“Isn’t it difficult and unpleasant to deal with conflict for a living?”

May 2nd, 2015   •   Comments Off on “Isn’t it difficult and unpleasant to deal with conflict for a living?”   

Not really. Conflict arises everywhere, all the time, but the bulk of them, we deal with straightforwardly or even unconsciously.  We exchange what we value less for what we value more. If we all had identical needs, desires, priorities and points of view, economic exchange would be very difficult.

What gets complicated is when we think we know our own minds, and the minds of others, but are wrong about one, the other, or both. Our thoughts aren’t transparent, our statements aren’t always clear, and we’re frequently unaware of our own biases and blind spots. As Kathryn Schulz put it in her TED talk, being wrong feels just like being right – It’s knowing you’re wrong that feels awful.

For a peek into my process, I’ve put some common statements in the left-hand column, what might go through my head when I interpret that statement in the middle column, and the labels attached to what may be going on (the possible cognitive bias at work) in the right-hand column, in case you’re curious about the phenomenon and care to look it up:

I’m not good with conflict. I’m triggered by displays of anger, sadness or disappointment and therefore reluctant to explore or share my thoughts. Empathy Gap
It’s just common sense! This is what I expect, based on my belief that reality is what I’ve experienced, and that reality comprises my beliefs and not others’. (Often accompanied by overconfidence in the accuracy of one’s answers to questions, and by wishful thinking.) Naïve Realism
Overconfidence Bias
Confirmation Bias
It is what it is.
They knew this would happen.
They were asking for it.
The world is just and fair, so this must be their own fault some how. Just-World Fallacy
Status Quo Bias
How could they do that to me? Other people make their decisions based on how they feel toward me. The more harm I suffer, the more they are to blame. Fundamental Attribution Error
Defensive Attribution Hypothesis
That’s impossible. If that happened, I’d feel awful forever. Impact Bias
That’s nuts. I’m realistic and rational, my feelings and interests have nothing whatsoever to do with my position. They’re being selfish, emotional, childish, etc. Curse of Knowledge
Empathy Gap
Outcome Bias
Naïve Realism
They broke the agreement! They know every relevant fact that I know, and it means the same thing to them that it means to me. Curse of Knowledge
Empathy Gap
Impact Bias
That’s not what my neighbor got! My hopes and expectations are based on what happened to similarly situated people at another time. Anchoring Effect
Just-World Fallacy
Sunk-Cost Bias
I can’t believe this is happening. This situation and the possible outcomes are so traumatic for me, I’m shutting down. Ostrich Effect
There’s no way a court would support that! I like my proposal better. Overconfidence Effect
Confirmation Bias
Yeah but what I forgot was an oversight. What they did was way worse! I judge myself by my intentions and others by the impact of their actions on me. Fundamental Attribution Error
Omission Bias

So, if you’re asking yourself, “How can they be so (self-righteous, entitled, blind, selfish, stupid, etc.)” maybe switch to “Which of these biases or errors, on my part or on theirs, would make this seem valid?”

Then you can avoid jumping into a downwardly spiraling conversation….

Good Natural Resource Revenue Management is “Anna Karenina” in Reverse….

November 1st, 2013   •   Comments Off on Good Natural Resource Revenue Management is “Anna Karenina” in Reverse….   

At least 80 percent of countries considered fragile or affected by conflict are home to valuable extractive resources that the global economy hungers for. Earth’s riches like oil, gas, and minerals often fuel conflict, trapping all but the elites in poverty amid vast wealth.

On the margins of the October 2013 Annual Meetings of the IMF and the World Bank, the Bank hosted a high-level panel to discuss how to make the Earth’s riches work for poor and fragile countries. They gathered leaders from Shell, the Extractive Industries Transparency Initiative, Revenue Watch Institute, Norway’s Minister of International Development, and the Prime Ministers of two resource-rich countries with very different experiences: Timor-Leste and the Democratic Republic of the Congo.

The panelists pronounced their own positions, and maybe needled each other a little, but there was little genuine dialogue. I take this to mean that there will be plenty of mediation and dispute resolution work for professional neutrals and forums between firms, governments, local communities and international NGOs.

Each panelist had their own idea of the necessary conditions for a fair agreement with investors and a fair distribution of the benefits of the resultant revenue windfall.

  • Transparency
  • National Unity
  • Strong Political Leadership
  • Rule of Law and Effective Administration of Justice
  • Government Capacity to Negotiate and Administer Contracts
  • Strong Public Expenditure Control
  • Two key points went unsaid. The rents and the investment opportunity exist because the state is fragile, not in spite of it. Any country possessed of the listed attributes isn’t fragile. And if the country had had these attributes for any length of time, well, the reserves would already have been discovered and extracted.

    The other key point: Every jurisdiction that is deemed a success at managing resource wealth has found it’s own institutions and practices, suited to its own demographic and political context. After an exhaustive review of literature and practices around the world, and many years of grappling with discovery (and exhaustion) of natural resources in countries rich and poor, I’ve concluded that “best practice” is a bit of a conceit. Sure, there are principles, models and hypotheses to consider, and international examples to refer to, but nothing that comes in a box. Each jurisdiction has to work out how to manage the first-class problem of unexpected realization of wealth. It can take several tries (even a paragon like Norway has revised it’s framework periodically) and it’s going to involve some waste. This struck me as the reverse of the oft-quoted line from Tolstoy’s Anna Karenina: Happy families are all alike; every unhappy family is unhappy in its own way.

    There is no guarantee of success, but what seems to have helped most is long-term technical assistance to reform-minded government leaders as early in the process as possible, ideally before resource revenue flows have grown large enough to distort public finances and corruption is entrenched. In jurisdictions where resource exports and revenues are large, this can require a systematic review of existing agreements (e.g., Guinea, Mali), a process that threatens major entrenched interests and requires patience, mutual respect and effective consultations.

    What also seems to have helped is the emerging international transparency norm. These are increasingly backed up by legislation in OECD jurisdictions, requiring firms to stake their access to capital on adhering to the transparency norm. In the short run, firms can be caught with otherwise lawful contracts in host jurisdictions that demand confidentiality. In the long run, the effect isn’t obvious to me. I’m concerned that it could lead to only “bad” firms investing in “bad” countries.

    High-Level Panel on Natural Resource Windfalls in Poor Countries Next Week….

    October 3rd, 2013   •   Comments Off on High-Level Panel on Natural Resource Windfalls in Poor Countries Next Week….   

    Direct investment in extractive industries often leads to difficult conflicts between firms, governments, local communities, and a range of other stakeholders, local and international.

    Next week, I’ll be at the Annual Meetings of the IMF and World Bank , and look forward to sharing insights with you from:

    Blessing or Curse: Making Earth’s Riches Work for Poor and Fragile Countries, a high-level panel of industry and government experts.