[Today we celebrated the annual graduation of students from the University of Virginia and the Darden School. In years past, I have offered a few remarks to help set the tone of the event. But today, a light but steady rain commenced just as the ceremony began. We had been assured by the state meteorologist that this rainfall would be temporary. Therefore, we decided to proceed outdoors as planned. But I made a special concession to help accelerate the proceedings in case the conditions didn’t improve: I omitted my remarks. As the rain was falling, I announced that we would continue with the ceremony despite the weather. The students roared their approval; they were in very high spirits. They also applauded after I announced how the ceremony would be abbreviated. Sometimes, hearing less from a Dean is a good thing. Lesson: effective communication recognizes the conditions of the time and place, and the receptiveness of the audience. What follows are the reflections I would have offered in better weather.]
I will always carry a special memory of the MBA Class of 2009. In all likelihood, no Darden graduating class has seen more economic change in a shorter space of time. You took the GMAT and applied to Darden in 2006. As you enrolled in August 2007, the world financial system was awakening to the effects of subprime debt and the aggressive use of leverage. It took more than a year for the full implications of this to appear plainly—then the crash of several large financial institutions in September and October 2008 woke up everyone to the gravity of the crisis. Of course, these events occurred just as your job search season was commencing. You discovered the truth that you must make your own career; it will not be given to you. As Mark Twain said, “Don’t go around saying the world owes you a living. The world owes you nothing. It was here first.”
Despite this, I note that as of last Thursday, 78 percent of the MBA-Full Time class had job offers and that 70 percent of the class had accepted an offer. Anecdotally, I know of several late-breaking offers that would lift the percentages further. This is a high ratio in times like these.
By now the damage of this crisis has spread to various industries (from banks and housing to autos, hospitality and entertainment, media, and semiconductors) and to the global economy. The length and severity of these conditions illustrate the famous saying of John Maynard Keynes, that markets can remain irrational longer than you can remain solvent.
You have endured a massive shift in expectations. This shift is the messenger, not the message, of important changes taking place in the world. CEOs such as Jeffrey Immelt of General Electric and Steven Ballmer of Microsoft use the phrase, “economic reset” to indicate the gravity of the message. We are not just experiencing a recession; we are experiencing a major re-boot of economic assumptions and outlook, one that is likely to prevail for years. The elements of this “reset” are deleveraging, major changes in consumption patterns, increased government intervention in the lives of businesses and individuals, a shift in attitudes about risk-bearing, growing populism, protectionism, and doubts about institutions in society, and a major shift in geopolitical power from the developed economies and toward the most robust emerging economies such as China, India, and Brazil.
Some of these changes have been years in the making. But crises accelerate change.
America and the world are at an historic inflection point.
Business Schools will need to adapt:
• more focus on ethics and the duties of managers to create value not merely to extract value;
• more study of incentives and of both the virtuous and perverse behavior they can induce;
• deeper consideration of risk, the ways we define it, estimate it, and fold it into decision-making;
• more focus on the interface between business and government; and finally,
• more exploration of globalization and its manifold effects on business.
You are the first class of MBAs to graduate into this new territory. I think those who don’t merely survive but actually prosper will adapt to this reset world in four good ways:
• First, they will practice business with high integrity. Integrity builds trust. And as we have learned very painfully over the past two years, the absence or failure of trust is at the heart of this crisis.
• Second, they will question and listen very well. They will never cease to learn as the world continues to morph around them.
• Third, they will take little for granted; they will create options. They will identify new possibilities in the face of intractable problems. At the heart of Darden’s initiatives in ethics, diversity, sustainability and globalization is a search for new alternatives to solving persistent problems. We face a stretch of great uncertainty. Options become very valuable in an uncertain environment.
• Finally, they will find courage to step out and do business despite all this uncertainty. Samuel Johnson said it best: courage is the cardinal virtue because it makes all other virtues possible.
You are well-prepared to do all this. Darden has taught you the eminent role of ethics in business, the ability to question relentlessly, the capacity to innovate and design new alternatives where none seemed possible, and finally, the courage to speak out in a crowd and challenge the conventional wisdom. Truly, at Darden, how we teach is what we teach. We wish you well on the life journey that lies before you. Good luck and Godspeed.
[Epilogue: perhaps ten minutes into the ceremony, the rain stopped. Two hours later, the sun was out, producing a wonderful Virginia spring afternoon—quite an auspicious beginning for the new graduates.]