Last year the world saw huge political ructions that took experts by surprise. IBISWorld Founder and Company Director magazine Futurist columnist Phil Ruthven AM FAICD talks about the global struggle between emotionalism and rationalism and why boards need to be wary.
Australian Institute of Company Directors (AICD): You’ve written about the modern political contest as being between rationalism and emotionalism, can you explain what you mean by those terms?
Phil Ruthven (PR): The human race has a brain that does two things: it thinks logically which enables it to survive as an entity with its knowledge of how to gather food, to avoid dangers, to produce children and so forth; but it also has an emotional side to the brain which is probably reflected more in things like art and entertainment.
I’m trying to distinguish, when I use the word rationalism, what I might call the evidence-based activities and opinions from the ones that are done without any evidence at all that are based on emotion. Given the human race will always have that tension between fact and fiction, it is going to be a constant battle.
That was evident in two of the events of last year. One was Brexit, which was very much an emotional decision to leave the EU given that 45% of all of their trade is with the EU. The second one, of course, was the election of Donald Trump where voters switched off all of the negatives that would normally bar an applicant from becoming president and voted for someone who would normally be considered unelectable.
AICD: Why do you think experts failed to predict events like the US election and the Brexit vote? Is it because they aren’t thinking clearly about that framework of rationalism versus emotionalism?
PR: I don’t really think that is the problem. I think that pollsters who have been getting it wrong had a mathematical failure rather than anything else. For example, in the polls in America, they counted the number of people that were going to vote for Hillary or Trump. That is irrelevant because the only thing that counts is the number of Electoral College votes and they are not evenly distributed according to population.
The presidential election is not a democratic vote, it is a distorted vote and the polls made the mistake of calculating popularity votes and they got that right, actually, because Hillary beat Trump by at least two million votes which meant Hillary won the popular vote. But that is not how you elect a president. You elect a president with the Electoral College.
They used the wrong statistics. I think the same thing happened in Brexit in the sense that they had underestimated the negativity coming from the non-capital city areas. So in a sense, it was unprofessional polling in both cases and in both cases, it is not that people misunderstood, it is that they read the wrong stuff which gave us the wrong information.
AICD: Putting together the contest between rationalism and emotionalism and the unexpectedness of the US election and the Brexit vote, what are the lessons we should be taking in Australia?
PR: The lesson is that we’re suffering from the demise of the fourth estate. We used to have experienced journalists giving us fairly good information that, by their own rules, was always double checked by somebody in a similar field to them.
The challenge we are facing politically and in the corporate world is that decisions are being based on mistruths. That is happening more and more, not just globally, but in Australia. It is a very dangerous trend.
AICD: What are the challenges that boards will face from the rise of emotionalism?
PR: There is a challenge to businesses around the world to be very careful on what basis they are making very important capital decisions. I think directors really have to become more rational than they have been and not be overly influenced by the emotionalism that is gripping politics and society at the present time. It is a very important period to be more careful as directors and be more professional than we’ve ever been.
Phil Ruthven spoke on the panel ‘The impact of recent global events on governance’ at the 2017 Australian Governance Summit.
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