Before Enbridge invested so much time and money on the proposed Northern Gateway pipeline, the company should have hired Daniel Kahneman as a consultant.
Although he's been at Princeton University for the past 20 years, he taught for eight years at UBC, so he knows the region. He would have been quite expensive, having won the Noble Prize in Economics in 2002 but his specialty in behavioral economics and the psychology of making decisions would have served Enbridge well.
Kahneman recommends in his book Thinking, Fast and Slow, that anyone, whether an individual or a company, planning a major undertaking that looks promising should first sit down and write a "premortem." In both the public sector and the private sector, postmortems are done after projects are completed to assess if they met the goals and if they didn't, what could have been done differently. Kahneman says very few people ever think of doing a premortem as part of their planning. In other words, imagine the mistakes you will be telling yourself not to make the next time, except tell yourself now, before you get started.
A serious premortem forces planners to look past what Kahneman calls "pervasive optimistic bias." That bias manifests itself in our personal lives right through to the efforts to build a pipeline through Northern B.C. from the Alberta oil sands to Kitimat. For starters, optimism gives people a sense of control that doesn't actually exist because it ignores other people (and their sense of control over their lives) and other variables, particularly luck (both good and bad). When planning a major project, particularly one with as many hurdles as Northern Gateway, it will always take significantly longer and cost significantly more than anticipated, a human tendency Kahneman calls the "planning fallacy."
Here's how Enbridge's optimistic planning has played out so far.
"Enbridge hopes to have commercial arrangements complete this year, putting it in position to have the pipeline in place by 2009 to early 2010," according to a Citizen story in the summer of 2005.
"A two-year assessment timeline - should the company get approval - puts the start of the three-year construction period beyond 2012," added a story in 2009.
The company's optimism also extended to the cost of the pipeline. In 2004, the company thought Northern Gateway would cost $2.5 billion. In media stories almost each year that followed, that number crept up. Today, it's at $7 billion.
If Enbridge had retained Kahneman, he would asked them to try to imagine beyond what he calls WYSIATI (What You See Is All There Is). Just because the planning documents look great and the PowerPoint presentation rocks with information and logic doesn't mean it's a done deal.
Kahneman could still have some words of wisdom for Enbridge. The optimistic bias remains even when experience and information should have changed the outlook to a pessimistic one, he writes. Whether it's at a personal level of staying at a crappy job or in an unhappy marriage, or it's at the corporate level to build a pipeline, people would rather keep investing their time and energy in something with little chance of future success than walk away. Kahneman calls it "sunk costs." Better to keep trying and failing than to have the feelings of regret that no longer trying bring ("if only I had waited another six months, it would have gotten better/we would have been successful").
In other words, Kahneman would argue that optimism has no place in a well-considered business plan and only if the idea is still sound after a lengthy dunk in some ice-cold logical pessimism should it proceed (or continue).
If Enbridge had taken the pessimistic view in 2004 that it would take 10 more years just to get regulatory approval, subject to 209 onerous conditions, that the price tag on the project would triple in that time and that widespread opposition would form against the proposal, would the company have still gone ahead?
The better question is how much more patience Enbridge has in its proposal and how much more time and money it's willing to invest supporting it in the face of so much opposition and uncertainty.
