Why business leaders should study history

Business leaders are better off when they put the consequences of their actions into perspective. So is everyone else.

What the hell am I doing here?

Two rows up, a teenage history major was arguing with a career intelligence officer about the origins of World War I. I was taking a break from business school to attend the Harvard Kennedy School of Government, and one week in, I was starting to wonder what the point was. After all, the name Franz Ferdinand doesn’t come up much in corporate boardrooms. Over the course of the semester, however, as we dissected the most pivotal foreign policy decisions of the last 100 years, a very different thought emerged: If only my MBA classmates were here too.

I now believe that there is no subject more important for business leaders to study than history.

Many of us were taught that studying history is about memorizing dates and facts, but that’s like saying studying math is about memorizing equations. What matters is how you use them. Mike Tyson once said that everyone has a plan until they get punched in the mouth. Business leaders are getting punched in the mouth every day in the form of competitive threats, customer demands, and quarterly earnings. How, in the face of this flurry, can they stick to the plan? How can they put their experience into perspective?

History can help. It offers an analytical tool for decision-making, a mindset for navigating a complex world, and a reminder to always expect the unexpected.

Leaders can draw on lessons from the past to address today’s problems. In Applied History for Decision-Makers, the course mentioned above, we analyzed the decisions leading up to events like the Cuban Missile Crisis and the invasions of Iraq and Afghanistan. In each case we sought to understand what information was available to the decision-makers at the time; what alternatives they considered; and whether, without the aid of hindsight, they made the “right” decision. Each time, the conventional understanding was shown to be a gross oversimplification. No one was surprised, for example, when a classmate defended Neville Chamberlain’s notorious appeasement of Hitler before World War II, a decision now regarded as a catastrophic mistake. Understanding the complexity of the situation helps us empathize with Chamberlain’s decision; knowing its consequences makes us less likely to repeat his mistake. Other historical cases offered lessons for contemporary issues ranging from climate to cybersecurity to US-China relations.

Studying history helps us escape the tyranny of the present. It reveals patterns across time that make current challenges more comprehensible and the future less unpredictable. A historically-minded business leader sees echoes of the past in the headlines of today. War in Ukraine, emerging technologies like blockchain and artificial intelligence, black clouds like inflation and supply chain issues, and the day-to-day volatility of global financial markets — these things may present serious challenges to business, but they are not unprecedented. Tech leaders and investors can find clues about the current downturn by understanding how previous ones unfolded. In doing so, they can avoid overreactions and chart a prudent path forward.

Finally, history teaches humility. Familiarity with past economic crises, natural disasters, and technological disruptions helps a leader remain cautious when times are good and to anticipate “black swan” events that are exceedingly unlikely and yet happen over and over again in history. The past reminds us to never take our position for granted, littered as it is with the carcasses of corporate giants — GE, Kodak, Blockbuster, Myspace — that believed that what made them successful before would continue to do so in the future.

The business world is historically illiterate, a problem that its leaders and the MBA programs that produce them have an obligation to fix.

Business leaders are obsessed with finding new tools to improve decision-making, from data analytics to silent meditation retreats. Why, then, do they so rarely turn to history?

First, they aren’t taught it. Business leaders disproportionately come from backgrounds in business and STEM subjects — in 2019, 36 of the CEOs of Fortune 50 companies studied these degrees in university — and likely haven’t taken a history class since high school.

Second, a business world fixated on innovation sees little value in looking to the past. Silicon Valley tells us that the answers to all that ails us lie in the future. “Move fast and break things” tells us that patience and reflection, virtues of the historical mind, are a death sentence.

Finally, if leaders do value history, they aren’t incentivized to use it. Quarterly earnings reports encourage short-term thinking at the expense of sustainable, long-term strategies, even though the latter is linked with higher performance and profits over time.

These forces have produced a business world that is historically illiterate, a problem that its leaders and the MBA programs that produce them have an obligation to fix. How can they get started?

Business leaders should consider an alternative to the New York Times test, which asks how you’d feel about your actions if they were covered on the front page of a major newspaper. Instead, use the “grandchildren test” — how would you feel if your grandkids read about what you did in your biography 50 years from now? This would help leaders put today’s decisions into historical perspective.

I’d also encourage business leaders to read broadly and encourage similar practices in their organizations, to hire diverse teams that bring a variety of backgrounds and familiarity with different histories, and to look to the deep reservoir of history to surface “new” solutions to today’s problems.

Not all business leaders will come to value history on their own, so MBA programs must make a point of teaching it. Doing so would cultivate leaders who are comfortable taking the long view and better understand the world in which they operate. They should also produce more business history research, which was the foundation of Clayton Christensen’s disruptive innovation theory. They can take inspiration from Harvard Business School’s Business History Initiative (sorry, GSB), a project dedicated to that work.

For the business leader, history is not a replacement for financial analysis or statistics or even gut instinct. It is a powerful complement to the other tools in her arsenal, one that enables her to navigate a complex world with more prudence and humility. Business leaders will be better off when they can put the consequences of their actions into perspective. And, I think, so will everyone else.