In 2007 Bob Bruner, the dean of the Darden School of Business at the University of Virginia co-wrote an interesting little book called ‘The Panic of 1907 – Lessons Learned from the Market’s Perfect Storm’ about the financial crisis that swept America precisely a hundred years earlier. Like many scholarly books it might have sold a few thousand copies to libraries, academics and the odd bibliophile banker had it not suggested that the present day market was exhibiting many of the characteristics of its historical predecessor. As a consequence, when everything fell off a cliff the following year the book went on to become something of a minor best-seller.
In the book Bruner documents how the headless chicken behaviour of financiers in 1907 was finally stemmed (and the economy saved) when the legendary ‘strong man’ J. Pierpont Morgan intervened to bang a few heads and restore order. Unwilling to rely on the idea of an individual riding to the rescue in the future the government created the Federal Reserve – an institutional version of a J P Morgan if you like – and many other Western powers followed suit with their own versions of a central bank.
How successful these central banks have been in turning the global economy around is a moot point. Ben Bernanke and his British counterpart, Mervyn King, might be heroes to some. Others would be all to happy to burn their effigies in the hearts of Manhattan or the City of London. What Darden’s Bruner points out is that expecting one person, one institution or one government to lead out of a crisis is a much less realistic option now than it was in the early 20th century. “We might have a better understanding of how crises happen these days,” says Bruner, “but I’m not sure we have any better understanding of how to rally people and the markets they create, how to get what I’d term ‘collective movement’.”
Of course the global nature of the problem and the speed of modern communications certainly don’t help. But the key sticking point appears to be the sheer diversity of stakeholders that any government now has to deal with and the myriad of special interests, both benign and malignant.
So what is the solution? What Dean Bruner appears to be saying is that it lies in a new model of leadership. Leadership that is flexible enough to deal with the diversity of groups and individuals it needs to deal with, broad enough to encompass the complete spectrum of tools from cajoling to (dare we say it?) threatening, and tailored enough to take a targeted rather than a broad brush approach. And if there is one challenge that should be top of the agenda at every major business school around the world, then this should be it.