INSEAD’s Ilian Mihov Imagines The Future - Poets&Quants

INSEAD Dean Ilian Mihov sat down for a chat in San Francisco with Poets&Quants. “The only engine of economic growth in the long run is business creation,” he says

Ilian Mihov is an economist who takes the long view of the link — inextricable, indisputable — between economic and social progress. The dean of INSEAD, one of Europe’s foremost business schools, likes to talk about a favorite paradigm: business as a force for good. He uses China as an example: A hundred years ago, China had 840 million people below the extreme poverty line, each making less than $1.90 per day. In other words, 85% of the country’s population lived in the most abject conditions with little hope for betterment.

A hundred years later, China has fewer than 25 million in extreme poverty.

“By any historical standard, this is a miracle,” Mihov says. “Globally, in the last 40 years alone, more than 1.2 billion people have been lifted out of poverty. That’s really phenomenal.

“And when you think about it, how did it happen? The answer is only one: economic growth. It is not government subsidies, it is not philanthropic giving, it is not foreign development or aid. It is economic growth. And the only engine of economic growth in the long run is business creation. If you don’t have people setting up factories and so on, you don’t have jobs, you don’t have growth.”

And INSEAD’s role? “We want to change the way that people think about business. The mission of the school is very simple: train people to be the best intrapreneurs, leaders, managers that can change the world,” Mihov says. And the French school he leads just may have the clout to do it.

Ilian Mihov, dean of INSEAD

‘IMAGINING THE FUTURE’ AT INSEAD

Mihov was in San Francisco this month to attend INSEAD’s Alumni Forum Americas, a two-day gathering of the school’s U.S. alumni along with C-level executives, global decision-makers, and thought leaders to discus trends currently shaping the global business landscape. More than 400 attended, making it the biggest gathering INSEAD has had outside its home bases of France and Singapore. 

Mihov, who became INSEAD’s dean in October 2013, does not seem overly concerned about the school’s recent downtick in rankings fortune. Ranked No. 1 in the world by Financial Times in both 2016 and 2017, INSEAD was knocked down a peg in 2018, coming in second behind Stanford Graduate School of Business. Yet INSEAD this year earned its third consecutive No. 1 in Poets&Quants‘ international rankings and was named No. 2 by Forbes for one-year international MBA and second-highest ROI. Overall, a very positive picture.

Mihov sat down with Poets&Quants at the site of the recent alumni event, San Francisco’s Intercontinental Hotel, for a wide-ranging interview that touched on rankings, the goal of gender parity in business schools, the so-called “Trump effect” on U.S. schools and whether European schools are benefiting, and more. Among the issues discussed were the topics du jour, including entrepreneurship, innovations in venture finance, the impact of technology on public trust, and INSEAD’s latest ventures: the Institute for Business and Society and the Center for the Study of Wealth Inequality.

The event, and others like it, is “about imagining the future,” Mihov says, “and how technology is going to change the future. What is our role? What is the role of trust? The ethics of AI and so on — blockchain, gender, all of these things are really relevant, really interesting, and they are issues that we talk about in school every day as well. This is why we see so many people coming to these events, and there are more and more.” INSEAD will have another event in Amsterdam in June, he notes, to talk about business and society and major shifts in management education — continuing the big conversation that INSEAD wants to lead.

INSEAD & WOMEN

INSEAD is located in Fontainebleau, an hour’s drive south of Paris, an idyllic space abutting a national forest. But though its surroundings are pastoral, its reach is global and its example followed by other top B-schools on any number of fronts: research, international courses, alumni mobility. One of those fronts, however, is (somewhat surprisingly) not gender equality. Like many top programs, INSEAD’s 10-month MBA program has struggled to increase its percentage of women students, with the latest cohort being composed of only 33% women — well below its U.S. counterparts and even some of the school’s European peers, like Oxford’s Said School, which reached 40% last fall. For Mihov, this is a good time to talk about gender equality in B-schools: INSEAD in 2018 is celebrating 50 years since admitting its first female MBA candidate. The school will mark iW50, as it’s been dubbed, with a summit in June, as well as Jennifer Petriglieri’s four-day Women Leaders program scheduled for the summer. INSEAD has also launched a Gender Diversity Initiative led by Zoé Kinias, Mihov notes, and the effort to reach gender parity — without putting a thumb on the admissions scale — will continue.

“We have two classes of about 500 students so we have more than 1,000 students every year, so in actual numbers we’re the third-largest supplier of female MBAs in the world. But in percentage terms we’re not where we want to be,” Mihov says, noting that 91% of INSEAD alumni surveyed in late last year expressed interest in efforts to increase the representation of women in high-impact leadership positions.

“Right now my belief is that the goal should be gender parity. We have created a new Gender Initiative to explore the question, but at the same time we think it’s a failure of society that we have so many gender biases, and we’re trying to understand what business can do to minimize these. Within this Gender Initiative, what is really exciting is that there is so much great research using state-of-the-art methodologies, getting data, and trying to understand what is behind these numbers — pay gap and all these other things.

“For INSEAD, we decompose the data, and we find that from the United States, we get 40-45% women; from China, 60% women. We realized that we have a much smaller percentage of women from European countries. Of course, we’re still a very European school. Then we go into each one of these countries — Germany, Italy, Spain — and we try to understand why fewer women apply. Obviously we have enough applicants, if we want to put the number to 40% or 50% we could, but we don’t want to do it just to say, ‘I have this number.’ You want to do it in the right way. And one hypothesis for why we have fewer female applicants from these countries is that for INSEAD in particular, we are admitting students who are a bit older, average age around 29, and this may not be the optimal time for female students who may be considering starting a family around this time.”

(See next pages for the full Ilian Mihov interview, edited for length and readability.)

You talk about business as the main engine for positive social change, lifting people out of poverty around the world. Why then is business viewed with suspicion by so many? Why the lack of trust in the business elite? And what can INSEAD and other business schools do about it?

In my view as an economist, the answer is because of when markets actually fail, and markets fail often. So we see tensions between business and society increasing when, for example, there are issues about sustainability, when there is pollution. It used to be that companies can take clean air and pollute and nothing happens. That created one tension. Markets failing to deliver goods and services to the poorest part of the population, because the pricing mechanism does not get them to be able to buy these things — that is another tension. Institutional economic structures fail when the incentives in the organizations are such that the top people can behave in a very unethical way.

So why we decided to do is to say, “Let’s start an institute for business and society where we look at all these different market failures and economic structure failures, and we’ll do research and prepare teaching materials and so on.” But the most important part is to try through this to change the way people think about how you do business, in the following way: When our students, our alumni go out and start making decisions, obviously you have to create value for the company, otherwise the company will go bankrupt. But in this process of value creation you have to start thinking as well, “What is the impact you are creating in society?” And sometimes it’s difficult because there are so many different externalities that you create. Some of them are positive, some of them are negative. Building awareness about these additional effects or impacts on society can then make business figures think, “Can I change my business model — can I change something — so that in the process of value creation for the company, I can also create value for society?”

Sometimes pure awareness about these issues will do miracles. We want to make sure that people will explore this. Sometimes it will not be enough, because sometimes the effect will be negatives; and sometimes, even though people want to do something better or behave in a way that they think is better, costs may prohibit a change in behavior. “My costs will increase because everyone else will continue behaving in the same way and then I’ll be driven out of business.”

And there is room for regulation. Regulation is an important component for solving some of these issues. I think the clearest example is sulfur dioxide, which used to be one of the key pollutants 40, 50 years ago. Today nobody is talking about sulfur dioxide because we have regulations and we have all these permits to pollute. So there is a mechanism. But it’s very important to realize that regulation cannot solve everything. So the first step where business makes its decisions in the best possible way is very important. You can’t regulate every little thing — but also if people are not convinced that they have to do this or that, you put regulation on them, they’ll find a way around it. We see that all the time.

How will INSEAD address the issue?

We created a cluster of courses on business and society, and we’re creating all kinds of programs and all kinds of interventions. And then there are the talks here and elsewhere as well. The idea being that we want to change the norms that apply to business today, and norms are things that change over time. Somehow we believe that the world we live in, all of the norms are God-given and things have always been this way and always will be this way. But when you think about it, norms are changing all the time. Fifty, 60 years ago, you go to business school, most business schools would have only men in the classroom.

In terms of beliefs and norms, there were so many men who believed at the time that women do not have to get a business education. Today nobody thinks like this.

That’s a good segue for my next question: It’s a big year for INSEAD, the 50th anniversary of your first female admit. Talk about that a bit if you would, and about INSEAD’s struggles to get a higher proportion of women in its student ranks.

It is a very important year. In 1967, the first two women joined INSEAD, Hélène Ploix and Solange Perret, and out of a class of about 120 students they represented less than 2%. Today we are at 33%, so things have changed, obviously. We have two classes of about 500 students so we have more than 1,000 students every year, so in actual numbers we’re the third-largest supplier of female MBAs in the world. But in percentage terms we’re not where we want to be.

Will women ever reach 50% enrollment at a major business school? 

Right now my belief is that the goal should be gender parity. We have created a new Gender Initiative to explore the question, but at the same time we think it’s a failure of society that we have so many gender biases, and we’re trying to understand what business can do to minimize these. Within this Gender Initiative, what is really exciting is that there is so much great research using state-of-the-art methodologies, getting data, and trying to understand what is behind these numbers — pay gap and all these other things.

For INSEAD, we decompose the data, and we find that from the United States, we get 40-45% women; from China, 60% women. We realized that we have a much smaller percentage of women from European countries. Of course, we’re still a very European school. Then we go into each one of these countries — Germany, Italy, Spain — and we try to understand why fewer women apply. Obviously we have enough applicants, if we want to put the number to 40% or 50% we could, but we don’t want to do it just to say, “I have this number.” You want to do it in the right way.

So when we realized there are fewer female applicants from these countries, we have tried to understand why. And one hypothesis is that for INSEAD in particular, we are admitting students who are a bit older, average age around 29, and this may not be the optimal time for female students who may be considering starting a family around this time.

The second hypothesis is that in some countries, there aren’t enough role models for women. Why do women need an MBA? So we’re trying to reach out and do a lot of activities to answer that question.

But there are also some factors that are harder, if not impossible, to correct, yes?

Yes. Throughout this process we’ve realized it may in general that there are fewer women who want to apply for one reason or another. And that is impossible to correct. So if it is role models or marketing or scholarships or age, these are things we can correct, we want to correct them, and of these corrections can lead us to parity, that would be fantastic. We want to make sure that there are no biases and barriers that stop women from following this career.

What can you tell us about the Women Leaders program scheduled for the end of June?

Jennifer Petriglieri is a professor of organizational behavior and the program is basically dealing with the problems that females executives face in organizations. How to deal in a boardroom that is mostly male, or an executive committee that is mostly male, and so on. And how to help other women move in their careers.

Very often people talk about mentoring. But mentoring is a thing that sometimes can go a little bit too much. It’s not about mentoring but about giving responsibility. It seems, according to one of our hypotheses, that executives who are male are much more willing to give responsibility to a male than a female executive. So we are seeking ways to remove these barriers and just say, “Look, enough with mentoring, from now on you’re the executive vice president or you’re the head of this division, and so on.”

This is one of the key things. There is still bias. Gender bias is something that has been with us for thousands of years — all of us have it, to some degree, and the mistreatment of women has taken many different forms. So now we’re trying to fight something that is very deep in our brains, and even the well-intentioned people do not realize how much their decisions are driven by a bias of going with the safe choice, because for you the safe choice is what you have seen before which is male executives.

And the Gender Diversity Initiative?

I was a member of the first Gender Diversity Initiative in 2007, and we did some studies trying to understand why we had fewer women in the classroom, why we had fewer women as faculty members, and we did some analysis. But this time I think is very different because every single question that we ask, it’s not just to get some data plots, we’re trying to do serious, rigorous research to understand the answer to the question. I’m an economist, so I started reading these papers, and some of them are absolutely fascinating. We have psychologists,, economists, management and finance scholars doing research on the experiences and impact of women in business and society.

In Peru they did a study where they want to understand how to attract more women into coding training programs. So in one of the groups, they just sent an email: This is how you sign top for the course, and so on. And in the  other group, in addition to an email there’s a role model — a woman who has been a coder and who has been successful. Just including this small thing dramatically increased the signing up for the course. And then you start thinking, Why? If I start to think about getting more women to come to INSEAD from Germany, for example, I can design an experiment with two groups and one of them has a role model and the other doesn’t, and I can see the ways people behave in one way or another. It’s very exciting.

There’s been a lot of talk and even some data about the so-called Trump effect, the driving down of international student enrollment at U.S. business schools as aa result of the rhetoric and policy proposals of President Donald Trump. Have you seen a rise in applications that can be attributed to this effect?

Yes, we have. For us it was a bit difficult to disentangle some of the causes, because there is a rankings effect (INSEAD was named the Financial Times top MBA program in 2017 for the second straight year), and then there is the effect of the election of President Trump, and we don’t know which is driving the increasing applications. But the numbers are up.

When we talk to students, the number-one thing they say they were looking for when they came to INSEAD was the career opportunities, then the quality of teaching, the global nature of the school, and things like that. Now what we have seen from Latin America, indeed the applications have increased tremendously and probably that’s beyond the ranking — it could very well be Trump.

In Asia, the increase in applications was very much due to the ranking, and while we have seen an increase from Muslim countries, but we don’t have that many students from Indonesia or the Middle East.

Besides its main campus in France, INSEAD has campuses in Singapore and Abu Dhabi (above)

What will the next few years bring at INSEAD? What is the outlook in Fontainebleau (and Singapore, and Abu Dhabi)?

The outlook is very good. We’re very fortunate with not only the rankings but to me the really important thing is that when you look inside the school, is there the energy, enthusiasm, passion for what we do? Do we have students coming and wanting to study at INSEAD? Do they get really good jobs?

And when you look at these criteria — because, again, as you know, all these rankings have a bit of arbitrary weight on one metric or the other — but when you look at INSEAD there is so much energy, so many ideas, and at some point I just feel like we are the most complicated business school in the world. We have two campuses fully fledged in Singapore and Fontainebleau, another campus in Abu Dhabi, we are the biggest school in terms of students: every year on the market, 1,000 MBAs appear and need to find jobs. And even though the two-year programs might have more people on campus, every year on the market they put fewer than what INSEAD does.

These students come from 94 different countries. They want sometimes to be in Singapore, sometimes to be in Fontainebleau, 75% move between the two campuses — which actually is a big value add at INSEAD, that you can experience Asia and Europe. We create field trips to places like San Francisco, too. So this is why I say it’s the most complicated school. And also when a student says, “I want a job in Japan,” we have to help them find a job in Japan. At a school here is the U.S. , they say, “Go find yourself a job in Japan.”

It is complicated, but at the same time we think that through our projects with the Institute for Business and Society, changing the mentality, changing the mindset of how we do business, there is even more enthusiasm. There is a huge project in digitalization. There is phenomenal work in machine learning and artificial intelligence in the future of management: What do you need to know as a student about machine learning? AI is a lot of speculative things, but machine learning is here.

So all these things are pulling the school in many different directions, and it’s exciting.

DON’T MISS MEET INSEAD’S MBA CLASS OF 2018 and INSEAD REPEATS AS NO. 1 IN NEW FINANCIAL TIMES 2017 RANKING

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