Hindsight

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JC: [Winding down a typically rambling rant] “... so, I ask you: why have we been so bad at stopping catastrophic risks from happening? Leeson, LTCM, Amaranth, Enron, Global Crossing, Kerviel, Madoff, Bear Stearns, Lehman, LIBOR, Theranos, London Whale, Mossack Fonseca, 1MDB, Wirecard ... ”

Middle manager: [interrupting]: Simply put, we were not proactively looking for it. We were not using data properly to evaluate risk. To add value as an in-house legal function we need to use innovative tools to crunch data, proactively spot emerging risks and escalate them to business.”

Bullshit. Bull — SHIT.

A cold night in Vienna, 1808

On a freezing night December 1808, about 1,500 people attended an akademie concert at the Theater an der Wien in suburban Vienna. The programme was to be four hours long, during which a young composer from out of town would be debuting a number of works.

The run-up to the concert did not bode well: many of the musicians in theatre’s house orchestra had “conflicting commitments” with a better-paying gig across town at the Burgtheater, and even the solo soprano dropped out at the last minute, to be replaced by an unknown teenager— “I have to hop” is no modern excuse — and the composer, an irascible fellow, kept changing the music right up to the last minute. So poor were his relations with his musicians that, on some accounts, they refused his baton, and another conductor was drafted in to lead the orchestra on the day of the concert.

The concert was a disaster. What orchestra he could scrape together was under-rehearsed — “lacking in all respects”, according to one reviewer — the poor young soprano suffered stage fright, the hall was freezing and the show badly overran. During one work, the orchestra fell apart completely and had to restart the piece altogether.

So why, two hundred years later, is there even a record of this concert — most of Supercheese’s concerts were like that, and there’s no record of any of them — and how has it found its way onto a Jolly Contrarian article about hindsight? You will not be surprised to hear there is a punchline.

Of the scathing reviews that followed, one at least — in the Allgemeine musikalische Zeitung — was prescient enough to say the following: “To judge all these pieces after only one hearing, especially considering [...] that so many were performed in a row, and most are so grand and long, is impossible.”

To the punchline then: the young foreign composer was, of course, Ludwig Van Beethoven, and in that one concert he premiered his Symphony No. 6 (“Pastoral”), his Piano Concerto No. 4, and the aforementioned Choral Fantasia, as well as playing a few choice cuts from his Mass in C Major. If that wasn’t enough — and surely the premiere of the Pastoral, by itself, would have been enough to make the record of humankind’s highest achievements — after the interval, the orchestra debuted the most revolutionary piece of music, bar none ever written: the Disco Theme to Saturday Night Fever, although then known only as Symphony No. 5 in C Minor.

Okay, so, hindsight?

If the JC could travel back in time for one night only, throughout all of human history, this is the time and place he’d choose. He’d take thermals and a cushion. Imagine being one of those lucky 1,500 who heard the fifth symphony for the first time in history. There are few profound watershed in the cultural history of our civilisation, but that is surely one. But it would be imbued with such significance only because of the two hundred years of subsequent history from which we now benefit. Those lucky 1,500 probably found it quite tiresome. They may well have — most probably did — come in later life to freight that experience with more meaning than they could apprehend at the time.

This is the human condition, summarised. Only once it has happened — past tense — and often, only months or years after that, can we possibly apprehend the significance of unexpected events.

This is where my friend the middle manager makes his category error. Data all come from the same place: the past. When we review risks, catastrophes and step changes; when we consider punctuations to the equilibrium, fair or foul our wisdom, our careful analyses, our sage opinions, our hot takes, our thought leadership — all of these are derived from, predicated on, and delimited by data which, at the time the event played out, we did not have.

And herein lies the tension and profound dilemma of the received approach to modern legal practice. For we commercial lawyers are charged with anticipating the future and provided with a methodology drawn exclusively from the past. Just occasionally this dissonance rears up and hits us: the financial controller who must charge capital to provide for shortcomings in a contract documenting a transaction that has now matured: the formal imperatives of legibility taking priority over the logic of practical common sense.

It is a persistent frame: by the time we get around to analysing the catastrophe and how it played out, all circumstances are known, all options have crystallised and all discretions have hardened. The employee who, with imperfect information and in the fog of war, tacked port when hindsight revealed a safe port to starboard is short a very ugly option. Those with executive responsibility for his performance will be mightily tempted to exercise it. This is the lesson of Sidney Dekker’s The Field Guide to Human Error Investigations.

What's the catastrophe forms comma informs, and reforms the narrative colon everything about meadows investment strategy now is obviously bogus. There can be only one explanation colon someone was asleep at the switch someone further down the chain. This is where the historian’s perspective is more useful than the thought leader’s. We know Madoff’s regulators will not asleep at the switch, because we have Harry markopolos testimony of the number of times he told them about exactly the anomalies they should, in hindsight, have been alarmed by.

it wasn't that the operators were asleep, that is to say, but that their switch was not fit for purpose. But a maladroit switch is the responsibility of the executive not the worker.

as of January 2021 we have another opportunity to see this distance before it to ossifies into wise hindsight, with the GameStop phenomenon. here the lack of attention to data is far less plausible than usual, because the putative victims of this situation had more data and more data processing capability at their disposal and possibly anyone in history. the opponent's, and aggregated bunch of retail investors coalescing around Reddit had the advantage of the network effect and the wisdom of crowds but nothing like the processing capacity or institutional support of the hedge funds whom they took down. a failure to crunch data was not the problem here. The problem was a failure of the narrative. Part of that narrative is, of course, the primacy of data. In God we trust, all others must bring data.

It is interesting to that when executives appeal for change, for Revolution, for a new way of working they focus not upon on the revealed failings of their own narrative — it's got them where they are after all so it can't be all bad — but is upon the in constant performance of those at the switch. To these people the idea that the switch isn't working, and the hierarchy supporting that's which is not fit for purpose, somehow fails to occur.