Hein Aucamp, Perth City Chapter, submitted this as a comment to the last post but I think it contains ideas that are important enough to warrant a post of its own. Hope you all agree. Penny
Silo! We use this word to indicate a situation in which efficiency and conclusions are impaired because cloistering prevents us from including all the required factors.
If you stand at the top of a silo and look down inside, you see a tiny horizon, much smaller than the surrounding landscape.
Our manner of talking – our language and choice of vocabulary – can be revealing about our perspective. It can show how much we can see and how many relevant factors we are taking into account.
I remember being at an AIFMG training course in 2012. There was a discussion about whether a road is really an asset. From a Local Government’s point of view, why isn’t a road considered a liability? After all, it requires effort and expenditure, it must be maintained, and it must be replaced. Should it really be called an asset?
But from a wider perspective a useful road is definitely an asset. We can easily see this, because when it is consumed, the community wants another one. Of course an asset has associated costs; that in itself does not make it a liability. What makes it an asset is that its benefits outweigh the costs.
Now look at the dangers of the silo effect in the discussion about the road. From the limited perspective of the asset custodian it would be much easier to entertain the notion that a road is a liability. The custodian bears the burden of the effort and records the expenditure. But when we extend our horizon to include all the relevant factors and actors, we see that it is an asset.
The comparison between road and rail in the last post is an interesting case study. May I venture to say that it is always possible, by drawing a small enough perimeter, to decide that any piece of infrastructure is a liability? The perspective just needs to be small enough to exclude the funding mechanism and the benefits to the end users.
In the road vs rail example mentioned, the economist unconsciously placed a circle of reasoning around both road and rail. In the road circle, he discovered a satisfactory funding mechanism; in the rail circle, he did not. So he reached his conclusion because he was looking for local net benefits. If on the other hand he had used a horizon instead of a silo, he would have been looking for system-wide benefits.
(Admittedly, it is much harder to comprehend funding mechanisms and benefits that are outside your silo even if inside your horizon.)
Hein Aucamp hein.aucamp@waiam.com.au
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