In 1972 I worked in the world of finance with an IBM 370, Model 145 – one of those mainframe computers with a front panel of flashing white, yellow, and sometimes red lights. In those days few people had even seen a computer. We gave tours to the curious and joked that the computer allowed us to make mistakes much faster. In the years that followed the computer became the convenient scapegoat when things went wrong. Everyone new an anecdotal story of the woman who received a $50,000 telephone bill. Garbage in, Garbage out, became a popular term in the defense of computers.
Today, 2008, we find ourselves in a global economic meltdown. And there is plenty of blame to go around. Those big bankers and economists are scurrying around pointing their fingers. They are saying they literally hired Rocket Scientists to develop mathematical formulas which justified complex financial packages. We hear some saying the formulas were correct mathematically, but they did not factor in human behavior. They made a million mistakes a minute.
In the early days of business technology we were very careful to program the computers to follow the principles of the American Association of Accountants. To avoid trouble we held to strict rules and regulations. The independent auditors who came to town lived by the same regulations. Everyone understood the rules of accounting principles – and everyone followed the rules. Some of the rules are complex, but idea of following rules was simple.
Business transactions are as old as the Bible. Abraham had to negotiate a business deal to purchase the cave where he was to entomb his wife. Abraham followed simple accounting principles. The point here is that rules of business do not require Rocket Science. Even someone as dense as a Christian Fundamentalist can grasp the idea.
Computers have allowed business to grow. Corporations are easily consolidated – with computers merging the variety of corporate information into a single set of account ledgers. There is nothing inherently wrong with this. The problems arose when simple ideas of regulations were ignored.
I am amazed at the insanity. There was a time when conservative meant strict adherance to regulations. Many of us grumbled that we invested more time checking and rechecking than we invested in actual production. The old conservative accountants just smiled and said, “Check the numbers again.”
Along the way, and we can point to Bill Clinton or Ronald Reagan or either of the Bushes, or we can point to the Congress – it makes no difference – along the way the rules and regulations were relaxed, and sometimes completely eliminated. The justification: Government should not encumber business with regulations.
Fools, absolute fools.
Those regulations of basic accounting principles had two basic applications.
- They made sure the math was correct – the simple idea of balancing a checkbook.
- They kept honest people honest.
Again – this is not rocket science.
Without the regulations the honest people who ran the banks could not resist the opportunity. Everyone lost.
Trust God, but lock your car.