I’ve just read a fascinating book, The Age of the Unthinkable, by Joshua Cooper Ramo. Ramo is a managing director at Kissinger Associates, focusing on China. He’s a former foreign editor for Time magazine.
The Age of the Unthinkable talks about how uncertainty and interconnection is increasing in every aspect of our lives and in world politics. From the interplay of energy use and the environment to finance and mortgages, to diseases spread by travelers, to terrorists and weapons of mass destruction, the world is becoming unmanageable using old models.
Complex decentralized systems are not unmanageable. Think of the Internet or healthy ecosystems or financial markets (OK, there was mismanagement at some levels. But the system worked, trading can go on even with the overload of a crisis). The thing is, they’re not manageable by straight-line thinking and top-down control.
As you might guess from his background, Ramos talks a lot about international relations. He says the old institutions set up after WWII – from the UN, to the way the State Department is organized, to how foreign aid is distributed – are not only incapable of dealing with today’s uncertainly but are actually counterproductive. One reason is they’re all designed to confront perceived problems head-on, which often has the result of making them worse – think nuclear proliferation, the war on terror, the financial crisis.
To oversimplify, Ramos says we need to do a couple of things.
1. Build resilient systems at every level.
- To deal with bioterrorism or new virus strains, we could try to plan for every eventuality, develop and stockpile vaccines, etc. But a more effective plan would be to build a strong healthcare system, with an efficient and effective public health component, and be ready to react to whatever happens.
- On the financial crisis, he talks about America’s low savings rate as a reason why the meltdown is so hard on individual families. If people had adequate rainy day funds we’d be better able to ride out the inevitable downturns.
2. Design for uncertainly by using the model of our immune system.
- Be ready to react to crisis and opportunity with flexible systems. He talks about involving people at every level of an organization, or of a society, in decision making. Great case studies from Hizb’allah to a company in Brazil’s 1980’s financial meltdown to AIDS care in Africa.
This seems to me to overlap with the transition to a creative economy and Richard’s mantra that every person is creative and we need to make all work creative.
(Interesting David Brooks piece about Iran in today’s NY Times along the same lines.)
June 20th, 2009 at 6:30 am
Very timely post, what with Obama’s “White Paper” just being released.
These are not my words, they’re taken from a blog post on the subject elsewhere, but think how they apply to “The Age of Uncertainty”:
The Obama Administration White Paper was heavy on blaming the folly of the private sector and defects in regulatory structure for the crisis. It was light on flaws in regulatory policy or execution (the real problem in “The Age of Uncertainty”).
There is a risk that the white paper serves to increase the uncertainty of the business environment. If you are operating a financial institution today, you cannot set up a new division or line of business without knowing whether it will be whacked by regulators down the road. One of the risks of having a “financial product safety commission” is that it will knock down products after the fact, which in turn will have a chilling effect on innovation.
It is very typical of government to respond to a failure with a re-organization. That appears to do something, but in fact does little.
So… how do you regulate in the age of uncertainty? More is not better.
June 20th, 2009 at 8:25 am
In terms of financial regulation in an uncertain world, it has to start with business leaders. If business leaders acted ethically, with the interests of all stakeholders in mind, then regulations would not be necessary. The recent financial meltdown was a direct result of a the systematic education of our business leaders to maximize shareholder wealth.
In order to manage a complex system, that cannot be centrally managed, requires decentralized checks and balances at the agent level. This means that you need to self regulate by educating the agents (e.g. business people) on what society expects. Then, you can put centralized checks in place that get the outliers.
Some MBA students at Harvard are trying to set the example by taking the MBA Oath (http://mbaoath.org/). This is a first step in regulating the complex financial system. These types of oaths do work (e.g. doctors and engineers).
June 20th, 2009 at 11:00 am
Please stop. The Bushie love for old war criminals like Kissinger and his associates is obvious.
You remember Henry Kissinger, don’t you? Viet Nam, Chile, South America, etc.
But but but, they must must be smart people. Why? Because they tell us so.
I’m sure if Hitler lived and opened his own consulting firm people would be quoting him too.
Honestly Florida. No standards?
June 20th, 2009 at 3:38 pm
Alex,
I share some of your feelings about Kissinger. And I hold grudges long enough I’d probably not buy one of his books.
I picked up The Age of the Unthinkable in the bookstore and read some of it before looking at Ramo’s bio. It looked interesting enough I bought it, it didn’t seem to be hard line. Ramo is in his mid-late 30s’, he would have been about 3 during the bombing of Cambodia and overthrow of Chilean democracy.
One interesting thing is some of Ramo’s ideas in the book and his Bejing Consensus seem to go directly against Kissinger’s Great Powers focus with smart guys in a room deciding things for everyone else history. Whether Henry has changed on these I don’t know.
June 20th, 2009 at 4:59 pm
The most charming thing about the left is how they let bygones be bygones.
June 20th, 2009 at 7:32 pm
I might have been a little hard on you M Wells, but letting Nixon & Kissinger off led to Reagan-Bush (Iran Contra) and Bush-Cheney (Iraq, etc). All illegal and all impeachable, and if Dems had backbones, the US could’ve avoided the history repeats. Instead they end up with $1.2M pensions for massive incompetence and illegal activities.
Buzzy, I’m sure the 17% approval rating for the GOP is a misunderstanding. Not. Mostly because they’re viewed as corporate stooges who really don’t stand for anything. Of course the Dems aren’t much better. But then I do know the Constitution and the Bill of Rights, and understand how those things are supposed to work.
June 21st, 2009 at 11:39 pm
I am going to change tack here in the discussion and consider a part of Ramo’s argument here about decentralized systems and their consequences in terms of ideology. The internet itself has met with increased demands for its regulation and yet most of us are aware that it eludes it at every turn. Terrorism, ditto. There is something about chaos theory as well as organic life that refuses to surrender to our structuring nature = as Kenneth Burke wrote – we are goaded by hierarchy and rotten with perfection. But I think that we are in interesting times and we can go to and fro about who is to blame historically and so on, but what I want to know is how are we ever going to change our minds about our need to control….????
June 22nd, 2009 at 11:59 am
Kirsti,
Thank you. Ramo points out that in virtually every area of science, the uncertainty principle crops up. When we mess with natural systems, which we can’t help doing, we get unexpected consequences (global warming, endangered species). His argument is that international politics is somewhat the same way, and that working indirectly to change conditions is often more effective than direct confrontation.
This raises many interesting questions. Working indirectly often means behind the scenes which goes against the growing demands for openness and transparency. Some of the most innovative companies (Apple, Google) are the most secretive. But of course lack of openness can lead to abuse of power. So what to do?
As Jarie says, a lot depends on groups (professions, etc.) willingness and ability to self-regulate. Self-regulation has worked OK for doctors, not so well for financial institutions.
I think one of Ramo’s points and a key to this discussion is that nothing is ever finished and static. The desire for control often assumes that if we just do the right things (universal health care, invade Iraq, regulate greenhouse emissions) we’ll “solve the problem”. But what actually happens is we just create a new set of conditions and problems. This doesn’t mean that we can’t improve things, but they’re never going to be finished.
June 22nd, 2009 at 4:11 pm
The desire for control often assumes that if we just do the right things (universal health care, invade Iraq, regulate greenhouse emissions) we’ll “solve the problem”. But what actually happens is we just create a new set of conditions and problems. This doesn’t mean that we can’t improve things, but they’re never going to be finished.
Or… maybe it means that the Hipocratic Oath should be taken by more than just doctors (who don’t even take it anymore).
We need to admit that BECAUSE WE DON’T KNOW, the best cause of action is often to do nothing. For example, don’t have the surgery (which can have all kinds of complications). I think that people who have elective surgery are crazy.
Global warming is another excellent example. The opportunity cost of “doing something” is not negligible. Lower economic growth, over time, leads to huge downshifts in living standards. Those costs are borne by people in the future, and people in third world countries.
But because it is a downshift in future potential (of Chinese and Indian peasants, mostly), it is not properly weighted in the accounting of costs.
June 22nd, 2009 at 5:50 pm
Kissinger isn’t enthusiastic about the book, having said the book “has one basic theme that is a little difficult for me, which is that my generation is sort of a bunch of dodos.”
I was annoyed by Black Swan at first, but the mass of people need to be nudged repeatedly to start rethinking.
I bought the book on tape.
June 22nd, 2009 at 7:10 pm
Jim,
Great quote from Henry the K. I Googled it and found a critical book review in the NY Times and a gossip piece in the New Yorker. Good context for thinking about Ramo. So, what is a “geostrategic advisory firm” anyway?
http://www.newyorker.com/online/blogs/books/2009/05/last-night-at-the-river.html
http://www.nytimes.com/2009/06/21/books/review/Rosen-t.html?_r=1
June 23rd, 2009 at 7:24 am
“There is a risk that the white paper serves to increase the uncertainty of the business environment.”
Buzzcut,
that is the same type of uncertainty that took place (and helped to prolong) the Great Depression.