What’s New At Chicago Booth? Plenty - Poets&Quants

Chicago Booth Dean Madav Rajan

In the 15 months since Madhav V. Rajan took over the deanship of the Booth School of Business at the University of Chicago, Booth has won yet another Nobel Prize for a faculty member and landed in first place in U.S. News’ ranking of the best full-time MBA programs for the very first time.

It would be temping to say that Rajan, who had spent 16 years at Stanford’s Graduate School of Business who oversaw Stanford’s MBA program from 2010 to 2016, has the magic touch. But the former accounting professor-turned-academic leader thinks himself the beneficiary of “dumb luck.”

Regardless, Rajan is off to an incredibly fast start for a new business school dean, virtually insuring that his deanship will be as impactful as Edward ‘Ted’ Snyder who helped to significantly raise the visibility and reputation of the school from 2001 until 2010. Though Rajan’s official start date was July 1 of last year, he began working on Booth’s behalf in April, before his separation from Stanford.

HELPED TO REPLENISH YOUNG TALENT IN FINANCE & ECONOMICS

“In many ways, starting in April really helped to get it going,” says Rajan, who succeeded another former Stanford Senior Associate Dean Sunil Kumar at Booth. “The normal trajectory might have been you come in, you do the listening tour, you learn and I just didn’t have that option.”

Since officially arriving in July of 2017, Rajan has:

• Raised more than $200 million for the school’s $950 million capital campaign, part of the university’s effort to bring in $5 billion in philanthropic support.
• Completed an extensive listening tour of faculty and alumni, racking up roughly 180 meetings with Booth alumni.
• Hired away from Harvard University a superstar professor of behavioral economics to lead a new center in human machine intelligence.
• Launched a novel economics-business track for University of Chicago undergrads that will have Booth faculty teach 20 sections of undergraduates in this academic year.
• Begun a data analytics concentration in the full-time MBA program.
• Put greater emphasis on faculty recruiting, helping to replenish young talent particularly in the areas of finance and economics.
• Opened a new university campus in Hong Kong, one of the three base locales for Booth’s Executive MBA program.

As if that is not enough, Rajan is now planning to launch a $75 million fundraising effort exclusively devoted to MBA scholarships at a school that already is fairly generous in awarding the best incoming students financial aid packages. He will zero in on beefing up Booth’s faculty strength in marketing. And he is considering a building expansion because the Charles H. Harper Center on the Hyde Park campus and the Gleacher Center in downtown Chicago are already at capacity.

RAJAN ON THE SIMILARITIES & DIFFERENCES BETWEEN STANFORD GSB & BOOTH

In a wide-ranging interview with Poets&Quants in the dean’s corner office overlooking Frank Lloyd Wright’s world-famous Robie House, Rajan seems comfortably settled in his new role. He spoke candidly about the differences between the business school cultures at Stanford and Chicago, the value of the MBA, getting approval to teach Chicago undergrads, and arriving at Booth just in time to enjoy the school’s No 1 rank in U.S. News and the awarding of a Nobel Prize to behavioral economist Richard H. Thaler, the school’s eighth Nobel.

“Having dumb luck is a great thing,” he quips. “So you take a job, and you raise money, and you win a Nobel Prize and U.S. News says you are number one. It’s all been good. I’ll take dumb luck anytime. It’s been wonderful, super fun, and it probably has gone way better than I had any right to expect.”

Rajan believes he has taken over a school that is in great shape. “But, he says, “there is a way to go on a number of dimensions. This school has always had the best faculty and that is part of its reputation. But if you go back over the past four or five years, we’ve done well but not super well at recruiting. It was below the standards the school had set for itself so that is one of the issues I wanted to fix when I came in. In fields like finance and economics, which are the lifeblood of the school at many levels, we weren’t doing that well. So turning that around was one of my big priorities coming in last year.”

18 NEW FACULTY RECRUITED, INCLUDING A HARVARD SUPERSTAR

Sendhil Mullainathan

The new dean has already overseen the recruitment of 18 faculty, offering first time tenure-track appointments to assistant professors from Harvard, Stanford, MIT, Columbia, and NYU. Among the 18 new recruits, Booth brought aboard six profs in finance, four in economics, and a pair in econometrics and statistics.

Of all the hires, however, the biggest one was Sendhil Mullainathan, the renowned behavioral economist from Harvard University, who is expected to help develop a new discipline at the intersection of human and machine intelligence. A former MacArthur Fellow, Mullainathan helped co-found the non-profit organization ideas42, which applies behavioral science to positively change lives; and co-founded Abdul Latif Jameel Poverty Action Lab.

Rajan says “hiring Sendhil was a massive stroke of luck. A lot of people did a lot of work to recruit sendhal here. You never want to say the dean does faculty recruiting because the faculty would want to fire me. John Heaton was the faculty dean and he manages all of those things. But obviously I met Sendhil, and we had lots of discussions about what he wanted. He is a superstar. It is a very big catch, getting someone with his stature at the prime of his career and doing things that are at the heart and soul of what we want to do at the school.”

‘CHICAGO BOOTH IS ABOUT DATA’

In fact, says Rajan, the Sendhil hire has already helped overall faculty recruiting. “A lot of people knew that he was thinking of coming here and that created some buzz as well. It will bring to Chicago people who are interested in doing things that combine behavioral science and economics which is increasingly a big field where we are uniquely positioned.”

Rajan says he always thought of Booth as a school that specializes in empirical research and its application to finance. In the late 1960s, the Center for Research into Security Prices was established at Booth, an initiative that allowed Booth’s finance profs direct access to massive amounts of data on the markets and trading.

“Chicago Booth is about data. In many ways, I feel like this is a school that was ahead of the curve and the world has moved to that model, and that has been massively helpful to the school. If you think about an area like marketing, for example, we have ended up with the best quant marketing group in the world simply because they did data in marketing long before anyone else. That to me is what we have to build upon. For any faculty who want to do novel, risky big data projects, this is the school that will support them and enable them to do it. So hiring Sendhil was fantastic because he is going to come and run a new center for us on human machine intelligence. and so this is a center that we want to do anyway. Having Sendhil come and run it was just a wonderful confluence of things.”

Booth School of Business Photo by John A. Byrne

CREATING A NEW BUSINESS ECON UNDERGRAD TRACK ‘WASN’T WITHOUT CONTROVERSY’

The single biggest change, however, has to do with Rajan’s goal to increase the ties between Booth and the University of Chicago. When Rajan was hired, University President Robert Zimmer told him that one of the he especially liked the fact that Rajan had put together a number of joint degrees for Stanford GSB including programs with computer science, electrical engineering, and foreign policy. At Chicago, there was the opportunity to connect with the university undergraduate population, particularly around economics, the top undergraduate major.

Even so, for a new dean from the outside it could have been a particularly controversial move. Rajan concedes it took “a lot of negotiation” to get the university to go along. “This wasn’t without controversy,” notes Rajan. “There are faculty in the humanities who feel we may be doing too much pre-professional education. But more and more studeNts want that. They want to do things that are applied and drive them into careers they want to do. Within the economics track, which was a very theoretical major, if we can carve out the 70% to 80% who want something more applied, it can potentially be a big play for us and the university as a whole.”

Though the change was approved in May and not yet advertised, the fall classes already were  sold out. Booth will do 20 sections of undergraduate teaching this year, and that will grow over time.

‘A NO-BRAINER’ TO CONNECT WITH CHICAGO’S ECONOMICS DEPARTMENT

“One of the reasons that is important is if you look at the last 15 years the reputation of Chicago undergrad has grown phenomenally,” says Rajan. “They are now in the top two or three universities and they have amazing admission rates. The fact that Booth had no connection with the university was just a missed opportunity. This was an incredible asset base. These were students our faculty would enjoy teaching. The students I knew would want to learn from our faculty. But Booth was pretty isolated from the university campus for a very long time.”

When Rajan began his academic career at Wharton, he especially enjoyed teaching undergraduate business students. “I still think they were among the smartest kids I ever taught in my life,” he says. “Here you have some of the best and brightest undergraduates, many of whom want to do economics. How can you as a business school not want to play a role in that? It just seemed like a no-brainer to try to push that. So this fall, we started a new business economics track in the econ major.”

The full major includes nine classes, with a minimum of four and  maximum of six from Booth, all taught by the school’s tenured faculty. “So the new business econ major is taught half by us and half by the economics department,” adds Rajan. “It fulfills one goal because it connects us better to the department which is an amazing department and we are doing it together. It is jointly governed with three faculty from the department and three from Booth.

‘OUR ALUMNI SAY THEY ARE GOING TO COME AND HIRE EVERYONE OF THESE KIDS’

“A student coming into the university would do the Chicago core, the liberal arts curriculum, then they would take classes in the department, things like macro and micro economics and empirical methods, and then they would take classes at Booth in things like accounting, marketing, and finance. These will be students with incredible market value when they finish. When I speak to our alumni in private equity and other fields, they say they are going to come and hire everyone of these kids.

“There will be a lot of finance courses because there is a huge appetite among the undergrads to get into finance which I feel is great for us. The proportion of our MBA grads going into financial services is declining because more and more finance firms like to hire from undergrad. But this connects us back to those companies. So to me it is just a perfect hedge because we’ll get alumni now from the college who are going to work for the banks and private equity firms. If they choose to come back to Booth for an MBA, it doesn’t really matter to me because they are our alumni anyway. Those students are fantastic. They love finance and our faculty love teaching them. It’s also a great recruiting advantage for faculty.”

One of the things he immediately inherited at Booth was an existing capital campaign to raise $850 million, a goal that has since been revised to $950 million. Rajan expects to surpass the goal this month, seven months before the June, 2019, end of the fundraising initiative. “When I came in it was the final two years to go which is not the ideal time for a new dean to come in,” he says. “I spent 50% to 60% of my time this past year visIting alumni, doing the meet- the-dean tour but also doing a lot of fundraising. That part has gone very well. Since I arrived, we have raised more than $200 million. It’s one of those things you don’t know until you do it, but I have loved it. And it was good because having that done makes it that much easier to do the other things as opposed to figuring out priorities and then getting the funding for it. We have a good endowment but it is not great by any stretch of the imagination so doing more in terms of traveling and connecting to alumni was immediately important.”

‘THE SCHOOL DIDN’T THINK ALUMNI HAPPINESS WAS A GREAT METRIC. IT WAS NOT THE CHICAGO WAY’

The contact he has had with alumni in roughly 180 separate meetings have demonstrated to him the loyalty of the Booth network. “These are people who graduated 30 years ago and at that point I don’t think the school thought of alumni happiness as a great metric,” he says. “It was not the Chicago way. But what is great is that they value what the school has done for them. They knew what they knew coming in and what they knew coming out and they know how that has helped them throughout their careers. So that connection comes from a place of gratitude toward the school and what it gave them to become successful.”

His transition to Booth, Rajan thinks, may have been so smooth because of the similar faculty cultures between Stanford GSB and Chicago Booth. “If you look at it on the faculty dimension, the schools are pretty similar,” he says. “In fact, there are three schools that are very similar on faculty: Chicago, Stanford, and MIT. If you look at what the faculty wants to do and to which they aspire, those three schools are very similar and that has been a huge benefit to me coming from Stanford to here.”

What’s different, he believes, is the student culture and the size and scope of the business school’s offerings. “Stanford was like one MBA program and that was all we did. All your hopes and fears are attached to the MBA program, for better or worse. It’s just a very different feeling here. The students, I think, come in and they buy into what the school does. they are prepared to work hard. This is an old school in many ways and what the school really does a good job of is orienting the students who come in to understand what the school does.

THE GSB CURRICULUM CREATES ‘MORE TENSION BETWEEN STUDENTS & THE ADMINISTRATION’

“For Stanford, the small size helps in forming a really good community among the students. But the curriculum there creates more tension between the students and the administration and the students and what the faculty wants to do. There is just less of that here. The faculty tend to teach things that they do research on, and the students buy into that in terms of what they want to study so it is a much more aligned place than Stanford.”

Obviously, location is a big part of the change. “Silicon Valley plays a big role at Stanford,” acknowledges Rajan. “The students, particularly the international students, have never seen anything like it. They come there and they want o be a part of that. Even if entrepreneurship wasn’t really want they wanted to do, the environment sort of moves people in that direction a lot more than even the school ever wanted it to. So the school pushes back against it quite a bit. So there is the push trying to keep students away from Silicon Valley as much as possible and getting them to focus on their studies. That’s much less of a distraction here.”

One significant difference between Booth and the GSB is the greater flexibility built into the core MBA curriculum at Booth. “At Stanford,” Rajan notes, “the goal was to sell it as being flexible but it was a lot of work because it wasn’t. A lot of the tweaks I had to do was trying to make it feel like students had good options. At the end of the day, I always felt they were disappointed because it wasn’t as flexible as they had hoped.

Madhav Rajan during his days at Stanford GSB

SINGLE BIGGEST SURPRISE AS DEAN: NO EMAILS FROM MBA STUDENTS

“Here, that’s really not an issue and our flexible curriculum is a big asset for the school. Everybody does LEAD (Booth’s leadership development initiative at the start of the MBA program) but other than that you pick your classes and the pathway you want to take. If you want to do accounting later or earlier, you can do that and I think that flexibility is a massive benefit. It really fits in well with students and their notion of wanting to own their own curriculum and their own path. So that is less of an issue. I don’t have students coming here and complaining, ‘Why do I have to do A, B or C when I already have expertise in a subject?’”

In fact, he says, the single biggest surprise in his new job is that he no longer gets emails from students. “This is very much a culture of this is the way stuff is, let’s get it done and let’s move on. There isn’t this idea of let’s escalate it and make a big issue out of it here. Students are very professional here. They want to study hard, get their degrees and move on. There’s much less of all the ancillary things that can suck up a lot of time.”

In the near term, Rajan has set his sights on a number of objectives, including the launch of  $75 million fundraising effort devoted entirely to MBA scholarships. He acknowledges that there is something of an arm’s race among the top schools for highly qualified women candidates. “Today, we’re at 42% which is a high for us, but the scholarships you have to give are pretty substantial. We have an endowment but it is not that big. So we want to launch a big scholarship campaign starting in the fall. With the capital campaign, donors have a very clear preference on what they want to give to and we have a long ways to go on the scholarship part. it seems a natural thing for us to do. I would like to raise $75 over the next two or three years. We want to get a couple of key gifts and then use matching money from it to get the scholarships going.

‘THE MBA’S ROI HOLDS UP PRETTY WELL’

“If the undergrad major works out really well and we’ve increased the faculty to meet the demands of that major, that will be a success,” he says. “I want to do a little bit more in marketing right now to increase the size of our faculty there, to get the endowment up, to finish the scholarship campaign. We are also looking for a new facility in London because we are leaving that in 2020. This building and Gleacher is now at capacity. On Saturdays, Gleacher is just completely packed.”

Rajan believes that online MBA offerings could have an impact on Booth, particularly on its part-time MBA programs as more highly ranked business schools get into the market, including the recently announced decision by the University of Michigan’s Ross School to launch an online MBA next year. “If you are Stanford and all you do is the full-time MBA, online is not something you care about. They don’t have to worry about the person who decides between part-time classes and online. Over time are more schools of Michigan’s stature going to be offering online programs? At what point does that become credible enough that we start to lose full-time students?

“Right now, we have a large part-time program in the Gleacher Center downtown. It’s one of the biggest assets we have. All the evening classes are done there and many MBAs live downtown and more and more they take classes with the evening students. We love students who do an afternoon class here and then an evening class at Gleacher with the part-time students. That has become a massive asset for us as well. So even though the evening program has shrunk compared to what it was 20 years ago, the full-time students often take classes there.”

‘AS LONG AS WE KEEP CHANGING AND MORPHING, WE WILL BE FINE’

Not surprisingly given his position, Rajan remains a strong advocate for the MBA’s value to an individual. “The MBA value probably isn’t what it was 20 years ago but it is still high. Certainly, if you go to the top schools, the ROI holds up pretty well. If you think of it in terms of the payback period, it used to be two and one-half years and now it is four years. But if you think of it as the last degree you are going to do in your life, and you will build on that for the rest of your life, it holds up very well.”

While applications at Booth slipped by 8.2%, causing the school’s latest international contingent to fall to just 30% in the Class of 2020, Rajan says the greater concern over the decline is over the long-term outlook as opposed to this class given the depth of quality in the applicant pool. “The class that just started has the lowest proportion of international students we have had in quite awhile,” he says. “It reflects a decline in international students and that has been true industry wide. But it is very country specific. There are some countries where you just don’t get applications because they (students) know that if they get admitted the chances of getting a visa are not that great. And even if they get a student visa, the chances of getting a job are relatively low.

“And there are other countries where if the student’s plan is to go to Booth and return to their home country they are still happy to come and do it,” adds Rajan. “So we are still seeing students from such countries as Japan and Chile, but certainly from the Middle East, Russia, and places like that we are not seeing that many applicants any more. So the pool is definitely not as broad as it used to be. At the end of the day we still end up with the right number of students and the metrics are all great. but you do worry where does this go next year. If the international tensions keep persisting and the visa problems get bigger that is something you have to worry about.

“Where it becomes an issue is the hollowing out in the middle. Students feel that if they get into an elite school then it is worth doing. Otherwise, they ask why would I give up two years of compensation to go into a second-tier program? MBA programs have changed to give students what they need for the jobs they will be doing. Twenty years ago you wouldn’t have imagined getting the data skills and Python programming you get today. As long as we keep changing and morphing and having the curriculum go where it needs to go, we will be fine.”

DON’T MISS: MEET THE CHICAGO BOOTH MBA CLASS OF 2020

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