I am in the US at present and watching the financial crisis unfold here is quite disturbing and I couldn’t help but hope that those in charge of trying to manage this have some crowd surfing skills. Today’s New York Times points out that:
“Some economists worry that a psychology of fear has gripped investors, not only in the United States but also in Europe and Asia. While investors’ decision to protect themselves may be perfectly rational, the crowd behavior could cause a downward spiral with broader ramifications.
“It’s like having a fire in a cinema,” said Hyun Song Shin, an economics professor at Princeton. “Everybody is rushing to the door. You are rushing to the door because everyone is rushing to the door. Clearly, as a collective action, it is a disaster.”
This is a serious technical, economic and financial issue obviously but like most big decisions these days, the skills required to fix it are much broader and about understanding how people react to news like this. Linear, logical, rational thinking is fine up to a point, but then you have to engage the imagination and put yourself in others’ shoes. Makes me want to have a Mark Earls type advising in those smokey rooms in New York and London.