Re: Deadly Disease # 6

["Jim Clauson, Breakthrough Systems" <jim@jclauson.com>]

From "Carl Betterton" <carl.betterton@gmail.com>

Not sure what John Hunter means by "systemic" 
failure to "think" long term. Thinking is not 
done by organizations, but by individuals within 
those organizations. This individual thinking 
(and resultand action) helps explain some of the 
economic and other messes we encounter.

Three points. First, people in general are not 
good at estimating risk and probability. Second, 
people have their own interest in outcomes. 
Third, the system will overcome you as an 
individual. Individual and organizational 
decisions and policies suffer accordingly.

See for example:

New World, New Mind,  Robert Orstein and Paul Ehrlich
Judgement Under Uncertainty, Amos Tverksy and Daniel Kahnemann

Evolutionary survival (safety/security need) 
seems to have programmed us to handle immediate 
problems. People pay most attention to immediate 
risks and perceived consequences. Future costs or 
benefits, even large ones, are not very salient. 
Prevention takes a back seat to fixing.

So people will start an exercise program after 
their heart attack. This does not make them 
ignorant or foolish, it only shows they are 
human. People in general attend to today's 
problems, not so much to tomorrow's, and almost 
not at all to those they will face 10 or 20 years 
down the road. And in looking at solutions most 
of us prefer those with with immediate benefits 
over those with less immediate results, even if 
the long term benefits will be many times 
greater! Short-run solutions to immediate 
problems, colored by self-interest – is this not 
what most people do most of the time? The long 
term consequences of our current behavior (or 
policies) are hard to see, compared to the immediate benefit or cost.

Another element of this can be illustrated using 
the "prisoner's dilemma" and the "tragedy of the 
commons." People make rational decisons that are 
suboptimal. I know a small building contractor 
who has gone out of business because the firm was 
unwilling to hire illegal immigrants – which all 
his competitors were willing to do.

If we want to "reach" people we have to recognize 
how most human brains work, that there is indeed 
an element of self-interest to humanity, and that 
people are at every moment living/working in and 
responding to the systems that affect them. Then we can adapt our approach.

There is an interesting recent development 
regarding John's mention of long term costs to 
firms of health care and pensions. In the USA, 
FASB (Financial Accounting Standards Board) has 
issued its new 
<http://www.fasb.org/st/summary/stsum158.shtml>Statement 
No. 158 - Employers' Accounting for Defined 
Benefit Pension and Other Postretirement Plans to 
correct what John mentions, namely the lack of 
reporting for long term health care liabilities. 
The new reporting requirement has just gone into 
effect (Dec 15, 2006) so the numbers are yet to 
be reported, but according to a columnist in 
Forbes Magazine (page 128 of the Jan 8th issue 
just out), "the numbers will be devasting."

Why have so many organizations NOT reported these 
gigantic financial obligations and said 
accurately that the obligations are not fully 
funded? It is that the people in these 
organizations are like everybody in general, and 
are not good at estimating risk and probability – 
well, no ... they are experts and know exactly 
what they are doing. Is it that they (the 
management) have their own interest in outcomes? 
Certainly! And is it because they as individual 
organizations function within a larger system 
that can overcome what an individual organization 
might want to do? Yes. If one organization 
reported these large future obligations but its 
competitors chose not to do so, people in general 
will disinvest in the candid, honest 
organization. Most organizations will report only 
what they are required to report, and here lies a 
good example of the need for regulation, either 
through professional association, government, or 
some other entity (e.g., FASB).

Best regards,

Carl