This baggage induced recession

The clearer I get about the dynamics of emotional baggage by writing this series of posts, the more useful it appears as an explanation. What got us into the current global recession now looks to me like baggage. Here's how I'd explain how widespread emotional baggage got us into this mess.
  • The kind of work done inside big investment banks in financial centers around the world is ideal for people carrying lots of emotional baggage. The analysts, quants, traders and executives work with numbers all day. Their quantity of baggage would disqualify them for more demanding jobs that required them to serve clients with high quality relationships or to upgrade financial products with increased reliability, transparency and solidity. Their baggage made their being recklessly greedy into a big "can-do" and their secretive, off-the-books deceptions equally urgent.
  • The kind of management called for in bygone industries (automobile manufacturing, print journalism, etc) is survival based. Their markets appear dangerous and ideal for baggage to take control of decisions, plans and projects. Their skewed judgment of changing demand, technologies and disruptive innovators would throw money at problems with no solution and miss opportunities to reinvent their business models. The activation of their baggage amidst so much danger would pre-empt their creativity, human intelligence and ability to really relate to their constituencies. They could only assist dying industries in achieving rigor mortis.
  • The kind of employees getting laid off in droves might even by labeled "excess baggage" by their former employers. Their chronic over-reactions to workplace challenges would fail to contribute value, solutions or teamwork. They would feed their own victim stories, justify attacks on other employees, blame higher ups for problems and shirk responsibility for cleaning up their own messes. Their baggage from painful past histories would pre-empt their functioning like valuable employees that deserved respect, tenure and some job security.
  • The broadcast and print media covering the recession could only make it worse by reporting on it "accurately". The journalists constantly feel the urge to catastrophize the latest setback, over-dramatize the newest numbers and dwell on the deepening recession. Baggage makes us feel like our misery loves company. These reporters could not halt their feeding a self-fulfilling prophesy because their own baggage keeps them inside deteriorating, vicious cycles. The bad news leaves them with no alternative but to fear it, to worry about it constantly and to forewarn others about it worsening.

Add these four factors together on a global scale and we get what we've got: a deepening recession.


  1. Yes, I'm currently reading Nicholas Nassim Taleb's Fooled by Randomness and traders in particular - a mix of competitiveness, attempting to apply logic to past market behaviour or statistical analysis, how they understand and remember random events, placing reliance on a particular strategy / clients etc then when things turn out negatively, implying that this has never happened before so it should not have done / will not again in the future.

    When looking in search of answers (I have certainly been spending much more time reading anything and everything around this financial crisis) you do end up reading huge volumes of traditional media as well as blogs with specific stances and you do question motives as to why articles / posts published at specific times, why particular language used etc

    I forgot to mention risk, but could go on forever about that one too. Great post !

  2. Thanks for relating this post to Taleb's writing and your own widespread reading. I find Taleb to have a wonderful take on the patterns of our misperceptions, that I'm equating with baggage.I find the cognitive challenges he poses difficult to master, as I explored in post about his book The Black Swan two years ago.

  3. Hi Tom, oops I mentioned Nassim's name, the wrong way round - I have watched some interviews and how far I have read - he is really entertaining and very thought provoking too. I seem to be working backwards, I hope to be able to read the Black Swan soon.

    Based on what I have understood from your posts - we construct ideas based on our conversations, data, news we have read and are fooled by our own attempt to interpret them in a scientific or mathematical way (I read in Benoit Mandelbrot's Misbehaviour of Markets about financial models saying little with much). We use aspects which we perceive in our daily reality to add to this 'theory or story' we are constructing which will protect us from risk - a rare event such as losing everything - material objects, career prospects, respect amongst peers, self-respect etc - as you mentioned in your post (thanks for that by the way).

    From what I understand about chaos theory too, this would mean that we could just as easily say, that a butterfly's wings (perhaps a small SME in a developing country whose business appears to be completely local) flapping very quietly will not affect anyone's perception of how a particular international market is going to behave that day - because the butterfly is too small, too far away, the weather conditions are looking great etc Our story then sounds much more probable to our peers as well as to ourselves. So if somehow that butterfly does affect international trading indices - we then resort to a series of thoughts to analyse what has happened:

    Some will study data at great depth and manage to find some highly improbable but somehow convincing link to the butterfly through means of visualization or the reputation of the data analysts.

    Some will analyse the outcome and put it down to some series of thoughts or actions by people that cannot be scientifically proved or disproved.

    At least one of us will have constructed trading strategies because we believe that butterfly wings will always be flapping somewhere and event will cause international turbulence - and profit from that in material wealth and other ways. Other people will evaluate this and attempt to create models from it which can be shared for others to also make profit (which I think is incorrect?)

    Or we can try and find better ways of responding to crisis which is what you are suggesting (and have been throughout your blog)?

    Thanks very much for really making me think, I've really enjoyed this brief opportunity to try and pull some thoughts together!

  4. Hi Nicola: Thanks for taking this further and giving me much to ponder too. I'm saying something close "butterfly wings will always be flapping", but not quite that. I'm saying everyone will always be protecting themselves with narrative fallacies. Those fallacies appear chaotic, not deterministic.

    What you say be flawed trading strategies applies to narrative fallacies. Yet traders, brokers, and investors are operating with narrative fallacies that will delude themselves into panic selling, greed, excessive speculation, staying out of the market, etc. Those varied delusions will occur in waves of consensus, opposition, politicization and media exaggeration.

    There's no escape while having expectations, trading strategies and a better read of the chaos.The solution is to expect anything, choose between alternative stories, keep options open and respond free of preconceptions.

    I'm glad you're getting so much value out of this.

  5. Thanks again. I like your solution - when you read things like this interview about microfinance and some of the other ideas emerging that seem to gloss over issues of how small businesses can continue operating or - make huge assumptions (its all going to be ok) which others buy into - sometimes literally, instead of keeping options open that anything can happen. I need to go away and think some more...

  6. Thanks for all the thoughts you've shared with us here, Nicola. You've gotten me to make some new connections in my understanding of how baggage can get resolved by addressing narrative fallacies. Cheers!