A Risk Management
class of bright, perceptive MBA students devoted their meeting this weekend to
Olympic sports – scrutinizing the death on February 12 of Georgian luger Nodar
Kumaritashvili, who lost control on the last curve of the world’s fastest track
at the Whistler Sliding Centre and crashed into a steel pillar.
The students’ usual
focus is on the manifold failures in risk identification, appreciation and
evaluation over the last three years. They look to specify and learn from such
displays of bias, error and miscomprehension as Jimmy Cayne’s loss of control
of the real estate funds of Bear Stearns, the confession by Ramalinga Raju of a
multi-billion dollar fiction in the accounts of Satyam Computer Services, and
Akio Toyoda’s tone-deaf bungling of the world’s largest vehicle recalls.
What they found was
a set of questions with compelling resonance for the financial crisis:
- ·
Was a
fatal crash the result of an overly aggressive and under-trained youngster,
turned loose in a competitive environment beyond his skills and capabilities?
- ·
Or did
the designers who pushed the limits of knowledge and technology compromise the
need for safety to the desire for high-speed achievement, failing to recognize
that traditional measures of safety were outmoded and insufficient?
But like any other advanced
and sophisticated device designed and operated by humans – whether a space
shuttle or a nuclear reactor or this decade’s leading-edge array of exotic
financial instruments -- a luge track is subject to the non-zero possibility of
catastrophic error.
Even the engineers
of the most prosaic highways, who strive to improve both safety and overall
speed, are mindful of speeders who will test their design limits. Where
pressing the outside limits of speed and safety is the very goal of the
participants – recall the Olympic motto: “Citius,
Altius, Fortius” – it is hollow and unresponsive to the point of
irresponsibility to claim that the track is "relatively safe" (here).
As elsewhere,
average performers disappear into the obscurity of the crowd. Outliers achieve
prominence in two ways, both beyond the boundaries of ordinary expectations:
At the Games, one
athlete wears a gold medal and salutes his national anthem from the victor’s
podium. But at the opposite tail of the performance curve, the one who crashes
earns only a memorial wreath and a home-town funeral.
In the marketplace,
where the gold-medal outlier may be Warren Buffett, the opposite tail is
populated by the likes of Dick Fuld of Lehman, Fannie Mae’s Franklin Raines and
Countrywide’s Angelo Mozillo.
There is one huge
difference between the “failure study” of the Whistler designers – who promptly
lowered the luge start, re-shaped the fatal curve and padded the unfortunately-located
steel pole – and the finger-pointing scapegoaters of Washington and London and
Brussels.
Namely, every
failure in the engineering field is an opportunity for learning – even if
belated. Thanks to the iceberg, the Titanic’s design was no long the model for
generations of at-risk ocean liners. Nor, after 9/11, would high-rise towers
ever copy the World Trade Center.
But in the
politically-motivated bickering over the allocation of blame for the financial
markets’ debacle, by contrast, there is not even a civil forum in which to ask
the pertinent questions – much less make progress on a search for answers.
Which, as I remind
my Risk Management students, invokes the observation on learning of the 5th
century BC playwright Aristophanes:
Youth matures
Immaturity
is outgrown
Ignorance
is curable by education
Only
stupidity is forever
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I love Aristophanes. I also like this one by Euripides. “There is something in the pang of change More than the heart can bear, Unhappiness remembering happiness.”
Posted by: Francine McKenna | February 21, 2010 at 06:49 PM
An excellent and thought-provoking metaphor; thanks Jim
Posted by: Charles H. Green | February 21, 2010 at 10:01 PM