This Business School Will Change the World, if It Can Survive

Back Bloomberg Jan 7, 2016 By Natalie Kitroeff

A YouTube video of Milton Friedman was cued up on a whiteboard in front of 14 business school students late one morning in 2015. Before their professor pressed play, she turned to the class.

“Is my point in playing this for you that Milton Friedman is right and you should all memorize what he said?” she asked.

From the room came a chorus of loud “No”s. The professor, Donna LaSala, nodded. “It’s just one opinion among many,” she said cheerfully.

The students in the classroom were all masters in business administration candidates at Presidio Graduate School, a 150- student institution in San Francisco that bills itself as a progressive alternative to mainstream business schools.

The school offers an MBA in sustainable management, a certification tailored for people who want to use business to “create a more just, prosperous and sustainable world,” according to the school’s mission statement.

In theory, plenty of business schools pursue that mission by offering classes on sustainability and ethics and touting efforts to recruit a more diverse faculty and student body. But many would argue that elite programs have not yet reached their goal of grooming ethical leaders or diversifying their classes. Women made up 29 percent of business school graduates in 2015, and black, hispanic, and American Indian MBAs accounted for 15 percent, according to Bloomberg’s survey of more than 9,000 students who graduated in 2015. After a string of elite MBAs were nabbed for insider trading and other bad behavior in the wake of the financial crisis, researchers at top business schools built a coalition devoted to promoting broader ethical teaching at their institutions. In August, the White House invited hundreds of business schools to Washington and asked them for a commitment to enrolling more women and minorities.

While other B-schools work to expand their reach and shed their old boys’ club stigma (with some success—Bloomberg data show that the share of women in business schools has increased six percentage points since  2007), Presidio resembles the school they say they’re trying to become. Its current MBA class is 56 percent female, and ninety percent of Presidio graduates work in sustainability posts, according to Presidio’s president, William Shutkin. That can mean impact investing, working within a utility company on the renewables portfolio, or working in a mainstream grocery business on sustainable food sources.

But the school has sacrificed prestige and funding in pursuit of its vision. Presidio charges $65,520 total, about 52 percent of what a top-ranked business school does, and its graduates make a median base salary $80,625, compared with the $120,000 or more that students at high-earning elite schools made after they graduated in 2015, Bloomberg data show.

With less affluent graduates, the school can’t raise all that much from alumni to supplement its tuition revenue. The school gets 80 percent of its $4.5 million in annual revenue from tuition and the rest from grants. Shutkin said the school is desperately trying to grow. But Presidio doesn’t have the brand appeal of local competitors such as Stanford Graduate School of Business or Berkeley Haas School of Business, and it hasn’t yet captured the attention of do-gooders nationwide (80 percent of its students are from the Bay Area, according to the school).

The school has stayed solvent by keeping expenses low, Shutkin said: Students spend most of their time completing coursework away from campus, and show up for classes only once a month. The school has a small core of faculty, rents all its buildings, and doesn’t shell out for such things as lavish post- exam dinner events and end-of-semester open bars—mainstays at some top business schools. It has slowly expanded its student body, from 22 students in 2003 to a peak of 250 in 2011, as its name recognition has increased among networks of young people seeking to make capitalism a force for good.

At professor LaSala’s public finance class, a student with gray streaks in an unruly beard and wearing no shoes listens as one of his classmates explains negative externalities using Marxist theories. One woman, who has a pair of clogs resting on the floor and her legs folded into her chair, asks an off-topic question. LaSala squeezes the student’s shoulders and says she’s putting that thought in her “parking lot”—a spot on the whiteboard she reserves for issues she’d like to return to later. Next to the parking lot is a list of people who haven’t spoken up recently. “I know that some people don’t vibe off the energy of talking,” she says. The list of names is meant to convey gently those she might be interested in hearing from.

“They’re definitely not communists,” said Shutkin, describing the student body. “It’s not wide-eyed hippies wearing Birkenstocks. It’s not the stereotype.” Shutkin described his students as “mavericks” who are willing to take a chance on Presidio because they can’t find what they’re looking for–an intense focus on sustainability and ethical training–at typical MBA programs.

Most people who go to mainstream business schools seem satisfied with the moral guidance their programs provide. According to Bloomberg’s survey, 79 percent of MBAs in the class of 2015 strongly agreed with the statement: “I feel inspired to pursue an ethical career.” Only 1.3 percent disagreed.

Frank Teng, a part-time student at Presidio, said the people who are drawn to the alternative path he’s chosen are simply different from most MBAs.

“By going to Presidio, you are already making a statement. All the top business schools have been part of the problem, in creating the challenges we are currently facing,” Teng said. He chose Presidio, he says, because he wants to “work within the system” rather than protest it. Teng has spent the past seven years working in sustainability at Jones Lang LaSalle, a commercial real estate firm, but many of his classmates hail from activist, rather than corporate, roots. Presidio’s curriculum helps them learn how to talk to a crowd that may view them as outsiders. “It’s about understanding the issues enough to be able to speak convincingly and persuasively to [that] audience, to convey your passion,” Teng said.