Ever since rewatching Too Big To Fail recently, I have been fascinated by the role that Timothy Geithner played during the financial crisis and his solutions to it. What is more, I’m about 90% certain that this curiosity was not spawned by Billy Crudup’s emotive portrayal of him.
The former Treasury Secretary’s perspective on the financial crisis is an instructive one, and not just within that industry. He as a new book out this month, Stress Test:Reflections on a Financial Crisis, and has been doing the television circuit promoting it. On every program from Charlie Rose to The Daily Show, Geithner has been expounding upon the position he was in between 2007 and 2013 , his approach to saving the US economy, and – perhaps most importantly – his understanding of the disparate perspectives of the key players.
I have only just started the book, so I will hold off on a thorough review for the moment, but I did note one recurring theme from these interviews that I will keep in mind as I read Geithner’s book: the concept of individual versus group rationality. He hit upon this time and time again during the interviews. He explained how each actor in the crisis, be it Congress, the banks, individual investors, regulators, or the broader public, acted entirely rationally from the narrow perspective of their own self-interest. However, in so doing, they each contributed to the cataclysmic chain of events that caused the crash, and also each contributed to the slower-than-hoped recovery. It is absolutely clear that this is not said in any way to assign blame, far from it. My impression of the interviews is that he makes this point to learn from the mistakes and missteps that were made along the way.
In a crisis, there is a natural instinct to look after number one, yet counter-intuitively, that is exactly the kind of mentality that can exacerbate a disaster. In many respects, it is the classic prisoners’ dilemma. Which brings me back to the title of this post and the allusion to the unofficial motto of LOST: we have a choice between surviving together, maybe not quite as well as we would like, or sacrifice others and fail alone.
There are too many ways to build upon this idea to really expound upon in one post (hey, it took LOST six seasons to get to the point, and even then most people still weren’t satisfied), so stay tuned for more thoughts on this moving forward.
OR, you can beat me to it. The floor is yours. I would love to hear from people more on the idea of competing perspectives, or even specifically about Geithner, about the management of the banks or the reactions to the financial crisis.