Harvard Sold Larry Summers Down the Charles River

Feb. 22 (Bloomberg) — Harvard forced Larry Summers overboard after all. Yesterday, Summers announced he was leaving as president after five stormy years trying to row Harvard upstream toward the present.

This seems weird. After all, we're talking about Larry the Confident here, a man famous for the way he tossed his head back at the rest of the Group of Seven. As Treasury secretary under President Bill Clinton, Summers steered the economy of the biggest country in the world. Harvard is just a dinghy next to Battleship U.S.

Comparing Summers's experience in both offices is, however, useful. It reminds us that pulling retrograde institutions forward against resistance can be hard. Executives who try do so need unrelenting support. If they get the backup, they tend to succeed. If they don't, the result is ugly — whether they are at the U.S. Treasury or Harvard.

Consider the Clinton administration, which by the second term knew what it wanted on the economic side. It wanted to prove that modern Democrats wouldn't trash the economy or the budget like their retrograde, union-beholden predecessors. It wanted a strong dollar, no matter what Big Steel said. It wanted to show that the party of the Great Society could lead the budget into surplus before the party of Reaganomics ever got a chance to.

Be Consistent

Whatever you believe about this policy, you have to concede that the Clinton Team was consistent. The administration pushed, and got, the end of welfare. Treasury Secretary Robert Rubin repeated the phrase "the U.S. supports a strong dollar" so often it became a refrain. When Summers succeeded Rubin as Treasury secretary, the storyline stayed. Clinton backed both secretaries. Robert Reich, the old Labor Secretary, fumed, but he was already overboard himself, back in Massachusetts. And if Secretary Summers swaggered on the deck like a triumphalist, that suited the era.

Summers arrived in 2001 planning to transform Harvard, just as the Clintonites had transformed the concept of a Democratic administration. Under Summers, Harvard would be less of a home for the 1970s mindset, while demanding more intellectual competition. Corporate vice presidents don't have tenure any longer, so why should academics?

"There is one sector in the U.S. economy that hasn't changed like the rest: higher education," Richard Huber, Harvard alumnus and former chairman of Aetna Inc., said yesterday. "Summers wants Harvard in this century, not the last one."

Summers's Missteps

But Summers soon met trouble. The first rough patch came when he declined to consider divesting Harvard's holdings in Israel. About the same time a few star academics, annoyed that he demanded more teaching, huffed off to other universities.

Last year, Summers angered women's studies majors by noting a simple reality: once you get three standard deviations out there on math aptitude tests, you find more boys than girls. The president's point was that even if you didn't like that fact, you probably wanted to address it. But the professors swarmed him, ending the debate.

Next came the issue of Harvard's portfolio manager, Jack Meyer, who was paid millions for making billions for Harvard's endowment. Academics found that pay-to-endowment ratio too irritating to bear, and Meyer departed. Many months passed before Harvard replaced Meyer with Mohamed El-Erian, Pimco's bond star.

Confidence Deficit

The problem here, many believe, is Confident Larry. Neil Rudenstine, Summers's predecessor, is so collegial he can coax love from a stone. Summers is capable of antagonizing a stone in the same time frame, just by flashing his teeth.

The reality is more complex. Summers's problem at Harvard is indeed one of confidence. But this time too little confidence, not too much.

At Harvard, he had a habit of announcing a bold idea and then backing off with an elaborate apology. Hardly had the flap about women's intelligence come out than Harvard said it was spending an extra $50 million to lure more women and minorities to the faculty. This on top of outreach programs to enroll students from poor families.

Such behavior is too reactive and not consistent enough. Perhaps if Summers had gone around the Yard saying "Harvard supports a strong dollar," he might have stayed in office.

The real problem lies not with the man but with the institution. The Harvard Corp., Harvard's executive board, hired Summers to make changes. Treasury Secretary Robert Rubin, Summers's old boss, joined the Corporation in 2002. But instead of standing by Summers, the Corporation gave its ear to the mob — the professors who choose to take offense at reminders that they are less important than they believe themselves to be.

Not Enough

Harvard's management is now telling itself that Summers attempted too much, and that, perhaps, it would have been better to find someone more like Neil.

This is self-deception. One set of stakeholders to recognize this is Harvard's undergraduates. A poll last weekend by the Harvard Crimson, the student newspaper, showed that undergraduates supported Summers 3-to-1. At least this group knows which decade this is. One student told the Crimson he liked Summers because Summers ran things "more like a business."

By afternoon yesterday, though, Summers was saying goodbye. It's a shame. After all, as Mr. Rubin himself knows: if you can change the Democratic Party, you can change a single university, even Harvard. But to do so, you need a boss to keep the wind in your sails.

(Amity Shlaes is a Bloomberg News columnist. The opinions expressed are her own.)

© Copyright 2006 Bloomberg

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