Financial Crises and Leadership at the ‘Elbow Joints of History’

Scott C. Miller can pinpoint the moment he decided to study economic history.

September 15, 2008. London. He had just emerged from a Tube station when the news broke: Lehman Brothers had collapsed in the biggest bankruptcy in U.S. history.

“I was seeing people who looked like I felt on 9/11,” he says. “I knew something massive was happening in the world, but I didn't understand what it was.”

He decided to change that.

Today, Miller is an economic historian and assistant professor at the University of Virginia Darden School of Business, where he teaches the elective “Financial Crises & Civic Reaction” to Full-Time MBA students and “Financial Crises: Lessons for Democracy & Capitalism” to Part-Time MBA students.

Financial Crises at the ‘Elbow Joints’ of History

One myth about financial crises is that they are rare.

In reality, there is typically a crisis of some sort — a category that could encompass a banking crisis, a currency crisis or a sovereign debt crisis — happening around the world at any given time in recent history.

Fed chairman Paul Volcker once wittily remarked that “about every 10 years, we have the greatest crisis in 50 years.”

Miller’s journey into financial crises began with the Panic of 1791 when he was a graduate student. He met Professor and Dean Emeritus Bob Bruner, author of a book on the Panic of 1907 and multiple papers and cases on economic crashes and crises.

Bruner also taught a class on financial crises. Now the baton has been passed to Miller.

“The course is predicated on my belief that the big changes we see in societies and political systems, especially economic shifts, tend to come after episodes of great financial or economic distress. The way I describe them is they are the ‘elbow joints of history,’” Miller says in the latest episode of Office Hours, a faculty spotlight series.

“You may have movements, but then something tends to break in the economy or financial system, and because that is the one thing that touches everyone in a society, that tends to cause shifts, and that can either be a very good thing or a bad thing.”

There are many moments in history when this has happened. For example, the depression of the 1780s in the United States spurred the creation of the American Constitution and a fundamental change in how the American economy worked. Looking to Europe, it was a financial crisis that caused the French Revolution and the raft of beheadings that happened in Paris.

“And you could also argue that it was a series of financial crises that really emboldened the rise of Nazism in Germany in the 1930s,” says Miller. “These are the pivot points.”

The goal of the class is straightforward: help students understand financial crises, as they will likely face at least one during their careers. And equip them with the leadership skills needed to navigate a crisis successfully.

“The problem is that crises are shrouded in myth, and people tend not to understand what they are and how they work,” Miller says.

“If you assume a crisis is going to play out in one way, but it ends up going another, you can make a series of really bad decisions. The goal is to help people understand both how crises work and, as future business leaders, how to navigate them. In the course, we look at a series of decision makers, government officials and leaders of companies, dealing with these crises.”

Because the class takes place at Darden, which prepares future-ready leaders, a key element is leadership lessons.

“In these crisis situations, this is how you need to prepare,” Miller explains. “Here's how you need to act. Here's how you need to lead your firm or your agency. And how to understand how these crises affect broader society, because these are linchpins of how political systems and societal systems move. It is a connective tissue.”

Unlike most Darden classes, this one spans two quarters — a full semester. The material covers 22 crises across eight countries and 300 years, starting in France in 1719 and finishing in Sri Lanka in 2022.

Leadership Lesson from Alexander Hamilton

Another popular class Miller teaches is “Alexander Hamilton: Lessons in Management, Strategy and Leadership,” offered in the Executive MBA program.

The irony of teaching a class on Hamilton at the University founded by his bitter political rival, Thomas Jefferson, is not lost on Miller.

“They were very at odds,” says Miller of the two Founding Fathers. “Hamilton called Jefferson ‘a man of scattered and sublimated imagination who had no sense for good taste or good government,’ and Jefferson said that Alexander Hamilton was ‘the new Caesar who was going to subvert the Republic.’ So you definitely had no love lost between them. What I will say, though, is you have to understand both of them to understand Americans and America today.”

Miller is fond of saying America “is a Hamiltonian country with a Jeffersonian spirit and brain.”

What initially drew Miller to Hamilton was his backstory: Hamilton was a striving immigrant from the West Indies who rose to become George Washington’s chief of staff, shaped the U.S. Constitution, created the nation’s financial system, and ultimately died in a duel with the vice president.

“I was very compelled by his story,” he says.

But there are also important takeaways from his life.

“Hamilton offers a series of lessons and circumstances that I believe Darden students can really learn from,” says Miller.

“First, he had to deal with a very specific set of economic, financial and strategic problems that few historical figures ever had to face. He was tasked with reforming, operating and guiding an entirely new economic and financial system — one that, in many ways, operated like a startup.”

Second, Hamilton’s record was not without flaws.

“He was quite brilliant and did some really amazing things, but he also had some gargantuan failures. I think it’s important for students to study someone who, and I use this phrase very rarely, was truly brilliant and achieved truly great things that reshaped the United States and the world, but also made some catastrophic decisions. Darden students can learn from both.”

Recently, Miller brought Hamilton to life in the classroom — in a manner of speaking. Working with Fred Telegdy, a senior instructional designer at the Darden, Miller created a customized Hamilton chatbot.

For the final exam, students had to “talk” with Hamilton for 20 to 30 minutes and critique one or more of his policies. They also had to critique the model.

“It was an amazing experience,” says Miller. “We're already working on making it a face-to-face, effectively a Zoom exam, with Alexander Hamilton next year, which is terrifying and wonderful at the same time.”

(For more on the Chatbot, see “AI Alexander Hamilton takes his shot in a Darden classroom.”)

The Democracy-Capitalism Nexus

Miller, who is also director of the Democracy and Capitalism Lab at the Karsh Institute of Democracy, believes that not only can democracy and capitalism work together, but they’re also essential to each other.

“The goal of the Lab is to understand the synergies between free markets and free people and the tensions between them,” says Miller. “If we are to remain free and prosperous, we need to understand the relationship between these things, acknowledge the conflicts, and do everything we can to find ways to integrate them more fully.”

To listen to the full conversation, visit “Office Hours,” presented by Darden Ideas to Action.