Claire Duffy's blog about public speaking and communication (in real life). Speak well, do well!
‘Speech of the Year!’ bellowed the headline in the Wall Street Journal. My enthusiasm fired up. It subsided a bit when I found the story was about ‘a regulator, of all people’, and that ‘the orator of note was from the Bank of England, and that his subject was The Dog and the Frisbee.’
I am limited in my experience of financial institutions, and Mr Banks in Mary Poppins is the only person I know of from the Bank of England, but I was pretty sure this was a rare combination. Dog. Frisbee. Bank of England. Orator.
Intrigued, some further reading revealed the man in question to be BoE Director of Financial Stability, Andrew Haldane. I checked Mr Haldane out on YouTube. Allowing for low-skilled camera operators in badly lit rooms, it is still clear from his presentations that Mr Haldane is pretty good at explaining things.
I judged this mostly by the fact that I could understand him. This is really saying something because when it comes to matters numerical I am pretty close to the back of the pack. I can’t claim to have comprehended his talks entirely, but his general drift was perfectly clear – even to me.
The Speech of The Year does not seem to exist in video, but a flick through its 36 page text was illuminating. It’s a great read, and utterly convincing. Mr Haldane and his colleague have done some research and it tells the following story: complex regulatory systems like the Basel agreements, the Dodd-Frank Act, or the Vickers recommendations, are doomed to failure.
Simple, quantity-based restrictions are the equivalent of a regulatory commandment: ‘Thou shalt not.’ These are likely to be less fallible than: ‘Thou shalt,’ provided the internal model is correct.” That is one reason why Glass-Steagall lasted for 60 years longer than Basel II.
The intended audience knows their Glass Steagall from their Basel II, but even though I don’t, I am persuaded by what he says. Why? Because Mr Haldane uses concepts I do understand to prefigure his thesis. Which brings us back to the dog and the frisbee.
The title of the talk is a metaphor. Let me summarise his opening:
Catching a frisbee is difficult….Were a physicist to write down frisbee-catching as an optimal control problem, they would need to understand and apply Newton’s Law of Gravity.
Yet despite this complexity, catching a frisbee is remarkably common….it is not an activity only undertaken by those with a Doctorate in physics. It is a task that an average dog can master….
So what is the secret of the dog’s success? The answer, as in many other areas of complex decision-making, is simple. Or rather, it is to keep it simple.
I get it. Even I get it!
Now let’s look at his speech conclusion, the metaphor has become a bookend.
Modern finance is complex, perhaps too complex. Regulation of modern finance is complex, almost certainly too complex. That configuration spells trouble. As you do not fight fire with fire, you do not fight complexity with complexity. Because complexity generates uncertainty, not risk, it requires a regulatory response grounded in simplicity, not complexity.
To ask today’s regulators to save us from tomorrow’s crisis using yesterday’s toolbox is to ask a border collie to catch a frisbee by first applying Newton’s Law of Gravity.
Isn’t that lovely? So let’s be impressed by his structure and his metaphor and take a closer look at why it works. Here’s one description.
Metaphor can create shortcuts to understanding: cognition as the crow flies. Say, you have a complex idea you need to get across. You can take your audience on an energy-sapping trek through the terrain, cross raging rivers of data, scale each conceptual obstacle as you come to it and finally, if you’re lucky, arrive at your destination. Or, you can invite them to take flight, fix their bearings and make their way to journey’s end on the wing of a metaphor.
Put more simply, we can learn something new by linking it to something you already know or something universally known. You understand the unknown by associating it or joining it to something familiar.
Every schoolteacher worth their salt knows this, but they are busy teaching school. It’s the people who would communicate so much better if only they knew it who are the ones to worry about. But they’re busy regulating banks, testing for global warming, and drafting legislation which will tie us all in knots for the foreseeable future.
‘Everything should be made as simple as possible, but not simpler’ was supposedly said by Einstein. Yes, I agree, it should. But ‘not simpler’ is difficult to define and that’s where things can fall apart. I recently found this more nuanced version:
‘Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius—and a lot of courage—to move in the opposite direction.’
Perhaps the Bank of England has it.