Category Archives: Business

Blog, Business, Technology

Tech Companies Must Be Strictly Regulated: They Have Only Themselves to Blame

Originally published November 1, 2017 on The Huffington Post

Tech companies are part of an all-too-familiar pattern. First, resist and decry all reasonable regulations, thereby asserting repeatedly that there are no regulations that are acceptable. Second, engage in and/or allow disreputable behavior (provide a platform for disinformation, hate speech, unscrupulous ads by foreign governments). Third, do everything possible to ensure that a backlash is inevitable resulting in onerous regulations, the very things one adamantly opposed in the first place.

Tech companies have only themselves to blame. By not acting responsibly, by being unable and unwilling to consider how all of their marvelous and wondrous creations would be both abused and misused, and by not engaging in proper steps to mitigate harmful actions and behavior, they have made the need for severe regulations abundantly clear.

In short, they are no better than those industries such as tobacco that have come before them and resisted all reasonable regulations until they were forced on them. But then, what does one expect of an industry run primarily by young socially immature males?

This post is based on a forthcoming book: Out of Control: Combatting Technology Run Amok, Columbia University Press.

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Blog, Business, Crisis Management

Facing Up to Reality: It’s a Mess!

Originally posted June 15th, 2016 on the Huffington Post

In 1979, in a highly critical speech—“The Future of Operational Research Is Past”—that he gave to the Operations Research Society of America, of which he was one of the early founders and past presidents, the late social systems’ theorist Russell L. Ackoff appropriated the word “mess” to stand for a whole system of problems that were so intertwined that one couldn’t take any problem out of the mess and study it independently of all the other problems to which it was connected. In short, to treat problems as if they were independent was not only to distort their “true nature,” and thereby to make their solution impossible, but also to make the mess as a whole unmanageable:

“…Managers are not confronted with problems that are independent of each other, but with dynamic situations that consist of complex systems of changing problems that interact with each other. I call such situations messes. Problems are abstractions extracted from messes by analysis; they are to messes as atoms are to tables and chairs. We experience messes, tables, and chairs; not problems and atoms.

“Because messes are systems of problems, the sum of the optimal solutions to each component problem taken separately is not an optimal solution to the mess. The behavior of a mess depends more on how the solutions to its parts interact than on how they act independently of each other.”

The following chain not only shows what we are up against, but it illustrates the “nature of the New Reality.” Each of the components is not only a mess in itself, but all of them are linked together. As such, they constitute A General Mess. One cannot solve anyone of them without solving all of them in concert. More accurately, one cannot cope with any of them without coping with all of them in concert.

The Sustainability Mess, which cannot be tackled without tackling

The Global Warming/Climate Change Mess, which cannot be tackled without tackling

The Renewable Energy Mess, which cannot be tackled without tackling

The Middle East Mess, which cannot be tackled without tackling

The Terrorism and Weapons of Mass Destruction Messes, which cannot be

tackled without tackling

The Fundamentalism and Corruption Messes, which cannot be tackled without tackling

The Poverty Mess, which cannot be tackled without tackling

The Crime Mess, which cannot be tackled without tackling

The Racism Mess, which cannot be tackled without tackling

The Education Mess, which cannot be tackled without tackling

The Income Distribution Gap Mess, which cannot be tackled without tackling

The Unemployment Mess, which cannot be tackled without tackling

The Global Financial Mess, which cannot be tackled without tackling

The European Union Mess, which cannot be tackled without tackling

The Aging Population Mess, which cannot be tackled without tackling

The Social Security Mess, which cannot be tackled without tackling

The Health Care Mess, which cannot be tackled without tackling

The Washington Political Mess, which cannot tackled without tackling the

The Media (failure of the fourth estate) Mess, which cannot be tackled without tackling

The Capitalism Mess, which cannot be tackled without tackling

The Sustainability Mess.

Thus, the whole cycle of messes repeats itself again and again.

Name one public figure if you can who acknowledges that all of our problems are parts of a mess.

Before one can attack a problem, it’s absolutely necessary to understand its true nature.

(I wish to credit Murat Alpaslan for first formulating the General Mess.)

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Blog, Business, Crisis Management

Wall Street: An Unmitigated Culture of Risk

Originally published on The Huffington Post, May 16, 2012

Co-written by Murat Alpaslan

Earlier this year, we published Swans, Swine, and Swindlers: Coping with the Growing Threat of Mega Crises and Mega Messes. It was an in-depth study of the Great Financial Crisis of 2008. While it was written long before the latest JP Morgan Chase debacle, unfortunately, it anticipated it perfectly. Indeed, it predicted that unless there were momentous changes in the culture of Wall Street, we were in for more of the same.

We are dealing with a perfect storm of (1) complex financial instruments that are beyond the abilities of even the best so-called experts, let alone ordinary mortals, to understand adequately, and (2) an enabling culture of Wall Street that despite all disclaimers to the contrary has little interest and will in understanding and mitigating risk. In short, the financial temptations to engage in risky activities are too great, especially for those with a predisposition towards psychopathology. Apparently, Wall Street tends to attract and nurture psychopaths in greater numbers than are found in the general population.

The complexity of the financial instruments and the lack of proper regulation of the industry are certainly key factors in what caused the latest crisis. Still, it demonstrates once again that until the culture of Wall Street is reformed radically, unscrupulous agents will find ways around the best regulations.

When the Great Financial Crisis started to unfold, Mitroff was fortunate to have repeated conversations with a friend — call him Adam Smith (not his real name, and not necessarily his real gender; in fact, “Adam” is a composite of several people) — who works for a major bank. Adam has uncovered a set of primary assumptions and beliefs that are at the heart of the financial industry. The assumptions and beliefs that he has exposed result from hours of interviews and conversations that Adam has conducted with some of the top Wall Street analysts, managers, and executives. They are also the result of his analyzing countless books, reports, and articles. They derive as well from Adam’s many hours of working among and thus observing at first hand the behavior of the “natives.”

The following set of assumptions and beliefs that Adam observed not only tell us about the dominant culture of Wall Street but they also reveal its dark side as clearly and starkly as anything:

1. We are the Masters of the Universe; we can manipulate anything and anybody to our advantage; we can “game the numbers and the system to serve our needs.”
2. We’re smarter than anyone else; unless you are as smart as us, you can’t possibly understand the complicated financial instruments we’ve invented.
3. We don’t need controls and regulations. We have been selected for our unique skills and talents. As a result, we know what’s best for us.
4. We bet and play with others’ money. It’s a high-risk, high-reward environment. It’s not for everyone.
5. We are entitled to the huge amounts of money we make because of the value of the huge deals that we bring to market.
6. We don’t fail — period! We’re too big and important to fail. Indeed, the world cannot allow us to fail because we are essential to the functioning of the world’s capital markets.
7. Since numbers are the only things that really matter, we can manage risk by reducing it to a mathematical equation.
8. You are only as good as your “last kill” — that is, “big deal.” If you are not producing, then you are not valued.
9. To succeed you have to make difficult decisions. There is no room for bleeding hearts. If, in order to get ahead, you have to fire your best friend, then don’t think twice about doing it.
10. We can’t control the markets. We just pay attention to today and to the transactions immediately in front of us that are within our control.
11. If you’re standing still, then you’re “moving backwards.”
12. We are a culture based on performance. We are constantly grading and weeding out the weak and underperforming.

All of the preceding assumptions and beliefs not only reflect the narrow-mindedness and insularity of Wall Street, but they express a deep sense of entitlement and narcissism, as well as an inability and/or unwillingness to self-regulate. In fact, the assumptions and beliefs constitute a self-sealing and perpetuating system. In many ways, they are nothing but primitive defense mechanisms. They certainly reveal the underlying psychopathology inherent in the system.
Obviously, not everyone in the industry subscribes fully to these beliefs, but according to Adam, the majority not only overlooked and tolerated them to a great degree, but sadly, they still do.

A Culture of Trust

A financial system is basically a trust-based system. No financial system can operate effectively without trust.

Even after the financial crisis, most of us still have to assume that our financial system is trustworthy. For instance, we still trust that “money” is a valid form of payment and assume that others do as well. We trust that the banks will be there tomorrow. We trust that our pension funds, insurance companies, and investment advisers have our best interests in heart. We trust policy makers. We trust the Fed chairman’s monetary policies. In short, trust is the central assumption in any financial system.

With this firmly in mind, let us offer a set of counter assumptions or beliefs that a trust-enhancing financial system would have. Indeed, given recent events, doing everything that we can to ensure such a system is of the highest priority.

1. We are the Moral Masters of the Universe; we never manipulate anything and anybody to our advantage.
2. We have been selected for our unique moral values. Although we can self-regulate, we also want controls and regulations.
3. We never bet with your money. We don’t take unnecessary risks with your money that we wouldn’t take with ours. We know what’s best for you and all of us.
4. We are not entitled to the amounts of money we make unless we bring do so responsibly.
5. We make mistakes! We know we are essential to the functioning of the world’s capital markets. That is why we will not get too big to fail.
6. Moral values matter. We manage risk but never reduce it to a mathematical equation.
7. We are only as moral as our last action. If we are not acting morally, then we ought not to be valued.
8. To succeed we have to make difficult decisions. But there is no room for machismo. We try to make the best decisions, and we never put aside our values and emotions.
9. We can’t control the markets. But we do our best to pay attention to the future.
10. We are a culture based on trust. We are constantly grading and weeding out the untrustworthy.

The main cause of the Great Financial Crisis was not merely financial. It was also cultural. The financial system needs to move from a culture of selfishness and narcissism to a culture of trust.

Obviously, given recent events, we have no illusions whatsoever that moving to a new culture is either easy or forthcoming. For this reason, we have to keep the pressure on.

Given Adam’s penetrating analysis, we can no longer pretend that we do not know the underlying cultural forces at work. We have indeed met the enemy, and “he is us!”

Originally published on The Huffington Post, May 16, 2012

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Blog, Business, Crisis Management

The Age of Super Crises

Originally published in Tikkun, Winter 2011

The notion of healing or repairing the world is more vital than ever. Indeed, with the advent of super crises, it has taken a whole new meaning.

For over twenty-five years, I have researched and consulted on some of the major crises of our time. These include the Tylenol poisonings in 1982, September 11, Katrina, BP’s spill in the Gulf, and the latest toxic sludge in Hungary.

Crises have the potential to destroy entire industries, bring down governments, and adversely affect large regions of the globe. Not only are they bigger, costlier, and deadlier, but they come at us faster and faster. We are engaged worldwide in the wrong kind of contest.

Consider the latest toxic spill in Hungary. To put it in terms that anyone can grasp, it is as though we filled up the entire Empire State Building with some of the worst stuff imaginable, tipped the building completely on its side, and then spilled the full contents on the ground. The resulting mess would have filled an area of approximately seventeen square blocks, or slightly over a half-mile in any direction. The Hungarian spill is estimated to be 264 million gallons, compared to the 190 million gallons that BP spilled in the Gulf. In the long run, it may also be more toxic.

As BP and the latest disaster demonstrate all too well, reacting after a crisis has occurred is not sufficient. If one is not well prepared before, then reacting not only fails to contain the initial crisis but actually makes it worse.

The good news is that there are model companies that not only want to do the right things to protect the environment, but have actually learned what to do in order to substantially lower the chances of producing super crises. In short, they have learned how to be prepared for a wide range of crises. Unfortunately, the bad news is that crisis-prepared companies make up only 15 percent to 20 percent of all companies at best. The remaining 75 percent to 80 percent are thereby crisis-prone. They are mega disasters just waiting to happen.

If crisis-prone companies are unwilling to learn and change on their own, then government has no alternative but to step in, monitor them closely, and require them to behave responsibly.

This will not, of course, please those who are calling for less government. But, government exists to protect its citizens from those dangers from which they cannot protect themselves.

Make no mistake about it. Super crises pose as severe a danger as any we face. The risks are now as dangerous as terrorism. They are certainly as big a threat as global warming.

Originally published in Tikkun, Winter 2011

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Blog, Business, Crisis Management, Media + Politics

Commonwealth Club Lecture on C-SPAN

On February 24, 2010, I gave a talk on my latest book, Dirty Rotten Strategies, at the Commonwealth Club of California.

C-SPAN attended the lecture to record it for broadcast on C-SPAN2’s “Book TV.”Watch the full lecture on the C-SPAN website.

In my talk, I examine how many institutions either solve the wrong problems unintentionally, or worse, intentionally tackle the right problems in the wrong way.

Many thanks to C-SPAN for attending and recording my talk.

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Blog, Business, Media + Politics, Uncategorized

Democrats Need to Talk Turkey and Show Their Colors on Pocketbook Issues

By Bennet Kelley and Ian I. Mitroff
Originally published on Feb. 4, 2010, on The Huffington Post

Some years ago, angered by the fact that Italy refused to extradite a Kurdish rebel responsible for the deaths of hundreds of innocent Turks, the Turkish people threatened to boycott Italian products and even attack the stores of Italian businesses based in Turkey. Some local businesses attempted to dodge the issue by claiming they were not Italians but were merely running Italian businesses, which only angered the Turks even more because it ignored their fury.

In contrast, Italian clothing retailer Benetton won the hearts of the Turkish people, as its Turkish subsidiary quickly ran ads proclaiming that they too were Turks and were just as angry as other Turks. They went even further, adorning the mannequins of the United Colors of Benetton in only black. In short, Benetton seized the moment to spin a narrative of how they sided with the people against a big, impersonal company and an entire country.

For much of the last year, however, the Democrats have played the role of the befuddled business executives. They may soon wish they were in Turkey, however, since they are facing an election in which the unemployment rate may equal the 9.9 percent unemployment rate for Ronald Reagan’s first midterm in 1982 — the highest unemployment rate for a post-World War II midterm. In addition, as the Massachusetts special election plainly demonstrated, voters are angry and frustrated with Washington. The Massachusetts result was a wake-up call to Democrats to follow Benetton’s example and demonstrate that they stand with the people or else incur their wrath.

Democrats need to make it abundantly clear that they hear the cries of PTA parents of Main Street and not the AIG barons of Wall Street. More importantly, they must become a voice for them by taking on and fighting the Goliaths who got us into this mess.

President Reagan faced an even worse economy in 1982, but he used his State of the Union address to explain to voters that he heard their cries and positioned himself as a Washington outsider who had “an economic program in place completely different from the artificial quick-fixes of the past.” This demonstration of vision and leadership mitigated his midterm losses, since he retained voter’s confidence as a leader even while his job approval slid throughout the year as unemployment increased.

Last week, President Obama matched Reagan’s performance by owning the people’s pain. Yes,

the recession has… compounded the burdens that America’s families have been dealing with for decade… but these struggles are the reason I ran for president.

He let the people know whose side he was on through his litany of job creation, tax cuts and financial reform proposals. More importantly, with closing exclamations that “[w]e don’t’ quit” and “I don’t quit,” he gave the people hope by expressing a resolve to see this fight through to the end.

One speech, however, will not carry the Democrats through to November. The success of Obama’s speech highlighted the Democrats prior failure to communicate these same points. Instead, too often Democrats have allowed the GOP to frame the debate and develop the narrative of Obama’s first year that percolates through talk radio, blogs and the mainstream media.

The jobs bill, financial reform and health care each give the Democrats a “Benetton moment” to recast the narrative to reflect reality. The Republicans’ opposition to use of TARP money for a jobs bill and the creation of a Financial Consumer Protection Agency provide a clear opportunity to demonstrate who is fighting for Main Street.

Democrats also need to spin the Republican attacks on health care on its head. This is not about big government but big profits and our future competitiveness. For working Americans tired of working longer and harder and still falling behind, the Republican’s “do nothing” approach give us all the pain but not the relief. By the end of the decade, working Americans will pay twice what they are paying now for less coverage; one in six Americans will be uninsured and we will continue to lose jobs as American businesses suffer from the weight of health premiums.

Finally, the Benetton mannequins speak loudly on the power of symbolism in reframing the debate. For example, Obama’s Cabinet Secretaries and party leaders could spend one day each month in the field working side by side with everyday Americans, not just as a photo op but to listen and communicate the progress being made.

President Kennedy once said, “We should not let our fears hold us back from pursuing our hopes.” That is the challenge of this election. An ominous storm is looming, but if Democrats can reframe the debate they can harness this storm of frustration and discontent into a tidal wave for change.

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Blog, Business, Crisis Management, Media + Politics, Uncategorized

Interviews, Reviews, and More of “Dirty Rotten Strategies”

I’m thrilled that my recent book co-authored with Abraham Silvers, Dirty Rotten Strategies: How We Trick Ourselves and Others into Solving the Wrong Problems Precisely, has received positive attention and feedback.

Here is a recent radio interview I did with Mike Papantonio on Ring of Fire Radio, a nationally syndicated radio show which airs on the AirAmerica radio network. The subject of our interview was “Fixing the Wrong Healthcare Problems.”

I enjoyed this thorough and incisive review of our book by Dan Bednarz on his blog, Health After Oil: The Impact of Energy Decline on Public Health & Medicine.

I was also thrilled to see this recent review of the book on Blog Business World. The thoughtful review of our “insightful and well reasoned book” summarizes the critical importance of properly defining the right problems, and clearly summarizes what we call Type 3 and Type 4 errors.

And finally, be sure to read the recent author interviews I did with the New Jersey Star-Ledger and Blog Business World.

Have you read the book? Please tell me what you think by posting your comments and feedback here.

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Blog, Business, Crisis Management, Media + Politics

Dirty Rotten Strategies: How We Trick Ourselves and Others into Solving the Wrong Problems Precisely

Dirty Rotten Strategies

People and organizations are perfectly capable of making the most outrageous missteps. But, how does a person, organization, or society know that it is committing an error? And, how can we tell that when others are steering us down wrong paths? Far too many institutions have enormous incentives to let us devise elaborate solutions to the wrong problems. As Thomas Pynchon said,” If they can get you asking the wrong questions, then they don’t have to worry about the answers.”

My latest book,  forthcoming in October 2009, Dirty Rotten Strategies: How We Trick Ourselves and Others into Solving the Wrong Problems Precisely, delves into how organizations and interest groups lure us into solving the “wrong problems” with intricate, but inaccurate, solutions. My co-author Abraham Silvers and I argue that we can never be sure if we have set our sights on the wrong problem, but there are definite signals that can alert us to this possibility.

While explaining how to detect and avoid dirty rotten strategies, we put the media, healthcare, national security, academia, and organized religion under the microscope and examine the failure of these major institutions to accurately define our most pressing problems. For example, the U.S. healthcare industry strives to be the most technologically advanced in the world, but, our cutting-edge system does not ensure top-quality care to the largest number of people.

Dirty Rotten Strategies is a bipartisan call for anyone who is ready to think outside the box to address our major concerns as a society—starting today. More information, including reviews and the table of contents, are available through Stanford University Press.

Ian and co-author Abraham Silvers have spoken about the tenets in Dirty Rotten Strategies before audiences at Sun Microsystems and other corporations. Contact Ian about speaking at your organization.

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Blog, Business, Crisis Management, Philosophy + Systems

Managing the Mess

By Emery Roe and Ian Mitroff

An odd aspect about the financial mess is how little discussion has been given to managing it, and the economic crisis with it, as messes.

In all the finger-pointing, one party has escaped with less attention than deserved – business schools. It is opportune to ask what schools would be teaching if they took mess management seriously.

First, they would be teaching systems thinking, not the mathematical modelling that passes for it today. Mess management requires people who know the interconnections among diverse systems of households, finance, the economy, politics and society. It requires people that tolerate and can map out complexity. Too many business faculties do not do this, consequently adding to the mess instead of helping to manage it.

Second, inter-systems experts are not in business schools. Mark Lombardi, a conceptual artist, showed how important Osama bin Laden was to politics and finance. He placed bin Laden in an earlier financial and political crisis – he did it in 1979!

Our argument is that works such as Caryl Churchill’s play, Serious Money, about the events leading to the 1987 stock market crash, must be part of systems thinking about the events of 2008-09. Unless we make these connections, we manage the wrong problem. By ignoring the “messiness” of complex systems, many in business schools are guilty of solving wrong problems precisely.

Third, we need to show students how connecting the dots in the financial crisis changes the dots. The crisis has been described as a hurricane breaching the levees of banking and financial institutions. This confuses the hurricane with the limitations of the levees.

Levees can be overwhelmed to the extent that independent flood protection systems become tightly coupled systems spreading the disaster further. Unless we mitigate climate change, we cannot lessen future hurricanes, but we can design and manage better levees. In crisis and reliability management, we can and should design systems that work even when independent risks turn out to be inter-dependent and when rescues create their own messes. This requires better damage containment systems before the arrival of the next crisis and better management of setbacks during the crisis.

Fourth, good mess managers are not just the Paulsons, Trichets and Bernankes, they are also the professionals in IT units, engineering divisions and business continuity operations. Governments promoting infrastructure development as an economic stimulus need to understand and capitalise on their management skills in recognising system patterns and formulating local scenarios.

Financial and economic services cannot be reliable without equally reliable telecommunications and electricity. Those who provide these services constantly work on the edge, around the messes created by ill-informed policies and poor technology design. These managers keep our interconnected critical infrastructures running and prevent accidents which would add billions more to the financial and economic crises. Society’s most under-utilised resource remains the skills of professionals who keep our infrastructures reliable.

Business schools would do well to learn a lesson from the September 11 attacks; air traffic controllers achieved the unprecedented in landing all 4,500 commercial and general aviation aircraft in the US safely. Success meant managing all the messes in between.

This is what we expect from business faculties – guidance in landing the economy and finance safely. They could do more if they understood better what experienced mess managers are doing to land the assets set into flight by business schools.

Emery Roe (along with Paul R. Schulman) is the author of High Reliability Management: Operating On the Edge, Stanford University Press and a member of the Collaborative for Catastrophic Risk Management, UC Berkeley.

Originally published on February 2, 2009, on FT.com. Republished with permission.
Copyright The Financial Times Limited 2009

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