John Kay - Beware of Franklin’s Gambit in making decisions

Beware of Franklin’s Gambit in making decisions

Benjamin Franklin, a leading figure of the 18th-century enlightenment, advocated a rational approach to decision- making. In a letter to the English chemist Joseph Priestley, Franklin claimed to have found “great advantage” in a process he described as moral or prudential algebra: set out pros and cons, attach weights to each consideration and arrive at a balanced judgment taking all relevant factors into account.

Yet Franklin knew very well that this was not how real people, including himself, behaved. Franklin was an occasional vegetarian, having balanced the moral, nutritional and practical arguments. But confronted with the delicious smell of freshly grilled fish, he observed that the fish themselves disregarded his precepts by eating other fish and so deserved to be eaten. “How convenient it is,” he said, “to be a reasonable creature, since it enables one to make or find a reason for whatever one has a mind to do.”

I came to realise the prevalence of Franklin’s tactic when engaged commercially in the development of economic models for business. Why, I asked myself, did we not use these models ourselves? The explanation was that the models were not useful in running our business, or theirs. Their value was in enabling managers to justify to boards, investors, or some government agency decisions that had already been made on other grounds.

I came to think of this process as Franklin’s Gambit – the process of making or finding a reason for what one already has a mind to do. Franklin’s Gambit was implicated in the two most serious policy disasters of the past decade; the Iraq war and the financial crisis of 2007-08. The ways in which evidence was selected and massaged in both Britain and the US to provide support for the attack on Iraq are now well known. Policy makers such as Alan Greenspan and Tim Geithner, as well as international organisations such as the IMF, used Franklin’s Gambit to explain the value of the proliferation of complex financial instruments. They claimed that such innovation represented the more sophisticated management and dispersion of underlying risks.

In reality, it was a source of spectacular instability. Analysis was a fig leaf for ideology and elaborate distortions of reality were used to justify predetermined conclusions. In both cases, a bogus rationality concealed rather than illuminated the reality of public and private decision-making.

When we make hiring decisions, or construct risk maps, or undertake investment appraisals we complete templates, the purpose of which is not to help us manage or decide but to rationalise what we already believe we know. At best, these exercises are irrelevant: at worst, our judgments are concealed or distorted by the need to justify them in terms of these formal processes. The – necessary – proliferation of external mechanisms of accountability is associated with an – unnecessary – proliferation of formalised procedures. Assessments are based, not on whether the decisions made are any good, but on whether they were made in accordance with what is deemed to be an appropriate process. We assume, not only that good procedure will give rise to good outcome, but also that the ability to articulate the procedure is the key to good outcomes.

To see how stultifying such behaviour can be, imagine the application of this emphasis on process over outcome in fields other than politics or business. Suppose we were to insist that Wayne Rooney explain his movements on the field; ask Mozart to justify his choice of key, or Van Gogh to explain his selection of colours. We would end up with very articulate footballers, composers and painters, and very bad football, music and art. Perhaps business and politics are no different and we should rate leaders and officers for their good scoring ability.

Instead, we claim to believe that there is an objective method by which all right thinking people would, with sufficient diligence and intelligence, arrive at a good answer to any complex problem. But there is no such method. A perhaps apocryphal story tells of the professor of decision sciences contemplating a job offer from another university and discussing his conflicting emotions with his wife. “Surely, dear,” she says, “you of all people should be able to make this decision wisely?” “Don’t be silly,” he responds. “This matter is serious.”

 

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