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Sol Sanders Archive
Wednesday, August 31, 2011     INTELLIGENCE BRIEFING

On economic experts,
and other myths

More than a hundred years ago, the brilliant philosopher and father of modern psychology, William James, warned his American compatriots against “scientism”.


From The days are long gone when Soichiro Honda could show up late for a board meeting, wearing a shop coat and absent-mindedly toying with a camshaft, speaking only to insist that the company spend unheard-of percentages of revenue on upgraded production equipment, R & D, and racing. Luckily, his friend Takeo Fujisawa, who ran the company day-to-day, always had Honda's back."     
James saw an increasing tendency to extend the then budding scientific method of controlled experiments in the physical sciences into intractable social and political problems. He warned it would not work, perhaps as much based on his psychological understanding as his philosophical logic, that is, as the old saying goes, people will be people.

Not too many listened to James then — or since. The old logical fault has taken on new vast proportions since the invention of the computer and the incredible ability to accumulate virtually limitless numbers as well as “soft” information. Now the digital revolution has given us the capacity for virtually unlimited mathematical calculations. Listen to that fountain of politically correct wisdom, National People’s Radio, almost any morning or afternoon, and you will hear another long dissertation on some social or political issue, usually foisted on us by the tenuratti, backed up by voluminous, if often irrelevant, statistics.

Also In This Edition

Nowhere has the disease taken root more than in the business schools, pickled there by management experts, often practitioners of what has been termed “the dismal science” but more accurately, the pseudoscience. A few years ago, I was flattered to be asked to “lecture” a class at the prestigious University of Virginia business school. A professor had somehow learned I had written a popular [not so popular as I would have wished] biography of

I sat in on the tailend of the professor’s presentation of Honda as “a case study”. I was worried the gentleman might fall off the edge of his lecture platform when, spelling out Honda’s success, writing an algebraic formula across the blackboard, he began to run out of space. Luckily, he left the room after introducing me. I picked up the monologue, telling my young audience I would possibly be going off on a different tangent since I had written an anecdotal book.

There were, I must say, a few knowing smirks, indicating I had underestimated the students if not the professors, in their search for networks of future acquaintanceship in these courses rather than “learning” in the classical sense.

I had had considerable exposure to the company and, luckily, despite corporate antagonism toward my project, through a shinseki [a “relative”, the nakahodo, the “in- between-person” who had arranged the marriage of Honda’s eldest son], direct exchanges with Honda, himself. I found Honda a mechanical genius, but no businessman. The evidence was how repeatedly the company had almost bankrupted when he went chasing sometimes valuable, sometimes moonbeam, inventions. [Honda, for example, was virtually the only automobile company to attempt its own automatic gear transmission, later to be abandoned.]

At a certain point in time, as the lawyers say, MITI [Ministry of International Trade and Industry], the all powerful Japanese bureaucracy then overseeing Japan, Inc., intervened. It anointed a production line genius from the wartime Hayakawa aircraft to take over Honda’s “business side”. The rest, as they say, is history.

The gentleman in question was an eccentric; e.g., a devoted Wagner fan he annually took a troop of young men to the Bayreuth Festival. But sitting through several drunken evenings in his little gazebo in a palatial house garden hidden away in Tokyo’s Akasakimits’kei neighborhood, I learned many Honda “proprietary” secrets. [I have been amused to see him quoted extensively in more recent books on Honda; he died shortly after our meetings. But then Ouija boards are a common utility in the book writing profession.]

All this was recalled when The Financial Times recently warned of new problems despite all the huffing and puffing over Dodd-Frank, the latest attempted reform of Wall Street by two legislators too associated with political corruption. The FT said “… the vast $6,000 billion over-the-counter derivatives market risks being undermined by potential ‘data caps’. …” Hmmm. A good, old and close friend, despite being an economics professor but luckily not in a business school, tells me: “… These models tend to ‘work’ until there is some kind of structural shift…” English? These models tend to work until they don’t work.” Hmmm.

Dr. James, here we go: 2007-08 here we come [again]!

Sol W. Sanders, (, writes the 'Follow the Money' column for The Washington Times . He is also a contributing editor for and An Asian specialist, Mr. Sanders is a former correspondent for Business Week, U.S. News & World Report and United Press International.

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