Trumpets” (his loyal but not-too-well-informed, non-college-educated base) has faith that our nation or our world will be a better place the longer Trump remains in office. But everyone everywhere believes that the products and services of Musk, Bezos, Jobs and the likes of Page, Brin, and Zuckerberg will make human life better, at least personally, and probably collectively, in a now-indefinable way.

That’s why the stock prices of these pioneers’ firms often seem to defy gravity. No button-down spreadsheet or balance sheet can capture the potential of their visionaries’ dreams, or the myriad untold uses of their products and services. These pioneers are our present-day counterparts of Carnegie, Edison, and Grove (Andy Grove, the founder of Intel the chip maker).

That’s also why it’s never a good idea to bash corporations, whether in America or anywhere else. There are bad ones, of course, just as there are bad people. But corporations provide most of our creature comforts, nearly all of our innovation, and much that makes modern life less nasty, brutish and short than it was a couple of centuries ago.

After Reagan and the GOP got through with government, most of what it provides is infrastructure (today, not very well!), national defense, emergency response, and safety nets. These things keep us from the abyss, but they hardly propel us toward the stars. Maybe the GOP planned it that way, and maybe its plan is coming to fruition. But whatever the cause, that’s the way it is. Corporations matter, and the best ones matter a lot.

Yet I get ahead of myself. Suffice it so say that the gravity-defying stock prices of innovative corporations are reflections of real potential and possibilities. They are also reflections of the essence of capitalism—risk and its proper reward—an essence that we Yanks have all but forgotten amid our excesses of corporate welfare, “competition” through PR and PACs, state-offered tax breaks, and bank bailouts.

So how did we Yanks reach this point? How did we get to a place where our nation’s name and flag inspire doubt and fear (although immigrants still race to our shores), while our corporate logos, or at least some of them, inspire hope and emulation? Was it the GOP’s two-generational propaganda campaign, beginning with Reagan, that “Government is not the solution; it’s the problem”? Or was it something else? And if business is the source of hope and government the source of trouble, how can we boost the source of hope without it becoming another source of probable oppression of individuals?

These basic questions are the subjects of this essay. But before we get to them, we must acknowledge the obvious: not all business is a positive force in society. There is a dark side to American business and capitalism, and to that we first turn.

The dark side of American business

Not all of American business is beneficent. Like Frankenstein monsters seeking only to preserve their own artificial life, some big businesses use their economic and social power simply to preserve and advance their own private interests, regardless of the consequences for other businesses, society, innovation, or our planet. And the superrich people who profit from these businesses can be ids of the Frankenstein monsters, i.e., powerful forces for social, economic and even technical retrogression.

The three best poster children for the dark side of American business are all somewhat anomalous. In a nation in which big business is largely public, stock-exchange listed, and widely analyzed in detail, the two Koch Brothers own the third largest private company in America. So they are anomalously secretive. According to an in-depth analysis, their holdings’ standard reply to reporters’ inquiries is “We are privately held and don’t disclose this information.” Their obsessive level of privacy takes us back over a century, to a time when J. P. Morgan (the financier, not the firm) ruled American finance from private, smoke filled rooms.

Originally, Rupert Murdoch was not even American. Born an Australian, he was granted citizenship in a private law by a willing Congress, at a time when English-speaking rich men were even more welcome here than rich Chinese immigrants are today.

But lets take these poster children for the dark side one at a time. Nearly all the Koch Brothers’ vast holdings have to do with fossil fuels. Except for big interests in Canadian tar sands—the second dirtiest fossil fuels after coal—they are not much in extractive businesses like Exxon Mobil’s. Their interests are downstream, in pipelines, refining, and petroleum products other than fuel. As reporter Tom Dickinson summarized for Rolling Stone:

“Koch-owned businesses trade, transport, refine and process fossil fuels, moving them across the world and up the value chain until they become things we forgot began with hydrocarbons: fertilizers, Lycra, the innards of our smartphones.”

Fair enough. These are important businesses, making (among many other things), paints, lubricants, fertilizers, plastics and medicines. What they do is essential to our modern life, especially medicine. Imagine a modern hospital without the gloves, catheters, saline bags, plastic protective gear, and thousands of miles of insulated wire in all those medical instruments. All or most of these things come from fossil-fuel derivatives, and the Koch Brothers’ industries make many of them, or their raw materials.

But the Koch Brothers are not content just to make useful products for money, like most business people. They want to rule us. They want to be kings.

Through their super-wealthy, largely self-funded PAC, Center for American Progress, they have pushed a relentless political agenda of smaller government, less regulation, more pollution, more precarious worker safety, and unrestrained global warming. And they have been successful, second only to Murdoch’s Fox, in giving us our government today—an inexperienced, clueless, narcissistic president and a Congress with no plan or program but lowering taxes (mostly on the rich) and reducing the regulations that keep us safe from corporate errors and excess.

The odd thing is that some of what the Koch Brothers do in the political arena is directly contradictory to their own business interests, as well as the general welfare. If we burn all our fossil fuels at our currently projected rates of increase, we will exhaust them within the lifetimes of children now living. Then where will their children get the fossil-fuel feedstocks for the paints, lubricants, fertilizers and medicines that the Koch Brothers’ holdings make? They will have to synthesize them, atom by atom, from others feedstocks like minerals and biomass, at much greater cost in energy and dollars. Most products in hospitals and doctors’ offices (among many other things) will become vastly scarcer and dearer: our health-care system might begin to resemble Africa’s.

The second contradiction in the Koch Brothers’ quest for monarchy relates to global warming. Not only will burning more fossil fuels leave fewer for the Kochs’ main businesses of converting them into non-fuel products. It will also heat our planet, perhaps soon into runaway warming that could threaten our species’ survival. That, too, will increase the demand for all the stuff that Koch Industries makes while decreasing the supply of raw materials. Yet the Koch Brothers salve their tiny consciences by funding the science program Nova on PBS, while doing everything they can to make us ignore the growing threat of global warming, and to elect pols (like Trump) who dismiss, defund, ridicule and fire the scientists who study it.

But for luring us into the dark side, the Koch Brothers have nothing on Rupert Murdoch. From tiny Australia (now less than 25 million population), Murdoch has come to dominate global English-speaking news media with a simple formula. Unlike Josef Goebbels, Hitler’s media man, who hired all the highbrow writers and actors that could stomach Nazism, Murdoch went straight for the common man’s id. He made a mighty media empire by going lowbrow and focusing on “hot” media (television) and rare tabloids for those who don’t read much and almost never read books. And he made their reading irrelevant by showing them entertaining bullies who, like Archie Bunker, seems to have all the answers without much thought.

My favorite mental metaphor for Murdoch’s media empire is his regular titillating inside pages in the English tabloid The Sun. An entire inside page shows a photo of a beautiful young woman with bared breasts.

With it, Murdoch puts his arm around the working man and smiles. He says, in effect, “I’ll give you what you want; I’ll make the ‘news’ interesting for you. And I’ll do it even if you have no interest in politics, business or anything serious. The only price is that you lend me your mind and your vote.”

Meanwhile, Murdoch has his hand behind the working man’s back, reaching for his wallet (with tax policy), cutting his safety net (Social Security, Medicare and health insurance), and making his life less healthy and more dangerous by cutting regulation of pollution and workplace safety and depriving workers of useful health insurance. Murdoch’s media empire slants its stories in these directions, pummelling the viewer or reader with hasty and illogical rants, which can be entertaining and seductive. Over decades, this endlessly repeated nonsense—originally intended just to increase readership and viewership—has polluted our politics and transmuted some 40% of honest, non-college-educated workers into Trumpets.

There is no doubt in my mind that Murdoch’s Fox is the most effective and the most pernicious propaganda organ in human history. He and his media empire have done more harm to American society than any single postwar villain in human history—even Stalin, Mao, Fidel Castro or Putin today. They have coarsened our politics and diplomacy, cheapened and dumbed down our discourse, made violence an early resort in both domestic and foreign matters, and generally reduced our public dialogue and analysis to tribalism and base instinct. Caesar could not have done more with his paid mobs and bread and circuses.

Trump’s minority-bashing and subtle incitement to violence, Scaramucci’s profanity-laced tirades, and Trump’s casual lies are direct successors to the daily, endlessly repeated off-the-cuff tirades on Fox. If you don’t believe that, then watch this six-minute clip summarizing Fox’ decade-long demonization of Barack Obama, our only President since Bush Senior to show consistent faith in rational principle and consistently good character.

And then there were the banks. Under the guise of “innovation,” our big banks invented and exploded a raft of so-called financial “derivatives;” securitized liars’ loans, credit-default swaps, collateral default obligations, and the rest. As I have analyzed, the need for and proper use of these news instruments was suspect, if not nonexistent, from the outset. But they made the boring business of banking, for a time, a high-risk, high-reward occupation whose practitioners could, and did, get obscenely rich. The final consequence was the Crash of 2008, the massive government bailouts of big banks worldwide, and the ultimate betrayal of capitalism and the risk-taking and personal responsibility that underlie it, or once underlay it.

Suffice it say here that so-called “innovation” by the big banks, in a quest for more money above all, ultimately destroyed an otherwise smoothly functioning global economy. It brought us the worst financial crisis since the Great Depression—a debacle from which we and Europe are still recovering after nearly a decade.

The failure of antitrust or competition law to contain the damage

In years past, the standard answer to business getting too big, powerful and reckless was antitrust law. Anglo-American law has understood the basic principles of antitrust law since the 1620s, when the English Parliament enacted the Statute on Monopolies, generally prohibiting them.

Our own Thomas Jefferson wanted to include the Statute’s principles in our Bill of Rights. But our other Founders lacked Jefferson’s analytical genius. They failed to foresee the danger of monopolies and unholy business combinations in a then-largely-agrarian society. So they voted him down.

As a result, the only vestige of antitrust principles in our Constitution is a negative inference from our so-called “Intellectual Property Clause.” By explicitly authorizing only temporary legal monopolies for patents and copyrights, it impliedly prohibits monopolies and monopolizing for other purposes.

It took a century after our Constitution for our pols to enact our first real antirust law, the Sherman Act of 1890. Since then, antitrust law has had some successes. It broke up the Standard Oil monopolies of the early twentieth century, giving rise to a thriving fossil-fuel industry and independent gas stations. With the pressure (but not the result) of litigation, it forced IBM to “unbundle” software from its computer hardware in 1969, creating the entire software industry that later Microsoft (for PCs) , Apple (for smart phones), Google (for Internet searching) and Facebook (for social media) have come to dominate.

But antitrust law is a blunt and weak instrument for restraining bad behavior by business. It can’t stop the Koch Brothers’ foray into politics, which our First Amendment seems to protect, at least as interpreted by our increasingly right-wing Supreme Court. It can’t stop Murdoch’s media empire from turning an ostensible “news” organization into human history’s most powerful propaganda machine—a machine all the more powerful for making propaganda amusing and entertaining. And despite some indirect prohibitions on getting “too big” for fair competition, it didn’t stop our big banks from getting “too big to fail.”

For better or for worse, our First Amendment does not restrict so-called “news” media from propagandizing, or from failing to distinguish between their opinions (propaganda) and so-called “news.” From there, it took only a baby step to reach our present state, in which “fake news” is increasingly a real and menacing phenomenon, coming not only from Russian intelligence operatives, but from the highest levels of our own government. When fake news blurs our collective conception of reality, can madness be far behind?

In the end, antitrust law is a weak instrument for restraining rogue business because its basic purpose is to protect and require competition. (This is why Europeans use the much more descriptive term “competition law;” our equivalent term “antitrust” has historical origins that date to Teddy Roosevelt’s time.) Antitrust law has nothing to say about size alone, except where the size of a business or an oligopoly clearly threatens competition. As one of our greatest judges never to reach the Supreme Court said, “The successful competitor, having been urged to compete, must not be turned on when he wins.”

This point puts antitrust law on a knife’s edge. What is hard competition, which is legal and encouraged? And what, in contrast, is a ploy to suppress or crush competition itself? This is not an easy distinction to make. As a result, antitrust law is so subtle that even a “superlawyer” like David Boies utterly botched an attempt to stop Microsoft from crushing Netscape (the inventor of Web browsing) with Microsoft’s operating-system monopoly. In going for the “gold” of declaring Microsoft an illegal monopoly and breaking it up, Boies neglected the illegal tie of Microsoft’s browser to its monopoly operating system, with which Microsoft crushed Netscape.

So we can’t restrain rogue businesses that want to be king by restricting their speech or political activity. Our First Amendment precludes that. And we can’t restrain them by antitrust law because it’s too weak, too limited in purpose, and too complex. And in any event, we can’t restrain big business from getting “too big to fail,” running to much-maligned government for bailouts when it loses, and thereby breaking all the rules of capitalism and fair play. We can’t stop our pols from playing ball with failures in order to avoid economic collapse, or from letting collapse loom until it’s too late.

So how do we restrain business from, to upend Google’s corporate mantra, being evil? Law doesn’t seem to be much help these days. And it’s probably not going to help in the future, not with Scalia-clone Neil Gorsuch on the Supreme Court.

But maybe education can help. That’s where business schools come in.

How business schools brought us to our current pass

It may come as a surprise to most Yanks, especially to professors, but higher education is a relatively recent phenomenon. Colleges and universities as we know them today began in the Renaissance. There were none in the democracies of ancient Greece and Rome, nor throughout the Middle Ages. They are about five hundred years old.

Business schools within colleges and universities are an even more recent development. ESCP Europe, or the “École supérieure de commerce de Paris,” claims to be the world’s oldest business school, founded in 1809. The University of Pennsylvania’s Wharton School of Business claims to be America’s oldest business school. It was founded in 1881, or 136 years ago. The idea of having a business school here is younger than our nation and younger even than President Lincoln’s notion of universal public education.

With an institution so young, it’s worth asking a simple question: why? Why do we Yanks have business schools in particular—and far more than any other nation—when most colleges and universities already purport to teach everything worth knowing. What, if anything, do business schools add? What do they do, and why are they separate?

The first thing to note is that real businesses are as or more diverse than the departments in any general university. They are as diverse as human life. Banks, for example handle (and try to make) money. They deal primarily in numbers of dollars and cents. So you have to be good with numbers to be a banker. Newspapers and book publishers work with words (or today, images and video). Do a banker and a newspaperman, let alone a reporter who might eventually rise to lead a newspaper, have much in common?

Then there are companies that make real products. Car companies make complex moving machines. Other companies make electronic equipment, like vacuum cleaners, washers, dryers, and dishwashers. Still others make electronic gear with integrated circuits and sometimes individual transistors.

Are all these businesses interchangeable just because they make money? Can a woman who designs wheels and axles design an integrated circuit or transistor? Can a maker of washing machines program a computer? Could a banker or newspaper reporter do their jobs?

To anyone with the slightest acquaintance with engineering or technology, the answers are a resounding “no!” That’s why we have different departments and often different schools in colleges and universities: to teach these subjects and pass on these skills to different people with different essential aptitudes.

Of course, the proof of the pudding is in the eating. Henry Ford was an engineer who rose up from the shop floor. So was Andrew Carnegie. Neither went to business school. Rick Wagoner majored in economics and finance and got an MBA; as I have detailed in another essay, as CEO of GM he drove it into the ground. Carly Fiorina did much the same with Hewlett-Packard, the once thriving computer, printer and electronic instrument company. She had an MBA but had majored in medieval history and philosophy in college. Think she knew how to design a computer or printer? Think she knew what she was looking at when she saw one of HP’s products and opened the cover?

Now let’s look at the some of American’s great innovative businesspeople. Thomas Edison had no MBA; neither did Alexander Graham Bell. Steve Jobs? No MBA. Bill Gates was a college dropout. Elon Musk, Larry Page, Sergey Brin, and Mark Zuckerberg? No MBA. Like Bill Gates, Zuckerberg is a college dropout. Andy Grove, one of Intel’s founders, had an undergraduate degree in chemical engineering from CCNY and a Ph.D. from UC Berkeley. He was an expert in one of the sciences that led to integrated circuits. But he had no MBA.

Isn’t it odd that, of all these pioneers of American industries, not a single one went to business school? The only one who even had a higher degree was Andy Grove, whose co-invention with others involved a highly sophisticated combination of chemical engineering, semiconductor electronics and vacuum deposition technology. The others mostly invented new industries by understanding the capabilities of emerging technologies and using their imaginations. Combine that sort of imagination with passion and persistence, and you get Tesla, Microsoft, Amazon, Apple, Google or Facebook. There may be no other way.

So if none of the leading innovators of American industry had an MBA, and if two CEOs who did drove their firms into the ground, what do business schools teach?

As near is I can tell, business schools teach two main things. First they teach money: the mechanics of making it, getting it as capital (through venture-capital investments and more pedestrian stock and bond sales), accounting for it, keeping it, plowing it back into the business, and not wasting it.

Much of what business-schools teach falls under the aegis of common sense or accounting—general knowledge of which is vital for any firm that intends to “go public.” Investment in its various forms, and how to get it, is vital for any start-up and for most going businesses. Business schools also teach a smorgasboard of anecdotes, under the rubric of “case histories,” of “dos” and “don’ts” in business and the right and wrong ways to handle crises.

The second thing business schools try to teach is “leadership.” Here, I think, is where they begin to go off the rails.

There is no such thing as “leadership” devoid of context. Put a distinguished four-star general in the president’s office in a major university, and he will likely fail, if only because university faculty are not accustomed to military discipline and act more like a herd of cats. (A similar thing might happen to the distinguished generals that President Trump has put in his Cabinet to save his presidency; they might well fail because their boss knows branding, publicity, media and “reality” shows, but not much about real reality. And he has no discipline whatsoever, while his military minions grew up with it.)

Put a finance guy (Rick Wagoner) in charge of a car company or a finance-marketer (Carly Fiorina) in charge of a computer-peripherals maker, and you get failure. Put a genius in branding, self-promotion, demagoguery and lying (Donald Trump) in charge of our nation, and we’re about to see what we will get, probably impeachment or precipitous decline.

It’s hard to tell which concept is more pernicious: the notion that you can learn “leadership” devoid of context or substance, or that you can run a complex, modern business well just by knowing how to manage money. Don’t you have at least to know something about the products or services and their underlying features, customers and technology?

As for money, it’s kind of a paradox. Of course business people want make money; that’s about the only thing that newspapers, movie companies, Apple, GE, GM, Google and Facebook have in common. But is that enough? When you emphasize money and its extraction, handling and augmentation repeatedly over a course of one or two years, doesn’t it become your primary value? Don’t business schools inevitably—whether deliberately or not—promote the intended consequence of making money as the center of their students’ moral universes? And doesn’t that focus inevitably lead to over-financialization, like that which once gripped GE, and from which GE is still emerging?

I know, I know. The better business schools have begun to teach their students to heed the needs of others “stakeholders” besides formal shareholders, such as employees, suppliers, customers, the community, and even the general public. That’s all to the good, but it’s only a halting first step.

If one course out of ten teaches about satisfying “other stakeholders” and all the rest teach profit as the paramount goal, what does the student learn? Could our culture of corruption, from the White House to our city councils, derive from an emphasis on profit, the so-called “bottom line,” over everything else?

A similar thing has happened to law schools and the law. When I studied at Harvard Law School, from 1975 to 1978, we were taught that lawyers were not just business people, but professionals with a calling. We were told that severe moral qualms required informing the client and, if the client’s immoral conduct persisted, permitted (but did not require) firing the client.

That of course, is hard to do when you are hungry or embedded and when others with no moral scruples are ready to take your place the moment the door closes behind you. But a society without moral bearings is not just unpleasant to live in. It’s prone to periodic collapses, like the Crash of 2008.

Before the Crash of 2008, how many bankers knew they were doing wrong but did it anyway because they were making obscene amounts of money and, in their view, everyone else was doing the same or similar things, including the supposedly independent ratings agencies? How many lawyers and accountants were complicit, or looked the other way, although they were making much less money, out of simple inertia or inability to have or assert moral values? The Crash, from which we and Europe are still emerging, was a society-wide failure of conscience as much as it was a bankers’ failure.

But isn’t that exactly what you get when your paramount value is the “bottom line”? And can’t you draw a straight line from that to the morality-free, conscience-free lying and demagoguery of our current president?

They say you can’t teach morality, at least not in a formal school setting. They say that’s the job of parents and religion. But one quick glance at our society tells us that, if so, neither parents nor religion is doing its job. Insofar as concerns religion, we Yanks shouldn’t be so surprised, for religion was a major justification for slavery in the South, where it still is twisted to justify bossism, racism and depriving the poor of health insurance today.

Conclusion

It’s hard, especially for a retired professor, to accuse institutions of higher education of complicity or negligence in the decline of our society. Business schools seem to recognize that they’re unlikely, to say the least, to produce the next Thomas Edison or Steve Jobs. True genius can and does arise only on its own merits and in its own time. We’re lucky we live in capitalist society that can recognize, nurture and finance it.

But it should be obvious to every informed American that we Yanks are undergoing a severe moral crisis. Religion is on the ropes, for many reasons. Our schools are declining, if not failing. We are not yet ten years out from a general financial panic and economic collapse caused by a failure of basic morality of at least three levels: bankers and their lawyers and accountants. We have a president the pole of whose moral universe is himself, his family and his business empire. His daughter tried to sell her trinkets out of the White House. And his recent chief spokesman, albeit rapidly dismissed, talked like a hit man about to finish off his prey.

By the skin of our teeth, we escaped throwing millions of middle-class workers out on the street with no or useless health insurance. We escaped because three honest senators—John McCain, Susan Collins and Lisa Murkowski—were able to put the well-being of their fellow citizens above fulfilling a partisan promise with no plan and no other goal than partisan advantage.

So maybe, just maybe, a bunch of schools who teach people who haven’t yet found themselves, or who are temporarily out of job, that profit and money are our paramount values is not the way to “make America great again.” Maybe, just maybe, business needs to focus more on its myriad different subjects and tasks, and less on the mechanics of securing investment and chalking up a profit in the short term. Maybe the largely procedural stuff that business schools teach may be what upper management wants but is not what we Yanks need as a culture and a society.

Maybe Jeff Bezos, with his relentless focus on good customer service, and the late Steve Jobs, with his relentless pursuit of excellence in products, should be our role models, and not all the people in our nation who get rich without much effort or much benefit to the rest of us. Maybe, just maybe, business people should put honesty, community service and making the world a better place on as high a pedestal as their quarterly reports and annual bonuses.

In an earlier essay, I outlined how corporate law (at least in Michigan) decided during the nineteenth century that business corporations exist only to make profit for shareholders, and nothing else. Among other things, that decision forced Henry Ford—Henry Ford!—to pay dividends to his shareholders, allowing one Dodge to start a rival car company, rather than to save his money to make his own manufacturing even more efficient, so he could offer his cars to more buyers at lower prices. That decision also gave Ford less corporate money to do what he had done long before: jump-start our Yankee consumer society by paying his workers enough so they could buy the cars they made.

A similar mindset recently caused a shareholder of Apple to question the “return on investment (ROI)” of features of that make Apple’s devices accessible to the blind. To his eternal credit, Apple’s current CEO, Tim Cook, replied as follows:

”When we work on making our devices accessible by the blind, I don’t consider the bloody ROI.’ . . . [Apple does] a lot of things for reasons besides profit motive. We want to leave the world better than we found it.”

More than occasionally, making the world a better place gets you more and better customers. If you want to know why the stock prices of Amazon, Apple, Facebook, Google and Tesla sometimes seem to float on air, you need look no further than that. If you want to know why Tesla is more valuable than GM, which makes over twenty times as many vehicles, you need look no further than that.

If your goals include helping humanity—which necessarily includes a lot of customers—your possibilities are endless. If your sole goal is to preserve your stream of profits in a declining industry with exhausting resources like fossil fuels, your perspectives are more limited. You’ll always be looking over your shoulder at competitors as they advance. And you might be tempted, like the Koch Brothers, to barge into the political arena, about which you know nothing, to change good laws and repeal good regulations, just so you can make your obsolescent products more cheaply, set your competitors back, and slide down the demand curve.

Neither business schools nor any other formal institution can succeed in teaching moral behavior where parents, primary schools, and organized religion all fail. But at least they could teach that. They could teach that moral and broad-perspective businesses can be formidable innovators and formidable competitors and can have better futures than the rest. They can teach that respect for such firms, and their high stock prices is, in a fundamental sense, a moral good. They can teach that there is nothing moral or admirable about obsolescent industries, like fossil fuels, trying to use politics and PR, rather than legitimate marketplace competition, to strangle nascent industries like renewable energy in their cribs.

There is more to business than short-term profit, and the best, most valuable business firms know so. If business schools can manage to teach that, they might just help our species muddle through.

Ignorance and Incompetence: the Big Risks

As the foregoing essay outlines, excellence in private business is, for the time being, our only rational basis for national hope. Why is this so? How big is the problem?

There are many ways to asses the damage. So far, our pundits have focused mainly on the damage to comity, social cohesion and human relations—the relentless stream of insults, lies and gaffes coming out of the White House and in the president’s Tweets.

Trump has insulted virtually every sector of our society. Not only has he bashed minorities—African-Americans, Hispanics, immigrants (both documented and not!), Muslims and Asians. At times he’s also bashed doctors, educators, intellectuals, college professors and scientists. He seems to have bashed everyone who knows more than he does.

But the damage goes far, far beyond insults. Trump has emptied the top levels of our federal government of people of knowledge and competence and has filled them with people like himself. With few exceptions (mostly Secretary Tillerson and the generals) our top federal leaders are self-important people of ignorance so vast they don’t even know what they don’t know.

Remember That Idiot Rumsfeld? He was Dubya’s first Secretary of Defense. He brought us our debacle in Iraq, by hyping the war, by sending too few troops into the fight, and by committing a series of gross blunders in managing it. Eventually Dubya fired him, too late to do much good.

Yet even That Idiot Rumsfeld was smart enough to think a bit about what he didn’t know. He gave it a label, “unknown unknowns,” and tried to include it in his strategic thinking.

The people in charge of our government now are one whole level down from that. They don’t want to know what they don’t know, and they don’t want to learn. Like Soviet Commissars imbued with the spirit of Communist Revolution and little else, they rely on their ideology to guide them. They don’t sweat the details or the facts.

This nasty state of affairs has been self-evident for global warming for some time. Not only is Trump changing our national policy, having yesterday submitted formal notice of our intention to withdraw from the Paris Accord. He and his EPA Chief, Scott Pruitt, have systematically fired our scientists working on global warming and have made it harder to access their work by taking their web pages down and withdrawing their work from publication. Trump and his crew are figuratively killing the messengers, the mostly American scientists who sounded the alarm beginning decades ago.

Although global warming is a long-term risk, it’s already having short-term consequences, including the present heat-wave in our Pacific Northwest and the unprecedented wild fires in southern Europe. But there are equally serious risks even in the shorter term, and Trump and his team are ignoring them, too.

Our federal Department of Energy exemplifies the problem. Most Americans have no idea what it does, for much of its work is secret and highly specialized. But the same is true of the Trump Administration, now six months in. Without knowing or caring what the DOE does, the Trumpets have decimated its political and career employees, propose to halve its budget, and have put an equally ignorant non-specialist (Rick Perry) in charge.

According to a recent, brilliant journalistic exposé, the Department of Energy manages six risks, any one of which could suddenly become existential for all or part of our nation. The first is the risk that one or more of our own nuclear weapons could detonate unintentionally, or could fail to detonate when we fire it. In one case, it could start an “accidental” nuclear war, or it could accidentally kill millions of our own people and devastate vast swaths of our own territory for centuries. In the other, it could turn an attempt at a pre-emptive strike (say on North Korea) into a massive loss or a general nuclear war.

Only highly-trained physicists with supercomputers can asses this risk accurately. Why? Because we no longer can run actual tests on these weapons. The dangers of radioactivity and our treaties forbid doing so. We have to “test” these weapons, some of which are decades old, virtually, with computers and math used by Ph.D. level scientists. Yet Trump’s “leadership” has either fired many of them or motivated them to leave.

The second and third risks come from nuclear weapons in the hands of rogue states: the ones North Korea does have, and the ones Iran some day might have. Gauging the intentions of Kim Jong Un is impossible. Gauging the intentions of Iran’s President Rouhani and his boss the Ayatollah is difficult at best. So the best way to avoid war with, or a sneak attack from, these two rogue nations is to keep abreast of their capabilities.

The scientists, engineers and strategists in the DOE are the ones charged with doing that. They know that North Korea’s latest “high shot” missile has the potential to reach Alaska and maybe even Washington state. They are also the ones who decided, based on facts on the ground and nuclear physics, that if Iran abides by the terms of its nuclear agreement, it cannot have a nuclear weapon for a number of years, if ever. They came to these conclusions based on science and engineering, not ideology.

When Obama was president, the Secretary of Energy was Ernest Moniz, a Ph.D. nuclear physicist on leave from MIT. Now, under Trump, it’s Rick Perry, who lost a political debate, badly, by forgetting that the DOE was one of the three federal departments he wanted to eliminate. Trump, himself no genius, has said of Perry that he “should be forced to take an IQ test” and that “he put glasses on so people think he’s smart.” Yet there he is, heading a department staffed by people unfathomably smarter and more knowledgeable than he.

The fourth risk is the possibility of a terrorist or foreign enemy taking down part or all of our national electric power grid. Everything in our society, including our iPhones and our defense, depends on the grid. But it’s far more vulnerable than most people assume. Unbeknownst to most of us, a single unknown assailant nearly took out all the power to Apple’s and Google’s headquarters in 2013, just by shooting 17 transformers with a high-powered rifle (and knowing where to shoot).

Also unbeknownst to us, most of our vast electric-power network has no single authority minding the store. All we have is a few regional compacts and a mass of privately-owned, profit-making utilities working together, if at all, when they feel that doing so is in their own interests. DOE is the sole agency charged with preparing a plan for the survival of our electric power against an attack by a resourceful and determined terrorist or enemy.

The fifth risk primarily affects a single part of our nation—the state of Washington. Due to its sparse population and remoteness, most of eastern Washington, the part around Hanford, was sacrificed to the rush to build nuclear weapons based on plutonium during World War II and the Cold War. Now that area is probably the most horribly polluted portion of our nation, despoiled with radioactive substances that have millennial half-lives.

Not only does radioactive plutonium have a half-life of 24,100 years; it is also one of the most toxic and carcinogenic substances known to science: a single particle, lodged in your lungs, can give you lung cancer. And beneath Hanford, “a massive underground glacier of radioactive sludge is moving slowly, but relentlessly, toward the Columbia River.”

The only institution in our nation with the knowledge, expertise and resources to ameliorate this horror is DOE. And Trump wants to cut its budget, thereby condemning much of Eastern Washington, and perhaps Portland, Oregon, to exile or to a millennium of environmental horrors.

The sixth risk involving DOE is more subtle. In the long run, it may be the most important. For unbeknownst to Rick Perry and most Americans, DOE contains a source of the funding for the most successful public-private innovative partnership in human history.

Private money won’t finance basic research in science because basic research provides no glimmer of assurance of success. That’s the nature of research: you try a lot of ideas. Most fail, and only a very few pan out. That’s not the same thing as what venture capitalists require: having a product or service that works, some success in the marketplace, and a business plan that promises exponential growth.

There is also a never-never-land between basic research and applied research that private investors won’t finance. Somewhere in that never-never-land lay the technology behind GPS—the global positioning (satellite) system that guides our cars and iPhones, and the very Internet that makes it all work. DOE, i.e., the wicked witch of government, financed the initial development, design and launch of both. The governmental office that did so was in the Department of Defense: DARPA, the “Defense Advanced Research Projects Agency.”

During Dubya’s presidency, a small clone of DARPA began within DOE. It was called ARPA-E (the “Advanced Research Projects Agency-Energy”). Its mission was to do for energy what DARPA had done for defense, coincidentally giving our species the greatest media of communication and location in human history. ARPA-E’s trivial budget, a mere $300 million—was aimed at giving our nation and our species some reliable sources of energy when fossil fuels run out, probably within the lifetimes of children born today.

Here’s how reporter Michael Lewis describes ARPA-E’s political, budgetary fate under the Trumpets:

“Right away [the first head of ARPA-E] faced the hostility of right-wing think tanks. . . . ‘They were very gracious’ [at a lunch, he said,] ‘but they didn’t know anything. They were not scientists in any sense. They were ideologues. Their point was: the market should take care of everything. I said, “I can tell you that the market does not go into the lab and work on something that might or might not work. ”’”

“Present at lunch was a woman who, [he] learned, helped to pay the bills at the Heritage Foundation. After he’d explained ARPA-E—and some of the life-changing ideas that the free market had failed to fund in their infancy—she perked up and said, ‘Are you guys like DARPA?’ Yes, he said. ‘Well, I’m a big fan of DARPA,’ she said. It turned out her son had fought in Iraq. His life was saved by a Kevlar vest. The early research to create the Kevlar vest was done by DARPA.”

The guys at Heritage declined the invitation to actually visit the DOE and see what ARPA-E was up to. But in their next faux budget they restored the funding for ARPA-E.”

Unfortunately, the Trump Administration is not as smart the right-wing GOP think tank. It has zeroed out ARPA-E funding in its budget proposal. The probable reason: a single failed investment in the bankrupt solar-array firm Solyndra, out of all the projects that ARPA-E has funded and might (if let be) fund now.

Evidently, the GOP and Trump agree on government and science by anecdote. Solyndra is the “welfare queen” of the energy world, notwithstanding the profit that ARPA-E has turned since 2009.

So there you have it. Trump the narcissist is just the point of the dumbing-down spear. Behind him is a whole shaft of self-important people who believe you don’t have to know anything or even learn anything. All you have to have is faith in markets; then anything government can do business can do better, even when private markets provide no financing.

The trouble is, we Yanks are no longer the sole unscathed victors after the most horrible war in human history. We no longer have the luxury of expanding our production and our economy to put Germany, Japan and most of Europe back on their feet. They are on their feet now, and they are our competitors.

So we have to find wholly new products and services and create whole new industries to expand our economy and our horizons and get our mojo back. Are we going to do that without ARPA-E? without government investment in innovation that private investment won’t support? by putting all our energy into sucking out and burning the Earth’s remaining fossil fuels ASAP?

Make no mistake about it. Amazon, Apple, Boeing, Google, Facebook, and Tesla, among others, are the best of our private sector. They will keep us afloat for a while. But these firms use existing technology. They won’t discover the next source of renewable energy; they won’t continue the expensive but so far quixotic quest for nuclear fusion (the Sun in a bottle). They won’t even discover a successor to fracking, which, according to Lewis, “was not the brainchild of private-sector research but the fruit of research paid for 20 years ago by the DOE.”

In the best of all possible worlds, Trump will be impeached and removed for unrelated sins maybe two or three years down the road. In the meantime, our nation will be run and managed by people who are ignorant and incompetent and proud of it. Next to that, the daily melange of insults that emerges from this White House is small potatoes.

Meahwhile, Brazil, China, Germany, India and Japan, among others, will be busy exploiting our collective national stumble to race ahead, perhaps irrevocably. These are the wages of ignorance and incompetence, from which there is no escape. We Yanks are nowise immune from the consequences of our own stupidity.

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Diatribes of Jay

03 August 2017

How Business Schools Helped Ruin America, and What to do About it

Ignorance and Incompetence: the Big Risks

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