As I sometimes do I was tapping away on a blog post and then thought I’d like to give it greater exposure. So I didn’t press ‘publish’ and then pitched it to the Age who liked the idea. So I worked away to convert the post into a column – they’re fairly different things (for me anyway). So here’s the column. It was published today in the Age and picked up by the SMH I’m pleased to say. And, not that it’s all that fascinating, but just for the hell of it, I’m writing this in the window I wrote the original post in before I pressed ‘save draft’ rather than ‘publish’. So if anyone’s inteerested in the contrast between the blog post and the column of the post, the original post is below the fold. (Sorry for the lack of a fold earlier in the piece.
On his journey to the Lodge Kevin Rudd argued that one of his opponents’ political philosophers, Friedrich Hayek held the twin beliefs that people are naturally selfish and that this was a good thing. Ironically Hayek believed the converse – that our evolution in small bands on the African Savannah had produced a species that was naturally given to group solidarity. And Hayek thought that was a bad thing – an obstacle to building a free modern society.
A brief glance at our world, both today and through history confirms our natural tendency to solidarity. With brief interludes in ancient Athens and Rome, it took until the sixteenth century before, in the teeth of the misery and mass bloodshed brought by generations of religious civil war in Reformation Europe, the penny dropped that society might function without unanimous agreement about the nature of God and the universe: As Elizabeth I put it – providing Englishmen were loyal and law abiding she need not look into their souls.
It took more centuries for the idea of factions within government to be accepted and ultimately institutionalised. But still the revolution seems only half won. Amongst the carnival of dissent and struggle in the marketplace for money and ideas – which has brought humans as close as we have yet come towards a free, meritocratic society, most organisations are run as Good Queen Bess’s tyrannical dad, Henry VIII would have run them – by fiat, with dissent hushed up if it is tolerated at all.
Of course to get things done, organisations can’t be riven with faction, and indecision. But the same can be said for polities. And just as a Catholic could be a loyal subject of Queen Bess, so dissent within a firm can respect its authority; its need for decision. Why shouldn’t it be possible for an employee – or for a board member, CEO or Chairman for that matter – to say something like this?
I opposed the dividend policy the company agreed on. I may do so again. But more people supported it and I support our firm’s need to make and stick by clear decisions.
(I’d apply the same standards to cabinet government but that’s utopian for the foreseeable future. The media’s feverish sensationalism would turn it into a circus.)
As James Suroweicki’s The Wisdom of Crowds observes, to be wise, a crowd must embody diversity of opinion and cognition, some preferably open means of capturing those insights over as wide a range as possible, and independence of individuals within the crowd. The more such qualities are lacking the more tenaciously organisations gravitate towards what Orwell called groupthink, reminding us that Suroweicki’s book was offered as a foil to the mid nineteenth century book Extraordinary Popular Delusions and the Madness of Crowds. That book’s topics included markets’ endlessly recurring cycles of euphoria and gloom, alchemy, the crusades and other human high points.
Groupthink and complacency feed on each other often preventing organisations from learning except in a crisis. Because, though little fault of our own we had a good financial crisis, our bureaucrats and banks rest assured of their own acumen.
As financial entrepreneur Christopher Joye blogs, England’s officials, through no more derelict than ours, had a bad crisis. And now its central bank is being ruthlessly honest in its soul searching. In contrast our own Reserve Bank’s reform appetite has been weak, its cosy husbanding of the major banks’ largely undisturbed. In cobbling together its timid banking competition package our Government boasted of how assiduously it worked with financial regulators. But wouldn’t any politicians in government talk policy through with their own official insiders? For me it underlined the Government’s obliviousness to the wisdom available from further afield.
The cultivation of dissent and open discussion are also a recipe for ethical hygiene. I thought of this when listening to the ABC’s Background Briefing on the history of asbestos in Australia. Tasmanian firm Goliath Portland Cement’s former finance director Roger Martin was asked if Goliath knew of asbestos’s hazards back when he started in 1981. Martin replied that his then Chairman, Sir Henry Somerset wasn’t the kind of person who’d have countenanced such hazards to the employees. “It wasn’t that kind of company.”
Martin’s complacency was sincere. But he confessed his amazement when shown documentary evidence of Goliath’s managing director being informed of the hazards back in the 1960s. He’d sent a note to his counterpart at James Hardie whose personnel manager had responded when asked “The best advice you can give your friend [at Goliath] is to ignore the publicity. Dust is a fact. Denials merely stir up more publicity.”
How did actions of such high immorality occur in virtually every similar firm around the world? They were hiding in plain sight under the cover of normality. They were perpetrated by people who’d have adamantly denied working for “that kind of company”. But had it been normal to express divergent views within the company, would no-one have spoken up to awaken the consciences of those who, as they observed the common decencies of everyday life, were groupthinking their way to criminal disregard for their fellows and, ultimately catastrophe, not just for their fellow employees, but also for the company towards which they proudly boasted their loyalty?
So as a new decade begins, I’m proposing another Good Queen Bess moment. Organisations should develop cultures which encourage diversity, dissent and debate amongst the crowds within and, where possible, even outside their walls. That way they can inoculate themselves against the grand folly of groupthink. They can aspire to the wisdom of crowds instead.
Rusted on Troppodillians may remember a post by Don Arthur debunking a Rudd op ed (but not the more expansive article on which it was based). “Like Rudd, Hayek did not believe that human beings are “almost exclusively self-regarding”. Instead, he thought that we instinctively lean towards other-regarding values like altruism and solidarity. Unlike Rudd, however, he thought this was a problem.”
Certainly one can see evidence all around one of people’s natural hankering for solidarity and the painfulness with which human beings have moved beyond this as society and political governance becomes more complex. It took until around the sixteenth century for the penny to begin to drop in Europe that perhaps a society could function without everyone believing exactly the same thing – without as Good Queen Bess put it “looking into mens’ souls”. Another century or so for it to be OK for there to be ‘factions’ in the running of governments, and indeed for those factions to be institutionalised.
Still it’s odd that it hasn’t gone further – or not odd if you think that our biological preference for solidarity is behind it. Note the apoplexy that the media has when someone doesn’t agree with their leader in a political party. Something similar, indeed more rigorous applies in business. Yet at least commonsensically speaking, none of this is necessary. Part of the desire for solidarity is a natural and reasonable desire that fighting organisations (which is what political parties and firms are) should not be riven with faction, division and the emotional and political turmoil, indecision and weakness that can come from a state of internal siege. But just as a Catholic could be a loyal subject of Queen Bess, so dissent within a company can remain perfectly respectful of the company’s authority structure.
Why shouldn’t it be possible for a member of a board to say this?
I attended that board meeting and spoke against paying a dividend as high as we ultimately decided to pay, and I’m still not sure that it’s the right decision. If it comes up again, depending on the circumstances I’m quite likely to have the same view, but I’m just a member of the board and the board is the supreme decision making body of the company and, because I support the company’s capacity to make decisions, in that sense I support its decision in this case.
One could say the same about politics, but there the media would make it quite impossible to do this, at least for the foreseeable future.
In any event, I would argue that just as this kind of approach has been one of the foundations of our great good material and political fortune in the modern world, extending it further into our economic and political life would bring important benefits. At least when I think about it, one of the hugely dysfunctional things about bureaucracies is the groupthink within them. And since we cannot do without bureaucracies I would argue that bureaucracies that cultivate respectful dissent are likely to be far more productive than those that don’t.
And if you think Hayek is right about our historical and pre-historical antecedents, if you think pre-historians are right in proposing that the most important pronouns for early humanity were ‘us’ and ‘them’ then dissent needs to be cultivated, with groupthink being the unfortunately natural state of many groups of humans.
If you read James Suroweicki’s great book The Wisdom of Crowds his preconditions for crowds to be wise underscore my point. They are:
a) Diversity of opinion and cognition
b) Independence from one another (crowds are stupid when there is too much influence between their members as with the irrational exuberance (pessimism) of a speculative boom (bust).
d) A sound method of aggregating opinions.
I could go on. We hear about risk-aversion in decision making in large bureaucracies. As I’ve argued elsewhere, there’s some method in this process of giving different decision makers within organisations powers of serial veto, but they almost invariably kill all sorts of worthwhile and quite harmless innovation.
By way of temperament and decisions in my life I’m probably less risk-averse than most of the decision makers in the Treasury and the Reserve Bank but sometimes they back much riskier positions than I’d feel comfortable with. I think we’ve paid insufficient attention to our current account deficit and that it’s led us into more risk than we should be bearing, even though there’s still more chance of things working out OK than not – and lately with mining exports kicking in, things seem to be swinging somewhat more in favour of the higher risk, more laissez faire view.
In an excellent post Christopher Joye documents something similar in the RBA.
For largely no fault of its own, the BoE has had a bad crisis. The UK banking system collapsed. As a consequence, the reform appetite is very healthy indeed. The BoE leadership is being ruthlessly honest with the community about the changes that need to be made to protect the system from the next crisis. This is one of the perverse benefits of bad luck: you are much more motivated to work to tilt the probabilities in your favour the next time the sh-t hits the fan.
In comparison, Australia had immense good fortune. That is, we had a great crisis, and hardly felt the effects of the offshore storms–just a wee bit of turbulence. As an unsurprising consequence, the reform appetite within the RBA is weak.
Australia’s good crisis has reinforced the RBA’s natural conservatism and tendency to resist change (remember they opposed the creation of APRA). This has led to it obfuscating about governance problems (eg, executive leaks to journalists), obfuscating about reform challenges in preference for defending the status quo (eg, the patent unwillingness of staff to voluntarily and actively engage with the public on the moral hazard and too-big-to-fail debates of the day), obfuscating about its own unusual role in the economy (eg, arguing on the one hand that taxpayers should not wear more private sector risk, but creating new linkages between itself, a taxpayer-owned institution, and the private sector as seen by the RBA’s response to BASEL III), obfuscating about financial stability risks (relentlessly talking ‘up’ the system and the work of regulators rather than apportioning more time to discussing the downside hazards), and a clear propensity for quashing policy innovation.
Again, Chris is not your standard risk averse kind of guy, but he’s drawing attention to risks the RBA guys are (according to his argument) groupthinking their way into accepting as OK. Finally – and without drawing moral parallels between any of the people here and what happened in the case below, somehow when listening to this podcast of Background Briefing I thought of the same thing. Here’s the transcript:
Di Martin (Narrator): [A] critical set of James Hardie’s documents . . . tell a damning story about Alex Walker, the Managing Director of Goliath Portland Cement. In 1965, Alex Walker was returning from a trip to England, where he’d read a feature on asbestos and mesothelioma in The Sunday Times newspaper, that in part read:
Reader: A disquieting new occupational disease capable of killing not only the exposed workman, but also perhaps his womenfolk and even people living near his place of work, is the subject of intensive behind-the-scenes activity by British scientists, experts on industrial health, and at least two government ministries.
Di Martin: Alarmed, Alex Walker sent the article to his counterpart at James Hardie, John Boyd Reid.
Mr Reid in turn wrote the following memo to his personnel manager.
Reader: Attached hereto is a copy of an article which was given to me by Mr A. Walker, Managing Director of Goliath Portland Cement Ltd., Tasmania. He is concerned about this sort of information getting around Australia.
Di Martin: Hardie’s chief asked to be sent whatever information was available on the contents of the newspaper article.
The reply from his personnel manager came just one day later, saying that the article:
Reader: … is merely one of many reports on world studies which have been conducted since 1935 when the association between the exposure to dust and carcinoma of the lung, mesothelioma of the pleura, tumour of the bladder and uterus and other fatal complaints, was first recognised.
Di Martin: The James Hardie personnel manager went on:
Reader: The only preventative action is to eliminate the presence of dust.
Di Martin: And finally the personnel manager advised Hardie’s boss, John Boyd Reid that:
Reader: The best advice you can give your friend is to ignore the publicity. Dust is a fact. Denials merely stir up more publicity.
Now on it’s face this story is a story of immorality. But it’s immorality that is a very normal kind of immorality, that’s always managing to work its dark ways inside institutions – institutions that not only feel it natural to expect ‘loyalty’ meaning absence of ‘trouble making’ but which make it somehow natural for people to do things which we look back on and realise were truly terrible. Some of the people who did this were bastards of the highest order. But many would not have been. They would have observed the ordinary decencies of life.
Yet their acceptance of – nay desire for – the quiet solidarity of being within a group led them to groupthink their way towards something horrifying. And, incidentally though relevantly to my argument here, to something which threatened the organisation they naturally sought to defend, with catastrophe.
Somehow I think we need another Good Queen Bess moment which can help us make the next step towards a world in which it is not just normal but highly valued for people to express respectful dissent within organisations so as to better ensure that those organisations are intellectually healthy and in the best state to represent their own interests, and though that the interests of us all.
Postscript: The piece made into WAToday as well.