Blind Gods

Recently, the BBC published as a podcast (available at http://www.bbc.co.uk/podcasts/series/analysis/all) a debate held at the London School of Economics, a venerable institution which doesn't appear to have succeeded in improving our management of the economy. The topic of the debate: "Keynes vs Hayek", the eternal controversy between the advocates of government intervention and those who feel market forces should be allowed to run without constraint.

I am not an economist. Perhaps that is why the debate -- listen to it, if you must -- disappointed me so much. Not because it was too high-brow and hard to follow. No, because it was definitely low-brow, and at times even childish. The sad reality, or so it appears, is that economists don't even agree on the basic facts, which makes any debate on their interpretation rather futile. Each side seems locked in a worldview of its own, with observations of reality conveniently rearranged such as to support their favorite theory. No wonder that the economy has gone into a spin.

Of course, not all of the disagreement is on economic facts and theory. A lot of it, appears, is about the level of wisdom that can be expected from governments. Keynesians argue that in times of crisis governments should spend money to stimulate the economy, and if they cannot think of a smart way in which to spend money, they should spend anyway. The followers of Hayek fiercely object that government cannot be trusted not to act stupidly, and that even the best plans are inferior to the self-stabilising efficiency of market forces. Or, the staunchest followers of Keynes operate from the assumptions that humans are smarter than the market even if they are are acting stupidly; while the tribe of Hayek operate from the assumption that the marker is smarter than humans even if the latter act intelligently. 

A case can be made for the long-term achievements of impersonal, persistent forces: Biological evolution has produced systems of wonderful complexity and balance, by the fundamentally simple mechanism of filtering random variations for their contribution to survival and reproductive success. One can imagine that economic markets could achieve something similar by testing companies for their survival. The criticism of government intervention, as formulated by the free market thinkers, is that intervention so often serves to keep threatened species, failed business, alive. Yet it seems unfair to describe this generation of free-market thinkers as economic Darwinists. Unfair to Darwin, that is.  

Because there is a tendency to attribute to the market forces a lot more than the ability to drive the actors in it to the optimum fitness by the simple means of eliminating those who are not fit. Market forces are supposedly able to avoid crises, to get us out of the boom-bust cycle, and to make life better for everyone: The "invisible hand" of Adam Smith is thought to provides the market forces with intelligence, foresight, even benevolence. No serious biologist would make such a claim for the forces of biological evolution. Evolution is a powerful force, but it is exclusively and ruthlessly interested in the here and now, on what is beneficial on this very moment. It doesn't care about the future. 

(Of course, those who do make such are a claim are the proponents of "intelligent design" who wish to see the invisible hand of God at work in evolution: Perhaps it is no coincidence that radical free-market economics and creationist belief reside at the side end of the political spectrum in the USA.)

There is a natural human tendency to believe in foresight. If there is a landscape of mountains, hills, valleys and chasms, and there is a force that supposedly drives us towards the highest peak, then it is tempting to image that forces as some kind of mountain guide, who plots the best route upwards for us. That is not how biology works, and probably not how the market works. We are somewhere in the landscape, but we are blindfolded, crawling on hands and feet, and just trying to climb in the direction of the steepest slope. Its perfectly possible that there is a deep chasm at the end of that slope: We are in the invisible hands of a guide who doesn't care.

There is every reason to doubt the wisdom of politicians. But looking for wisdom where there isn't any, is probably not the best possible solution.

Sua Emittenza

As I write this, the writing is on the wall for Silvio Berlusconi, prime minister of Italy and of the most contested politicians in the extremely fractuous political history of his country. An ignominious end is coming to a surprisingly long career: Most of us would have expected it to end a lot earlier.

In history, making parallels is dangerous. But it is nevertheless tempting to refer back to the fall of that other flamboyant, womanizing, rethorical Italian leader, Benito Mussolini. The Duce had ruled Italy for 21 years, four years more than the Cavaliere, and like him he had relied a lot on the power of the media. And in 1943 as in 2011, the end came when the leadership had lost any and all credibility. In 1943 the crisis was military, while in 2011 it is financial, but the same feeling persists that the country has come to a dead end and only a change of leadership offers some hope.

And here is the worrying bit. In 1943, Mussolini was voted down by the Fascist Grand Council and dismissed by the king: This was not a revolution, hardly even a coup d'etat, and those in power after the fall of the Duce were the same people who had been his followers before his fall. While they aimed to change policies, indeed to change sides in the war, they were fundamentally unable to change the course of events. Is 2011 really that different? If the long career if "Sua Emittenza" indicates anything, it is that he could not be removed by his enemies, not by the political opposition, and not by judges investigating his many dubious activities. Berlusconi's fall, like Mussolini's, is arranged by his (former) friends, to protect their own survival in the circles of power.

There are of course other, less controversial examples. Margaret Thatcher was similarly forced to resign as prime minister by the inner circle of her own party, and so was, in more recent memory, Tony Blair. What these examples have in common is the inability of the successors to break with the past. They could have said, with Mark Anthony, that they had come to bury Caesar, not to praise him. But they could not really lay the ghosts of their predecessors to rest, nor achieve intellectual freedom from the climate in which they made their own careers. The results have been lacklustre.

And lacklustre solutions are the plague of Europe. Everybody agrees that something must be done, but nobody has the courage to advocate a sufficiently radical solution. Perhaps no monetary and financial crisis has had such political impact since the last days of Louis XVI, not coincidentally a monarch who also faced large debts, large deficits, and an inability to borrow more. Louis XVI appointed and fired a series of prime ministers in his attempts to find a way out, but he was (fatally) unable to reconcile himself to a change in the system. And his problem, as historians have pointed out, was not the magnitude of France's debt, but the lack of trust in its ability to service it, because the French government was systemically weak. Contemporary Britain owed even more, but investors remained confident in its ability to pay interest.

Nobody should want another French revolution. But the lessons of 1798 still apply: Changing the officials won't help much, even if they are incompetent. To rescue the financial system, it must be given a wider and stronger basis. The Europe of 2011 is much like the France of 1798, a patchwork of regional entities with their own systems of privileges and taxation. The time for this is past. As the revolutionaries put it, "the republic is one and indivisible." Or as a British luminary formulated it, we must all hang together, because if not we will certainly hang separately.

Leaked Secrets

The leaking of thousands of confidential messages by WikiLeaks has caused dismay in the diplomatic world, despite the soothing words of foreign policy observers and journalists who observe that there is actually little in these revelations that is really new. Official anger is considerable, with the US government taking the predictable line that the leaking of its secret puts lives at risk. At first sight that claim is neither strong nor very credible: Most of the published information is at worst embarrassing. However, one of the main goals of diplomacy is to avoid war; and it is certainly arguable that diplomacy must often be confidential to be effective.

The cause of the leak is also interesting. Apparently all this "secret" information was found in a computer system that is accessible to, depending on the source, anywhere between 2.5 and 3 million members of the American administration and military. The system was created after 9/11 to collect data that could be mined for information about possible terrorist actions, at first sight a commendable goal. Apparently it is trivially easy to extract data from it and burn those files on a DVD, a circumstance that seems less than commendable from a security point of view. It all appears rather amateurish.

However, it is as well to keep in mind that the first step to data security is to decide what data should be secured, and at what level. It is important to make distinctions and gradations in this, because there should be a link between the value of the information and the level of protection that is applied. The most secure system should be used infrequently and by a small group of people, and it should contain only information that is really highly important. In the case of the famous German Enigma cryptography system which was attacked so effectively by Allied cryptographers during the Second World War, the work of cryptanalysts was greatly simplified by the fact that the same system was used for both valuable strategic information and for trivial, stereotypical weather forecasts.

On the gliding scale of secrecy, it is difficult to argue that diplomatic observations that the Italian prime minister parties too much and a British prince behaved tactlessly and foolishly, can or should be rated Galactic Top Secret. Embarrassing as such comments may be, there seems not much of a case for rating them more than Confidential, and a pretty moderate confidentiality at that. The loutish arrogance of many comments made by US ambassadors should remind us of the sad reality that few of these men are professional diplomats. One becomes US ambassadors by having distinguished looks, a high level of tolerance for cocktail parties, and being a generous donor to a successful presidential election campaign. The latter characteristic is undeniably the most decisive one. These are not the criteria for producing brilliant diplomatic insights.

Putting such information in a data mining system that is widely accessible does not appear to be particularly objectionable from a security point of view. On the other hand, as information it is so low-grade that one should seriously challenge its inclusion in a data mining system, where it is just noise. Given that many US ambassadors are awarded there prestigious posts as a reward for their generous financial support in presidential election campaign, we should perhaps not be surprised to find this kind of gossip here. One hopes that communications from professional US diplomats have a bit more meat on the bone.

The question is what more information is in there, besides the juicy bits for the press. There have been reports that since 9/11, high security level clearances have been issued to a very large group of people: A practice that suggests that too much information has been declared to be secret, with a too high level of secrecy, and which is likely to have the ironic results that the real secrets are no longer very secure.

The Art of Military Euphemism

On a fairly regular basis, journalists publish rants about the euphemistic language used by the world's military forces, and in particular their use of such terms as "collateral damage" and "friendly fire". On linguistic grounds, one can object to these terms, but the reality is that they are not particularly euphemistic, as everybody knows precisely what they imply. And they merely scrape the top of the iceberg of military jargon, which contains many gems worthy of closer scrutiny.

Peace Marble. The Pentagon has the long-standing habit of given code names to all military operations and projects. Among these projects are deliveries of weaponry to other countries under the Foreign Military Sales (FMS) program. If these involve combat aircraft, these programs are traditionally given code names that begin with Peace, a habit that suggest that program managers suffer from a severe irony deficiency. Under the code name Peace Marble one finds sales of F-16 fighter jets to Israel. Peace Vector covers similar deliveries to Egypt, and Peace Gate to Pakistan.

Blue Circle. After the end of the Second World War, the British military used as system of 'Rainbow' codes, in which code names always consisted of a color and a noun. Hence Blue Danube, Orange Herald and Red Beard were names given to nuclear weapons, while Blue Vixen, Indigo Corkscrew, and Yellow Aster were radar systems. The sobriquet of Blue Circle originated in 1984, when due to technical problems, a number of new and very expensive Tornado ADV interceptor jets were delivered without their radar systems, and blocks of concrete were "installed" instead to maintain the balance of the aircraft. This ballast was promptly (and unofficially) dubbed Blue Circle, after the well-known brand of cement.

Delivery of kinetic effect. Kinetic energy is the energy of a moving object, and in particular is a property of small fast-moving objects, such as bullets. Kinetic effect is what happens when these strike their target. Hence delivery of kinetic effect has become official code for the acts of shooting or bombing. Close kin to this phrase is kinetic military action, which of course means combat. And yes, military officers routinely use this obfuscating terminology.

Animal, Vegetable, or Mineral. Under the official aircraft naming system introduced in the Royal Air Force in 1918 all fighter aircraft had to be given names of a zoological, vegetable or mineral nature. Seriously. The specific sub-category depended on the number of crew members: Two-seat fighters were to be named after mammals, but single-seat fighters after birds, reptiles or insects. The names also had to alliterate with the name of the manufacturer. This concept of an overheated bureaucratic imagination did result in experimental combat aircraft with enchanting names such as the Sopwith Snail, Westland Wagtail and Gloster Gnatsnapper. Perhaps unfortunately, this poetic system lasted only until 1927. In 1932 the RAF decided that hence forth fighter aircraft would get names reflecting speed, activity, or aggressiveness.

Just Cause. In a famous memorandum during WWII, Winston Churchill pointed out to his general staff that  military operations should not have names that are over-confident, boastful, despondent, or frivolous. Other obvious requirements for code names should be that do not give away the nature of the operation to the enemy, and of course that they are distinct enough to avoid confusion. The US invasion of Panama in 1988 set a dubious precedent for another practice: The selection of code names that are blatant and transparent public relations efforts. Just Cause was the first in a series that now includes toe-curling gems such as Iraqi Freedom.

The Colour Out Of Space

H.P. Lovecraft (1890-1937) is likely to remain one of America's more controversial, although influential, authors. He left a substantial legacy of stories that blended together science-fiction and horror, with notable high and low points. At its worst, Lovecraft's prose aims for horror by numbers, by filling deep ravines with gnawed human bones and unleashing torrents of macabre adjectives. His best stories are clearly those in which he shows both some stylistic restraint and a fertile imagination.

One of the obvious challenges for a horror writer with a bent for science-fiction, is finding believable things that the reader can be horrified about. Lovecraft's imagination ran to producing, besides the Cthulhu mythos, various huge and squishy monstrosities, vaguely humanoid beings that are related to fungi and live in outer space, and ghouls living in dark corridors below New-England's cities. Today, at a distance of nearly a century away, it is inevitable that some of them no longer retain their capability to induce belief in the reader, if only for a short time. One suspects that the more elaborate the invention was, the quicker it lost its effectiveness.

The brilliance of the Colour Out Of Space, from the story of the same name, is in its sheer intangibility. The storyteller, who hears his own account from a witness, recounts how it landed in the garden of Nahum Gardner, near the well, on a meteor. The substance of the meteor defies explanation and scientific investigation, as it refuses to cool, but slowly shrinks and vanishes, despite showing no tendency to react with any chemicals in the laboratory. It has a spectrum unlike that of any known element, also reflected by the indescribable color of a globule embedded in the meteor, which on investigation turns to be hollow and empty. Finally, the residue of the meteor vanishes without leaving a trace, although there is a strong hint that something remains in the well.

From this apparent return the normality, the malign influence of whatever intangible entity that remained behind slowly establishes itself. At first it warps nature, so that trees, fruits and animals grow large but distorted, and in the case of the fruit, acquire a disgusting taste. It establishes its influence over Nahum Gardner and his family, slowly sapping their health and driving them mad. It remains intangible, but not invisible, as the area of its influence becomes marked by the luminescence, "shining with the hideous unknown blend of colour." In the finale, it sucks all life from its area of influence, causes people and animals alike to become brittle and crumble into grey dust. Until at last the Colour Out Of Space returns to where it came from, leaving behind a lifeless area in which all organic matter has decayed forever into grey dust. As behooves a good horror story, some small part of it remains behind, to constitute a future threat.

It is tempting to read in the Colour Out Of Space a warning of the dangers of radioactivity. Lovecraft died in 1937, well before the great public became aware of nuclear energy and the associated dangers, and the story was published in 1927. Still, Marie Curie won her two Nobel Prizes in 1903 and 1911, and toured the USA in 1921, making this at least a possible source of inspiration.On the other hand, Marie Curie herself was notoriously unaware of the dangers of radioactivity, and she died of radiation disease in 1934.

One might also read into it a more general expression of concern about the evolution of human society, of the general dangers represented by scientific advance, by modern technology, by people abandoning ancestral traditions to live in urbanized, anonymous societies. Pessimism and fears such as these were certainly part of Lovecraft's mindset, and while scientists feature in a lot of his stories, they are generally there to discover things they later wish to be able to forget. Lovecraft sometimes antedated his letters by two centuries, expressing the wish that he would have lived in the 18th century.

It almost certainly goes well beyond the author's intentions to equate the Colour Out Of Space with the color of Red Tape. Nevertheless, the story also seems an apt metaphor for the morbid dehumanization of society itself, for the irresistible expansion of bureaucracy, the gradual morphing of men into the anonymous custodians of the rules. Slowly absorbing the life energy out of human activities, until all crumbles into grey dust.

Sauce for the Black Swans

I am reading The Black Swan (second edition) by Nassim Nicholas Taleb, Lebanese in exile, New Yorker at heart, financial trader, philosopher. A book that has caused a modest stir in some circles. Its author would probably agree that most books that cause a stir in the circles of financial managers are a waste of good ink and paper, but The Black Swan is worth reading.

The thesis of the book is that large areas of human activity are dominated by the Black Swan events: Unpredicted, seemingly random occurrences with a high impact. Unpredicted, rather than unpredictable, as Taleb concedes that what constitutes a Black Swan is in the eye of the beholder. Therefore the book focuses not on the nature of such events, but on the human psychology that causes people to overlook their possibility, indeed (given a sufficiently long period of time) their probability. And why Taleb adds a third characteristic of a Black Swan that people are always, with hindsight, able to find a explanation for them, which enables them to forget about the lesson for the future. As a potential cure for these ills, Taleb advocates skeptical empiricism: Proceeding on a cautious observation of the world, while resisting theories and models. The underlying philosophical problem is how skeptical empiricism (supposedly taking into account the Black Swans) can be separate from inductive reasoning (supposedly not). As one cannot prove a negative, one can never exclude the possibility that a Black Swan may occur – Taleb's concept is not falsifiable! – yet it is obvious that inductive reasoning is often useful, despite the risk.

Taleb presents his concepts from the background of a financial trader and analyst, which provides him with experience and examples. However, very much to his credit, he does not roll out endless tables and graphs to try to prove his case using anecdotal evidence, nor does he confuse the reader with financial jargon. This is a very accessible book. At times the perspective does appear a bit too narrow and biased: In a footnote Taleb argues in apparent seriousness that the outbreak of the Great War in 1914 came as a surprise, because "bond prices did not reflect the anticipation of war." Maybe bond prices didn't, but military preparations did! Yet Taleb is probably wise to draw his arguments from the financial arena, because this has the benefit of offering a lot of quantitative data -- and besides, judging from some errors in the book, his knowledge of general history is scant.

That is not to say that Nassim Taleb is a one-dimensional figure which understands only market numbers. He clearly possesses erudition and makes an effort to demonstrate it. His erudition, evidently, is that of a writer, scholar and soft scientist. It is also that of an egocentric full of an idea, who can at times be unthinkingly dismissive towards activities in other areas. Nike, Dell and Boeing, he writes, make money through "thinking, organizing and leveraging their know-how" while outsourcing "the grunt work" and "the noncreative technical grind." That is managobabble. I doubt that Nike is leveraging much beyond the American dominance of the media markets and its established brand position. But Boeing? Modern airliners are enormously complex machines, and in the endless pursuit of savings in fuel and cost of operations, every little detail counts. Creative design work cannot easily be separated from the "grind" of technical skill, and knowledge of how the "grunt work" is done is vital, because it determines the limits of the feasible. Yes, Boeing outsources a lot, but that actually includes the outsourcing of a lot of creative work, while a lot of the technical grind and construction work is still done in Seattle. Boeing splits up the work by components – fuselage, tail, wings, flaps, engines, instruments, seats – and not by easy categories such as "creative" and "non-creative".

The author, then, is a erudite man with an idea that he proposes and defends energetically, forcefully, and sometimes bitterly. His strong rhetoric can be confusing as he repeatedly slices and dices the universe into categories, subtly changing the dividing lines by introducing new terminologies: Creative versus noncreative, scalable versus nonscalable, techne versus episteme, Mediocristan versus Extremistan, domains in which useful experts can be found and domains were the supposed experts do a very poor job of predicting the future, Gaussian versus Mandelbrotian. The proposed division of reality is a ragged, frayed one, but attentive readers will nevertheless get the point: We should be more cautious in the use of our mental predictive "machinery" with its reliance on the law of averages. We usually depend on it in everyday life and it serves us well for many  purposes. But we should be aware that there are also areas in which it breaks down because the unpredicted, the outlier, is the dominant force there, instead of a detail that can be glossed over: A natural disaster, a major invention, a very rich man, a financial collapse. And, Taleb argues, these areas are growing more important as society gets more complex and interconnected, and may now involve the majority of the decisions that we will be required to make. We need to be aware of this, because we are not mentally equipped to take Black Swans into account: It takes a conscious effort to do so. 

Taleb has an axe to grind with economists who use formal mathematical models to predict the markets: He is not opposed to the concept in principle (he suspects that fractal statistics may work) but dismissive about approaches based on Gaussian statistics, which in his view have been proven a failure again and again, because they are too reductionist and start from flawed assumptions on uncertainty and risk. The fierceness of his attack on the idea may be justified, but in defense of the economists I would say that they would not be the first ones to formulate a model under a given set of assumptions and approximations, then see it abused to make predictions under entirely different circumstances. Some of them may be guilty of hubris, but there may be some innocent victims.

I am not very impressed by the forays in evolutionary psychology, and there are other weak points. For example, there is a section with the bold title Information is bad for knowledge, but in this he only demonstrates that a gradual flow of information is bad for knowledge – and that a less gradual flow may be better. If subtle, the difference is very important. Even worse is the technical gaffe in the chapter on the Gaussian distribution, where he claims that the distribution will become narrower as sample size increases. This is a common misunderstanding among people with a tenuous grasp of statistics, but that does not make it excusable in a book that pretends to challenge conventional statistics. Nor is it accurate to assume that the  fundamental uncertainty is the quantum world, as defined by Heisenberg's principle, obeys a Gaussian distribution. There are some other strange statements in the extension to the second edition, which lead to the conclusion that for the more academically and mathematically schooled collaborators of his scientific publications, Taleb must be a difficult man to work with.

Yet these problems do not undermine his central thesis, and he does make some strong points. If you think that the inventions we see around us came from someone sitting in a cubicle and concocting them according to a timetable, think again. Having spent most of my career in research, I can observe that although it is many ways the art of generating (falsifiable) predictions, the activity itself is inherently unpredictable, because the study of the unknown produces inherently unpredictable results. Nevertheless I have seen a lot of people sitting in cubicles who were expected to deliver new inventions according to a timetable. That approach does not work, but so far that has not stopped anybody from trying it – quite the contrary. The human (managerial) desire for predictability, control and guaranteed outcomes is so overwhelming, that we continue to rely on predictive frameworks even after they have failed time and time again, and seek to impose them on others.

Taleb's strong recommendation is to try to incorporate room for the unknown and unpredicted in your (business) strategy. The Black Swans cannot be predicted, but by a smart strategy you can mitigate the impact of negative ones and maximize the effect of positive ones. He highlights the foolishness of acceptiong the risk of rare, but very damaging events on the assumption that they will never happen – especially if they actually have a history of happening from time to time, like financial collapses. On the other hand, you should be ready to grasp the once-in-a-lifetime opportunity: A serendipitous discovery should not be ignored, merely because it doesn't fit into your strategy.

Having finished reading the book and the lengthy extension added to the second edition, I cannot escape the observation that Taleb has something of the crank about him. There are the dazzling intellectual maneuvers, the scattering of small factual and logical errors, the solipsistic ranting of a self-declared genius against the establishment: You can also find these in a book dedicated the the mysteries of the pyramids, the Bermuda triangle and Atlantis, all explained at one stroke. The redeeming quality that makes the book worth reading is that the central points are nevertheless entirely valid. The more straightforward point is that in a domain where the outcome can be determined by rare events with a high impact, statistical approximation breaks down; and the abuse of Gaussian statistics in areas where they are not applicable is inherently misleading. The less obvious point, which really makes the work significant, is the argument that this condition of statistical breakdown is not the exception but commonplace, and dominates financial markets.

Bromides: Top-Ten Excuses for Bad Management

10. It is inevitable.

The Hand-Of-God excuse is frequently invoked by managers who have elevated their lack of imagination to a strategy. The principle is simple and attractive: If there never were any choices, then no wrong choices can have been made. 

By avoiding any serious consideration of alternatives, the responsibility for a decision can be deflected very effectively .

9. We are in an economic crisis.

The Herbert Hoover excuse holds that in a time of economic crisis, difficult decisions need to be made. Surprisingly, the mere fact that these decisions are difficult can be used against a shield against those who question their wisdom. 

A plan that would be subjected to serious scrutiny in a more benign environment, and might on closer consideration not be the wisest course, can be pushed through in a rush if there is a crisis atmosphere. The sheer urge to do something may even induce people to rummage the dustbin for plans already abandoned and ideas already dropped, and execute them anyway.

Admittedly there are benefits to this as well: A time of crisis can offer opportunities for plans otherwise considered too radical or too risky. But the selection is often made randomly. Beware of politicians declaring "War on X". Excuse them, Lord, for they do not know what they do.
 
8. I am sure we can make it work.

The Voluntarism excuse holds that, no matter how convoluted, impractical, bureaucratic and cumbersome a process is, there are ways to make it work. Which is likely to be true, at some level. Just fill in the paperwork.

The problem with this reasoning is that it is like eating soup with a fork: Given time and persistence, it can be done. But it is not a particularly efficient procedure, and the time and energy spent on it could be used for better purposes. Any competitor with enough wisdom to use a spoon will leave you in the dust.

7. It is policy.

This is the Meaningless excuse. It implies that we do this, because, well, we have decided to do this. Or at least somebody has. At some time. Don't ask who, when, or why.

6. All our competitors do the same.

The Lemming excuse is used surprisingly frequently by companies operating in a notional free-market environment. Of course conforming to the behaviour of the pack fails to ensure a competitive advantage, but on the other hand it requires no initiative and does not entail the risk of falling behind the others. Therefore a bad strategy that was already adopted by the  competitors will often be embraced more eagerly than a good one that was not.

Financial markets are particularly vulnerable to this kind of logic. Common sense may tell one that the best strategy to make money is to buy low and sell high, yet most actors will sell in a bear market and buy in a bull market.

5. It is what we have been told to do.

Although this must have been invoked countless times since the dawn of history, I consider it fair enough to call this the Admiral Markham excuse. Markham was British admiral, who in 1893 was ordered to turn his ship to port, and duly did so, although he knew a collision would inevitably result. HMS Victoria sank in 13 minutes, taking 358 men with her.

As one of the exasperated Sea Lords put it, "Any fool can obey orders!"

4. It is the American / Chinese / French / European practice.

It is appropriate to call this the Syphilis excuse, after the disfiguring, sexually transmitted infection that was called the French disease by the Italians, the Italian disease by the French, the Polish disease by the Russians and the Frankish disease by the Turks.

In any international collaboration or organization, there is a tendency to assume that some completely brain-dead process is part of the national culture of the other parties involved, perhaps even a matter of national pride. From this one can then conclude seamlessly that any effort to change the practice would be wasted. And perhaps even offensive.

Oh, East is East and West is West, and never the twain shall meet,
Till Earth and Sky stand presently at God's great Judgment Seat;
But there is neither East nor West, Border, nor Breed, nor Birth,
When two strong men stand face to face, though they come from the ends of the earth!

3. We need to think positively.

The Bay of Pigs excuse seeks to silence critical voices simply but effectively by encouraging them to fall in, for the sake of group cohesion and a positive team atmosphere. Any dissenters can be accused of not being good team players. (Or, in politics, of being unpatriotic.)

The practice leads to "groupthink", a kind of collective self-hypnosis that protects the members from challenging the status quo or proposing alternatives. Groupthink is dangerous, but easily rationalized by extolling the virtues of conformity.

The excuse earns his name from the disastrous invasion of the Bahia de Cochinos in 1961: Later Kennedy realized that a lack of critical thinking had allowed a doomed plan to move forward, and during the Cuban missile crisis he took great pains to stimulate his advisors to think independently.

2. Our credibility is at stake here.

The Domino Theory excuse holds that any change in direction or admission of error must have devastating consequences for the credibility of the leadership or of the organization. Therefore, it is actually better to continue a policy that has failed, than to try something else.

In practice very few, if any, senior managers are willing to admit to an error of any kind. To avoid this, they find ways to talk up the devastating consequences of admitting failure. It is not difficult to construct hypothetical scenarios involving a cascade of disasters triggered by a loss of confidence.

As Edmund Burke pointed out to the British government during the American Revolution, one's dignity can become a burden, and seriously conflict with one's best interests.

1. This is a large organization.

The Dinosaur excuse takes it for granted that a large organization must be ineffeciently organized. And of course the challenges of a managing an organization increase steeply with its size. But as some large organizations nevertheless continue to exist and flourish, it is evident that solutions for these structural problems can be found: Otherwise they would all have become extinct long ago.

However, the search for solutions is easily inhibited by telling people that they don't stand a chance to see them adopted. And both colleagues and superiors have a motive in doing so, as people who find better management solutions are likely to rise through the ranks.