Joe Bower
Professor, Harvard Business School
02:38

The Dearth of Leadership Today

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The financial system has drifted away from the industrial and commercial system, and the leaders of financial institutions have found they can make a lot of money by building organizations of traders.

Joe Bower

Joe Bower is the Baker Foundation Professor of Business Administration at Harvard Business School. He is an expert on corporate strategy, organization, and leadership, and has devoted much of his teaching and research to challenges confronting corporate leaders in today’s rapidly changing hyper-competitive conditions. His forthcoming book, with H.L. Leonard and L. S. Paine is called "The Future of Market Capitalism."

Professor Bower has also been active in the development of various institutions and programs. Between 1968 and 1973 he helped establish the International Institute for Applied Systems Analysis in Vienna, Austria. In 1978, he founded the Program for Senior Managers in Government at Harvard’s JFK School of Government; and in 1995 he founded the General Manager Program at Harvard Business School. Currently he is helping to build the new joint MBA-MPP degree program offered by the Business School and the Kennedy School of Government.
Transcript
Question: Why have we seen a dearth of leadership in the past decade?

Joe Bower: I don’t know.  It really bothers me.  Basically what’s happened is that the size of capital markets has become huge, and then trillions of dollars move around the world every day in the banking system.  The result is that you can really make huge sums of money in activities that are fundamentally trading or arbitraging and lots of capital in the financial system has gone into those businesses.  So, in financial service firms, we see proprietary trading, proprietary venture capital and so on, and then you do those activities and you can leverage it because the banks are willing to put in large sums of money.  The earning on those activities are much more attractive than conventional finance.  This is why we see the financial system, in effect, drifting away from the industrial and commercial system.  The industrial and commercial system is much more boring, it doesn’t seem to offer the kind or profits, it’s more complicated, than financial.  So, I guess I’m saying that the leaders of great financial institutions have found that they can make a lot of money by building organizations that in effect have traders.  And we can be critical of that, but that’s the way the markets have developed.

Recorded on April 1, 2010

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