Philip Whiteley's Blog

May 25, 2011

Note to ministers: find out what is happening

Filed under: Uncategorized — felipewh @ 8:55 am

The cataclysmic failure of mathematical models that were supposed to predict market risk, and enable the banks to control them, is now obviously accelerating the impoverishment of the West. The mountainous sovereign debts and the ‘austerity’ programmes (put in inverted commas because they are effects, and not causes, of the crisis) are going to be with us for some years to come. Policy choices can only alter a few details.

A fascinating discussion I attended last week covered much of the grand illusions of Western thinking that contributed to the malaise. The talks, organised by Bill Critchley and Tim Casserley of the Edge Equilibrium, and attended by corporate executives, covered the misguided notion of trying to bring the science of certainty to an inherently unpredictable world. Tim expands on this to decry the pretence that the organisation (like the market) is a ‘thing’ that can be manipulated by superstar leaders. Collectively, there is an assumption of a machine-type metaphor (a particularly gratifying insight for me as Max Mckeown and I offered a critique of this in Unshrink, published nearly a decade ago, but sadly not required reading by policy wonks or investment bankers).

Bill observed how 90% of change programmes fail, according to the objectives set, and how no budget produces what it is supposed to produce. Organisations do work – but only because enough managers know how to improvise; how to make things work despite the mantra of how they are supposed to do it.

Tim, who has considerable senior management experience, decried the fantasy of control, pursuance of perfection, sense of omnipotence and the absurd 90-day financial reporting cycle that has characterised corporate environment in recent years.

What is alarming, however, is how little of this insight seems to influence our leaders. You would expect them to be undergoing a complete revision of the ideas that brought this avoidable economic crisis to pass. Instead, they seem to be obsessed with pop sociology, according to a recent blog by Robert Colville in the Telegraph; books like ‘Nudge’. I have not read all the titles on the list, and I do not doubt that they contain many valid ideas, but the collective lack of desire to analyse the deeply flawed models that have so spectacularly gone wrong is frightening. It is like the Titanic disaster inquiry board looking only at matters of interior décor on the ship.

This affects policy. The UK government wants to reform the National Health Service. Fine; it desperately needs wide-ranging reform. Instead, however, ministers have put forward a restructure, believing implicitly in the machine metaphor.

Here is an alternative reading list: Making Social Science Matter, by Bent Flyvbjerg; 13 Bankers, by Simon Johnson; The Big Short, by Michael Lewis, and This Time is Different, by Carmen Reinhart and Kenneth Rogoff. And may I add Unshrink the People, by Philip Whiteley and Max Mckeown?

Note to ministers: try to find out what is happening before setting policy. And during and afterwards, also.

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