The Unaccountability Machine

The Jolly Contrarian’s book review service™ →Go uptown The Unaccountability Machine: Why Big Systems Make Terrible Decisions - and How The World Lost Its Mind — Dan Davies, 2024. Index: Click ᐅ to expand: Book reviews Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

’Tis neither malice, spite, nor virtue
Whose ledger swells, or plucks, the seedy fruits of progress —
But mainly accident.
Lest thee with surety know aught else —
Withhold thy assignations.

—Otto Büchstein, Die Schweizer Heulsuse

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—Anon.

Business administration is broken

The epic judicial processes of 2024 have been Tom Hayes’ appeal against LIBOR rigging, about which we have had much to say elsewhere, and the Post Office Horizon IT scandal. Both are resolving to the question: to what extent can we put this absolute shower down to the nefarious, or just bone-headed, interventions of individual operators.

Yet, much of the engineering of business administration — you hardly need an advanced degree in operations research to know these days, there’s a lot of it — exists specifically to prevent bad apples, or stupid apples, subverting our complex modern organisations and systems.

Much of modern business administration is a catalogue of a singular failure to achieve that basic end. Our roll of honour refers. LIBOR rigging and the sub-postmasters débâcle are but pinnacle examples. With all that infrastructure, superstructure and supervision how were a band of relatively lowly trading staff able to run riot?

Where were all the barking dogs?

With all its infrastructure, internal and external legal advice, consultancy, and, er, second sight, how did no-one stop to think something must be wildly, catastrophically, wrong with the Post Office’s theory of the situation? How did no-one, even once, applying Otto’s razor?

Rogue apples, middle England and the grace of God

Either these are peculiar, localised problems — rogue gangs of bad apples plague the innocent houses of commerce — or the prevailing business administrative paradigm is in crisis and we need another theory of the game.

Because it relieves executives of accountability and leaves only a deniable residue of responsibility for hiring them in the first place, “bad apples” is always the preferred diagnosis. The paradigm being in crisis, by contrast, suggests senior executives take credit for all the good stuff, dodge the rap when things go tits up and live a charmed life never being honestly marked to measure for anything. They are a waste of money, in other words.

LIBOR submitters fit the “rogues gallery” identikit nicely. By making microscopic adjustments that no-one else would notice, they (allegedly) stood to make multimillion-pound bonuses for themselves. It was almost a victimless crime.

The post office middle managers do not. If they had anything to gain personally from vilifying pillars of the community up and down the country, it was indirect and paled in comparison to the city bonuses on offer to the LIBOR submitters. These people do not seem psychopathic. Their motivations are not base. They do not resemble “bad apples”. They seem unremarkable, familiar, mediocre middle managers.

Watching their excruciating evidence, three things occur: first — The weave of life’s tapestry wouldn’t have needed to be that different for these witnesses themselves to have been sub-postmasters on the other end of this outrage. None more so than CEO Paula Vennells, a middle-English lay Methodist, who even looks like a sub-postmaster.

Second — A montage of every utterance by every witness of the manifold variations of “I don’t remember” would go for hours.

Third — There but for the grace of God go I. Post Office in-house legal head Rodric Williams is a fifty-something expat New Zealander, whose career trajectory, in vector if not altitude, is strikingly similar to mine. In the halogen glare of cross-examined hindsight, his ineffectual interventions in an epic miscarriage of justice over an extended period are regrettable, but none of them resonate as odd. Williams was adept at the sort of pencil-pushing, risk-averse buttocracy that is drilled by bitter experience into every single inhouse lawyer in the land. This is what inhouse counsel do. This is how we behave. We should ask ourselves: knowing what he knew then, would we have done any differently? We should not kid ourselves here.

Modern corporation as an unaccountability machine

Which brings us, finally, to Dan Davies’ fascinating new book. There is, he reports, a crisis of accountability in the modern commercial world: the relationship between “we” the general public and “we” the representatives and managers of the corporations which intermediate much of public life — many are on both sides of this equation, of course — his irreconcilably broken down. This is because modern corporations are designed to diffuse individual accountability for the actions a corporate legal entity takes, using what Davies calls “accountability sinks”. This is Davies’s example:

Someone — an airline gate attendant, for example — tells you some bad news; perhaps you’ve been bumped from the flight in favour of someone with more frequent flyer points. You start to complain and point out how much you paid for your ticket, but you’re brought up short by the undeniable fact that the gate attendant can’t do anything about it. You ask to speak to someone who can do something about it, but you’re told that’s not company policy.

The unsettling thing about this conversation is that you progressively realise that the human being you are speaking to is only allowed to follow a set of processes and rules that pass on decisions made at a higher level of the corporate hierarchy. It’s often a frustrating experience; you want to get angry, but you can’t really blame the person you’re talking to. Somehow, the airline has constructed a state of affairs where it can speak to you with the anonymous voice of an amorphous corporation, but you have to talk back to it as if it were a person like yourself.

One creates an accountability sink by delegating the administration of a human process to a rulebook and then not giving anyone direct power to override it. Airlines, banks and online retailers of course have no access to anyone whatsoever. But the crushing stasis that anyone who works in financial services will know is a variety of the same thing.

And it explains exactly why noone saw, or appreciated the significance of or stopped to consider the implications of, the potentially incendiary advice they were receiving. it was not their job to second guess a process that had been set on rails well before they were involved. They were like those furious ice-sweepers in the sport of curling — the policy having been set and launched, it had momentum, and their job was to purely facilitate its prosecution. It was no part of their role to impede its stately progress. From an immediate career path perspective, the last thing these drones would want is to create ructions further up the chain of command.

In organisations over a certain size there is a presumption, not lightly rebuttable, that others in the organisation know what they are doing. This is its own accountability sink. Questioning a decision that appears to have been made elsewhere — whether by application of rigid policy or the exercise of someone else’s discretion — is to sell a personal put option whose benefit, if there is one, accrues to the organisation, but whose loss allocates solely to you. If you turn out to be right, someone else carries the can, if you’re not, you will. Either way, you have lost a friend.

Your only upside is avoiding an unthinkably remote tail risk: that some day, years from now, the entire shabby affair will be exposed and all participants held to public account before the watching eye of the internet. Even then if you end up at even money you will be lucky.

Bear in mind, too, that these people are paid partisans. Litigation in the common law world is an adversarial process. It is not a fact-finding enquiry. Yes, there are standards of disclosure and honesty required of witnesses but, upon finding weakness in a witness, the litigants instinct is not to instantly concede defeat but to find a better witness. The theory of the case rarely

A special mention of the ultimate flimsiness of legal professional privilege here. Some people who really ought to know better put in writing some extraordinary things. The misjudgment seemed so total until you realise that, normally , this class of communications would never see the light of day, barred from view by the deep magic of litigation privilege.

Individuals are, therefore positively disincentivised couraged from raising their hands.

We should not underestimate the overwhelming power of plausible deniability.

The role of in-house counsel

There is an argument, unstated in much commentary on the case, that the primary role of in-house counsel — not just the GC in her papers to the board, but all lawyers in the organisation — is as the organisation’s moral conscience. They, and their compliance colleagues, are ideally positioned to sit above the fray from where they can challenge the probity of the organisation’s baser commercial instincts.

That’s a plausible theory of the game, but it hardly reflects current practice. JC has a tongue in cheek history of in-house legal which charts the growth of the in-house legal function from a gray fellow in a cardigan behind a desk next to the photocopiers who, wordlessly managed the firm’s powers of attorney, to the weaponised, operationally supported 1,000 strong battle unit we know today.

No part of that transformation grew out of the yen for a stronger corporate conscience. It was about business facilitation, cost management (legal eagles were meant to be able to call bullshit on their external advisors) and the commodification of legal services. Precisely, the urge to codify rules and take away the need for anecdotal intellectual reflection about what the firm was doing. In-house legal is an accountability sink machine.

Doubters are invited to peruse the contemporary thought-leadership of legal visionaries in its natural home: LinkedIn. There is much delusional halfwittery about legal service delivery, DEI, how to automate the legal department, demand management, the role of AI in replacing lawyers. But good luck finding a think-piece that even mentions the law, let alone anything as nebulous as an in-house lawyer’s obligation to make ethical judgments.

It is easy, and tempting, to put this down to an unusual confederacy of stupid apples — this suits our personal self esteem because such a thing could not happen to us This is the house we have made