“Function in Disaster, Finish in Style”
Dmitry Chernov and Didier Sornette, professors at ETH in Zurich, Switzerland - see links below - co-authored two books that document man-made catastrophes. Looking for risk management recommendations, they focus on the recurring behaviors that turn the drama of individual decision-making at scale into predictably tragic institutional disasters.
Both books, see citations below, present carefully documented, historical cases of man-made catastrophes, including still on-going cases such as genetically modified organisms. The first book takes a generalized view of the problems. The second book organizes cases by industry sectors, looking at risk management from the perspective of each sector’s specific value-added patterns.
Source: Chernov, Dmitry, and Sornette, Didier (2016), Man-made Catastrophes and Riks Information Concealment, Case Studies of Major Disasters and Human Fallibility, Springer
Source: Chernov, Dmitry, and Sornette, Didier (2020), Critical Risks of Different Economic Sectors, Based on the Analysis of More than 500 Incidents, Accidents and Disasters, Springer
https://rre.ethz.ch/the-lab/people/profile.MTk0MTgy.TGlzdC8xODM2LC0xMzM5MzIwOTU4.html
https://mtec.ethz.ch/people/person-detail.MTM1Mjg5.TGlzdC8xMDUwLC0yMDgyMjgwMDQ4.html
Building up from an earlier post on the reproducibility of research, see link below, this post traces connections between their work, and the work of Ole Peters (ergodicity economics), Hanna Arendt (the banality of evil), Alexander Solzhenitsyn (live not by lies), and Malcolm Kendrick (the clot thickens).
Describing the Problem
Chernov and Sornette researched a large number of cases of man-made disasters to identify decision-making patterns when people make decisions on behalf of institutions.
They conclude that individual decision-making at scale leverages our shared cognitive limitations into predictably tragic disasters, because: (i) it prevents us from seeing the unexpected, (ii) it increases the fear of personal consequences for what is eventually seen, and (iii) it induces willful blindness to avoid facing the problem.
Further, scale encourages a lack of self-restraint in individual decision-making that leads to institutional interventions with predictably destructive, “unintended” and “unexpected” consequences.
Further the illusion of control that comes from institutional scale destroys the individual checks-and-balances that would otherwise anticipate, and avoid the catastrophic breakdown of these fragilized institutional components.
The Connection to Ergodicity Economics
Note the connection between these generalized findings, and Rory Sutherland’s presentation at EE 2022, see link below.
Institutional decision-makers see reality through a lens based on ensemble averages, and in the context of incentives based on an additive growth dynamic. This lens gives them a different mind-map of reality than individual decision-makers who see reality through a lens based on time averages, and in the context of incentives based on a multiplicative growth dynamic.
The difference between these two forms of averaging can be so large as to have different signs: The institutional decision-maker sees a benefit, most individuals experience a loss.
Individuals in institutions seem prone to averaging the past wrongly (ensemble average vs. time average), in addition to having diverging incentives about the future (linearly growing additive growth dynamic vs. exponentially growing multiplicative growth dynamic).
The Connection to Hannah Arendt
Thinking about the consequences of leveraging the limitations of human decision-making with scaled-up institutions brings up Hannah Arendt’s work in general, and her essay “Thinking and Moral Considerations: A Lecture” in particular.
Source: Arendt, Hannah (1971), Thinking and Moral Considerations, Social Research, 38:3 (1971: Autumn) p.417
Individual decision-making has a built-in, error correction mechanism when the mind making the decision can reflect on itself as it makes the decision. Thinking interrupts mindless motion in the present, forcing self-reflection on what is otherwise pattern-matching such a following a track, a map, or even orders.
This infinite regress of the self looking at the self provides checks-and-balances that go under many names: Two-in-one mind, the pattern-matcher vs. the thinker, knowledge vs. meaning, bearing witness to the other in one’s self, knowing about the present vs. thinking about the absent, etc.
Arendt’s insight about the banality of evil comes from otherwise normal individuals that lose the ability to hold both the pattern-matcher and the doubting thinker in their mind when making decisions. This is called willful blindness.
Oedipus Rex functioned in disaster as a competent institutional leader, but his willful blindness - his failure to keep both the knowing pattern-matcher and the doubting thinker together in his mind – inevitably led to his tragic ending in disaster.
Source: Knox, Bernard (1957), Oedipus at Thebes, Sophocle’s Tragic Hero and His Time, Yale
Pattern-matching is a quest for knowledge, a direct perception of the present. Thinking is a quest for meaning, self-reflecting model building to see the unseen, to see the absent, and to plan for the future.
The Connection to Alexander Solzhenitsyn
Oedipus Rex feared thinking, focused on pattern-matching, and leveraged this willful blindness with a complete dedication to institutional leadership. Self-knowledge threatened his sense of self, out of a latent fear that it could be crushed if forced to see that he was not as good as the institutional persona he played for all the world to see.
Oedipus Rex shows that individual decision-making at scale, i.e. playing a role on behalf of institutions, can sever this link between the knowing pattern-matcher and the doubting thinker of the individual decision-maker.
This is a message that one can see in Alexander Solzhenitsyn’s “Live Not By Lies”, including: “We fear only to lag behind the herd and to take a step alone”, “… we lie to ourselves for assurance.”, and “Whether to remain a conscious servant of falsehood..,”.
Source: Solzhenitsyn, Alexander (1974*), Live Not By Lies
He also shows the way out of the problem: “Personal non-participation in lies.”
Better Mind Maps of The Territory
As explained, and then demonstrated masterfully as well as concretely by Dr. Malcolm Kendrick in “The Clot Thickens”, it is not sufficient to fully describe the nature of wrongful error, it is necessary to provide a better solution.
Source: Dr. Kendrick, Malcolm (2021), The Clot Thickens, the enduring mystery of heart disease, Columbus Publishing.
Returning to Chernov and Sornette’s findings, let’s close this post with three questions that can move us in the direction of better solutions for individual decision-making at scale:
How can institutional decision-makers see beyond the limits of their decision-making tools based on ensemble averages?
How can institutional decision-makers see beyond the constraints of their incentives based on additive growth dynamic?
How can institutional decision-makers find the personal conviction to stop negative cascades from earlier bad decisions, sooner rather than later?
At the end of each post, we ask ourselves the following question before we publish it:
“What is an individual member of the next generation supposed to do with this?”
Personal practice based on this post, include:
(i) Listen to the doubting thinker in your mind.
(ii) Include different averaging methods, such as time average growth rates, in your models for decision making.
Minds are closing down under stress. People are tired of ideas. They want to know how to survive. “CTRI by Francois Gadenne” connects the dots of life-enhancing practices for the next generation, free of controlling algorithms, based on the lifetime experience of a retirement age entrepreneur, and continuously updated with Wealth, Health, and Statistics research performed on behalf of large companies.