The Ten Commandments for Business Failure - Don Keough [35]
Meanwhile, the experts who helped us into this situation went on their way to “help” other people.
Whatever happened to common sense? The expertise of some experts has been disproved so many times that you would think they would wear out their welcome.
Philip Tetlock has been monitoring experts’ views on world politics for many years. He notes, “Almost as many experts as not thought that the Soviet Communist Party would remain firmly in the saddle of power in 1993, that Canada was doomed by 1997, that neo-fascism would prevail in Pretoria by 1994, that EMU would collapse by 1997… that the Persian Gulf Crisis would be resolved peacefully.”* He found that these experts were 80 percent confident of their predictions. They were actually correct only 45 percent of the time. They might as well have been flipping coins.
But what was most telling was that in following up with these experts, despite incontrovertible evidence that they had been wrong, Tetlock found that they showed no sign of losing faith in their own understanding of the situation. Instead, they manufactured a whole series of excuses—“I was almost right—it hasn’t happened yet but it will—completely unforeseeable forces intervened like an earthquake—based on the data I was given, I was right.”
It’s October and an Indian chief believes it’s going to be a cold winter. So he tells his tribe to collect firewood. To double-check his prediction, the chief calls the National Weather Service and asks a meteorologist if the winter is going to be a cold one. The weatherman says, “According to our indicators, we think it might.” So the chief tells his people to find extra wood just in case. A week later he calls the National Weather Service again, and they confirm that a harsh winter is headed their way. The chief orders all his people to scavenge every scrap of wood they can find. Two weeks later, the chief calls the National Weather Service again and asks, “Are you sure this winter is going to be cold?” “Absolutely,” the weatherman replies. “The Indians are collecting wood like crazy.”
THEY’RE WRONG, wrong, wrong again and again. Yet they keep coming around, prowling the halls of business and, yes, government, peddling some new expert observation, some prediction, some new jargon, or some new, recycled idea.
How many crazes can there be? Theory X. Theory Y. Chaos. Management by objectives. One-minute managing. Total quality management. Peak performance. Empowerment. Downsizing. Ramping up. Ramping down.
They are constantly “reengineering”—mainly they’re reengineering the language. I recently heard one manager talk about “dehiring” some employees.
And what is matrix management? As near as I can determine, that means that thanks to the matrix, one person can enjoy the advantage of reporting to three, maybe more managers.
Just before the dot-com crash, I heard a lot about the term “burn rate.” That’s what we used to call simply spending someone else’s money—money that they will never see again.
It’s all rather amusing, except that our worshipping of experts can indeed lead to serious, and sometimes widespread, failure.
Consider John Meriwether and Long-Term Capital Management.
In the heady 1980s, Meriwether was among the headiest. He led a group of bond traders who generated profits for Salomon Brothers. In 1994, he and two others, economics Nobel Prize winners Myron Scholes and Robert Merton, founded Long-Term Capital Management, a highly unregulated investment pool in what is known as a hedge fund. Their clients were the extremely wealthy. Their brilliant theories were little understood but greatly admired because they could not fail! And for three years they delivered spectacular, almost unbelievable results. By 1998 they had invested some ninety billion dollars, most of it borrowed. But no one worried. The experts in charge