Iatrogenics. Avoid unintended harm
The modern healer in most cases is no longer the doctor but a thought leader, a CEO, a government, an NGO, a church, an inspired association or community, a philanthropist or a responsible investor. Nassim Taleb calls these people interventionistas. In his opinion, these people come armed with solutions to solve the first-order consequences of a decision but can create worse second and subsequent-order consequences. Luckily, for them at least, Nassim states, they’re never around to see the train wreck they created. In his book – Anti-Fragile – Taleb calls out this naive interventionism, when we don’t have an idea of the break-even point of the intervention.
THE SECOND-ORDER CONSEQUENCES
The term “iatrogenics” is currently used to describe any outcomes resulting from interventions that exceed their intended benefits. Some examples of iatrogenic effects are more apparent than others. For instance, when negative consequences are immediately visible and appear to have a direct cause-effect relationship with the intervention, we can confidently infer that the intervention caused harm.
Conversely, when negative consequences are delayed or can be attributed to various causes, we may be less inclined to conclude that the intervention caused them. Before intervening, we must have a comprehensive understanding of not only the benefits but also the potential harms of our actions – the second and subsequent order consequences. Without this knowledge, how will we be able to determine when our actions, despite our good intentions, are doing more harm than good?
Why would people do something even when it could actually cause more harm?
Shane Parrish, the author of FS blog, lists a few reasons why well-intentioned people tend to intervene even if the consequences outweigh the benefits, which I further expand:
1) An inability to think through problems. This first flaw is the inability to think through second and subsequent-order consequences. They fail to realize that the second and subsequent order consequences exist at all or could outweigh the benefits. Most things in life happen in the second, third, or nth steps. Consequences have a long tail!
2) Separation from consequences. It can be challenging to recognise when we are causing harm when there is a time lag between our actions and their resulting consequences. This time delay may foster self-deception and potentially encourage it. Since we tend to seek confirmation of our beliefs and presumably take action because we believe it will be beneficial, we are unlikely to acknowledge evidence that contradicts our convictions. If we concentrate solely on measuring the outputs of our actions without adequately analyzing the actual outcomes and long-term impacts, we risk ignoring potential long-term consequences. This highlights the importance of investing sufficient time and resources to fully evaluate the outcomes and potential impacts of our actions, including misleading cases of greenwashing and social washing. We cannot simply dismiss unpleasant consequences as lessons learned!
3) A bias for action / Intervention Bias. This is also known as the “do something syndrome“. I personally call it “solution in search of a problem” syndrome. As an advisor, analyst, politician, or social worker, it can be challenging to admit that you do not know the answer to a problem. In most cases, when seeking to enhance a situation, the initial impulse is often to modify something, make adjustments, or introduce new strategies. However, this approach can be misleading. On occasion, taking no action or removing certain elements may be the most effective solution.
4) No skin in the game. The fourth flaw is one of the incentives. There is no or little skin in the game. We win if things go short-term right and suffer no consequences if things go wrong long-term.
5) In several cases, there is an asymmetric distribution of risks and benefits from the intervention: some stakeholders bear the risks, while others bear the benefits. Clearly, this uneven incentive structure is flawed. As the saying goes, read people’s incentives and you will understand their behaviour. For a thought-provocative view of international interventions, check out John Perkins’ book: Confessions of an Economic Hitman.
IATROGENICS & RESPONSIBLE INVESTING
Iatrogenics plays a crucial role in impact/responsible/ESG investing, where the allocation of your money is specifically done to generate a measurable positive impact alongside a financial return. Unintended negative consequences can undermine its potential success. Thus, the concept of iatrogenics in investing reminds us to:
a) Do no harm! It is necessary to consider the second and subsequent-order effects of our impact investments. By taking a comprehensive approach that considers the potential harm that our interventions may cause, we can create more sustainable and impactful investments that truly make a positive financial, social and environmental difference.
b) Do not fall for overestimated or irrealistic benefits of the investment promoted by sell-side greenwashing or social washing practices. On this topic, check out Damodaran’s article A Skeptical look at ESG Investing and Tariq Fancy’s essay the Secret Diary of a Sustainable Investor.
Interventions and Investments — in particular, those explicitly driven by positive impact —should be implemented:
1) when there is a measurable benefit
2) when the benefits visibly outweigh the negatives
3) when there are consensus and mitigation measures over the management of negative effects
The intervention must demonstrate benefits that are orders of magnitude greater than the natural path of non-intervention. It is crucial to assess the beneficiaries and the individuals who will bear the repercussions of the intervention, as they are often distinct groups of stakeholders. A prime example is the endorsement of electric cars, which eliminate CO2 emissions from traffic but disregard the pollution generated by power plants (nuclear and carbon) and batteries.
Author Shane Parrish invites us to recognize that some systems self-correct; this is the essence of homeostasis. “Naive interventionists, or the interventionistas, often deny that natural homeostatic mechanisms are sufficient, that something needs to be done — yet often the best course of action is nothing at all”.
Overall, when applying the concept of iatrogenics in the philanthropic and solidarity fields, we must take a proactive approach to understand, cap or mitigate unintended harm. This requires a commitment to measuring risk and a willingness to adapt and adjust activities as new information becomes available.
One important step in applying the concept of iatrogenics is to engage in meaningful dialogue with stakeholders, clients and beneficiaries affected by the intervention efforts. This means listening to the perspectives and concerns of community members and working collaboratively to design interventions that are responsive to their needs and aspirations. By involving stakeholders in the design and implementation of interventions, individuals and organizations can ensure that interventions are more likely to have positive sustainable impacts.
Another critical step in applying the concept of iatrogenics is to adopt a holistic approach. This means recognizing that interventions do not operate in isolation, but are part of larger social, economic, and environmental systems. By taking a systemic view of interventions, organizations can identify potential unintended consequences and work to address them before they occur.
Finally, organizations must be willing to focus on the evaluation phase, measuring the actual impact, and admitting when they have made mistakes and taking steps to rectify them. This requires a culture of transparency and accountability, where we – do-gooders “interventionistas” – are open to feedback and are committed to learning from their experiences.
Don’t forget these two timeless proverbs: the road to hell is paved with good intentions; don’t make the cure worse than the disease.
Keep It Real. Sweat Your Assets.
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