Every so often, when a major newspaper musters a considerable pool of expertise to explain what it regards, with solemn conviction, as an enormously complex tale of hubris and woe, I am struck not by how difficult but by how strangely easy it is to follow the human saga.
This, despite the fact that the customary, editorial waiver clearly alerts me, like a warning label on a pill bottle, that what I am about to consume may cause drowsiness, confusion or even nausea.
So it was a few days ago when, on the fifth anniversary of the global liquidity meltdown, I had occasion to delve into the Report on Business’s (ROB) cover story, “The financial crisis: Through their eyes,” in which no fewer than nine senior reporters presented the results of their interviews with 18 “key players” in Canada’s capital markets, including Finance Minister Jim Flaherty, former Bank of Canada Governor Mark Carney and three private bank CEOs.
Part testimony, part confession, the piece reads a bit like a transcript of a group therapy session for capitalists still suffering from the effects of post-traumatic stress disorder even as, the ROB notes, “the visible scars of the financial crisis are fading.”
But if I had expected, while reading the piece, to fight a battle for illumination with only dim certainty of winning – if I had assumed that I would necessarily marshall every weapon in my intellectual arsenal to fully understand what really happened to the global economy in 2008 and 2009 – it became quickly apparent that no such effort would be required of me.
These experts, these “key players”, are no more lucid on the subject today than they were a half-decade ago. Their most revealing observations are entirely familiar, thoroughly explicable, and could apply to any catastrophe the fates and furies periodically visit on hapless souls.
“In July of ’08, I attended what’s called the international pensions conference, [attended by] CEOs of the 40 largest pension plans, corporate and public,” Jim Leech, who was a senior vice-president of Teachers’ Private Capital in 2008, tells the ROB. “They were pretty oblivious to what was going on.”
Mark Carney: “The summer of 2008 was awful because the system was coming apart and people didn’t appreciate what was happening.”
Louis Vachon, CEO of the National Bank of Canada: “It’s definitely not the end of financial crises. I think there will be more. Will we see something as bad, and as socially impacting as we saw in ’08? I think the odds of that occurring again are very, very low in the next few decades. From my lips to God’s ears on that one.”
That all of us – common investors and financial adepts, alike – were “oblivious to what was going on” and that “people didn’t appreciate what was happening” and that avoiding a repeat performance at some point down the road may hinge on some sort of supernatural intervention confirm what we already suspect, and have suspected all along: None of us really know much about anything, especially the big things in life.
Still, David H. Freedman, a regular contributor to The Atlantic, thinks he knows just enough about the blind spots in human comprehension to write a whole book on the subject. In his 2010 effort, Wrong: Why Experts Keep Failing Us – And How to Know When Not to Trust Them, he observes, “Economists weren’t exactly lining up in late 2007 and early 2008 to warn us all that national economies, global financial institutions, and real estate markets were rapidly spiraling toward a black hole of potential collapse.”
That’s because they didn’t know. At least, they didn’t know the larger story as it grew unwieldy, elaborate and, ultimately, out of control.
In fact, I like to express the limits of expertise almost algorithmically: Specialized knowledge grows increasingly superficial and unreliable in direct proportion to the degree of complexity built into any system of human endeavor. This goes for financial markets, political regimes, Greek tragedies, Norse sagas, and the comedy routines of the late, great George Carlin.
Of course, I could be wrong about this. I’m no expert.
The Bruce Scribes 