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Monday, August 9, 2010

The Assumption Dilemma

The simple truth is that nothing would get done if we didn’t make assumptions.  We would literally be frozen in our tracks if it were not for assumptions made relating to our physical world, as well in the world of human relations.  The relevant question is not whether or not to assume, but rather how confident are we in that assumption.    Not only is it a matter of calculable risk, it is also a matter of faith and trust in unknowns and intangibles.  A very important question is how much faith can be put in people.  Friday the head of Hewlett Packard stepped down for falsifying an expense account.  As an investor I had assumed that character in the top ranks of the company would not be an issue, partly I guess because I calculated that top executives made sufficient salary that it would be in their self-interest to be honest.  But human beings are not rational calculating machines.  They are subject to irrational behavior.  This means that character assumptions must remain tentative.  Yet, any effective action requires trust; hence, an awesomely fundamental dilemma.  The only way out of this dilemma when dealing with human beings is:  “Trust, but verify”—a favorite saying of Ronald Reagan.  Even in the family unit this is done in an informal way.  Human behavior is not isolated to the corporate, national, and international levels.  (I might also add that trust and verification are common necessities in physical systems and processes as well.)  So how would I answer the child’s question: “Don’t you trust me?”  I would say, “Yes, I trust you.”  (I will err on the side of trust.)  “Just don’t push my hot buttons.”

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