Bankers Behaving Badly!
The financial services industry is based on a fantasy. The fantasy that money possesses inherent value. And the more you have the more valuable you are.
That fantasy collapsed with the findings of the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released in 2019. Commissioner Hayne uncovered an unbelievable litany of widespread lying, cheating, and conniving over four decades. More than 130 witnesses and 10,000 public submissions revealed terrible stories of financial hardship, job losses, divorces, trauma, and suicides, all at the hands of bankers.
One of the biggest defences from bankers and their agents was, ‘it wasn’t me, it was the culture’. Individuals argued that they were not necessarily responsible. It was the culture of their organisation. ‘Everyone was doing it’. This was the same defence heard in the Nuremberg Trials of 1945-1946.
The Royal Commission advocated for a change in the culture of Australian banking and insurance organisations. Yet a change in culture is a change in the processes by which people engage one another. Auditing business processes doesn’t change culture. And getting everyone to attend ethics courses doesn’t lead to more ethical behaviour. That’s because these are logical and rational fixes for what is a systemic, emotional problem.
It's all about the three systems of thinking. System 1 thinking is experiential, intuitive, emotional; ‘How can I make the most money to get my bonus? What feels good about how we serve the stakeholders?’ System 2 thinking is rational, deliberative, logical. But often it’s used in service of system 1 thinking. ‘How can I get away this? How can we cover it up? What justifies what I’m doing?’ It’s a post-facto rationalisation, where you realize it’s probably bad behaviour, but you can cover it up and get away with it.
System 3 thinking is a particular framework for balancing system 1 and 2 thinking and finding a solution that best serves the common good. In essence it is good judgement and wise thinking. System 3 thinking also challenges the fantasy of money, because it is concerned with life experience and common sense, compassion, diversity of values, and emotional regulation. System 3 thinking brings about a focus on what really matters; and promotes productive decisiveness rather than procrastination or inaction.
In my book, “System 3 Thinking: How to Choose Wisely when facing Doubt, Dilemma, or Disruption” (2021) I contend that training in System 3 thinking would be far more effective in instilling a sense of virtue and implicitly good behaviour in the financial services industry. We desperately need more people who know how to make wise choices rather than simply going along with the way things are. We shouldn’t need a Royal Commission to reveal just how rotten the industry is. What we need more than anything else, is wise leadership.
What of the 76 separate recommendations from the Royal Commission? Only a handful have been implemented. They’re still at it. Finding ways to make more money and feel good about it. Artfully hiding their chicanery. All the audits in the world won’t make any tangible difference. The bad bankers are still addicted to the fantasy of money.
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