Probably more than we have ever dared to think. We are starting to suspect that their thinking may be based on deep and fundamental ignorance. It is a terrifying thought.
An extract from
Stumbling and Mumbling Chris Dillon’s Blog 14th October 2008
On the subject of our economic leadership -
…….. “I thought: “But surely they’ve learnt from statistics and experience by now. Their risk management can’t be as terrible as Taleb claims. I know bosses are stupid, but they can‘t be this gibberingly, imbecilically, carpet-chewingly, moronically cretinous, can they?” I suspect most economists thought my way.
It looks like we were wrong and Taleb right.
But this isn’t because Taleb had any great insights into the nature of risk. It‘s because he thought banks‘ risk managers were idiots, whilst economists didn’t think so - not even me.
In doing this, however, we were just following economists’ standard procedure - of assuming that agents were if not rational then at least not wholly stupid. “ ……..
There were over 30 comments, all by erudite and thoughtful experts – and for me, all missing the point. I selected this extract from Chris' blog because it highlights our core message
“To get Different Results you must apply Different Thinking”
As we say in our web site – if you always do what you always did, you will only get what you always got.
And that is what the economists, the financial analysts, the bankers - and the government – have been doing. And that is why, when the balloon finally ran out of the hot air they had all been spouting, the fall was so fast and so catastrophic.
As an engineer, I learned the Laws of Thermodynamics. Amongst them were two topically relevant concepts -
- All types of Perpetual Motion Machines are impossible.
- All transactions involving Energy are "lossy".
Wealth is the Energy that powers our social existence. The same rules apply.
We have had 12 years of the leaders of our economy ignoring, or trying to conceal, "lossiness" and imagining they had a Perpetual Motion Machine of Wealth – truly not understanding that they were doing.
We engineers learned that the energy efficiency of any device depends on how close we can make it to a hypothetical Perpetual Motion Machine – in other words – on how much we can reduce its “lossiness”.
In ChangeWORLD we know, not just from experience but from rock solid research, that the organisations that massively outperform the rest, and that will be least threatened by the current economic shambles, are in fact those with the least “lossiness”, the lowest waste and the highest quality of business process . They are the ones that, on our Competitive Strength Report scale, will rate as “Free”. There are very few.
The majority, with the Comparative Competitive Strength level of “Comfortable”, are now faced with the prospect of a very rapid, unexpected and enforced transition into “Constrained” - the doorway to The Abyss, total failure. There will be absolute carnage over the next 18 months. There does not have to be – there could be more survivors if they can apply Different Thinking fast enough.
The same rules and logic apply to Government, and to our national economy. If we have an excessively “lossy” economy, it will have low Comparative Competitive Strength. It will become, inevitably, “Constrained”, facing The Abyss. Our leaders have indulged themselves in the illusion of success, ignoring the “lossy” economy, during the exceptionally benign economic conditions of the “NICE” decade. Self-deluded and smugly claiming "Excellence" they were actually only “Comfortable”. Now everything has changed, and they don’t know how to face The Abyss.
Like we all are, right now. Have you noticed the number of references to the “Abyss” in the last two weeks?
Our absolute screaming frustration is that all of this is known – and all has been ignored – because it is predicated on the idea that:
Solid and sustainable Wealth is the outcome of applied and continuous effectiveness of performance.
That has never been what the wheelers and dealers of the City,
Do you want to know what you can do right now to pull your business away from the Abyss? Are you going to do it to them before they finally do for you?