Re: [xmca] US discovers capitalism doesn't work

This from Alexandra Michel:

In his message "US discovers capitalism doesn't work" Martin Packer asked
researchers with an interest in studying mind and culture to attend to the
events in the current financial markets, exploring psychological dimensions.
As he pointed out, our research has addressed this topic. We respond to
Martin's request to illuminate existing events through the lens of our
research.

In a book forthcoming at Cambridge University Press in November ("Bullish on
Uncertainty: How organizational cultures transform participants"), we track
incoming bankers into two Wall Street investment banks ("Individual Bank"
and "Organization Bank") over the period of two years. We document how the
banks' distinct work practices transformed bankers' identity, cognition,
emotion, and motivation. We here summarize the aspect of our findings that
is most relevant to the current debate: namely how the banks' practices
affected banker decision making and, thereby, the banks' ability to adapt to
an uncertain environment.

Not surprisingly, given current events, a prominent theme in both banks was
how to manage the uncertainty caused by their dynamic and complex business
environments. Individual Bank, like most organizations, managed uncertainty
by reducing it. For example, it used integrated strategies that are
communicated top-down by management, preferred employees with relevant
experience, assigned newcomers to narrowly defined and pre-specified roles,
trained them to fill these roles effectively, matched employees to projects
based on their relevant experience, and set explicit goals on which
employees are reviewed and rewarded. These practices reduce uncertainty
because they offer (1) organizational concepts that narrow the amount of
information employees have to consider and (2) standards to aid employees in
making decisions.

Our book shows how that these time-honored practices have unintended
consequences that undermine the very effects they wish to achieve.
Specifically, uncertainty reduction practices create experts who over-rely
on what they think they know and therefore fail to recognize new and unique
situations as such. As a result, firms like Individual Bank might not notice
changes in their market and fail to adapt.

Alexandra Michel
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Received on Sun Sep 28 14:28 PDT 2008