Inspection vs Prevention

Most of freedom and of pleasure
Nothing ever lasts forever
Everybody wants to rule the world
--Tears for Fears

Early in my industrial career I learned that problems with a production process could be addressed in one of two ways. We could increase inspection of the process and its output to reduce the probability that 'bad' output would slip out the door to customers. More inspection was a straightforward, easy solution--simply a function of slapping more regulatory oversight, usually in the form of more eyeballs, on the process.

The other alternative was to engage in problem solving to unearth the root cause (or causes) of the problem. This approach was complex, time consuming, and often times painful. Painful not because of the monetary costs involved, which while often considerable were really investments in improvement, but because when we really dug deep toward the true root of the problem we uncovered issues that we didn't care to face. More often than not, the root causes of problems were management controllable decisions that had been poorly made (e.g., equipment design choices, workplace configurations, unclear operating procedures, lack of customer input in product design, making promises we couldn't keep to sales folks, etc). Correcting these type of problems requires an admission of being wrong in the first place--an admission difficult for the human ego.

As such, the tendency was to avoid problem solving if possible.

The issue, however, with going the inspection route was that the underlying causes of problems were never discovered and, like Ground Hog Day, they would rear their ugly heads over and over. Further, oversight could not guarantee that defective output would not sneak thru--even when inspecting 100% of the output. Human fallibility, in the form of attention lapses, confirmation biases, etc, increases the likelihood that regulatory breakdowns will occur.

I'm reminded of these lessons learned when reading commentary such as this by Treasury Secretary Geithner, where he asserts that more regulation and oversight is what we need to prevent future financial system meltdowns. Of course, an added incentive for him in promoting the 'more inspection' alternative is that it's good for government--more regulators and bureaucrats necessary to oversee things.

Once again, it appears we're destined to repeat the mistakes of the past. More regulation provides the illusion of corrective action, but does little to address the underlying problem. Think about it--the root cause of a problem can not be that there was not enough regulatory oversight. Something must be causing the defects that a regulatory process hopes to detect.

Choosing the regulatory approach virtually guarantees--a word that I don't like to use lightly--that we will repeat the crisis of the past couple of years, perhaps on a greater scale.

It's also a certainty that, were government officials to engage in true problem solving of the recent financial meltdown, they would unearth root causes that point directly at themselves.