Commencement Address 2010
The Berkeley MBA Programs
May 14, 2010
Richard C. Blum
Founder, Blum Capital Partners
and the American Himalayan Foundation
Thank you, Dean Lyons, for that generous introduction. I am honored to be here today to speak once again, after 18 years, at the Haas Business School's commencement.
I read the Economist regularly and I totally agree with their conclusion that Haas is the best business school in the United States. And they're right, we don't have an attitude.
I would like to mention some of the wonderful deans who have helped make the Haas School what it is today and whom I have had the privilege to know. First was Ewald T. Grether who was here when I went to the school and was the dean probably longer than anyone else. Greth, in many ways, set the tone for what was to come. He was intelligent, kind and for me, I couldn't have had a better personal advisor. After Greth, it has also been a privilege to know and work with Dick Holton, Ray Miles, Bud Cheit — we were on a Japanese board together, Laura Tyson — we have worked for years on global poverty issues together — and, of course, Rich Lyons.
My latest assignment in a long list of assignments from the business school is to perhaps pass on a bit of advice to this graduating class.
One way to look at it is that you are down to your last lecture and, I promise to keep it brief. I recall the words of Adlai Stevenson on a similar occasion many years ago when he said: "for the next few minutes, I am supposed to talk and you are supposed to listen. I only hope we both begin and end at the same time."
As you probably know I spend a lot of time in Washington, DC; the center of a very divided country. Mistrust of government has never been more acute. And, we seem to have intractable problems both at home and abroad. But, in spite of these problems, the real truth is that our system has more decency and integrity, more good women and men than you'll ever read about in the news.
Sometimes we forget that American government, for all its imperfections, is the political aspiration of much of the world. Yes, the system has shortcomings — big ones — but, if you don't like what you see or hear politically, then I recommend that you get involved, whether it be in Washington or in Walnut Creek. I have seen time and again that individuals, who feel strongly about issues (I am married to one of those individuals) and who are persistent, can and do affect the course of events. The bright young African American who began as a lawyer and community organizer, and who had a vision and was persistent is now the President of the United States.
It has now been 50-plus years since I received my MBA. When I graduated in 1959, in the Eisenhower era, no one foresaw the speed and dimension of the gathering forces of change. We were accused of complacency, but even the accusers did not imagine what was to come.
The 1950s were truly the calm before the storm. The winds of that storm would bring with them much that was right — a resolve to fight discrimination, a willingness to dissent on the basis of conscience and to confront evils that had been accepted for so long and which consigned so many to second class citizenship. The political revolution that began then still continues, in this state, across the nation — and in a very real sense, around the world.
The business world, too, was to be transformed, perhaps as much as politics and society. As the 1950s came to a close, that transformation, too, was only dimly seen, if at all — and at best by only a few. The late fifties offered, what appeared to be, an immutable reality: GM was the largest corporation on earth; Bank of America was the largest bank; and big steel was the all powerful center of the American economy. Further, Pappy Waldorf was Cal's best football coach until Jeff Tedford came along.
In the fifties, when you left college to go into business, there were many safe careers in banking, accounting, retail and human resources, and as executives in government. If one studied the characteristics of major industries like steel, automobiles, petroleum, and finance, you knew that change was glacial or non-existent. Urban strife was all but unheard of; cities worried about auto accidents, not automatic weapons, drugs were sold in pharmacies, urban crime and violence were about 1.0 on the Richter scale.
Obviously, some things don't change. But, most things do. So, I suppose one lesson might be that the only constant is change. I believe, however, there are certain basic truths about life and business that not only endure through transforming events, but also are essential to understand in surviving and mastering change.
One truth is that risk is inescapable — and in my opinion, risk is the best teacher of all. For those who survived the partial collapse of our financial system in 2008 and maybe you were all better off here studying it rather than being buried in it, there are enormous lessons to learn and some good books to read such as Too Big To Fail and The Big Short (Michael Lewis, the author is from Berkeley). In any event, as you pursue your careers, it will be almost impossible to find a riskless career path. Major institutions like the investment banks and the automobile companies will continue to restructure their operations and balance sheets and in some cases develop a radically different economic model. Despite the hundreds of thousands of job losses, these businesses are re-emerging and will be better managed. At the same time alternative energy companies, the world of connectivity, breakthroughs in biotechnology, and rapidly expanding markets in Asia and emerging economies hold great promise. Ultimately, a leaner corporate America will become more competitive.
I've always been a risk-taker; and I really urge that you consider taking some too, especially when you are young — and I think you should view the current environment as an opportunity. In as much as you can hardly find a truly safe job, you are, by definition, going to take a risk, so you ought to consider joining a small or a medium-sized company at least for part of your career — particularly one that is on the cutting edge, or that has discovered a amount of chaos — and that niche market. Change brings a certain amount of chaos — and that can be frightening; but it is also the time of greatest potential for those who can seize the moment.
An additional dimension to all of this that we never thought about many years ago is that we might look at those careers that really can help make the changes the world desperately needs. As many of you know, I started the Blum Center for Developing Economies to address the many problems caused by global poverty. The Haas Business School has been a major player in the rapid growth of our new Center. I want to particularly thank Rich Lyons, Laura Tyson and John Danner who have been instrumental to our growth. Developing countries today offer real opportunities in both entrepreneurial NGOs which are saving and changing lives and for profit opportunities whether they are in micro finance, wireless, agriculture, healthcare or education. Also there is opportunity to work with those companies, that may be ventures by nature, but which are addressing the enormous issues connected to climate change.
Just a few years ago, how many of us knew very much or, anything at all about solar power, wind turbines, Google, Genentech, Facebook, Twitter or Starbucks. You have to understand that as a risk-taker, you will make mistakes — often costly ones; but, just consider it to be part of an education that does not end today — a continuing education that must never end.
By the time I was 30, I had learned the hard way what "margin calls" were about; I lost most of my meager net worth in ventures that I would not look at for two minutes today and, I lived through a year when my income dropped by two thirds.
Now that I'm older and presumably wiser, I am asked why our investment company has been able to invest successfully over a long period. The answer is that I learned and my partners learned how to assess risk and as a result, we haven't in recent years made many serious mistakes (we don't use a lot of leverage). My advice is to learn about risk and reward early on.
Another enduring truth is the paramount importance of integrity throughout your life. Unfortunately, the business world may test your strength of character as never before. At Berkeley, in 1982, as an earlier decade of greed was just beginning, the noted economist Leonard Silk, reviewing the events of Watergate and long before ENRON and WorldCom, Madoff or the sub-prime mortgages, asked the question "...Whether it is possible to become a valuable and trusted part of an organization and remain an honest and self-respecting human being?" Throughout history, the age-old excuse has been heard that it is important to be "part of the team" — or that we "were only following orders." Yet, that is also in the nature of organizations: so you, too, will be expected to follow orders— and where will you draw the line?
There is, in my mind, a bottom line about the relationship between business and nation. As Leonard Silk also said, "no organization in a free and democratic society can be taken as a surrogate for the society itself. A business organization is necessarily a limited and partial microcosm. Its goals are not necessarily contiguous with those of the whole society but are, by its very nature, self-interested, focused on its own profits and growth — and no matter what the consequences for the society as a whole, its own survival." To put Silk's point another way, let me reverse a very old phrase from the 50s: whatever is good for General Motors or Wall Street has certainly not been good for America.
The danger of this kind of self delusion in business is particularly great when the pursuit of material rewards are magnified — and the business organization, especially in the age of the multinational, explicitly professes no higher loyalty than to itself. 2008 was full of examples.
You are the ones who will have to bring that higher loyalty to your companies — and I hope none of you will check your consciences at the door. Because a set of high principles, a refusal to subordinate honesty in search for the bottom line — is not only morally correct, but essential good business over the long term.
The record of scandals over the decades is now clear: Greed corrupts and lawlessness destroys business organizations at least as surely as a refusal to invest or adapt or modernize.
The best businesses are ethical and socially responsible — not in some goody two shoes way, but in making practical, hardheaded distinctions between what's right and what's wrong. In the 21st century businesses may have to be leaner, but they don't have to be meaner.
So don't assume the worst about the organization you join; act as if it's better than that. Because if you do, you will be a better business executive — and a better human being.
In closing, let me now change the subject somewhat and offer one other piece of advice — that is to forget business at least some of the time. Have an interest that takes you totally away from the business world — whether it's skiing, windsurfing, hiking, meditation, opera or some worthwhile nonprofit. You have to step outside your daily environment, not only to replenish your spirit, but so you can strategically review where you are, where you are going and what you should do next.
For me, hiking and climbing led me to the Himalayas, the Sherpas of Nepal, the beginnings of the American Himalayan Foundation, our Berkeley Center and, eventually, an interest that embraces many aspects of global poverty which now consumes most of my time.
Now you may ask why an aging fellow, with a few bucks like me, is asking you all to be generous when you're probably trying to figure out how to pay off your student loans. The statisticians say that most of you will be in the top 50 percent of wage earners in this country ten years after graduation. For those of you who can, look around and get involved. As you leave the campus today, you will find many organizations that you can associate with even if you have no funds to contribute. A little sweat equity may actually be of more value than a check.
In today's increasingly globalized world while there are more winners than losers, it is nonetheless creating a huge division between rich and poor. There are 3 billion people on our planet who live on $2 per day or less, and I firmly believe that extremism has its roots in ignorance and grinding poverty.
We are all familiar with the key quotes of John Fitzgerald Kennedy's inaugural address but, if you read his text from one end to the other, more than half of it speaks to our commitment to the rest of the world...we need to refocus.
Lastly, "When you are old and gray, and look back on your life, you will want to be proud of what you have done. The source of that pride won't be the things you have acquired or the recognition you have received. It will be the lives you have touched and the difference you have made. I hope you will develop the passion and the voice to help the world in ways both large and small. Nothing will give you greater satisfaction."
Well, I have tried to indicate some of the promise, some of the peril, and some of the challenges that lie ahead for all of you. I am grateful to you for letting a long ago graduate share the freshness and hope of this day. My wish for your life is that it will equal your talent and your education.
Thank you, have a good day — and good luck! GO BEARS!