Shrivastava statler (eds ) learning from the global financial crisis; creatively, reliably, and sustainably (2012)

Learning from the Gl o b a l F i n a n c i a l C r i s i s High Reliabilit y and Crisis Management Series Editors: Karlene H Roberts and Ian I Mitroff Series Titles High Reliability Management: Operating on the Edge By Emery Roe and Paul R Schulman 2008 Dirty Rotten Strategies: How We Trick Ourselves and Others into Solving the Wrong Problems Precisely By Ian I Mitroff and Abraham Silvers 2010 Swans, Swine, and Swindlers: Coping with the Growing Threat of Mega-Crises and Mega-Messes By Can M Alpaslan and Ian I Mitroff 2011 Learning from the Gl o b a l F i n a n c i a l C r i s i s Creatively, Reliably, and Sustainably Edited by Paul Shrivastava and Matt Statler STANFORD B U SINESS BOO K S An Imprint of Stanford University Press Stanford, California Stanford University Press Stanford, California ©2012 by the Board of Trustees of the Leland Stanford Junior University All rights reserved No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Stanford University Press Special discounts for bulk quantities of Stanford Business Books are available to corporations, professional associations, and other organizations For details and discount information, contact the special sales department of Stanford University Press Tel: (650) 736-1782, Fax: (650) 736-1784 Printed in the United States of America on acid-free, archival-quality paper Library of Congress Cataloging-in-Publication Data Learning from the global financial crisis : creatively, reliably, and sustainably / edited by Paul Shrivastava and Matt Statler     pages cm   Includes bibliographical references and index   ISBN 978-0-8047-7009-5 (alk paper)   1.  Global Financial Crisis, 2008–2009.  2.  Crisis management.  3.  Sustainable development.  4.  Economic policy.  I.  Shrivastava, Paul, editor of compilation.  II.  Statler, Matthew, editor of compilation   HB37172008 L43 2012   330.9′0511—dc23  2011030083 Typeset by Newgen in 10/14 Minion To the well-being of future generations Contents Acknowledgments Introduction Paul Shrivastava and Matt Statler xi Creatively 1 Truth, Beauty, and the Financial Crisis: Evaluating What Works Robert Richardson and Matt Statler 17 2 Aesthetic Leadership: Walking Toward Economic Recovery Ralph Bathurst and Margot Edwards 55 3 Smashing Moneytheist Mirrors: How Artists Help Us Live with Financial Schizophrenia Pierre Guillet de Monthoux 4 Hence God Exists Skip McGoun 76 96 Comments 5 The Art of Finance Steven S Taylor 117 viii Contents 6 The Play Ethic and the Financial Crisis Pat Kane 121 7 Cassim’s Law Henrik Schrat 128 Reliably 8 Managing the Global Financial Crisis: Lessons from Technological Crisis Management Paul Shrivastava, William Gruver, and Matt Statler 9 Failures of High Reliability in Finance Nathaniel I Bush, Peter F Martelli, and Karlene H Roberts 10 Wrong Assumptions and Risk Cultures: Deeper Causes of the Global Financial Crisis Ian I Mitroff and Can M Alpaslan 141 167 188 Comments 11 A Busy Decade: Lessons Learned from Crisis Planning and Response from 1999 to 2009 Michael Berkowitz 199 12 A Critique of Managing the Global Financial Crisis: Lessons from Technological Crisis Management Brett Messing 205 Sustainably 13 Green Financing After the Global Financial Crisis Perry Sadorsky 213 14 245 Leveraging Ourselves out of Crisis—Again! Aida Sy and Tony Tinker 15 The Normative Foundation of Finance: How Misunderstanding the Role of Financial Theories Distorts the Way We Think About the Responsibility of Financial Economists Andreas Georg Scherer and Emilio Marti 260 Contents 16 A Multilevel, Multisystems Strategic Approach to a Sustainable Economy Mark Starik ix 291 Comments 17 The Global Financial Crisis: A Perspective from India Murali Murti and N V Krishna 313 In Lieu of a Conclusion Paul Shrivastava and Matt Statler 329 Contributor Biographies 337 Index 347 350 Index crises: and art, 55–58, 67–72; as enacted phenomena, crisis management: application to global financial crisis, 152–55, 160–62; communication, 202–3; ethical dimension of, 162; long-term, 157; overview, 147–52, 207; planning, 199–203; policy implications of, 155–59; prevention, 151; using systems frequently, 200–202 cross-sectoral collaborations, 308 cultural finance, 270, 274 culture of risk, 189–91 culture of trust, 193–95 “current financial crisis is bad” example, 28–30, 34–35 Czarniawska, Barbara, 130 Daiwa Bank, 176 dashboard visual, 125 David O’Brien Centre for Sustainable Enterprise (DOCSE), 334 decision biases, 48–49 decision making, 180–81 deference to expertise, 179–81 deflation, 217, 235 deleveraging, 147 De Morgan, Augustus, 96–97 denial, 192 Depository Institutions Deregulation and Monetary Control Act (1980), 252, 256 deposits, bank, 246, 253, 254, 256 deregulation, 131, 155, 252, 256, 284, 320–21 derivative securities, 110, 118, 171; as art, 118–19 Descartes, René, 58 description vs evaluation, 19–20 design for environment, 297 deskilling in banking, 247 determinism vs voluntarism, 267, 272, 279 Detroit, Michigan, 62–66 Detroit Industry (Rivera), 70 Deutsche Bank, 202–3 Developing Communities Project, 71 Dewey, John, 67 Dhade, A., 322 dialectical contradictions of capitalism, 246–47 dialogic art, 63, 66–67, 69 Diamond, Jared, 330 Diderot, Denis, 96–97, 106 Dimon, James, 173 disavowal, 192 discomfort zone, 335 distributed energy, 300–301 diverse workplace, 69 diversity of experience, 174, 179 Dodd-Frank Act, 148 domestic renewable energy, 215–16 dominant culture on Wall Street, 190–91 Dominican Republic, 250, 258n9 Donald Duck, 136 Dorfman, Robert, 104 dot-com technology bubble, 170, 252 Dotty Wotty House, The (Guyton), 65–66, 71 D’où venons nous? (Gauguin), 56 Drexel Burnham Lambert, 253, 258n12 drug, consumerism as a, 132 Duesenberry, James S., 103 Dupont, 305 Dutch tulip bubble, 170 early warning signs, 151 earth, physical and biological limitations of, 3–4 Earthwatch, 299–300 East Germany (GDR), 133 ecology, 157, 292, 302 econometrics, 82–83, 85, 102 economic and finance departments (EFDs), 188–89 Index economic growth post-recession, 216 economic indicators, 237, 315 economic socialism, 82 economists, responsibility of, 261–63, 280–85 Edgeworth, F Y., 98, 101 EESA (2008), 257 EFDs (economic and finance departments), 188–89 efficient market hypothesis, 283–84 electricity grid, restructuring, 159 electronic medical records, 159 emancipatory cognitive interest, 265, 271, 279 emergency operations center (EOC), 201 emergency simulation exercises, 164 emotional denial of crisis, 149–50 empirical observation, verification of truth by, 23–24 empirical pregnancy, 59 encounter vs recognition, 59 energy security issues, 215, 217, 300 enhancements, cybernetic, 122 Enron, 153, 248–51, 252–54, 258n9 enterprise risk management, 161 entrepreneurship, 85–86 environmental degradation, exploring through art, 57 environmental education, 294–95 EOC (emergency operations center), 201 epistemological assumptions, 267, 272, 279 epistemological simplicity, 28, 33, 36, 39 equal exchange, 81–82 equations as metaphors, 97 equity markets, 238 ETFs (green exchange-traded funds), 223 ethical dimension of crisis management, 162 ethical noncognitivism, 275 ethics in play, 121–26 ethipedia case database, 304 351 etiquette.inc, 304 ETNs (green exchange-traded notes), 223 eudaimonia, 42 Euler, Leonhard, 96–97, 106 European Climate Awareness Bond, 224 European Union Emission Trading Scheme (EU ETS), 223 evaluation, truth as, 39–46 evaluative discourse, 27–37 evangelical fervor, 306 excess energy, wealth as, 135 exchange as mirroring, 81–83 existence, perceivability criterion for, 26 expanding damages stage, 149 experts and truth, 40–45 expressivism, 41 external failures, 149, 153 Exxon Mobil, 153, 321 facts: as truth makers, 23; as value neutral, 29; and values distinction, 17–18, 30 factual vs evaluative discourse, 30 failures: of imagination, 147–48, 159–60, 162, 207, 261; internal and external, 149, 153 fair-play ideal, 122 falling rate of profit, 246–47 Fama, Eugene, 284 Fannie Mae, 146, 153, 168, 192, 315 fat tails, 261–62 Federal Deposit Insurance Corporation (FDIC), 145, 253, 254 Federal Housing Finance Agency, 146 Federal Reserve: actions leading up to crisis, 143, 154, 170, 224; centralized decision making, 181; purchase of securities and bonds, 232; regulation of, 145, 158 feedback loops, 169, 171 Ferraro, Fabrizio, 269 finance as art not science, 56–57 352 Index financial agents: as artists, 119; as players, 121–26 financial crisis See global financial crisis (GFC) Financial Crisis Inquiry Commission, 173, 182 financial services sector, 323 Financial Stability Oversight Council, 148 financial theories, 281; means of, 266 See also constructivist finance; positivistic finance; postmodern finance firewalls, 247, 254, 256 First We Take Manhattan (Cohen), 61 Fisher, Irving, 99–102 “five red apples” example, 36 Fixed Income Money Market Dealers of India (FIMMDAI), 325–26 Florida real estate boom, 252 Foreign Exchange Dealers Association of India (FEDAI), 325 foreign exchange reserves, 324 forest restoration plans, 308 fossil fuels, 217, 218, 292 foundational/aesthetic finance, 264, 266 frameworks, 276, 293 France, 217 Frank, Barney, 154 Frankenstein (Shelley), 131 fraud and free markets, 168 Freddie Mac, 146, 153, 168, 192, 315 free-market globalization, 321 free play, financial speculation as, 122–26 free riders, 258n10 Freidman, Thomas L., 207, 292 Freudian defense mechanisms, 192 Friedman, Milton, 131, 263–64 future income expectations, 318 Gabriel, Yiannis, 129 games theory, 123–26 Gandhi, M K., 327 Garicano, Luis, 261 Gauguin, Paul, 56 Geisteswissenschaften, 49 Geithner, Timothy, 184 general economy, 134–35 General Growth Properties, 209 General Motors, 320 generic disaster preparedness, 200–201 Geneva, Switzerland, 77 geothermal energy, 215 Germany, 133, 217, 234–35 gestures, relational, 80 Gift, Imagination and the Erotic Life of Property (Hyde), 84 Gift, The (Mauss), 135–36 giving vs exchanging, 83–85 Glass, Carter, 158 Glass-Steagall Act (1933), 145, 158, 252–53, 256, 321 global economy, 190, 330 Global Equity Opportunities Fund, 207 global financial crisis (GFC): algorithms and experts on, 42, 44–45; antecedent conditions, 2, 144–47, 224–28; applying crisis management lessons to, 152–55; effect on green financing, 213–14, 219–21; India’s resilience during, 313, 316–27; longterm nature of, 157; need for global response to, 158, 190, 330; pre and post, 76–77; summary, 142–47, 207; too-big-to-fail problem, 210; U.S recession statistics, 227 global GDP, 215 globalization, 321, 330–31 global public policy consortia, 301 global regulation, 156 global stakeholder communication, 158 global systems, managing, 160–62 global warming, 214, 217, 303, 308 Goldman Sachs Group Inc.: bailout of, 207; CEO statement to Congress, Index 182; consequences of going public, 144–46, 205; hedging before crisis, 209, 296; overseas speculation by, 254 Good Novels, Better Management (Guillet de Monthoux & Czarniawska), 130 Gore, Al, 295 government policy, 218–19 government-sponsored enterprises (GSEs), 146, 153, 154 GPS Partners, 205–6, 208 Gramm-Leach-Bliley Financial Services Modernization Act (1999), 144–45, 205, 252, 254 grandiosity, 192 Great Recession See global financial crisis (GFC) greed, 50, 71–72, 130–33, 189, 327 green bonds, 224 green economies movement, 306, 308, 334 green exchange-traded funds (ETFs), 223 green exchange-traded notes (ETNs), 223 green financing: economic decoupling, 238–40; economic recovery scenarios and, 230–36; market performance of clean energy, 222–23; as part of stimulus package, 228–30; stages of, 217–19; trends in, 219–24 greenhouse gases, 214–15, 231, 235 green organizational approaches, 297–98 Greenspan, Alan, 1, 170 greenwashing, 298 Griffin, D., 67–68 Grimm brothers, 129, 137 group sensemaking processes, 163 growth: post-recession, 216; vs sustainability, 59 GSEs (government-sponsored enterprises), 146, 153, 154 353 guard dog scenario, 162–63 Guillet de Monthoux, Pierre, 130 Gulf of Mexico BP oil pollution, 292 Guyton, Tyree, 63–66, 72 Habermas, Jürgen, 265, 277, 279 Hammarskjöld, Dag, 69 Hardy, G H., 25 Hayek, Friedrich, 83, 123 Haynes, John, 98–99 hazard-specific planning, 200–201 health costs, 318, 320 hedge funds, 170–72, 209 Heidelberg Project (Robinson), 62–66, 70–72 Heidenreich, Ralph, 132 Heidenreich, Stefan, 132 Henaff, Marcel, 83–84 Henriques, Irene, 217 Herron, J., 64 Hesse, M., 108 heuristics and economic models, 98 high-reliability organizational (HRO) studies, 169–70; commitment to resilience, 177–79; deference to expertise, 179–81; preoccupation with failure, 170–73; reluctance to simplify, 174–75; sensitivity to operations, 175–77 high-tech/high-touch green approach, 299–300 Hirschkop, K., 67 historical trends, reliance on, 170 holding-company status, 257 holistic integrated thinking, 334 Holliday, Chad, 303, 305 homelessness, 334–35 home ownership: housing prices, 170; lack of equity, 146–47, 153; loans in U.S vs India, 318–19; rise in, 144; risky actions by home buyers, 192, 295; and sustainability, 297; tax code and, 157 354 Index Homer [Simpson] economicus, 123 homogeneity vs best practices, 174–75 House of Cards (Cohan), 206 housing-asset bubble, 315 “How Did Economists Get It So Wrong?” (Krugman), 17–18, 28, 31, 47–48, 261 HRO (high-reliability organizational) studies See high-reliability organizational (HRO) studies Huey, John, 62 human creativity, 331 Humane Economy, A (Röpke), 134 humanities curricula, 332–33 human nature, assumptions on, 267, 272, 279 human resources, 184 humility among leaders, 68–69 hybrid fleets, 297 Hyde, Lawrence, 84 hydropower, 217 hyperreal financial markets, 270, 273 Iceland, 254–55 ICN Business School’s Art Technology and Management Program, 335 ideal conditions, 39–40 idealization, 192 identity, 60–66 ideographic vs nomothetic theory, 267, 273, 279 ignorance, varieties of, 168 Iguchi, Toshihide, 176 imagination: failures of, 147–48, 159– 60, 162, 207, 261; in practice, 162–64 IMF (International Monetary Fund), 255 imperatives, disguised, 37 improv, 118–19 Inconvenient Truth, An, 295 India: banking sector, 324–26; cultural framework, 316–21; decoupling or integration, 239–40; economic indicators, 2008–2009, 315–16; growth rate, 238, 317; no green stimulus, 229; oil consumption, 215; role of central bank, 323–24; role of government, 320–23, 330; savings rate, 316–18 Indian Banks Association (IBA), 325 inertial momentum, 330 inferential statistics, 98 inflation, 246, 323 information-intensive strategies, 295 innovation commons, 124–26 inputs, processes, outputs analysis, 293–302 insider artist, 78–79 instant gratification, 295 instinct, 42 institutional credit, 318, 319 instrumental/pragmatic finance, 275 insurance, statistics of, 98 Integrated Resource Planning, 303 intellectualization, 192 interdependence of systems, 153 interest rates, 216, 224–25, 231–32 internal failures, 149, 153 internal risk management systems, 156 international financial system, lack of, 300 International Living Building Institute, 304, 308 International Monetary Fund (IMF), 255 intuition: on financial crisis, 29–30; limits of, 24; moral or aesthetic, 28, 30; Wittgenstein on, 42 investors, optimization problems of, 282–83 Iran, 215 Iraq, 215 irrational exuberance and rules of play, 125 ISO 14001, 303 Italy, 217 IXIC (Nasdaq), 222 Index Jackson, M., 65 Janich, Peter, 268–69, 274 Japan, 217 Jharkind, India, 335 job losses, 157, 159 Johnson, Mark, 108, 276 JPMorgan, 143, 254 justification of financial markets, 275– 77 Kambartel, Friedrich, 269, 274 Kant, Immanuel, 58, 80 keiretsu, 121 Kelly, Kevin, 123 Kerviel, Jerome, 176 Kester, G H., 63, 66 Keynes, John Maynard, 131, 143 Kinloch, V., 64 Kirsanova, T., 318 Klein, R L., 104, 105 Knight, Frank, 100, 102 Knorr Cetina, Karin, 49–50, 125 knowledge economies, 331 Koopmans, Tjalling, 103, 105 Krugman, Paul, 17–18, 28, 31, 47–48, 261, 285 Kuwait, 215 Kyoto protocol, 223, 236 labor, sub-subsumption of, 247 Lakoff, George, 108, 276 Landry, Maurice, 266–68, 273, 279 Lange, Oscar, 101 language: acquisition of, 21; meaningful linguistic expression, 36–37 latent failures, 175–76 Lavington, F., 99 Lawson, Tony, 283 leadership, 57–58 Leadership in Energy and Environmental Design (LEED), 304, 308 Learning by Doing Urban Resilience, 334–35 355 “Lectures on Aesthetics” (Wittgenstein), 40–41 LEED Platinum standard, 304, 308 Leeson, Nick, 177 leg godt (good play), 126 Lehman Brothers: collapse of, 143, 155, 168, 227; earlier problems, 207; leverage ratios at, 146; Repo 105 operations, 177, 181 lending long, 245–46 Leonhardt, David, 185 Lessig, Lawrence, 124 leverage: disguising, 248–49; Enron, 250; %GDP of top 15 banks, 256; ratios, 146, 170–73, 178, 185, 210 leveraged buyouts, 207–8 Levine, David, 267 Lewis, Michael, 121, 174 life-cycle analysis, 297 Lincoln Savings and Loan, 253 linguistic fixation of scientific findings, 268–69 liquidity trap, 235 L’Itinéraire, 335 Living Building Challenge 2.0, 304, 308 Local Agenda 21, 303 local urban food production, 303 logical positivism See positivism logicism, 32 Long-Term Capital Management (LTCM), 170, 173, 178 long-term ecological survival, 300 long-term stakeholder value, 296 Lot of Shoes, A (Guyton), 65 L-shaped scenario, 235 LTCM (Long-Term Capital Management), 170, 173, 178 MacKenzie, Donald, 48, 286 Mackey, Sam, 65 Madoff, Bernard, 153–54 mammalian grounds of play, 124 management control perspective, 164 356 Index management storytelling, 19 Managing the Unexpected (Weick & Sutcliffe), 169–70, 174, 176, 177, 180 manufacturing and sustainability, 297 Maori culture, 60–61 March, James, 163 margin borrowing, 252 margins of safety, 170 margin trading and calls, 250–54 Maritain, Jacques, 58 market equilibrium, 264, 266 market pull drivers, 218 market volatility, 125 Markowitz, Harry, 98 Marschak, Jacob, 101–2 Marx, Karl, 246–47 Masters, Blythe, 131, 135 mathematical discourse, 32–34, 36–37 mathematics: logic and, 33; “unreasonable effectiveness” of, 97; as a weapon, 106; well-formed statements, 31–32 Mattern, M., 67 Mauss, Marcel, 135–36 MBA Oath, 333 McGoun, Elton, 263, 270, 272–75 McLean, Linda, 65 meaning: observable actions consti­ tuting, 34–35; by referring, 21, 35 meaninglessness, 31 means of theories, 266 media response to crisis, 150 Mehr Geld (Heidenreich & Heidenreich), 132 Merrill Lynch, 155, 206, 207, 254 metaphors: Ali Baba fairy tale, 128–37; changing a tire, 135; companies as organisms in forest, 123; equations as, 97; facts as placeholders for, 129; finance as sport and play, 121–26; models as, 107–11; rhetorical/ metaphorical finance theory, 276, 286n5 metaphysical and epistemological simplicity, 28, 33, 36, 39 metaphysics: alternative to, 275; elimination of, 24–26; as error, 20–21; nature of, 24–25 methodological assumptions, 267, 273 Mexican peso crisis, 209 “MFA Is the New MBA, The” (Pink), 80 microfinance, 319 migration of authority, 180 Milken, Michael, 253, 258n12 Mill, John Stewart, 185 minorities, 69–70 mirrors: exchange as, 81–83; money as, 77; Pisteletto’s performance art, 86–93 Mittal, M., 322 models and hypotheses: actions based on, 274–75, 280; causing market volatility, 48, 172; in corporate crisis management, 152; evaluating, 275; global systems, 160; learning from inventors of, 45; as linguistic devices, 276–77; mathematical, 272, 283; as metaphor, 107–11, 276; mistaking for real world, 17–18, 189, 261; as necessary consequence, 264; performative when working, 274; predictive value of, 49, 263–68, 274–75, 278; relation between theory and praxis, 268–69, 273–74; rigor over relevance, 261; role of, 261–63, 275, 278; search for unified description, 285; as self-fulfilling prophecies, 269; serving powerful market players, 271–74, 279; tying to original problems, 285; Wall Street risk, 189–90 See also financial theories monetary policy, 234, 323 money as mirror, 76–77 moneytheism, 76–86 moral and aesthetic discourse, 27–37 Index moral-hazard problem, 258n10 moral imagination, 162 Moralzehrer, 134 Morgan, Gareth, 266, 272–73, 279 Morgan, M S., 102 Morgan Stanley, 179, 254 mortgage-backed securities, 171, 296– 97 See also subprime crisis Moses, 132 Mount Simeli (Schrat), 129 multilevel, multisystems approach to sustainability, 292–93; individual (micro) level of analysis, 293–96; organizational (meso) level of analysis, 296–300; societal (macro) level of analysis, 300–302 multimedia, 306 Mumbai terrorist attacks, 202 mutual understanding among powerful, 271 Myers, Stewart C., 109–10 9/11 Commission Report, 147–48 Nasdaq (IXIC), 222 National Incident Management System (NIMS), 200 Natural Step, 303 nature, 293–95 Negri, Antonio, 126 neoclassical approach, 285 neoteny and speculative free play, 123–25 net capital rule, 146 New Century Financial Corporation, 207 New Spirit of Capitalism, The (Boltanski & Chiapello), 79 Newsweek magazine, 125 New York City emergency planning, 200–203 New Zealand, 61 Nietzsche, Friedrich, 20–21, 37, 49 nihilistic relativism, 37 357 NIMS (National Incident Management System), 200 nominalism vs realism, 267, 272, 279 nomothetic vs ideographic theory, 267, 273, 279 noncognitive practice of experts, 40–44 nondeliberative/nonpropositional engagement, 43 nonmathematical economists, 106–7 nonperforming assets (NPAs), 319, 326 nonsense, 24, 27, 33 No Pants Subway Ride, 118 normativity, expert as source of, 43–44, 264, 266 Norton, John, 99, 101 Notown (Okrent), 62 Novick, D., 103–4 NPAs (nonperforming assets), 319, 326 Nussbaum, Martha, 275 Obama, Barack, 68–72, 330 obesity, 294 objectivist conception, 267 observable human well-being, 46 off-balance-sheeting, 248–51 Office of Emergency Management (OEM), 201 Off the Grid Solar Communities, 335 oil companies, state-controlled, 321 oil prices, 216, 217–18, 227–29 Okrent, D., 62 O’Neil, Stanley, 206 ontological assumptions, 267, 272, 279 ontological claim regarding nonsense, 27–28 open-source development community, 125 operational process control, 326 opinion leaders, 306 OPM (option pricing model), 107–9 OPM (other people’s money), 144–46 optimization problems, 282–85 option pricing model (OPM), 107–9 358 Index options, 110 organism, company as, 123 organizational-learning element, 152 organizational-level sustainability approaches, 297–98 organizational reward systems, 183 organizational silos, 161 organizational theory: foundations of, 18–19; on framing, 20; social construction of systems, 49–50 OTC (over-the-counter) derivatives, 171 other people’s money (OPM), 144–46 Oven, The (Guyton), 65 overpopulation, 292, 306–7 overproduction, 247 painter’s canvas, depth of, 59–60 panics, 283, 285 Paulson, Henry, 155 Paulson and Co., 208–9 peak associations/networks, 301, 303, 308 perceivability criterion for existence, 26 personal liability under Glass-Steagall, 145 personal sustainability plans, 302–3 Pfeffer, Jeffrey, 269 philosophy of science, 264 physical inventory, 119 pictures, truth of, 22–23, 37 Pigou, A C., 99, 103 Pink, Daniel, 80 Pistoletto, Michelangelo, 77–78, 80–81, 85–86, 87–93 Pistorius, Oscar, 122 Plato, 83, 84, 162–63 play and the arts, 159, 162–64 play ethic, 121–26 political economy, 81 political theatre, 68 pollution prevention, 297 population, 292, 306–7 positive-feedback cycles, 171–72 positive finance, 263, 266, 269 positivism: and elimination of metaphysics, 24–25; on facts as value neutral, 29; on verification and nonsense, 25–28; vs antipositivism, 267, 272, 279 positivistic finance, 263–70; limitations of, 268–70, 280; means of, 266–68; purpose of, 265–66 postmodern finance, 270–74; limitations of, 273–74, 280; means of, 272–73; purpose of, 271–72, 278 powerful market players, 271–74, 279 Pozen, Robert, 171 practical cognitive interest, 265, 271, 278 pragmatism, 40–46 praxis, theory and, 268–69, 273–74, 280 preoccupation with failure, 170–73 preventative planning, 151–52 price-value dichotomy, 82–83, 85–86 Primary Dealers of India (PDAI), 325 Prince, Chuck, 174, 206 principle based regulation, 169, 210 principle of verification, 26 Principles for Responsible Management Education, 333 private equity deal, 207 private sector, 231, 322 privatization, 131 proactive measures, 158 probalistic measurement of risk, 101 process auditing, 183 productive expenditure, 134 productivity indexes of Indian banks, 322 profit, 98, 171, 246–47 profitability indexes of Indian banks, 322 projection, 192 propensity to save, 316–18 Protestant ethics, 83 provocation as art, 118 public comprehensibility, 45–46 Index public responsibility, 330 public-sector banks (PSBs), 321–22, 325 public square as dialogic art, 66–67 qualitative and quantitative judgments, 19 quality monitoring, 183–84 quantification of financial sector, 180 “quants,” 107, 122, 178 quarter-to-quarter profitability, 174, 177 Ranciere, Jacques, 80 rationality as fundamental principle, 264 Reagan, Ronald, 131, 253, 256 real estate bubble, 142 realism vs nominalism, 25, 267, 272, 279 realization crisis, 247 real options, 110 recognition vs encounter, 59 recovery scenarios, 230–36 recycling, 296, 301 reductionism, 189 redundancy, 184–85 reference-class problem, 99–100 referentiality: overview, 21–22; and relation to meaning, 34–38, 48 referent organization, 183–84 regulating risk, 155–56, 183–86 regulation problems, 282–85, 324 regulators as sports referees, 122 Reinhardt, Carmen M., 128 relational aesthetics and gestures, 80 relative frequency and risk, 98–102 reluctance to simplify, 174 renewable energy: domestically produced, 215–16; investments in, 300; as percentage of consumption, 217 Repo 105 operations, 177, 181 Republic (Plato), 83, 162–63 reregulation, 169, 185–86 359 rescue, relief, rehabilitation, recovery stage, 149 Reserve Bank of India (RBI), 321, 323–24 resilience, 4, 313, 326–27 Resolution Trust Corporation, 256–57 resource based cross-border hostilities, 302 resource budgets, 307 resource depletion, 217 responsibility, 136, 153, 261–63, 280–85 retirement benefits, 318 return to normalization stage, 149 Review of Economics and Statistics (1954), 102–3 reward systems, 183 rhetorical/metaphorical finance theory, 276 Richard, Gabriel, 62 risk: applicability to economic activity, 101–2; as asset price volatility, 189; distinct from uncertainty, 100; EFD definition, 188–89; in fog of Internet data, 124; in global financial crisis, 144–45, 173; and moral-hazard problem, 258n10; origins of measurement of, 97–102; perspectives on, 184; surveilling, 155–56, 208; Wall Street culture of, 189–91 risk-related management disciplines, 161–62 Rivera, Diego, 70 Robinson, Peter, 60–62, 72 Rogoff, Kenneth S., 129 “rogue” traders, 176, 180–81, 183 Romania, 254 Röpke, Wilhelm, 133–34, 136 Rorty, Richard, 286 Rosenstein-Rodan, Paul, 101 Ross, Edward A., 98–99 Roubini, Nouriel, 184 Rubin, Robert, 150, 209 360 Index rules of the game, 125–26 rules of valuation, 129 rush-to-purchase mindset, 296 Russia, 170, 238, 239–40 Sadorsky, Perry, 217 Samuelson, Paul A., 103, 105–6, 285 Sarbanes-Oxley (2002), 248, 252 Saudi Arabia, 215 savings-and-loan crisis, 252–53, 256 savings rates, comparative, 316–18 Schmidheiny, S., 303 Scholes, Myron, 262 Schrat, Henrik, 129 Schumacher, E F., 58–59 Schumpeter, Joseph, 136 science, significance of art to, 56–57 scientific management, 26, 30 SEC (Securities and Exchange Commission), 145–46, 154–55, 253 Securities Acts (1933–1934), 248, 252–53 securitization, 144, 146–47, 153 Sefton, J., 318 Self and Other questions, 59, 62 self-insurance, 324 self-referential academic games, 270, 274 self-regulatory organizations (SROs), 153, 325–26 self-sufficiency, economic, 330 semantic claim regarding nonsense, 27–28 senior creditor status, 209 senior management, 207 sensitivity to operations, 175–77 sentences: meaningfulness criterion, 26; and name objects, 35–36; as pictures, 22–23, 26; well-formedness of, 23 serial epiphanies, 59 shared organizational identity, 163 “sharing nicely,” 126 Sharpe, William, 98, 264 Sheridan, D M., 65 Shiller, Robert J., 284 shortages, Indian culture and, 319 short-term mentality, 179, 206, 295 Shrivastava, Paul, 334–36 siege mentality, 154 simultaneous and interacting failures, 149, 153 singular insider artists, 79 singularity, 79 skepticism, 174 skill and tool libraries, 298 slack, 164 Sloan, A., 71–72 SMEs (small and medium-sized enterprises), 301 Smith, Adam, 83 Smith, Adam (pseudonym), 190–91 Smith, Clifford W., Jr., 109 Smoot-Hawley Tariff Act, 154 Smuts, A., 72 Snooks, G D., 102 social action as goal, 58 social constructive finance, 270 Social Crisis, The (Röpke), 134 Social Enterprise Association, 334 social facts, 34–35 Social Impact Core Curriculum, 332–33 socially produced spaces, 64 socially responsible art, 77 social marketing, 296 social media, 298–99 social mobility, 320 social sculpture, art as, 80 social support systems, 320 Société Générale, 176 solar energy, 215, 217, 220, 300–301 Soles of the Most High (Guyton), 65, 72 Solow, Robert, 105 Sophism, 84 sources of knowledge, 3, South Korea, 230 S&P 500 (GSPC), 168, 222–23 sports/play metaphors, 121–26 Index SROs (self-regulatory organizations), 153, 325–26 stability over growth approach, 324 Stacey, R D., 67–68 Städel Schule (Frankfurt), 78, 79 stagflation, 216–17, 234 stakeholder capitalism, 8, 121, 126 stakeholders, global, 158 state capitalism, 320–23 state-controlled companies, 321 state property taxes, 193 Statler, Matt, 331–32 status, quantitative methods conferring, 107 Stern School of Business, 331–34 stimulus efforts, 143, 157, 228–31, 324 stock market crashes: 1929, 252, 273; 1987, 172, 178, 273 See also global financial crisis (GFC) Storytelling in Organizations (Gabriel), 129 Strategic Environmental Management, 303 Strategic Plan: First We Take Manhattan (Robinson), 60–61 street magazines, 335 stress, financial and emotional, 150–51 stress tests, 184 structured problems, 276–77 subjectivist conception, 267 subprime crisis: assertions regarding, 35, 76, 85; bank assets still at original price, 257; Chuck Prince on, 174; Community Reinvestment Act (CRA), 144, 146–47; consequences of, 141, 168; details of, 146–47, 207–9, 224–26, 251–52, 257; failure of Sarbanes-Oxley to prevent, 248; global impact of, 158, 216; internal and external failures, 153 sub-subsumption of labor, 247 supraorganizations, 304 sustainability: implications for 361 academics, 307, 334; implications for practitioners, 308; local, regional, international attention to, 300–301; multilevel, multisystems approach, 292–308; need for, 5, 50–51, 329–31; redesigning economic system for, 156–57; of shared context, 45 sustainable supply-chain management, 297 Sutcliffe, Kathleen M., 169, 174, 176, 177, 180 Sutton, Robert, 269 Sutton-Smith, Brian, 123 Switzerland, 255 synonymous and ambiguous express­ ions, 38–39 synthetic statements, 31–32 Taleb, Nassim, 175, 184 talent, market value of, 84 tax code, U.S., 157 Tea Party, 330 technical cognitive interest, 265–66, 271, 277–78 technical complexity in a system, 148 technologies of foolishness, 160, 163– 64 technology, energy, 217–21 technology stock bubble, 170, 252 ten-sigma events, 172 tenure system, 189 Terranova, Tiziana, 124–25 theories See financial theories theories of meaning See referentiality tidal energy, 215 Tinbergen, J., 104 Tintner, Gerhard, 101 too-big-to-fail problem, 210 too-big-to-save problem, 247 Top Runner program, Japanese, 184 toxic assets, 181 Transition Initiative movement, 298, 303 362 Index transparency, 156, 203 Treasury Department, U.S., 181, 209 triggering events, 148–49, 207 Troubled Asset Relief Program (TARP), 143–44, 175, 209, 313, 320 truth: and beauty, ontological difference between, 47–48; correspondence theory of, 23, 35, 37; as evaluation, 39–46; and meaning, 21, 34–35; and noncognitive practice of experts, 40–44; as rule-conforming, 40 truth aptness/evaluability, 23–24, 27, 41–42 truth makers, 23 Turnbull, Stuart, 109–10 Turning the Back on Art, 85 variation, 98 Venice Biennale 2009, 78, 80–81, 86–93 verification principle, 31 Verwoert, Jan, 78–79 vesting periods, 179 Vico, Giambattista, 58 videoconferencing, 297 Viniar, David, 209 Virno, Paolo, 80 visual clarity, desire for, 125 voluntarism vs determinism, 267, 272, 279 Vom Kriege (von Clausewitz), 164 von Clausewitz, Carl, 164 von Mises, Ludwig, 83 V-shaped recovery, 216, 234 uncertainty, 98, 100 undergraduate business school curriculum, 332 unemployment, 157, 159 unemployment insurance, 320 unified description, 285 Union Carbide Bhopal plant, 153 United Kingdom, 217, 254 United Nations, 304 United States, 215, 217, 227–29, 236, 238–40 United We Walk (Guyton), 66 unproductive expenditure, 134–35 unreasonable effectiveness of mathematics, 97, 107 unstructured problems, 276 U.S Green Building Council LEED standards, 304, 308 U-shaped recovery, 216, 233 utility, 134 Utopia (Moore), 83 Walking the Talk (Holliday, Schmidheiny & Watts), 303 Wall Street: culture of risk, 189–91; dominant culture on, 190–91; Freudian defense mechanisms on, 192; opinions regarding, 77; too big to fail/save?, 255 Walmart PSP, 302 Watts, P., 303 wave energy, 215 Web 2.0, 124 Weber, Max, 83 Weick, Karl E., 129, 169, 174, 176–77, 180 Werhane, P., 162 West Bloomfield, Michigan, 66 Whyte, William H., 121, 125 Wigner, Eugene, 97, 107 wikis, 298–99 WilderHill New Energy Global Innovation Index (NEX), 221–23 Willmott, Hugh, 271 wind energy, 215, 217, 220, 300 Wittgenstein, Ludwig: architect example, 42–44; and expert craftsman, 40–41; “five red apples” example, 36; “Lectures on value of objective work, 82 value-price dichotomy, 82–83, 85–86 valuing companies, 57, 124–25 VAR (value at risk) analytic, 151, 154 Index Aesthetics,” 40–41; rejection of reduction, 34; senselessness, 33–34 workingness, 19–20, 47, 50 World Bank, 301 World Business Council for Sustainable Development, 301, 303–5 WorldCom default, 208, 252 World Dam Commission, 301 World Resources Institute, 304 363 worldwide monitoring system, lack of, 300 Wright, Ronald, 55–57 W-shaped recovery, 234 Yellowstone Club, 209 yield curve, 237–38 zero-sum games, 121 Zielonka, Piotr, 263, 270, 275 ... Cataloging-in-Publication Data Learning from the global financial crisis : creatively, reliably, and sustainably / edited by Paul Shrivastava and Matt Statler     pages cm   Includes bibliographical references and index... According to the prevailing narrative, the global financial crisis originated in the U.S real estate and financial sectors in the first few years of the twentyfirst century The failures of the financial. .. discourse, and it also offers a reality check on the chapters and extends the appeal of the book to practitioners Paul Shrivastava and Matt Statler Creatively In “Truth, Beauty, and the Financial