Maintaining Optimism in the Face of Reality. Occasional observations on the state of the world, society, business and politics. Usually anchored by facts, always augmented by opinion.

Interesting Reading  | e-mail post

I was doing some reading on my flight to and from Chicago this weekend. A couple of passages from the text I found interesting as a high level public official in the White House ruminates on the challenges he and the President faced supporting an unpopular, but necessary, action on the world stage.
To me, the attacks were an illustration of how harsh and ugly the political process had become. Critics weren't content to disagree with our policies; they impugned my motives and asserted hidden conflicts. At that point, I was still somewhat surprised that opponents would make ad hominem attacks as a way of dealing with policy disagreements. As time went on, I came to recognize that, to some extent at least, Washington unfortunately functions this way....

The administration was committed to a plan of action and had to stick with it even if the chance of failure had increased. The cost to the administration of reversing course - in terms of lost credibility - would be enormous. ... There is a strong impetus to stick with presidential decisions, even when circumstances change, because the world is watching to see if you keep your commitments. Credibility and reliability are powerful values. Thus, changing direction may sometimes be worse than proceeding with something that could be wrong....

[It] also demonstrated the difficulties our political processes have in dealing effectively with issues that involve technical complexities, shorter-term cost to acheive longer-term gain, incomplete information and uncertain outcomes, opportunities for political advantage, and inadequate public understanding. Unfortunately, many of the most important economic, geopolitical, and environmental challenges of today's complicated world fit this profile, raising the question of how effectively our political system will be able to deal with them....

Our program could only have been undertaken by a President - and an administration - willing to take a major calculated risk, substantive and political. We could have failed because of a mistake in our analysis, but also because of unforseeable circumstances, or simply the forseeable risk actually occurring. If the odds are calculated accurately at three to one, you'll lose one time in four. Unfortunately, Washington - the political process and the media - judges decisions based solely on outcomes, not on the quality of the decision-making, and makes little allowance of the inevitability of some human error. This can easily lead to undue risk aversion on the part of public officials....

But even our closest allies are ambivalent about the role of the United States. We are criticized if we don't lead and resented if we do.
Now, some of you may have read this and wondered if I was reviewing an early manuscript of memoirs Dick Cheney has been preparing in what little free time he may have. While that would be engrossing reading indeed, no such luck for either you or me; these are not tales of the Bush administration's moves in Iraq or attacks suffered by Cheney related to his former connection to Halliburton.

In fact, these all come from the first chapter of Robert Rubin's book "In an Uncertain World" [hardbound] [softcover]. In the first chapter, from which the above quotations are drawn, Rubin, Clinton's Secretary of the Treasury for the better part of Clinton's tenure, was discussing his move within his first days as Treasury Secretary to stabilize the Mexican economy, ultimately acting in complete defiance of Congress to provide loan guarantees to the Mexican government through the Exchange Stabilization Fund. That decision was a smart decision at the time it was made, and was also vindicated by the passage of time, even though it took many months for the intended benefits to be realized. And that was just for something as straightforward as supporting a relatively (by U.S. standards) small economy.

It is an excellent book thus far, and I imagine I will finish it in fairly short order. Rubin is an incredibly intelligent man; his success at Goldman Sachs and an illustrious tenure at Treasury are both testament to that. In the book, Rubin provides a good education and thoughtful commentary both about the mechanics of national and global macroeconomic policy from a person who has dealt with it in both the public and private sectors. He also provides good food for thought about the fact that all meaningful choices are made in the context of risk, and that risk aversion is not a rational approach to decision-making.

The book offers an education to people on both sides of the political spectrum, for citizens and for businesspeople. I cannot recommend it strongly enough. Also, if you are interested in this idea in the corporate context, I also heartily recommend The Timid Corporation: Why Business Is Terrified of Taking Risk.

e-mail post | Link Cosmos | [Permalink]  |  | Sunday, October 24, 2004
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