Tuesday, January 02, 2007

Enron: A puzzle or a mystery?

What's the difference? In a fascinating New Yorker article Malcolm Gladwell explains:

The national-security expert Gregory Treverton has famously made a distinction between puzzles and mysteries. Osama bin Laden’s whereabouts are a puzzle. We can’t find him because we don’t have enough information. The key to the puzzle will probably come from someone close to bin Laden, and until we can find that source bin Laden will remain at large.

The problem of what would happen in Iraq after the toppling of Saddam Hussein was, by contrast, a mystery. It wasn’t a question that had a simple, factual answer. Mysteries require judgments and the assessment of uncertainty, and the hard part is not that we have too little information but that we have too much. The C.I.A. had a position on what a post-invasion Iraq would look like, and so did the Pentagon and the State Department and Colin Powell and Dick Cheney and any number of political scientists and journalists and think-tank fellows. For that matter, so did every cabdriver in Baghdad.

He then uses the rest of the article to argue that Enron was essentially a mystery that threw too much information at people, essentially challenging them to unmask it.

Woodward and Bernstein didn’t have any special training. They were in their twenties at the time of Watergate. In “All the President’s Men,” they even joke about their inexperience: Woodward’s expertise was mainly in office politics; Bernstein was a college dropout. But it hardly mattered, because coverups, whistle-blowers, secret tapes, and exposés—the principal elements of the puzzle—all require the application of energy and persistence, which are the virtues of youth. Mysteries demand experience and insight. Woodward and Bernstein would never have broken the Enron story.

“There have been scandals in corporate history where people are really making stuff up, but this wasn’t a criminal enterprise of that kind,” Macey says. “Enron was vanishingly close, in my view, to having complied with the accounting rules. They were going over the edge, just a little bit. And this kind of financial fraud—where people are simply stretching the truth—falls into the area that analysts and short-sellers are supposed to ferret out. The truth wasn’t hidden. But you’d have to look at their financial statements, and you would have to say to yourself, What’s that about? It’s almost as if they were saying, ‘We’re doing some really sleazy stuff in footnote 42, and if you want to know more about it ask us.’ And that’s the thing. Nobody did.” [...]

... Mysteries require that we revisit our list of culprits and be willing to spread the blame a little more broadly. Because if you can’t find the truth in a mystery—even a mystery shrouded in propaganda—it’s not just the fault of the propagandist. It’s your fault as well.

Update: Over at Orgtheory.net, Brayden King looks at educational implications of Gladwell's article:

As educators, many of us try to teach our students how to do both of these things. Teaching students to find the right information is hard enough, but I’m finding lately that teaching students how to solve mysteries is the real challenge. However, in my estimation it is the most important skill that any student can learn. Students need to learn how to put together all of the right information to make the right inferences. [...]

But if Gladwell nd the Time article are correct (which I think they are), mystery solvers will be those individuals who benefit the most in our information age. We just have to figure out how to help students realize the importance of it and come up with better ways to apply it in the classroom.