Creatures of habit

Creatures of habit

However much knowledge and experience we acquire, sometimes our best-laid plans can go awry, says John Kay. That’s when it’s time for a change of direction

Vince Cable’s cruel jibe that Stalin had been transformed into Mr Bean hangs over Gordon Brown’s premiership. Brown’s insistence on micro-management was accompanied by frustration over his limited ability to influence events. Micro-management fails because complex goals are rarely best achieved by detailed planning based on defined and quantifiable objectives – whether those goals are building a fair and prosperous society, satisfying the multiple incompatible demands of an electorate or managing a business.

As the great utilitarian John Stuart Mill acknowledged towards the end of his far from happy life: “I never, indeed, wavered in the conviction that happiness is the test of all rules of conduct, and the end of life. But I now thought that this end was only to be attained by not making it the direct end. Those only are happy (I thought) who have their minds fixed on some object other than their own happiness; on the happiness of others, on the improvement of mankind, even on some art or pursuit, followed not as a means, but as itself an ideal end. Aiming thus at something else, they find happiness by the way.”

Happiness is achieved obliquely, through a process of adaptation and improvisation that recognises complexity and uncertainty. This is equally true of most political and commercial objectives.

The illusion of control blinds us to the real complexity of politics, business and finance. We find intentionality and design where there is only chance and improvisation; directness where there is obliquity. By describing Napoleon’s Russian campaign through the eyes of individual participants, Tolstoy denied the deterministic notion of history. Describing the battle of Borodino, he wrote: “It was not Napoleon who directed the course of the battle, for none of his orders were carried out and during the battle he did not know what was going on. […] It only seemed to Napoleon that it all took place by his will.”

‘The mind-bending genius of David Beckham’ was the headline in the Daily Telegraph on 21 May 2002. A few months earlier, the England footballer had secured victory against Greece with a remarkable goal. Dr Matt Carré, a specialist in computational fluid dynamics at the University of Sheffield, analysed the process. Carré went on to say that “Beckham was instinctively applying some very sophisticated physics calculations in scoring that great goal”. But Beckham isn’t a physics genius. Whatever he did when he scored that goal, he didn’t solve a set of complex differential equations in his head on the spur of the moment. Napoleon did not direct the course of the battle of Borodino – in fact, for much of the time he did not know what was going on – and Beckham did not have time to review the many alternatives before he scored his goal in Greece. The oblique decision maker reviews only a small subset of the options available in principle.

The most successful 20th-century US president, Franklin Roosevelt, understood very well that goals and actions must constantly be revised if high-level objectives are to be achieved. Roosevelt described his approach as one of “bold, persistent experimentation”. “Try something,” he went on. “If it fails, admit it frankly, and try another.” Roosevelt’s achievement was based on the combination of a strong general sense of high-level objectives and an equally marked absence of commitment to any specific intermediate or basic goals or actions.

Roosevelt is admired today because he achieved these high-level objectives: the survival of American capitalism and the defeat of German and Japanese imperialism. But he did so through pragmatic improvisation in the face of circumstances that neither he nor his advisers could predict or control. Roosevelt understood that the scope of his authority was inescapably limited by the imprecision of his objectives, the complexity of his environment, the unpredictability of others’ reactions and the open-ended nature of the problems he faced.

In a famous essay, Isaiah Berlin adopted Tolstoy’s distinction between the hedgehog, who knows one big thing, and the fox, who knows many little things. Hedgehogs move slowly and directly, foxes quickly and obliquely. Political scientist Philip Tetlock has used this taxonomy in a study of expert political judgment. Over the course of two decades, he invited respondents to predict political events, and used hindsight to assess the quality of their responses. The experts were not very good at anticipating the future.

But Tetlock’s most striking discovery is that, although the foxes perform better in terms of the quality of their judgments, the hedgehogs perform better in terms of public acclaim. Hedgehogs are people who know the answers. Foxes know the limitations of their knowledge. The confident certainties of hedgehogs attract the attention of politicians and business leaders. Give me a one-handed economist, goes the saying, but careful judgment is often a matter of ‘on the one hand, and on the other’. Yet hedgehogs, who claim to predict the future, will always attract a larger audience than foxes, who acknowledge they can’t, even if the larger audience learns nothing useful from the predictions.

It is hard to overstate the damage that has recently been done by people who thought they knew more about the world than they really did. There were the managers and financiers who destroyed great businesses in the unsuccessful pursuit of shareholder value. There were the architects and planners who believed that buildings could be designed from first principles, that vibrant cities could be drawn on a blank sheet of paper and that expressways should be driven through the hearts of communities. And there were the politicians who believed they could improve public services by imposing multiple targets. The Iraq war and the credit expansion of 2003-07 were both predicated on an assumed knowledge of the world that people who made the relevant decisions did not in reality possess. US policymakers did not understand the culture and politics of the Middle East. Bank executives believed that their risk control systems, which they mostly did not understand, enabled them to monitor transactions that they did not understand either but that they believed to be inordinately profitable.

Successful decision making is necessarily oblique – it is often the case that we do not understand why we succeed even after we have succeeded. Intention does not dictate outcome, nor does outcome allow the inference of intention. Hindsight plays a large role in our interpretation of events. Neville Chamberlain returned from Munich proclaiming “peace in our time” and received a hero’s welcome. Eighteen months later, he was driven from office a broken man, and died within a few months. Winston Churchill delivered a characteristically powerful epitaph to the House of Commons: “It is not given to human beings – happily for them, for otherwise life would be intolerable – to foresee or predict to any large extent the unfolding course of events. History with its flickering lamp stumbles along the trail of the past, trying to reconstruct its scenes, to revive its echoes.”

Perhaps, in the flickering light of history, the men of the noughties who overestimated their knowledge, control and understanding will be seen in a more favourable light. Perhaps.

John Kay is an economist, columnist and author. His book, Obliquity, is published by Profile Books.