ba-an664_qa_p_ns_20081010183835.jpgBack in 2006, money manager Jeremy Grantham was one of the first to sound the alarm that world credit markets were about to implode.  Of course, he was right. And of course, nobody listened.

But this time around, people are paying attention to an interview Grantham gave to Barron’s last week.  He has several interesting insights, but the most intriguing is his explanation for why we got into the mess in the first place (empahsese added):

 “I ask myself, ‘Why is it that several dozen people saw this crisis coming for years?’ I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even [U.S. Treasury Secretary] Hank Paulson and [Fed Chairman Ben] Bernanke — none of them seemed to see it coming.

I have a theory that people who find themselves running major-league companies are real organization-management types who focus on what they are doing this quarter or this annual budget. They are somewhat impatient, and focused on the present. Seeing these things requires more people with a historical perspective who are more thoughtful and more right-brained — but we end up with an army of left-brained immediate doers.

So it’s more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four-dozen-odd characters screaming about it are always going to be ignored. . . .

So we kept putting organization people — people who can influence and persuade and cajole — into top jobs that once-in-a-blue-moon take great creativity and historical insight. But they don’t have those skills.”

8 Responses to “Too many left-brain organization men spoil the pot”

  1. Well no doubt you are now bound for a Cabinet appointment. LOL.

  2. Dan Pink Dan Pink says:

    @ jeffrey — LOL indeed. My appointment to any cabinet post is a sure sign that you should short every stock in the S&P 500 and take all your cash and bury in your backyard.

    @ Dimitry — A bias for action is good. But action for action’s sake can produce an array of unintended consequences.

  3. You hit the credit crisis nail on the head! I saw the train coming several years ago when lenders were strong-arming appraisers to justify mortgages of 125% of a home’s true value and approving buyers with credit scores in the 500’s. The train was coming and those of us on the tracks could see it but nobody in Washington could. Today, they are attempting to remedy the crisis by manipulating interest rates just like they’ve done for decades. They do not recognize the true source of the problem and continue to treat the symptoms instead of the disease. While (unfortunately) the 700 billion bailout appears to be a necessary evil it addresses only part of the problem — those homes which are in the foreclosure process now. It does not stop the flow of foreclosures coming down the river toward the brink of foreclosure. In order to reduce the number of near-future foreclosures, we need to reduce the interest rates on existing loans in order to provide homeowners a better chance to keep their homes. While this approach has been recommended by people like Dave Ramsey, nobody in Washington seems to be paying attention. It is a creative, new approach, but I fear it lacks the support of our legislators because the banks who made bad loans would be held accountable in real money and our lawmakers recieve too much funding from them to ever rock the boat.

  4. C. A. Hurst says:

    I think I would call this “The power of ‘Duh.'”; not on the part of Mr. Grantham, but on the part of all those in the business and finance communities who stubbornly refuse to listen to people who actually exhibit both business acumen and common sense.

  5. P. Farris says:

    The detailed oriented people may work their way up the corporate ladder and eventually become execs, but those who are capable of seeing the big picture are the ones who are more likely to outlast them in the long run.

  6. printjunky says:

    Combining widely varied elements in atypical fashion–that’s the kind of problem solving missing in the current debacle. Pre-Barack.

  7. Alan Furth says:

    Wall Street’s left-brained ways are the reason why so many financial economists and traders mechanically apply mathematical tools that cannot capture the complexity of market dynamics, and disregard history and fuzzy qualitative sources of information as “not scientific”.

    For example, Felix Salmon recently argued in a brilliant article that overconfidence in one single mathematical formula was the cause of the CDO meltdown.

    I analyze this and other ideas using “A Whole New Mind” approach in a recent blog post:

    http://alanfurth.com/a-whole-new-mind-for-finance

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