What Facebook Can Do to Rebuild Trust



Wharton's Kevin Werbach and Pinar Yildirim, and University of Maryland's Jennifer Golbeck discuss the challenges ahead for Facebook following the Cambridge Analytica scandal.
Recent weeks have not been kind to Facebook. Since the privacy brouhaha over Cambridge Analytica erupted in mid-March, the world’s biggest social network has lost $41 billion in market value as investors unfriended it. While Facebook certainly is not the only tech giant that lets marketers mine the data of its users and their friends — and politicians from both parties also collect and analyze data to better target voters — the firm is taking the brunt of the public’s anger, especially after the fake news fiasco.
Federal and state agencies are investigating Facebook. Congress has asked CEO Mark Zuckerberg to testify. A growing group of companies have halted advertising on Facebook. Tesla CEO Elon Musk, along with celebrities such as Cher and Will Ferrell, joined the #DeleteFacebook movement and closed their accounts. Nearly 175,000 people have signed a Change.org petition asking Facebook to better protect their data and be more transparent. It is arguably the biggest PR crisis the company has ever faced.
How can Facebook regain the public’s trust? Wharton management professor David Hsu said the social network should deploy a lot more resources to protect user data and think more deeply about the different ways its platform could be abused. But it seems that Facebook has been more concerned with monetizing its mobile platform, especially since it’s a public company. “All the [Wall Street] analysts are saying this is the metric we pay attention to. So it’s not surprising that, up and down, executives are focused on that rather than” safeguarding consumer data.
But it turns out that privacy concerns affect its core product: user content. By not paying attention to this macro-risk, it has cost the company dearly. “This probably reflects on managerial experience,” Hsu said. Zuckerberg’s management style is to make many of the decisions himself about the user experience. While a founder-CEO can learn on the job as a company grows, it is critical however to recognize one’s strengths and weaknesses. “It’s not just a one-person show,” he said. Founders and leaders need to “be realistic about their domain of expertise and where they need wise counsel.”
What Went Wrong
At the heart of the grievance is that in 2013, a university researcher collected data from 270,000 users who opted to take a personality quiz. At the time, Facebook allowed third parties to collect information about users as well as those of their friends. Thus, the researcher was able to get data on millions of Facebook users without having to ask permission. Facebook said it ended the policy in 2014. A year later, reporters told Facebook that the researcher shared the data with Cambridge Analytica, a U.K. target marketing firm hired by the Trump campaign. Such sharing without authorization is against Facebook’s policy.
“[Part] of the issue Facebook had is that it went beyond just storing user information. It was collecting and adding additional data to help advertisers target [its] users.”Ron Berman
Facebook said it demanded that the researcher and Cambridge Analytica certify that the unauthorized data was deleted, which they did. But last month, journalists said the data might not have been deleted after all. Facebook, which booted the two parties from its network, said Cambridge Analytica agreed to be audited. Meanwhile, Facebook also moved to strengthen other data controls: Now, friends of users must authorize third parties to collect their information. Developers also must get Facebook’s permission before they can ask users for sensitive information.
Last week, Facebook executives met with reporters and pledged to protect the integrity of data, especially those related to elections. The company detailed a series of improvements to better fight foreign interference, remove fake accounts, boost ad transparency and hamper the spread of fake news. “None of us can turn back the clock, but we are all responsible for making sure the same kind of attack on our democracy does not happen again,” said Guy Rosen, vice president of product management. “We are taking our role in that effort very, very seriously.”
Fixing the Problem
Lyle Ungar, professor of computer and information science at the University of Pennsylvania, said Facebook erred in the following: It should not have let organizations collect information on people without their consent, such as user’s friends, and organizations collecting the data should not be able to sell it without people’s consent; it should have required that political ads be more transparent so people know who is paying for them; it needs to take more responsibility for what third parties do on its platform; and it needs to be more sensitive to how people feel about their data being used in different ways.
Lynn Wu, Wharton professor of operations, information and decisions, said Facebook also could take a page from Google in making it easier for users to know what data is captured. “If you log onto your Google profile, you can actually see what they know about you and your interests and you can modify and change it as you see fit,” she said. In addition, Facebook could send out summary statistics about the users’ social graph regularly. “This is what we know about you. These are your friends. This is how your data is shared,” she said. “And maybe you can control that.”
Wharton marketing professor Ron Berman added that “part of the issue Facebook had is that it went beyond just storing user information. It was collecting and adding additional data to help advertisers target users on Facebook.” The company should have asked users if they wanted their data to be augmented with third-party information and shared with advertisers, he added. Credit card companies, for example, are required to disclose how they share their data, and consumers can opt out of this practice.
While Facebook stands accused in the public discourse of letting content slip in that might have helped elect Trump, Berman is not convinced people are that susceptible. “It is very hard to change someone’s opinion about voting. First, they would need to be undecided voters — and there aren’t that many of those, surveys show. Second, they need to be exposed to only one side of the political spectrum,” he said. But being undecided means the voter will seek different political views, so that means the opposition can also present its information. “I am just not convinced the impact [on the election] has been as big as people claim it was,” he said.
Move Fast and Break Things?
But there is a larger issue to consider than fixing Facebook’s foibles with more privacy controls. Its famous dictum is to “move fast and break things.” But it is so big now — with 2.1 billion users — that breaking things could have wide repercussions. As such, Facebook has to go through “a real cultural shift,” said Kevin Werbach, Wharton professor of legal studies and business ethics, on the Knowledge@Wharton show on SiriusXM channel 111. (Listen to the podcast at the top of the page.)
Werbach compared Facebook’s troubles with Microsoft’s situation in the 1990s under co-founder and CEO Bill Gates, when the government sued it for antitrust violations. The company was accused of acting monopolistically by bundling software with its Windows operating system, used by most of the world’s personal computers. Today, Microsoft has learned from its experience. Led by CEO Satya Nadella, it is a “fundamentally different company — not at a product level, but at a cultural level,” he said.
“… [There] are now fundamental questions being asked by users and by governments around the world about not just the specifics of what Facebook did in this case — but also about what Facebook is.”–Kevin Werbach
But Werbach also pondered whether a much more drastic change might be needed for Facebook than a culture shift. The company “understands that there are now fundamental questions being asked by users and by governments around the world about not just the specifics of what Facebook did in this case — but also about what Facebook is,” Werbach said. “Is there something inherently problematic in the kind of information platform that Facebook has created? And that’s a fundamental challenge to the company.
“Will Facebook and companies like it — either on their own or being forced by governments — have to fundamentally change their business model?” Werbach asked. “And not even just at the level of what data do they share with third party apps. Will they be forced to give users control of their data? Will they be forced to share their social graph with competitors, as some are calling for in Europe? These would be fundamental changes that would have huge impacts on their business, but they are the kinds of things that go with this basic question about whether the business model is ethical and trustworthy.”
Make Facebook a Public Utility?
Werbach floated the idea that perhaps digital platforms should be regulated as public utilities such as railroads, electricity, communications and broadband. “We have a whole body of law and regulatory oversight based on the idea that these are fundamental infrastructural platforms for society and for public discourse,” he said. The U.S. chose not to strictly regulate digital platforms to let them innovate and disrupt incumbents. “But we’re, I think, long past the point where it makes sense to talk about Comcast as a big, powerful company and not also talk about Facebook and Google as big and powerful companies.”
Wu has another idea: Consider making Facebook a decentralized social network using the blockchain. That means there is no central authority like Facebook making decisions about the network for its users. Rather, users decide what they want to see on the platform, how it operates and how data sharing is handled. She pointed to the open-source Linux operating system — similar to Windows or Mac OS X — as an analogy. Users decide what features to put into the software. And even if Facebook becomes decentralized, it can still make a profit. Linux is free, Wu said, but applications can be built on top of it that make money.
However, the drawback to decentralization is that there could be less incentive for users to keep innovating on new features. Wu noted that even though Linux is free, the dominant system for PCs is still Windows, and it’s Mac OS X for Apple computers. Also, there already are decentralized social networks out there for people who care deeply about privacy — but they haven’t become very popular. “They’re still pretty small and they’re very much in startup mode,” she said. To get the best of both worlds, someone has to come up with a new business model. But “I don’t think Facebook is necessarily the right one to do it,” Wu added.
Of course, Facebook could also start charging users instead of relying on advertisers to make money. Berman said the company was only making about $18 per year per user before expenses — or $7 per user after deducting the cost of running the platform. “This isn’t a terribly high number, but consumers are often not willing to pay even this amount to maintain their privacy,” he said. Another option is to limit which companies can advertise, such as allowing only brands whose users opt in to see ads.
Privacy Leak Fallout
Facebook is far from alone in monetizing user data in exchange for free services. But the current uproar over Cambridge Analytica could lead to the tightening of privacy laws that will affect many companies going forward, especially the tech giants. “It’s a problem for Google, it’s a problem for Amazon and any other large online company which has been collecting and using data for various reasons,” said Wharton marketing professor Pinar Yildirim, who joined Werbach on the Knoweldge@Wharton radio show. “They will all be exposed to any regulation that may come out of this incident.”
It will also affect consumers “in a drastic way,” Yildirim continued. “Consumers are used to using their products or services for free, in exchange for providing their information to advertisers. If we start to build walls [around] third-party developers or advertisers for use of that data, that’s also going to shift the way that services are provided to consumers.”
Just take a look at the European Union, which has more stringent privacy rules than in the U.S. A few years ago, there was a study on the impact of Europe’s new rule, where consumers have to opt-in for cookies to track them on the web rather than opt out. Apps, websites and other online services remained free, but ads became more irritating, Wu said. Since most people did not opt in, that means marketers cannot target individuals with smaller, specialized ads. The result? Big pop-up ads, ads that takeover whole screens and the like became more prevalent. “Because they can’t target you effectively anymore, they give you the screen-takeover [ad], which is annoying,” she said.
Google, Amazon and other online giants that collect data “will all be exposed to any regulation that may come out of this incident.”–Pinar Yildirim
When the EU’s new General Data Protection Regulation (GDPR) takes effect on May 25, it will even be tougher for marketers, Wu said. A key change in this legislation is that any company anywhere in the world that targets anyone in the European Union must actively get that person’s consent before collecting their personal data. The penalties are severe: Up to 4% of annual global revenues or 20 million euros, whichever is greater. Moreover, cloud storage companies are not exempt.
With companies thus constrained, it stands to reason that EU consumers will not be exposed to as many products and services as other citizens. But at least their data will remain private. “There’s going to be some kind of consumer welfare loss,” Wu said. “At the same time, maybe people care about privacy more, so we have to think about the costs and benefits of doing that.”
In a recent interview with CNN, Zuckerberg said Facebook is open to regulation. “I actually think the question is more what is the right regulation rather than” whether or not the industry should be regulated, he noted. For example, he said there’s plenty of regulation of ads on TV and print. “It’s just not clear why there should be less on the internet. You should have the same level of transparency required.” He said Facebook is proactively rolling out tools that let users know who bought the ads and whom they’re targeting.
Wharton marketing professor Gideon Nave said Facebook has become the symbol of personalized targeting when other companies are doing similar things. Moreover, personalized targeting has been around for ages – the new thing here is just the improvement in campaign efficiency. “If you publish an ad in a golf magazine based on the demographic and psychographic characteristics of people who like golf, you’re targeting, too,” he said. The advent of the internet and platforms like Facebook and Google “gives us a capacity to do it in a better way because we can target each person individually,” Nave added. “But the idea itself is not new.”
The Facebook imbroglio inflamed public sentiment because it exposed how people could be manipulated. “People don’t like to feel they’re being manipulated,” Nave said. “In reality, we are manipulated all the time from the moment we’re born. We’re manipulated to like specific brands of soft drinks and computers” even though inside the package, the products may be almost identical to each other. “Advertising makes you focus on things [such as emotions] that you will associate with specific products,” he said.
In the long run, Nave believes Facebook will weather this crisis. “People forget about the past and many people still don’t care that much about privacy,” he said. “Facebook’s API policy that had allowed third parties such as Cambridge Analytica to exploit its data has already been changed years ago, and at the time nobody seemed to care,” Nave pointed out. Millennials also have a more relaxed attitude about data privacy since they’re used to giving out personal information to get free services. Indeed, 40% of people choose to keep their Facebook likes public. “It’s possible a few weeks from now everyone will forget about it,” Nave said. “It could be temporary.”


Want to Nurture Creativity? First, Get the Culture Right



David Yager, CEO of the University of the Arts, talks with Wharton's Jerry Wind and Grace Cho of Orangenius about how the right culture can help nurture increased creativity.
Is creativity inborn or can it be taught? David Yager, CEO of the University of the Arts (UArts) in Philadelphia, believes it can be taught. It’s one of his main areas of focus at the institution. Yager is working on building a Ph.D. program on creativity that can attract people from diverse backgrounds such as science, art, engineering and business. “We are looking at creativity across different disciplines … [and] trying to understand the drivers for creative people,” he says. In a conversation with Knowledge@Wharton, Yager spoke recently with Jerry Wind, an emeritus professor of marketing at Wharton and Grace Cho, CEO of Orangenius, a firm that helps artists develop business skills, about how an organization’s culture plays a significant role in teaching, identifying and nurturing creativity; his attempts to change the culture at the 141-year-old UArts; and why it is important that creativity and business acumen go hand in hand. This interview is part of a series produced in collaboration with Orangenius. (Listen to the full podcast using the player at the top of this page.)
An edited transcript of the conversation follows.
Grace Cho: David, what got you interested in art?
David Yager: I’ve always been more interested in creativity and what drives creativity than art per se. I began with looking at creative writing as an outlet. Then I became interested in drawing and painting. It was always about — how do I express something in a different way? How do I attract an audience and deliver content that can be taken in through art, versus the same content being produced in a different way? I’ve always thought about my particular art as a way of getting people to think about things in a different way. For me, life is about trying to be creative in everything I do.
As a university president I think about, how do I not follow the rules? Just because we’ve done it before, is that a good reason for doing it again? I try to get the faculty and especially the students to think about that. I’m very student-centric. I try to get students to understand what opportunities they have in being at the University of the Arts, what opportunities they can have if they’re creative, and how that creativity can be translated across different disciplines.
“We can teach people to be more creative. But equally important, we can teach people to recognize creativity within their organizations.”–David Yager
Our students are changing and it’s important for me to be in touch with the language they’re using, the way they’re learning, the way they’re thinking about things, how technology has changed, how social media has changed. How they engage with each other has also changed. This is a generation that thinks differently about things. I think it’s important, as an academic, to be aware of our students, understand the position they’re coming from, and try to help them be better at the things that they’re doing.
Cho: Tell us about the University of the Arts — the student body, the makeup, where they come from.
Yager: We’re a 141-year-old institution. One of the things I’m constantly dealing with is changing the culture, because I believe culture determines a lot of the things we do. How we teach is a culture. How we believe in ourselves as a faculty is a culture. Even the courses we teach, reflect a culture. You were educated 25 years ago, and you’re very good at certain kinds of things, and so you believe that’s what we should be teaching students, or that’s basic knowledge that’s important. But maybe it’s not what we need to be teaching our students now.
We have a great history and great alumni. There are two unique things about us. We’re one of the two private, stand-alone schools of the arts that teach all of the arts. CalArts in California is the other one. And, we’re the only University of the Arts in the United States. There’s one in Berlin. There’s one in London. One in Hong Kong. And that separates us out, I hope, in the way we think about things. We want to be razor-sharp in certain areas, but we also want to be big-picture focused as a university.
Our status as a university has allowed us to work on a PhD program. The program we’re working on is on creativity. We’re looking at creativity across all disciplines and trying to see if we can build a program that a scientist, an artist, an engineer, a business person might come to. We’re trying to understand the drivers for creative people. How much of creativity is taught? How much of creativity is part of the person?
Knowledge@Wharton: Do you think creativity can be taught, or is it inborn? If it can be taught, what are some of the barriers to creativity that need to be overcome? Could you speak about that from the perspective of an art school?
Yager: I think creativity can be taught.
Jerry Wind: I agree.
Yager: Can you be the most creative person in the field just by being taught? That piece I’m not sure of.
Wind: Probably not.
Yager: I think you could help almost anyone become more creative. The corporate world right now is struggling with that — how do they create more creative middle management? How do they create more creative C-level people? And that’s what we’re thinking about relative to our program. We can teach people to be more creative. But equally important, we can teach people to recognize creativity within their organizations, which I think is an even bigger problem. Sometimes they don’t know how to decide on who the creative people are.
I have a lot of ex-students who work at Google. I’ve followed Google pretty much since they began. One of the things that always fascinated me was that they were hiring very diverse, creative people, including musicians. They were hiring musicians for a very particular reason –because they’re not just good programmers, but they program very differently from how a computer scientist programs. I’m not sure if their management is still doing this. They’ve grown so big. They don’t train like they used to. A lot of people in management have moved through very quickly. I think they’re going to struggle trying to figure out how to identify the creative people and how to allow them to be creative.
I was at a dance event recently and one of my colleagues had brought his six-year-old son. My colleague works on the development side. He’s not a particularly creative person, but his son is very creative. And we all said to him, “Just let him be creative. Don’t take it out of him.” So I think it’s a combination of letting people go in a direction, but there are certainly lots of things you can do with almost any group to get them to think more creatively than they thought an hour ago.
Wind: I agree. I look at creativity as a trait that is not normally distributed. The extreme — the Picassos, the Mozarts — they don’t need us. Don’t touch them. But everyone else — we can move them toward being more creative. There are tools for this. When I taught creativity, I especially focused on tools at the individual level. David mentioned another very important dimension, which is, how do you identify creative people? The challenge there is how do you make sure that you don’t constrain their creativity? There is a lot of concern that our educational system, starting at K through 12, not only university, kills creativity.
I would add one other dimension where you can enhance creativity, and this is by working on the organizational architecture. How do you create a culture of creativity? How do you create processes that encourage inquiry? The structure allows this. If you have a very hierarchical structure, like most universities, it kills creativity. What you need to create is a structure which has more of a co-creation culture.
When I taught a course, it basically focused on identifying the kinds of tools that would help you and provide the students with the ability to implement the tools. I used to also bring people as guest lecturers from diverse fields, all the way from scientists to artists to curators to choreographers and also from business, to show that creativity and the characteristics of creative people are pretty similar. Over the years, I’ve probably had people from 40 different disciplines.
One of the things that we found is that the same principles apply to all of them. For instance, constraints enhance creativity. What you also want to emphasize is what you can do from a leadership point of view in terms of designing the organizational architecture in the network in such a way that it will enhance creativity.
“What’s frustrating to me, having spent most of my life in a traditional university, is that creativity is not really thought about as an important attribute of leadership within the university.”–David Yager
Yager: What’s frustrating to me, having spent most of my life in a traditional university, is that creativity is not really thought about as an important attribute of leadership within the university. And yet, at the end of the day, the most successful people and programs are based on someone who stepped up, who was really creative and looked at things in a very different way. It’s easy to point to those examples, but difficult to get people to think that it’s important.
I gave a talk a number of years ago at the National Academy of Science on the relationship of creativity in the arts and creativity in science. I think they’re absolutely similar. A scientist who’s really creative, who solves something that nobody else has solved, has come about it from a very different point of view
Knowledge@Wharton: It seems that what’s common to creativity in the arts and creativity in the sciences is the ability to exercise your imagination. How can the corporate world unleash the imagination at a time when there is so much risk aversion? Middle managers, in particular, are especially risk-averse. How do you come up with a creative culture that unshackles imagination, and which allows people to take risks?
Yager: First of all, you have to believe that at the end of the day it’s going to drive success — in terms of stockholder value or money or whatever you use to measure success. And it should not be short-term. It’s not that yesterday you believed one thing, and today you believe something else, and all of a sudden you are going to create something new.
If you look at Google, the number of “mistakes” or wrong decisions they make would bankrupt many other companies. But then they have the wins that put everything back in place. For Google, it’s about being first. It’s about being on the top. They don’t think that taking risk is a bad thing, because they know if they don’t take risks, they can’t be on the top.
Years ago, I was working for a tech company, and we were competing on a project with IBM. We had the right solution. IBM did not. But I knew the client was going to select IBM. Because if they picked us and it didn’t make it, they might lose their job. But if they picked IBM and they didn’t make it, they could always say, “Well, I went with IBM.” So that’s a cultural thing.
I take risks here, as president of the university. For me, there are only two choices: You either maintain status quo, or you take leadership and take the risk. It’s not a wild risk. It’s risk modified by a process, a procedure, a history, experience and all those other kinds of things.
Knowledge@Wharton: What would be an example of a risk that paid off, and one that didn’t pay off?
Yager: I’m involved in three risky things right now. I don’t know where they’re going to go. They’re all a little different. Last year, I challenged my senior leadership. I went to all the deans and said, “I’m an investor. I have a pool of money. Come to me with a proposal. You tell me what the criteria are for success, and then we’ll decide if those criteria match our criteria.” That was risky in a sense, because people aren’t accustomed to doing it. The responses I got showed me that it was a little far out. They didn’t get it.
This year I said it a little differently. I said, “I want to be in the top 10 in certain disciplines, or top 15 or top 20. Pick out a program, and show me how that program has the opportunity to be a top-tier program, what it would cost to invest in it, and why.” I’m waiting for those now. I would have loved it if a dean or a president ever did that to me. I was always going to them saying, “I have this great idea. Would you invest in this?” That confused them — that we’re a business. When I interviewed for the position, I remember saying to the chair of the search committee, “If this place is going to be successful, we have to run it as a very successful business,” because that will allow me to have the money to do what I am doing.
“For me, there are only two choices: You either maintain status quo, or you take leadership and take the risk.”–David Yager
Wind: Why don’t you push your experiment one more level and go to zero-based budgeting.
Yager: Actually, last year we did. And, [I told them] to turn back 10%. This year also we’re doing a zero-based and turning back 10%. But the problem is, Jerry, if you don’t have the background and experience —
Wind: They cannot relate to you.
Yager: Yes, they don’t know how to get to it.
Cho: Do you think it’s a language issue? You just said it yourself. You say it in one way, versus it’s the exact same mission, but said in a different way. Sometimes when I talk to educators, it’s about the language.
Yager: I think partly that is it. And partly, it is that people have avoided certain things. I think part of what I have to do, since I really believe culture rules over everything else, is that I have to get people in place at senior management and middle management who are going to take risks and actually push me. If I’m the only one who’s doing the pushing, that doesn’t make sense. They need to be pushing from their point of view.
What bothers me about large research institutions is they become so hierarchical. It’s one of the reasons I left the University of California. I realized I had two choices. I could be a provost or president of a large institution, and be part of killing myself trying to change the hierarchical structure. Or, I could go to a place that’s smaller, where I know I can do it, and where I could do it in probably three years. It was a very conscious decision. I didn’t want to spend the rest of my life wasting time, going through meetings and committees to get anything done.
Wind: This is the key to answering the earlier question about the challenge with middle management. “How do you empower them to make decisions?” We can address this by at least three things: One is by what David was talking about– changing the culture. Google has been very effective in doing this by allowing everyone to spend 20% of their time on whatever they want to. Two, there are tools for this. Three, create a culture of experimentation. You can ask each one of your deans, “Come to me next year with a zero-based budget and at least one major experiment or series of experiments that can get us in the top 10. You will not get your budget approved unless you bring this experiment.” Everyone knows that not every experiment will succeed. So the minute you do this, you’re basically creating a culture where people are willing to take risks. That’s the way you could deal with this major problem of empowering the middle management.
Yager: It always gets down to culture. If you don’t spend time building the culture, it won’t work. In my first, second and third town hall meetings here I put up just one slide. And that one slide said, “We”. I talked about why, if it’s not “us” together, we’re not going to succeed. That’s a cultural difference. You can’t be “those people over there,” the administration, the president. That kind of thing — where it feels like “us” and “them” — kills culture. It kills it in corporate America, and it certainly kills it in universities.
Wind: And silence. What’s killing universities these days is the silence.
Yager: Right. And silence. I physically get out of the office. I go to events. I know the students. I know the faculty. I fund things. When I first got here, someone came over to me and said, “Our jazz band was just selected to compete for the top jazz bands in the United States. They picked six. But it’s in Monterey, California, and it’ll cost us $25,000. So we can’t go.” I said, “What do you mean you can’t go? Get all the stuff. I’ll raise $25,000 for you.” So they went out there and they did an okay job. They were really nervous. It was their first time doing this thing. I sat through the competition and then I went to the band leader and said, “I have to go up to San Francisco for an event. I’m leaving. Let me know what happens, but you guys didn’t do that well.” Last year, they got invited again and I raised $25,000 for them. They were much better prepared. I flew out again. When they finished, I went to the back, and I said, “Matt, you guys won.” And they did win. After that they got invited to play at the Monterey Jazz Festival as the number one jazz band.
So, I was willing to help make a decision. I was willing to raise money. I was willing to take a risk. Some might say, “Why did you go out for the jazz band? You didn’t come to my event?” Or, “Why did you raise money for them? You didn’t raise money for me.” I get this all the time, no matter what I do. I’m a people investor, rather than a program investor. I need to have a person that I’m investing in in a program. I invest in people.
“They want to understand music, but they also want to understand the business of music.”–David Yager
Wind: That’s the same as venture capital. VCs invest in people. They don’t invest in a program.
Cho: That’s right. David. Usually when it comes to educational institutions, even though they’re doing wonderful things, they seem to be moving at a glacial speed. Your approach must be so disruptive to whatever system there was earlier. How do you instill that sense of urgency with your leadership team? And how do you make them feel comfortable, to have that courage to do so?
Yager: I try to do it in a number of different ways. I use data to show them what’s working and what’s not working. For instance, I have one top-tier program, and the data show that a lot of students are applying for it. They’re applying from all over the place. So we now spend less money on recruiting students. When I was interviewed, one of the questions they asked me was how was I going to grow enrollment? Even though I acted like I was throwing an answer off the cuff, I had done my homework, and I said, “Enrollment’s not your problem.”
They got very angry with me. A Fortune 50 CEO was chairing the search and he said: “How can you say that? Enrollment is our problem.” I said, “It’s not.” And I waited. He then asked: “Okay, so what do you think the problem is?” I said, “First of all, enrollment is a symptom. If you’re treating the symptom, you’re going to treat it every year. We have to treat the problem, and that will fix the symptom. But fixing a problem takes much more time, much more thoughtfulness, much more creativity, and much more energy. But we will get there.” So we’re treating what I consider a symptom of something.
Wind: So you need a combination of creativity and courage. The courage of conviction. A lot of people can come up with an idea, but they will not have the courage to go to the board and say, for example, “No, admission is not our problem.”
Knowledge@Wharton: In addition to creativity and courage, there’s a third component, and that’s passion. As you are pursuing the path that your creativity suggests and your courage allows you to pursue, you need passion to overcome all the obstacles that are going to come up.
Yager: Yes. The passion gets people to join you.
Cho: You have to have that charisma to drive people. There is a fourth component also. And that is, you speak as if you are the CEO of a Fortune 500 company. There’s a base of business knowledge that you have. How do you spread that amongst your students, among the faculty who perhaps don’t think that creative people should have this kind of knowledge?
Yager: When I first got here, one of the things I wanted to grow was our professional practice. But I got lots of push-back from faculty. They said they didn’t have the credit hours for it. So we had an alumni event in Los Angeles and I asked them: “What did you learn that made you successful, and what did we not do?” Every one of them said, “I loved the school. Best experience in terms of being an artist. But I didn’t know anything about the business when I left.” So I went back to the faculty and said, “These are the pieces we’re missing. We have to move in that direction.”
The first thing we did was to start growing our internship program. I’m a firm believer in internships, but professional internships where they’re not carrying coffee, they’re actually doing things. I recently hired someone who’s doing special projects for me. One of the special projects is I want an inventory of all our professional practices. I want to put it under one umbrella. I want us to start having courses that teach the business.
We have a very successful program called Music, Business, and Entrepreneurship. It started about four years ago. It has grown from 30 students to 200 students. They bring in business people. They bring in lawyers. They bring in accountants. They bring in finance people. They bring in thinkers. And why it’s so successful is that those kids identified early on that they want to be in the business of music. They want to understand music, but they also want to understand the business of music. I’m going to take some of that model and do programs on the business of art, business of theatre, business of dance. We’re still trying to figure it out.
One of the arguments I get from faculty is that a lot of our students don’t want to do that. My argument is that a lot of our students don’t even know what they don’t want to do. It’s the same thing with internships. They say they don’t want internships. But they’ve never done an internship. They don’t know how valuable it is for their career. Part of our job is not to let students slip through just because they say they don’t want to do it. Part of our job is to say, “This is really important.”