John Kay

The elevation of credibility into a central economic doctrine has turned a sensible point – that policy stability is good for both business and households – into a dogma that endangers stability.

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.

Although it is essential that they do, policymakers and business people have difficulty thinking in terms of systems. The common sense of everyday observation has an appeal that analytic, evidential reasoning can never match.

In conditions of ignorance, people seize on any information available, even if their reason should tell them that it is irrelevant. Just watch the occupants of the airport lounge fiddling with their BlackBerrys.

Modern titans derive their authority and influence from their position in a hierarchy, not their ownership of capital.

Thirty years before Havel, George Orwell identified the corrupting influence of discourse based on the repetition of pre-packaged phrases. A corrupting influence not just on language but on society itself.

A semantic confusion leads us to use the word market to describe both the process which puts food on our table and the activity of gambling in credit default swaps. That confusion has enabled people to claim the virtues of the former for the latter.

Rational expectations fail for the same reason communism failed – the arrogance and ignorance of the monopolist.

Always ask of data “what is the question to which this number is the answer?”. “Earnings before interest, tax, depreciation and amortisation on a like-for-like basis before allowance for exceptional restructuring costs” is the answer to the question “what is the highest profit number we can present without attracting flat disbelief?”.

Probabilistic thinking requires us to recognise both that something might happen and that it is unlikely that it will. Because this is difficult, we are always surprised, shocked, and inadequately prepared for extreme events.