The crash of 2008 offers many lessons most of which we will probably miss. Hopefully, we will learn a few things so this deep and ongoing pain and suffering doesn’t have to be endured by those who follow us. For the purpose of this month’s blog, I wish to focus on just one lesson that I am not hearing much about.
When disasters occur we tend to seek out the culprit or culprits responsible for them and blame it all on them. Disasters can result when one person or one small group of people screw up really badly and act less than honorably.
A new book from the Collective Wisdom Initiative is being published later in the Fall. I have had the privilege to preview it knowing several of the authors. One of the subjects the book covers is “collective folly” pointing to the huge mistakes groups and societies can make when the consensus is wrong or misguided. Similar to “groupthink,” there develops a consensus reality that isn’t based in good sense even though the group agrees to it.
The lesson from the meltdown I’m addressing here is the collective folly that resulted from colossal numbers of people making mistakes, some more egregious than others, but almost everyone involved in capital markets had some role in this historic disaster: people who were eager to buy a home they couldn’t afford, the brokers who allowed false credit applications, every citizen who relied on credit instead of savings and was in debt over his/her head. It includes the legislators who passed bad laws or repealed good ones. Consumers who continued buying gas guzzlers contributed to this meltdown. The list includes the accountants and financial engineers who looked the other way trading their souls for job security. The “collective” includes the bean counters who worked for the rating agencies which, in turn, “followed orders” and understated the risk of complex securities and synthetic financial constructs no one really understood. And, yes, it certainly includes the greedy Wall Street shysters who are taking most of our blame, and rightly so. But not all the fault lies with them. Many of us contributed to this collective folly.
Just how many have been complicit is hard to say but it is safe to estimate it would number in the hundreds of millions, possibly billions, who had something to do with this “perfect storm” blowing up in our faces. Unfortunately, the people having the least to do with this disaster will most likely suffer the most. Billions of people at the lower end of the wealth ladder, making only pennies a day, are the true innocents in this global crisis.
When we look the other way while something wrong is happening, fail to challenge a decision we think is bad, condone others’ behavior with our silence, abandon rudimentary prudence to live beyond our means, misrepresent facts on a loan application, we are complicit in the outcome. When we rationalize our behavior even when we know it is contributing to an unsustainable way of life, we are out of integrity with ourselves.
A few months ago I asked two questions of the group I was addressing. “What part did you play in bringing about this crash?” After people pondered that for a while and I could see the expressions of recognition on their faces, I asked my second question. “What are you still doing that will prevent the system from changing?”
It is time for deep soul searching and lifestyle changes that start us along our way toward collective wisdom and it is time to abandon the path of collective folly. This is a crisis of collective conscience, a global integrity crisis, and as in all crises, we have an opportunity to learn and grow from it.
So here is the lesson we can all learn: Many people acting even slightly dishonorably can bring about just as horrendous an outcome as a few hard case evil doers.
Almost seven years ago, post Enron, MCI, Tyco, and other almost forgotten doers of dishonor, I wrote In Praise of Confronting (http://www.coachworksfarm.com/Pages/whatsnew.htm).
When I read A lesson from the Meltdown, I thought of it, re-read it, and decided to share it.
Let's keep writing and speaking about this moral issue in hopes that this time the lesson will stick.
Thanks for consistently pointing the way.
Posted by: Bill Bevans | September 01, 2009 at 12:10 PM