Which would all be well and good except for one thing: the IMF is a false prophet.

Even a cursory review of the IMF’s fortune-telling performance reveals that their predications are, at best, a reasonable guess. IMF forecasts typically come close to the mark during relatively stable periods. But they nearly always fail to predict major economic adjustments which is, of course, when they would be most useful.

Mistaking complexity for accuracy

We have an unfortunate tendency to reward complexity with excessive authority. To think that because the IMF numbers have been compiled by experts using impenetrable models, they must be right. It is the mistaking of complexity for accuracy.

The same problem frequently rears its crystal-gazing head in business.

About this time of the year, many managers spend more hours than usual parleying with spreadsheets. For an intense month or so, these documents are judiciously filled in, cell by cell, as the next year’s budget takes shape. Eventually, after the requisite amount of argy-bargy between departments, the financial crystal ball is given a last spit-and-polish and displayed to one and all.

This enormous collective effort, along with its underlying level of detail, give the budget impressive influence. More than any single person in the organisation, the budget will drive major decision making during the following year. Levels of employment, levels of output, sales targets, purchasing decisions. All will be governed by this soothsaying set of spreadsheets.

Which would all be well and good except for one thing: the budget is a false prophet.

In most cases, the budget will be out of date before its year begins. External forces change things. Competitors come up with special deals and deplete market share. A new product takes off much better than expected leaving capacity sorely strained, while last year’s star product gathers dust (and ties up cash) as it sits forgotten in the warehouse.

But again, because the budget looks accurate in all its complexity, and because so much blood, sweat and typing went into its compilation, it is given more credence than it deserves.

A widespread weakness

The mistaking of complexity for accuracy is widespread. It could be argued that it played a role in triggering the global financial crisis. Undue faith was put into labyrinthian financial instruments, into unfathomable risk management models, into convoluted – not to mention corrupt – ratings systems.

Which is not to say that budgeting, forecasting and predicting should not be done. But when they are done, whether on a small scale in your office or an international scale, their projections need always to be washed down with a hefty dose of scepticism. No matter how complex and sophisticated they appear.

What’s the twhype all about?

Twitter is so simple that it almost defies description. It is a website on which you can publish short public messages of no more than 140 characters. Ostensibly the idea is to post updates – ‘tweets’ – about what you’re doing. Other users can follow the progress of your updates and you can follow theirs.

It’s trumpeted as a way of keeping in touch with friends and family without the need to write at length and without expectation of a reply. So, for instance, the travelling business person might send updates over a day like: “plane arrived on time – remarkable!”; “meeting went on and on but we got what we wanted”, and “why are Melbourne taxi drivers always lost?”.

While all this drama is unfolding, this person’s friends and family – ‘followers’, in tweetspeak – can visit the Twitter website at any time and check on their loved one’s progress.

Twitter is a bit of a cross between text messaging, instant messaging and blogging, while not really being any of those. The jargon is ‘micro-blogging’.

Just another source of information to add to our already info-crowded lives? Possibly. Yet, provided tweetcrastination and tweetaholism can be avoided, Twitter has intriguing potential as a communication tool.

Like so many internet ideas, including the web itself, Twitter has quickly outgrown its developers’ original intentions. Innovative users, mobile friendliness and a free programming interface have propagated a cornucopia of new applications for Twitter.

Twitter has become a networking tool, a customer service tool and a word-of-mouth tool. Twitter users are breaking the news before the media hears about it. Twitter can help you find a job or fill a job. Twitter can help you sell your products or your politics. Twitter can help you stick to your diet or quit smoking. The list continues to grow…

Yet it is still early days. Twitter may be no more than another bubble floating over the internet landscape, ready to burst at any moment. Like many, I was suspicious at first. But Twitter is different. Its simplicity, its brevity and its inherent informality (there isn’t much room for spin in 140 characters) all work to support an interesting new way of communicating.

It might work for you or it might not. The only way to find out is to get out there amongst the tweeple and give it a twy!

Saturday, February 7, 2009 was a hot day in Victoria. Unbelievably hot. As they had the week before, temperatures ramped up to levels three and four degrees higher than had been recorded in any previous year. That’s the meteorological equivalent of taking a full second off the 100m sprint record.

These temperatures combined with hellish winds, dry air and an already baked countryside to create the most bushfire conducive circumstances in living memory.

For days before, the weather bureau had been warning of these conditions. This gave the situation a surreal difference from many others in that we all knew it was coming but we didn’t know where or when, how fast or how dangerous.

For those of us safely holed up in suburban Melbourne there was no danger, but there was plenty of dread. For those on bush properties, there was really only hope. Emergency services – staffed mostly be courageous volunteers – waited anxiously across the state. They pounced as reports of fires started to trickle, then teem in.

Much of the worst damage took place late on Saturday afternoon and into that night. As a result it was not until Sunday morning that the scale of the destruction became apparent.

Victorians are well used to bushfires affecting our communities. There is a strange informal categorisation of our reactions. If a fire burns a large area of bushland, that’s bad. If it burns a few properties as well, that’s terrible. Very occasionally a small number of lives are lost: a tragedy.

The Black Saturday fires destroyed nearly 2000 homes and took over 200 lives. Two sizeable towns, along with some smaller ones, were virtually totally destroyed. To put this in perspective, the death toll represents roughly the same proportion of Australia’s population as the September 11 toll represented of the United State’s population.

We have no category for this.

The scale of this disaster has left few Victorians untouched. Nearly everyone knows someone who was killed, or lost a loved one, or lost their house, or was otherwise directly affected.

As recover begins, our communities will learn many lessons from this disaster, some of which may be worth sharing down the track. But for the moment, our thoughts need to stay with those who have lost so much.

www.redcross.org.au

Patch Adams is an American doctor who believes, literally, that laughter is the best medicine. He was made famous by the aforementioned film which was inspired by his life. You may remember it starred Robin Williams. Patch eschews what he sees as the over-seriousness and false hierarchy dominating western medical care. He also likes acting the clown.

Barack Obama is President of the United States. (I know that you know that, but that’s the first chance I’ve had to write it as a statement of fact rather than hope). Obama has a great respect for the traditions which keep history alive. He has little respect for conventions which kill off innovation and original thought.

The powerful quality shared by Adams and Obama is what we might call ‘selective conformity’.

From very early in our lives, most of us start carrying with us a swag of social norms. Doing so is essential to acceptance. Society isolates and casts out those who are excessively different in the same way that the immune system wards off germs.

Unfortunately we become so used to carrying our collection of conformances with us that we forget to set them aside at times when they are no longer useful.

Our norms have us accepting outdated work practices. They cause us to disregard interesting but risky ideas, hampering innovation. They see us granting respect to position rather than merit. They allow racism and other discriminations to fester. They keep many in dead-end jobs and spiritless lifestyles. They promote government and business cultures in which political agendas and ideology stifle enterprise for the common good, the knee-jerk outnumbers the thought-through and mediocrity is the only winner.

Selective conformity allows those who possess it to carry enough norms with them to achieve acceptance but not so many that they are held back. It allows a doctor to wear a red nose if it makes his patient laugh and a president to appoint a cabinet member from the previous administration because he’s the best man for the job.

Of course, selective conformity is available to all of us. We can all draw on it by being honest with ourselves, by asking ‘why?’ more often, by challenging the status quo as an end in itself. It does require courage, taking us closer as it does to the precipice of social unacceptance. But I suspect we’d all find some liberation in the lighter load.

As it turns out, your investment with this friend is a winner. The fund starts providing you with consistently solid returns; it’s astonishing how clever this bloke is. The fund’s reputation grows. Soon everybody who’s anybody wants in – even more so when admission to the fund is restricted by invitation only.

Things continue in this comfortable vein for some time. While the market is strong, the performance of this fund is greenbacks on the cake. Whenever the market starts to head south – and this is the best bit – the fund continues to grow at over 10%! It seems too good to be true.

And it is.

If there is one story that captures the essence of the financial market’s ‘annus horribilis’ in 2008, it must be the emerging story of Bernard Madoff’s gargantuan fraud. (If you’ve missed the story, there’s a good summary at http://is.gd/cp2a.)

The Madoff fraud – like its big brother, the Global Financial Crisis – is characterised by one persistent weakness: the failure of participants at all levels to pursue what Jim Collins calls the Brutal Facts (http://is.gd/cpmI).

The Brutal Facts, put simply, are the truth. While it might seem self-evident that we would want to know the truth in all situations, the reality is that most of us have a strong tendency to avoid the truth when it might hurt.

In finance and business this leads many to ignore the fundamentals. It happened during the internet bubble a few years ago, where businesses without any cashflow were ridiculously overvalued by investors. It has happened in the Subprime crisis, where high risk loans have been disguised behind a heavy camouflage of complex derivatives. And it has happened to Mr Madoff’s faithful investors who have learnt, to their cost, that money doesn’t grow on trees afterall.

We’re all prone to it. Whether it’s suppressing the sinking feeling that a new assistant isn’t going to be up to the task, convincing ourselves that we are indispensable, or putting off a doctor’s appointment for fear of what might be revealed.

It takes a clear head – as well as a fair degree of honesty and courage – to confront the Brutal Facts. This makes it easy to shrug them off when we’re busy, and underlines the reason why we need to give them space during our down time.

Over this New Year period, be wary of friends bearing unbelievable investment opportunities. But don’t miss the chance to think about what Brutal Facts you might be overlooking or ignoring.

Things hotted up after that though. The ‘to do’ list quickly got very long. Apart from finding a puppy for the girls and organising a basketball ring for the White House, you wouldn’t believe how much work there is to do to get ready for the top job.

First there were the phone calls to get through. Seems every world leader has to be able to tell his or her people that they have called the president-elect to offer their congratulations. I guess if I take their call it makes them look important at home. Thankfully, some just dropped me a note; the congratulatory letter from Mahmoud Ahmadinejad was unexpected.

Then I had to start finding people to work with me in the White House. Had a big win early when Rahm agreed to be my Chief of Staff. Isn’t he just the image of Josh Lyman from West Wing! If Rahm can be as sharp and strategic as Josh we’ll be in good hands. Other jobs are harder to place though. I tried to track down C J  for the press secretary role but she’s busy making movies. Sarah Palin probably thinks she has what it takes to be Secretary of State, but I’m not sure how well she would stay on top of things once she moved to Washington and lost her view of Russia. I doubt the “first dude” would enjoy Washington either as there’s not much to shoot in DC. So I’ll have to think about those jobs, as well as all the various advisory roles, for a bit longer.

Speaking of advice, it’s only been a week but I’ve had plenty. If I compiled all the ‘first five things Obama must do’ lists that the commentators and experts have put together, I’d have enough work to get us well into a second term. Must say it seems a bit odd, though. A lot of the expert advice on the financial crisis is coming from the same experts who got us into this mess in the first place. I’ve also received advice from all the living former presidents, the most salient of which came from from George Bush Snr.: don’t let your kids go into politics.

There’s a mountain of planning to do. We’ll want to get a running start as expectations are high and the only way I’ll be able to meet them will be to come up with something BIG. A ‘New New Deal’. The name needs a bit of work, I know. Sounds a bit like a game show these days.

My first week as President-Elect was wrapped up by a quick visit to what will be our new home: the White House. The Bush’s were very friendly and gave us the grand tour. I’m sure glad someone else will be doing the vacuuming and mowing or I’d never get anything done in my term! It was great to see the Oval Office too, and to have a chat to George about the Big Job. I did my best not to look or sound as if I owned the place yet. There is only one president at a time and I must let George see out his term. Gee it’s hard not to overshadow him though.

This, I suggested, was an example of a broader complexity we are faced with in our lives, particularly our working lives. “Modern evolution almost requires complexity as a matter of course.” Feedback from many of you over the years has reinforced that I wasn’t alone with these thoughts.

Has anything changed? That depends on your point of view.

On a macro level, our world does seem to have become more complex. Certainly not less. Surveys suggest that workplace stress levels are high and that working hours are long. Email has become more of a burden than a tool. Customers are tired of dealing with companies who bark but don’t bite when it comes to making service simple.

Global markets create opportunity but complicate commerce. In response, governments lay on the laws while businesses battle for their slice of the pie by offering more and more choice. Notice how the typical market response to climate change is simply to extend the range with a ‘green’ product. ‘Carbon neutral’ beer is one of the more bizarre.

The reality is that this societal complexity is not going to go away. It has, in fact, always been with us. All that changes is its form and context. Way back in 1889, poet Banjo Paterson wrote, in Clancy of the Overflow:

“… the hurrying people daunt me, and their pallid faces haunt me
As they shoulder one another in their rush and nervous haste,
With their eager eyes and greedy, and their stunted forms and weedy,
For townsfolk have no time to grow, they have no time to waste.”

Sound familiar? And he didn’t have to deal with traffic congestion or email or 35 varieties of yoghurt.

Despite all this, a degree of simplicity is still possible at a more micro level – at the level of you and I and the organisations we work in. The trick, as I alluded to in another article, is to avoid fighting against the wind and waves and, instead, to control your own boat as best you can.

Put another way, if your business, your work or even your life is more complex than you would like, there is little point blaming the market, or the times, or the technology. There is even less point waiting for these things to change. Rather than trying to avoid complexity, we need to come to terms with it. To adapt to it. To find, each of us, our own way of steering through it.

In the end, it’s about the choices we make. We can let the waves of complexity break over us, or we can turn around and catch a ride with them. The latter takes a bit of effort but is ultimately much more rewarding.

‘You said “no” to that urgent order I sent through,’ says Mark sharply.

‘That’s right. We can’t do it in the time you want.’ Kate surprises herself with her outward calmness.

‘But we … you … we … never say “no”. We’re all about service, remember. Service. The customer as number one and all that. Isn’t that what we talked about only last weekend at the retreat?’

‘Yes,’ replies Kate, ‘but it was “customers” that we talked about. Not “the loudest customer with the most urgent order”. There is a difference.’

‘Oh, come on! These guys have an urgent order themselves which they won’t be able to meet if we can’t supply them today. They’ll go nuts. I’ll be spending the next few weeks getting them back on board.’

‘That might be the price we pay for avoiding a whole lot of cost and hassle for a lot of other people,’ says Kate. ‘I could change all our plans to get this urgent order through. If I do that, I will satisfy this one customer. Given that we are already flat out, other orders – orders that have already been scheduled – will be put back. That will mean at least three customers who’ve been promised delivery today will end up receiving their product late. On that basis alone the maths is simple: three annoyed customers versus one annoyed customer. No change wins.’

By now the redness has crept up and colonised the whole of Mark’s face. Kate’s apparent unflappability only seems to increase the hue.

‘But the factory can run faster if we ask them too. We’ve done it before. Just squeeze the order in. That way everyone is happy: better productivity and extra sales. A win-win.’

‘No. That won’t work. Every time we do that we have quality problems. We end up throwing out defective product and we put our quality reputation at risk by sending out substandard product. In other words, more cost and even more disgruntled customers.’

‘Then let’s run overtime. I need this order to meet my budget,’ pleads Mark.

‘No. I won’t do that either. This product you’re ordering hardly makes us any money – the margin is already low. Run it on overtime and we go backwards. It might make your sales volume look good, but it will cost us more. And on top of that, this customer of yours only orders from us once every two months. They’re not that important.’

‘Not important!’ Mark’s exasperation leaves him momentarily lost for words. ‘Not important. Of course they’re important. Every customer is important. Every sale is important.’

Kate is unperturbed. ‘Relatively less important. The three customers we would irritate are all major customers. You know: big sales, big contributors to our profits. The reality is that moving heaven and earth for this one small customer is simply not worth the trouble or cost if we look at the big picture. That was another catch phrase last weekend, if you remember.’

Mark has no response. He turns away and stares blankly down the corridor, then looks back at Kate.

‘So what am I supposed to tell them?’ he says, subdued.

‘You have to use your least favourite word. You have to tell them the truth. You have to tell them sorry but “no”. N. O. Not this time.’

Kate waits for a response but is met only with a silent stare. She turns her attention to the wall beside her. A large whiteboard summarises the production plan for the next few days. She turns back to her computer and taps away for a moment, then looks back at Mark.

‘Tell them we can get it to them on Friday afternoon. Point out that that will be a day quicker than what we normally promise; that you are doing them a favour.’

‘Sure,’ says Mark dispiritedly. He skulks off.

‘And tell them,’ says Kate loudly after him, ‘to learn how to say “no” themselves.’

As she turns back to her planning board, Kate ponders the stress, extra cost, rework, waste and general complexity she has just avoided for the business.

‘Wow,’ she says quietly to herself. ‘”No” is a powerful word if you want to keep things simple. I’ll have to try using it more often.’

Spare me the dramatics. Spare me the countless column-inches of ‘how did it happen?’ analysis. The most surprising aspect of the recent financial market crisis has been the surprise itself. It was always going to happen. Now that it has, perhaps we can remind ourselves of a few home-truths.

At its core, the current economic situation is no different from any previous collapse. It boils down to too many financial institutions lending too much money to too many people in excessively risky situations. 

It’s been an orgy of lending. Not only have banks been injudiciously lending to house-buyers. Financiers have been injudiciously lending to the banks so that they could lend more to house-buyers.

Meanwhile, the suppliers of all the stuff we use have been freely extending credit to department stores so that they could buy more stuff to sell … on credit. As I write, a number of U.S. retail chains are going to the wall having overextended themselves in both directions.

The only real difference between this credit crunch and previous versions has been that the monetary manipulations this time were the financial equivalents of a triple twisting, double somersaulting dive in the pike position. Nevertheless, as we’ve now been reminded, no matter how fancy the gymnastics, a dive always ends in a splash.

And so to the home truths. The single biggest factor in the drama surrounding the current collapse has been – and herein lies a broader lesson for business and management – the total disregard for the fundamentals, the basics, the simple truths. 

Every week, the financial advisor on a local radio station repeatedly reminds callers that when it comes to money, the bigger the reward, the bigger the risk. Yet as the rewards have piled up, few have dared to consider the riskiness of their situation.

Another example. Anyone who has done any investing will have been reminded (if only in small print) of the maxim that past performance is not an indicator of future performance. Yet for the last few years a great many – including numerous slick-selling lenders – have chosen to ignore this truth. 

In fact, as it’s all gone pear-shaped, our ‘self-serving bias’, as psychologists call it, has blossomed. This is the tendency to take credit for the wisdom of our decisions when things go well but blame others when they don’t. (Listen to a politician if you need an example.)

In virtually every aspect of life – business and work, parenting, fitness, golf, you name it – there are well established simple truths. The challenge is not to forget them in the ever-tempting desire to ‘get rich quick’.