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8 April 2017

Wilful Blindness

Tag(s): Boards, Business, Leadership & Management, Politics & Economics
In the trial of Jeffrey Skilling and Kenneth Lay, the CEO and Chairman respectively of Enron, Judge Simeon Lake summed up by instructing the jury:

“You may find that a defendant had knowledge of a fact if you find the defendant deliberately closed his eyes to what would otherwise have been obvious to him. Knowledge can be inferred if the defendant deliberately blinded himself to the existence of a fact.”

Judge Lake was applying the legal principle of wilful blindness; you are responsible if you could have known, and should have known, something which instead you endeavoured not to see. Skilling and Lay could have known, and had the opportunity to know, just how corrupt the company was. Their defence not to know was no excuse under the law. They could and should have known and so were responsible. Wilful blindness was first developed as a legal concept in the 19th century. A judge in Regina v Sleep ruled that an accused could not be convicted for possession of government property unless the jury found that he either knew the goods came from government stores or had ‘wilfully shut his eyes to the fact’.

From then on judicial authorities referred to the state of mind that accompanied one who ‘wilfully shut his eyes’ as ‘connivance’ or ‘constructive knowledge’. The concept is widely used in cases of drug trafficking or money laundering. The mule who is paid to carry illicit drugs will plead ignorance of what the parcel contained. This is no excuse as the carrier should have made it her business to know. The law doesn’t care why you remain ignorant, only that you do.

Once one understands this idea one can see it everywhere, and far too often in cases that have not come to court: in the Catholic Church over abuse of children, in Nazi Germany, at BP, in the Iraq war,  in our continuing failure to reform the banking system. Some of the greatest crimes have been committed in full view, not hidden away, and yet thousands of people chose not to look or to question.

But wilful blindness also applies to common strands in human behaviour. We seek out people who are like ourselves. This is human nature but in the process we find it more difficult to accept diversity. If this is applied in a company then questioning of unacceptable norms may not happen. If it is applied in a community if leads to a lack of debate over political issues. The preference people have to live with others like themselves has made a considerable impact on the political map of the USA. Whereas, in 1976, only 26% of people lived in landslide counties, by 2000 45% did. This goes a long way towards explaining the polarisation that has so beset American politics leading at times to a near-breakdown in government. But this phenomenon is not confined to the USA.

Wilful blindness can be reinforced by the love we have for individuals or institutions like the church. The child-abuse scandals that have engulfed the Catholic Church in the USA, UK, Ireland, Canada, Australia and elsewhere were allowed to continue for decades because a love of church and tradition conspired to keep whole communities blind to what they deep down always knew. In Ireland the 2005 Ferns Inquiry unearthed one hundred complaints against twenty-one priests in just one diocese. In 2006 the Murphy report examined the history of 46 priests, picked from a sample of 102 against whom complaints had been lodged. Enquiries into just those 46 priests produced allegations from more than 300 children. A further report in 2009 found that ‘maintenance of secrecy, the avoidance of scandal, the protection of the reputation of the church and the preservation of assets’ were more important than justice for the victims. The Pope’s envoy to Ireland refused to testify before Irish lawmakers, while none of the bishops who failed to report paedophile priests has been dismissed. Today, a third of the Irish population has no trust ‘at all’ in the Church.

Albert Speer, Hitler’s chief architect and, after 1942, the second-most powerful man in the Reich, was one of the few of the Nazi leadership not to be hanged following the Nuremburg trials. He became outspoken about the criminality of Hitler’s regime and was determined to accept responsibility for what he had done as a member of the government. But yet he was blind to what he was accepting responsibility for. His biographer, Gitta Sereny says “Speer was … a highly talented man, highly intelligent, but studied obliviousness was his defence. And the defence was there because he somehow knew there was something wrong”. His blindness, according to Sereny, was profoundly motivated by Speer’s love for Hitler. Hitler believed in his talent, gave him tremendous opportunities to express it and so Speer could not face up to the dreadful crimes that Hitler and his cronies were committing every day.

Robert S. McNamara was US Secretary of State for defence in the 1960s. He was as convinced a Cold Warrior as any of his colleagues. His job as he saw it was to prosecute the Vietnam War, not to question it. He was later to admit that his passion, both for the ideology of the Administration and for the success of his career, blinded him to any understanding of his enemy. Years after the war he was to meet North Vietnamese former foreign minister Nguyen Co Thach. Thach, who was fluent in both English and French, said “Mr McNamara, you must never have read a history book. If you had, you’d know we weren’t pawns of the Chinese or the Russians. McNamara, didn’t you know that? Don’t you understand that we have been fighting the Chinese for one thousand years? We were fighting for our independence. And we would fight to the last man. And we were determined to do so. And no amount of bombing, no amount of US pressure would ever have stopped us.”

Ayn Rand was an American novelist and economic libertarian whose views have inspired many people in influential places. She believed that if he were only liberated from the regulations and constraints imposed by government, man would attain ever greater heights of freedom, creativity and wealth. “I am opposed,” said Rand, “to all forms of control. I am for an absolute laissez-faire free unregulated economy. I am for the separation of state and economics. “

One of her most devoted admirers was Alan Greenspan who took over the Federal Reserve in 1987. He wanted to do whatever he could to deregulate the market but he did it quietly by pressing for a series of small incremental changes. It was as if the fabric of regulation was a Swiss cheese: put a few holes in, then a few more – and eventually there’s no cheese left.  What followed was a series of disasters. In 1994, when Greenspan raised interest rates from 3 per cent to 3.25 per cent, the market place was full of derivatives that assumed interest rates would stay low. When they rose instead, all hell broke loose. Major corporations like Procter & Gamble admitted to billions of dollars in losses from largely unregulated derivatives, many of which even their internal financiers did not understand. Congressional hearings were held, in which George Soros testified that “there are so many of them and some are so esoteric, that the risks involved may not be properly understood even by the most sophisticated investors”

But shortly after, Greenspan raised interest rates another 0.5 per cent, causing a bloodbath on Wall Street. Property and casualty insurers lost more than they had paid out on Hurricane Andrew. Hedge funds, banks, securities firms and the life insurance industry lost billions. Virtually every kind of institution, from every sector of the economy, suffered massive losses. When Long Term Capital Management became insolvent in 1996, the size of the failure threatened the entire US economy.

You can trace this series of debacles from 1987 through to Enron in 2002 and the banking crisis in 2007-8. But in every case because derivatives were largely unregulated the regulators had no warning of each new catastrophe because they had no information about the market. When Greenspan was finally confronted by Congress he admitted that there was a flaw in his thinking but held to his fundamental view that the markets acted best when unregulated, clearly blind to the evidence that he was wrong. Financial Times journalist Gillian Tett, whom I have had the pleasure of meeting and who was one of the few journalists to foresee the 2007-8 crisis[i], compares such blind faith to the medieval Church.

“If this was a religion, Alan Greenspan was the Pope. He blessed derivatives. Then you had the high priests up at the altar passing out blessings in the financial Latin that the congregation don’t understand. The Pope is saying it’s all miraculous and wonderful and the blessings come in the form of cheap mortgages.”

In her superb book Wilful Blindness[ii] Margaret Heffernan explains these and other excellent examples. She describes scandals both in the public and the private sector caused by the wilful blindness of company boards, leadership teams, and even whole communities. She examines what makes us blind and what it is in human nature, in the structure of our brains and of our institutions that makes us so prone to this weakness. She looks at the comforts and costs of our refusal to see and at the inspiring individuals who prove that we could see better.

From phone hacking to Deep Water Horizon, from private denial to public healthcare, wilful blindness is all around us. It some situations it may have a positive effect. It oils the wheels of social intercourse when we ‘turn a blind eye’ to someone’s defects, physical or behavioural. And in times of national emergency, it is probably a vital factor in maintaining morale. During the London Blitz, morale was better sustained by dancing and party-going than by acknowledging a terrifying future. But more often we may think being blind makes us safer, when in fact it leaves us crippled, vulnerable and powerless. But when we confront facts and fears, we achieve real power and unleash our capacity for change. As all wisdom does, seeing starts with simple questions: what could I know, should I know, that I don’t know? Just what am I missing here?

[i] See my blog Does anyone know what is going on? 2nd November, 2013
[ii] Wilful Blindness Margaret Heffernan Simon & Schuster 2011

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