When did logic become a four-letter word?

Posted by Carmine Coyote under Best of Slow , Corporate culture , Slow Leadership

Facing up — logically — to the start of another year

Do you ever ask yourself unanswerable questions, such as: “Why do so many people talk so much about change and do so little different in their lives?” or “What makes companies and managers believe that the same ways of operating that got them into some mess are going to get them out again?”

I do, although I also know there isn’t an answer — other than to sigh at mankind’s invincible ability to screw things up (yet we claim to be the most intelligent creatures on this planet!) — but I have to hope that facing up to the question is at least better then pretending things are alright as they are and going to the Mall, which is what we are generally encouraged to do today.

Once or twice over the holiday period, I have been tempted to tackle this unanswerable question: “How did it happen that so many highly-educated and massively over-paid people on Wall Street and elsewhere managed to get caught out putting their money into investments that have been proved to be based on unquantifiable — in fact, largely unintelligible — amounts of risk? Why were so many supposed experts caught doing something outlawed in Risk Management 101?”

Giving up on logical thought

We all know that human beings, as a species, are remarkably poor at making rational decisions. We may claim to be thinking animals, but nearly all our decisions are made on an emotional basis and justified afterwards. We do what feels good and use our powers of thought to dress up the choice in an acceptably rational outfit later.

Yet these executives and professional investment managers are paid to think. They’re employed precisely because it’s supposed (falsely, as it turns out) that they can make rational choices and act according to the facts, where you or I would cross our fingers and hope, or pick out an investment with a pin.

Then, if times turn tough, these same people are expected to remain calm and rational, not act like any Tom, Dick, or Harriet, and run for safety, screaming “sell!” as loudly as they can.

In fact, they’ve been no more rational or logical in their actions than the most ignorant, amateur investor. They’ve bought investments without understanding them, or the risks they posed, and followed every passing whim of fashion. They’ve been as discriminating in what they gobbled up as a starving sewer rat; as willing to follow an independent path as a frightened lemming.

What’s going on?

I said at the start that the subject of this post is an unanswerable question. That’s not because there is no reason; more that there are so many linked causes and sub-causes that it’s impossible to sort them all out.

But I think there is one thread that unites many of the issues involved: the notion, prevalent for some years now, that being emotional is warm, attractive, and ultimately “good,” while being objective and logical denotes some inner deficiency of feeling. You see it in schools, where social skills are often prized above knowledge or critical thought. You see it in journalism, where “human interest” takes the place of news or analysis. You see it in the cloying sentimentality beloved of so many advertisers.

There are, of course, situations that do call for emotions; no one feels comfortable around someone who remains cold and withdrawn all the time; nor with those who use their imagined intellectual superiority to put others down. But there are many, many situations that demand rigorous logic and the courage to look reality in the face, even if what you see is horribly ugly. Investing is one of those, as are the large majority of actions involved in running a business.

You would hope that top corporate leaders have the sense to see when objective logic is needed, and when empathy is required instead. Yet what we have today are leaders who neither empathize with their employees struggling to earn a living — what does someone who earns millions every year know or care about the problems of paying the mortgage, or finding affordable healthcare? — nor show the ability to act logically in calculating risks and stay away from investments so exotic that nobody — including their own subordinates — has any clear notion of what those risks really are.

It used to be said (often by those same, smug “professionals”) that ordinary people always lose money because they are blinded by greed when things are going well, and driven only by fear as soon as the market turns down. If that’s so, it’s hard to see any difference between these over-paid professionals and anyone else in the present situation.

Learning our lessons

If executives do not act differently from the ordinary person; if they do not stay objective in good times or bad, and make choices based on logic. facts and fiduciary obligations, rather than personal greed and emotional whims, what basis is there for paying them large salaries? If leaders fail to lead, because they are themselves being led along by fashion and the wish to keep up with the Boardroom Joneses, what credibility should they retain?

The lessons we should take from the sub-prime debacle are human, not financial. The idea of the infallibility of free-market policies has been shown to be simply another ideological myth — along with the myth that attending to quarterly results will ensure long-term viability. Logic dictates that long-term success requires long-term thinking. Reason shows that taking on unquantifible risks is equivalent to making a blind guess. Justice demands that those who fail to earn the rewards they claim by right of superior understanding should forfeit them.

Logic and reason can be as beautiful and delicate in their use as the most refined emotions. Humans crave the joy of solving puzzles and following quests to their ultimate fulfillment. If they did not, there would be no long shelves of mystery books and fantasy novels in every bookstore and Hollywood would be out of business. It is as natural to take pleasure in using your mind to reach a logical conclusion as it is to use your emotions to feel love, joy, or happiness.

Thinking and logic cannot save you from every kind of mistake — nothing can do that — but they surely beat following each emotional whim, running with the crowd, and hoping for the best. Let’s stop deifying emotion, as if all emotion were created equal. Love is an emotion, but so is hate; altruism is an emotion, but so are self-centeredness and greed.

Logic may lack obvious warmth, but it also lacks much of the power emotions have to let us imagine doing whatever we want is also doing what is right.

http://www.slowleadership.org/blog/?p=348