Philip Whiteley's Blog

July 14, 2010

See it human. As if there were any other way

Filed under: Uncategorized — felipewh @ 10:10 am

The core part of Stefan Stern’s valedictory column in the Financial Times reads simply: ‘It is remarkable how many senior executives have told me over the years, with a hint of wonder in their voices, that their business is “really a people business”. As if there were any other kind!’

His call to ‘see it human’ seems like a forlorn quest in the barren wastelands of British newspaper comment. There is now not a single journalist in the UK national papers who understands just what is wrong with the way in which management has been taught. At the end of a decade which has seen some of the most complete failures in the history of governance, editors are turning their backs on any proper critique or even basic coverage. (Though perhaps I should give the FT the benefit of the doubt: we don’t know Stefan’s replacement yet). The failure of the Guardian/Observer is the most shocking: sacking Simon Caulkin, their last remaining quality commentator, and the only one to have understood why the credit crisis occurred. These papers are banned from my household.

Depressing, and counter-intuitive. But there’s a surprising under-current. While ‘progressive’ media reject humanistic notions in management, a most curious phenomenon is occurring in an unlikely place. I’ve discovered that someone called Nassim Nicholas Taleb, founder of the Black Swan theory, is a big hit in the investment community. His is one of the most devastating critiques of neo-liberal thinking. But because he has been a successful trader, he carries clout in the strange world of money. He points out that the pretence that economies can be ‘modelled’ mathematically – the bogus notion of ‘Value at Risk’ developed by JP Morgan and related mathematical metaphors – was a major contributory factor into the credit crisis. The dehumanizing notion that there must be some sort of Newtonian ‘law’ governing economics failed in theory. Now it has failed spectacularly in practice. A mathematician called Benoit Mandelbrot told the economics profession how badly wrong they were way back in 1963, and was ostracized for his trouble.

So the likelihood is that investors are going to start asking deep questions about human capital, human risk and human potential. This may not appear to be automatically progressive or ethical thinking – but it will be impossible for investors to evade these questions, for the simple reason that people behave like people, and want to be treated with respect. So proper human capital due diligence is going to have to accommodate this dimension. You only have to look at the way in which Chinese worker suicides are threatening the world’s low-inflation assumptions as an example.

This is going to be beautiful: hedge fund managers teaching Guardian editors about ethics! Sadly, they probably won’t be ready to learn.

I’m going to abandon modesty and self-restraint. The rest of this blog is going to consist of a bit of ‘I told you so’ and a plug for the conference I’ve put together for 30 September.

First of all, the ‘I told you so’. Nearly a decade ago, Max Mckeown and I wrote ‘Unshrink the People’, and made some of the same points as Taleb – particularly exposing the nonsense that economies and organizations obey some sort of mechanical or mathematical ‘model’. One excerpt reads:

‘Scientific’ management … uses concepts borrowed from engineering, so let us make a comparison with the real thing. Every engineer will assume certain things about background, constant factors. …. So the mechanical engineer assumes that gravitational acceleration is constant at 9.81 m/s2 and the chemical engineer that there is perfectly even mixing of ingredients. But what is the basic, operating assumption of the scientific manager? That people will not behave like people! It is an oxymoron, but most managers believe it. Everyone who defines flexible labour markets, or operational efficiency, or “synergy” from a merger, in ways that remove people and their motivations from the equation, is assuming that people will simply fall uncomplainingly into the new slot allotted them in the reconfigured machine. It is a theory that is not rooted in the real world. And in practice, it nearly always goes wrong.’ (Unshrink the People, FT Prentice Hall, 2002).

Taleb is a best-seller, and Max and I were not. So I’m a bit jealous. Still, part of a wider movement, blah blah….

Now, the plug. On 30 September, Stefan and Simon Caulkin will be among the speakers I’ve put together for a conference, hosted by the Human Capital Forum. There will be other top speakers. More details are available here:


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