by David Boyle
And behind the measurements there is a vast amount of data, and whole offices full of ‘data miners’ – with their picks and Davy Lamps – digging through computers to come up with bizarre correlations in the figures. It’s done so quickly: ‘Every month, I’d receive three cartons of paper that I spread out on the floor in my office,’ said Skandia’s sales statistics manager Per Kingfors. ‘I also received files on disks and faxed reports. It took days, weeks even, to put all the data together. Now we sit and drum our fingers if we wait more than 20 seconds to get a report.’
But behind all these figures, you get the feeling that somehow it isn’t working. The more they all measure, the more it all slips through their fingers.
Of course the measurements are not exactly what they want. Screeds of data about customers and how often they buy from you is not the same as a real measurement of ‘loyalty’. ‘If you want loyalty, buy a dog,’ said the chief executive of a UK chain of DIY stores when research showed that most people out DIY shopping didn’t know whose store they were buying from.
Even the bottom-line figures are behaving oddly. ‘If you want to look at regular stock, you go either to a financial analyst or an economist,’ said Michael Bloomberg, the founder of the online information giant, as the value of the website Yahoo overtook that of British Airways. ‘If you want to value an Internet stock, you go to a psychologist or a publicist.’
Even the investor magazine Fortune has included a rant against the rising tide of measurement. ‘If information is a strategic asset, does that mean more and more must be good?’ asked columnist Michael Schrage in 1999. ‘Just because single left-handed blond customers who drive Volvos purchase 1,450 per cent more widgets on alternative Thursdays than their married non-blond, right-handed, domestic car-driving counterparts does not a marketing epiphany make.’
In a one slightly complicated sentence, Schrage has put the problem in a nutshell. Measuring is easy these days. But the world is too complicated for figures. ‘It’s easier to count the bottles than describe the wine,’ says Thomas Stewart in Intellectual Capital.
It doesn’t seem to matter how many figures you have laid out in front of you, they will not interpret. They will not give you cause and effect. For that you have to make a leap of intuition. Which of all the millions of figures that most companies have at their disposal are the ones making them succeed – or is it just the business cycle? Or will they find themselves praised for their astonishing performance one moment, like Marks & Spencer, and the next moment find themselves dropping down the markets like a stone?
Companies now have vast databanks of information about their customers, segmentable in every possible direction. They know precisely how they behave and what they buy. Why they behave like that remains as elusive as ever.
Which is one reason why it’s so difficult to come to a clear conclusion by calculating a better bottom line. Zadek makes no attempt to add up all the figures in a social audit. ‘It would be meaningless,’ he says. And how do you balance up the triple bottom line?
‘I don’t know,’ says Elkington. ‘The point is that there are at least three different dimensions to valuing performance that we need to address. The best companies can integrate all three and scarcely be aware of it – like walking. For several years I felt it was better to separate them out and give them a bit of oxygen, but sometime over the next five to ten years, all of them must be collapsed back together and integrated.’
This is the great unanswered question, like the search for the Yeti. Is there such a thing as one number at the bottom that really says it all? As far as I know, this is the impossible dream – single numbers don’t seem to be able to live up to the complexity of life.
There’s an echo here of the days before any kind of auditing. Before Pacioli invented his book-keeping methods, medieval merchants had no books to balance. Instead they kept a kind of diary which listed transactions together with birthdays, battles and other social events. ‘The Italians called this a ricordanze,’ wrote the historian of such things, Alfred Crosby. ‘But how does one balance a diary?’ Social auditing is simply a return to the ricordanze: you can’t balance it.
For the time being, anyway, imposing single numbers seems to distort. Managing by them tends to lead to lower morale, worse service and higher costs. The fact that management has moved a little further on from there is definitely progress. We have come a long way from the 1970s, when fearsome executives would appear with their print-outs in far-flung edges of a corporate empire to grill local managers about figures and nothing but figures. No longer is one of the biggest companies in the world so committed to getting a 20 per cent return on investment that it issues all its executives with underwear bearing the words ‘ROI 20%’.
Even old Deming, the total quality guru, got it right years ago when he complained about business people counting too much. ‘Accounting-based measures of performance drive employees to achieve targets of sales, revenue and costs, by manipulation of processes, and by flattery or delusive promises to cajole a customer into purchase of what he does not need,’ he said.
Need? How can you measure whether a customer needs something? But then, as Deming said – in a wonderfully self-contradictory statement – 97 per cent of what matters in business can’t be counted. Maybe this was what Anita Roddick means when she describes business as like her mother’s café – about life and people and fun as much as profit.
In the end, even after all those measures and highly paid knowledge managers, the difference comes down to people, their instincts and their intuitions – those business pioneers who can do things automatically like walking. Perhaps that’s why the most successful manager in the world, General Electric Chief Executive Jack Welch, spends the vast majority of his valuable time interviewing people for the top 500 jobs in his company. ‘My whole job is picking the right people,’ he said. And if you wonder how he has time for anything else, he probably doesn’t.
Given that, is it possible to run a business successfully without calculating so much? Social auditing suggests that a compromise might be possible. But perhaps the most hopeful sign is the success of the biggest second-hand book chain in the USA, Half Price Books. They have successfully built themselves into a major chain by expanding city by city not according to financial calculations, marketing projections or anything else that requires a calculator. They decided where to open next according to wherever their employees happened to have family reasons for wanting to move.
Bizarre measurement No. 8
Carcel
(Another unit of light, used in France. 1 Carcel = 10 candles.)
* * *
Proportion of medical columns in Canadian newspapers judged to be giving ‘potentially life-threatening’ advice: 28 per cent
Time you would have to yell to produce enough sound energy to heat a cup of coffee: 8 years, 7 months and 6 days
Chapter 8
Historical Interlude 4: National Accountant
He keeps a lady in a cage
Most cruelly all day,
And makes her count and calls her ‘Miss’
Until she fades away.
G. K. Chesterton, ‘Song Against Grocers’
It is astonishing how many foolish things one can temporarily believe if one thinks too long alone.
John Maynard Keynes
I
It was 5 June 1916. At the River Somme on the Western Front, the Allied armies were gathering for the battle they believed would finally cut through the German trenches. To the north of Scotland, it was a cold, stormy evening as HMS Hampshire set sail from the anchorage of the British Grand Fleet at Scapa Flow. Her four funnels belched smoke as she sailed past the sheer cliffs of Marwick Head, taking the western route past the Orkney Isles to avoid the worst of the buffeting wind. At 7.40 pm, a mile and a half from the coast, an enormous explosion almost cut the ship in two. She had sailed straight through a minefield laid by U475 with great precision, but in the wrong place. Within ten minutes
the ship and crew had disappeared. Only 14 survived. One of those who was never seen again was the British Secretary of State for War, Horatio Herbert Kitchener. He was 19 days short of his sixty-seventh birthday.
Kitchener had presided over the last cavalry charge of the British army. He was a national hero for his conduct against the Boers. As Secretary of State for War, he was instantly recognizable from his poster campaign – with a pointing finger and the words ‘BRITAIN NEEDS YOU’ – which succeeded in recruiting two and a half million volunteers. About 19,000 of them would be killed on the first day of the Battle of the Somme, just 25 days after his icy death. He may not have been a great man, said Margot Asquith, the prime minister’s wife, but he certainly was a great poster.
In this sense, Kitchener was the very embodiment of numbers in a society newly alive to the horror of them, when each casualty figure hid a devastated and grieving family. By the end of the war there would be 2,516,014 of them killed, captured and wounded from Britain alone. By December 1915, the official British kill target was 200,000 Germans a month, but they seemed to be suffering similar numbers achieving it. The generals saw no further than the numbers. ‘We are like a gambler who must always call his opponent’s bluff,’ said General Sir Henry Rawlinson about the horrendous casualties. ‘Whatever chips he puts down, we must put down more.’
Kitchener’s death belongs in this story not just because of the numbers, nor because Lloyd George had been planning to accompany him on the Arctic journey, but had changed his mind at the last minute. It belongs here because Lloyd George – had he joined Kitchener on the ship – would have taken with him a brilliant young Treasury economist, John Maynard Keynes.
The day Kitchener met his end was also Keynes’ thirty-third birthday. He was at the time also a fellow of King’s College, Cambridge, an active homosexual and a central member of the Bloomsbury set, which was even then conducting its revolution to exorcize stuffy Victorian religion and morality. He was a recognized expert on Indian currency, and his views were increasingly sought by politicians and civil servants alike. If we had lost Keynes on the Hampshire, he would not have been there to lay the foundations of modern economics, the world financial system, the IMF – and gross national product, the system whereby we can count up the wealth of a whole nation, and see whether it is rising or falling in one figure.
Although his history-changing General Theory of Employment, Interest and Money would be packed full of equations and statistics to prove his contentions, and although he spent eight years before the First World War writing a treatise on probability – pausing on the task during the war years – he didn’t like statistics very much. Numbers fascinated him, but then so did myths and fairy tales – especially the story of Midas who could turn anything he touched into gold. He was sceptical of the whole idea of econometrics, which meant applying numbers and statistics to economics. He saw economic problems as basically moral crises – not the old-fashioned kind of morality, urging thrift and careful saving – but all because of people’s fatal love of money. Keynes described this love as ‘a somewhat disgusting morbidity, one of the semicriminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease’.
‘The truth seems to be that numbers were for him simply clues,’ wrote his latest and most voluminous biographer Robert Skidelsky, ‘triggers of the imagination, rather like anecdotes are for the non-mathematically minded.’ Keynes was not, at first sight, one of the great tradition of number-crunchers. How could he be, as a central intellectual figure in the Bloomsbury revolution. There they were, urging a new individualism – urging people to use their intuition and creativity after the dead hand of Victorian stuffiness and pomposity.
And the person he blamed more than anybody else for this stuffiness was the counter-in-chief, Jeremy Bentham, whose tradition he described as ‘the worm that has been gnawing at the insides of modern civilization and is responsible for its present moral decay’. Not for Keynes the struggle to understand creativity or poetry because it couldn’t be measured. On the contrary, he fell in love with an artist, married a ballerina, and spent part of the Great Depression financing and supervising the creation of the Cambridge Arts Theatre. ‘If I had the power today,’ he said in 1933:
…I would surely set out to endow our capital cities with all the appurtenances of art and civilization on the highest standards … convinced that what I could create I could afford – and believing that money thus spent would not only be better than any dole, but would make unnecessary any dole. For what we have spent on the dole in England since the war we could have made our cities the greatest works of man in the world.
Not for Keynes the reduction of the grandeur of human life to money, or to numbers. So how come he is in this book at all? The answer is that it was Keynes’ national accounting system, which would sum up everything in the British economy in one gigantic number, that kept Britain alive during the darkest days of the war, consistently outperforming the Nazi economy which everyone thought was so efficient.
As the finest economist of the century, Keynes was wedded to measurement. He used figures every day to win his intellectual battles and conduct his highly successful speculations on the world’s stock exchanges. But he never used numbers to pin down life. It was the generation that came later that took his national accounts and turned them into an absolute description, one that reduced whole nations to a single tyrannical figure. By that time Keynes was dead, and the man who claimed the invention of national accounts along with him was having serious doubts.
II
Karl Marx was three months under the turf at Highgate Cemetery, Charles Booth was vaguely wondering about a poverty survey of London, and Robert Louis Stevenson was putting the finishing touches to Treasure Island, and on 5 June 1883 – 33 years to the day before the sinking of HMS Hampshire – John Maynard Keynes was born at 6 Harvey Road, Cambridge. Like Bentham, he was a sickly child, coming down with rheumatic fever and heart pains around his sixth birthday. For the rest of his life he was obsessed with the idea that he was physically repulsive. He also soon realized he was homosexual – a nervous moment in British history to discover that about yourself. ‘Gross indecency’ was punishable by a year in prison with hard labour, and had been since he was two years old. As Oscar Wilde discovered so tragically, there was no exemption for genius. At Kings at the age of twenty, he was elected to the elitist intellectual group known as the Apostles, a regular twelve of whom had been meeting since the start of the previous century. They met behind bolted doors on Saturday nights, listening to endless learned papers from each other, eating anchovies on toast.
It was a brand new century, Queen Victoria was dead and a new age seemed to beginning – based on the individualistic ideas of the Cambridge moral philosopher G. E. Moore. They seemed to overturn Victorian religion. Morality couldn’t be calculated, he said – it had to come from within. It was ‘exciting, exhilarating, the beginning of a renaissance, the opening of a new heaven and earth,’ said Keynes. ‘We were the forerunners of a new dispensation, we were not afraid of anything.’
The following year he came first in a whole spread of papers in the Civil Service exams, but only eighth or ninth in economics. ‘I evidently knew more about economics than my examiners,’ he wrote. Soon he was working in the India Office, spending his evenings working on what would eventually become his book on probability – linking it to intuition rather than anything directly measurable – and raging at the way government was run during his day job. It was ‘government by dotardy,’ he wrote after his first committee meeting. ‘At least half of those present showed manifest signs of senile decay, and the rest didn’t speak.’ He kept the same tone up, inside and outside government, for most of his life.
He was in love with the artist Duncan Grant, much to his friend Lytton Strachey’s fury, and was already going to the ballet at Covent Garden twice a week, feeling his way towards his theories of Indian currency. Around him there w
as a flowering of Edwardian culture. Human nature changed in December 1910, said Virginia Woolf later. From then on the truth was to be found by intuition as well as reason. No more Benthamite calculus. No more tabular data as the source of all truth. No more obsessive collecting of figures. This was the age of Picasso, of leaps of daring imagination.
The Great War broke out over bank holiday weekend. ‘Who is this Keynes?’ asked Lloyd George the following day. As Chancellor of the Exchequer, he was furious about his interfering memo on the currency, and from that moment on ‘this Keynes’ would become an increasingly important shadow in Lloyd George’s life, sometimes as nemesis – at the peace negotiations in 1919 – sometimes as saviour. Keynes was soon working at the Treasury with a staff of 17 under him.
It was a difficult position for a sensitive man like Maynard Keynes. It made him exempt from military service, which could well have saved his life, yet he found himself increasingly disillusioned with the war and its conduct. After conscription started in 1916, he was constantly battling to get his friends exempted too. As an act of symbolic protest, he even declared himself as a conscientious objector. He agonized about whether to resign his post in protest, only to come home to find an article by a well-known Liberal pacifist on his dinner plate. Attached to it was a note which read:
