Functional stupidity, a reference

18/02/2013 § 2 Comments

A friend sent a link to an article in Le Monde that highlighted the role of stupidity in the financial crisis. Not any old stupidity, but ‘functional stupidity’:

Selon cette théorie de la “stupidité fonctionnelle”, le monde de la finance serait dicté par le “fais d’abord, réfléchis après”. Une attitude qui tend à écarter les questions gênantes, et les longues réflexions sur les actions des salariés – alors même qu’on attend d’eux de grandes compétences.

(According to this theory of ‘functional stupidity, the financial world is ruled by ‘act first, think later’. This attitude tends to avoid difficult questions or considered reflection on behaviour by employees — even while they are expected to be extremely capable.)

The journal article in question is Alvesson and Spicer (2012), ‘A Stupidity-Based Theory of Organizations’ (here). I liked this comment from the conclusion:

Furthermore, we think the consensus in this broad field needs to be challenged – perhaps key developments and contemporary conditions also mean that modern economies and organizations become more ‘stupidity-intensive’?

Can I add ‘stupidity’ as a factor of production in our CGE model?

The central idea is not far from Simon’s bounded rationality (which they discuss briefly). Cognitive power is limited, we can’t take everything in, so we use shortcuts. One problem is feedback loops. When things are going well, the positive feedback reinforces the mental shortcuts. If ‘go along to get along’ keeps producing results, you do more of it.

But, if the behaviour is increasing the risk of low-probability events, there isn’t a feedback loop to tell you that. The negative feedback doesn’t kick in until something happens. Alvesson and Spicer suggest that this becomes a time for reflection and reassessment. The stupidity is no longer functional, so people have the opportunity to find new behaviours.

Reassessment is only one possibility. Zizek noted (in First as tragedy?) that in times of crisis people tend to return to safe ways of thinking, return to the old ways, even return to an imagined past. If functional stupidity is that past, then there is the possibility of more of the same only worse. In a paper I’ve discussed here before, ‘What can psychoanalysis offer organization studies today?‘, Costas and Taheri describe two possible directions that ‘authentic management’ leads: greater authoritarianism or more reflective behaviour inside organisations. It’s the same with functionally stupid organisations in crisis. They could hold fast to what worked in the past or reconsider how to adapt to new conditions.

Of course, the argument presupposes that the financial sector actually has to bear any consequences of its myopia. If it just gets rewarded regardless — which is what happened in the crisis — the herd behaviour described by Alvesson and Spicer will continue unabated.

h/t Y.K.

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§ 2 Responses to Functional stupidity, a reference

  • Grant Taylor says:

    Cognitive power is limited, we can’t take everything in, so we use shortcuts.

    Our limited mental bandwidth is compounded by the haste with which so much seems to need to be done these days. Communications are now so immediate that it seems difficult to make time to think before acting.

    Also,

    When things are going well, the positive feedback reinforces the mental shortcuts. If ‘go along to get along’ keeps producing results, you do more of it.

    Social pressure is very, very powerful, especially when everyone is afraid they don’t really know what they are doing (but don’t want to show their ignorance by asking the question that no-one knows the answer to).

    I have seen the fear in their eyes.

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