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5 July 2019

The Fifth Risk

Tag(s): Politics & Economics, Foreign Affairs, Technology
I am again indebted to our son Andrew for recommending to me an excellent book by Michael Lewis, The Fifth Risk.[i]  I should not really have needed this recommendation as I have read a number of books by Michael Lewis including for example The Big Short, which was made into an Oscar-winning film and Liar’s Poker, that defined the excesses of the 1980s, but somehow this one had escaped my attention. Lewis has the touch of genius about him combining a remarkable journalistic skill in uncovering the truth behind the big disasters that happen from time to time and the ability to describe these in highly readable style.

This time he has approached the election of Donald Trump as president of the United States of America, not from the point of view of policy but looking at the extraordinary and dangerous lack of competence. The morning after Trump was elected president, the people who ran the US Department of Energy – an agency that deals with some of the most powerful risks facing humanity – waited to welcome the incoming administration’s transition team. Nobody appeared. Across the US government, the same thing happened: nothing.

People don’t notice when stuff goes right. That is the stuff government does. It manages everything that underpins people’s lives, from funding free school meals, to policing rogue nuclear activity, to predicting extreme weather events. It steps in where private investment fears to tread, innovates and creates knowledge, assesses extreme long term risk.

By federal law the nominees of the two major parties are expected, months before the Inauguration, to prepare to take control of the government. The government supplies them with office space and equipment in downtown Washington DDC but they are expected to pay for the necessary staff out of campaign funds. Trump’s campaign team explained this to Trump but he replied, ‘**** the law. I don’t give a **** about the law. I want my ****ing money.’ His people carefully explained that if he didn’t run with a transition team it would look like he didn’t think he had any chance of being president. Trump saw the sense in that but still thought it was a waste of time. He was so smart, he said, that he could do the transition arrangements in a couple of hours.

Except that he couldn’t. Noone could. It involves finding candidates for 500 different offices. While in the UK we are used to a permanent civil service and an incoming Prime Minister just needs to appoint about 100 ministers from his own party, in the US everything changes with a change of administration. Because of this it has been the long standing tradition for an outgoing president to help an incoming one with the transition, even when they are from the opposing party. So George W. Bush helped Barack Obama and Barack Obama was willing to help Donald Trump but Donald Trump didn’t want any help from Barack Obama.

The hero of Lewis’s book is a man called Max Stier who, despite a conventional education at Yale and then Stanford Law School which would normally lead to a prosperous legal career, thought the U.S. government was the single most important and most interesting institution in the history of the world and couldn’t imagine doing anything but working to improve it. He persuaded a financier called Sam Heyman to set aside $25 million for him to create an organisation to attract talented young people to want to work for the government. Partnership for Public Service trained civil servants to be business managers; it brokered new relationships across the federal government; it surveyed the federal workforce to identify specific management successes and failures; and it lobbied Congress to fix deep structural problems. It was Max Stier who had persuaded Congress to pass the laws that forced Donald Trump to actually prepare to be president.

There are a great many Americans who believe that the US government gets in the way and they would all be better off if it was considerably down-sized. That’s because they don’t understand what it does. The basic role of government in the US or the UK or anywhere else is to keep us safe. The US government employs two million people, 70% of them one way or another in national security. It manages a portfolio of risks that no private person, or corporation, is able to manage. Some of these risks are easy to imagine: a financial crisis, a hurricane, a terrorist risk. But most aren’t: the risk, say, that some prescription drug proves to be both so addictive and so accessible that each year it kills more Americans than were killed in action at the peak of the Vietnam War. Other risks that the government must consider might seem unreal:  a cyberattack that leaves half the country without electricity or some airborne virus wipes out millions, or that economic inequality reaches the point where it triggers violent revolution.

Enter the presidential transition. A bad transition took this entire portfolio of catastrophic risks and made all the bad things more likely to happen and the good things less likely to happen. Within days of winning the election the entire transition team was fired. After all Trump and his family were going to manage it themselves but they had no idea how any of it worked.

The Department of Energy spends a lot of time and money trying to make bombs less likely to explode when they are not meant to explode. It was staffed by peole who were experts in nuclear physics. Trump sent in someone whose qualifications seemed mainly to be as a lobbyist for carbon producers. He reminded the experts there of McCarthyism as he asked them to provide a list of Department employees or contractors who attended any of the  Conference of the Parties (under the United Nations Framework Convention on Climate Change ) in the last five years.

Lewis interviewed one of these experts and asked him what were the principal risks the US faced. At the top were Russia and China. Then North Korea and Iran. The serous risk in Iran wasn’t that the Iranians would secretly acquire a weapon. It was that the president of the United States would not understand his nuclear scientists’ reasoning about the unlikelihood of the Iranians’ obtaining a weapon, and that he would have the United States back away foolishly from the deal, which is exactly what he did. Released from the complicated set of restrictions on its nuclear-power programme, Iran would then build its bomb.

And the fifth risk? Project management. The human factor.  The certainty of human error. The cock-up theory rather than the conspiracy theory of history. Another way to think of this risk is the risk a society runs when it falls into the habit of responding to long-term risks with short-term solutions. Some of the things any incoming president should worry about are fast-moving; pandemics, hurricanes, terrorist attacks. But most are not. Most are like bombs with very long fuses that in the distant future, when the fuse reaches the bomb, might or might not explode. It is the innovation that never occurs, and the knowledge that is never created, because you have ceased to lay the groundwork for it. It is what you never learned that might have saved you.

The Defense Department has a well-known research-grant programme called DARPA that funded the creation of GPS and the internet, among other things. Much of the innovations that we all appreciate came from US government sponsored research. Private enterprise will rarely work on research for which it cannot see a business case.

The Department of Energy had a similar, if less well funded, programme called ARPA-E. This was conceived during the George W. Bush administration. It was comparatively trivial - $300 million a year. It made small grants to researchers who had scientifically plausible, wildly creative ideas that might change the world. If you thought you could make water from sunlight, or genetically engineer some bug so that it eats electrons and defecates oil, or create a building material that becomes cooler on the inside as it grows hotter on the outside the only place for you to take your idea and get funding was ARPA-E.

ARPA-E won the praise of business leaders from Bill Gates to Lee Scott, the former CEO of Walmart, to Fred Smith, the Republican founder of FedEx, who has said that “pound for pound, dollar for dollar, activity for activity, it’s hard to find a more effective thing government has done than ARPA-E.” Trump’s first budget eliminated ARPA-E altogether. It cut funding to the national labs implying the laying off of six thousand people. It eliminated all research on climate change. It halved the funding for work to secure the electrical grid from attack or natural disaster.

Lewis’s expert witness said when he saw the budget “All the risks are science-based. You can’t gut the science. If you do you are hurting the country. If you gut the core competence of the Department of Energy, you gut the country.”

Lewis closes as follows “But you can. Indeed, if you are seeking to preserve a certain worldview, it actually helps to gut the science. Trump’s budget, like the social forces behind it, is powered by a perverse desire – to remain ignorant. Donald Trump didn’t invent this desire. He was just its ultimate expression.”


[i] The Fifth Risk Michael Lewis Allen Lane 2018




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David's Blog

A Close-Run Thing[i]
20 July 2019

The Fifth Risk
5 July 2019

Alan Johnson
1 June 2019

The College of Arms
18 May 2019

How Democracies Die
11 May 2019

Leadership (2)
27 April 2019

In Memoriam Peter Short
20 April 2019

The Great Escape
30 March 2019

Leadership
23 March 2019

The Spring Statement
16 March 2019

The Moral Maze
9 March 2019

First Man
23 February 2019

Institutions
2 February 2019

Tragedy and Challenge
26 January 2019

Uncharted Waters
19 January 2019


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