October 23, 2008, it was nice to have Mr. Greenspan confirm my analysis for last month's eNews when he said, to paraphrase, "I presumed the greed in the system would include an adequate sense of sustainability. How could I know they were stupid enough to kill the goose laying the golden eggs." He believed that self-interest was an adequate safe-guard against abuse, and therefore pulled back on regulation and interest rates. But history almost always shows us that the goose gets eaten, and the run of golden eggs ends...the results of short-sighted stupidity. Had Mr. Greenspan cast his typically objective eye on that history and applied his skills of critical thinking on it, he would have avoided some of his admitted mistakes. In all candor, I've made very similar kinds of mistakes when assessing people and their motivations.

Critical thinking isn't about what you like or dislike. It isn't about a nasty demeanor everytime you hear something. Critical thinking is the application of fairly simple principles to test whether or not your approach to things makes sense.

Let's take a type of principle called a conservation principle. E=mc² is an example of such a principle. Among Michigan farmers in most of the 20^th Century, "Pay as you go," was a conservation principle. If you didn't have the money, you didn't buy it.

But the banking industry, for instance, doesn't operate on conservation laws. If a typical bank has ten customers each depositing $1000 dollars, it will make up to $120,000 in loans against the $10,000 it actually holds. Most of the institutions involved in the current mortgage mess (using these same, simple numbers for examples) made a half a million dollars worth of loans against every $10,000 they had on deposit, or what would be called a 50 to 1 margin. Critical thinking using a conservation law like, "If you haven't got the money, don't lend it," would have saved some trouble.

For another example based on an EvolvingSuccess principle, consider the following. Alpha climbers understand status and prestige, but they don't understand performance. If a board is attempting to woo some famous CEO into their company, critical thinking is not used to compose an attraction package. They only want to obtain some sense of status or prestige for the company that the candidate might bring merely by his or her presence. Outrageous salaries, bonuses and parachutes are offered with (apparently) no conditions based on performance. Well, since the board is likely composed of alpha climbers, why would you expect to see performance conditions in the package? Critical thinking about performance doesn't really seem to kick in, does it?

Using well tested principles to guide your planning and decision making is time very well spent. Have your list of two to five reliable principles handy, run your new ideas against them, and execute the new direction if the principles show you that you have a good shot.

(View our special Tribute Page for the 30th Anniversary of the Launch of the IUE Project, the basis of Optimizing Luck.)

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