Saturday, August 12, 2017

Deadly cocktail

The value of waiting to make an irreversible decision is intuitively clear to most thinking humans but it is likely too much to ask of politicians, even those who are not politically astute. Business and finance schools have been graduating stars who descend on Wall Street, consulting firms and corporate board rooms with a tool box that is mostly useless in aiding decisions. The same are now advising those with little understanding of the impact of their utterings and decisions and it is a cocktail of ignorance, arrogance, and shortsightedness that puts humanity at great risk.

It has been predictable for a while. Part of the blame has to go to educational institutions who have been clinging to age old ideas of economic value and optimality in decisions. The concepts were developed for companies thriving in a regime of manufacturing and the reluctance to let go of old ideas have costed both the academics and their disciples dearly. And to make matters worse, the ones in power seem to think that they are in the know just because they got branded. It is not so, just the opposite. In corporate finance, for example, unless one can publish within established notions of value and risk, it is tough going. And the crop of the young academics, trained in empiricism, have been toiling with their spreadsheets to prove what they know are incorrect theories. So, it is not innovation that matters but the ability to perpetuate the status-quo. Most do not seem to understand that we do not make widgets anymore and the ideas applicable there are not relevant for an environment driven by uncertainty and flexibility.

There has to be a basic test of competence before anybody can take a decision-making position, companies and countries included. The same has to be true in academics also and the fact that the "peers," accepted established notions proposed by those who are rising is not an automatic reason for tenure. It is a shame that politics and academics share many common features.