I am sure there will be lots for everyone to hate in the soon to be revealed Obama plan to regulate financial markets. But an article in the WSJ is intriguing for what it reveals about the mechanics of decision making.
One heartening clue is that apparent search for alternatives before a final plan came forward.
“We identified lots of options and we approached some of them with presumptive answers, but in a way nothing was nailed down until it was all nailed down because so much of this is interconnected and interrelated,” said Treasury Department Deputy Secretary Neal Wolin.
Note the obvious nod to the fact that the plan has lots of moving parts, one of the hallmarks of complex decisions.
Another interesting insight was the apparent attention paid to seeking “disconfirming points of view.” One of the big decision traps we fall into is some combination of talking to the same people we always do, or seeking out people we think are “just like us” as a way of confirming what we already think we want to do, vs. argue strongly for an alternative point of view.
The team was built to have contrasting views so officials could debate a wide range of alternatives. Key players included Treasury Assistant Secretary Michael Barr, an expert on financial institutions and consumer protection; Cass Sunstein, a constitutional-law expert who joined the White House from Harvard Law School; and Patrick Parkinson, a markets expert who took a leave from the Federal Reserve to join the Treasury Department.
Larry Summers is a controversial figure at the best of times, known for a towering intellect and the fact that he knows it. Love him or not, his role of critic in chief is another example of good decision hygiene (even though it’s incredibly painful, and yes, destructive if it comes at the wrong point in the process).
Roughly once a week, sometimes more, the team met with Treasury Secretary Timothy Geithner or National Economic Council Director Lawrence Summers to run through ideas. Mr. Summers became known for his ability to shred and discredit any idea presented, forcing aides to scramble to defend their proposals.
“The challenge for many people…is that he can argue both sides of an argument better than anyone,” said Diana Farrell, deputy director of the NEC.
Officials now feel that this exercise with Mr. Summers, which left some red-faced at the time, will make it much easier to defend their ideas on Capitol Hill.
In the end, there will be massive criticism because the plan was hatched as a complete piece of work, done away from Congress (unlike the current attempts at Health Care overhaul). As an exercise in dealing with complexity, reducing inclusion is a classic strategy. As an exercise in dealing with political reality, it’s not a recipe for success. The long knives are out. Let the games begin.
Tags: financialmarkets, decision making, decision quality, Obama, Neal Wolin, Larry Summers, Diana Farrell, Michael Barr, Cass Sunstein, Patrick Parkinson
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Another big change and in support of higher quality decisions is the involvement of cross functional stakeholders who will be impacted by the ultimate decision. NYT, 6/17/09 – “The administration, which has sought to reduce the corrosive influence of lobbying on policy making, actually encouraged the tussle by inviting executives, academics, former officials and others to the series of meetings overseen by the Treasury secretary, Timothy F. Geithner, and Lawrence H. Summers, the president’s top economic adviser. The meetings were often attended by their top aides: the deputy Treasury secretary, Neal S. Wolin, and Diana Farrell, a deputy director of the National Economic Council at the White House.
In the last two weeks alone, the administration has heard from top executives from Goldman Sachs, MetLife, Allstate, JPMorgan Chase, Credit Suisse, Citigroup, Barclays, UBS, Deutsche Bank, Morgan Stanley, Travelers, Prudential and Wells Fargo, among others. Administration officials also discussed the president’s plan with the top lobbyists at major financial trade associations in Washington.”
I saw that same article this morning Peter. Your point is spot on. I imagine those conversations were very interesting to say the least. A useful point to make is that in the private sector, the rules of engagement for those people should be set from the beginning. You get a vote, you guys get a voice, you get visibility, etc. In the public arena, it doesn’t work that way. As that same article points out, the people who didn’t get what they wanted in the first round will now move on to their favorite elected official and begin the process all over again. And if they lose there, they’ll just keep going with the regulators, etc. It’s how the political process works but it is a terrible way to make decisions.