The Enronization of Climate Science Revisited

More recently, North was one of two “expert” witnesses interviewed by the Penn State Inquiry. To non-climate scientists, North’s admission that he hadn’t read the Climategate Letters (out of “professional respect”) would seem to disqualify him as an expert, but not, it seems, in the bizarro world of modern climate science.

There was an extremely interesting blog post a few days ago by Rob Bradley, an old friend of North from Enron days – where North had been Bradley’s climate consultant – in which Bradley asked North very pointed questions in which he compared the present behavior of climate scientists to Climategate to their shared experience (as innocent parties not in the know) through the gradual revelation of Enron problems. Bradley:

I challenged Gerald North and this panel with an analogy between Climategate and bad behaviors that sank Enron (where I used to work and where North was my climate consultant)

Here is a lengthy excerpt from Rob Bradley’s letter to North:

I see that you are going to be part of a panel at the Friday AAAS meeting on Climategate. Some of us fear too much downplaying. You were a consultant for me at Enron for several years on climate science and watched the fall of the company with great interest. So I would like to challenge you to interpret Climategate in terms of the fall of Enron.

Here are some themes from Enron to consider applying.

1) Slippery slopes where small deviations from best practices escalated into problems that were not anticipated at the beginning of the process.

2) A lack of midcourse correction when developing problems were not properly addressed.

3) Old fashioned deceit when the core mission/vision was threatened (for Enron it was ‘to become the world’s leading company’–for Jones et al., it was there is a big warming and a climate problem developing)

4) The (despised) short sellers busted the Enron mirage. Ken Lay at the last employee meeting even likened the short sellers to ‘terrorists” (this was just a few months after 9/11). Question: does mainstream climate science regard Internet ‘peer review’ of Jones et al. like the Enron faithful regarded the short sellers who first discovered the problems of Enron?

5) Enron suffered from the “smartest guys in the room” problem. Does Climategate reveal arrogance and a lack of humility among “mainstream” climate scientists?

6) Denial: we employees were almost all in denial when the problems at Enron first surfaced. Have you and others who are close to the scientists of Climategate been slow to recognize the problem? Has Nature and Science also been slow? If so, What does this say about human nature.

7) Taking responsibility. Skilling and Lay never did and, in fact, they joined together in a legal cartel where the unstated strategy was to not blame each other for anything and sink or swim together. Has this happened, or is it still happening, with Climategate if you believe that scientific protocol and/or legal rules were violated?

Bradley continued his post with a discussion of “Circling the Wagons”;

I do leave Dr. North with the challenge to more forthrightly deal with Climategate, which he has failed to do to date. I am very discouraged about the circle-the-wagons mentality of too many academic scientists who are covering for each other (many are long time personal friends, and they are united in THE CAUSE of climate alarmism). As I complained to North in another email:

Your own reaction to Climategate has shaken my faith a bit when you say it is no big deal and then you haven’t read the emails.

Analogies are always treacherous, because, all too often, one gets drawn into debates about the analogy that are just as complex as the original issue. Or debates about the validity of the analogy. So one needs to take care in trying to go a bridge too far in this sort of comparison.

Nonetheless, as it happens, in the early days of Climate Audit, I posted on both Bre-X and Enron. Here are some relevant posts on Enron:
http://climateaudit.org/2005/06/28/consensus-two-examples/
http://climateaudit.org/2006/03/09/enron-trial-in-the-news/
http://climateaudit.org/2006/05/26/enron-verdict/
http://climateaudit.org/2008/09/17/lehman-bros-and-consensus/

In the first post, I observed ironically that there was a “consensus” in 2000 that Enron was the best-managed company in the US, seizing that honor from GE. Money managers and analysts are not stupid people – the intriguing question for me was (and this sort of question interested me before I was interested in climate) is how could so many smart analysts get it wrong? And at what point did it change from “shame on you” to “shame on me” i.e. at what point could an alert analyst have spotted inconsistencies and problems? And what were early warning bells?

One of Bradley’s questions draws attention to the visceral hatred at Enron for the short sellers that “busted the Enron mirage”:

The (despised) short sellers busted the Enron mirage. Ken Lay at the last employee meeting even likened the short sellers to ‘terrorists” (this was just a few months after 9/11). Question: does mainstream climate science regard Internet ‘peer review’ of Jones et al. like the Enron faithful regarded the short sellers who first discovered the problems of Enron?

Ironically, I’d been very impressed by the anecdote about short sellers in Eichenwald’s book and connected this incident to proxy reconstructions in an early CA post:

In Eichenwald’s terrific book on Enron, the first person credited with noticing the problems was a short seller, who really came out of left field. He simply noticed what was, in effect, a statistical anomaly – the profits were miniscule relative to the capital employed and they always came out fractionally positive. When you had large fluxes in and out, it didn’t make sense that the knife edge always came out just positive. He wondered what accounting decisions had been made. I think like a short seller.

Whenever I see knife edge balances, like the knife edge balance by which the net index from modern proxies comes out a hair warmer than the index from medieval proxies in many multiproxy studies, I wonder what accounting decisions were made. You can dress it up in statistical language, but civilians can think of the issues as being accounting decisions. Sometimes you need to look at more than one thing. Andrew Fastow did.

The stories in Eichenwald’s book about Fastow’s rage reminded me of Mann’s rage – often exemplified in public, but now placed further into context by the Climategate letters.

The comparison with Enron may also be helpful in placing Climategate into context. Obviously, corruption at Enron did not prove that all business enterprises were corrupt. Conversely, no defense lawyer for Ken Lay or Jeffrey Skilling or Andrew Fastow would have stood before a court and argued that, because no one had showed that all business enterprises were corrupt, corruption at Enron didn’t “matter”.

It did matter. Honest businessmen did not discourage an investigation of Enron or try to sweep it under the carpet. The best way to restore confidence in the rest of the system was to do a proper investigation of Enron.

I think that there is a useful analogy here. Defects in proxy reconstructions do not prove the non-existence of AGW just as corruption at Enron doesn’t prove that all businesses are corrupt. But the fact that some lines of scientific argument are unaffected by CRU conduct or misconduct doesn’t mean that potential misconduct by CRU and others doesn’t “matter”. It does. The difficulty of the “community” in understanding this does not reassure the public – that’s for sure.

I also think that the “community” underestimates the public prominence of the Team as the face of climate science, in large part because of their prominence in the under-estimated blogosphere. Michael Tobis, for example, thought that the entire topic was unimportant because he wasn’t interested enough in Mann’s work or proxy reconstructions to bother understanding the questions. That’s fair enough. But because these disputes have been so visible in the blogosphere, the net result (whether the community likes it or not), long before Climategate, Mann, Jones and Briffa were much more prominent as the public face of climate science than they were within the “community”.

The Climategate Letters arrived on a scene where there was already a large audience that could readily understood the “dank” nuances of Yamal, bristlecones and most notably divergence. This audience knew exactly what the “trick …to hide the decline” meant, while the climate science community was still hallucinating that the “trick” might be a sophisticated statistical method.

In my posts about Enron, I discussed their “trick” – in order to avoid reporting business losses, losses which would have punctured the mirage and prevented them from raising fresh money to keep the scheme alive – they sold worthless assets to off balance sheet limited partnerships with complicated guarantees. The trick to hide the losses had considerably more sophistication than the trick to hide the decline in the IPCC 2001 report.

My own take on Enron was that the failure wasn’t caused by the “trick”, but by horrendous non-performing investments – the “trick” merely disguised the recognition of the non-performing investments. Making bad investments isn’t an offence, but tricks are. And these were what ultimately cost Fastow, Skillings and Lay – with Lay arguing to the end that he was so far above the fray that he didn’t know about the trick.

I think that there’s a moral for the science community from business failures in how to handle a problem like Climategate. In order to get past something like Enron, the affair could not be ignored. It had to be investigated properly. (Judy Curry has an editorial here from a different perspective.) For obvious reasons, people with employment history in Enron or shareholders in Enron would not be appropriate people to serve on an investigation commission, though their testimony and information would be invaluable to the investigation.