A safe place to talk  A piece in the Times this weekend discusses Israel's use of white phosphorus shells: Charles Heyman, a military expert and former major in the British Army, said: "If white phosphorus was deliberately fired at a crowd of people someone would end up in The Hague. White phosphorus is also a terror weapon. The descending blobs of phosphorus will burn when in contact with skin."
Elsewhere, Rabbi Michael Lerner writes:
The basic condition for creating peace is to help each side feel "safe". A first and critical step is to speak in a language that is empathic toward the suffering of each people in a climate of discourse in which both sides' stories are heard and understood.
Yet Israel, as the militarily superior power, ought to take the first steps: implementing a massive Marshall Plan in Gaza and in the West Bank to end poverty and unemployment, rebuild infrastructure and encourage investment; dismantle the settlements or make settlers become citizens of a Palestinian state; accept 30,000 Palestinian refugees annually back into Israel for the next 30 years, apologise for its role in the 1948 expulsions and offer to co-ordinate a worldwide compensation effort for all that Palestinians lost during the Occupation; and recognise a Palestinian state within borders already defined by the Geneva Accord of 2003.
This is the only way Israel will ever achieve security. It is the only way to permanently defeat Hamas and all extremists who wish to see endless war against Israel.
The most significant contribution the new Obama administration could make to Middle East peace would be to embrace a strategy that homeland security is best achieved not by military or economic domination but by generosity and caring for others. If this new way of thinking could become a serious part of US policy, it would have an immense impact on undermining the fearful consciousness of Israelis who still see the world more through the frame of the Holocaust and previous persecutions than through the frame of their actual present power in the world.
It breaks my heart to see the terrible suffering in Gaza and in Israel.
Once again, making it safe is the prerequisite for communication, communication the prerequisite for learning, learning the prerequisite for change – the inescapable logic of the Yala.
 Margaret Atwood’s intriguing book “Payback: Debt and the Shadow Side of Wealth” (see my last post) asks two key questions: Where will it all end? and Where should I start? Where should I start is perhaps the easier one; answered in a couple of epigrams: “the journey of a thousand miles starts with a single step” and that first step “starts where your feet are”. For me, that means explaining how the creation of a Yala will improve the performance of the complex, contradictory relationships of our multi-cultural world. Atwood, for example, asks what if the president of the United States goes on television post-9/11 and says: We have suffered a grievous loss – a blow has been struck at us that was motivated by a obsessive desire to harm us. We realize that this was the work of a small group of fanatics. Other nations might bomb the stuffing out of the civilian population where these fanatics are at present located, but we recognize the futility of such an action. Nor will we accuse any bystander nation of being involved. We realize that acts of vengeance recoil upon the heads of the inventors, and we do not wish to perpetuate a chain reaction of revenge. Therefore we will forgive. Just imagine – Atwood says – the impact of taking such a position, not that there was a snowball’s chance in Hell of this ever happening. Instead, having itself broken International Law, America now seeks global coordination to counter an economic crisis, which, in the words of Nobel Prize-Winning economist Joseph Stiglitz, comes with a “Made in America” tag on it. Similarly, I am shaking my head, like millions of others no doubt, at the breaking news of Israel’s assault across Gaza’s borders… where will it all end. Already, the repercussions of the global crisis are manifesting themselves in strange and unpleasant ways. The Daily Mail, for example, has a fascinating story about the UK’s recycling emergency. Rubbish carefully sorted by householders is piling up in vast warehouses as the market for waste paper collapses. Experts warn that the mountain of garbage could double in the next three months. Before the market crashed, more than half of the ten million tons of recyclable household waste produced each year was sold to China, where steel cans, plastic, glass, paper and cardboard are processed and used to build homes, cars and electrical goods. But the economic crisis has led to a plunge in demand from China for British raw materials. Taxpayers are facing a multi-million-pound bill to store 100,000 tons of waste paper and cardboard. Moreover, if paper is stored for longer than three months it will rot and attract vermin, rendering it worthless. Where will it all end? That is up to us. Constructive dialogue – starting “where our feet are” – is the only way through such problems. Where should we start? In your case, that first step is taking the time and trouble to become acquainted with the Yala concept and software, a revolutionary way to help individuals, groups and organizations to thrive and survive in the incredibly difficult time ahead.
 Over Christmas I have been reading Mary Atwood's book "Payback: Debt and the Shadow Side of Wealth". This comprises the four 2008 Massey Lectures broadcast in November 2008 as part of CBC Radio's Ideas series. She offers many intriguing thoughts relevant to today's troubled world. For example, the news on Sunday 28 December was that Church of England bishops have launched a concerted attack on British Prime Minister Gordon Brown, accusing him of squandering the opportunity to transform society and pursuing "scandalous" policies. The Labour government, in response, accused the bishops of dragging politics into religion.
Which, as Mary Atwood points out, is a bit rich since the government drags religion into politics whenever it suits them.
She points out that the whole theology of Christianity rests on the notion of spiritual debts and what must be done to repay them. During their lifetimes, all souls not in a state of grace or actually sold to the Devil fully and finally are believed to be in an intermediate condition: in peril, but not fully damned as yet. Time is running out. Will you be redeemed before the clock strikes midnight and the Grim Reaper arrives? Hang by your fingertips! It's never over till it's over.
You never know, that is, unless you're a believer in the Antinomian Heresey. If you're so certain of your own salvation that even the most despicable things you do are right. And the London Telegraph suggested that Tony Blair, the former Labour Prime Minister, was indeed gripped by this heresy:
Righteousness overrides the law – which was, arguably, the PM's position on Iraq.
If justification by faith, rather than by works, is the high road to heaven, the logical extreme of the position is that works don't matter at all.
Divine grace, over which we have no control, brings about faith. Faith brings about salvation. Ergo, if you're not touched by grace, there's not much you can do about it except look forward to an immensely long retirement having your toes warmed by the devil in the pitchfork hotel.
If, on the other hand, you are one of the Elect, whoop de doo: Jesus wants you for a sunbeam and no amount of bad behaviour is going to prevent him seeing you right. This is a pretty crazy view to take, most of us would agree, and historically it has been discouraged by both civic and religious authorities for rather obvious reasons. But there it is.
But "actions speak louder than words" or, as the philosopher Witgenstein put it, words gain their "meaning in action". A point that comes to mind as Israel has taken to the internet to fight the propaganda battle against Palestine.
"The blogosphere and new media are another war zone. The important thing is to get the truth out there," Major Avital Leibovich, an army spokeswoman, said.
The stakes are high for Israel, intent on smashing Hamas before world opinion forces it to put the brakes on its devastating airstrikes on one of the most densely populated conurbations in the world.
According to Uri Dromi, a former government press adviser and air force colonel, the key to Israel's campaign, in terms of the international reaction, was the timing.
He said: "The timing was perfect. No one was there. Obama was in Hawaii. Bush was in Texas. Condoleezza Rice was away. It was a twilight zone. It was the perfect time for Israel to do something which we believe is justified, but will always come up against problem opposition."
However, Mr Dromi admitted that the administration will struggle to win hearts and minds if footage of those suffering in Gaza continues to be shown. "When you have a Palestinian kid facing an Israeli tank, how do you explain that the tank is actually David and the kid is Goliath?"
Once again, FAREED ZAKARIA's GPS programme on CNN (that aired on December 28, 2008 - 13:00 ET) hosted a stunning discussion between leading pundits (my italics):
HERNANDO DE SOTO, PRESIDENT, INSTITUTE FOR LIBERTY AND DEMOCRACY: Well, what is happening now, because I can't see anything outside the recession that we are facing today, is that, from my point of view, what we're seeing is that the real economy has a lot to do with trade, and has a lot to do with cooperation.
Seen from a Third World point of view, the interesting thing is that, as trust breaks down in Western societies, the United States -- among other things, because nobody really knows who owns what assets and what liabilities -- this is why banks have stopped lending to each other.
You're starting to find out that the real economy has a lot to do with trust, more than with the so-called fundamentals. That when people are not able to identify each other, when they don't know what rights they have over what property or liabilities, then you don't get cooperation. And trade adds itself to that.
If you bring up trade restrictions, if you increase them, what you're going to do is break down more and more that international cooperation, which has given us over the last 60 years more growth than we've had over the previous 2,000 years.
We have to go back to open trade. We've got to go at -- understand that we cannot micromanage something which we don't have enough knowledge about. I mean, right now at this moment, the reason banks don't trust each other is because nobody knows who's got the toxic paper.
I mean, Fareed, we don't know who's got the toxic paper. You know that there are buildings behind bad paper. We don't know which are the buildings that debts are not being paid on. We've lost track.
And we've lost track, because instead of having universal documentation as to who owns what -- which is what international cooperation would give us -- today, you've got that most of the paper in the world is untrackable.
JAGDISH BHAGWATI, PROFESSOR OF ECONOMICS, COLUMBIA UNIVERSITY: I think the -- in each of these financial crises that we have had, the new instruments and changes have usually gone way beyond comprehension. And I think that's really at the heart of financial innovation.
DE SOTO: It's about transparency.
BHAGWATI: The downside is really important. So, when we say we must regulate, the regulators must first understand what's to be regulated.
JOSEPH STIGLITZ, NOBEL PRIZE-WINNING ECONOMIST, COLUMBIA UNIVERSITY: I think the point that Jagdish made is exactly right, that much of the innovation that we've had in the financial sector in the last two decades has been of negative value. It has been creating complexity.
It's not a question of disclosure. You could disclose these documents, but nobody -- the buyer, the seller, the regulators can't understand them.
And it was done deliberately. It was done deliberately, so people couldn't understand what was going on.
...
DE SOTO: Where you have to point towards regulation control is not to stifle the economy, as Secretary Gutierrez rightfully points out is a danger. Control means to find out who owns what at this moment.
The reason you are in paralysis, the reason you are collapsing, is because you no longer know who's got whose hand in whose pockets. And you've got to make a distinction. And remember that financing is there at the service of production, in combination, and is not center stage.
Yesterday I shared my thoughts in an article called "The Antidote to Economic Malaise: A Culture of Collective Mindfulness" for Seeking Alpha (a web site for US investors). This drew a range of comments from Wonderful, wonderful, wonderful. Let's have more like this on Seeking Alpha. to I don't think it's a coincidence that Muhammed Yunus is a Muslim. and There's one major flaw with this article, if people actually had the capacity to be critical of situations and offers to the point where they could sniff out a con before it had a chance to happen, significant portions of our existing economy would falter immediately-not just the housing market and hedge funds, and many very successful sales staff members would never work again. In the spirit of a Yala – encouraging the frank exchange of dissimilar views – Seeking Alpha is clearly doing a great job. Meanwhile, back in the pre-Christmas world, advertisers are struggling. The classic Coca-Cola ads, always kitsch, now look crass. Target have made a brave attempt to couple conspicuous consumption with saving. But John Lewis seem to found the best approach, using the mastery of a Beatles song to remind us that Christmas is a time of love. If this makes you uncomfortable, Grameen point out that - One billion people live on less than $1 a day.
- One-in-five people live without adequate water or food.
- 26,000 children die each day from preventable causes.
A contribution at http://www.stoppovertynow.org supports Grameen Foundation's work to help local organizations reach some of the world's poorest women with small loans. And, if you are American, you may be pleased to know that Grameen operates in the USA so you could be helping poor or soon-to-be-impoverished compatriots.  I have not blogged for a few days although this has certainly been an eventful period. Simon Johnson in the Baseline Scenario confesses to angry exchanges with European politicians. He argues that Europe needs to provide more support to weaker EU countries and the weakest euro zone members. He accuses European governments (excluding the UK) of being in denial, of seeing the global economic crisis as an American problem and of thinking that only America will feel its impact.
In essence, he is concerned that Europeans do not hitch a free ride off the US bailout. Misery loves company!
So, in a backhanded way, the Baseline Scenario supports Muhammed Yunus's view (see my last blog) that nothing short of a global response will suffice.
In his book "Creating a world without poverty" (2008), Muhammed Yunus lays the blame on the failure of capitalism. Yunus believes that:
- poverty is created by economic, social, and political systems, and by false ideas—not by the laziness, ignorance, or moral failings of the poor;
- women have a central role to play in setting things right; and,
- technology is a crucial enabler of the revolution, decentralizing economic and political power as worldwide markets in ideas, goods, and services become accessible to all.
I agree with Yunus, and think the Baseline Scenario needs to be careful whom it describes as "in denial". I take issue with its authors, for example, over an unnecessarily fatalistic attitude to the inevitability of bubbles.
Weick and Sutcliffe in "Managing the Unexpected' (a book I have mentioned more than once in this blog) talk a lot about the temptation to dismiss unexpected events as normal. High Reliability Organizations (HROs), in contrast, track down bad news and stalk the anomalous. Such organizations keep asking people if they have noticed anything out of the ordinary. They praise them for an affirmative answer, and disseminate what they have spotted. The unexpected is a solid clue that your model of the world is in error.
The latest Baseline Scenario posting, a review of Paul Krugman's book "The return of depression economics", still seems to blame the irrationality of people rather than accept a failure of policy:
He doesn't quite come out and say it in so many words, but a lot of Krugman's story has to do with what might be called psychology. He describes how economic crises may be the product of poor governmental policies and weak economic fundamentals - or they may be entirely the product of panics that have the very real effect of destroying wealth and setting countries back for years. Seen from this perspective, the scale of the current crisis may not have any proportional relationship to the fundamental flaws of our economy (or the global economy). It may simply reflect the fact that the scale, liquidity, and leverage of the global financial system have made it possible for panics to have much greater damage than they did in the past. At least there is a reluctant concession of the relevance of social psychology, even though economists do not understand it. Likewise, it is interesting to see President-elect Obama choosing a woman, Mary Shapiro, to head the Securities and Exchange Commission and criticize the ethos of Wall Street.
The question is what ethos, what culture ('the way we do things around here"), should replace it? Again, Weick and Sutcliffe point the way. They note that HROs are organizations like any others, just more aware of the harm they can do.
HROs have a big incentive to contain the unexpected because when they fail to do so the results can be catastrophic. Lives can be lost, but so can assets, careers, reputations, legitimacy, credibility, support, trust and goodwill. Consequently HROs persuade all their members to be chronically worried about the unexpected and sensitive to the fact that in the face of the potential for surprise, any decision or action may be subject to faulty assumptions or errors in analysis. They:
Work to create a climate where people feel safe to question assumptions and to report problems or failures candidly. In my jargon, the best thing a Wall Street organization could do is create a Yala, a safe place to talk.
I leave the last word to Messrs Bremner, Bird and Fortune.
 In stark contrast to my last post on Dick Fuld, I have just been watching an excellent interview, on 13 November 2008, with Muhammed Yunus – a very different kind of banker. Here is the blurb:
Muhammad Yunus is the founder of the Grameen Bank which has for over 30 years provided millions of Bangladesh's rural poor with the opportunity to lift themselves out of poverty through microcredit loans. In 2006, Professor Muhammad Yunus and Grameen Bank were jointly awarded the Nobel Peace Prize "for their efforts to create economic and social development from below." He is widely regarded as the pioneer of microfinance and continues to challenge conventional thinking and identify new ways to unleash the entrepreneurialism of the world's poor. In January of 2008, Grameen America opened its doors in Queens, New York in the United States, making microloans to entrepreneurial individuals, especially women, to help them build credit and defeat poverty. Professor Yunus talks about the progress of Grameen America and the importance of sustainable microfinance as an alternative to pay-day lending, as well as Grameen's plans for healthcare which are a central part of his larger vision for helping eradicate poverty in the world. Jane Wales, President and CEO, World Affairs Council (of Northern California), asks him about the global economic crisis and seeks his advice for President-elect Obama.
Yunus points out that it is the World's three billion poor who will be hardest hit by the global economic crisis. The longer it goes on, the worse will be its effect on people all over the world. Unless this tremor is stopped by some strong global action, its effects will not be limited to the economic environment; it will spill over into the political and social environment also. He uses health care analogies to describe what needs to be done. For him, it's not about treating the patient but about keeping the patient healthy. Regulators failed. Government bailout was the only means left to the whole world because there is no other agency, no other instrument you can use to address the situation. Whether you like it or not, government is the last resort. But allowing the private sector to do anything they want, because the government will step in and bail them out when they run into trouble, should not become a habit. Now, while we are still going through the crisis, is the best time to fix the system. Once we get out of the problem we will forget. It's not simply about regulation. Regulation is a second order of priority. If we are going to put all our confidence in a market economy then the market itself needs to find a built-in system to correct the present anomaly that has exploded into this big crisis. We have to find a way to correct the market economy and put that system in place before we open up again for business.
The second part is regulation. Stronger regulation, which Yunus describes as stiffling, is not the solution. Rather we need regulation that is more focused on the things that went wrong, specific and efficient regulation. When a body has cancer you don't start by treating the whole body, you focus on the place where the cancer is located. The best care is not to allow this to develop - early detection - just like any disease. We need a mechanism for early detection in the market. Thus if there is a sign of any asset getting toxic, we can hunt it down and take it out. That way the market becomes more reliable. But if you leave it to the regulators to take care of everything, if regulators fail government has to bail the market out because it is now government's failure. Regulation is only there in case your built-in system misses something. We are all very happy about globalisation. But if we all live in a global village we can't have a national mechanism to take care of everything. If this is a global village we need some kind of global overseeing mechanism, whether you call it a global central bank, whatever you call it you have to have that in position. This is not a unipolar economic system any more; it is a multipolar economic system. You cannot rely on only simple, national-level oversight, you need a global overseeing methodology.
Technology has made this world completely different. Where we will be in ten or fifteen years is almost unthinkable at the speed the world is changing. So we had better get ready for that. So when we are preparing this kind of an institution, we are not creating an institution to manage the system today but an institution to manage the system for the next fifty years. It would be very bad judgement on our part to carry on with 1940s and 1950s institutions to take care of the 21st Century world.
As to President-elect Obama, Yunus points out that the US President is the defacto President of the World, he can't avoid it. When you talk about poverty it is not the poverty of one country but the poverty of the World, it is a global phenomenon. The President of the USA provides leadership for the World.
Yunus's message to Obama is that we should at least try to eradicate worldwide poverty. Cutting poverty in half by 2015 is a tremendous target. The new President should show his commitment by setting a new date: when there will be zero poverty in the world. We have got to make a serious commitment that we will do it, and the moment we do the technology will emerge to achieve it.
The basic principle that everybody should be taught is that "my way of living should not harm anybody else on this planet".
Coming from someone else, this would seem like fanciful stuff. But en route Yunus humbly describes solid achievements. What stuck in my mind was that his bank's officers are rewarded with gold stars (not obscene bonuses) for achieving business and humanitarian goals.
It is a long interview. You'll find it here.
 The Yala software is written, debugged, tested, and ready to go. The book is printed and in stock. My challenge now is to get the message out. I am sure there are people looking for fresh ideas on how to dig ourselves out of our current economic mess; the question is how to reach them. You can find almost anything you want on the internet but locating it is sometimes like finding a needle in a hay stack and other times like getting a drink at a fire hydrant. And the notion of creating a safe place to talk, an environment for the frank exchange of differing views, may seem hopelessly idealistic and impractical, at first.
For example, The Times this weekend is carrying a revealing story about Dick Fuld the head of Lehman Brothers by a former editor of the Financial Times who was working at the heart of the bank as it brought the global economy to the brink of disaster. Provocatively entitled "Exposed: Dick Fuld, the man who brought the world to its knees", this recounts a too familiar tale of hubris: a top man, insulated from bad news by sycophants, with a bully as second in command.
On September 15, Lehman Brothers Holdings filed in New York for chapter 11 bankruptcy protection. An institution with total assets of $639 billion – more than the gross domestic product of Argentina and roughly 10 times the size of Enron when it filed for bankruptcy protection in December 2001 – had gone up in smoke.
Fuld had made a lot of people fabulously rich... To say he was surrounded with a cult of personality would be an understatement. He was the textbook example of the "command-and-control CEO". More than that, to many employees and to the outside world, he was Lehman Brothers – his character inextricably intertwined with the firm's.
Fuld inspired great loyalty and, on occasion, great fear. Those closest to him slaved like courtiers to a medieval monarch, second-guessing his moods and predilections, fretting over minute details of his schedule down to the flower arrangements and insulating him from trouble – from almost anything he might not want to hear.
His ferocity could be intimidating, his eyebrows beetling tight over his hard eyes, his brutally angular brow appearing to contort in rage...
Even when in a relatively upbeat mood he seemed to take pleasure in violent imagery. Lehman was "at war" in the market...
"When I find a short-seller, I want to tear his heart out and eat it before his eyes while he's still alive," the chairman declared. Histrionics, maybe – but with a purpose. Fuld had used this aggression to consolidate his reputation as the most successful chief executive in the banking business and one of the most respected corporate leaders in America. But the style also contained the seeds of disaster. It meant that nobody would or could challenge the boss if his judgment erred or if things started to go wrong.
THE curious thing was that at some level Dick Fuld knew that trouble was brewing well before the crisis broke. I witnessed him give a fascinating talk about risk at a private lunch with newspaper editors nearly two years ago. With a precision that seems almost uncanny, he virtually prophesied the looming crash.
In truth Fuld had become insulated from the day-to-day realities of the firm and had increasingly delegated operational authority to his number two, a long-standing associate named Joe Gregory.
If Dick was the king, Joe was Cardinal Richelieu. A gregarious sort with a taste for flamboyant displays of wealth... he was also a ruthless enforcer for the boss. His job was not to encourage debate or intellectual curiosity in subordinates but to bend the bank to Dick Fuld's will.
If something went wrong, you could be sure that Gregory would be on the telephone in a towering rage. Even very senior executives would dread getting one of those calls.
Problematically, Joe Gregory was not a detail man or a risk manager. On the contrary, as Fuld was musing to outsiders about his worries concerning risk, Gregory was doing the precise opposite: actively urging divisional managers to place even more aggressive bets in surging asset markets such as the mortgage business and commercial real estate.
Standing in his way by showing aversion to risk could be fatal to your career. Divisional chiefs who urged caution or tried to rein back on risky bets were swiftly ousted.
Underlying it all was a classic power struggle, mirroring the rivalry between New York and London as financial centres...
Here was a corporate governance structure almost preprogrammed to fail: an overmighty CEO, a top lieutenant eager to please and hungry for risk, an executive team not noted for healthy debate and a power struggle between two key players...
To make matters worse, they mounted an increasingly shrill campaign against their critics. One particular hedge fund manager, David Einhorn of Greenlight Capital, had been critical of Lehman's financial disclosures, thus suggesting to some observers that the bank might have something to hide. Einhorn became an obsession for Fuld and his closest hench-men, who speculated openly about hiring investigators to tail him or search his rubbish bins.
You could say it was a case of shooting the messenger. It was certainly a distraction from the primary business of putting Lehman to rights. But it was typical of the mixture of defiance and paranoia – "us against the world" – with which Fuld drove the firm.
What can we do? Fuld accepts no responsibility. Prosecuting Fuld and Gregory solves nothing.
If Lehman Brothers is the world we live in then a Yala has no place in it. But Lehman Brothers are no more, and the rest of us have to live with the consequences of their incompetence... and learn the lessons. One comment on The Times article adds: Shows again that it is very difficult to combine the alpha male personality and corporate governance. It also shows the true nature of a company narrow minded near sociopath motivated by self interest only. Lacking sufficient internal checks and balances society has to do more to protect itself. Yes, this is precisely the right time for a Yala.
Week after week Alexandra Burke has been delivering heart-stopping performances to standing ovations on the UK’s X-Factor 2008, reality-TV, phone-in, singing contest. And last night she was declared the winner, singing a version of Leonard Cohen’s Hallelujah accompanied by floods of tears worthy of any beauty pageant. Here is that performance. What makes her success especially gratifying is that three years ago she was turned away in the earlier stages of the show, and her last week has been clouded by the actions of an ex-boyfriend allegedly trying to sell a 10-minute sexy video of them together for £100,000. President-elect Obama’s transition to power has been likewise tainted by the Blagojevich scandal. Americans, that I talk to, believe that Blagojevich’s refusal to resign is emboldened by the incriminating evidence he has on others. Rahm Emanuel, the President-elect’s new Chief of Staff, and Jesse Jackson Jr, the co-chairman of his presidential campaign, both face new revelations about their possible involvement in the scandal. Let’s hope for all our sakes that President-elect Obama – who surely has the X-factor of star quality and who now faces as tough a set of issues as any new president, ever – will surmount all this as joyously as Alexandra Burke. Here is Alexandra, who confesses to being a nervous wreck before every appearance, giving a more-typically assured performance from earlier in the series.  First engage brain, the title of my last post, might well have been an alternative subtitle of Weick and Sutcliffe’s excellent book “ Managing the Unexpected: Assuring High Performance in an Age of Complexity” (2001), which I have mentioned in this blog before. It ought to be compulsory reading for all bankers and regulators – indeed all managers who are today coping with the unexpected. I make no apology for repeating its message. Weick and Sutcliffe observe that highly reliability organizations have five priorities. (1) They are preoccupied with the possibility of failure and so encourage error reporting, analyze near misses and resist complacency. (2) They seek a complete and nuanced picture of any difficult situation. (3) They are attentive to operations at the front line, so that they can notice anomalies early while they are still tractable and can be isolated. (4) They develop capabilities to detect, contain and bounce back from errors, creating a commitment to resilience. (5) Finally, they push decision-making authority to people with the most expertise, regardless of rank. Again and again these authors challenge the dominant management discourse. For example, they make a case against planning. Planning, they note, is intended to prepare for the inevitable, pre-empt the undesirable, and control the controllable. But can do just the opposite of what is intended, creating mindlessness instead of mindful anticipation of the unexpected. First, since plans are built from assumptions and beliefs about the world, they embody expectations. Second, plans can undercut organizational functioning because they specify contingent actions that are designed to cope with the future. The problem is, these contingent actions are doubly blind. They are blind because they restrict attention to what we expect. And they are blind because they limit our present view of our capabilities to what we have now. Third, plans presume that consistent high quality outcomes will be produced time after time if people repeat patterns of activity that have worked in the past. In my view, it is only by transcending the closed-loop notions of control (set targets, monitor performance, identify variances, take remedial action) that we can begin to get a grip on complex relationships. But if applied social psychology can help us deal with the global economic crisis, can it also help us understand its origins? I think the answer is yes. Fortunately, the excellent BBC series by Adam Curtis “The Century of the Self” is now available for download (free). I have recommended this before, too. But if you missed it, do watch it now. There are four programs of one-hour each. If you are only going to watch one, watch number four. This last part describes how politicians took up “focus groups” and the consequences. It’s possible to argue that the global economic crisis is the result of governments’ indulgence of the view that everyone can be anything, do anything and have everything they want. Here is the conclusion to that series: Freud believed that individuals were not driven by rational thought but by primitive unconscious desires and feelings; and Bernays believed that it was too dangerous to ever let the masses have control over their own lives, and consumerism was a way of giving people the illusion of control while allowing a responsible elite to continue managing society...
Although we feel we are free, in reality - we like the politicians - have become the slaves of our own desires. We have forgotten that we can be more than that, that there are other sides to human nature.
Fundamentally, here we have two different views of human nature and of democracy.
You have the view that people are irrational, that they are bundles of unconscious emotion. That comes directly out of Freud and businesses are able to respond to that. That is what they have honed their skills doing. That is what marketing is really all about. What are the symbols, the images, the music, and the words that will appeal to these unconscious feelings?
Politics must be more than that. Politics and leadership are about engaging the public in a rational discussion and deliberation about what is best, and treating people with respect in terms of their rational abilities to debate what is best.
If Politics is not that, if it’s Freudian, if it is a matter of appealing to the same basic unconscious feelings that business appeals to, then why not let business do it? Business can do it better. Business knows how to do it. Business after all is in the business of responding to those feelings.
Two things have happened since that series was produced. First came 9/11 which turned national security into a party-political issue, giving US and UK governments the pretext to vastly reduce the human rights of their people in the name of homeland security (see Naomi Klein’s “ The Shock Doctrine”). Second were moves to encourage personal indebtedness – to keep the “dangerous crowd” hard at work and therefore more docile – that have culminated in the global economic crisis. Yes we are individuals, but we depend on others. This truth lies at the core of our being. We therefore have to shift our focus from ourselves to our relationships. We must reaffirm our connectedness in order to rediscover our humanity. Maybe, if we learn from this disaster, the next hundred years will be called “The Century of the Other”.
From The Times today (my italics): During the boom years we created twin connected bubbles in assets and credit. Both of those bubbles have burst. Falling asset prices are leading to losses for those who borrowed to buy those assets (from hedge funds to homeowners). And as they struggle to pay their debts, they sell other assets, driving down their price and causing losses for other borrowers. And when they can't repay banks, the resources of banks are depleted, which means there is less credit available, which drives down asset prices further, and so on in a vicious cycle of decline.
So it is unrealistic to expect our banks to cease the insidious process of contracting the volume of credit they will provide until the price of property, shares, commodities and other assets stops falling. Asset prices have to find a floor before the financial economy can rebuild itself and the real economy can receive the necessary finance that will allow the recovery to begin.
Who's to blame? The short answer is all of us. But it's hard to mount a convincing argument against the notion that the most at fault were the banks and bankers - because they systematically failed to do what they were handsomely remunerated to do, which was to assess properly the risks of all that lending. Their survival as institutions now wholly depends on the goodwill of governments and taxpayers.
There are reasons to believe that credit from taxpayers can't and won't be repaid for many years. So if we've witnessed a semi-permanent nationalisation of the banking system and will soon see significant taxpayer support for real companies in the real economy, then our banks and companies will have to work much harder to sustain the goodwill of those who are keeping them alive: millions and millions of taxpayers.
That means that those running our biggest businesses will have to be more visible. They will have to manifest a genuine understanding not only of the anxieties of their employees but of all taxpayers. Those chief executives who succeed will be those who imbue their businesses with simple, commonsense standards of decency. And they'll almost certainly be paid less for doing more.
But the biggest lesson of all is that we are a million miles from having created the political and regulatory institutions to help us to contain the risks of globalisation. If the unfettered movement of capital, goods and services is going to survive, if there is not going to be a retreat into national fortresses that could impoverish all of us over the longer term, we will have to find a far better way of monitoring global risks and of bringing governments together to deal with them.
The answer? A Yala. Why? One example… The second step in creating a Yala (after Understanding Interfaces) is to Clarify Aims. It should be obvious, but how often do we rush to “just do something” without making time to ask if it is the right thing? This from Baseline Scenario: Discordant headlines in Bloomberg:
Fed’s Kohn Says Regulators Should Encourage More Bank Lending Amid Turmoil: U.S. regulators should rise to the “challenge” of encouraging an expansion in bank lending amid a weakening economy and continuing financial-market turmoil, Federal Reserve Vice Chairman Donald Kohn said.
Fed’s Kroszner Urges Banks to Increase Capital Reserves to Buffer Losses: Federal Reserve Governor Randall Kroszner urged banks to hold more reserve capital to protect themselves from future “cascading losses,” as potential market fixes are “no guarantee” against another credit crisis. “This is the inconsistency I pointed out in the goals of the financial sector bailout”, says James Kwak. Once again, “communication is not what you say – it’s everything you do”. The message? Those TARP guys don’t know what they are doing. Discordant headlines, inconsistency, paradox even, all make the case for a far more thoughtful approach to the management of complex relationships. Until you've understood your interfaces, your thinking on aims will be muddled, too.  If there is one thing President-elect Obama knows a lot about, it is the power of self-organization. Umar Haque in Harvard Business Publishing describes him as “ one of the most radical management innovators in the world today” and calls “Have a self-organization design” the first of “Obama's Seven Lessons for Radical Innovators”. But what does creating a safe place to talk have to do with resolving the world economic crisis? Quite a lot, according to Obama. This from Bloomberg a short time ago: Former U.S. Senator Tom Daschle, the top health policy adviser to President-elect Barack Obama, said reworking the U.S. health-care system is a necessary part of an economic recovery plan.
High health costs hurt the ability of U.S. businesses to stay competitive and create new jobs, making it a “top priority” that health-system changes not be delayed, said Daschle, speaking today in Denver at a health-care forum.
Businesses last month eliminated 533,000 jobs, the Labor Department said today in Washington, and the November unemployment rate of 6.7 percent is the highest since 1993. With more than half of Americans getting health coverage through employer-provided benefits, job reductions make it harder for people to maintain health insurance. The new administration needs to help everyone get affordable coverage, Daschle said.
“That’s what makes this so urgent and so much a part of the economic recovery process,” Daschle said. “I believe that for the first time in American history, health-care reform will be done.”
Daschle, who currently is head of health policy for the president-elect’s transition team, has accepted Obama’s offer to become Health and Human Services secretary, a Democratic official familiar with the matter said last month.
The former Democratic senator from South Dakota urged today that Americans join in community discussions in the last two weeks of December to develop ideas for new national policies that will reduce health costs, boost the quality of care and get everyone coverage. The events are being organized through the transition team’s Web site, change.gov.
“In order for us to reform our health-care system, we must first begin reforming how government communicates with the American people,” Obama said in an e-mailed statement after Daschle’s speech. “I encourage Americans to take part if they are able.” Here is Daschle talking about the initial response. Here is a “word cloud” of that initial response.  And from the change.gov site, here is a promise… As we continue to cultivate an open conversation with our online community, we'll be taking steps to facilitate these discussions in new and innovative ways. …and a request suggest ways to keep the conversation going in the future All of which makes a piece in yesterday’s Business Week particularly intriguing. Called " Health 2.0: Patients as Partners", it describes how Social networks like PatientsLikeMe let people take charge of their own care--changing the nature of drug research and the practice of medicine. Medicine has always been a top-down affair. Doctors, drug companies, regulators, and researchers are the expert gate-keepers, telling patients what they need to know. Even their own medical records are locked away to protect their privacy. So what would happen if critically ill patients joined together, obtained their personal information, and made it public?
Just such a real-world experiment is under way at a Web-based social network started by the company PatientsLikeMe. The two-year-old venture has already signed up 23,000 participants in five chronic-illness categories—amyotrophic lateral sclerosis (ALS), Parkinson's disease, HIV/AIDS, multiple sclerosis, and mood disorders.
On the company's Web site, PatientsLikeMe members are charting their medical histories in minute detail, sharing their most private information with one another and the world at large, often with photos and real names attached. To make money, the company aggregates these records, stripped of identifiers, and sells the information to drug, device, and insurance companies, all with the consent of its patient-members. The buyers can mine a rich vein of data on a variety of chronic illnesses that is simply not available anywhere else. In return, patients get the hope that they are furthering progress toward cures.
This new patients-as-partners model is often called Health 2.0. PatientsLikeMe and a proliferation of similar startups are building a new business predicated on the belief that the wisdom of crowds of patients will bring insights, solace, and most of all, power. A Yala provides another powerful “new and innovative way” to facilitate such discussions. So, in reply to his invitation, I am sending Senator Daschle a copy of “ Yala: How to Manage Complex Relationships” with these words: This book has what you seek. It will help you structure the discourse and see emerging patterns of thought, complementing your social networks and forums and keeping the conversations going... These times demand extraordinary remedies. A Yala is not social networking as you know it. It will help you encourage and access dialogue at every level.
An article in The Telegraph today is called "Telling the truth is lambasted in politically correct Britain" and attracts 91 furious comments. Another in The Times is headed "I earn virtually no interest, but inflation is 4.5%: I am being kicked in the teeth for being a careful saver" with 53 comments already. And another in The Economist entitled "When the golden eggs run out" is about the disastrous impact of the credit crisis on savings with ten comments, one asking "Why bother to save at all? Why bother to be prudent? Indeed, why bother to work? Let the generous state provide." Meanwhile the Naked Capitalism blog despairs at the lack of contrition of Citigroup's Robert Rubin (how different from Sir Tom McKillop). Understanding interfaces is the first step in successful management of complex relationships. Interfaces are boundaries where different groups meet and difficulties are likely to occur. Some interfaces are obvious: cross functional, inter-organizational, and international. Others are not. My post on “ The haves and have-nots”, for example, highlights an important interface which too often we prefer to ignore. An interesting discussion about the different meanings of the word “feedback” has made me think about another less-obvious interface, and may shed light on a paradox in the design of web forums. This train of thought all began with a recent management blog by Adam Jones in the Financial Times called: “ If you are paranoid now, wait until you join Rypple”. A new web-based service called Rypple is offering workers private, anonymous feedback from colleagues and bosses.
Members use the site to ask their peers how they performed in a specific task, or how they are doing in general. The peers write down what they think and these opinions are returned to the feedback-seeker without their names attached.
This nameless-character-assassination/dispassionate-evaluation enables members to work on their weaknesses on a rolling basis, instead of having to wait for their annual career appraisal, the company says. But, Jones notes: I agree that alternatives to annual career appraisals are desirable. But I’m not sure anonymous feedback is that useful, even for the young and thick-skinned. People tend to ignore advice from those they don’t respect, while tips from peers with gravitas have extra weight. Anonymity risks devaluing all comments.
In theory, you could get around this by inviting only your wisest peers to become part of your Rypple feedback network, which is what the site suggests, in fact. But is that practical?
After all, if anonymous electronic feedback enters the workplace mainstream, presumably a range of bosses will want to pronounce on your performance – and you won’t respect all of them.
He finds some answer to his reservations in another intriguing blog, this time by Tammy Erickson in Harvard Business Publishing, called “ The Double Meaning of ‘Feedback’” She asks: Have you ever felt frustrated with an employee who continually comments that they'd like more feedback - when you feel that you've given the person just about as much feedback as is humanly possible or remotely sane? What more is there to say? She suggests the source of frustration may be a very different view of feedback between the generations. If you're a Boomer [born soon after the war], consider what you expect to happen when you have a "feedback session" with your boss. In all likelihood, the purpose of this exchange would be to assess your performance, to render a judgment. Because Boomers love to win, your hopes may be high for a prize - but still it's not exactly the sort of thing one wants to go through on a daily, weekly, or even monthly basis - once or twice a year is plenty, thank you very much.
If you're a member of Generation X [born between 1965 and 1980], the meaning of "feedback" is similar - it relates to an assessment or judgment. But the hoped-for outcomes may be a bit different. More money is great, but so is a longer leash -- more freedom to operate in your own preferred way.
But for members of Generation Y [born after 1980], "feedback" means something very different. Ys learn through personal interactions. They are accustomed to reaching out to friends and family for suggestions, coaching or factual input on any number of topics, as they go along. Rather than being linear learners -- I learn, then I go off and do -- Ys are "on demand" learners. They start a task, uncover a need for additional information, seek that specific bit out, and move along. This cycle might happen multiple times every day.
So, when a Y says "I'd like more feedback," they are almost always expressing a desire to learn more. They are not in the assessment/judgment mode, along with its inevitable prize or demerit outcome. They are not looking for trophies (although they're not looking for lumps of coal, either). They don't want you to judge them, but rather to teach them. They hope you'll share ideas, input, suggestions, or coaching.
People who comment that Ys "can't take criticism" are again missing the point. It's not that they can't take it -- it's that that is not what they're seeking. They are in the learning, not the grading phase. They are asking you to teach, not to score. The whole issue of feedback becomes important in the design of web-based forums. Feedback is the fuel of emergence – it helps patterns of thought to crystallize. But the extent to which contributions (like Amazon book reviews) are flagged as helpful and contributors ranked (top ten, top fifty, top hundred, and so on) is controversial because respecting all viewpoints equally is central to the notion of dialogue. Paradoxes like this are important. They open our minds to new things. So I certainly won’t attempt to “answer” this one. In case you feel this is all a bit theoretical just consider the challenge President-Elect Obama is facing, neatly summed up elsewhere in the Financial Times as “ Too many cooks in Obama’s kitchen”: President-elect Barack Obama will not be short of economic advice. Little of that advice will be unanimous. The Byzantine complexity of the White House economic policy-making machine means that a range of institutions and individuals will be pushing, pulling and shoving in different directions. With a new President who knows little if anything about economic matters, the adviser who comes out on top in the internecine struggle to be the Alpha-Adviser will effectively be running US economic policy. What are the institutions and who are the people in this play? Will it be drama, tragedy, comedy or farce?
What is Obama doing? He is turning to the web for ideas, coupling social networking software and forums (including the ability to rate others’ comments) to enable dialogue. Clearly he sees feedback as more about learning than performance review. What Obama doesn’t have – yet – is the added value of a Yala. This would map the discourse (for example, on health care) and show patterns of thought. Meanwhile, I take away yet another type of interface, that between generations: Boomers, X and Y. I will put a Wiki on www.yalaworld.net to collate interesting and less-obvious examples. Excellent piece in The Times today called: “ Better services without reform? It's just a con.” It adds: This is a time for creative innovation, not the rigid belief that statistics can show us all the answers to our problems...
In the previous two phases of public sector management - the Tory phase and the Labour phase - we were certain that we could know, that we could find a brilliant example of good practice and spread it everywhere. I remember lauding some American schools to a colleague at No10, and being told that these were progressive schools, so they were bound not to work.
In the next phase we must embrace our lack of knowledge. We must allow for chaotic, greatly diverse public services, never settling on one model of provision. We must allow outside organisations to question the fundamental ideas that shape health provision or welfare provision. We must allow them to innovate and keep the money saved through innovation. That way there is a chance that public services, just like say, electronic goods, will keep improving without costing more.
One thing is for sure. We can't carry on as we are, pretending that without reform our money will go farther. That would be a con trick. Spot on. Also today, these words about “ Yala: How to Manage Complex Relationships”: From the Christopher Gibson-Smith, Chairman of the (UK) Stock Exchange Geoffrey Morton-Haworth's book, Yala, presents the challenges of managing complex relationships with rare clarity. This will help everyone, from those who tried and inexplicably failed, to those who succeeded and want to do more. From David Schmittlein, Dean of MIT Sloan School of Management This book offers a wealth of insights into business processes and strategies, that stem directly from the author’s richly textured experiences. These experiences leaven the described business approaches and conclusions, showing clearly how these substantial insights can have real and important consequences for companies. From Julian Brown, former Director of Corporate Strategy for Scottish Power It’s hugely refreshing to see you extolling the virtues of honesty and openness in business. It seems to me that much more damage is done and many more opportunities are lost by trusting our colleagues and counterparties too little than would be by trusting them too much. It's gratifying to have some support for such unfashionable views. Another piece in The Times which asks: Where has all the bank-bailout money gone? And observes: The government is caught in a dilemma. It has pumped money into the banks to save them, not for them to lend.
Last week Mandelson declared: “It is completely unacceptable to the government and to business in this country for banks indefinitely to stop functioning as banks.”
Mervyn King, governor of the Bank of England, called the lack of lending the “single most pressing challenge to domestic economic policy”. Why is anyone surprised? The impression I get from from articles like this, even from MIT's Baseline Scenario, and from many other commentaries is one of incomprehension, incredulity that this messy world doesn't fit the neat models of economists... which reminds me of the Coen brothers' No Country for Old Men. I saw this film recently. Nominated for seven Oscars in 2007, it won four including best film, best screenplay and best director. RottenTomatoes.com, the movie review site, gives it a 94 per cent rating, describing it as: Another triumph for the Coen Brothers, 'No Country' has the perfect mixture of suspense, humor, and desperately compelling performances. The seemingly simple story hides a more complex narrative, and high tension is maintained throughout. But the American friend who lent me the DVD warned that it was exceedingly violent and lacked a satisfactory ending, a verdict echoed by others who didn't like the film. I think it is a great film. But I see why many people found it puzzling and lacking in closure... because it's a film about incomprehension. Throughout, the local sheriff Ed Tom Bell (played by Tommy Lee Jones) reflects on the senselessness of these changing times. The film starts with his voiceover reminiscing about the old days when some sheriffs never wore guns; it ends with him describing himself as "outmatched". Art is often opaque. It forces us to think. We don’t go back to Leonardo's Mona Lisa for answers, but for the questions it raises. Someone else wrote: Every scene is riveting because you never know which way it's going to go. That includes the ending, which at first glance may feel disappointing. Something about it stuck in my craw -- yet I could tell that the problem was with me, not with McCarthy [the author] or the Coens. I was missing something. Seeing the film a second time, I caught subtleties I had missed at first, and everything fell into place. It's a mistake to take the film for a simple crime thriller. You look at it that way and you'll surely be let down by the conclusion. Look at it instead as a story about the capriciousness of fate, about how lives can be changed in the blink of an eye in ways that are unpredictable and unfair. One character even vocalizes the film's theme outright: "You can't stop what's comin'. It ain't all waitin' on you. That's vanity." No Country for Old Men is more than a film about thoughtlessness and futility. It's a film about consequences (the violence that goes with lucrative illegal activity); about misplaced principles (the killer "keeps his promise" to kill the dead man's wife); and, about denial (asked if he's going to shoot a witness, "That depends. Have you seen me?" the murderer replies). Capriciousness, senselessness, consequences, misplaced principles, denial and above all incomprehension. Excruciatingly brutal, and not in the reassuringly jokey way of Kill Bill, no wonder fellow sailors didn't like it. After all, it's set in Texas. Back to my original point, there are ways to get your mind around the financial meltdown and maybe this catastrophe will make people think more deeply. But complexity science and applied social psychology are hardly the domain of accounting, economics and finance. Thus “exceedingly violent and lacking a satisfactory ending” remain the conclusions of many.  There is a good piece by philosopher Alain de Botton in Monacle entitled "Why money is not enough": I believe 2009 will be the year when the question of how society should be arranged will cease to be an idle, abstract topic, dwelt upon by ivory-tower intellectuals after a few glasses of wine, and will instead enter the workaday mainstream with a vengeance. Everyone will become a political philosopher; and all of a sudden, some of the great issues facing our world will be up for grabs. It will be a frightening, exhilarating time. Expect to see record numbers of people reading political blogs, attending classes in political theory and turning once again to Karl Marx, Adam Smith and John Ruskin.
All this because a consensus about the virtues of individualism, liberalism and consumer capitalism is splintering beneath us. At the heart of the debate lie questions about fulfilment. We'll be asking whether the modern economy has been attending to our needs. We'll be asking, to paraphrase that thundering 19th-century prophet Thomas Carlyle, "This successful industry of ours, with its plethoric wealth, which of us has it enriched? We have sumptuous garnitures for our life, but we have forgotten to live in the middle of them. Are people better, stronger, braver? Are they even what they call 'happier'? Do they look with satisfaction on more things and human faces in this God's Earth? No, for we have profoundly forgotten everywhere that cash-payment is not the sole relation of human beings."
Environmental arguments against consumer capitalism will fuse with a horror at the vulnerability of capital markets. There will be a new climate of scepticism about the market system - one which will defy old labels of left and right. Expect to see ex-bankers finding unexpected points of agreement with environmental activists, poets and fashion designers. Ultimately, the question will be: are our economies delivering on their promises? It'll again be pointed out that our outer success is masking deep-seated inner disturbances.
Western society has always been an uneasy amalgamation of the values of the old Roman Empire - success, wealth and individual glory - and the values of the Judeo-Christian world, with its emphasis on charity, serenity and love. After 20 years of success, the values of the Roman lion will go into abeyance and the more compassionate lamb will take centre stage again.
This will have consequences. Greed and superficiality will be out.
Television executives will have to raise their game and stop giving us bread and circuses when we need facts and consolation. During a deep recession in the construction sector, we'll ask whether buildings should ever have been in the business of making money. Wise minds will stress that the quality of our houses, streets and cities is ultimately part of the mental health industry - and should not be seen as commodities without public responsibility.
The sensitive and educated readers of monocle will know not to give up all interest in the aesthetic side of life, but nevertheless be smart enough to raise questions about enterprises that use beauty as a superficial lure, rather than as a way to herald inner transformation.
Over all, we'll become a lot richer, but not in a way we had planned.
Here's where John Ruskin comes in. He was interested in wealth - obsessed by it even. However, it was wealth of an unusual kind that this great art critic had in mind, for he emphasised repeatedly that he wished to grow wealthy in kindness, curiosity, sensitivity, humility and intelligence - a set of virtues he referred to as "life".
In his great text, Unto This Last, he entreated us to set aside our monetary conceptions of wealth in order to take up a "life"-based view, in which the wealthiest people would not be the bankers and the landowners, but those who most keenly felt wonder beneath the stars at night or were best able to interpret and alleviate the sufferings of others. After the greatest stock market crash in living memory, there will be no end to questions about what being wealthy really means. Alain de Botton recently founded the intriguingly-named " School of Life". Sign up here for their "daily aphorism". Today's: "Between two evils I always pick the one I never tried before." Mae West (1893 - 1980) de Botton believes it is the job of philosophers - people who like to think - to reconcile us with our world... and he does it beautifully. Seeing stars at night, without the light pollution of our cities, is one of the joys of sailing. When in dock, watching hummingbirds on the mimosas is another.
Consequences of the financial meltdown:  From the UK Telegraph, "Recession: When the money goes, so does the toxic wife"
As the recession worsens, a lot of rich men are finding their gold-digging wives are taking to their heels ...
'You loser!" screamed Katie, aiming a vase at her husband. "You've destroyed my life,'' she continued, hurling it. "Just look at my hair, look at my nails! You loser, you jerk, you nobody." Katie's husband, Jack, whose property portfolio disintegrated in the financial crash, had just told his wife that she would have to cut back on her thrice-weekly visits to Nicky Clarke, the nail salon in Harvey Nichols, and the oxygen facials, chemical peels and seaweed wraps at Space NK.
Not only that, but they no longer had the money to pay for an army of bullied Eastern Europeans to wait on her hand and foot. Worse was to come – the brow-lift would have to be cancelled; her black Amex card would have to be snipped in half; and there was no way, he told her, that he could carry on spending £28,000 a year on Henry's school fees at Eton.
Chloe, too, would have to leave the marginally cheaper (only £25,000 pa) Wycombe Abbey immediately. Such was the aggression and verbal and physical abuse that followed that Jack was left with cut lips and blood streaming from a broken nose.
Their eight-year-old child, not yet at boarding school, sat cowering in a corner and dialling 999. When they arrived, they had to restrain Katie forcibly from attacking her husband. An extreme and isolated example of the global economic meltdown hitting the £1 million home? Sadly no. When the super-rich feel the pinch, inevitably, the Toxic Wife heads off.
From Associated Press in San Francisco, "Owners abandon their boats in drove s" From Southern California to Maine, the foundering economy, high fuel prices and poor fishing have driven boat owners to abandon perhaps thousands of vessels on the waterfront, where they are beginning to break up and sink, leaking oil and other pollutants. Boats have long been a barometer of consumer confidence, disposable income and the overall state of the economy. Now, marina and harbor officials are reporting a sudden increase in the past year in the number of deserted pleasure boats and working vessels.
In Antioch, a town about 45 miles east of San Francisco, harbormaster John Cruger-Hansen showed up at his marina one day last spring to find the horizon changed overnight. On the San Joaquin River, he saw an old crane, a rusted barge, a tugboat and an assortment of other junked boats, all of which had been hauled in and left illegally.
From the The Times, in the UK again, " Beijing - the perfect site for the 2012 Games. As ministers argue whether to cut housing or hospitals, we can no longer afford to throw money at the Olympics".  Suddenly 2012 sounds a lot less enticing. The year in which Britain was to have been triumphant, basking in international Olympic glory, will be the year when the debt hits home. In schools and hospitals and social services departments, in libraries and nurseries and courts, 2012 will be the year that high times turn to hard times.
The Institute for Fiscal Studies estimated yesterday that the country faces spending cuts of £19 billion in 2012-13. Cabinet ministers have already begun fighting over who takes the hit. The unemployed, the homeless, the destitute will join the athletes parading through London.
It will be payback time, big time. In 2011-12 the tax increases strike: the 45p top rate, the rise in national insurance. In 2012 national debt is forecast to reach the magic £1 trillion. And in 2012 we throw billions of pounds at the Olympics.
Oh, that we could cancel them instead. We obviously cannot afford them any more.
News these days dramatically underlines the central themes of this blog: the impotence of conventional management when confronted with complex relationships and the importance therefore of understanding interfaces and nurturing dialogue. The stock market bailout illustrates the impotence of conventional approaches. In her Wall Street Journal blog, Deborah Solomon notes: At a House Financial Services Committee hearing this morning, an obviously irritated Chairman Barney Frank told Mr. Paulson he needs to use the money to help reduce the number of foreclosures... He pointed to a proposal being floated by FDIC Chairman Sheila Bair, which would have the government guarantee half the losses of mortgages that are modified but that ultimately go into default.
While many in Congress are embracing that proposal, Mr. Paulson and others have qualms with it, in part because they believe it provides an incentive for banks to foreclose and may convince some borrowers to stop making payments in order to qualify for government aid. Within Treasury there’s a view that if the government is going to cover half the loss, banks will modify the terms of a loan for weak borrowers they know can’t make their payments, then foreclose and get the government to make up half the loss. Similarly, The Baseline Scenario observes that: For all the increased discussion among politicians and academics about reforming the global system, to preempt the next crisis, why would the most powerful people on Wall Street want this? The Citi deal shows that the clout of the US financial industry has, if anything, actually increased over the past eighteen months. “Wall Street owns the upside and the taxpayer owns the downside” is an old saying which seems more appropriate now - and on a bigger scale - than ever. There is no harm in proposing changes to deficient national regulatory systems and international, rather creaky, Bretton Woods structures. But strong forces just found out that these structures are completely compatible with rather juicy bailouts (and there may be more to come), so don’t expect rapid or meaningful real reform. Because complex relationships, like the stock market, have the ability to learn and change in their parts and as a whole, efforts like these to manage them top-down and from the center are likely to have unintended and generally unwelcome consequences. Complex relationships have interfaces, edges, borders, places where turbulence is most likely to occur–like the warm and cold fronts in a weather system. The only way to manage such systems is to focus on interfaces and encourage dialogue. Using another example of a complex relationship in the news today, the Mumbai attacks are said to be motivated by border disputes between India and Pakistan – the most tangible of interfaces. And, since both India and Pakistan have nuclear weapons, dialogue is surely the best way forward. My Sunday post described the five steps to creating a Yala: (1) understand interfaces, (2) clarify aims, (3) raise issues, (4) invite views and (5) automate wisely. Automation is not the place to start but will help you shape who talks to whom, what they talk about, how they talk about it and who else knows. Computers can act as "transitional objects", "something to think with", by providing a useful discipline. Knowledge and understanding of your relationships is certain to increase as you work through the steps of defining a Yala. Automation can then help complex relationships become smarter, learn faster and act sooner by putting local dialogue into a global context, connecting people in neighbouring organizations, and displaying patterns of thought. The Yala software consists of fourteen modules written to work within the DotNetNuke framework.
The book "Yala: How to Manage Complex Relationships" comes with each license for the Yala software. Management books tend to gloss over technical difficulties and technical books to ignore human ones. This book provides a far more helpful discussion of both management and technology.
 The use of (networked) computers to support collaborative work is far from new. For decades now Groupware, as it is commonly referred to, has been developed to help geographically dispersed teams. But the success of this type of application has varied greatly as it became apparent that human collaboration is by nature complex and the computer systems that we use are sometimes more of a hindrance than an aid. Here is a new article that looks at how DotNetNuke can be used as Groupware and what advantages it has to offer.
The DotNetNuke framework is a powerful tool for collaborative working on its own and is better still when combined with commercial modules like Active Modules Social Networking Forums. With the further enhancement of Yala ideas and software it becomes a unique way to improve the performance of complex relationships.
Here is a snippet of Sunday’s CNN GPS conversation between Fareed Zakaria and Niall Ferguson: ZAKARIA: So, what do we do, Niall? Because you're right. The bank bailout hasn't worked. They've used $350 billion. It seems as though it just isn't enough capital.
FERGUSON: I think it's not been enough, because the losses are still much bigger than anybody's acknowledged. If you figure out how much has been lost -- the Bank of England came up with a ballpark figure for the global financial system of $2.8 trillion. Well, the write-downs that have been acknowledged so far are a fraction of that.
So, part of the problem is the banks don't trust one another, because they know that there are many more bodies buried out there than have yet been exhumed. Part of the problem is bank trust. And the core of that problem is lack of transparency. If as Neil Rackham puts it “the deeper you see, the more you trust”. Conversely, the less you see, the less you trust. This was underlined by the Baseline Scenario’s assessment (“ Weak, Arbitrary, and Incomprehensible”) of the most recent Citi bailout: Citi has over $2 trillion in assets and several hundred billions of dollars in off-balance sheet liabilities. $27 billion is a drop in the bucket. Friedman Billings Ramsey last week estimated that Citi needed $160 billion in new capital. (I’m not sure I agree with the exact number, but that’s the ballpark.) Yes, there is a guarantee on $306 billion in assets (which will not get triggered until that $27 billion is wiped out), but that leaves another $2 trillion in other assets, many of which are not looking particularly healthy. Here we are again with " Project Chicken": nobody owning up about their problem in the hope it will soon be eclipsed by someone else’s even bigger one. You cannot make people come clean about problems. Attempts to do so will generate denial and hostility. Direct challenges will most likely trigger defences and result in greater obfuscation. No force or ultimatum or major argument is going to work. All you can do is create an environment where it is safe to talk by listening, by being someone who can be trusted to listen. People have to come to the decision that it is a mistake to continue to cover up problems. Few people can do that in an environment where others insist they were wrong to do so in the first place. Our first instinct is to protect ourselves. We need a place to go that is secure. Messengers tend to get shot. So when people start having doubts about keeping silent, provide an alternative. When they call and want to talk don't be surprised, be supportive. Find out if they feel threatened. Get them to talk about it. What effect is it having on them? Does it make sense? Don't use their confusion to flood them with information. You can ask them about the specifics, but realize that they have a lot to think about. It can take some time. Give them space. Let them ask for information or find out themselves. If people want to talk, get them talking. Have them describe their experiences, good and bad. Talk helps if the listener is non-judgmental. It is inner conflict that overcomes the conspiracy of silence. Getting people to think about what they have experienced and observed as compared to what they have been taught and led to believe is the key to breaking the spell they are under. That’s all very well on a one-on-one basis but how do you create an environment that’s safe to talk on a grand scale? Well, that’s what a Yala is for. Global Public Square, Fareed Zakaria's excellent chat show on CNN International on Sundays, excelled itself in straight talk this week when he brought together three articulate and informed commentators: Thomas Friedman, foreign affairs columnist for the New York Times; Anne Marie Slaughter, the dean of the Woodrow Wilson School of Public and International Affairs at Princeton University; and, Niall Ferguson, professor of both history and finance at Harvard University.
This is what they said:
Auto Industry Bailout: until we solve the banking problem, there'll be a line three times around Capitol Hill of every sector of the U.S. economy saying, "I'm going to bleed to death on your doorstep."
Barack Obama: we should seriously consider moving up the inauguration date.
Bank Bailout: hasn't worked, the heart of the economy has basically stopped, we probably need double that amount of capital.
Britain: staring the fate of Iceland in the face.
Europe: Not only do the Europeans have a bigger financial problem than the United States, they do not have the tools to deal with it.
China: what we really risk is the Chinese government feeling threatened and deciding that they need to drum up a nationalist response to distract the public from the economic woes.
The next administration's biggest foreign policy challenge: managing weaknesses when we too are weak.
What would be the grand strategy of weakness? Plan A: borrow from China. Plan B: print money.
You can find a complete transcript of the discussion here (after the Al Gore interview).
Yesterday's post – the ghastly graph of the current crash coupled with a Monty Python clip – highlights a problem. How do you get your mind around a situation that is not mind-sized without being flip or becoming paralyzed?
Marvin Weisbord and proponents of Future Search answer that it is vital not to ask "what is wrong and who is going to fix it?" but to ask instead "what is possible here and who cares?" The first question, they argue, is too depressing, too debilitating; the second is far more encouraging, energising. Likewise the practice of Appreciative Inquiry (an organizational development process that engages individuals within the organization in its renewal) focuses and builds on the strengths and potential of an organization and does not discuss its weaknesses.
But is this, like Pollyanna, being too foolishly or blindly optimistic?
Issues are important and we need to find a way to talk about them. In the words of the old Zen saying: "the obstacle is the path". Warren Buffett likes to say "bring me the bad news, the good news will take care of itself". But I have had less-good bosses who only wanted to hear good news, I guess we all have. I felt totally unsupported. I wonder how much this crisis was created and compounded by weak people like them who cared only about maximum profit and maximum deniability.
The five steps in creating a Yala integrate both perspectives: first raising issues, then exploring together what is possible.
1. Understand Interfaces
Complex relationships – like the stock market – have interfaces, edges, borders. These are the places where turbulence is most likely to occur–like the warm and cold fronts in a weather system.
Focusing on interfaces simplifies the management of complex relationships. It transforms the mix of more or less important contacts into a well-defined web of connections.
First, identify the components of the relationships: the individuals, groups and organizations, what they do and what they seek to do together. Map these elements, noting where they meet. Next, find out who are the people who determine the success of each interface.
Understanding how interfaces evolve as relationships change and grow takes you "where the action is".
2. Clarify Aims Clarifying the aims of each interface builds a common sense of purpose.
When any group comes together, for whatever reason, they begin to form a community. Encourage contributors to give their interface a name, build a common vocabulary, share stories and develop a history. Talking this through strengthens the bond between the people involved.
Clarifying aims helps everyone grasp "what is going on here? 3. Raise Issues Issues are the challenges in achieving the aims of an interface. People find their way by resolving issues.
Issues demand attention. Their presence compels people to deal with them. These are the ultimate tests of each community's way of dealing with events.
People need a process for working through issues. Helping them raise issues safely, discuss them openly, assess them correctly and respond appropriately, helps ensure their interface succeeds.
Dealing effectively with such crises reinforces the social fabric.
4. Invite Views Dialogue is the lifeblood of complex relationships.
Make dialogue safer, more frequent, more diverse, more ubiquitous, more forward looking, more practical and more action-oriented.
Inviting diverse views will enrich the conversation, enhance solutions and create ownership.
5. Automate Wisely Automate cautiously. Though computers make great servants they can become terrible masters.
Automating it is about managing communication, it is not just about entering text or clicking on icons. Know exactly what you are trying to do before you decide how to do it.
Automation can help you shape who talks to whom, what they talk about, how they talk about it and who else knows. The current stock market decline is the worst since the Great Depression (double-click on chart below to see the detail).  There is only one response to a chart like this...
 Royal Bank of Scotland chairman Tom McKillop and outgoing chief executive Fred Goodwin arrive for a shareholders meeting in Edinburgh.Tom McKillop is a good man and yesterday, as Chairman of the Royal Bank of Scotland (RBS), he apologised to shareholders at an extraordinary meeting. RBS was valued at £60bn at its peak and is now worth just a tenth of that. McKillop admitted the bank had been run on too low a capital base for too long. The bank had already raised a record-breaking £12bn in April to shore up its balance sheet but, in October, had to admit that it needed government support to raise a further £20bn, far more than its stock market value, and is now set to be majority owned by the UK taxpayer. McKillop told shareholders in Edinburgh: "I expressed the considerable regret of the board at the time of both our rights issue in the spring and in October when this further capital raising was announced. This regret I hope is clear but I want to make it unequivocally to all of our shareholders and the many people who depend in some way on the success of our company.
"I, as the chairman of RBS, both personally and in the office I hold, am profoundly sorry about the position we have reached. I feel this sincerely, on a number of levels and for a variety of reasons.
"I am sorry about the very real financial and therefore human cost that those who have invested in us now feel and recognise how seriously this has impacted shareholder confidence in RBS. And I am also sorry if any of our customers have suffered anxiety as a result of the situation.
"But I am also acutely aware - every day - of the fact that thousands of our employees, past and present, have believed so much in their company that they gave more than their labour to it. They bought shares, share-save options and Buy as You Earn, often from very modest incomes. They were proud of what RBS had achieved and were delighted to be associated with it.
"The buck stops with me as chairman and with the leadership of the group. Accountability has been allocated and fully accepted. For my part, I will retire as chairman at the 2009 AGM when the new board structure is in place." As I said, Tom McKillop is a good man and must feel highly traumatised. This is not all his doing, very far from it, but he has accepted responsibility and shown he is a far better person than those many others who are far more culpable yet have neither made any apology nor given a hint of contrition. But it is not quite as simple as that. This new bailout places an additional burden of debt of over £330 (US$495) per person on every man, woman and child in the UK, a country where, as I noted in my last post, a quarter of the people live in poverty. Repentance – I was taught as a child – means not just saying you are sorry but making sure it never happens again. Communication (as I have said over and over in this blog) is not what we say, it's everything we do. So what should McKillop do in reparation? At a very minimum he needs to initiate the conversation about what we must all learn from these incredibly expensive and painful mistakes to make sure they never happen again. It's easy to see how difficult it was for a bank employee to speak out about the risks of issuing and trading collateralized debt obligations (CDO's) – see my post " How to get your mind around the economic crisis". Sir Tom McKillop needs to ask his employees and ( if Alan Greenspan's right) not just his people but also his counterparties: "what must we all learn from this to ensure it is never repeated?" In the words of Margaret Wheatley: "To bring health to a system, connect it to more of itself. The primary change strategy becomes quite straightforward. The system needs to learn more about itself from itself. " Creating a Yala – a safe place to talk – is the essential prerequisite for such discourse. |
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