The Case Against Passion: Yves Smith

The Case Against Passion

“Passion” became fashionable in business at around the time other forms of emotional overshoot were hot, like “delighting customers.” While there may have been earlier efforts by Tom Peters and other corporate quacks gurus to infuse staid, supposedly rational business behavior with more pizzaz, the passion fashion seemed to take hold in the dot-com era. And that in a perverse way makes perfect sense.

Even though the Internet has proven to be transformative, the Internet bubble was, as Greenspan noted in one of his most acute moments, irrational exuberance. You were a hopeless dinosaur if you dared question the logic of investing in companies run by 22 year olds who admitted their business would never show a profit but were still hugely valuable because they had a lot of eyeballs. Those who timed this momentum trade correctly did spectacularly well, but most investors were left holding the bag.

Weirdly, the passion fashion persists. It’s an odd exhortation of Dionysian impulses when management (at least the professionalized sort) is usually presented as Apollonian: businessleaders as creators of order out of chaos, able stewards of large enterprises. Now one might argue that this is all hogwash, that Keynes was closer to the truth when he talked about animal sprits. He came pretty close to saying if someone was rational, they’d never invest or start a business.

But the real question is who this vogue for romantic attachment to one’s work really serves. Faking passion in job interviews seems to be as necessary as faking orgasms is in some relationships. On the surface, this long-lived fas appeals to the narcissistic tendencies that are ever more common in American society, that we all have some special talent or destiny and we are supposed to go forth and, to use that horrible New Age turn of phrase, manifest it.

But being emotionally invested in career success as the proof of one’s worth makes people exploitable. That’s the secret of elite firms like Goldman and McKinsey, which hire people who were not simply bright, but have a record of achievements that shows that they care deeply about external validation. When an organizational guru came in to give a look over McKinsey in the 1980s, he was famously told by the head of the firm, “Don’t mess with the insecurity.”

Now that isn’t to say that you shouldn’t care about your work, but there is a difference in degree, and I’d hazard it is actually a difference in kind, between seeking to achieve a level of competence or mastery versus the bizarrely idealized passion. That’s a good old fashioned sense of satisfaction in doing a good job, and that can operate at any level, from being a house cleaner or store clerk to someone in a much loftier position. And the idea of valuing. Yet as we’ve become a winner-take-all society, we’ve tended to devalue competence, even though jobs competently done are what keeps the system running. Instead, we’ve created more and more steep payoff curves, with the most extreme being in fields like acting and professional sports, where a very few people do egregiously well, and a lot of people have a go at it for very modest or no pay, because they think they have (or actually may have) some talent, but also do love the process.

What bothers me is that the human potential movement (est and its many derivatives) tended to equate following your dreams with achieving happiness. This is a dangerous formulation; in fact, the Buddhists would likely see this as another version of samsara or suffering (Buddhists welcome to correct me). Wanting something is setting yourself up to be disappointed, either by not getting what you sought, or attaining it and finding the achievement to be less satisfying than you’d envisaged, and most liked supplanted by a new set of wants that you start pursuing.

With this as prologue, I wanted to turn to a post from the Harvard Business Review’s blog, “To Find Happiness, Forget Passion,” that Lambert liked, but I found less than satisfying:

Several years ago, a friend decided she wanted to follow her passion. She loved the liberal arts and academe….So she spent seven years getting a PhD, writing an award-winning dissertation in the process. It was a wonderful ride while it lasted, and she was among the happiest people I knew.

Then the recession hit. The value of university endowments crashed. Teaching and research positions were cut. She moved back in with her family, stopped paying off her student loans, and waited two years before getting a minor teaching role in a small research center. Throughout this time, she suffered the anguish of an uncertain future, became socially withdrawn, and felt a sense of betrayal.

It’s a poster tale for our times. Was following her passion worth it?

Like myself, today’s twentysomethings were raised to find our dreams and follow them. But it’s a different world. And as the jobless generation grows up, we realize the grand betrayal of the false idols of passion. This philosophy no longer works for us, or at most, feels incomplete. So what do we do? I propose a different frame of reference: Forget about finding your passion. Instead, focus on finding big problems.

Putting problems at the center of our decision-making changes everything. It’s not about the self anymore. It’s about what you can do and how you can be a valuable contributor. People working on the biggest problems are compensated in the biggest ways. I don’t mean this in a strict financial sense, but in a deeply human sense. For one, it shifts your attention from you to others and the wider world. You stop dwelling. You become less self-absorbed. Ironically, we become happier if we worry less about what makes us happy.

The good thing is that there are a lot of big problems to go by: climate change, sustainability, poverty, education, health care, technology, and urbanization in emerging markets. What big problem serves as your compass? If you’re a young leader and you haven’t articulated this yet, here are some things you can do.

Develop situational awareness. There’s too much focus on knowing the self. Balance this with knowing the world. Stay in touch. Be sensitive to the problems faced by the unfortunate and marginalized. Get out of the office and volunteer. If you’re in school, get out of the classroom. It’s been a long time coming, but business schools are finally instituting changes that put the real world at the center of their programs.

Look into problems that affect you in a very personal way. We’re more likely to be motivated by problems we can relate to on a personal level. In Passion & Purpose, Umaimah Mendhro recounts her story fleeing a war-torn Pakistan with her family and how the experience of dodging bullets to escape helped her summon the wherewithal to found thedreamfly.org, an initiative that helps create connections across communities in conflict.

Connect with people working on big problems. In a world where problems are by their very nature interdisciplinary, just getting to know people who are passionate about one problem leads to discussions on how other problems can be solved. When Jaime Augusto Zobel de Ayala helped reinvent Manila Water to better provide for the Philippines’ capital, he had to deal not only with the typical issues a public utility had to face, but also with problems related to climate change, technology, and community development.

Take time off and travel. Forget about traveling as a tourist. Instead, structure a trip that takes you off the beaten path. Go to an unconventional place. Backpack and get lost. The broader and richer experience pays dividends down the line. Steve Jobs described his time living in India as one of the most enriching and mind-opening phases of his life, and this undoubtedly helped him develop the intuition to solve the big problem of making lives simpler through technology.

We don’t find happiness by looking within. We go outside and immerse in the world. We are called to a higher purpose by the inescapable circumstances that are laid out on our path. It’s our daily struggles that define us and bring out the best in us, and this lays down the foundation to continuously find fulfillment in what we do even when times get tough.

Happiness comes from the intersection of what you love, what you’re good at, and what the world needs. We’ve been told time and again to keep finding the first. Our schools helped developed the second. It’s time we put more thought on the third.

What big problems are you trying to solve?

It may sound churlish to take issue with this prescription. It sounds like a long overdue rebellion against the breakdown of communities, both the physical kind and the sort you’d find in the workplace when businesses offered long term employment. And the world has no shortage of urgent problems that would benefit greatly from more sincere people putting shoulder to wheel to try to remedy them.

What bothers me is anchoring this orientation as as new prescription for happiness. Now it is indeed true that people with more extensive and numerous social networks are healthier; ironically, that’s one of the reasons unequal societies are less healthy. The sort of people you associate with is very much class/income related, so if you lose your perch, you lose most if not all of your putative friends. That in turn produces even more pressure to keep your foothold on the economic ladder.

Go again and read the featured post more carefully. The author hasn’t freed himself of the passion paradigm; notice how he urges readers to find people who are “passionate about problems.” And it’s also hard to put aside the HBS ego orientation: positing his audience to be “young leaders” and urging them to get involved in big problems.

If happiness is the aim, research points to other routes. Altruism lights up the pleasure centers of the brain, supposedly (it never seems to work for me, I just think about how inadequate what I have done or given is relative to the scale of the problem). But I’m not sure “doing altruism” works, if you get the distinction. If you do something generous, you might get a boost from helping other people, but I’m not certain self motivated altruism would produce the same results.

Mihaly Csikszentmihalyi argues that people are happy when they are in a state he calls “flow” which is being fully engaged in the activity at hand. He describes it in an interview in Wired as:

being completely involved in an activity for its own sake. The ego falls away. Time flies. Every action, movement, and thought follows inevitably from the previous one, like playing jazz. Your whole being is involved, and you’re using your skills to the utmost.

That can happen when you are “in the zone” when playing a sport, engaged in problem solving (sudoku and crossword puzzle junkies seem to exhibit this sort of concentration) or engrossed in a really good book. One has to note that multitasking would seem to train people out of being able to attain that level of involvement.

But even then I’m not certain Csikszentmihalyi is right about happiness so much as onto a much better approximation. His thesis is that individuals attain a state of flow when they are faced with a task that is demanding enough that it takes their full attention, but not so hard that they cannot succeed at it. How do you regularly find this level of challenge?

By contrast, Buddhists accept the inevitability of suffering and don’t seek happiness, yet they are studied by brain researchers for their equanimity. That in turn results from meditation, which is a form of mental discipline, and appears to create an ability to approach more activities with the sort of prized mindfulness (lack of ego and full engagement) that normal people achieve only by happenstance (or perhaps by luck, by finding or falling into a career that provides them with the sort of tasks that can put them in a state of flow). I’m told a Buddhist saying is “Before I was enlightened, I carried water and chopped wood. Now that I am enlightened, I carry water and chop wood.” In other words, your circumstances do not create your mental state. You do. But few of us are skilled enough to have mastered this faculty.

I wish there were a way for Americans to get over their fixation with happiness and try to use the inevitable pain of the human condition to come to grips with more fundamental questions of meaning. The fact that the HBR is raising the issue of failure as a spur to action is a promising sign, but its readers probably need to be willing to step further outside cultural assumptions to have a real impact on their own psyches, and potentially, the communities they inhabit.

Bill Black: The High Price of Ignorance

Posted: 07 Nov 2011 03:30 AM PST

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By Bill Black, an associate professor of economics and law at the University of Missouri-Kansas City, a white-collar criminologist, a former senior financial regulator, and the author of The Best Way to Rob a Bank is to Own One. Follow him on twitter @WilliamKBlack

I have just finished giving three talks, in three days, in three states during which I continued one of my common obsessions – doing research about financial crises. Among of the primary beliefs I’ve had reinforced over these 72 hours are my views about how incredibly harmful financial ignorance is, and how precious are the sources who combine sound information about finance with humanity. As a father, I do not play silly games about which kid I like best, so I will simply express my personal belief that Naked Capitalism is one of the preeminent sites for learning about finance, while always remembering people.

My first talk was in central Missouri to the Missouri Association for Social Welfare (MASW). MASW is made up of people who have worked, often for decades, to help those mode in need in our State. They have seen their efforts overwhelmed by the ongoing crisis and they are eager to learn why it occurred and how to prevent or reduce future crises. This is a group that combines policy wonks and boots on the ground caregivers. They are well read, but they do not find that regular media sources provide them with any comprehensive understanding of why we suffer recurrent, intensifying crises. A few of their members, however, read our blog (NewEconomicPerspectives – created and maintained by my UMKC economics colleague Stephanie Kelton) and Naked Capitalism. They learned from these sites about my work and reached out to me to keynote their conference because they have a thirst for learning about finance and the crisis.

Thursday I presented “in the belly of the beast” – the University of Chicago’s School of Law. The students on their law forum reached out to bring someone with views very different from their own faculty and the other speakers. They were not rejecting their faculty’s views ala the Harvard economics students who walked out of Professor Mankiw’s class to protest what they viewed as his unwillingness to discuss rival theories. The students simply wanted to have an opposing viewpoint expressed. They knew that I existed because of media appearances that were largely generated because many members of the financial media who read Naked Capitalism and NewEconomicPerspectives. Many of our readers learned of us and our research findings and theories by reading Naked Capitalism. Naked Capitalism is so important because it does not simply feature the views of an individual. It seeks out and gives visibility to diverse, thoughtful views from those who inhabit the reality-based world and support their theories with sound analytics and compelling data.

My reaction to the U. Chicago conference was that the students did well to reach out in this manner. On our panel (on private-sector fraud and corruption) the other panelists’ (all Chicago-school) principal concern was that we reduce the prosecution of elite white-collar criminals, reduce the incentives to blow the whistle on the CEO, and reduce the incentives to bring a qui tam civil fraud actions against corporations. We inhabit alternative universes. In our reality-based universe, the problem is elite fraud. In their faith-based theoclassical economics universe the problem is that the “mob” is seeking to murder innocent bank CEOs by bringing back the weapon of the French terror, the “guillotine.” These are the exact terms used by one of my co-panelists. We may never be able to convince the theoclassical Chicago-school faculty to cease their identification with and apologias for the one percent, but we are read by at least some of their students because of the visibility provided by Naked Capitalism.

My talk Saturday was in LA at the invitation of the “Occupy Wall Street” (OWS) participants as part of a “teach-in.” Again, the participants are eager to learn about why we suffer recurrent, intensifying financial crises. Some of the protesters are well versed on the nature of the ongoing crisis and its causes because they read Naked Capitalism and blogs such as NewEconomicPerspectives. Many of the protestors, however, are not well informed and have views about the crisis that are intense but not fact-based. They too have read

articles on blogs, but those articles and blogs are the antithesis of Naked Capitalism. They are sensational, but contrary to the facts. Many of these myths are enormously harmful – they led the speakers to view it as impossible to succeed, that no one could be trusted, and that our government had never done anything successful. Collectively, their messages were the ideal toxic blend of views that would render any effort against the “control frauds” and “systemically dangerous institutions” useless. The opponents of OWS could not have designed a more self-defeating meme. Naked Capitalism understands how grim the situation is and how difficult our tasks are, but it does not give in to hopelessness and defeatism.

The research project that reinforced my view about the crushing costs of financial ignorance was reviewing Attorney General Holder’s testimony before the Financial Crisis Inquiry Commission (FCIC). It is apparent that neither Holder nor his senior staff read Naked Capitalism (at least in that era). Attorney General Holder made two extraordinary statements at that hearing demonstrating his utter ignorance. Chairman Angelides asked Holder to explain the actions the Department of Justice (DOJ) took in response to the FBI’s warning in September 2004 that mortgage fraud was “epidemic” and its prediction that if the fraud epidemic were not contained it would cause a financial “crisis.” Holder testified: “I’m not familiar myself with that [FBI] statement.”

For those of you who have never been involved in preparing an agency head to give a major piece of testimony (something I did fairly often), let me confirm that it is a very big deal. The staff briefs the head of the agency thoroughly on the key issues and how the agency responded to them. The DOJ’s (the FBI is part of DOJ) preeminent contribution with respect to this crisis was the 2004 warning to the nation (in open House testimony picked up by the national media). (Stop and think how widely known the warning would have become if Naked Capitalism was operating in 2004 and had input from white-collar criminologists.) For Holder not to know about the most important (and most praise-worthy) action by his department requires that none of his senior staffers knew about the FBI testimony.

 

For none of his senior staffers to know about the FBI testimony requires that they know nothing about the department’s most important and (potentially) useful act. That depth of ignorance could not exist if his senior aides cared the least about the financial crisis and made it even a minor priority to understand, investigate, and prosecute the frauds that drove the crisis. Because Holder was testifying in January 14, 2010, the failure of anyone from Holder on down to know about the FBI’s warnings also requires that all of them failed to read any of the relevant criminology literature or Naked Capitalism. We need to reach the point where the failure of senior officials who need to be financially literate (and that includes everyone at the senior levels of DOJ) to regularly read Naked Capitalism and NewEconomicPerspectives marks one as irredeemably unprofessional.

 

Holder’s prepared testimony is a further testament to the costs of ignorance. In addition to claiming that the DOJ’s response to the developing crisis under President Bush was superb, Holder implicitly took the position that (without any investigation or analysis) that fraud could not and did not pose any systemic economic risk. Implicitly, he claimed that only economists had the expertise to contribute to understanding the causes of the crisis. If you don’t investigate; you don’t find. If you don’t understand “accounting control fraud”; you cannot understand why we have recurrent, intensifying financial crises. If Holder thinks we should take our policy advice from Larry Summers and Bob Rubin, leading authors’ of the crisis, then he has never read Naked Capitalism.

 

Now let me state at the outset what role the Department plays and does not play in addressing these challenges” [record fraud in investment banking and securities].

 

“The Department of Justice investigates and prosecutes federal crimes.…

 

As a general matter we do not have the expertise nor is it part of our mission to opine on the systemic causes of the financial crisis. Rather the Justice Department’s resources are focused on investigating and prosecuting crime. It is within this context that I am pleased to offer my testimony and to contribute to your vital review.

 

Two aspects of Holder’s testimony were preposterous, dishonest, and dangerous.

 

I’m proud that we have put in place a law enforcement response to the financial crisis that is and will continue to be is aggressive, comprehensive, and well-coordinated.

 

DOJ has obtained ten convictions of senior insiders of mortgage lenders (all from one obscure mortgage bank) v. over 1000 felony convictions in the S&L debacle. DOJ has not conducted an investigation worthy of the name of any of the largest accounting control frauds. DOJ is actively opposing investigating the systemically dangerous institutions (SDIs).

 

Holder’s most disingenuous and dangerous sentence, however, was this one:

 

Our efforts to fight economic crime are a vital component of our broader strategy, a strategy that seeks to foster confidence in our financial system, integrity in our markets, and prosperity for the American people.

Yes, the “confidence fairy” ruled at DOJ. It is the rationale now for DOJ’s disgraceful efforts to achieve immunity for the SDIs’ endemic frauds. The confidence fairy trumped and traduced “integrity in our markets” and “prosperity for the American people.” Prosperity is reserved for the SDIs and their senior managers – the one percent. But then you know that because you read Naked Capitalism.

Mr. Market Had a Really Bad Day

  Yup, folks - it's here - and it's only the START.

I strongly suggest reading all the very fine comments, too.  It's telling it like it IS and WILL BE.

Mr. Market Had a Really Bad Day

 Yves Smith 

You know things are not normal when a 4%-5% movement in equity markets looks routine.
I’ve been a bit surprised that it has taken investors this long to get the memo that the prospects for the economy (both domestically and internationally) are lousy. The stunning US GDP revisions of last month should have been a wake-up call, but they seemed to be swamped by the deficit ceiling/S&P downgrade theatrics.
In case anyone managed to miss it, advanced economies have decided to put on the austerity hairshirt, which assures near or actual deflation. The concern re the uptick in consumer inflation figures excludes the biggest input into goods costs, namely wages. Commodities inflation seems to be driven by a combination of speculative inflows (which is believed to include hoarding of storable materials, such as metals in China) and emerging economies, particularly China, running at over potential and being too slow to increase interest rates to cool off demand.
The US program of using monetary stimulus as a fix for a failure to reform the banking system, write down bad debts, and apply generous stimulus as an offset isn’t working out very well. The notion was to have the wealth effect of higher stock prices and hopefully stabilizing and improving housing prices restart consumer spending. But consumers were in retrenchment mode as a result of being overlevered, and the lousy job market is keeping them correctly very cautious. So QE-induced optimism goosed asset prices, like stocks and subprime debt, without doing much for the real economy.
But even though investors got ahead of themselves in the US, the real trouble spot is Europe. The latest EU attempt at confidence building by Sarkozky and Merkel on Tuesday wasn’t even kick the can down the road, it was pure smoke and mirrors. With a lack of any political consensus on moving to a fiscal union, the job of holding the Euromess at bay falls to the ECB. And as we’ve indicated, its Bundesbank mentality guarantees it won’t do a Bernanke and balloon its balance sheet to the €2-3 trillion level needed to do the job. It has already done roughly €96 billion of bond purchases to support periphery debt. Italy has €68 billion of debt maturing by the end of September, and market participants estimate the ECB would need to buy €100 billion of Italian debt to keep its borrowing rate at 5%. That would push the ECB’s purchases above the level than many think the bank is comfortable with. This is not a trivial issue. The ECB is already divided on further interventions; we are told by colleagues who speak to staffers that board meetings have devolved into screaming fights.
The assumption has been that if we have a Eurocrisis, the authorities will do what the markets think is the right thing and bail out the banks and provide generous liquidity. But any TARP-type facilities will have to be on a national level, and with austerity the order of the day, that would seem to be a non-starter. It also seems unlikely that the ECB would change stripes and create a raft of Bernanke-style emergency lending and asset-purchase facilities, or at least not quickly enough to halt an unraveling.
The other wild card is that the policy paralysis in the Eurozone means an eventual breakup, with some countries exiting and the rest remaining as a rump Euro area, seems more and more likely. Europe otherwise needs a vastly lower euro (Wolfgang Munchau has estimated .60 or .80 to the dollar) to alleviate the internal imbalances and give periphery countries a boost via increased exports. That does not seem likely, plus that magnitude of a currency move would have its own knock-on effects. A dissolution could take the form of a German bloc exiting, but given the denial among politicians, it would probably happen as a result of banking-related stresses becoming more acute, rather than as part of a program to remedy them.
I’d rather be proven wrong on this one, but days like today are likely to look tame relative to what is in store.