Look at the lineup at the Federal Reserve Bank in 2008: Ben Bernanke, Donald Kohn, Randall Kroszner, and a few others. What do these people all have in common? They’re all bankers and economists. They all see the world in essentially the same way.
When financiers created dangerous housing bubbles in the years leading up to the 2008 crisis, the Fed failed to act. That’s because the members of the Fed were thinking just like the financiers were.
There were no fresh perspectives from people outside the financial world.Maybe those people could have stepped outside of the tired “Keynes versus Smith” ideologies to find new solutions. The Fed wasn’t facing the larger reality. It was stuck in the financial world. To get out of that world takes people who don’t know the difference between Keynesian and classical economic theory. Those are the people who would have brought the outsider perspectives. They wouldn’t have been afraid to look silly in front of the “experts.” The experts helped get us into that mess. They should have bent an ear to other voices.
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Deliberate Diversity™ could have prevented the Great Recession – or at least mitigated its effects – because a diverse group of people would have brought new perspectives to the problems the Fed was facing. The principles of Deliberate Diversity™ include a requirement to radically diversify the mix of players. This allows the key decision-makers to see beyond their own ideologies and find new solutions.
Singular perspectives prevent people from seeing new solutions to problems. If you do not invite others with different perspectives to advise and counsel you, you will make the same mistakes over and over again. When you can’t think outside of the norm, you just keep working within the norm, even if that norm leads to crisis.
Now, the Fed is in a place where it can start taking advantage of Deliberate Diversity™. Janet Yellen, the new Federal Reserve chair, may be an economist like her predecessors, but she’s different from the norm. Yellen is the first female chair of the Fed. Her experiences as a woman can give her some new perspectives that her male counterparts may not have had. Let’s hope she will choose not to assimilate, but to assert her unique perspective as a woman. The Fed is still run by financial “experts,” but the perspectives of the experts are diversifying. It’s a start.
You have to go beyond the norm, especially when it comes to the long-term health and success of a company. In this case, the Fed didn’t go beyond the norm. Look what happened: short-term booms led to a long-term recession. Radical selection on issues of major consequence avoids these sorts of major crises.