In this last post in the rules of the game series, we look at the creative use of the rules in a couple of situations. Rules can be used to create productive and predictable conflicts. One such conflict is in law enforcement, where cops hate defense attorneys — if we are to believe Michael Connelly’s depiction of how things work at LAPD. It is not as if they are really working against each other, although it may look that way. Both of them are working toward implementing a set of rules that will lead to justice for all, while avoiding power concentration and corruption. The best way of doing it happens to be by creating a perpetual conflict, which also happens to be fodder for Connelly’s work.
Another conflict of this kind can be seen in a bank, between the risk taking arm (traders in the front office) and the risk controlling teams (market and credit risk managers in the middle office). The incessant strife between them, in fact, ends up implementing the risk appetite of the bank as decided by the senior management. When the conflict is missing, problems can arise. For a trader, performance is quantified in terms of the profit (and to a lesser degree, its volatility) generated by him. This scheme seems to align the trader’s interests with those of the bank, thus generating a positive feedback loop. As any electrical engineer will tell you, positive feedback leads to instability, while negative feedback (conflict driven modes) leads to stable configurations. The positive feedback results in rogue traders engaging in huge unauthorized trades leading to enormous damages or actual collapses like the Bearings bank in 1995.
We can find other instances of reinforcing feedback generating explosive situations in upper management of large corporates. The high level managers, being board members in multiple corporate entities, keep supporting each other’s insane salary expectations, thus creating an unhealthy positive feedback. If the shareholders, on the other hand, decided the salary packages, their own self-interest of minimizing expenses and increasing the dividend (and the implicit conflict) would have generated a more moderate equilibrium.
The rule of conflict is at work at much larger scales as well. In a democracy, political parties often assume conflicting world views and agendas. Their conflict, ratified through the electoral process, ends up reflecting the median popular view, which is the way it should be. It is when their conflicting views become so hopelessly polarized (as they seem to be in the US politics these days) that we need to worry. Even more of a worry would be when one side of the conflict disappears or gets so thoroughly beaten. In an earlier post, I lamented about just that kind of one-sidedness in the idealogical struggle between capitalism and socialism.
Conflicts are not limited to such large settings or to our corporate life and detective stories. The most common conflict is in the work-life balance that all of us struggle with. The issue is simple — we need to work to make a living, and work harder and longer to make a better living. In order to give the best to our loved ones, we put so much into our work that we end up sacrificing our time with the very loved ones we are supposedly working for. Of course, there is a bit of hypocrisy when most workaholics choose work over life — they do it, not so much for their loved ones, but for a glorification, a justification or a validation of their existence. It is an unknown and unseen angst that is driving them. Getting the elusive work-live conflict right often necessitates an appreciation of that angst, and unconventional choices. At times, in order to win, you have to break the rules of the game.