Thinking Space

This interesting example comes from the 2008 financial crisis. In the aftermath of the crisis, a federal reserve program launched in 2009 incentivized banks to lower monthly mortgage payments to homeowners who were struggling but still able to make partial payments.

It was a great idea on paper but this is how it worked out due to specialised groups and silos: A bank’s division that specialised in mortgage lending started the homeowner on lower monthly payments, another division in the same bank that specialised in foreclosure noticed that homeowner was suddenly paying less and declared them in default and seized the home. “Nobody imagined the silos like that inside banks”, a government adviser said later.

Overspecialisation and silos certainly bring in ownership, accountability, and togetherness but they can also lead to collective tragedy even if each individual/group has taken a most reasonable course of action separately.

Always apply generalization and sense-making to your individual overspecialized decisions.