Tuesday, December 20, 2011

Play-by-play, ‘groupthink’ and myopia

“My father told me not to believe in authorities or celebrities – that society tends to imagine them as superhuman. It's good advice. People are snowed by celebrities all the time. In academia people have this idea of achieving stardom – publishing the best journals, being at the best university, writing on the hot topic everyone else is writing about. But that's what my father told me not to do. He taught me that you have to pursue things that sound right to you. In 2004, when I wrote the second edition of my book Irrational Exuberance, I said in the preface I was worried that the boom in home prices might collapse, bring on bankruptcy in both households and businesses, and lead to a world recession. I remember thinking that this sounds kind of flaky – nobody else is saying this, I can't prove it, this could be embarrassing. But I had learned from my father not to care what other people think. This was my book, and I believed this, so I just said it.”

That’s from the 12th Dec. issue of Fortune magazine, “The best advice I ever got,” from Robert Shiller, Yale University economist. And it seems just yesterday when Shiller was on TV discussing his book, and like most US residents (half of whom are invested in the stock market) the writer and wife were glued to the financial channel, enjoying the play-by-play (of the stock market) from their favorite anchors, effectively dismissing Shiller. And so it’s not surprising that Filipinos are critical of Americans for their short-term orientation. But aren’t we falling into the same trap; and beyond the focus on the play-by-play is the manifestation of groupthink if not myopia?

We have all become economists dissecting GDP numbers by the fraction and by the quarter? The Aquino administration (and even Obama) went through a learning curve, and still struggles to get the PPP initiative going. And if reports are accurate, they found a government that ‘sucks’ – corruption was a way of life! Did Mar Roxas find it too? The DOTC is notorious for big time corruption as the World Bank complained about?

In fairness, doing a play-by-play is important, except that in the case of our economy much of the hurdles we face go deeper. And in the private sector, a similar challenge would call for restructuring! Is Juan de la Cruz predisposed to restructuring? For example, even a 7% growth in GDP unless sustained over a generation+ does not mean economic liberation for Juan de la Cruz – which we conveniently forget! And we’re hyperventilating over one quarter or one year? (And instinctively we don’t ‘start with the end in view,’ which also explains why despite their artistry, Europe is behind the US in product idea commercialization.) We are dealing with a dilapidated structure that must be razed to the ground? Half a century of failure to build the requisite foundation – e.g., power, basic infrastructure, strategic industries – is akin to building a house upon the sand? But human nature takes the easier path, confirmed by the work (intuitive heuristics) of Nobel laureate Daniel Kahneman.

And given our soft culture, how many Filipinos would accept the advice Robert Shiller got from his father? And while we now appreciate the imperative of investment, we have yet to overcome the bias for oligarchy – despite our ambivalence – over foreign investment. And it also goes with professional services. The Philippine elite – including professionals – like its oligarchy, influence the directions of the country; and in both cases, parochialism has triumphed under the guise of nationalism and patriotism? Unfortunately, parochialism has effectively starved us of technology and innovation. How much damage has been done over decades is not easy to quantify, especially with something that is second nature to us?

And it’s never easy to accept a national failure; but it is ‘painless’ to do the play-by-play, and succumb to groupthink if not myopia? In the case of the US, the damage was so severe it triggered the global recession that the world is yet to overcome. Robert Shiller was a lone voice in the wilderness? [Shiller reminded the writer of ‘groupthink’: “It is the mode of thinking that happens when the desire for harmony in a decision-making group overrides a realistic appraisal of alternatives . . . The majority of the initial research on groupthink was performed by Irving Janis, a research psychologist from Yale University, 1972,” Wikipedia.]

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