News/Events

WDI at 25: Our History, Our Future

Monday, April 24, 2017

 

“The book is now closed on a period of intense, bipolar hostility that has defined our lives for more than four decades, and it is now for us to determine what will fill the next pages of history. We stand now at the dawn of a new era – an opportunity unprecedented in history. What we do today – by act or omission – will shape the world for generations to come. At no other time has the necessity of success and the consequence of failure been so great.” – Bill Davidson, April 23, 1992

 

As he sat down in the middle of a crowded, noisy Chinese restaurant situated in a suburban Detroit strip mall, B. Joseph White knew this “mundane place” was not the ideal setting for a major “ask” – soliciting a large donation from one of the University of Michigan’s most prominent graduates.

But the eatery was one of Bill Davidson’s favorites, not far from his Guardian Industries headquarters in Southeast Michigan. White, in his second year as dean of what is now the Ross School of Business, needed a big gift to kickstart his fundraising campaign with its theme “The Point is the People,” a refocusing of spending on students and faculty at the school.

As the two talked, White reviewed in his head some recent tutoring he’d received about fundraising, how “consider” is the most important word, and made his pitch to Davidson.

“I asked him if he would consider a very significant gift to do something important for our students and faculty, and be something he would be proud of,” White recalled of the September 1991 lunch. “He said yes, he would.”

As an indication that Davidson was anticipating White’s request and was one step ahead – as usual – he pulled a sheet of paper out of his jacket pocket.
“I have a challenge here for you,” he said as he handed White the paper.

On it was the framework for a nonprofit center or institute Davidson was thinking about, affiliated with the university but independent from it with its own faculty and students.

The single sheet of paper, stained by grease and soy sauce by the end of lunch, was the first step in creating the William Davidson Institute at the University of Michigan. Today WDI is celebrating 25 years of developing knowledge and enabling firms, governments, nonprofits and NGOs to more quickly engage with the world economy, while enriching the international experiences of U-M faculty and students by expanding their global view with on-the-ground projects.

 

“We know all too well the social upheaval that is caused by economic disorder. We have little choice but to seize this opportunity and to meet the challenge, or risk the prospect of these emerging nations sliding into social and economic chaos. We all have a responsibility to contribute to this great effort. This is our future, not just the future of far-away lands. How we respond to this challenge will determine whether our children and our grandchildren will continue to enjoy the peace and prosperity we have known.”

 

Davidson didn’t include a focus area for the institute in his outline, but initial ideas considered included manufacturing based on Davidson’s work with his glass-making company Guardian Industries, or something focused on improving the city of Detroit, another important issue to him.  

But eventually the idea of an institute studying transition economics in the wake of the fall of Berlin Wall and with it, communism, resonated with Davidson. Guardian had recently begun operating a glass plant in communist Hungary – considered to be one of the most progressive countries in the Soviet bloc – but during the negotiations Davidson was shocked by the government’s ignorance when it came to market economies.

“He was struck by how little they knew,” said Ralph Gerson, a former Guardian senior executive  involved in the negotiations and a WDI board member since the Institute began. “They did not have any sense of market principles or have a clue on how assets are properly valued.”

In order for the transaction to take place, Guardian flew some key government officials and key staff of the National Bank of Hungary to the company’s European headquarters in Luxembourg for a crash course in finance.

The experience confirmed what Davidson was thinking; that these newly-freed countries would struggle to transition from a command economy to a free-market. And an institute at the business school could help make this transition easier.

“He felt the institute could make a real contribution,” Gerson said. “Bill also felt it was an area that could make the business school more international and take its expertise around the world.”

At the business school, White said there was a push to become more global in its thinking and actions. The fall of communism interested some faculty there, but they knew there was still a lot of work to be done to develop successful market economies.  

“The view at the time was that the stakes were high because if market economies didn’t develop well in central and Eastern Europe, then we thought there might be backsliding to communism,” White said.

Frank Wilhelme, head of development at the business school in those years, was handed Davidson’s stained note and tasked with making it happen. The ensuing months would entail complex and sometimes stressful negotiations between the school, the university’s central administration, and Guardian. Still, Wilhelme, who spent nearly 30 years at the school in a variety of roles, called it “the most fascinating gift I ever worked on at the school.”

He had a lump in his throat when White told him he had three months to come up with a solid proposal from Davidson’s note. He immediately started conversations with people at Guardian about the purpose of the institute and how it would be funded. Guardian officials worked on an affiliation agreement between the company, the business school, and U-M’s Board of Regents, as well as articles of incorporation and bylaws.

Wilhelme also identified key business school faculty such as Kenneth Lieberthal and C.K. Prahalad and talked to them about what impactful work the institute could do. Lieberthal was named the first William Davidson Professor of Business Administration in 1995 and would sometimes visit Davidson at his Guardian office to talk about Chinese politics and economics. He joined the WDI board in 2008 and continues to serve today.

He said Davidson didn’t want to establish just a think tank or a consulting firm.

“His goal was to foster good research, test the research conclusions in the real world, and then make the results available in practical terms, not just via books, articles and conferences but also via helping set up institutions and curricula and training programs,” Lieberthal said.

One hurdle that needed to be cleared was the university’s central administration, which was uncomfortable with long-term, independent organizational affiliations with outside groups. But White said Davidson was adamant about the structure, especially the independent aspect.

Earlier that year, White flew with Davidson overseas to give his academic opinion on whether a university had simply taken Davidson’s donation but ignored his wishes on how it was to be spent. White concurred with Davidson’s suspicions, prompting Davidson to cancel future gifts to the university.

“I think he felt that if WDI would have a significant degree of independence from the university, including its governance, but strongly affiliated and located within the university, that would improve the odds that it would stay focused on its purpose and his donation would not be converted to uses convenient for the university but not in fulfillment of the purpose of the Institute,” White said.

To ensure the creation of WDI would pass review by the Internal Revenue Service, Davidson hired former tax agents to advise Guardian. Looking for a good model for an independent, nonprofit school, the agents suggested the Poynter Institute in Florida, a journalism school that owned stock in the St. Petersburg Times Co.

In December 1991, Davidson approved the preliminary plans and a to-do list of the final details was made, including how much Davidson was willing to give. His initial offer was $500,000 a year for 10 years. But White told him the scope and hoped-for impact required a larger gift, so Davidson proposed $1.5 million annually for 20 years. The $30 million would be the largest gift ever given to a U.S. business school at the time.

White said he was committed to turning a very good business school into a great one, and Davidson’s gift was part of what was needed to do that.

“It was a time of high aspirations and a pretty exciting environment,” he said. “For us, as a public university business school to land the largest gift to any business school was amazing. It was a big deal. It was national news.”

In late March, it was decided that on April 23, 1992, the rest of the world would be let in on what White, Wilhelme and the others at the university had been working on – the William Davidson Institute (WDI).

 

Today, the University of Michigan is stepping up to this great challenge, and I am proud to be a part of its effort…I know that the talent, the energy, and the vision are here to meet the challenge. The Institute’s mission is to equip economic decision makers in these emerging countries with the tools of commercial success.

 

An upstairs lounge at the business school was converted to use for the news conference. University officials attended, including U-M President Jim Duderstadt, both U.S. senators from Michigan, the state’s governor, John Engler, who now sits on WDI’s board, and U.S. Treasury Secretary Nicholas Brady, who gave the keynote address.

Once the celebration ended, Davidson didn’t walk away. Lieberthal said it wasn’t Davidson’s style to say, “I”ll give you X amount of money, and good luck.” Davidson attended WDI’s board meetings, was always well prepared, made clear what his expectations were without making it seem like they were direct orders.

“I respected how he engaged without dictating,” Lieberthal said. “But he made sure that he understood what was going on and that WDI’s mission was really to achieve some long-term objectives and make some contributions, and he wanted to be sure we didn’t lose sight of that because we had a large endowment.”

Wilhelme, who attended WDI board meetings for 16 years, said Davidson emphasized to the board and WDI leadership that “if they saw an opportunity to make an impact, let’s spend the money now.”

Karen Davidson, who took her husband’s place on the WDI board after his 2009 death, said he was involved in several endeavors outside of Guardian and donated money to many causes. And while a parent may say it is unfair to be asked to name their favorite child, Karen Davidson said her husband was definitely most proud of WDI and remained active in its affairs right up until his death.

“He was happy that WDI was providing these great experiences on the ground for students and faculty, and that it was helping people and organizations in these emerging countries,” she said. “The Institute became exactly what he hoped it would.”

At the April 23 news conference, Ted Snyder, a business school professor, was introduced as the inaugural director of WDI. White said getting Snyder “to take on the job was the single most important thing” he did.

“It was one of the most amazing moments of my life,” said Snyder, now the dean of Yale’s School of Management. “It was an honor to be asked to be the inaugural director.”

The Institute focused on four major efforts:

  • Developing relationships with enterprises in transition economies and deploying faculty-led teams of masters-level students to work on high-priority projects
  • Delivering annual, six-week seminars for 50 senior business leaders, entrepreneurs and government officials from countries with economies in transition
  • Funding fellowships that allowed U-M scholars to engage intensively on the ground
  • Forums led by C.K. Prahalad for Indian CEOs

The Institute also worked on projects with multinational companies and indigenous companies in mostly former Soviet bloc countries those first three years, and also got a grant from the U.S. Treasury Department to look at bank privatization in central and Eastern Europe. He also took great care to start the Institute down a good path of being fiscally responsible with its endowment.

Snyder said Davidson and Gerson provided valuable feedback in those early days.

“Both Bill and Ralph were rightly concerned about how do we leverage the work, how do we capture the lessons and share them,” he said. “That was a useful question.”

Snyder was director for three years, leaving in 1995 to take a position in the Dean’s office at Ross. He said what he learned from engaging with senior managers from transition economies around the world, visiting students and faculty advisors in the field, has stayed with him throughout his career. He said those experiences were extremely valuable, and made him more analytical, more appreciative and a better listener when traveling around the world and meeting people.

“I’m much more able to engage with people around the world, and I expect that’s true for the students and the faculty and staff who have been involved in WDI,” he said.

In order to find Snyder’s replacement, WDI undertook a national search to find someone to strengthen the research agenda of the Institute.

Jan Svejnar, an economics professor at the University of Pittsburgh, was recruited to be WDI’s second executive director. Svejnar had been one of the chief architects of the Czech Republic’s economic reforms of the early 1990s and served as an advisor to Czech President Vaclav Havel. He also was co-founder of CERGI-EI in Prague, a graduate program that trains economists from the former Soviet bloc countries.

During his time as executive director, Svejnar invested heavily in creating an internal research capability. One success was a transition economics working paper series that ranked among the most downloaded in the world.

Under Svejnar, WDI also helped establish or assisted in the development of American-style business schools in emerging markets such as the Czech Republic, Uzbekistan and the Ukraine.

After eight years at the helm of WDI, Svejnar stepped down to return to teaching and research full time.

By the early 2000s, the transition in central and Eastern Europe had progressed significantly and businesses were encountering cutting-edge issues in other geographies, such as China and India. These new trends led the board to expand the Institute’s mission to encompass  “emerging economies” around the world.

In spring 2004, the WDI board announced that Robert Kennedy, then serving as the Institute’s associate director, would become WDI’s third executive director. Kennedy came to the Institute in September 2003 from Harvard, where he had been an associate professor of business administration. Prior to that, he worked in more than a dozen countries as a management consultant and venture capitalist.

Responding to changes in the international business environment, Kennedy redirected the research effort from economics issues in Central Europe towards building multidisciplinary expertise in several focus areas.

In summer 2013, Kennedy left to become Dean of the Ivey Business School at the University of Western Ontario in Canada. A year later, economist and professor Paul Clyde was tapped to lead WDI, taking the title of president. Before joining WDI, Clyde served as the academic director of the Part-Time MBA Program at the Ross School of Business, where he also led the development of the Weekend MBA Program

Clyde said there have been different leaders of WDI, evolving geographies, and different areas of emphasis, “but the private sector focus has been there throughout.”

“We still focus on how do we help the private sector transition to a market-based economy,” he said. “How do we help them thrive in a market-based environment.”

 

“In a sense, we are not just educators, administrators, or businessmen; we are co-workers for the cause of economic and social freedom. We must do all in our power to see that those countries that have already taken the difficult first step forward will continue along the path of progress without faltering. This is no small task, but together we can make a difference. Together we can set an example for others to follow.”

 

As he charts the course for WDI and the next 25 years, Clyde said the Institute’s endowment allows it to focus only on projects that will have impact. He said the Institute will continue to look for good partners on projects and remain focused on the private sector.

“This recognition that for-profit entities are really going to be the quickest path to growth is something we’re going to continue to focus on,” Clyde said. “If we’re successful and these economies grow and become thriving markets, the need for us as an institute would not be there anymore. We’re trying to get rid of the need for institutes like ours.”

Gerson said in the coming years, WDI must continue to identify primary issues in emerging economies to study but avoid becoming completely absorbed with any one of them.

He said it has been remarkable and exciting to see WDI grow from an idea in one man’s head to something real that has made contributions to growth in a number of areas around the world over the past 25 years.

“Bill’s vision was to improve the capabilities of a lot of people in a lot of countries,” Gerson said. “The key to his philosophy was that you best help a person by helping them help themselves. That’s what this Institute has done; it has given people the tools to prosper on their own.
“It is an Institute that provides tools for opportunity around the world.”

 

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