Financial Crimes: One Reason There's No Justice at Justice

Three years after the financial crisis, not one of the big financial sleezemeisters that created the subprime mortgage machine has gone to jail. Plenty of people have lamented this basic fact. Sure, complicated financial crimes can be hard to prove, and weasel’s like this guy have money, but it’s hard to see that as much of an excuse. One major factor – one that doesn’t really get a lot of attention – is that the way prosecutors organized themselves to investigate the crimes set them up to fail.

Here’s how it worked: Despite the fact that the Southern District of New York (think Wall Street) had the most experience ferreting out accounting fraud, the Department of Justice basically handed out big cases as plums to different U.S. attorneys offices. Countrywide (the shady mortgage company now owned by Bank of America) went to Los Angeles; Washington Mutual went to Seattle, A.I.G. went mainly to Washington. Even Lehman Brothers was split like a pie with the Southern District getting just one slice. According to George Packer of the New Yorker:

Given the targets in question – huge banks, well-insulated executives, intricately structured financial products, tens of millions of knotty documents – it’s unlikely that a federal prosecutor’s office, staffed by generalists and operating under standard procedure, which is to wait for cases to come in, could have made serious headway.

What the Department of Justice needed to do was organize itself as a knowledge-based organization rather than merely an investigating organization. Knowledge-based organizations put a premium on building up knowledge in core areas that they know will be critical to their success, and then develop systems to share that knowledge. (This field is sometimes called knowledge management.)

Measurement Has Its Limits: The Cookie-Radish Effect

 No willpower needed

I recently wrote about how measuring your own activity, using something as simple as a stopwatch in the shower, can pay off big time in behavioral change. (It can speed you up on tasks you tend to do slowly.) That said, I’ve recently run into a few people who take that concept much further. They schedule tasks for themselves in 10-minute intervals and constantly check to see whether they’re on time and on task. I’ve even talked to one colleague who suggested I do something similar.

Yikes! I can’t imagine being a slave to the stopwatch in that way. But I want to have a clearer reason why such a thing makes no sense for me. Something more than it just doesn’t feel right. So here it is:

When you force yourself to do something that takes a lot of effort or willpower, what you are actually doing is using the rational part of your brain (the part that handles executive functioning) to take over from the more emotional and instinctive part of your brain (the part that wants to do what feels right). Well, there’s a lot of research that suggests that most people have rational effort/willpower in limited quantities. Use too much of it and you’ll begin to run out.

Measurement Drives Behavior, Even in the Shower

A tool for behavioral change?

Sometimes lasting change comes from very small adjustments… and a little understanding of how our brains are wired.

My natural pace in the morning is slow. I’m one of those people who always seems to take a good long time picking out clothes, showering, getting dressed, etc. And this used to make me late a lot. But in the past year, I’ve turned the situation around. The new element: wearing a waterproof watch with a stopwatch function.

By starting the timer when I step into the shower, I’ve completely changed my dynamic. I haven’t made any conscious effort to speed up (seriously, none), but that’s what has happened anyway. The only effort has been to look at my watch from time to time. That’s where my brain’s wiring takes over. It can’t see a sequence of times, day in and day out, without looking for patterns. I developed a pretty good idea for how long I should take at the various tasks: showering, toweling off, getting dressed, coming down to breakfast, etc. (A five-minute shower is about average, and eight minutes is slow.) Now I can’t help noticing when I take longer than usual; I find myself taking corrective action without much thought. Slow at one step, and suddenly I speed up at my other tasks. Now, when I have everything laid out the night before, the whole sequence of getting out of bed and out the door is less than 25 minutes.

There’s a basic idea that underlies this change: Measurement drives behavior. Just by the act of measuring something and paying attention to the results, people begin to change what they do. This idea is critical in the business and management world. But there’s no reason it can’t work at the level of personal change, too. The hard part is picking the right things to measure and getting the whole process started. That seems to be what’s going on with my morning stopwatch. Looking at a timepiece was not hard to turn into a habit. 

Bin Laden: Leaders Get One Transformation

He couldn't transform
Al Qaeda twice

There is an old adage that a visionary leader of an organization typically has one major transformation in him, but it’s unlikely that the leader will be able to transform the organization a second time. (It’s an adage that’s particularly common in nonprofit circles.)

Osama bin Laden helped Al Qaeda transform from an organization that essentially carried out its own terrorist acts (9/11, Kenya bombing, etc.) to an organization that acted largely through a group of affiliates (Al Qaeda in Iraq, Al Qaeda in the Arabian Peninsula, Jemaah Islamiyah, etc.) This change was a necessary one, given how much pressure the terror group’s central leadership was under after 9/11 from the continued hunt, drone strikes and the like from the United States and its allies. But it was also a smart transformational move by Bin Laden. To an extent, this shift allowed Bin Laden’s central Al Qaeda leadership to continue to push for attacks against the U.S. and its allies, and get credit for attacks that the central Al Qaeda leadership didn’t actually coordinate.

But Bin Laden didn’t have a second transformation in him.

Puerto Rico Part II: The Engineer Turned Forest Ranger

In my previous post I introduced Frank, who was our guide in the El Yunque rain forest in Puerto Rico. As Lani and I walked along a rain forest path, Frank talked plants and wildlife and then about bits and pieces of his background. Here’s what we learned:

Frank was born in Puerto Rico, but moved to the continent (that’s how many Puerto Ricans refer to the mainland United States) when he was young. You can still hear the remnants of a New York accent in his throaty voice. After high school, he joined the Air Force and was posted with NATO in Europe. He married his high school sweetheart and things went along smoothly. He studied electrical engineering, something that served him well when he left the service. He moved to Puerto Rico where he began working for a large computer manufacturer. He eventually helped the company develop factories that built things like main frame computers – you know, those large, clunky pieces of electronics that existed in the Stone Age, i.e., before advent of the PC. (At one time, tax incentives led a large number of electronics companies to run factories on the island.)

In a matter-of-fact way, Frank told us that his wife died of cancer in the early 1990s. Although he didn’t say the words, I suspect Frank had a nervous breakdown. Frank couldn’t work. He just shut himself off.

“I was depressed, I thought it was all over. I just didn’t want to go on,” Frank explained to us.

Puerto Rico Part I: Rare Finds in a Rain Forest

Lani and I were recently visiting some of her family in Puerto Rico and managed to spend a few days in a mountainous tropical rain forest called El Yunque. (It’s a national forest.) We hiked around verdant landscapes populated with giant ferns, tree frogs, and climbing vines and scrambled our way across mountain streams feeding into waterfalls.

El Yunque is also where we met Frank, shown at right (last name omitted to protect his privacy). A longtime electrical engineer, Frank had a personal crisis that initially dragged him down but ultimately led him to a life as a park ranger, something he’s done now for 15 years. “I work as close to heaven as you can get,” he says.

Frank will be 72 this year, though in person he looks a decade or two younger. (The light breezes of the mountains and Frank’s obvious gusto for his constant level of physical activity probably has something to with it.) He does a whole set of ranger-y tasks: trail maintenance, guiding visitors, search and rescue, etc. He roams around with a wide-brimmed hat, a hand-carved walking stick he made himself, and a necklace with a large ivory-looking tooth on it. A few times a day, he leads short hikes for visitors starting about two thirds of the way up the main mountain. Lani and I were lucky enough to get him all to ourselves on a slow afternoon. We wandered with him under the variegated canopy.

Less Taxing To Do Lists: A Self-Justification

I have a quirky way of making to do lists. As you’d expect, I include all the complicated things I need to get done by breaking them down into simpler steps. But I also make sure to include super-basic items that take almost no effort, as well as a few that I’ve already completed and can check off without actually doing anything. For some reason, the list looks less daunting this way.

Here’s an example. I’ve been slogging through my taxes over the past couple of weeks, and I made a point of writing in really easy items along with all the important complicated stuff. Things like gathering up the W-2 forms that came in the mail from our employers and creating the pile of tax-related receipts I will eventually need to deal with. I even gave myself kudos for filling out the cover page of a tax organizer from the accountant we work with. Of course there are other to do items that make my brain sputter and fizzle. (Itemizing? Ack!)

Lani finds the odd mélange in my to do lists amusing, but now I’ve found some scientific backup. It even has a fancy, scientific-sounding name. It’s called the endowed progress effect.