September 01, 2003

It was a classic case of technology/business disconnect. The folks in the "back office" (maybe not literally a back office, but certainly a facility removed physically, not to mention culturally and philosophically from the customer-facing and financial management operations) come up with a great idea, something really visionary, elegant, unique and-most important, of course-cool; not to mention something that's so esoteric that only they understand it. It's a solution that will do great things: "Trust us."

Until recently, that was the classic tale of IT. Despite all the talk of "No technology for technology's sake," for years large-scale banking technology initiatives were rarely challenged in more than a cursory fashion, largely because hardly anyone in the executive suite understood what the CIO or head of IS was talking about. Also, probably until the early 1990s there was pretty much pure optimism about the potential for information technology to transform and improve. And even before business/technology alignment became one of the politically correct corporate goals, most heads of IT understood how to "sell" the complicated and obscure systems and projects they managed so that they were approved without many questions, challenges, or grumbling.

However, this time around, both management and end-users understood just enough of the project, once it was about to be launched, to react with a vehement, "No way!" And, while the ultimate goal and anticipated impact of the plan may in fact have produced measurable benefits, the concepts involved in the implementation and the arrogance of those who conceived it were enough to scuttle the entire initiative-not to mention forcing a top executive behind the initiative to resign under pressure.

As you probably have surmised, this scenario did not take place within a bank IT organization. It's a description of what happened last month when word got out that the Defense Advance Research Projects Agency (DARPA), the Pentagon branch that develops technology for warfare (and also which played a key role in the creation of the Internet) had come up with a plan for "betting" on future terrorist attacks, essentially by creating an exchange that would commoditize the risk of such events (see also "The Closing Line" on pg. 50). No matter that, via insurance, securitization, derivatives and other trading instruments the markets "bet" on all sorts of bad and harmful things (pollution, natural disasters, dishonest executives, drug-taking athletes, etc.). Regardless of any intrinsic value in erstwhile DARPA official John Poindexter's plan, the fact that its backers never took into account the likely response-the mood in Congress, the attitude of the media, and the emotions and fears of the public-meant they got what they deserved. Rack it up as another lesson in the demystification of technology.