There is an important moment in most people’s adult lives. It’s the moment when they stop thinking they are soon going to and enter the pantheon of “fully responsible adults” and acknowledge that there is no such thing. It’s the gained knowledge that we live in a sloppy, messy and fallable world.
For me, this moment occurred around the time when I turned 25. I was working for the most successful software company the world had ever known at the time (Microsoft, circa 1996), and finally realized that everyone…the engineers, the designers, the marketers, the researchers, the managers, the sales people, the visionaries, were just making it up as they went along. I do not mean this to be a criticism of those people - quite the opposite; the person who realizes that they are a gifted but inperfect amateur is a humble and very useful person to have making critical decisions. It is when these curious and gifted amateurs get replaced by people completely certain of their own abilities that things start going south.
The people to be deathly afraid of are the self professed “professionals.” These serious people of certainty are dangerous specifically because they do not realize they are amateurs making their way in uncharted waters. Think of the captain of the Titanic here – “iceberg!”, or perhaps Colonel Custor confidently leaving behind his heavy guns because they would just slow him down. Living in England in 2003, I often heard a wonderful phrase to describe this kind of person “acting often in error, but never in doubt.” This seems to pretty well describe almost every member of the US Congress – right wing, left wing, male or female, irrespective skin color or sexual orientation, the common trait seems to be a “foolish certainty” as each one fights to wrest control of the ship’s wheel and lurch the boat in the direction they are certain points toward safe harbor or calmer seas. These people behave like the Sorcerer’s Apprentice (http://en.wikipedia.org/wiki/The_Sorcerer%27s_Apprentice) going from crises to crises, creating ever more magic brooms with buckets to try to clean up their mess, when what is needed is clear thinking humble pragmatism.
Take today’s uproar over AIG’s ridiculous bonus payments. This is serious business and no doubt something should be done, but the original seeds of the problem were created when Congress, the US Treasury and the Executive branch acted in a series of expedient operations to ladle enormous sums of money into this faltering enterprise without bringing the company into an orderly bankruptcy reorganization. Having become 80% owners of AIG without the legal protection of bankruptcy to reorganize their obligations, they have become the legal guarantors of its contracts. These include those contracts guaranteeing fully undeserved bonuses, some to its most culpable employees. This was an act of arrogance, of “foolish certainty” by the US government, assuming that it could take a shortcut to prop up a lynchpin of the economy without suffering the inevitable consequences. But much like Mickey Mouse wearing the wizard’s hat and conjuring up a magic broom to circumvent the necessary clean-up work, unintended consequences inevitably occurred. This is equally true for Fannie Mae and Freddie Mac -- the list goes on; hopefully we will not add the US Automakers or other industries to this list of open ended taxpayer obligations...we are not that rich and cannot raise this much debt without sinking our own ship.
A far more humble approach, acknowledging both the immediate need to “do something” to stave off a crises, but accommodating the fact that that immediate action is always imperfect, would be to take the organization in question into a speedy bankruptcy, and then salvage (sell off) the viable parts and meet the necessary counter-party obligations. Instead, full of hubris, the government flooded money in, and now scrambles to take money back from those who reaped contractual (but fully undeserved) bonuses. The US has well formed bankruptcy laws that are intended to address just these kinds of concerns yet these were disregarded by the self-acknowledged professionals in Congress and the Treasury. This kind of expertise we can do without.
It is tempting to lay all the blame on “those greedy people in finance who brought our economy to its knees” – even more so, because much of this blame is in fact deserved – they were greedy, reckless and arrogant. However tempting or satisfying, this approach is not useful. It is not useful because we have real work to do here; the finance industry needs to be recapitalized and reshaped, as does the auto industry, as do millions of people’s personal finances. For this, intelligent and humble use bankruptcy laws are the best way to achieve the necessary ends. There is no better way to separate the wheat from the chaff in these areas, to salvage what real value exists, and dispose of obligations in an orderly way. Most importantly, no other way allows for both addressing the time-critical need to “stop the bleeding” while acknowledging that other issues (like “what bonuses shall be paid?”, or “what unfunded pension obligations met?”) will need be sorted out deliberately over time.
It’s time to stop acting like the Sorcerer’s Apprentice, madly chopping at broomsticks, and start acting with the intelligent humility that acknowledges that we are all, and Congress foremost, amateurs making their way through uncharted waters.
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