Guiding Quote

“Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning.” Einstein

Sunday, October 5, 2014

Old economic paradigms don't die, or fade away; their believers get awards.

In the past few months the Institute of Economic Affairs in the UK announced it's annual award to the person who made great contributions to free enterprise during their working life. The recipient of this honour was Viscount Ridley, the Brits do love a Lord, who's main claim to notoriety in the UK was to be Chairman of The Northern Rock Bank, an institution that had existed since 1850. It started life has a building society and converted to a bank in 1997, following the trend advocated by the IEA and Thatcherite economic theology.

As a bank it adopted the prevailing economic ideology, and then some, and followed a highly risky loan strategy, which included giving borrowers mortgages of up to 125% of their properties value! The end result was that in 2007 it suffered the first run on a British bank in 150 years. It had customers lining up outside it branches demanding their money back! Over a few days they had to pay out $3B. But it wasn't enough and the Bank had to be nationalized at a cost of $40B to the UK taxpayer.

Yet the man who presided over this debacle, the 5th Viscount Ridley, instead of facing any sanctions or censure ends up, seven years later, being given an award for economic achievement! A decision that would beggar's belief in rational world. Lose billions and get an award. The epitome of failing upwards.

So what does this mean in the project management world? We have an entrenched paradigm that is waterfall, and we have contending methods such as Critical Chain (which is a variation of waterfall) and Agile. Like the failed efficient market model in conventional economic theory education, waterfall is considered to be mandatory on all project courses, especially for beginners. So any new or improved PM model has to overthrow decades of conditioning and also to get the PM establishment to demote waterfall to a subset of models that only deal with well established technologies and methods. As the financial example above indicates getting any establishment to change is difficult even when the evidence of failure is over whelming.