Those at the nucleus may not have the best view

 

By John Kay
Published: February 1 2011 23:06 | Last updated: February 1 2011 23:06

This year we celebrate the centenary of the discovery by Ernest Rutherford of the nucleus of the atom. Rutherford's work would lead directly to the atomic bomb, nuclear energy and many other events of political and economic, as well as scientific, significance.
Rutherford was professor of physics at Manchester University, and he presented his findings in 1911 to a meeting of the Manchester Literary and Philosophical Society. The audience consisted mainly of local business people. The announcement of one of the most important scientific breakthroughs of the 20th century was preceded by a session in which a Manchester fruit importer exhibited a rare snake he had discovered in a consignment of bananas.
Modern physics is difficult but any good physicist will be pleased to try to explain it. The gift of exposition is not necessarily aligned with intellectual distinction: as a student, I was disappointed to find that the most distinguished of my lecturers, the economist Sir John Hicks, had never mastered how to hold the attention of a class. But clarity of thought and clarity of expression tend to go together. The best textbooks are often written by the best researchers: Richard Feynman could not only do physics brilliantly but also brought it alive with words.
So when someone tells you something is too complex for you to understand, the usual reason is that they do not really understand it themselves. Sometimes they know that they do not really understand it: often they do not.
For the inquisitive intellectual, few people are as irritating as those whose combination of ignorance and arrogance is so profound that they claim to understand things they do not even know they do not know.
The world of business and finance, which values confidence and certainty, is full of such people. "It isn't really like that," they will say; and when you ask what it is really like, they will tell you it is too complicated for you to apprehend. What they really mean, but do not recognise, is that it is too complicated for them to apprehend.
The bad financier, or businessman, like the bad scientist, pursues complexity almost wilfully because he believes such complexity demonstrates his knowledge and sophistication. So the blind lead the blind through the mysteries of structured financial products and the jargon-ridden thickets of corporate strategy. People sell securities whose properties they only dimly appreciate to people who do not understand them at all. Consultants describe the business world in language – and, of course, PowerPoint presentations – whose elaboration disguises the banality of the thought.
Real understanding lies in finding simplifications that bring order to disparate facts. Such was the nature of Rutherford's discovery and of his understanding; and why he felt able to reveal his findings to the Manchester Library and Philosophical Society. But Rutherford's task was easier in one important sense: the world he laboured to make sense of was unchanging and unaffected by our understanding, if not necessarily our observation, of it. The same is not true of business and finance.
Some patterns become apparent only with hindsight. David Hackett Fischer wrote of "the historian's fallacy" – the explanation of the behaviour of participants in the light of later knowledge. Perhaps Henry Ford and Bill Gates were the men who really understood the automobile and computer industries, or perhaps they were just the people whose opinions turned out to be right, which is not the same at all.
People in the middle of events often know less about them than those watching from the outside, which is why interviews with senior business figures inform us about what these people think rather than what is happening. The panels of grandees at Davos who pronounce on the future of the world may know less about the subject than spectators on the lower slopes. After all, it was the observer Rutherford, not the nucleus itself, who told those Manchester businessmen what the atom was really like.