The Wisdom of John Bogle

Nowadays, when one thinks of professions, the role of “investor” does not leap to mind. Nor, for that matter, does banker or financial analyst or other roles that entail the accumulation, deployment, or investment of funds or other forms of capital.

The situation used to be different. Indeed, in the middle of the 20th century, the local banker or investment counselor was seen as an individual—indeed, usually the representative of a small bank in the community or an individual practitioner. And it was generally assumed that this investor’s primary obligations were to the individual over whose funds he or she had stewardship.

One of my heroes—and the hero of millions of investors worldwide—is John Bogle, founder of The Vanguard Group and creator of the first index mutual fund that was available to the general public. In his essay “Balancing Professional Values and Business Values,” Bogle cites the examples of Adam Smith, the 18th century polymath, and Benjamin Graham, the 20th century scholar of economics and investment, to remind us of the ethical precepts that should guide the thought and action of investors today. And he draws on an article about the professions, published a dozen years ago by Lee Shulman and me.

Writers rarely know whether their writings are noticed, and, if so, by whom and with what effect. I was deeply honored when John Bogle, vigorous at 89, sent me his fine essay, along with a personal note.

The Yin and Yang of the Medical Profession

One morning in mid-December 2016, while we were in New York City, Howard had the misfortune of suffering a sudden attack of “acute necrotizing pancreatitis.” A terrifying diagnosis. We’d never heard of this, and we don’t recommend it! Howard became very ill and remained so for five months.

Fortunately, the attack occurred just a few blocks from a major hospital, NYU’s Langgone Medical Center, where we went by ambulance. After one week of rest and expert care, Howard was past the acute stage, and we were able to return home to Cambridge. Howard then again received expert care at the Beth Israel Deaconess Medical Center over the next five months, largely at home but with frequent trips to the hospital’s advanced endoscopy suite. At the time of this writing Howard is back to health—or, as he likes to quip, “back to his old complaints.” And, as part of this recovery, he and his wife Ellen have drawn some broader lessons about medicine and about the professions in general.

Living in the Northeast of the United States, having excellent medical coverage, and access to a network of specialists, we could reasonably expect that Howard would receive first-rate care. And fortunately he did. But what impressed both of us was that the care transcended appropriate tests, procedures, and drugs. We had three physicians: Tyler Berzin, the gastroenterologist who healed Howard’s pancreas via five endoscopies; Dana Fugelso, the surgeon who removed his offending gallbladder; and Samuel Osher, our long time internist. All three not only remained in constant and close contact with one another, but they also maintained an ever deepening relationship to both of us over the period of illness and recovery. To unpack the metaphor of the title, they complemented the “yin” of medical expertise with the “yang” of personal attention and caring.

We can reasonably expect that, in the 21st century, in a major medical center, physicians will keep up with the latest findings and prescribe the appropriate treatments. But given the pressures of paperwork, the increasing regulation of almost every aspect of treatment, the demands of time and scheduling in a major metropolitan area with highly competitive specialty care, and seemingly unending national debates about health policy, it’s easy to see why the personal, caring, human dimension can be lost or largely attenuated. It’s tempting to assume that this personal dimension from the expert physicians can be supplied either by other personnel—residents, nurses, paraprofessionals, or clergy—or, less happily, by artificial means, such as robots programmed to be empathetic. Yin from the physician, yang from others, be they living or artificial.

What we experienced firsthand was something very different and quite wonderful. Nearly every day, we reported in person or via email to the three doctors, describing the symptoms that had emerged, the actions, if any, we had taken, and the questions that had arisen. We received immediate feedback, sometimes in the form of an email 30 minutes later, other times in the form of a phone call three minutes later. And not infrequently more than one of our three physicians responded. Several times when we had not emailed for a few days, Dr. Berzin called us just to check on how things were going. Unheard of! We were often scared and worried and anxious—because unexpected symptoms or technical snafus occurred—and the fact that we were in such close touch with our physicians was, if we may say so, psychologically life-saving.

The medical issues took center stage and appropriately so; but over the course of the several months, we came to know our three physicians as human beings with their own families and their own concerns— and they, in turn, learned about our own lives, struggles, and more positive developments as well. The yin of knowledgeable care was complemented, appropriately and quite lovingly, with the yang of personal contact, communication, and caring.

While the treatment was serious, there were also lighter moments. Asked how much “work” I could do, one doctor said, “Do what you feel comfortable doing.” A second doctor said, “Howard, Your health is first and foremost. Drop everything and rest!” When we pondered these contrasting bits of advice, and asked the third doctor, we received the response, “Perhaps you should split the difference.” And so we did.

One can appropriately ask, “What difference did the yang really make?”, or “Did it make enough of a difference to justify the possible neglect of other patients, or the invasion of the doctors’ personal time as they responded to emails even at the oddest of hours?” We posed this latter question to one of the physicians who replied, “My patients come first, and I am always here for them. This is not just a profession for me, it is a calling.” We wish that phrase were on the lips of every physician—indeed, of every professional; that’s the kind of world in which we—and presumably the readers of these words—would like to live. None of our physicians were “concierge” physicians, offering extra care to an elite for extra compensation. And while we may have benefited from having lived for a long time within a university community, we believe that these physicians offer five star treatment to all in their care.

As readers of this blog know, all of our professions are undergoing enormous disruptions, and many may not survive in a form that we would recognize. Indeed, in the future, much of the “expertise” of professions will be handled either by more easily-trained paraprofessionals or by computer programs that are at least as accurate, and perhaps more accurate, than the human beings that they are designed to replace.

But rather than replacing the professional, we are hopeful that we can maintain and bolster the more humane aspects of the professions—the personal knowledge, contact, understanding, and interpretive skills that one human being—or, in our fortunate case, three human beings—can provide to those who are in need of professional services, be they legal, medical, spiritual, educational, or work-related… and to concerned members of their families. The sense of a calling—that precious descriptor—is vital for the professional, those whom he or she serves, and the health (if we may) of the community. For those of us who care about the professions, we need to understand how such exemplary professionals came to the stance that they have voluntarily assumed, how they maintain those roles, and how best to inspire others not only to fill out those important check lists but also to regard their work as a calling.

Ellen Winner and Howard Gardner will happily celebrate their 35th wedding anniversary this year.

When Colleges Act Like Businesses: Is It Ethical?

by Barbara Hou

I recently came across an article that highlighted a troubling practice: In order to meet their enrollment and net revenue targets, some colleges are reaching out and offering more money to students who did not respond to their acceptance offers, after those students have already made decisions to enroll at other colleges and after the official decision deadline. Here I review what makes the practice unethical, and also present counterarguments that deserve to be considered.

1) Violates Published Deadlines. Colleges present themselves as nurturing good citizens, and good citizens play by generally agreed upon rules. Colleges that make representations about their deadlines are supposed to stand by them. By reaching out to students and changing their financial aid terms, these institutions change the rules of the game, manipulate students’ decisions, and entice students to renege on their commitments to other colleges.

2) Reopens a College Decision Process. Students are forced to revisit what can be an agonizing decision process. As one example, colleges may offer more money but not enough to make it affordable.

3) Makes Students Narrowly Money Minded. Importantly, the practice puts money front and center, making it a determining factor for why a student would choose one school over another, (I compare this to someone who takes a job solely for the salary without regard to the mission or methods of the employer.) Schools that dangle money likely are not a student’s first choice school, and students who accept such offers likely have compromised other possibly more valid considerations.

4) Turns Students into Commodities. Students literally become something that can be negotiated, haggled over, and bought. Colleges are supposed to offer an education, not be bazaars.

5) Takes Advantage of Students and Other Colleges. Finally, colleges that dangle money after the decision deadline engage in a bait and switch, if not a price-gouging scheme. By holding back funds until the last minute, these colleges can tactically collect as much tuition revenue as possible and in the process take advantage of other colleges who have played by the rules and locked in their commitments.

For these reasons, one might assert that if the college cannot make it ethically, it should go out of business. But are there reasons to think that the practice is not actually unethical?

1) Giving an Option. Looked at another way, these colleges do not force students to compromise on their values but give students a chance to re-evaluate them. Because the college has more unfilled seats than it expected, it now has the flexibility to offer stronger discounts to students. There may be nothing nefarious nor manipulative about this fact.  Indeed students also may be better able to take advantage of collegiate opportunities.

2) All Colleges Compete for Students. Colleges often compete for students based on less than ideal considerations, including beautiful landscaping or gleaming residential and gym amenities – unnecessary expenses that drive up the cost of college. Colleges also may match financial aid packages of a competitor, even if a student may have initiated the conversation.

3) Mission-Minded. Such tactics increase the likelihood that the campus can survive; offer an education that is worthy; and make an educational opportunity accessible to a broader swath of the population.

How can we reconcile these competing arguments? Having very briefly laid out some of the dimensions to this ethical issue, I suggest that colleges can be transparent about the role of money in their enterprises. For example, with regard to this specific issue, colleges can explicitly declare:

-Whether they will or won’t re-open financial aid considerations after the decision deadline. In that way, all players will know the situations they may confront; and

-Whether they allow students to make multiple deposits, and whether they actively rescind admission offers to students discovered to have made multiple deposits.

Going beyond the issue under discussion, colleges should also be candid about other less than ideal practices, such as: (i) whether they “gap” students by admitting students with aid that falls short of a student’s financial need, (ii) engage in “need-sensitive” admissions, (iii) give preferences to legacies, (iv) allow donations to influence offers of admissions, (v) offer merit aid to attract financial returns rather than to reward academic performance, or (vi) lower admission standards for athletes.

Such candor would allow us to open up a conversation about whether practices that may be appropriate in business are also suitable in higher education, and whether compromises in this regard align with the ethical fiber of higher education.

Barbara Hou is a doctoral student at the Harvard Graduate School of Education.

Commenting on “Why Philanthropy Is Not a Profession?”

My recent column “Why Philanthropy Is Not a Profession,” published by The Chronicle of Philanthropy, elicited a number of very helpful comments, clarifications and critiques.

In this brief response, I’ve found it illuminating to take into account historical, organizational and career considerations of the philanthropic sector.

Historical Considerations

Foundations, the first organized form of philanthropy in the United States, have existed for something over a century. When first launched, the foundations associated with John D. Rockefeller, Andrew Carnegie, and Henry Ford foregrounded the particular agendas of each wealthy philanthropist—either exercised directly or through executives whose assignment was to carry out the will of the philanthropist. With the passing of the original generation, foundations became far more bureaucratic; and they often deviated quite significantly from the ethos of the founder. Also, of significance, many of the foundations deliberately kept low public profiles: they wanted to support “good work” but not necessarily to have their names, or the names of their executives, strewn across the newspaper.

Times change. In some ways, the present era seems a throwback to the founding generation. Individuals of enormous wealth launch foundations (or comparable vehicles, over which they can exert even more control); they often have a clear agenda that they would like to pursue; and they take more of a hands-on approach than did the founding generation. Across the sector, favorable publicity is sought for both the foundation and its leaders—many employ public relations specialists. Worth noting, there are also far more philanthropies of significant size emerging in other countries, with each country having its own legislative purview and distinctions. Perhaps the biggest difference from earlier eras is the trend toward “sunsetting.” Many wealthy individuals plan deliberately for their foundations to close shortly after their own death.

It’s much too early to know whether these trends will continue, reverse, or move in yet other directions.

Organizational Considerations

My original column failed to distinguish adequately among three different roles: 1) the original philanthropist, the person or family whose assets fund the dispersing entity; 2) the executive of the foundation, who has a great deal of power and latitude, as long as the founder and /or his family are not on the scene and as long as the executive has the support of the board; 3) program officers (whom I called “philanthropoids”), who solicit and judge applications, typically have personal contacts with recipients, and are answerable to the executive and the board.

Both the original funder and the chief of the organization are public figures; they have the advantage and assume the burden of being in the public eye. As one foundation executive wrote, they have an amazing set of tools available, if they choose to use them, and at least until now, very little public scrutiny or second-guessing of their decisions.

In contrast, the philanthropoids are typically not known to the outside world. And within the world of funding, they are hard-pressed to get honest feedback on what and how they are doing. One shrewd foundation executive put it this way: “They are always in the never-never land of aspiring grantees who treat them with exaggerated respect and admiration, while their immediate superior in the philanthropic organization is often hesitant to be the only one who offers criticism of their performance.”

In a paper published a decade ago, Laura Horn and I described these philanthropoids as members of “a lonely profession”: while they are seen by grantseekers as powerful and worthy of deference, they typically do not know where they stand—what they have done well, and where they have made mistakes. And once they leave the funding agency, they are unlikely to be remembered fondly by the numerous individuals whom they have not funded… and fortunate if their former grantees send them an annual holiday greeting.

Career Trajectory

Unlike other vocations, the career trajectory for those in philanthropy is unclear and perhaps unknowable in advance. Leaders of philanthropic organizations rarely come from within that particular organization or indeed from other foundations (Susan Beresford of Ford is a well-known exception); typically, in the past, they came from academe, often former college presidents, and perhaps in the future, they are more likely to come from the ranks of higher corporate management. Until now, presidency of a foundation is likely to be the individual’s last job; only rarely does the former leader of a foundation take a major job elsewhere, and almost never at another foundation.

In contrast, program officers have far less illustrious pasts—rarely are they known outside the particular billet in which they worked. Moreover, as mentioned, because of the nature of their work, they deliberately maintain a low profile. Almost all who study or lead philanthropic organizations believe that program officers should have clear term limits; but for collegial reasons (and in its collegiality, philanthropy has the trappings of a genuine profession), it is difficult to enforce this preference. When, for whatever reason, the time or the term is “up,” there is no obvious next step. Perhaps in this way, more so than any other, philanthropy differs from other aspiring professions—the skills are difficult to define, and what might elsewhere count as an asset (having mastered certain skills) does not readily translate into an upward career trajectory, either within the present place of employment or at another philanthropic organization. It’s rarely desirable to “have been” a philanthropoid.

Now, of course, all of this could change. In a critical comment on my column, one writer enthusiastically described the professional training that she tries to give to program officers at foundations. I have no doubt that one can be helped to be a better philanthropoid. And perhaps in a changing landscape, more individuals who have worked in one philanthropy will transition to another philanthropic organization, perhaps even at a higher rank. But unless one can confidently answer the question “And what will your next job be?”, the career trajectory of philanthropoids will differ from trajectories associated with the traditional professions.

Closing Comment

As for my basic contrast between two approaches to philanthropy—“accountability” and “taste”— commentators acknowledged its usefulness. Sara Lawrence-Lightfoot wrote that her goal as a board chair has been to “bring together artistic value laden approaches and evidence based procedures.” Instead of worrying whether philanthropy is a profession, she declares “what matters is that we engage(d) in good works.” Foundation president Michael McPherson comments, “I’ve come to think that the role is part ‘curation’ and part something like strategic philanthropy. Thus, our fellowship programs are goal oriented and their effectiveness can be measured in ways that make sense. It would be very hard to apply that kind of frame to our field-initiated programs, where curation is a better model.” But Stanley Katz, a leading scholar of philanthropy, is not sanguine. He laments that for many leaders of the sector, “philanthropy is simply the business of giving, and … good works can be objectively and systematically evaluated in the same manner as the production of widgets. The objection that you report yourself making is one that fewer and fewer in the field would understand these days. It is a tremendous concern, especially with so few making so many decisions about such tremendous sums of money.”

In my view, if the price of gaining professional status is the embracing of a strict “business accountability” stance, it is a price that is not worth paying. Philanthropy is one of the few remaining fields where one can use human judgement and taste and where one does not need either to raise money or to follow strict legal guidelines. Rather than cutting off one of its limbs, I’d prefer if philanthropy were to help other sectors generate a broader vision of the means at their disposal.

My profound thanks to Michael Bohnen, Angela Covert, Patricia Graham, Stanley Katz, Raquel Marti, Michael McPherson, Sara Lawrence-Lightfoot and Lee Shulman for their thoughtful comments and suggestions.

Reference

Gardner, H. and Horn, L. (2006). The lonely profession. In W. Damon and S. Verducci (eds.). Taking philanthropy seriously. Bloomington, IN: Indiana University Press, pp. 77-93.

The Professions in America a Century Ago: Views of Louis Brandeis

Although this blog was launched because of my concerns about the “future” of the professions, it’s always useful to have a historical perspective. A few weeks ago, I reported my surprise that, five centuries ago, the French essayist Michel de Montaigne characterized the professions of his day in ways that are readily recognizable to our contemporary minds. Now I’d like to consider views and insights put forth a century ago by lawyer Louis Brandeis. These views highlight the ways in which today’s professional landscape resembles and differs from that in the early 20th century.

Louis Dembitz Brandeis is one of the great success stories of American history. The child of immigrants, raised in Louisville, Kentucky, in modest circumstances, Brandeis was an outstanding student at the Harvard Law School—receiving the highest grades ever achieved. He went on to become a highly successful attorney in Boston; and once he had established his own professional standing—often serving as attorney to wealthy businesspersons—he became a strong advocate for the rights of the less wealthy and less powerful. Indeed his decidedly progressive politics were a factor in President Woodrow Wilson’s decision to nominate Brandeis to the Supreme Court in 1916. Partly because of his political leanings and partly because he was the first Jewish person nominated to the Court, Brandeis’ confirmation hearings were unusually contentious. Brandeis went on to serve with distinction on the Court for over twenty years. He has now been honored in a variety of institutions—perhaps notably as the “patron saint” for the University in suburban Boston that bears his name.

As a student of legal history, Brandeis noted that the law held an especially important place in the United States. Not only was the United States heir to the English tradition of a government based on laws and not on men, with a long history of precedents and decisions on which to draw; but because the U.S. did not have a nobility or a rigid class system, and did have a written Constitution, lawyers were already recognized as especially important figures when Alexis de Toqueville visited the U.S. in the early 1830s. As Brandeis put it, “the lawyer has played so large a part in our political life in that his training fits him especially to grapple with the questions which are presented in a democracy.”

Brandeis went on to describe the traits for which lawyers were valued. Their training sharpened their memories and their reasoning faculties. But unlike pure logicians, the reasoning faculties of legal practitioners were always tested by experiences and invariably geared toward practical ends. Lawyers have to operate in real time—they cannot put off a decision until they have obtained “more data” or had more time to contemplate or consult.

Brandeis went on to describe the traits that were especially important—and especially desirable—for lawyers. They should be judicial in attitude, learn to see issues from various sides, and observe human beings even more keenly than they observe objects. Because of these skills and attitudes, they were best equipped to become advisers—and so naturally gravitated to positions of power and influence in their community and in the government. As he told a group of Harvard students in 1905, “It is as a rule …far more important how men (sic) pursue their occupation than what the occupation is.”

Brandeis came of age at the same time that America was becoming an industrial power on the world scene. Corporations and their leaders were assuming increasingly dominant roles in the society. Indeed, as a leading lawyer on the national scene, Brandeis knew many of these leaders personally, and this experience led Brandeis both to think about the risks to the role of the lawyer, and the opportunities that were afforded.

Having drawn on the insight of de Toqueville, an early visitor to America, Brandeis also cited James Bryce, an English observer who came to the United States in the 1880s and wrote an influential book called The American Commonwealth. Tracing de Toqueville’s own trajectory, Bryce noted, “Sixty years ago there were no great fortunes in America, few large portions, no poverty. Now there is some poverty… and a greater number of gigantic fortunes than in any other country of the world.” (p. 745) He went on to sound a warning: “Lawyers are now to a greater extent than formerly business men, as part of the great organized system of industrial and financial enterprise… And they do not seem to be so much of a distinct professional class.” Brandeis underscored this point: “Able lawyers have, to a large extent, allowed themselves to become adjuncts of great corporations and have neglected the obligation to use their powers for the protection of the people. We hear too much of the ‘corporation lawyer’; and far too little of the ‘people’s lawyer.'”

Brandeis was clearly concerned by this state of affairs. But he also discerned an opportunity—both for business and for the law. As he described it, professions were characterized by three features: 1) the necessary training is intellectual in character, involving knowledge and learning, not just skill; 2) the work is pursued largely for others and not merely for oneself; and 3) amount of financial return is not the accepted measure of success. Brandeis called for a science of management, where the criterion for success is excellence in performance in the broadest sense—for employees, customers, and the broader surrounding community—not simply the making of money. And to make his case in a concrete manner, Brandeis describes an individual (shoe manufacturer William H. McElwain) and a family of merchants (the Filenes) who have “accepted and applied the principles of industrial democracy and of social justice.” Should these attitudes and behaviors become the norm, then “big business” will mean business
“big not in bulk of power, but great in service and grand in manner.”

Brandeis ended his analysis with a message to aspiring lawyers: “The next generation must witness a continuing and ever increasing contest between those who have and those who have not… Nothing can better fit you for taking part in the solution of these problems than the study and preeminently the practice of law.”

As is often the case when one turns to history, the themes put forth by Brandeis over a century ago have a surprisingly contemporary resonance. Our political system is filled with lawyers, but it is partly a revulsion against lawyers that has led to the election of a self-declared successful businessman. Donald Trump is highly dependent on the lawyers who have represented his personal and financial interests and yet he rarely misses an opportunity to castigate the judicial system. My friend Ben Heineman has written a timely and important book The Inside Counsel Revolution in which he describes the crucial position that is currently occupied by the lead lawyer(s) in global corporations.

Business still aspires to become a recognized profession, while the law struggles to retain its professional status. One cannot help wondering what form these discussions will take 600 years after Montaigne penned his insightful essay and 200 years after Brandeis delivered his trenchant and inspiring talks.

Brandeis References:

–The Opportunity in the Law, Phillip Brooks House, talk to Harvard Ethical Society, May 1905.
-Brown University Commencement Day, published in System, October 1912 .