If you have an Impossible Problem - Break the Rules

I was talking to a friend about my next blog, I rashly asked him to suggest a topic. He suggested that I write about the Irish economic crisis. 

Now I am not an economist, but the more I thought about it, the more complex it became.  The first issue was ‘defining the problem’.  What exactly is Ireland’s problem?  - that depends on who you are.  The nature of the problem depends on which group of stakeholders you belong to, and the list is almost endless.  Bankers, bank shareholders, economists, politicians, taxpayers, workers, the UK treasury, UK taxpayers, the ECB, EU politicians, etc. - each will have a slightly different view on what the problem is and how to solve it. 

So then I started to think about how other economic disasters were resolved.  Argentina is an interesting case.

In 2001-2, Argentina suffered an economic collapse.  The causes were many and varied, it was a rollercoaster ride of political and economic turmoil.  It defaulted on its foreign debt of $132Bn.  The exchange rate of the peso went from 1 to 4 to the dollar.  Employment collapsed and imported goods disappeared.  To get by, people used unofficial ‘complementary currencies’ and bartering.  Eventually, the government ignored the IMF’s guidelines and secured a complete recovery.  Today, Argentina has one of the highest GDP growth rates in S. America and has repaid all of its foreign debt.

Breaking the rules worked for Argentina. The proposed solution for Ireland appears to be geared to wider political as well as economic issues, and follows all the rules.

Perhaps Ireland should break the rules too.



Joseph Stiglitz, Nobel Economics prizewinner, wrote an article questioning the wisedom of the IMF rules. (Argentina, short-changed: Why the nation that followed the rules fell to pieces)  http://www.yorku.ca/robarts/archives/institute/2002/stiglitz_argentina.pdf

Assumptions - Questioning Beliefs

Do we question our assumptions sufficiently? 

In my blog about Assumption Mapping, one of the variables was, ‘the level of confidence in the belief of the assumption’. 

How do we form our assumptions and how do we define our level of confidence in them?  It is easy to think that assumptions are facts - but they are NOT, they are based upon opinion and often just ‘received wisdom’ (whatever that means).  Furthermore, they are never caste in concrete,  for example, they can be conditionally, partially or even occasionally true – and if not, can often be made to be.

In the late 1990’s sales of Heinz’s ketchup had fallen considerably.  They needed to do something to boost sales.  In a stroke of genius, they just turned the label upside down.  It was the most successful innovation they ever made.  With the bottle ‘upside-down’, the ketchup was easier to pour.  They questioned the assumption that the cap should be at the top.  They sold 75% more ketchup.

Another consideration is that opinion is subject to bias.  Bias is everywhere, it is almost impossible not to have some form of (cognitive) bias.  There is an extensive list of cognitive biases on Wikipedia, all of which can affect our view of  ‘the facts’.  http://en.wikipedia.org/wiki/Cognitive_biases 

All of these can distort our beliefs and there are so many, it is a wonder that we are right about anything.

So when you identify assumptions, do not accept them as fact.

Not only should you question them, you should challenge the thinking that led to them.

Rule Breaking

 A considerable number of organisations have had significant cuts to their funding.  If these reductions were around 10%, the cuts they make could be ‘incremental’ – but I may be wrong.  However, they are facing cuts of the order of 30-40%, which are unlikely to be achieved with incremental savings.

One solution is to simply not supply some services, but this may not be politically, legally or morally acceptable.  And hoping that the Government will change its mind and relent is unrealistic. What to do?

When you are faced with an impossible problem, there is only one course of action.

You have to break a rule.  It is the ONLY way out

Here’s an example of rule-breaking.

Bangladesh is a country where around 50% of the population are ‘rural poor’.  They have no money, no assets, own no land and are often illiterate – and the women are among the poorest.

Getting a loan from a normal bank would be completely impossible for these people.

In 1976, Professor Muhammad Yunus started the Grameen Bank., a project to extend finance to the poor to provide self-employment and lift them out of poverty.  The average loan is around $100 (US). Over 95% of the loans are made to women, no collateral is required and they do not sign any legal documents (many can’t read anyway), and defaulters are never taken to court!

This is not aid, repayments are made weekly and interest is charged at 16%.  It has been a huge success.

Professor Yunus broke all the banking rules and won the Noble Peace prize.

Overcoming funding cuts while maintaining the organisation’s services and integrity will be very stressful and a severe test of leadership.  Long-held and cherished assumptions and beliefs will have to be challenged, perhaps even reversed.


Details of the Grameen Bank project can be found here.  http://www.grameen.com/