Obliquity, By John Kay

This book by the distinguished economist and writer John Kay is an extended essay about an idea which is intuitively true: namely, that certain targets are achieved only as a side-effect of aiming for something else. For instance, happiness is attained when people are absorbed by a meaningful activity – psychologists call this state "flow". Trying to be happy is a recipe for misery.

High profits are the fruits of a passion for engineering or writing software, say, while it's usually commercial suicide to make profits the sole purpose of business. On a holiday many years ago I met a chocolate engineer who claimed to have designed the walnut whip, and held forth at length about the properties of melted chocolate. He seemed a very happy man but I doubt his job is so satisfying now our confectionery companies have been taken over by executives who think only of maximising shareholder value.

The first half of the book gives several other examples of the principle of "obliquity", or aiming off the true target. The wealthiest people don't obsess about making money. Forests are less vulnerable to destruction by fire when some fires are allowed to burn. Less intuitively, economies are more successful when markets operate rather than when central planners run them.

Why should obliquity operate so widely? "Our objectives are often necessarily loosely described, and frequently have elements that are not just incompatible but incommensurable. The consequences of our actions depend on the responses of other people... We deal with complex systems whose structure we can understand only imperfectly," Kay explains. Add to this the unknown unknowns so widespread in life and the ubiquity of uncertainty, and the failure of the direct approach to many problems is not surprising.

Oblique approaches – or lateral thinking – are much harder to devise than the direct alternatives. The later part offers some examples and advice. Kay is a firm opponent of targets and precise rules. All affect behaviour in ways that make the target meaningless. He points out that the Basel Accords regulating banking run to 400 pages of detailed rules. The banks obeyed the rules (on the whole) but worked around them so the upshot was a riskier rather than a safer industry. What's needed is a set of high-level objectives internalised by all concerned, combined with some intermediate goals adjusted from time to time, and everyday activities consistent with these because nobody can think about strategic objectives all the time.

This seems utterly sensible advice – certainly to anyone who has noted the counter-productive effects of the Labour government's mania for targets in public services. There's one example of these in the book – an eight-minute response target for ambulances which led to the vast majority of emergency calls getting just that, and almost none recorded as longer. The target changed the way the dispatchers allocated vehicles, presumably trumping the prioritisation of patient need. We can all think of many other examples of counter-productive targets.

The most novel and interesting part of the book concerns the implications of obliquity for how we assess decision-making: an important point when voters are judging the record of the current government and the promises of those who want to take its place. All too often we make what Kay terms "the teleological fallacy". That is, we assume that good or bad outcomes are the result of good or bad policies or decisions. Usually luck plays a greater part. Enron was believed to be run by geniuses when doing well and by crooks when it failed, but the general movement of the stockmarket had more impact on its results. Successful investors almost always have Lady Luck rather than their skills to thank.

One alarming consequence of this fallacy is that people who claim to have direct answers are much more likely to be acclaimed for their wisdom than the oblique thinkers likely to get better results. Kay concludes that decision makers can choose between being effective and being popular. Voters reward those who are least likely to be good problem solvers: a sobering thought for the election campaign, from one of our cleverest thinkers.

Diane Coyle's latest book is 'The Soulful Science' (Princeton)