After last week’s semi-hiatus we are back to our regularly scheduled programming.
There’s a scene in The Newsroom where the head of the fictional cable news division tells some schmuck that young people’s heads won’t explode if you treat them like adults. It’s a great scene. Anyways, what I’m getting at here is that this week’s essay is a bit more intellectual than usual. In the past, I’ve been told that if I want to boost my readership then I need to write more conversationally and confrontationally. In short – folks want me to write as though my audience is a bunch of twelve-year-olds. I get the virtue associated with doing that, but just for one week, I’m going to pretend that everyone did the pre-reading. Enjoy.
Once upon a time – actually just a few months ago – I wrapped up my master’s degree in theology. While in conversation I often deflect from speaking about the degree by referring to it as ‘Jesus studies’ in actuality my thesis barely mentioned Christianity at all. Indeed, if I am not mistaken, the only scriptural reference shows up in a footnote citing Paul’s words in his first letter to the Corinthians:
“For now we see in a mirror, dimly, but then we will see face to face. Now I know only in part; then I will know fully, even as I have been fully known” (NRSV trans.).
Although these words were relegated to a footnote within the thesis, they were, in reality, the entire basis of the work which focused on the commonalities between the metaphysics of Leibniz and the third-century philosopher Plotinus – interesting stuff I assure you.1 You see, one cannot speak of the structure of reality without discussing the way in which one perceives said reality. A useful analogy for this would be how the use of a flashlight in the night shapes – and distorts/defines – what you see. In my view, Paul’s words indicate an epistemology (‘the study of human knowledge’) predicated on imperfect, yet perceptive, knowledge that vibed with Plotinus and helped shape that of Leibniz.
Anyways, this essay is not about my thesis but rather the managerial mindset that we find in the professional class. However, the previous tangent serves well to orientate ourselves towards the topic because we are really going to be talking about the role of knowledge in industry, academia, and government. The short of it is that we are going to take some dumps on folks with many letters behind their names and fancy titles before them. More importantly, though, we’re going to talk about why these folks make these mistakes, why we give them credence at all, and what we can do about it.
To understand where we’re going to go in this essay, we first have to identify who the target of the critique is. Given that most people who subscribe to this Substack work in finance, let’s set our sights via a figure we can all recognize – even if we recognize him as Twitter’s asshole par excellence – Nassim Taleb who describes this group as:2
“. . . academico-bureaucrats who feel entitled to run our lives [who] aren’t even rigorous, whether in medical statistics or policymaking. They can’t tell science from scientism — in fact in their image oriented minds scientism looks more scientific than real science. (For instance it is trivial to show the following: much of what the Cass-Sunstein-Richard Thaler types — those who want to “nudge” us into some behavior — much of what they would classify as “rational” or “irrational” (or some such categories indicating deviation from a desired or prescribed protocol) comes from their misunderstanding of probability theory and cosmetic use of first-order models.)”
For a more specific identification, we might describe these folks as those who wave ‘empirical’ generalizations around as though they were carried down from Sinai.
We would be wrong to describe these folks as experts. Instead, they are what we might call ‘managerial experts.’ The managerial aspect comes from the fact that their end goal is to manage outcomes in society whether they be political, economic, financial, commercial, cultural, or social. Hence the reference above to folks like Sunstein and Thaler. For them, there is a ‘correct’ answer to what people want to do. In effect, their desire is to convert subjective preferences into objective outcomes. An attempt to square the circle if ever I’ve seen one.
While the promise of such folks might seem tantalizing, there is a question as to whether or not they can deliver the goods they promise. As Alasdair MacIntyre puts it:3
“What managerial expertise requires for its vindication is a justified conception of social science as providing a stock of law-like generalization with strong predictive power.”
Without such a justificatory vindication we find ourselves in a situation where a class of folks make claims to authority and power which they themselves are – by their own standards – unworthy of. Surely if we asked Professor Thaler if we should give credence to bankrupt ideas he would say ‘no.’ But perhaps we are putting the cart before the horse here so let us step back for a moment and reflect on what’s happening here.
Let us say, as a point of agreement that “it is at once clear that many of the central features of human life derive from the particular and peculiar ways in which predictability and unpredictability interlock.”4 That is, life is both predictable in some ways and unpredictable in others. I am not going to claim that we are but fish swimming in a bowl of randomness. Again, citing MacIntyre:5
“A life lived from moment to moment, from episode to episode, unconnected by threads of large-scale intention, would lack the basis for many characteristically human institutions: marriage, war, the remembrance of the lives of the dead, the carrying on of families, cities and services through generations and so on.”
However, although there is some structure, and in some ways, predictive structures at that, “the pervasive unpredictability in human life also renders all our plans and projects permanently vulnerable and fragile.”6
We are therefore in a situation of imperfect knowledge. Try as we might, there seems to forever be a vast ocean of unknowability surrounding the small island of predictability. At its core, this state of affairs is the Achilles heel – if not the complete damnation – of managerial experts. As Hannah Arendt wrote:7
“The laws of statistics are valid only where large numbers and long periods are involved, and acts or events can statistically appear only as deviation or fluctuations.”
That is, so long as managerial experts can ignore events and realities outside of their predictive models and frameworks, then they can make claims to authority and power. Unfortunately, the fact that we live in a world inclusive of all events, not just those within models, renders the claims void. We would not trust an astronomer who mistimed the occurrence of an eclipse yet we are happy to keep economists in our pay who consistently misjudge inflationary movements.8
Given that the airwaves of CNBC and Bloomberg – just to name two prominent examples in finance – are perpetually filled with meandering sycophants who never cease to miss the mark with their predictions, we can all agree that the group under attack here exists. These folks not only exist but are quite prevalent and decently compensated. While we might try to restrict their existence to the realm of media, in reality, my money is on the possibility that +90% of white-collar professionals are of this persuasion. Forever happy to reach for a model, simplifying assumption, or generality in order to appear prescient.
But how did we get here? Why is it that much of the professional class consists of people dead set on managerial expertise? My guess is that it has to do with our fascination with the sciences – and more importantly, the art which is mathematics.
Reaching even further back into my personal history, I went to an obscure yet old liberal arts college full of students who could easily wipe the floor with the entitled cohorts found at Harvard. At this institution, the ‘life of the mind’ was what was on offer. Thus, one would imagine that we would all be fawning over the humanities and liberal arts. However, in reality, there was a tendency for us to view our fields of study – mine being history – as social sciences. Why? Because there was just something about the word ‘science’ that made us feel as though we were not the dumb fucks that everyone else thought we were. Were we scientific though? No. Why not? Because science ultimately relies on replicability which every event, person, phenomenon, and topic of interest in the social ‘sciences’ lacks. You cannot run the French Revolution once again and see if you can avoid The Terror.
Yet many in the humanities cling to the idea that if they could only be scientific enough then their continued existence – and funding – would be justified. Yet, of course, the folks in the natural sciences are never going to cede the word ‘science’ to folks who are so methodologically and teleologically distant from themselves.
This fetishization of science is not a new phenomenon nor is it confined to the weirdos like me in the arts. To find the most egregious form of this situation you just have to walk over to the business faculties of any university. Therein lie the greatest collections of intellectual half-wits, frauds, and imposters. Yes, the finance professors are spared much of this derision given that they tend to actually understand mathematics and what have you. But even then there is a tendency to make outrageous assumptions – think ‘efficient markets’ – for the purposes of easy math. A more blatant example is that of Porter’s forces which were allegedly concocted from studying hundreds of industries - a claim so ridiculous only business professors would believe it.
Although finance is a step removed from economics the following words of Arendt apply equally well to that particular field:9
“Economics. . . could achieve a scientific character only when men had become social beings and unanimously followed certain patterns of behavior, so that those who did not keep the rules could be considers to be asocial or abnormal.”
If you are looking for a story arc here, allow me to provide the following. In the 20th-century, science rose well above the other academic fields through its predictive capacities and the fruits of its labors. The most prestigious field being that of Physics followed by chemistry, biology, and engineering. In response, other fields of study tried to become ‘scientific’ through the utilization of mathematics, statistics, and measurements. Suddenly historians started counting things, sociologists applied statistical distributions to behaviors, and economists picked up calculus textbooks.
While these developments might seem helpful or benign the application of mathematical tools to these fields was done without a whole hell of a lot of consideration as to whether or not they were appropriate for the issues at hand. To be fair, these debates did occur within the faculties themselves but they rarely spread out from the ivory towers. The flaw here is, for example, as de Prado and Fabozzi note, in economics, “calculus was not chosen because it solved economic problems, but rather calculus defined economic problems.”10 Put differently, the use of mathematics in these fields was popular because (1) it gave a sense of ‘scientific’ authority to non-scientific practitioners, and (2) it led to ‘correct’ answers based on the logic of mathematics. When an economist calculates GDP growth, the calculation is valid based on the rules of the underlying theory and practices as opposed to some ‘objective’ reality of economic output. The economist defines what GDP growth is, how to calculate it, and then goes from there. They do not go outside and point to an amorphous blob in the sky and say ‘see, there it is.’
You’re probably wondering why the hell I’m going on and on about academics and universities when those institutions and practitioners pale in size and impact when compared to industry or even government. But it is important to note that white-collar workers today rely on these shiny pieces of paper called degrees which come from academia. We would be sorely mistaken to think that graduates enter the workplace without having gained a sense of ‘reality’ from their studies. For example, folks in finance sit around acting on the Fed’s inflation data; management consultants think that peer-reviewed papers in organizational behavior are sound foundations upon which to base recommendations; government administrators are pretty damn sure that they truly can actualize preferred outcomes via a set of known policy options. In short, universities are largely in the business of creating ‘managerial experts.’
How this mistaken identification of ‘social science’ with the abilities of the natural sciences shows up in the workplace is perhaps best presented by my own words in a previous work wherein I argued that this mindset11 12 13:
“...fails to recognize E.T. Bell’s axiom that ‘the map is not the thing mapped.’ That is, the detailed production plans and maps that management concoct in their ledgers and spreadsheets are merely approximations of what the actual process is. While high-level industrial engineers and MBAs may believe their spreadsheets to be true, anyone who has spent time on a shop floor (i.e. in the real world) will tell you that a plans are nice things to have in theory. Instead, what one finds in practice are an infinite number of deviations from the plan which, hopefully, will cancel each other out so as to be approximately in line with management’s projections. To steal a phrase from the German general von Moltke the Elder, ‘no plan of operations extends with certainty beyond the first encounter with the enemy’s main strength.’”
If we can agree both that managerial experts exist, and that their existence stems from historical, professional, and intellectual sources, then perhaps we can begin to answer the question as to why we listen to them at all and often compensate them handsomely.
I like to think that Mr. Taleb and I do not share much in common. He would probably detest my lack of language skills and lack of interest in the higher echelons of advanced mathematics – I took enough math courses in my engineering degree to know that most of it was useless to me. However, one thing we do have in common is that we both think lowly of MBAs despite the fact that we are holders of said degree. While I believe that it is fair to say that every degree program produces graduates who are prone to favoring managerial expertise, the MBAs are really the ones who go to school for the sole purpose of embodying such expertise. And guess what? They come out of school earning alright money. So what’s up with that?
Well, no one ever gets paid for answering a question with ‘well, that depends,’ or, ‘that’s not a question that can be answered.’ Instead, what happens is that those who are able to answer a question and sound intelligent while doing so make some decent cheddar. This situation is largely a win-win scenario. The asker of the question gets a decent-looking answer, and the answerer gets the rewards pertinent to the question’s asking. Thus, there is an awful lot of incentive involved with providing answers and positive feedback for accepting these answers.
The issue is that rarely in life do we find questions that can be answered with the exactitude of astronomy. Indeed, in business, every interesting question is without a precise answer. That’s what makes them so damn interesting. Thus, you would expect that the students trained to discuss matters which have no objectively right answer would be in high demand and consequently kicking ass and taking names, but that is not the case. Those with liberal arts training rarely show up in the upper echelons of finance for example. Here in Canada, you cannot swing a dead cat on Bay Street without whacking a couple of dozen dipshits with business degrees from Western. Meanwhile, my liberal arts college has never seen a recruiter from one of the major capital markets teams. This is despite the fact that we are known as an institution that pumps out god damn intellectual champions.
What industry appreciates instead are folks who will take a question, apply a framework, dig up some data, run it through a model, and provide an answer alongside an unhealthy dose of gusto. This is why MBAs get hired. They provide answers and show their work. While this might be okay when pricing a bond on an exam, there are things such as risk which are not quantifiable and instead require abstract critical thinking. Something which no MBA program in the world teaches to any meaningful degree. I should add here that the MBAs are some of the brightest folks you find in industry, which makes sense given that the point of the degree is to take top non-commerce graduates and pump them full of enough fun facts to read an income statement.
At its core, the situation we have been exploring revolves around the ability to sell an outcome. Those with managerial expertise sell their precise answers and ability to get to them. At no point do they question whether or not these answers are correct in an objective manner. Instead, what they are doing is playing by the rules of their intellectual worldview. You want to know why the sub-prime crisis happened? Because managerial experts – which are a class of people at all levels of the org chart – were playing by the rules of their class. The models said it was okay. And who are they to argue with models? To toss out the models would be to throw away their claims to authority and a good paycheck. Experts get paid while pioneers shit themselves to death on the Oregon Trail.
There is of course a sense of comfort that comes from listening to these experts. The idea that every problem can be solved with additional brainpower and frameworks is pleasant and optimistic. Unfortunately doing so leads us to ridiculous situations such as that which Louis de Bonald noted over two centuries ago in the wake of the ‘enlightened’ French Revolution:14
“Preoccupied with political economy, governments have believed that there were not enough farmers, although everything was cultivated, including lands that ought not to have been; that there was not enough trade, although there was perhaps too much; not enough taxes, although everything was taxed, even doors and windows; not enough population, although even the smallest States had more men than they could rule; and not enough money, as if there could ever be enough to satisfy our thirst for it. At the same time they allowed themselves to be persuaded that there was too much religion, too much morality, too much severity in the laws, too much obedience in the State, too much dependence in the family, too much respect in the inferior classes toward the superior classes, not enough equality. Such great disorders could only come from a defect in the administration; and there were so many administrations and administrators!”
What managerial expertise does is provide answers to questions that may not even require an answer. Yet, the answer exists nonetheless, and as long as there are people willing to provide answers, and those with wealth to reward them for doing so, there is no incentive for these charades to stop.
What can we do then? Ought we to sew the mouth shut of folks like Scott Galloway? Shall we round up my fellow MBAs and ship them off to hard labor? Of course not. But what we ought to do is shift our behaviors to reflect the shared understanding that managerial experts – although right(ish) some of the time – operate under conditions of imperfect knowledge. Even if they themselves are too ignorant, stupid, or incentivized to see so, there is no reason why the rest of us – even if we are but a small minority – ought to hand over authority and power to them in life, government, and industry.
Taking just business as an example. The market is ambiguous. Conditions are constantly changing and any model is out of date the second you begin to plunk data into it. But that does not make it useless. Instead, it makes it a product of human hands. Error arises when one uses that answer provided by the model and the model itself as a claim to superiority and correctness. Such characteristics only exist relative to other options. The same goes with whatever drivel comes out of the mouths of pundits on Squawk Box. It does not matter what a Managing Director at Morgan Stanley thinks in and of itself – only the results, which occur after the fact, give it any meaning, and only then its meaning exists within a vacuum of relativity to those of competing theses.
In short, what the prognostications of the professional class need are healthy grains of salt. However, if we wanted to ostracize all the marketing, strategy, and operational behavior professors and practitioners – not to mention the damn economists – I’d support that too. In the meantime, let us get on with business and life and leave prophetic predictions to both the divinely inspired and intellectually disturbed – if we’re lucky, someday we might be able to tell which is which.
Photo by Andrew Neel at Unsplash15
Evan Johnson, “A Confluence of Worlds: Leibniz, Plotinus, and The Monadology,” Master’s Thesis, University of Toronto, 2021: https://drive.google.com/file/d/1s9c8GfCwbJtNbFsTV1Fbyg_i3Xihqyw-/view?usp=sharing
Nassim Taleb, “The Intellectual Yet Idiot,” adapted from Skin in the Game: Hidden Asymmetries in Daily Life, (New York: Random House, 2018), available from https://medium.com/incerto/the-intellectual-yet-idiot-13211e2d0577
Alasdair MacIntyre, After Virtue: A Study in Moral Theory, 3rd ed., (Notre Dame: University of Notre Dame Press, 2007), 88.
Ibid, 103.
Ibid.
Ibid.
Hannah Arendt, The Human Condition, 2nd ed., (Chicago: University of Chicago Press, 2018), 42.
Adapted from After Virtue, 92
The Human Condition, 42.
Marcos López de Prado and Frank Fabozzi, “Who Needs a Newtonian Finance?,” The Journal of Portfolio Management, 44:1(2017), 1-4, 1. Cf. Prado and Fabozzi in K. Vela Velupillai, “The Unreasonable Ineffectiveness of Mathematics in Economics,” Cambridge Journal of Economics, 29(2005), 849-872.
E.T. Bell, Numerology, (Baltimore: The Williams & Wilkins Company, 1933), 138.
Daniel Hughes (ed.), Moltke on the Art of War: Selected Writings, (New York: Presidio Press, 1995), 45.
Evan Johnson, “The Three Cultures: The Intellectual Calamity Known as Business School,” 2021, https://www.academia.edu/44573099/The_Three_Cultures_The_Intellectual_Calamity_Known_as_Business_School
Louis de Bonald, The True and Only Wealth of Nations: Essays on Family, Economy, & Society, trans. Christopher Olaf Blum, (Naples: Sapientia Press of Ave Maria University, 2006), 115
https://unsplash.com/photos/cckf4TsHAuw