| Obliquity |
| John Kay, Profile Books, 2010, 210 pages, £10.99. |
| One of John Kay’s previous books was titled The Truth About Markets. This one might be sub-titled ‘The truth about consultancy’. In his latest offering Kay looks back on his stint as a consultant and asks why his clients did not use the models they paid his business to produce. He attributes it to the fact that they used models to justify decisions which had already been made, something he refers to as Franklin’s Gambit after the former American polymath. In other words, people tend to look at evidence in the way a drunk uses a lamp post: for support rather than illumination. Kay goes on to note the damage the use of this gambit has done, from the Iraq war to the global financial crisis. |
| From the vantage of hindsight, Kay recommends instead what he terms obliquity, meaning that the most effective decisions are often those which deliver the desired outcome indirectly. For example, finding the shortest route for the Panama Canal involved starting out in the ‘wrong’ direction, as the canal doesn’t go directly east-west. Broader goals such as happiness or the accumulation of wealth are also often best achieved via another activity, such as child rearing or developing a successful product in business. |
| Kay illustrates his approach by dividing decision makers into hedgehogs and foxes. The former believe they know one big thing and pursue it directly. The latter go for a more adaptive and flexible approach. President George W Bush was a hedgehog on Iraq, whereas President Roosevelt was a fox in his approach to tackling the Great Depression. Foxes prefer oblique solutions which are multi-faceted and acknowledge the limits of what they know. Such approaches work best in uncertain and complex systems where the outcome may depend on the reactions of others. Direct solutions work where everything is known and uncertainty is absent. Obliquity is about adaptation and muddling through, it is against grand designs and sweeping plans. |
| Business economists will recognise and identify with much of this and the book is an excellent analysis of decision-making both good and bad. It is another welcome step away from the conventional models assumed by economists, towards something closer to reality. Like John Kay’s regular columns in the Financial Times, it is well written and a pleasure to read. |
| Having said that, part of me is still left feeling frustrated by Kay’s argument. The book expounds on why obliquity is so common, why we need it and what to do about it. While it is difficult to disagree with this, the author does not really explain why people seem to prefer direct solutions. Certainly, it is difficult to win business in the investment world without a clear unambiguous process. |
| It would have been interesting if Kay had taken a closer look at the type of people who gain power and become decision makers. Those with conviction and vision often rise highest in business and politics. Perhaps leaders need the qualities of both the hedgehog and the fox. Oblique approaches and those who practice them may be more honest, but they do not always win hearts and minds. |
| Keith Wade |
| Chief Economist, Schroders plc |