https://www.bloomberg.com/opinion/articles/2024-05-05/the-forgotten-management-guru-who-knows-why-nothing-works

If Stafford Beer is remembered at all today, it’s for a luckless cameo trying to help President Salvador Allende run Chile’s newly nationalized industries in the early 1970s. Back then, Beer was the leading light of a movement known as management cybernetics, a math-heavy approach to studying self-regulation, feedback and decision-making systems. He developed most of the theory and its practice in the steel industry of 1950s Britain and later as a highly regarded consultant.

Allende recruited Beer at the suggestion of some Chilean engineers and managers who had studied his books. Their attempt to run large parts of the economy would likely have failed because the technology at hand — a few hundred telex machines and a rudimentary operations center with projections of hand-drawn charts — wasn’t fit for the scale of the mission. Regardless, it was cut short by the military coup of General Augusto Pinochet in 1973.


Fast forward to today, and Beer’s ideas deserve a second life. A new book, The Unaccountability Machine: Why Big Systems Make Terrible Decisions — and How the World Lost Its Mind1, makes a convincing case that this forgotten guru’s analytical approach can help us understand a lot of the big problems and small frustrations we see in companies, the economy and society.

Humanity has only grown and organized itself in larger and more complex institutions since Beer’s day. Author Dan Davies2argues that the malfunctions and side effects of our governments and industries have multiplied, too. None of this is going into reverse (absent a global war or climate catastrophe) and many people would be worse off if it did. So what we need is a better diagnosis of what causes our problems and an idea about what to do about them. Davies argues Stafford Beer can help.

The book draws out two key lessons from Beer’s cybernetics. The first is that complex social systems like companies and governments often create what Davies calls "accountability sinks." These are dead ends of responsibility, where a combination of policies, people powerless to change them and no way to communicate with someone at a level above, results in decisions that can’t be appealed or altered. A paradigm example is the frustration you will have experienced if you’ve been bumped from an overbooked flight. Moan to the check-in desk staff all you want, they can’t do anything.

These sinks can be constructed deliberately — to shield managers, bosses or ministers from the complaints of people subject to unpopular decisions — or they can appear by accident as an unexpected outcome of a system’s behavior. The latter isa malfunction that could be fixed.

The second key lesson is best summed up in Davies’ axiom: "Any system which is set up to maximize a single objective has the potential to go bonkers." The more you focus on controlling, measuring or maximizing one variable (or, in corporate speak, a "key performance indicator"), the more likely you are to ignore or lose control of something else that could prove damaging to your overall aim.

For an example of this, Davies, a former Bank of England economist and equity research analyst covering banks, picks the 2008 global financial crisis3 — or more precisely the question of how most economists and central bankers failed to see it coming. The short story is this: Independent central banks focused on inflation targeting became the fashion in the West in the 1980s and 1990s, because they were seen as the best way to promote stable conditions for investment and growth without political interference. These institutions were fairly successful at delivering steady prices and economic growth, but their policy framework let them ignore the vast buildup of private debt and mind-boggling structured credit. They had neither the remit nor the tools to tackle these looming distortions, until it was existentially important that they did.

This goes back to accountability sinks too. The debt bubble fell outside the scope of central banking concerns in the US, UK and Europe at the time. There was no higher-level governing function to consider whether an issue that wasn’t being dealt with by the system should be addressed. Sure, some investors, analysts and journalists made plenty of noise about the dangers of all this debt, but there was no person or institution whose job it was to receive, consider and act on this information.

So how can Stafford Beer help? I won’t attempt to explain cybernetics in detail, but one thing to grasp is that it doesn’t suggest looking for answers inside the mechanics of a central bank or an airline’s customer service desk. What cybernetics does is look at what a system is meant to do, what it actually does and what it is failing to deal with, or what might be festering in its blind spots.

The problems of blind spots and accountability sinks can be cured, if we wish, mainly through better communication and feedback, although I’m oversimplifying somewhat. Beer’s description of management has multiple layered functions. Each layer needs the capacity to comprehend and act on the exceptions or malfunctions of the layer below. And the role of the highest layers is to have a longer-term governing and almost philosophical function, scanning the horizon and picking up on developments or dangers that might be arise in the future. Lower orders can pursue single or limited objectives, but higher levels of governance need to preserve the viability of the system overall.

There are many other examples aside from the 2008 crisis. Davies spends two chapters dissecting the growth of shareholder-value capitalism since Milton Friedman’s famous 1970 essay The Social Responsibility of a Business is to Increase its Profits. This helped create the notion of "the market" as the great arbiter of success — and the biggest accountability sink of all.

The market drives companies to focus on short-term returns and to ignore environmental or social concerns. In this view, the long-term and uncertain payoffs from making industry greener or improving diversity make the investments required almost impossible to justify. You can see how the ideology of the market has led governments of the right and left to pursue waves of privatization, leaving countries like the UK paying long-term rents on hospitals and water-supply infrastructure to owners who often take the dividends and let the physical capital decay.

I’m at risk of making the book sound more righteous or browbeating than it is. I don’t think Davies is an anti-capitalist, but he’s very observant of its current unfairnesses and malcontents. Plus, the book has as much humor and stories of eccentricity as it does analysis and exposition. Even the serious stuff is written in deceptively simple style.

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The Unaccountability Machine is relevant now for its trenchant analysis of a wide range of instantly recognizable issues in our ever-larger and more complex global society —including the recent explosion of populism in so many countries, which Davies attributes to the failure of real choice available to many voters and the loss of feedback from discontented communities. It’s also striking to me that recent research into the safety4 of artificial intelligence is grappling with the same kinds of problems of negative side effects and dysfunction that Davies’s book draws from Beer’s cybernetics.

Davies has an optimistic aside that AI’s ability to capture and compress vast amounts of information into something humans can digest could make it an incredibly powerful tool of communication to keep industries and nations functioning and viable — so much more effective than a few hundred Chilean telex machines. On the other hand, decision-making computers that are impossible to interrogate could become the most stubborn accountability sink of all.

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