Friday, October 23, 2009
Check your mindset
I just saw a very interesting episode of the PBS show Frontline, entitled "The Warning." It looks at how a woman named Brooksley Born - the head of the Commodity Futures Trading Commission - attempted to warn the powers-that-be that the economy was headed for trouble and that the derivatives market should be regulated. At the centre of the story is Alan Greenspan, former Chairman of the Federal Reserve and his insistence on clinging to his beliefs and mindsets. It's a fascinating (and frustrating) story in and of itself, but it's also a great lesson about mental models.
Often, we get our mental models of the world confused with reality. We think the way we see and interpret the world is the way it is. Think about the glass-is-half-full versus the glass-is-half-empty as an extremely simple comparison of two mental models. One views the world in terms of plenty, the other views it as wanting. In Roger Martin's The Opposable Mind, which I recently wrote about, mental models are discussed at length. A couple of pertinent quotes from the book:
"Very little in life should be viewed as incontrovertibly real."
"Contented (mental) model defense is by far the most prevalent (conceptual) model - it is the factory setting for most people, who are generally unconscious of its operation. When we engage in contented model defense, we adopt a theory and then seek to support and defend it. As we accumulate data in support of the theory we've adopted, we become more certain that our theory represents the truth and more content that we have achieved our ultimate goal, certainty." (p. 125)
With that in mind, let's go back to Alan Greenspan. In a remarkable Congressional hearing from last year, Greenspan articulates his error in mistaking his mindset for reality and failing to critically check his assumptions. The direct relation from Martin's quote above and 1:15-1:32 of the video below is quite astounding.
Lesson learned: Try to go less than 40 years before you check in on your assumptions of how you view the world.
-John, October 23, 2009
Labels: economic crisis, greenspan, mental models
¶ 5:00 PM
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