Prophets

Years ago I worked for Professor Albert Shapero, who occupied an endowed chair in the School of Business at The Ohio State University. He taught and researched small business, and his position was unique in that he didn't have a PhD in a business-related discipline. His degree was actually a Master's in Mechanical Engineering. He didn't have a PhD, but he did have a corner office overlooking the oval and his own assistant (me). That would be a feature of academia: "professors" who bring in money get perks.

Anyway, one day Professor Shapero said something to me that has resonated and has never seemed more true than it does today. He said that MBAs would ruin the world. Keep in mind that he saw aspiring MBAs every day. This was back around 1980, when a business education was what many students wanted, and an MBA seemed to be a guarantee of future success. To this day, liberal arts undergraduate degrees and the breadth of their scope are often denigrated.

Why what Professor Shapero said that day resonates, and I honestly am not sure if he meant it the way I am now understanding it, is that as I look around at the wreckage of a world economy, I see nothing more than an over-emphasis on narrow expertise that fails to see the bigger picture. And then there is also the emphasis on profits, paper profits. Whatever widget is being made, its quality and reason for existence are less important than what profit can be squeezed from it. Whatever the facts of a balance sheet, accounting machinations become more important than what the numbers truly reveal. From the early 1980s we easily move through two decades of mathematical models and paradigms so that in the end what is being sold doesn't even exist: credit default swaps among other derivatives of mortgage-backed securities and God knows what else that hasn't yet been discovered.

Two years ago another professor, Nouriel Roubini, was dismissed by his peers as too pessimistic when he predicted the economic collapse to which we all are witness:

"On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac."

What Professors Shapero and Roubini have in common is that both were basically outsiders. (I'm using the present tense here, but Professor Shapero died some time ago.) Shapero earned his position by doing innovative against-the-grain research that demonstrated the importance of small enterprise to capitalism. Roubini had a peripatetic youth and therefore brought an outsider perspective to his studies at Harvard and later to his research. What else they share is the use of subjective, non-technical ideas as they reach whatever conclusions they do. In other words, along with their understanding of innovative data-based ways of seeing the world, they also trust their gut. I bet that's characteristic of prophets.