In this episode of Business Casual, the hosts welcome Susan Fournier, Dean of the Questrom School of Business, and Marcel Rindisbacher, director of the newly launched Ravi K. Mehrotra Institute for Business, Markets, & Society. 

They explore evolving perceptions of capitalism among younger generations and discuss the institute’s goal to deepen understanding of the role that business and markets play in addressing societal challenges. 

The conversation delves into definitions of capitalism, its impacts, and the growing skepticism from the youth, alongside reflections on capitalism’s vulnerabilities highlighted in recent political discourse.

Episode Transcript

[00:00:04.370] – John

Well, hello, everyone. Thi s is John Byrne with Poets and Quants. Welcome to Business Casual, our weekly podcast with my co-host, Caroline Diarte Edwards and Maria Wich-Vila. Today, we have two special guests to talk about capitalism. Yes, 40% of 18 to 29-year-olds view capitalism positively. According to a recent study by the Pew Research Center, it’s the lowest share in any age group and 33 percentage points lower than the share of those 65 and older. We had run earlier, a couple of years ago, an essay by the former dean of Columbia Business School, who said that even MBA students are now questioning capitalism and what its consequences are. And across town from Boston University, at Harvard University, a new student-led group is devoted to, let me say it, end capitalism before it ends us. So joining us today is the Dean of the Questrom School of Business at Boston University, Susan Fournier, and the head of a new center. The new center is called the Ravi K. Mehrotra Institute for Business, Markets, and Society. It’s launched to bring a deeper understanding of the contributions that business and markets can make to the world’s biggest societal challenges.

[00:01:41.210] – John

We have with us Susan Fournier, the Dean of the Questrom School of business, along with the new director of the center who had formerly been a senior faculty member, the Senior Associate Dean for Faculty and Research at Questrom, Marcel Rindisbacher. Well, welcome. Tell me, Susan, do you think capitalism is in trouble?

[00:02:05.730] – Susan

There’s an academic answer that comes first, which is how are we defining capitalism? I don’t think we need to debate who owns the means of production, which is back in a classic definition. But when you get into, I think capitalism as a term has with it an umbrella about the markets, the role of the markets, whether those markets are equitably benefiting all of the players, employees, and communities as an example, or consumers. And so I think capitalism has come to be known and founded with markets that are relatively free, although there are no free markets either, because they all have some regulation in them. But it’s come to be a catch-all for an us versus them, bit of a mentality about big business and the marketplace and confound it in there with monopolistic behavior and inequitable results for different stakeholder groups. So when you put it in that public context about how people talk about it and what they think and what they put under that umbrella, I think it is in trouble because it’s been connected and brought together with all kinds of societal ills.

[00:03:45.560] – John

Now, you have here three unabashed advocates for capitalism. And I should note that it was interesting that in a recent economic speech, Kamala Harris made clear that he is a capitalist, which does suggest that there is some vulnerability to the concept of capitalism. But why now, incidentally, for your Institute for Business, Markets, and Society? Why does it make sense at this moment?

[00:04:18.720] – Susan

I have to respond to the Kamala Harris point because that was one of the most quotable lines of that speech, Hey, I’m a capitalist. I think what she was referencing is a point, Hey, it’s election time and we’re going to try to move people with opinions. But some of the policies she’s put on the table, which seem to be government, government, government funding, And she wanted to be stating that, no, I do support business. I do believe business has a role to play in the marketplace. And I wouldn’t just be taxing and interfering with competition. So I think that’s another example of what do we mean when we’re saying, I am a capitalist? It leaves a lot of room. So sorry, your question was, however- Why now? Why now? I mean, honestly, some of this sentiment has reached a pitch, a fever pitch. And I think we’ve also been in maybe it’s since 2008, and when we had meltdowns of the markets, but we have a lot of instances on the table, high tech in the crosshairs, Google in the middle of a, let’s significant court case. We have a lot of negative anti-business sentiment about paying taxes, not paying taxes.

[00:05:58.800] – Susan

So that is growing, growing, growing, growing. And I think the tipping point maybe for Marcel and I is when we started to see the data among younger people really kicking in and saying, no, this is not a viable system, it has to go. Why now? We’ve got a paradox. At some level, people trust business more than they do other institutions. Trust in religious organizations is even lower. Trust in the government is even lower. But trust in business, nonetheless, is not, while higher than those, it’s not at a level where we would want it to be If we’re going to lead business schools. I mean, I’m the dean of a business school. We have 2,500 undergrads here. We have nine other programs of students. We have a mission to prepare the business leaders of tomorrow. It feels that perhaps we’ve been failing in our mission, if these opinions exist, of just trying to better understand and have a deeper appreciation, if you will, for what we mean when we talk about the role of business that goes beyond the simple, maybe the utopian, maybe the purely ideological, and that we have a responsibility to help leaders of today and tomorrow better understand what we’re talking about with your very question about is capitalism a problem.

[00:07:46.670] – John

Yes. I want to also point out that it’s common for business schools to launch centers, but it’s uncommon for a business school to launch a center as well-funded as this one. The The roots of it go back to a presentation that you actually made to your chief benefactor for this center, which showed a scale that was unbalanced. Then on one side, you had the criticism of business, which is executive compensation that’s too high, shareholder primacy, unethical leadership, income inequalities, loose regulations, corporate greed, tech monopolies, greenwashing in excessive profit. Then the praise, which was rather diminished in the scale. Business fuels innovation, business solves grand challenges, business has an engine for prosperity. When your benefactor saw this scale that you showed him, he said, That’s it, you got it. Basically, you found your donor for this new initiative, right?

[00:08:55.510] – Susan

Yeah, John, I will add we have other donors for this initiative initiative. He is our naming donor. So he was not the first one to resonate with that graphic. We had been on the road, if you will, for a year and a half, maybe more, talking about these general issues. And everybody pounds the table at that graphic and says, Yeah, this is just way too simplistic. Bad, good, one side higher, one side lower. The story is much more nuanced and much, much, much more in need of deeper understanding. Business does have, historically, I mean, throughout history, an incredible role to play. Business and the markets in which they operate, the capitalist markets in which we operate, help lift individuals into prosperity, help lift entire nations into a better place, and help address societal challenges, advance COVID vaccines resolve energy transition problems. So that is… I mean, anyone in business knows that business has an incredible role to play. And so do the markets in which we have competition and we compete. So that is the essence of the conundrum here. Let’s understand these things a lot more deeply. They are nuanced. And they are very complicated.

[00:10:32.790] – Susan

And business is a player in a big system, and arguably the system isn’t working optimally. So how can business as the center for agonist, because we’re a business school, how can we act within a system in which we operate and that sometimes has problems? Governments fail, markets fail. How do we make that the whole thing better so that that balance can be righted.

[00:11:06.050] – John

Caroline, what’s your sense of all this?

[00:11:08.340] – Caroline

I’m really curious about why this change has come about. I hadn’t seen those statistics before I read your article, John, about the perception of capitalism among young people, and it’s pretty shocking. It’s very different from my generation, I think, and you explain that in the article, that older people tend to have more positive views of capitalism much more than the younger people. I’m curious about why this has come about. And one thing I’m wondering is, do you think that social media hasn’t had an impact? Because we know that on the social media, typically things that are negative, things that generate fear, negative headlines typically grab people’s attention more than positive stories. And I think a lot of news organizations and media and people out in the blogosphere and so on, are exploiting that. And so do you think that social media is having an impact on how young people perceive capitalism and what can business schools do about that? Because I think there’s also a trend of young people not getting their news so much from traditional news media in the same way that previous generations may have, getting their news from social media and from different sources than people might have in the past.

[00:12:31.350] – Caroline

So how can you, as a business school, counteract that?

[00:12:36.210] – Marcel

I would say that misinformation or incomplete information plays a big role, because I think when you really try to go a bit deeper about them trying to understand what drives this opinion, I think people are very quickly to articulate things that do not fully describe what the pillars of capitalism are. But I think it’s There’s another effect there where also maybe the older generation has had the luxury of having have direct comparison with East Germany, West Germany. After the wall came down in Europe or so, there’s not really a socialist type of economy that you can point to and compare. Then in that perspective as well, when you think a generation that was born after 1990, ’90s or so, there’s the financial crisis in 2000 to date. There’s documentation that real wages don’t grow. There’s this perception that with big business having influence on the political system, you’re not represented. That’s very much resonated also in some recent books by Nobel Prize winning economists like Joseph Stiglitz and so on to postulate that something has to change. It has to do with work by Angus Deaton about really the life expectancy in the US that has been declining.

[00:14:06.130] – Marcel

Somehow this ideas floating around may have provided an amalgam where people just don’t see very clearly anymore, what are the real trade offs? What are the real choices? What is the unobserved trajectory that you would have if you would fundamentally change the system? I think from that perspective or so, what we are really trying to do in this institute is really to first teach the pillars and then really describe the trade offs such that people really understand what are the choices you have. I think if you get most of your income in terms of labor income, yeah, you don’t do as well as if you get your income in terms of capital income with the globalization and so on. There has been a divergence between the two. The younger generation is more affected by that. But that doesn’t mean that basically by turning around into a completely different system like socialism, that would be much better. I think this is the… We may have sometimes utopian conversations about what the alternatives are, and maybe the younger generation is like many young generations trying to find something new. They’re buying into a narrative that is probably a little bit utopian.

[00:15:23.460] – Marcel

I think our mission as an institution, higher education, is really just to have really frank discussions and really clear education where what this trade-off ultimately would be. As such, help them to understand better. Maybe it’s not as simple as I thought when I said, I don’t like capitalism.

[00:15:45.090] – John

Well, Maria loves capitalism, don’t you, Maria? What do you think?

[00:15:49.730] – Maria

I do. It’s interesting that you mentioned the early 1990s as a really pivotal point and the fact that today’s MBA students were probably born after, or if they weren’t, they were certainly too young to remember. I actually was able to visit the then Soviet Union in early 1991, about nine months before the dissolution of the Soviet Union. I have to say that any romanticized notions that I had about an economy run in that way was pretty quickly dashed by seeing the realities on the ground of what my host family was an exchange program. So what my exchange family had to do just to get basic groceries, it was really eye-opening. And so today’s youth, they don’t get to see any of that downside quite so much as perhaps we had access to all those a couple of decades ago. So that was a really interesting point that you made. But yeah, look, I love capitalism, but I also acknowledge that capitalism fails to account for certain externalities, particularly we’re seeing now, primarily with the climate, more than anything, being an increasingly urgent issue that has not been taken into account. But I am also hopeful and optimistic that the same capitalism that brought about this negative climate situation in which we find ourselves will also hopefully be the engine that will help find the solutions to this.

[00:17:22.240] – Maria

So my question is, I see that there are three pillars to this, the new institute Out. Specifically for the MBA students, how do you envision this mandate playing out in a pragmatic sense with what the MBA student experience will be? Is it going to be a formal class that will be introduced, maybe perhaps a small elective that will be offered, or is it more trying to integrate this messaging throughout the curriculum?

[00:17:57.080] – Susan

Interestingly, we are starting with the undergraduates. This is where the issue seems to manifest the brightest, I think. You change a lot from when you’re 18 years old to when you’re 28 years old and you’ve worked and you’ve seen how the world works a little bit more, right? So one thing that we are doing is absolutely bleeding some of this knowledge in these economic foundations and a better grounding in how it works. And a more acute lens on even, for example, let’s go back to another factor, the business roundtable. When they came out and said, We’re changing the purpose of business. And it is no longer about shareholders, it’s about all stakeholders. We came out and said that. And what we see is people Marcel, pick that off. Marcel used the word utopian and a lack of sensitivity to the trade offs. I mean, how do you have to balance all of this? And it is a set of trade offs. I think that the MBAs are more able to handle that and rationalize through that. Whereas with the people who come in to their first class in a business school, right out of high school, they don’t yet have formed, what is the role of business?

[00:19:34.170] – Susan

What is the role of competition? What is the role of markets? What about the alternatives? What about this idea called stakeholders? And how does that even work? And how does it all come together? So we have a required course that we’ve always had for anybody entering into Questrom that was always appropriately titled, business and society or something of this nature. And we are in the middle of one month in to launching a completely new version of that class that really starts at… It has strong economic foundations throughout But it’s also different than just an Econ course because we’re business school. So it’s a business economic point of view of this. And it takes people through to really help them understand this whole system, this system view, and to take the entire semester and ground them in that. The other thing we’re doing is we’re taking back, again for undergrads, we’re taking back Econ one and Econ two. And we’re bringing them back inside the business school. And we love our economics professors. They’re incredibly well-accomplished department in the College of Arts and Sciences. But in that point of view, business is almost an afterthought. It’s certainly a black box.

[00:21:10.600] – Susan

It doesn’t really enter into all of the things that they teach in micro macro, except maybe as cost related something somewhere. But business isn’t there as a protagonist in this big act play. So we’re also bringing those two courses, which are also required back inside. So now you have a three, four. Then all of those foundations will get carried through in other required courses that we’re going to teach or in elective throughout the curriculum. So I wanted to just cover the undergrad side in its full splendor, because it seems to be the scale problem, the naiveté most significantly. And maybe, again, I could kick it back to Marcel because he’s been involved in this curriculum renovation in this course called Business, Markets, and Society.

[00:22:10.790] – Marcel

Yeah, I think what we really try to do is really teach the pillars of capitalism. For example, before we talk about how capitalism fails and what has to be changed or can be changed to improve the system. Because in the past or so, it’s an intro course. We had maybe a teaching that was really very simplistic, stakeholder, Milton Friedmann, all that’s from the past. Now we do stakeholders. We start really thinking through about what the real challenges are when you want to do that, because there’s a whole theoretical underpinning why shareholder maximization is something that you can use to align what managers do and what owners or shareholders want them to do. Then when you want to go to the next step because you care about other aspects, which I think a lot of people, also including shareholders, do. The question is, how do you do that? And these answers are not so clear. And I think to understand the complexity and also just to advance as an institute, really the theory of what you could call the political economy of business that really thinks about this in a very deep way, that’s also in a direction that we would like our students to start to think.

[00:23:26.570] – Marcel

And then when they go and work, that they remember that this This is something that them is not so simple. Because I think, again, undergraduates are ideal to do that because I think my observation having many children, is like they are very well understanding the political system. They are very much understanding parts of history. But economics is not really taught in a very thoughtful way in high schools. I think in general, I think this is a fundamental problem to understand them Then how the economic system interacts with the political system within the economic system, what is the role of business? And as Susan said, in traditional economics, we talk about the production function or costs. But basically the institution business, the way it makes a decision, the way it interacts with the political system and all of that is probably not emphasized enough. Then when students go and work, they start to realize, Oh, a lot of this is much more complicated than I thought. And I think it’s our duty to try to prepare them. For the MBA students, I also say that I think all what we do in that institute is hopefully creating a environment where students just really start to actively engage in constructive dialog about these things because there are a lot of aspects of the things that we’re trying to discuss that don’t have clear-cut solutions, but that are challenges to really improve the capitalist system and then really have people engaged, but with thoughtful interventions and discussions.

[00:24:59.580] – Marcel

I I think the hope is that basically, we have a signature feature of all our students when they go and work somewhere, people could say, Oh, I appreciate the question student because he has really had a real exposure to these questions and can make thoughtful contributions to think about solutions.

[00:25:20.570] – John

It seems to me that the institute has an inside-outside approach to this. In addition to the fact that you are trying to engage your current undergraduate students in this debate, you also have a communication strategy to get broader reach outside your own students and to do faculty research, which, of course, then would result in a broader discussion outside the school. Marcel, could you describe those efforts as well?

[00:25:52.570] – Marcel

So one effort that is way under its way, we have, I think, in about two weeks, nine episodes of a podcast that is called Is business broken? I think that should give you some insights about what we’re trying to do. So they are on basically questions about exactly how do business and government regulation interact? What are the challenges? Four episodes are on ESG investments, then two on basically changes to the payment and innovation model for gene and cell therapy, where the traditional model with FDA approval and so on is just not working anymore. It’s a really interesting example to emphasize what is the role of the government and what is the role of business and how do they interact. Now, basically, the last two episodes that are planned is on misinformation on social media platforms. It’s this fascinating situation that on platforms you can publish what you want because it’s protected by free speech in contrast to newspapers. Then the question is, how regulate that? It’s not so easy just to say the government should regulate that because that is immediately against the second amendment of free speech. There are other ways you can do that.

[00:27:10.890] – Marcel

We have a faculty member here who’s actually doing research on how this could be solved. Again, this is an interesting example of where you can say that the real societal problem, it’s such that maybe just say, That should be regulated. That cannot be easily implemented or may also not be the best solution. But then you can think about, okay, what else could you do? Are there market innovation type or market making type of mechanisms that you could implement in platforms to really address that? That’s a big part of the communication strategy to be visible to the outside. The other things we want to build is basically, at the end of the day, it has a lot to do with business as an institution. I think trust in institutions, be it political institutions or businesses, is an part to really understand what may work or may not work in capitalism. What we’re trying to do is we try to use large language models and AI and build a business sentiment index that extracts how the perception of various stakeholders for business varies over time. Then we’re also trying to build, actually, because we also think that this public discourse and constructive dialog is very important.

[00:28:29.780] – Marcel

We also try to to build an AI-supported learning platform where you can really play in terms of dynamic case studies, examples where you see how this different groups, government groups, advocate groups, competitors in an industry have to interact to solve certain problems. We believe that with this asset building or so, we can also make an impact to research, but also education. Then we have also very specific research proposals that we are vetting that will support in terms of really advancing what hopefully will become the theory of political economy of business down the road. That’s a very ambitious goal, but we want to be ambitious. We are well-endowed, and we believe we can really make a difference here.

[00:29:20.960] – John

I wonder 10 years from now, when you look back on what you will have done, how will you measure the success of the institute and the impact that it might have? Ten years from now, what are you hoping to have happen? Susan?

[00:29:37.520] – Susan

I would start by where we just left off, that we will have a more informed group of future leaders graduating and walking out of the Questrom doors. I love what Marcel said, that from our conversations with companies, corporations, organizations, they really see value in what we’re doing. If people are branded with this a thoughtful emersion in these issues and they understand better the role of business and what it can be, should be, is, they see value in that. So my first wish is that when people leave here, they are known to have gone through an eye-opening education that really grounds in the role of business, and that they’re much better able to take and make real the mission that we have to create value for the world through business, because they better understand how to leverage it and what it is and how to make that happen. So that, to me, is the first sticky metric, is that the students are sought after and are stronger for the experiences they’ve had in the classroom and outside the classroom. The other thing, I guess, if we’re going to go 10 years, maybe we need more, like 40 years, though, Marcel.

[00:31:11.010] – Susan

We do have a really grandiose mission goal, which is to provide a real strong theoretical case for capitalism and business in capitalist markets. You can say to say that that potentially is lacking. That’s actually we had Larry Somers as a keynote speaker at our launch event, and he said that. He said, the strong, strong theoretical case hasn’t been made for this view that is more attentive to the system-wide reality of what business is inside the competitive markets. So way down the road, I think, if we’re contributing Taking that theoretical foundation to guide work in a way that theory, quote unquote, of stakeholders isn’t able to do. It’s not concrete, it’s not tangible. Is there a theory of trade offs? I don’t think so. Is there a theory of primate? I don’t think so. So can we get there in this incredibly aspirational way. Then in between, I would hope that we can deliver better every year on what Marcel talked about, having those debates, those public discourses, those episodes of the podcast, where all of this comes together. And each year, those get richer and richer because more people want to participate in them. And when we have events that packed because people want to hear this, and they want to understand, and they want to move us forward.

[00:33:07.970] – Susan

I mean, I loved Maria’s point about being there on the ground to see what alternate systems are for. So can we have those discussions that help open our eyes? That’s what I would love. And it will, therefore, take many, many decades.

[00:33:27.180] – John

Caroline and Maria, any final thoughts?

[00:33:30.520] – Caroline

I’m curious what the reception has been from students, both undergraduate and then in the MBA program, and then also from alumni.

[00:33:39.650] – Susan

Well, alumni are responding with support. We do, as we mentioned, have a naming gift to support the institute, but that’s not all. So we’re out there with alumni and non-alumni who really believe that there’s work to be to be done here. I would say in the business communities, the reception has been really strong. Yes, please. Let’s work on this. This work needs to be done. I think in the student reactions, we’re just starting. Marcel, do you have any early feedback?

[00:34:19.870] – Marcel

We have definitely students who come and ask, What can we do? How could we get involved in the initiatives and so on? Because I think it’s also to be fair, there are a lot of undergraduate students that come to business schools or as MBA students because they want to be successful in business and they see that there are challenges there. They understand that basically purpose is an important part. Then having maybe the toolset and the knowledge to really debate these issues in a more deep and sophisticated way that gives them leverage also in their job searches and all of that and their impact they can have because they want to really contribute to society by following their career path and so on. I think that resonates well. Obviously, the question is, what is the perception of people also outside of the business school? Or so is there really a general education purpose there that we can make more impact? Because I think it’s more important to probably also try to have a message for the public in general about these issues because I think there’s a lot of half baked answers out there that people, even in political debates, jump on.

[00:35:32.210] – Marcel

And then the content of or the quality of a lot of the discussions, even about this election from an economic policy point of view, I would hope that this is a bit more sophisticated and deep than it is. And I think if we can be through podcast and so on, reach this general public, then that would really be a success.

[00:35:52.920] – Susan

But that’s a high point to come. I love that. I mean, we’re part of an ecosystem at BU with 19 schools and colleges. So a measure of success is when other schools and colleges are working on big problems, that they come to us for our inherent and powerful role in affecting the solutions of whatever they’re working on, whether it be bringing very expensive gene therapies to the market or solving the misinformation problem or any other issues around sustainability or whatever, that they see business as a key protagonist in those solutions.

[00:36:37.880] – John

Maria, you have anything to add?

[00:36:39.880] – Maria

No, you both touched upon what my next question was going to be, which is, I think it’s great. It makes a lot of sense that you’re starting with the undergraduate who are enrolling in these economics and business classes, but on some level, you’re preaching to the choir. They might be a slightly skeptical choir given this generation, but it is still people who are interested on some level on business leadership, management, et cetera. So my question was going to be, do you envision interacting with the other schools within the broader university community? And it sounds like that’s part of it because that’s the audience that I think really does need to be reached. And also bringing those different perspectives into the fold will be really beneficial in terms of figuring out, well, so what does capitalism do? Where does it go from here? So that it does continue to bring the benefits, but it also takes into account some of its less savory aspects. And I think getting to those solutions is going to involve incorporating those different perspectives and bringing everyone into the fold. But sounds like you guys are already thinking about that. So that’s fantastic.

[00:37:43.250] – Susan

Yeah, we are. And I would also temper a little bit on the preaching to the choir. You would be amazed how simplistic people think about this. And you say mission driven and what that means to them and what what the role of profit is, and the prophet is bad. And it’s not all the choir at all. It really isn’t. So I think It is this simplistic view. And when I first came to this school, I remember the intro case for the course we’re talking about was about about what was the car that had an acceleration problem, but they didn’t fix it, which I don’t know. Anyway, they were teaching the case, and the case was this is how business people think. This is in the business school. There weren’t enough deaths, so it didn’t make sense to fix the problem. This is how business people think about their products and their products. This was our intro case. You have a really different choir if you’re having this a point of view from the minute you start. I think, yeah, I would say it is absolutely outside inside and work on all sides.

[00:39:13.340] – John

Well, let me thank Susan and Marcel for our discussion on capitalism. If you want to know more about the Ravi Mehrotra Institute for Business, Markets, and Society, you can check out the Questrom website, or you can refer to our story, Making the Case for Capitalism, Questrom launches a Well-Funded Mehrotra Institute. For all of you out there, I hope we made you think a little bit more deeply about capitalism, its benefits, and maybe even its negative sides. Thanks for listening. This is John Byrne with Poets and Quants.