Can You Find A Person at the Top – A Single Person – Who Has Truly Learned from the Mistakes that Led Up to the 2008 Crash? Even One? (Reflecting on the Movie Inside Job, and the Writing of Diane Ravitch)
“What can we believe in? There’s nothing we can trust anymore.”
(from the movie, Inside Job).
(Sorry about the long title on this blog post – I could not figure out how to shorten it).
I watched the move Inside Job last night. (Yes, I know I’m late to this). It tells what happened leading up to and during the crash of 2008. It was tough to watch this movie. It is distressing, close to full-blown depressing.
The movie, which won the Academy Award for best Documentary, looks far and wide for a silver lining. The filmmaker, Charles Ferguson so wanted to find someone who could admit “we made a mistake, and we’ve learned from our mistake, and actually changed our ways.” No such luck. No one – not one – no, not one! — seems to have learned anything.
And you can pick your participants – the bankers; the politicians, (both Houses of Congress, the White House – both the parties); the mortgage company lenders; the ratings agencies; the academicians – they’re all complicit! Every one of them! (and let’s add the media into this mix).
I was disturbed by so much, but I think I was especially disturbed by the fact that the teachers/leaders at our most respected academic institutions are so enmeshed in this story. The teachers wrote that regulation was bad – taught their students that regulation was bad. The movie began with a quick look at Iceland, and later we learned that two well-known academicians wrote glowing reports for Iceland, about Iceland, proclaiming the banks to be healthy – and did not disclose that they were paid tens of thousands of dollars for writing such glowing reports. And, they make far more money serving on the boards of the institutions that are part of this saga than they do teaching.
And the office holders, Democrat and Republican, in the White House and Congress, protected the autonomy of the financial institutions, did not pass genuine regulations, removed regulations, hired back and forth, from the financial institutions to the government…
And the ratings agencies defended themselves by stating: “we are just offering our opinion.”
And the executives of the financial institutions knew (yes, they knew!) that the “investments” they were selling were “crap,” ”shitty” (these are direct quotes from their own internal communications), and yet they sold them anyway to trusting customers, while they placed bets on these very investments going bad, to make even more money.
Who are these people?
And if you think my brief summary is too simple, too harsh – please watch the film.
When Charles Ferguson accepted his Academy Award, he stepped up to the microphone with his Oscar in hand and stated:
“Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong.” (watch his acceptance here).
I watched this in the same week that I read, and prepared to present, the remarkable, and remarkably disturbing, book The Death and Life of the Great American School System: How Testing and Choice are Undermining Education by Diane Ravitch. Ravitch is a former fan of, even champion for, No Child Left Behind. But no more. She now sees that it simply does not work.
Here is what she wrote:
I have a right to change my mind.
Then she quotes John Maynard Keynes, who responded with these words to someone who chastised him for changing his mind: “When the facts change, I change my mind. What do you do sir?”
Diane Ravitch believed one thing – it did not work! – and then she changed her mind.
That’s what learning is. It is paying attention, examining the facts, the evidence, and then changing your mind when you are proven mistaken/wrong.
If you have never changed your mind, you have likely never learned.
There is no Diane Ravitch in the financial meltdown saga. Oh, there are plenty of voices who warned against a lack of regulation, who warned about the coming problems. Good for them. But I know of no one from the inside who said, “I was wrong, and now I’ve learned, and I have genuinely changed…”
I read business books for a living. I read them, present synopses of them… I have read a lot of books on leadership. I know that there is a shortage of good leaders out there.
These companies held our ecocomy in their hands. The leaders of these companies needed to be the best, the very best, leaders we could produce. We all needed them to succeed. They failed.
And they seem to have learned nothing from the meltdown.
It is distressing.
Read the review of this movie by Roger Ebert here. It is worth reading.
Here’s the trailer for the movie:
How and why “As One behavior” can accomplish almost anything
There is so much to be said about what this book offers. Where to begin? Perhaps my purposes are best served by providing a series of five key points:
1. Mehrdad Baghai and James Quigley share what was learned from the a two-year Deloitte Flagship Project whose purpose was to examine the challenges of working together “As One.” The project’s scope was global, nourished and supported by best resources available from the US, UK, Canada, Netherlands, Australia, South Africa, and Japan.
2. Key questions are addressed. For example: What does it take to work As One? To succeed As One? To overcome barriers As One? To cope with failure As One? To become stronger As One?
3. Baghai and Quigley used an advanced forensic data analytic technique called a self-organizing map (SOM). Various maps (they use eight) “find relationships in data where the number of variables makes the analysis complex, and, they divide complicated data into groups of similar items so that you can understand what makes them similar.”
4. There are eight leader & followers archetypes: (landlord & tenants, community organizer & volunteers, conductor & orchestra, producer & creative team, general & soldiers, architect & builders, captain & sports team, and senator & citizens). A chapter is devoted to each of the eight. Baghai and Quigley thoroughly explain how leaders and followers can coordinate individual action with a group’s collective power.
5. Material about each of the two-part archetypes is organized within this format: Exemplary Individual, Exemplary Business, Key Characteristics of Leader and Team, “Is X the right model for the reader?”, and “How to become a better X?” For example, Chapter 4 (Pages 126-159):
Archetype: Producer & Creative Team
Individual: Jerry Bruckheimer (“The Man with the Golden Gut”)
Business: Cirque du Soleil
Key Characteristics of Leader and Team: Open culture, transparency, hands-off producer with a vision
Is it the right model?: Four reasons it could be great and four reasons to think twice
How to become a better producer?: Answer seven Qs such as “Does your culture effectively encourage openness and constructive criticism?”
No brief commentary such as this can possibly do full justice to what this book offers. Its scope and depth of coverage as well as the eloquence with which Mehrdad Baghai and James Quigley present the material are unsurpassed by any other single source of which I am aware and I have read and reviewed hundreds of books about leadership and teamwork. Moreover, the book’s design, lay-out, and abundance of illustrations are of the very highest quality. Its list price is $40 and well worth it but Amazon now sells it for only $16.00.
Up front, I need to acknowledge that I do not share James Strock’s high regard for Ronald Reagan’s performance as governor of California and then as president of the United States. I certainly don’t agree with Tom Peters who (in the Foreword to this book) observes, “there is no doubt in my mind that the most effective by far [of 12 American presidencies he has lived through] is that of Ronald Wilson Reagan.” To make that ludicrous assertion is comparable with insisting that William Jefferson Clinton was primarily responsible for the record federal and international trade surpluses that developed during his two terms or that George Herbert Bush is primarily to blame for the record federal and international trade deficits that developed during his two terms. In my opinion. all three were mediocre presidents, at best.
I gave this book a Five Star rating because I think it is well-written, carefully organized, and achieves its stated objective: To identify and discuss what executive lessons can be learned from the 40th president of the United States. In fact, there are several and Strock organizes them within four separate but interdependent groups: leadership, management, communication, and self-management. There are clusters of them listed at the conclusion of each chapter. Specific lessons are best revealed with Strock’s narrative but I will share this opinion that all of them are eminently sound. Their value, I hasten to add, will be wholly determined by ultimate objective and by the means by which that objective is achieved.
As I read this book what I found especially fascinating are the paradoxes that his leadership suggests. Here are five among those that Strock cites:
1. His values were those of a traditionalist but he was dedicated to change in himself, his country, and indeed the world.
2. He defined and embodied late-20th century conservatism but habitually cited Thomas Paine’s claim, “We can make the world again.”
3. To date, he was the oldest president and yet had a special bond with the young…except, perhaps, with his own children.
4. He was the first and (as yet) only professional actor to serve as president but even his strongest political opponents agreed that he was a thoroughly authentic person.
5. His communication skills included an ability to establish a rapport, an intimacy with his audience and yet there was always a psychic distance from everyone except his second wife, Nancy.
Strock inserts hundreds of quotations throughout his narrative of those who knew him best. For example:
According to Colin Powell after his first meeting with President Reagan, “What stayed with me was the paradox of warmth and detachment Reagan seemed to generate simultaneously, as if there could be such a thing as impersonal intimacy.” Martin Anderson said Reagan was “warmly ruthless.” According to Strock, Reagan seldom gave direct orders. This approach empowered others “to act on behalf of the broader vision.” Donald Reagan called this “Guesswork Presidency.”
According to Donald Reagan (no relation), “To this day [after two months as Reagan's Secretary of the Treasury] I have never had so much as a minute alone with Ronald Reagan! Never has he, or anyone else, say down in private to explain to me what is expected of me, what goals he would like to see me to accomplish, what results he wants.”
Whether or not you think Ronald Reagan was a great leader, you will find a wealth of information in this book that helps to explain what a great leader is…and isn’t, what a great leader does…and doesn’t do. I also highly recommend James Strock’s previously published book, Serve to Lead. If you share my high regard for Theodore Roosevelt, you will also enjoy another Strock book, Theodore Roosevelt on Leadership.
Here is an excerpt from an article written by Ted Cadsby for the Harvard Business Review blog. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.
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Of all the headwinds we face as decision-makers, the power of one overshadows all others: our need for certainty. It is typically more important for us to feel right, than to be right — a difference that didn’t matter much in the lives of our ancestors, but now matters a lot.
Certainty is the feeling of confidence we have when we’ve figured things out. Our physiology is geared to move us quickly to eliminate the uncomfortable tension of not knowing — the mild stress response our bodies trigger when we perceive that we have lost control because we don’t understand. It is this tension that motivates us to figure things out like the mysterious rustle in the bush, the confusing betrayal of a friend, the promotion we didn’t get — all the minor and major problems that confront us every day. Only certainty, in the form of the calm feeling of knowing, can replace the tension of not knowing. Settling on an explanation triggers a “lockdown” of our minds, in the same way that a fertilized egg locks out competing sperm.
As the female ovum floats down the fallopian tube, a few thousand sperm (of the 300 million that initially began the journey) search it out. One sperm will be the first to pierce the egg’s outer wall, triggering a chemical reaction that makes the egg’s wall harder and impenetrable to competing sperm.
The mind is like an egg; the sperm are the myriad possible explanations for any given problem the mind tries to solve.
Just as the few thousand sperm are stronger than the millions that perished along the way, some ideas are favored over others: our “fittest” explanations are those that cohere with all of our other beliefs and values — they are easily integrated with everything we already “know.” But just as one sperm will get to the egg first, even if more genetically fit sperm are available, the urgent drive to reduce the tension of uncertainty pushes us to accept the first reasonable explanation we craft. Our mind becomes “fertilized” and the calm feeling of knowing instantly infuses us, stopping our search for alternative explanations.
The lockdown of our minds serves an important purpose: Generations of our ancestors wouldn’t have survived had they constantly second-guessed their conclusions. In a harsh environment characterized by straightforward challenges that demanded quick responses, an indecisive caveman was a dead one. The rush to certainty became our standard operating procedure for two reasons: i) because we needed speedy thinking, and ii) because speed did not force a significant tradeoff in accuracy. The risk of interpretive error is low when you are confronted by a charging tiger or bush of lush berries because the cause-effect relationships in these straightforward situations are not convoluted or ambiguous. Even today, the majority of micro-decisions we make every hour are fairly straightforward, so there is no reason to second-guess or reflect on the limitations of our senses and intuitions.
But the whole speed-accuracy tradeoff falls apart in a world that tosses up complex problems. The need to be certain gets in the way of accuracy when it comes to problems that have multiple, interwoven causal factors that are difficult to unbundle. Complex problems require exploration, multiple perspectives, and a variety of possible explanations, before it is safe to draw any conclusions. Many complex problems can only be tackled with experimentation because they do not converge to definitive solutions. But a mind that is “fertilized” by the first satisfying interpretation is closed to the more subtle and complicated explanations that are often better. It is our mind’s lockdown feature that makes certainty the #1 enemy of effective decision-making in the face of complexity. Think of all the business failures that were avoidable if it weren’t for the hubris of leaders who were unwilling to revisit their faltering strategies, or the public policy failures that could have been mitigated, or our personal relationships that would run so much more smoothly if we weren’t so certain that we were right all the time.
But there is an antidote to premature certainty: Adopting a mindset of “provisional truth.”
[To read the complete article, please click here.]
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Ted Cadsby is a corporate director, principal of TRC Consulting, former executive vice-president of the Canadian Imperial Bank of Commerce, and author of two books on investing.