July/August 2008
HISTORY DOES THE EXECUTIVE SUITE
by
John S. McCallum
John S. McCallum is Professor of Finance at the I. H. Asper School of Business, University of Manitoba. His column is a regular feature of Ivey Business Journal.
Not many executives have taken much history beyond what is required in high school and college. Pity! It is a subject rich in insight for executive decision making and behaviour.
Executives above all need judgement and wisdom. History too often becomes an exercise in memorizing and parroting a blizzard of dates, places and events, which is why it’s hardly surprising that would-be executives take a pass in school in favour of more accounting, finance, operations, marketing and leadership. With such memories of history courses, who can blame practicing executives for not becoming engaged?
But dates, places and events are only part of what history at its best is. History is certainly dates, places and events. But far more important is why such and such happened and what that says about what is likely to happen in the future. It is at the heart of the executive function.
Consider the executive job. Executives make decisions and pull together the human, financial and physical resources to execute the decisions. A key to being a good executive is the discipline to stick to a time-honoured management progression: identify and define problems; develop options to deal with the problems; know your goals; analyze the options; assess intangibles; make decisions in a timely fashion; implement the decisions; make changes as circumstances require. Every step is a call on the future. Hence, my advocacy of history as a subject for executive study.
A line I remember from long-ago history courses nails the link between executives and the study of history: “Actions have consequences.” Executives that know for sure the consequences of their actions have no trouble deciding what actions to take. The study of history is about using the past to gauge the future consequences of current actions.
A few examples illustrate the relationship between what will happen in the future and executive decisions. The decision to invest in a new product line is based on likely future incremental revenues and expenses. The decision to hire candidate A over candidate B is based on who is likely to perform better in the future. The decision to locate facilities in location C over location D is based on which will likely work out better in the future. The decision to price a product is based on likely future sales at various price points. The decision to finance with stocks, bonds, loans or retained earnings is based on likely future costs of capital. Executives with an above average sense of how things will unfold should be treasured.
Accepting that prescience is crucial to executive performance, let’s read what Niccoló Machiavelli wrote in The Discourses on why the past is so important to getting a handle on the future:
“Wise men say, and not without reason, that whoever wishes to foresee the future must consult the past; for human events ever resemble those of preceding times. This arises from the fact that they are produced by men who have been, and ever will be, animated by the same passions and thus they must necessarily have the same results.”
Machiavelli goes on:
“He who considers present affairs and ancient ones readily understands that all cities and all peoples have the same desires and the same traits and that they always have had them. He who diligently examines past events easily foresees future ones … and can apply to them remedies used by the ancients or, not finding any that have been used, can devise new ones because of the similarity of the events.”
President Harry Truman used fewer words but got to the same point: “There is nothing new in the world except the history you do not know.” So did Mark Twain: “History doesn’t repeat itself, but it does rhyme.” Shakespeare uses the fewest words of all in The Tempest: “What’s past is prologue”.
History is about how people responded to circumstances in the past. People at core do not change much. They are, always have been and always will be driven by the same emotions: love, hate, greed, fear, anger, ego, arrogance, jealousy, revenge, etc. For executives, match today’s circumstances to the past, see what people did then, extrapolate from there. Sounds simple enough, but it is no easy trick in practice. An example: it is now late in the business cycle with confidence problems, credit problems, heavily indebted consumers, high oil prices and a struggling U.S. In the past, these circumstances have led to slowdowns in Canada or worse. A slowdown now is therefore not a bad bet.
Another line I remember from those long-ago history courses may be useful to executives as they think about the subject of history as a help to what they do: “Events have causes.” Executive life is one event after another and the events that need the attention are the ones that are likely to become problems. Executives are expected to deal with problems. “Does not deal with problems” is a reference no executive wants.
Unless you are lucky, it is unlikely you will deal effectively with problems unless you know the cause or causes of the problems. Solutions that do not recognize and accommodate causation are usually doomed right out of the starting blocks. The historian is trained to track problems back through their causes. The causes of events and the consequences of actions are at the essence of history as a field of inquiry.
Suggesting that busy executives sign up for a history seminar is unlikely to get much buy-in. Suggesting that Commerce and MBA students do the same thing is also unlikely to have much effect. Too many business courses already, and even if you wanted to, rigid program rules can be hard to navigate around.
That leaves reading. A lot of history can be learned through a systematic and disciplined reading program. Biographies are a good place to start. To quote Thomas Carlyle: “History is the essence of innumerable biographies.” Also consider a book on just what history as a subject is and how one should study it. There are many but one I like is Edward Hallet Carr’s What is History (Vintage Books, New York, 1961).
The word history derives from the Greek and Latin words related to knowing, knowledge, inquiry and learning. All are surely useful concepts for executives. Henry Ford famously said “History is more or less bunk. It’s tradition. We don’t want tradition. We want to live in the present and the only history that is worth a tinker’s damn is the history we make today.” Henry Ford may have been a great executive but this is not good advice for executives. Executives should think about the historian’s approach to things.
Just to whet the appetite listen to American philosopher and historian Will Durant: “One of the lessons of history is that nothing is often a good thing to do and always a clever thing to say.” Every successful executive knows this. The only question is was it learned the hard way through mistakes and bad experiences or the less painful way, through thought and study.
Reprint: 9B08DT06
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