Making The Case For Capitalism
Maria |
October 8, 2024

In this episode of Business Casual, the hosts welcome Susan Fournier, Dean of the Questrom School of Business, and Marcel Rindisbacher, director of the newly launched Ravi K. Mehrotra Institute for Business, Markets, & Society. 

They explore evolving perceptions of capitalism among younger generations and discuss the institute’s goal to deepen understanding of the role that business and markets play in addressing societal challenges. 

The conversation delves into definitions of capitalism, its impacts, and the growing skepticism from the youth, alongside reflections on capitalism’s vulnerabilities highlighted in recent political discourse.

Episode Transcript

[00:00:04.370] – John

Well, hello, everyone. Thi s is John Byrne with Poets and Quants. Welcome to Business Casual, our weekly podcast with my co-host, Caroline Diarte Edwards and Maria Wich-Vila. Today, we have two special guests to talk about capitalism. Yes, 40% of 18 to 29-year-olds view capitalism positively. According to a recent study by the Pew Research Center, it’s the lowest share in any age group and 33 percentage points lower than the share of those 65 and older. We had run earlier, a couple of years ago, an essay by the former dean of Columbia Business School, who said that even MBA students are now questioning capitalism and what its consequences are. And across town from Boston University, at Harvard University, a new student-led group is devoted to, let me say it, end capitalism before it ends us. So joining us today is the Dean of the Questrom School of Business at Boston University, Susan Fournier, and the head of a new center. The new center is called the Ravi K. Mehrotra Institute for Business, Markets, and Society. It’s launched to bring a deeper understanding of the contributions that business and markets can make to the world’s biggest societal challenges.

[00:01:41.210] – John

We have with us Susan Fournier, the Dean of the Questrom School of business, along with the new director of the center who had formerly been a senior faculty member, the Senior Associate Dean for Faculty and Research at Questrom, Marcel Rindisbacher. Well, welcome. Tell me, Susan, do you think capitalism is in trouble?

[00:02:05.730] – Susan

There’s an academic answer that comes first, which is how are we defining capitalism? I don’t think we need to debate who owns the means of production, which is back in a classic definition. But when you get into, I think capitalism as a term has with it an umbrella about the markets, the role of the markets, whether those markets are equitably benefiting all of the players, employees, and communities as an example, or consumers. And so I think capitalism has come to be known and founded with markets that are relatively free, although there are no free markets either, because they all have some regulation in them. But it’s come to be a catch-all for an us versus them, bit of a mentality about big business and the marketplace and confound it in there with monopolistic behavior and inequitable results for different stakeholder groups. So when you put it in that public context about how people talk about it and what they think and what they put under that umbrella, I think it is in trouble because it’s been connected and brought together with all kinds of societal ills.

[00:03:45.560] – John

Now, you have here three unabashed advocates for capitalism. And I should note that it was interesting that in a recent economic speech, Kamala Harris made clear that he is a capitalist, which does suggest that there is some vulnerability to the concept of capitalism. But why now, incidentally, for your Institute for Business, Markets, and Society? Why does it make sense at this moment?

[00:04:18.720] – Susan

I have to respond to the Kamala Harris point because that was one of the most quotable lines of that speech, Hey, I’m a capitalist. I think what she was referencing is a point, Hey, it’s election time and we’re going to try to move people with opinions. But some of the policies she’s put on the table, which seem to be government, government, government funding, And she wanted to be stating that, no, I do support business. I do believe business has a role to play in the marketplace. And I wouldn’t just be taxing and interfering with competition. So I think that’s another example of what do we mean when we’re saying, I am a capitalist? It leaves a lot of room. So sorry, your question was, however- Why now? Why now? I mean, honestly, some of this sentiment has reached a pitch, a fever pitch. And I think we’ve also been in maybe it’s since 2008, and when we had meltdowns of the markets, but we have a lot of instances on the table, high tech in the crosshairs, Google in the middle of a, let’s significant court case. We have a lot of negative anti-business sentiment about paying taxes, not paying taxes.

[00:05:58.800] – Susan

So that is growing, growing, growing, growing. And I think the tipping point maybe for Marcel and I is when we started to see the data among younger people really kicking in and saying, no, this is not a viable system, it has to go. Why now? We’ve got a paradox. At some level, people trust business more than they do other institutions. Trust in religious organizations is even lower. Trust in the government is even lower. But trust in business, nonetheless, is not, while higher than those, it’s not at a level where we would want it to be If we’re going to lead business schools. I mean, I’m the dean of a business school. We have 2,500 undergrads here. We have nine other programs of students. We have a mission to prepare the business leaders of tomorrow. It feels that perhaps we’ve been failing in our mission, if these opinions exist, of just trying to better understand and have a deeper appreciation, if you will, for what we mean when we talk about the role of business that goes beyond the simple, maybe the utopian, maybe the purely ideological, and that we have a responsibility to help leaders of today and tomorrow better understand what we’re talking about with your very question about is capitalism a problem.

[00:07:46.670] – John

Yes. I want to also point out that it’s common for business schools to launch centers, but it’s uncommon for a business school to launch a center as well-funded as this one. The The roots of it go back to a presentation that you actually made to your chief benefactor for this center, which showed a scale that was unbalanced. Then on one side, you had the criticism of business, which is executive compensation that’s too high, shareholder primacy, unethical leadership, income inequalities, loose regulations, corporate greed, tech monopolies, greenwashing in excessive profit. Then the praise, which was rather diminished in the scale. Business fuels innovation, business solves grand challenges, business has an engine for prosperity. When your benefactor saw this scale that you showed him, he said, That’s it, you got it. Basically, you found your donor for this new initiative, right?

[00:08:55.510] – Susan

Yeah, John, I will add we have other donors for this initiative initiative. He is our naming donor. So he was not the first one to resonate with that graphic. We had been on the road, if you will, for a year and a half, maybe more, talking about these general issues. And everybody pounds the table at that graphic and says, Yeah, this is just way too simplistic. Bad, good, one side higher, one side lower. The story is much more nuanced and much, much, much more in need of deeper understanding. Business does have, historically, I mean, throughout history, an incredible role to play. Business and the markets in which they operate, the capitalist markets in which we operate, help lift individuals into prosperity, help lift entire nations into a better place, and help address societal challenges, advance COVID vaccines resolve energy transition problems. So that is… I mean, anyone in business knows that business has an incredible role to play. And so do the markets in which we have competition and we compete. So that is the essence of the conundrum here. Let’s understand these things a lot more deeply. They are nuanced. And they are very complicated.

[00:10:32.790] – Susan

And business is a player in a big system, and arguably the system isn’t working optimally. So how can business as the center for agonist, because we’re a business school, how can we act within a system in which we operate and that sometimes has problems? Governments fail, markets fail. How do we make that the whole thing better so that that balance can be righted.

[00:11:06.050] – John

Caroline, what’s your sense of all this?

[00:11:08.340] – Caroline

I’m really curious about why this change has come about. I hadn’t seen those statistics before I read your article, John, about the perception of capitalism among young people, and it’s pretty shocking. It’s very different from my generation, I think, and you explain that in the article, that older people tend to have more positive views of capitalism much more than the younger people. I’m curious about why this has come about. And one thing I’m wondering is, do you think that social media hasn’t had an impact? Because we know that on the social media, typically things that are negative, things that generate fear, negative headlines typically grab people’s attention more than positive stories. And I think a lot of news organizations and media and people out in the blogosphere and so on, are exploiting that. And so do you think that social media is having an impact on how young people perceive capitalism and what can business schools do about that? Because I think there’s also a trend of young people not getting their news so much from traditional news media in the same way that previous generations may have, getting their news from social media and from different sources than people might have in the past.

[00:12:31.350] – Caroline

So how can you, as a business school, counteract that?

[00:12:36.210] – Marcel

I would say that misinformation or incomplete information plays a big role, because I think when you really try to go a bit deeper about them trying to understand what drives this opinion, I think people are very quickly to articulate things that do not fully describe what the pillars of capitalism are. But I think it’s There’s another effect there where also maybe the older generation has had the luxury of having have direct comparison with East Germany, West Germany. After the wall came down in Europe or so, there’s not really a socialist type of economy that you can point to and compare. Then in that perspective as well, when you think a generation that was born after 1990, ’90s or so, there’s the financial crisis in 2000 to date. There’s documentation that real wages don’t grow. There’s this perception that with big business having influence on the political system, you’re not represented. That’s very much resonated also in some recent books by Nobel Prize winning economists like Joseph Stiglitz and so on to postulate that something has to change. It has to do with work by Angus Deaton about really the life expectancy in the US that has been declining.

[00:14:06.130] – Marcel

Somehow this ideas floating around may have provided an amalgam where people just don’t see very clearly anymore, what are the real trade offs? What are the real choices? What is the unobserved trajectory that you would have if you would fundamentally change the system? I think from that perspective or so, what we are really trying to do in this institute is really to first teach the pillars and then really describe the trade offs such that people really understand what are the choices you have. I think if you get most of your income in terms of labor income, yeah, you don’t do as well as if you get your income in terms of capital income with the globalization and so on. There has been a divergence between the two. The younger generation is more affected by that. But that doesn’t mean that basically by turning around into a completely different system like socialism, that would be much better. I think this is the… We may have sometimes utopian conversations about what the alternatives are, and maybe the younger generation is like many young generations trying to find something new. They’re buying into a narrative that is probably a little bit utopian.

[00:15:23.460] – Marcel

I think our mission as an institution, higher education, is really just to have really frank discussions and really clear education where what this trade-off ultimately would be. As such, help them to understand better. Maybe it’s not as simple as I thought when I said, I don’t like capitalism.

[00:15:45.090] – John

Well, Maria loves capitalism, don’t you, Maria? What do you think?

[00:15:49.730] – Maria

I do. It’s interesting that you mentioned the early 1990s as a really pivotal point and the fact that today’s MBA students were probably born after, or if they weren’t, they were certainly too young to remember. I actually was able to visit the then Soviet Union in early 1991, about nine months before the dissolution of the Soviet Union. I have to say that any romanticized notions that I had about an economy run in that way was pretty quickly dashed by seeing the realities on the ground of what my host family was an exchange program. So what my exchange family had to do just to get basic groceries, it was really eye-opening. And so today’s youth, they don’t get to see any of that downside quite so much as perhaps we had access to all those a couple of decades ago. So that was a really interesting point that you made. But yeah, look, I love capitalism, but I also acknowledge that capitalism fails to account for certain externalities, particularly we’re seeing now, primarily with the climate, more than anything, being an increasingly urgent issue that has not been taken into account. But I am also hopeful and optimistic that the same capitalism that brought about this negative climate situation in which we find ourselves will also hopefully be the engine that will help find the solutions to this.

[00:17:22.240] – Maria

So my question is, I see that there are three pillars to this, the new institute Out. Specifically for the MBA students, how do you envision this mandate playing out in a pragmatic sense with what the MBA student experience will be? Is it going to be a formal class that will be introduced, maybe perhaps a small elective that will be offered, or is it more trying to integrate this messaging throughout the curriculum?

[00:17:57.080] – Susan

Interestingly, we are starting with the undergraduates. This is where the issue seems to manifest the brightest, I think. You change a lot from when you’re 18 years old to when you’re 28 years old and you’ve worked and you’ve seen how the world works a little bit more, right? So one thing that we are doing is absolutely bleeding some of this knowledge in these economic foundations and a better grounding in how it works. And a more acute lens on even, for example, let’s go back to another factor, the business roundtable. When they came out and said, We’re changing the purpose of business. And it is no longer about shareholders, it’s about all stakeholders. We came out and said that. And what we see is people Marcel, pick that off. Marcel used the word utopian and a lack of sensitivity to the trade offs. I mean, how do you have to balance all of this? And it is a set of trade offs. I think that the MBAs are more able to handle that and rationalize through that. Whereas with the people who come in to their first class in a business school, right out of high school, they don’t yet have formed, what is the role of business?

[00:19:34.170] – Susan

What is the role of competition? What is the role of markets? What about the alternatives? What about this idea called stakeholders? And how does that even work? And how does it all come together? So we have a required course that we’ve always had for anybody entering into Questrom that was always appropriately titled, business and society or something of this nature. And we are in the middle of one month in to launching a completely new version of that class that really starts at… It has strong economic foundations throughout But it’s also different than just an Econ course because we’re business school. So it’s a business economic point of view of this. And it takes people through to really help them understand this whole system, this system view, and to take the entire semester and ground them in that. The other thing we’re doing is we’re taking back, again for undergrads, we’re taking back Econ one and Econ two. And we’re bringing them back inside the business school. And we love our economics professors. They’re incredibly well-accomplished department in the College of Arts and Sciences. But in that point of view, business is almost an afterthought. It’s certainly a black box.

[00:21:10.600] – Susan

It doesn’t really enter into all of the things that they teach in micro macro, except maybe as cost related something somewhere. But business isn’t there as a protagonist in this big act play. So we’re also bringing those two courses, which are also required back inside. So now you have a three, four. Then all of those foundations will get carried through in other required courses that we’re going to teach or in elective throughout the curriculum. So I wanted to just cover the undergrad side in its full splendor, because it seems to be the scale problem, the naiveté most significantly. And maybe, again, I could kick it back to Marcel because he’s been involved in this curriculum renovation in this course called Business, Markets, and Society.

[00:22:10.790] – Marcel

Yeah, I think what we really try to do is really teach the pillars of capitalism. For example, before we talk about how capitalism fails and what has to be changed or can be changed to improve the system. Because in the past or so, it’s an intro course. We had maybe a teaching that was really very simplistic, stakeholder, Milton Friedmann, all that’s from the past. Now we do stakeholders. We start really thinking through about what the real challenges are when you want to do that, because there’s a whole theoretical underpinning why shareholder maximization is something that you can use to align what managers do and what owners or shareholders want them to do. Then when you want to go to the next step because you care about other aspects, which I think a lot of people, also including shareholders, do. The question is, how do you do that? And these answers are not so clear. And I think to understand the complexity and also just to advance as an institute, really the theory of what you could call the political economy of business that really thinks about this in a very deep way, that’s also in a direction that we would like our students to start to think.

[00:23:26.570] – Marcel

And then when they go and work, that they remember that this This is something that them is not so simple. Because I think, again, undergraduates are ideal to do that because I think my observation having many children, is like they are very well understanding the political system. They are very much understanding parts of history. But economics is not really taught in a very thoughtful way in high schools. I think in general, I think this is a fundamental problem to understand them Then how the economic system interacts with the political system within the economic system, what is the role of business? And as Susan said, in traditional economics, we talk about the production function or costs. But basically the institution business, the way it makes a decision, the way it interacts with the political system and all of that is probably not emphasized enough. Then when students go and work, they start to realize, Oh, a lot of this is much more complicated than I thought. And I think it’s our duty to try to prepare them. For the MBA students, I also say that I think all what we do in that institute is hopefully creating a environment where students just really start to actively engage in constructive dialog about these things because there are a lot of aspects of the things that we’re trying to discuss that don’t have clear-cut solutions, but that are challenges to really improve the capitalist system and then really have people engaged, but with thoughtful interventions and discussions.

[00:24:59.580] – Marcel

I I think the hope is that basically, we have a signature feature of all our students when they go and work somewhere, people could say, Oh, I appreciate the question student because he has really had a real exposure to these questions and can make thoughtful contributions to think about solutions.

[00:25:20.570] – John

It seems to me that the institute has an inside-outside approach to this. In addition to the fact that you are trying to engage your current undergraduate students in this debate, you also have a communication strategy to get broader reach outside your own students and to do faculty research, which, of course, then would result in a broader discussion outside the school. Marcel, could you describe those efforts as well?

[00:25:52.570] – Marcel

So one effort that is way under its way, we have, I think, in about two weeks, nine episodes of a podcast that is called Is business broken? I think that should give you some insights about what we’re trying to do. So they are on basically questions about exactly how do business and government regulation interact? What are the challenges? Four episodes are on ESG investments, then two on basically changes to the payment and innovation model for gene and cell therapy, where the traditional model with FDA approval and so on is just not working anymore. It’s a really interesting example to emphasize what is the role of the government and what is the role of business and how do they interact. Now, basically, the last two episodes that are planned is on misinformation on social media platforms. It’s this fascinating situation that on platforms you can publish what you want because it’s protected by free speech in contrast to newspapers. Then the question is, how regulate that? It’s not so easy just to say the government should regulate that because that is immediately against the second amendment of free speech. There are other ways you can do that.

[00:27:10.890] – Marcel

We have a faculty member here who’s actually doing research on how this could be solved. Again, this is an interesting example of where you can say that the real societal problem, it’s such that maybe just say, That should be regulated. That cannot be easily implemented or may also not be the best solution. But then you can think about, okay, what else could you do? Are there market innovation type or market making type of mechanisms that you could implement in platforms to really address that? That’s a big part of the communication strategy to be visible to the outside. The other things we want to build is basically, at the end of the day, it has a lot to do with business as an institution. I think trust in institutions, be it political institutions or businesses, is an part to really understand what may work or may not work in capitalism. What we’re trying to do is we try to use large language models and AI and build a business sentiment index that extracts how the perception of various stakeholders for business varies over time. Then we’re also trying to build, actually, because we also think that this public discourse and constructive dialog is very important.

[00:28:29.780] – Marcel

We also try to to build an AI-supported learning platform where you can really play in terms of dynamic case studies, examples where you see how this different groups, government groups, advocate groups, competitors in an industry have to interact to solve certain problems. We believe that with this asset building or so, we can also make an impact to research, but also education. Then we have also very specific research proposals that we are vetting that will support in terms of really advancing what hopefully will become the theory of political economy of business down the road. That’s a very ambitious goal, but we want to be ambitious. We are well-endowed, and we believe we can really make a difference here.

[00:29:20.960] – John

I wonder 10 years from now, when you look back on what you will have done, how will you measure the success of the institute and the impact that it might have? Ten years from now, what are you hoping to have happen? Susan?

[00:29:37.520] – Susan

I would start by where we just left off, that we will have a more informed group of future leaders graduating and walking out of the Questrom doors. I love what Marcel said, that from our conversations with companies, corporations, organizations, they really see value in what we’re doing. If people are branded with this a thoughtful emersion in these issues and they understand better the role of business and what it can be, should be, is, they see value in that. So my first wish is that when people leave here, they are known to have gone through an eye-opening education that really grounds in the role of business, and that they’re much better able to take and make real the mission that we have to create value for the world through business, because they better understand how to leverage it and what it is and how to make that happen. So that, to me, is the first sticky metric, is that the students are sought after and are stronger for the experiences they’ve had in the classroom and outside the classroom. The other thing, I guess, if we’re going to go 10 years, maybe we need more, like 40 years, though, Marcel.

[00:31:11.010] – Susan

We do have a really grandiose mission goal, which is to provide a real strong theoretical case for capitalism and business in capitalist markets. You can say to say that that potentially is lacking. That’s actually we had Larry Somers as a keynote speaker at our launch event, and he said that. He said, the strong, strong theoretical case hasn’t been made for this view that is more attentive to the system-wide reality of what business is inside the competitive markets. So way down the road, I think, if we’re contributing Taking that theoretical foundation to guide work in a way that theory, quote unquote, of stakeholders isn’t able to do. It’s not concrete, it’s not tangible. Is there a theory of trade offs? I don’t think so. Is there a theory of primate? I don’t think so. So can we get there in this incredibly aspirational way. Then in between, I would hope that we can deliver better every year on what Marcel talked about, having those debates, those public discourses, those episodes of the podcast, where all of this comes together. And each year, those get richer and richer because more people want to participate in them. And when we have events that packed because people want to hear this, and they want to understand, and they want to move us forward.

[00:33:07.970] – Susan

I mean, I loved Maria’s point about being there on the ground to see what alternate systems are for. So can we have those discussions that help open our eyes? That’s what I would love. And it will, therefore, take many, many decades.

[00:33:27.180] – John

Caroline and Maria, any final thoughts?

[00:33:30.520] – Caroline

I’m curious what the reception has been from students, both undergraduate and then in the MBA program, and then also from alumni.

[00:33:39.650] – Susan

Well, alumni are responding with support. We do, as we mentioned, have a naming gift to support the institute, but that’s not all. So we’re out there with alumni and non-alumni who really believe that there’s work to be to be done here. I would say in the business communities, the reception has been really strong. Yes, please. Let’s work on this. This work needs to be done. I think in the student reactions, we’re just starting. Marcel, do you have any early feedback?

[00:34:19.870] – Marcel

We have definitely students who come and ask, What can we do? How could we get involved in the initiatives and so on? Because I think it’s also to be fair, there are a lot of undergraduate students that come to business schools or as MBA students because they want to be successful in business and they see that there are challenges there. They understand that basically purpose is an important part. Then having maybe the toolset and the knowledge to really debate these issues in a more deep and sophisticated way that gives them leverage also in their job searches and all of that and their impact they can have because they want to really contribute to society by following their career path and so on. I think that resonates well. Obviously, the question is, what is the perception of people also outside of the business school? Or so is there really a general education purpose there that we can make more impact? Because I think it’s more important to probably also try to have a message for the public in general about these issues because I think there’s a lot of half baked answers out there that people, even in political debates, jump on.

[00:35:32.210] – Marcel

And then the content of or the quality of a lot of the discussions, even about this election from an economic policy point of view, I would hope that this is a bit more sophisticated and deep than it is. And I think if we can be through podcast and so on, reach this general public, then that would really be a success.

[00:35:52.920] – Susan

But that’s a high point to come. I love that. I mean, we’re part of an ecosystem at BU with 19 schools and colleges. So a measure of success is when other schools and colleges are working on big problems, that they come to us for our inherent and powerful role in affecting the solutions of whatever they’re working on, whether it be bringing very expensive gene therapies to the market or solving the misinformation problem or any other issues around sustainability or whatever, that they see business as a key protagonist in those solutions.

[00:36:37.880] – John

Maria, you have anything to add?

[00:36:39.880] – Maria

No, you both touched upon what my next question was going to be, which is, I think it’s great. It makes a lot of sense that you’re starting with the undergraduate who are enrolling in these economics and business classes, but on some level, you’re preaching to the choir. They might be a slightly skeptical choir given this generation, but it is still people who are interested on some level on business leadership, management, et cetera. So my question was going to be, do you envision interacting with the other schools within the broader university community? And it sounds like that’s part of it because that’s the audience that I think really does need to be reached. And also bringing those different perspectives into the fold will be really beneficial in terms of figuring out, well, so what does capitalism do? Where does it go from here? So that it does continue to bring the benefits, but it also takes into account some of its less savory aspects. And I think getting to those solutions is going to involve incorporating those different perspectives and bringing everyone into the fold. But sounds like you guys are already thinking about that. So that’s fantastic.

[00:37:43.250] – Susan

Yeah, we are. And I would also temper a little bit on the preaching to the choir. You would be amazed how simplistic people think about this. And you say mission driven and what that means to them and what what the role of profit is, and the prophet is bad. And it’s not all the choir at all. It really isn’t. So I think It is this simplistic view. And when I first came to this school, I remember the intro case for the course we’re talking about was about about what was the car that had an acceleration problem, but they didn’t fix it, which I don’t know. Anyway, they were teaching the case, and the case was this is how business people think. This is in the business school. There weren’t enough deaths, so it didn’t make sense to fix the problem. This is how business people think about their products and their products. This was our intro case. You have a really different choir if you’re having this a point of view from the minute you start. I think, yeah, I would say it is absolutely outside inside and work on all sides.

[00:39:13.340] – John

Well, let me thank Susan and Marcel for our discussion on capitalism. If you want to know more about the Ravi Mehrotra Institute for Business, Markets, and Society, you can check out the Questrom website, or you can refer to our story, Making the Case for Capitalism, Questrom launches a Well-Funded Mehrotra Institute. For all of you out there, I hope we made you think a little bit more deeply about capitalism, its benefits, and maybe even its negative sides. Thanks for listening. This is John Byrne with Poets and Quants.

Business School News | General | P&Q Podcast "Business Casual"
Making The Case For Capitalism
Maria |
October 8, 2024

Full Episode Transcript:

John Byrne: [00:00:00] Hello everyone. This is John Byrne with Poets and Quants. Welcome to Business Casual, our weekly podcast. We want to talk about international students. Schools are now reporting that a good number of their international recruits who were admitted to programs this fall haven’t been able to show up or have changed their mind.

At the University of Illinois, the school, the Gies College of Businesses, lost about 200 international students in its Master of Finance and Master of Business Analytics programs causing a $7 million hit. To their budget at UC Davis Graduate School of Management, 40 students didn’t show up who were admitted, and that’s resulting in two and a half to $3 million hit on their budget this year.

Both of these things have occurred before the announcement of a hundred thousand dollars tax on H one B Visa. Which will make it more difficult for many employers [00:01:00] to hire international students and keep them in the US for an extended period of time. And we’re getting the new class reports of the, of the new cohorts of students who’ve arrived on campus in the fall of this year.

And Carnegie Mellon is. Down 30% for their international cohort over the past two years. UCLA Anderson School is down 25% over the past two years, and schools are preparing for the worst because of the H one B Visa decision which could affect future employment. Caroline and Maria, my cohosts are in the market helping people get into the best schools in the world.

And Caroline, what do you think?

Caroline Diarte-Edwards: Yeah, definitely seeing concern among international candidates and people holding off on applying for the US schools. So it’s really a shame. I think the international schools, particularly the schools like Inea and London Business School and the other top.[00:02:00]

International European programs will benefit, they’ll get talent that might otherwise have come to the us, which is great for those schools. And I’m very fond of those schools, but it is sad as from the US perspective for sure. On the other hand, you could also take the perspective that.

If you do have options for your career post MBA that don’t require that you absolutely have to stay in the US as an international candidate, then now could be a very good time to apply, right? Because definitely application volume will be down and schools will be perhaps. More open to candidates that might otherwise have been waitlisted or rejected in the past.

For some candidates, this is actually a fantastic opportunity to get into a top school, but from, for, at least from the school’s perspective, it is a shame because, I’ve experienced firsthand the value of a very internationally diverse classroom and the value that brings with a [00:03:00] diversity of perspectives that enriches the learning experience so much for everybody.

Enriches the debate and bring so much to the academic experience as well as the the network and the social experience. So it’s everybody’s loss, right?

John Byrne: Very true.

Caroline Diarte-Edwards: And I think it’s a very myopic perspective that the US government takes that. There needs to be a more of a refocus at US educational institutions on the domestic market because those international applicants bring a lot to the domestic students in enriching their learning and enriching their network.

Of course bring a huge value to the US economy when they stay. So there are very impressive statistics on the value of immigrants to the US economy. So Indian immigrants, for example, are only about one and a half percent of the US population, but they have founded to date about 8% of all the tech startups in the us.[00:04:00]

And for sure some of that top talent from India will now not come to the us. They will go to perhaps they will stay at the great schools that we’ve talked about in India, or they will go to other international schools. So for sure it will be a loss to the us learning experience and to the US economy.

John Byrne: Maria, you run applicant lab which is a platform that helps applicants get into highly selective schools. And many of the people who use your product are international students. What are you seeing?

Maria Wich-Vila: Everything Caroline is saying concern is think a delicate way to put it.

And I think it’s because as the more affordable provider in the market, I tend to get the applicants who maybe they don’t have the family business to fall back on. Maybe they don’t have, large sources of income elsewhere in their lives. And so I think the concern is very real and very merited, right?

I can’t. In good faith, tell someone, if they [00:05:00] really start, sit down and do the math and start to do, run the numbers, if they just assume that things are going to stay as is. And this is the big caveat that I’m, I want to get to in a second, but if we assume that things stay as is and if someone really is from a lower income tier from Nepal or India or some of the other countries that I work with, yeah, maybe sit down and do that math and think about, okay, if I do have to come back to Nepal afterwards, how will I pay back that loan? There, there is though some good news. Even if we assume that things stay status quo, which I hope, and I’m pretty, I’m I think it’s, I’m cautiously optimistic that they won’t.

But there are other markets as well. So I’ve had a lot of candidates, or former clients, I should say, graduate from business school, not be able to get jobs in certain in countries and then. Being able to move to Dubai. Dubai for some reason, has started attracting a ton of candidates, primarily from South Asia but from other parts of the world who might be having trouble getting some of those work permits.

You could do worse than live in, Dubai’s not perfect, but [00:06:00] you could also do worse than live in Dubai, right? The salaries are pretty high. The standard of living, if you have a white collar job there is, it’s not the worst outcome. So it’s not I can’t stay in the us. That’s it.

There’s no other it’s not a binary of, it’s either the US or it’s nothing. And then I think the second point is I, we’ve just seen. So many things, let’s take something from a different facet of policy. The tariffs, right? The tariffs were announced and the markets went crazy, and in the months that have followed, oh, actually, here’s the tariff, but this one company, their products aren’t gonna be subject to the tariff.

And then there’s this other company that maybe they’re not gonna have to pay the same tariff. And I can’t help but wonder if some of these. Some of these very large companies that are getting tariff exemptions, their ability to lobby for. The H one B, maybe lowering of the H one B fee. If they’ve been able to successfully lobby tariffs, they might be success, able to successfully lobby against these, true, these [00:07:00] visa fees.

And a lot of these big companies, these big tech companies are in fact some of the largest employers of post MBA talent in the us. So I am cautiously optimistic that. This could be, hopefully right now it’s the big, the flash and storm and the, the making, the big splash, right?

Everything’s about showmanship and making the big splash. And maybe in the aftermath of the storm, that initial PR media storm, maybe the reality will start to calm down a little bit. Yeah, the other good news is that if you’re applying now, that means you would enroll in 2026. You would, if it, if you’re talking about the US two year program, you would graduate in 2028.

At that point, who knows what might happen. I like to think that what we have seen so far in terms of the Visa policies, hopefully. Roughly the floor about as bad as it can get. I think if they start implementing a similar thing to OPT, that could be the same thing. But if we just assume that okay, right now what’s been announced is that these foreign students all have to do, you can’t stay here, you have to [00:08:00] go someplace else.

It, we assume that’s like the initial negotiating position. It’s just gonna chip, it’s just gonna get, it’s got nowhere else to go. It’s even worse. So we’ve, we now have two and a half years roughly until. People applying now would have to really implement, or be really affected by this in a.

In a pragmatic and tangible way. And so that’s why I’m hoping that the little chipping away and the chipping away things will start to get a little bit better and a little bit better and a little bit better like we’ve seen with other facets of policy. Didn’t like a bunch of the CDC employees that were all fired under Doge didn’t more than half of them I think were recently rehired.

Yes. Back again true. Whatever you think of the policy, it seems like some of the policies are. Being slowly walked back. And so I think if you. If you’ve got an adventurous spirit, I, and by the way, if you apply now, sorry. I know I keep going, but I like, if you apply now, let’s say you get accepted, you don’t have to show up until August of 2026.

So that will give you [00:09:00] time, like definitely. Apply now and see what happens between now and August of 2026 to make the decision to not apply now, because you’re rightfully scared. I’m not blaming anyone, but to not apply now, maybe by maybe six months from now he’ll be like, ha, just kidding. I’m doubling the number of H one Bs.

Yeah, we have no idea what’s gonna happen. So things are So give yourself that optionality.

John Byrne: Yeah. And things are so uncertain that could very well happen because, one day at tariffs are on one country the next day they’re not one day they’re pausing the ab the interviews for student visas, the.

Say they’re not there’s litigation all over the place, challenging many of the presidential actions that have been taken that have put them in limbo despite all the headlines. So it’s, it, there’s more uncertainty than there is certainty about any of these things. And as you point out, you, if you [00:10:00] did apply this year, the odds are gonna be in your favor if you’re an international student, frankly, because there is no question.

That international applicant volume will be down at all the top schools in the us, which means that to maintain some semblance of a global class. Admission directors are going to have to dig a little bit deeper into their international applicant pools to select candidates. In a way, if you play the long term and in the BA, in, in many graduate degrees or long term bet, I think you’re gonna be.

Oddly better off. And it may even be that the schools will really even go out of their way to help international students in ways that they haven’t in the past because of these actions in Washington. And what do I mean by that? Just a more welcoming reception than the already welcoming reception you would get hiring immigration lawyers and people that can help you.

If in fact there is a [00:11:00] challenge of one kind or another. I think the takeaway is not to be discouraged and throw up your hands to say, ah, I always dreamed of coming to the United States and getting an MBA or a graduate degree in business. Use this as an opportunity to actually increase your odds of getting into a better school with the understanding that when you get out there, probably most likely be an administration change and a change in these policies if they even get completely adopted as Maria points out.

Wouldn’t you think that’s the best strategy, Caroline?

Caroline Diarte-Edwards: Yes, I agree. I think that it’s good to take a longer term perspective because it is such a long timeline, right? If you’re applying to a top two year program as you say, you’re gonna be coming out of the program at the end of the Trump presidency and things may look very different.

And Maria rightly points out that. Everything is very volatile, right? So one thing gets announced and the next week it [00:12:00] gets rolled back, right? They’ve done so many things where they’ve realized, oh, actually that was a really bad idea after all. So

They’ve changed things. So things may not it might, may not turn out to be as bad as we fear.

And then I would also encourage candidates. To apply to the US schools, but why not hedge your bets and apply to an international program as well? Agreed in a time of uncertainty. As Maria said, create options for yourself. And so I would encourage candidates to apply to the top US programs, but also apply to top international programs as well and see what offers you get.

And then you can make a decision. As Maria said, it will be closer to the time when you would be starting the program and there may be more clarity about the situation in the US and what your options are in international markets as well. So I think that given the current circumstances, a good strategy is to hedge your bets and apply more widely than you might [00:13:00] have otherwise done.

John Byrne: Plan Bs are good. Let me just say business schools in the US have for years advised international students that those should have a plan B in the event that they can’t get with a US company. The other thing to, to keep in mind incidentally, in terms of MBA employment is that most of the companies.

That basically employ the lion’s share of MBAs are all global concerns. So you can be hired here and if there’s any challenge in getting you employed here in the us you can simply start in an office outside the United States with a hope of coming back when things clear up. So that is also another important thing to keep in mind.

And I’ll just say this. Despite whatever messaging you’re reading in your local newspapers or on your streaming platforms or television stations about how immigrants may not be welcome in the us that’s not true at all. Universities are diverse places. Welcoming. [00:14:00] Embracing loving the diversity of their students and particularly those from different cultures and backgrounds that enrich the educational experience.

There is no Dean that I’ve ever encountered who said they want fewer international students. It’s the exact opposite. They’re putting out message after message, telling people that they’re still welcome and wanted. Needed in the classroom. Now, Maria, in the past we’ve seen applicants who try to say, okay, can I time my application and my enrollment in a program to what I think might be the next recession?

And we know that in recessions applications go way. In part because some people lose the opportunity to gain advancement in a recession. Some people get unemployed. Some people just realize, hey, a recession is a good time to take a time out and get a new educational credential, which may allow me to do things I otherwise can’t do.[00:15:00]

But it’s almost impossible to time a recession and I’m imagining it’s impossible to time what’s going on here now.

Maria Wich-Vila: Yeah. I mean if we could all time, when everyone’s been talking about a stock market crash that to, not to bring another disparate topic in, but like everyone’s been talking about, it’s a bubble.

It’s a bubble. I’ve been hearing ’cause a bubble for a year and a half. True. Yeah, you can’t time or ask, for example, ask the people who enrolled in business school, like who got into business school in 2020. Like there’s always gonna be these external shocks. We can try to predict a recession, but who knows if it’s going to happen?

Who knows if there’s going to be some sort of virus or the opposite of a virus. Maybe there’ll be a virus that helps us all live healthily forever. Who knows? There’s so much uncertainty out there that who knows what to do. So I think. I think yeah, have that optionality. I think go ahead and apply.

Now if there is a recession though, which everyone seems to think is coming at some point, at that point, it’s going to be harder to get accepted. And as Caroline has pointed out, so rightfully, if other international, high quality international students are [00:16:00] spooked by the current H one B talk, now is your chance.

International candidate. Jump in there, shoot your shot like you might be able to get into a school, assuming of course that you’re qualified, but. You might have a lot less competition now than you normally will, so this could be a golden opportunity for you. And one final as one thing that I wanted to point out was that I was thinking, okay, Maria, let’s say that, you just said that maybe there’s gonna be walk back of some of these and there’s gonna be, maybe he’s gonna change.

But even if there isn’t a change, right? Let’s think about this. The companies themselves are gonna have, and you started to alluded to this John, when you mentioned that a lot of them are global concerns. They’re gonna have now a two year window in which to say. Okay. We know that we’re not gonna keep these people in the states, so let’s open a huge office in Vancouver.

Let’s open a brand, an enormous new office in Toronto. Whatever that is. Because I was thinking back to over the summer when it looked like maybe a bunch of international students wouldn’t be able to get any student visa at all. And I know that some of the business schools we’re looking [00:17:00] at, do we rent out some space in Toronto and do Zoom classes?

We do a hybrid. What we did during COVID. I’ve heard that. I think Rice, I was actually having dinner last night with a dear friend who was, say he’s from Texas and he was saying that Rice has some sort of a campus in Paris and that they are leaning really heavily on their global campuses around the world to still be able to service these students who had gotten accepted.

So things like that, like if. Even if our sort of my very cautious and perhaps irrational optimism turns out to not be true, let’s say the things get, the OPT is banished and all, everyone is banished and it’s the worst case scenario. Again, there’s gonna be two and a half years for these companies. To quickly find, okay, fine, we’re gonna open up an office in Mexico City and we’re gonna pay people really well and we’re gonna what?

Whatever that is. ’cause they’re, the companies are still gonna want the talent, right? Just because the political administration doesn’t want the global talent in the country. That doesn’t mean that the country’s employers don’t want that talent. They [00:18:00] want that talent, they want that intellect, they want that energy and that drive to make their companies better and to make more money.

So they have a very strong incentive to not only be lobbying for these. Visa changes to go away, but if they don’t go away, they have a very strong incentive to come up with some way to provide, to provide those incomes and to provide those perks and some sort of a compromise type of situation.

So again I think if you’re applying now, if you’re going in with eyes wide open, shoot your shot. That’s my, I would absolutely tell people to to try that.

John Byrne: Yeah, I totally agree. And, generally this is my rule of thumb and Maria and Caroline, you may or may not agree with this, at the top MBA programs, they’re so selective that the people who apply to them generally are very self-selecting group.

So I always say that roughly 80% of the school’s applicant pool. Is qualified to actually get accepted, get in, do [00:19:00] well, and land a good job. And yet we know that at Stanford, the acceptance rate is 6%, that Harvard is 12 Wharton and Columbia is, a little under 20 or so. So there are a lot of really good candidates who aren’t getting in.

Which leads me to this, if you’re an international student who thinks okay, so these US schools just might dip a little more into the domestic pool to make up for the offset of international candidates. As it turns out, there is a little notice. Clause in the big beautiful tax bill that was passed here under Trump that places severe limits on federal loans for graduate students.

Now, the current grad plus loan program allows students to borrow up to the cost of their graduate programs. That comes to an end in July of next year. After that, grad students borrowing will literally be capped at [00:20:00] 20,500 bucks a year with a lifetime graduate school loan limit of a hundred thousand. That’s a big deal because, at the top MBA programs it’s not on typical.

For a student to borrow over a hundred thousand dollars easily. And so these caps are also going to affect domestic enrollment. So again, that, that contributes to your ability as an international candidate to get in both. The likely decline in competition not only from internationals but also from domestic students here, interestingly enough, that Bill, which passed has different limits for a professional graduate degree, but the bill basically says that only med school and law school qualify as professional degrees and not business school.

That’s another wacky thing that’s happened that will affect. Domestic enrollment as well. So I, I side with Maria and [00:21:00] Caroline to me the advice is, look long term. Don’t be affected overly affected by the change in policies in the US or the climate here. Understand that if you apply now and you matriculate next year and you graduate in two years after that you’re gonna be facing probably a very different environment.

Also understand the odds are in your in your favor, in getting into a highly selective, really good program in this coming year. And know that, while people too often calculate the value of an MBA based on short term variables, like what’s my starting salary gonna be? What is my sign-on bonus?

The truth is the MBA has enduring value over your lifetime. So it rewards you over your entire career and not just for the first or second years. And you can’t go wrong by graduating into a network of helpful and supportive people from a great school and [00:22:00] receiving a great education. So I think bottom line, we’re telling you apply.

Don’t get convinced by your colleagues or anyone else that this is a bad time to come to the us. Opportunity. Some of the best opportunity come comes when people perceive there to be significant challenges. And I think this is really true with business school. We hope we convinced you to come and try and hedge your batts too, as Caroline noted.

I think that’s really super important to have a plan B when you apply and toss a bunch of apps to the European schools which have excellent superb world class MBA programs and real international cohorts. 90% of the students not from the countries where the schools reside. Toss a bunch of them in your mix for your target schools to give you these different options at the end of the day.

This is John Byrne with Poets and Quants. Thanks for listening.

Maria

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