Navigating the Post-Crisis Economy

Robert Dolan: I think this is one of the important things… an important change for business schools is to really be supporting that kind of activity.

Business is great when you’re creating new products and ideas which are delivering value to consumers. And, I think, what we’ve tried to do is really move away, through our action based learning projects, to really move away from business education, being all about solving problems. And that’s what a typical case study is about. If you pick up any of the case studies; they are typically 15 pages long, it’s a statement of a management problem, here are your options, A, B, and C, which one of those solves the problem?

But on the other hand, what you really want to be developing in your students is not so much a problem solving capability as much as opportunity sensing. And so, that’s why we have moved much more of an action based learning orientation to try to help develop this entrepreneurial ability to sense what other people cannot, to really see what the opportunities are.

So this has really been a focus of ours through both the general management program in the MBA, generally, and also, through our Zell, Lurie Institute for Entrepreneurial Studies, where we’ve come up with a number of new courses that have really been quite useful for our students.

So we have one course, it’s a commercialization course, where we basically hold up a sign to the rest of the university of Michigan and say, new product ideas, bring them here. And then, our students vet those new product ideas. Most of them would come from either the engineering school or the medical school. And then, through donor support, we are able to actually invest in those companies if we believe that those are the right kind of metrics that they have in place and right sort of opportunities for them.

So I think the idea of a business school really have a role in fostering the innovative capabilities is something which is really important for us. And also, what we’re trying to do is extend the business school’s impact across the university via the course I just mentioned.

And we also offer a course now, that we call MBA Essentials for Entrepreneurs, which we teach the faculty and the graduate students of the other schools at the University of Michigan, other than the business school.

The idea of business school as a force for innovation and entrepreneurial activity is something that we believe in greatly. And it’s really helping us attract some really interesting students who really need for fundamental training in business but then, to really being applied to entrepreneurial activity, I think, is something we’re seeing a big increase in.

 

Robert Dolan: One of the things that we’ve been trying to do is find ways to make entrepreneurship not be a little company activity. But, in fact, when you think about it, it’s probably going to have some of its biggest impact in the larger company.

We’ve worked in our executive education operation with a number of large companies, trying to share the lessons of entrepreneurship with them. That’s one way. And, I think, another way is really via the projects that we’ve done with a number of large companies, trying to help bring some more entrepreneurial ideas to their environment.

 

Question: How can business thrive?

 

Robert Dolan: I think the biggest thing is to really have the attitude that you really; this time is going to require you to reinvent yourself. You know, so many companies that I hear talking about their strategy and it’s basically to say, well, we’re going to kind of honk her down. And when things turn around, we’re going to be really well-positioned. Well, I’m not sure when things turn around. And, that’s really the wrong idea, is to say, okay, we’ve had some strengths. Those strengths are going to be the ones that are valuable in the future as soon as we get out of this little bit of economic difficulty.

My sense is that the better companies are really looking at themselves and saying, okay, we had some historical strengths, but those aren’t necessarily going to be the things that are going to get us anywhere in the future. So we have to really reinvent ourselves in a way to be in touch with the kind of new opportunity.

So I think that sometimes these major disruptions or changes in the markets are really great opportunities because they can unfreeze things. Discussions which would not be taking place in a normal environment, the opportunity to maybe upsize something and downsize something else. I think the really good companies are kind of looking at the current situation and saying, okay, I understand that regulatory environment is changing dramatically. I have to think about how that impacts me.

But the important thing is to understand the new degrees of freedom that the status quo of not being acceptable to anyone anymore. That freedom to really do some things which might not have been possible before, I think, is what the great companies are taking advantage of right now.

 

Question: What worries you about current economic reform?

 

Robert Dolan: The one that really concerns me the most is that if we’re going to make a turnaround from our ideas on globalization and the kind of inclusiveness of the American economy to people from around the world. For example, the restriction, right now, on international hiring of international students, I think, is really problematic.

So we are seeing a potential declining interest in the best people from around the world coming to the United States because of this notion that, well, if you’re accepting top money, then you can’t use that to hire anybody who isn’t a US citizen.

So I worry a little bit, that in these times of economic difficulty and increasing unemployment rates, well, I think, we have to do everything we can to provide employment for the citizens of this country.

I don’t think the notion that we should do this by putting up barriers around the country and restricting the employment of really talented people from around the world is the right way to do it.

I think the inclusiveness of the American business society, of business culture has really been one of its great strengths. And I hate to see that lost in this economically difficult time.

 

Question: What will Wall Street look like in four years?

 

Robert Dolan: It’s kind of interesting to think about how Wall Street… Wall Street has really been dispersed around the world with… what’s happening with information technology. I mean, it’s going to be an interesting set of global participants rather than the ones who are physically here in New York. And I think that will… that will really increase the extent to which all the businesses is globalized.

 

Robert Dolan: Two things. Number one is that if you look at the savings rate of the American consumer and see it be 0 or a negative number, I mean, nobody really could’ve thought that was a very good idea. So that will be one particular issue, I guess.

And the second one, I think, is somewhat related; you have to protect yourself against more downside than we, maybe, once thought. I think the idea of the Dow going from 14,000 down to, you know, the 7s, there probably weren’t many people who thought, gee, I really needed to protect myself against that.

So just the whole idea of risk management. I think we all need to be more thoughtful about what really means on an individual consumer basis. And it’s kind of hard, I think, as you saw the returns that one was getting from being all inequities to say, gee, I am getting a little bit older. I know the theory, says I should be jumping out into equities and to fix income things.

But the idea of really being more thoughtful about managing the risk in your life, and not being so tied to current consumption, as we were as a society, I think, are two things that I take away from the last 10, 12 months.

 

Recorded on: April 13, 2009

 

Robert Dolan, Dean of the University of Michigan’s Ross School of Business, describes the economy of the future and reveals who will control it.

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Caplan & Horowitz/arXiv

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