Why do we plan since war plans, economic plans, business plans as well as retirement plans typically fail when exposed to reality? What can a retirement management professional do to mitigate the impact of pervasive planning failures?
Being foreign-born and therefore “outside looking in,” I could see something exceptionally American: a deeply rooted inclination towards the practical “middle-muddle” in contrast to the utopian and theoretical ideologies of my onetime daily experience.
In other words, striving for personal and collective success is more about plodding along to keep the daily under-shooting or over-shooting in the survivable range rather than about finding the newest magic ideological bullet. Crowding the extremes has a record of spectacular failures. Managing the middle-muddle has a record of solid successes.
Indeed, many — and perhaps most — economic problems, including retirement planning, are best solved incrementally because failures cannot be avoided and must therefore be kept small and frequent. Avoiding small personal or institutional failures turns them from tolerable learning costs and into terminal systemic bankruptcies.
I grew up in France in the 1960s and ’70s where I learned about the limits of radical extremes that despise the practical middle-muddle. The confrontations, demonstrations and arguments were the stuff of daily life: witnessing demonstrations in the street while going to school, putting up with constant disruptions in the classroom and remaking the world — on a daily basis — in the caf?-culture discussions.
First, I learned that politics is the brokering of claims of power over a people. I learned that the accounts of politics are kept in units of rules and regulation, that the currency of power is coercion and that power, once turned into coercive laws, rules and regulations, stays on the books far past its expiration date.
However, I also learned that business is the creation of claims on the production and productivity of a people. I learned that the accounts of business are kept in units of wealth, that the currency of business is money and that wealth, unlike power, if it is not to be lost must be reaffirmed daily through productive work.
When doing business becomes too much like central planning, the currency of business becomes corrupted by the currency of power: Coercion replaces money as the engine of daily life. Forced actions and rationing rather than contractual prices and options become dominant features of business transactions. Forced actions and rationing on top of previous forced actions and rationing become necessary because things get messy as they will not go according to plan.
This divergence from plan is not an accident. It is not a measure of ill will. It is not a measure of intentional sabotage or incompetence. It is structural. It cannot go away, no matter how careful or forceful the planner becomes. The fact that plans fail in the face of reality is known as the “knowledge problem.”