Whether you're contemplating a company or a country, the greatest risk in human affairs occurs when caution is abandoned in favor of delusional thinking.
Such thinking may be populist (bottom-up) or elitist (top-down); it can capture companies, sectors, and whole nations. From O-rings at NASA and WWII belief in battleships to Dotcom "this time is different", from Hitler to Mao and bin Laden, from prudence and prosperity of the past to risk-taking and economic decline of the present and in hundreds of other historical examples we see a recurring pattern: consistent failure to recognize realities, wild swings in the beliefs - the ideation - by which billions are governed.
Prudence is its own reward. It ensures continuity, sometimes at the expense of progress. The lesson of history is that mankind is NOT prudent. Yet today the governing ideology states that prudence is self-defeating:
“What’s the single most important thing to learn from an economics course today? What I tried to leave my students with is the view that the invisible hand is more powerful than the [un]hidden hand. Things will happen in well-organized efforts without direction, controls, plans. That’s the consensus among economists. That’s the Hayek legacy.”
(Lawrence Summers, quoted in The Commanding Heights: The Battle Between Government and the Marketplace that Is Remaking the Modern World, by Daniel Yergin and Joseph Stanislaw. New York: Simon & Schuster. 1998, pp. 150-151.)
This is just another wild swing in elitist thought and practice. Already, it has brought the global economy to the brink of disaster, and in its complete manifestation, once-prosperous nations and whole population segments to the edge of poverty. The thinking, of course, is evangelized by dominant and profitable financial and corporate sectors -- even as costs of their failures and risks have been assumed by a weary public.
Remember what they tell you: there is no public interest.
Remember that, when you worry about gas in your water supply, about the dangers in a nuclear reactor, about systemic risk and contagion in HFT, finance and economics, about corporate misdeeds, and the Enrons of the world.
Jim |
