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Saturday, May 14, 2005

Company/government nosesdives no different from animal extinctions, author argues

A new book apparently claims that the failure of large companies, governments, et cetera, to accomplish their goals can be understood with reference to the same processes as animal extinctions.

Alasdair Palmer, Public Policy Editor of The Sunday Telegraph, reviews Why Most Things Fail: Evolution, Extinction and Economics by Paul Ormerod, noting,

Why Most Things Fail might have been just another melancholy dirge on the omnipresence of death of the “all flesh is grass” variety, but this engrossing and entertaining book is much more than a mordant moan on mortality. It is a careful, comprehensible analysis of the limits of human rationality's ability to control the world, and of the implications for public policy - and, to some extent, for personal conduct - of the failure of most rational calculation to produce its intended results.

Ormerod occasionally over-states the hopelessness of the human predicament. Impressed by the parallels between the law which relates the frequency of extinctions in the animal kingdom to their size (the larger the percentage of living creatures an extinction wipes out, the less often such an event happens) and the law which relates the frequency at which firms fail to their size (the rate at which firms fail exactly parallels the way species go extinct), he concludes that firms will fail at a predetermined rate - irrespective of the decisions of the people who run them.

The collapse of IBM, for example, wasn't really the fault of its executives. Nor was it due to Bill Gates’s planning genius at Microsoft. No one, including Mr Gates, expected Microsoft’s Windows 3 to be the huge success it became. It wasn't any better than the competing products, and in some ways it was worse. Luck, more than any rational (or irrational) choice by managers, explains why IBM shrank and Microsoft prospered.

No amount of planning or rational calculation, insists Ormerod, can escape the iron law of failure which governs human endeavour. That conclusion, however, seems to me to be too despairing. “Human reason can't be as impotent as Ormerod implies. After all, its application to the problem of how to understand the laws which govern the natural world has produced spectacular results over the past 200 years. ... Ormerod's despairing vision of the inevitable failure of practical reason seems unable to account for that fact.

What I think reviewer Palmer does not see clearly is that Ormerod probably subscribes to Darwinian naturalism. According to that view, intelligence is simply an illusory state produced in the overdeveloped human brain, rather than a regular feature of our universe that creates design, as well as law and chance. Now, if a person believes in Darwinian naturalism, he is always looking for iron laws or randomness to account for events in human life, rather than the outcomes of intelligent decision-making.

Of course, there is not, in reality, any comparison between the reasons that megatherium and brontosaurus went extinct and the reasons why Enron went under, Martha Stewart went to jail, or the Dems lost the last U.S. election. But the amazing thing is that some people actually take comfort in believing that failure is an inevitable outcome of law and chance, rather than the result of poor or limited planning or bad choices (to be fair, not necessarily one’s own, often that of others - but choices nonetheless). To find out more about my book, go to By Design or by Chance?


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