Kahneman has a lot to teach them about optimism and the pitfalls of wishful thinking. When people decide they want to do something, they are very good at ignoring all the things that could go wrong. Most small businesses fail, but most small business owners believe their business will succeed. Planners usually underestimate how long a project will take to complete, and how much it will cost.
Kahneman describes a proposal by the psychologist Gary Klein, aimed at helping organisations that are about to make an important decision to reduce the likelihood of stumbling into a major mistake.
It’s called the “premortem”. Several people involved in the decision are asked to imagine they have been transported a year into the future. The decision has been made, and it has turned out to be a disaster. They are asked to spend a few minutes writing out an analysis of what went wrong.
The idea is that the exercise liberates people from the pressures of optimistic group think, and gets them thinking about a worst case scenario so they form a more realistic understanding of the possible risks they are dealing with.
It may be that on the night when Liverpool spent £35m on Andy Carroll, there was no time for Kenny Dalglish, Damien Comolli, Ian Ayre and John Henry to sit down and come up with a detailed premortem. If they had, what would they have come up with?
First, the known knowns. Carroll was 22 and had played about half a season in the Premier League, scoring a few goals and looking like a decent player. However, he was injured at the time of the deal, hadn’t played for a month, and the date of his return was uncertain. His brushes with the law had been front page news and at one point he had been compelled by court order to live with his club captain Kevin Nolan. So, right away Liverpool knew they were signing an unproven, immature player whose off-field behaviour gave grounds for concern.
Then there were the known unknowns. Maybe Carroll wouldn’t settle on Merseyside. Maybe he wouldn’t fit into his new team’s style of play. These were risks of which Liverpool were aware, the true extent of which was nevertheless hard to predict.
Any halfway-thoughtful premortem would have concluded that making Carroll the most expensive British player of all time had a massive downside in terms of risk.
Where Liverpool really came unstuck was the unknown unknowns: things nobody would have predicted which nevertheless happen to confound the best-laid plans.
We can be pretty sure that the premortems of Dalglish, Comolli, Henry and Ayre would have been more likely to include a scenario in which a chunk of Liverpool split off and drifted away to sea, sending the marooned Carroll vanishing helplessly over the horizon, than any mention of what actually came to pass.
Nobody expected Newcastle to take Liverpool’s money and use it to transform themselves into the better team, vaulting into the clutch of clubs between Liverpool and the Champions League football they crave.
There are times when it seems that the only agency governing the random events that make up our lives is the force of irony. Maybe randomness has a sense of humour, or maybe it is just the nature of things that if you spend a lot of time around petards, sooner or later you’re going to end up hoisted by one of your own.
John Henry arrived in English football as an apostle of rationality. Thin, calm, bespectacled, he looked the part of the wise owner, a kind of Wenger of the boardroom.
His data-driven approach to management had worked in baseball and he radiated quiet confidence that it could do the same in English football.
A few weeks after Henry’s group took over at Liverpool, Mike Ashley confirmed his status as the most-ridiculed owner in English football by sacking the popular Chris Hughton and appointing the reviled southerner Alan Pardew. Ashley was derided as a fat clown apparently bent on destroying his own club.
Who’s the clown now? Ashley’s scouting team has scored hit after hit, with the £2m signing of Hatem Ben Arfa probably the best value of the lot, while Henry’s beautiful minds have spent more to achieve less than any Liverpool regime in history.
Hailed as a gimlet-eyed seer of the football matrix, Henry has been more like a tourist blundering through a bazaar, thinking he is haggling cleverly with hawkers who have already added a zero to the usual price. After all the talk of value, Liverpool signed names, reassuring themselves that you couldn’t go wrong buying proven Premier League performers. Newcastle went out and found footballers who looked like they had the skills to improve the team. For some reason, football refers to Newcastle’s approach as the gamble.
Yesterday Liverpool started with nearly £40m on the bench in the form of Downing and Henderson. Carroll started, and the Geordies laughed at the leaden mediocrity of their former hero, whose most notable contributions were to dive when it looked easier to score, and to respond to his substitution bydirecting an ill-tempered outburst at the manager whose reputation he has done so much to destroy.
Maybe Henry & Co can start writing some premortems this summer. Carroll’s one should be clear cut. Selling him will confirm a large financial loss. There is also the 1% chance that he could magically discover some form and be the top scorer in the league for another team. They could put a clause in the sale agreement about that, although it would be wise to budget without the extra income.
The bigger decision facing Henry concerns the position of Kenny Dalglish. Here the premortem is more troubling. It is easy to envisage a situation in which Liverpool sack Dalglish, replace him with some flavour of the month choice, and end up just as bad as before, with the difference that the fans now loathe the owners and have thrown their energies into campaigning against them.
That endangers Henry’s whole project, which is presumably based on increasing the value of the club with a view to selling it in the longer term.
In the case of Dalglish, conservatism is the wiser course. Henry should keep him on.
In Liverpool’s position, a bit of luck could go a long way. And the best thing about having your worst league campaign in 20 years is that the only way is up.