Our interview with Larry Summers has not quite started according to plan. Half an hour after we are scheduled to meet in Klarman Hall, where Larry is speaking at a conference marking the 10th anniversary of the global financial crisis, he is still deep in conversation with an attendee while your interviewers hover awkwardly in the auditorium. We are spotted by a events coordinator and come dangerously close to being asked to leave the invitation-only conference but, after assuring her that Summers is indeed expecting us, are instead ushered in to a green room behind the stage.
As Summers enters the room, his assistant asks “When should I come back?” “Ten minutes.” With no time to waste on small talk – we are keenly aware that we are keeping him from the post-conference reception taking place upstairs, with guests including Hank Paulson and Summers’ own protégé Tim Geithner – we dive straight in to the interview.
Now President Emeritus and the Charles W. Eliot University Professor at Harvard University (where he first became a full professor at age 28), Summers has previously served as Treasury Secretary of the Clinton administration, Director of Obama’s White House National Economic Council, and Chief Economist of the World Bank. It is from this vantage point that he is deeply concerned about the direction taken by the Trump administration on foreign and international economic policies.
Summers served in Washington at a time where it was taken for granted that the world’s strongest economies – including the United States – were committed to a collective global economic system. That this proposition has now been called into question would have been unthinkable just two years ago. Drawing a bleak parallel from today to events of the first half of the 20th century, his fear is that the consequences of such a breakdown in the global system could be catastrophic.
Famously blunt, Summers has been an outspoken critic of President Trump. Today is no exception. “I think the president has stoked the worst tendencies within American life – of misogyny, bigotry, suppression of free thought, rampant populism.” Whether in US relations with the rest of the world, or in his domestic approach, the president has pitted one group against another to pursue “short-term primitive appeal over the approaches that are likely to be of more enduring benefit.”
It’s not clear if, once released, those populist tendencies can be bottled up. Much has been written about the forces of globalisation and capitalism fanning the flames of populism. In a capitalist system, the prevailing management paradigm is that business leaders exist to maximise long-term shareholder value. Does that still hold in this societal and political environment?
Summers does not dispute that this objective should still be pursued. “Arithmetically, shareholder value is the same as the difference in value of a company’s outputs minus the value of its inputs – quite apart from shareholders, the idea that what businesses should maximise is this difference makes sense.” It’s hard to argue with this logic. The issue in practice, however, is that this calculation is frequently distorted. As he demonstrates, companies that, for example, focus on short-run economic gains, that fail to recognise the long-run morale and turnover benefits of treating their employees well, or that avoid paying taxes by going to Ireland, are not necessarily maximising this arithmetic definition of shareholder value.
We are straying in to corporate ethics territory – and Summers is not impressed with the Harvard Business School approach. The School is not critical enough of these businesses that, he argues, subvert the basic system on a large scale. “If Harvard Business School interpreted its mission of social responsibility as more asking businesses to meet basic canons of proper moral practice, and less cheering for incidental activities that appear to be of an altruistic nature, I think that we would make a more constructive contribution to the development of capitalism.”
Earlier this month, Summers was the inaugural speaker for the “Managing the Future of Work Speaker Series” at HBS. In that session he recommended the recent book Winners Take All (by former New York Times columnist Anand Giridharadas) as “required reading”. He reminds us of that today: “Thinking about capitalism more broadly, this book raises an epistemological problem for the general ethos that feels to be pervasive at HBS. I wish there were more resistance to those kind of ideas in the ethics classes taught at the Business School and in the kinds of research that appear in the Harvard Business Review.”
It feels as if he has thrown down the gauntlet, but the reappearance of his assistant reminds us that our allotted ten minutes are dwindling fast and we move on to Summers’ thinking on leadership. He shakes his head. “I tend to be resistant to the veneration of leaders, as a way of approaching life.” It’s certainly not an answer we are used to hearing at HBS. His view is that those who revere all forms of achievement as leadership seem to see no difference between a “successful person or a leader.” But the alternative is to make the mistake of celebrating CEOs over people who make contributions in different ways. Neither option seems quite right. As he puts it: “I’ve never quite heard the music on leadership.”
Summers’ own method is to prioritise “vigorous argument,” challenging the status quo view and then pushing to do things better. With a litany of accomplishments ranging from “insisting that the United States commit Marshall Plan levels of money to respond to the 1994 Mexican financial crisis” to “pushing that every student with a family income under $60,000 could come to Harvard and pay nothing,” he speculates that many of these would not have happened if his emphasis had instead been on consensus-building. The reflection that he may have “more prudently chosen some battles, and been more conscious of the need to build up goodwill capital to maximise my effectiveness in senior positions,” is perhaps a veiled reference to the controversial comments on women and science that could have contributed to the end of his Harvard presidency. Yet overall, Summers maintains that he would not have changed this fundamental approach.
As a parting thought, he is very clear on one thing: “I have been privileged to hold a number of senior positions. And my approach has always been to say that the point of holding those positions is not to have held them, but to try to accomplish something, and to try to be in as much of a hurry as I can to accomplish as much as I can.”
Pria Bakhshi (MBA ’19) is co-Editor in Chief of The Harbus. She is originally from India via London, England (stopping in Tokyo and New York along the way) and graduated from the London School of Economics in 2011. Prior to HBS, she spent six years in sales and trading at Goldman Sachs.