ATC -- Lessons From Wall Street

Let's go back and visit that Frontline program about the collapse of Wall Street again, to see what we might learn about air traffic control.

Money, Power & Wall Street

(The transcript is here.)

"FRANK PARTNOY, Morgan Stanley, 1994-95: I think finance may have gotten too complicated for anyone to understand—...

FRANK PARTNOY: —and that the managers of these large financial institutions in some ways have been given an impossible task, that they won’t be able to comprehend what it is their institutions are doing. And that is really, really scary."

I've mentioned this somewhere in the distant past but let me bring it up again. The National Airspace System (NAS) is vast and complicated. Do you think that there is anyone -- anyone -- that understands even half of it? I've always mentioned this in the context of following the rule book. Your average mid-career controller doesn't have a clue what the other parts of the FAA are doing -- or how much they rely on the controller doing his job by the book so that they can do their job. That was true throughout my career. Now, toss in URET (collateralized debt obligations). And ERAM (mortgage-backed securities). And NextGen (high-frequency trading). Do you see how we've increased the complexity of a system that wasn't well understood in the first place? Do you think the very top-level FAA managers have a clue as to how complex this technological tiger that have hold of by its tail really is?

Me neither.

"MARTIN SMITH: In other words, some big banks simply didn’t know what they had in terms of risk.

DANIEL K. TARULLO: Certainly, they didn’t— they didn’t know some of the forms of risk that they had. That’s exactly right."

All you have to do is mention the word "risk", put it in the context of aviation, and everybody understands we're talking about something more valuable than money. So, given the complexity of the NAS, do you think everybody in the aviation business understands the level of risk present? The banking industry didn't. What makes you think the aviation industry does? It can't be because the aviation industry has better brains that the banking business. We've already established that Wall Street was willing to pay the best and brightest far more than other industries. You can bet your bottom dollar they pay more than the Federal government pays.

So, we not only have second-class managers, we have second-class quants. What? You don't think that quants have taken over ATC just like Wall Street? Who do you think designed the Conflict Probe on URET (a .pdf file)? Who do you think wrote the algorithms for Continuous Descent Arrivals? Quants. Don't delude yourself into thinking they understand air traffic control. They don't. They're smart. They're scary they're so smart. That doesn't mean they understand what you do. (And while we're here, don't think quants haven't taken over piloting too.)

Here's a twist for you. Pay close attention to this statement.

"MARK BRICKELL, JP Morgan, 1976-01: We’re thinking about how to manage risk. We were thoughtful and deliberate and careful. We had a responsibility not just to make a profit for the shareholders, but to look after the financial system as a whole."

That sounds like a conscientiousness employee doing the right thing for the right reason doesn't it? He probably was. He was on the team that created credit default swaps -- the financial instruments that blew up and brought down Wall Street.

I urge you to go back and listen to that whole program again -- Money, Power & Wall Street -- with the thought of looking for parallels between financial risk and aviation risk.

So, what does all this mean for a newly-minted controller? Let me give you just one specific instance. Imagine you're working the nastiest, most complicated inbound push you've ever worked. And the radar goes out. One second it's there, the next second it's gone. Can you get everybody on the ground safely? With just a radio and the tools at hand?

If you can't, something is terribly, terribly wrong. That's your job. If you lack the skills or the training or the tools then it is your job to fix it. Don't ever let anyone tell you it can't happen. It can. Wall Street can crash. So can your computer. So can your radar. So can your radio. That's why we had three of them. That's the reason we had redundant power. Redundant telephone lines. It is your job to make sure no one takes those away.

It is your job -- when you hear "That will never happen" -- to doubt. It is your job to plan for the worst. It is your job to never forget that 500 people can die in an instant. An instant of confusion brought on by unforeseen complexity.

Do not cede your authority because you surely cannot escape your responsibility. Your manager won't be the one sitting in front of a blank scope. The Administrator won't be talking to your airplanes. You will. The quants that wrote the algorithms will be long gone. You will be in the hot seat. Don't ever let anyone tell you it can't happen. It can. You will have to make it all work. Make sure that you can.

Don Brown
September 18, 2012