I am not the only one to notice that we seem as a nation, and as a world, to be reeling from one catastrophe to another. I have seldom seen a period of pessimism like the one that envelops us right now. The last time I can remember this type of feeling in the U. S. was in the late 1970’s and early 1980’s. I am generally an optimist about our nation, because we have always been a country whose people learned from its mistakes and made better decisions when encountering similar circumstances. We have made gradual progress over the last 234 years with respect to issues of racial equality, and caring for the poor, and providing justice. It comes in fits and starts, but it comes. We have had a history of growing wiser, and learning from our mistakes.

But I cannot remember a time when we have been more shortsighted. People like to blame the media because of the short news cycle and the immediacy that comes with internet coverage of every minor glitch, along with the need to endlessly feed news consumers. Long-term thinking is boring. But, as Tufts University’s Robert Sternberg would say, wisdom requires both dialogical and dialectical thinking. Dialogical thinking involves interacting with others and actively considering their perspectives. Dialectical thinking requires a focus on the long-term, rather than just considering short-term outcomes. These two seem to go hand-in-hand; rarely do you see one without the other.

I see evidences of these failures in thinking in all the major issues in the headlines, and perhaps worse on the horizon. We are not just drilling in depths we have never drilled before. One of the reasons that energy prices remain stable is the vast expansion of natural gas reserves, mostly in shale formations. Exploration and production companies are producing this natural gas in close proximity to homes and schools in bedroom communities around Dallas/Ft. Worth. Many homeowners have suddenly become royalty owners. But there have also been interesting impacts on neighborhoods, and no one really knows what the seismic effects will be long-term. They have stopped drilling in Flower Mound because of concerns. Earthquakes anyone?

Our country, like others, is taking on precipitous debt, playing fast and loose with our credit standing. There has been no serious discussion about whether it is worthwhile as a strategy. There is a dearth of long-term thinking, and people mostly shout past each other. The borrowers are in the majority, so we dig the national debt to depths no one could have imagined twenty years ago. Those financial tremors you feel in Greece and Spain are real.

But one good thing that failure brings is the opportunity to change, to acknowledge our failures in thinking. Sternberg says that the five fallacies of thinking are egocentrism, omnipotence, omniscience, invulnerability, and unrealistic optimism. Disasters that are in your face every day tend to mute these fallacies. Not too many people at BP believe they are all powerful to stop disasters, or know everything about how to make a well a mile deep in the Gulf stop spewing out oil, or that they are invulnerable to the anger and financial consequences that will wash over them as surely as the crude washes up on the shores of the Gulf Coast. An unrealistic optimist now hopes the damage is contained to this summer, and that ecosystems largely recover in a decade or two.

We are creative and intelligent. We know how to drill deep into formations we could never reach, to produce gas in places we never thought we would, to temporarily wash away crises with floods of money. But we are not wise. We think about now, and we refuse to seriously engage one another about the future. We are neither dialogical nor dialectical.

We have a chance, if we grab it, to throw aside the fallacies of thinking and admit that there are real risks that accompany what we are trying to do, and that some of them are not worth taking. It will take humility and teachability. But the best time for something like that to happen is when we get it really wrong.

Now is that time.

Categories: Bottom Line Ethics

One of the major problems with capitalism is the outsourcing of externalities, expected or unexpected events that have broader effects beyond the company causing them. Transocean’s Deepwater Horizon problem, with the thousands of gallons of oil pouring into the Gulf, is a classic example of an externality, and it provides an interesting example of how regulation can actually increase the costs to the populace when a disaster of this nature takes place.

People are understandably infuriated at the outcomes from the well explosion. They are reacting by fleeing companies connected to the event. BP alone has lost $17 billion of its market capitalization, according to The Wall Street Journal. BP representatives have made regular comments about accepting responsibility for legitimate claims. The well’s operator, Transocean, has sought protection from unlimited liability under an 1851 law, the Shipowner’s Limitation of Liability Act. According to the Associated Press, this would limit the company’s liability to $27 million. This seems wrong on its face to most people, and it has enraged Senator Chuck Schumer, who wants the law repealed. Admittedly, Senator Schumer has been known to get apoplectic over a lot less; he seems to have a propensity for getting excited. But this is an easy opportunity for him to capitalize on public anger over the spill.

What he does not mention is that this 1851 regulation had its own externalities, its own unforeseen consequences. If Transocean’s liability is, in fact, limited, the Shipowner’s Act is explicitly the cause of Transocean’s ability to outsource the externality to American taxpayers (or other unfortunate parties involved who may be held to greater levels of liability under joint and several liability laws). I am doubting that Congress, almost a decade before the French developed the first ironclad battleship, had floating oil rigs in mind. Who can blame them? But Congress in recent years has shown a penchant for demonstrating far less foresight, and they are on a roll.

Sending attorney general Eric Holder to Louisiana to threaten criminal prosecution is not the kind of action that leads to good legislation either. There are significant ethical issues involved in this problem, as there are in all externality situations. The environment needs to be protected in a time when unemployment is high. There needs to be strategic thinking about how to address justice concerns and allocation of liability, as well as addressing how to minimize the probability of these “black swan” unexpected events happening.

Shutting down new drilling in the Gulf for six months, as ordered by the president, will do this to some extent. It will also insure that rigs are sent elsewhere in the world, and with them American jobs. These issues are joined at the hip, and when anger causes sudden swerves in a deliberate problem-solving track, you rarely get better ethical decisions. What you get is short-term solutions, and the externalities that go with them.

But I am well aware that as long as the public is watching the BP camera showing oil pouring into the Gulf, deliberate decision making is unlikely. We are witnessing a risk management failure at BP of enormous proportions. I just returned from a Gulf coast vacation, and I wonder if I will be able to go on another one in the near future. I shake my head thinking of the damage to wildlife. What has happened is devastating.

I do not expect to be listened to on this issue, because populist anger is all the rage (pun intended). But we must carefully discern what must be done to minimize harm from what seems just to do in the moment to eliminate all risk and get revenge on those we blame. If not, we should not be surprised at the externalities we outsource to future generations.

Categories: Bottom Line Ethics