Robert McNamara, Kill Ratios and Climate Data

Robert McNamara (June 9, 1916 — July 6, 2009) was one of the brightest men of his time. After WWII he was one of the “Whiz Kids” recruited by Ford where they introduced modern planning, organization, and management control systems.

McNamara profoundly believed that everything could be managed by numbers (or what we today call “metrics”). He became Secretary of Defense under President Kennedy and served from 1961 to 1968. He played a major role in escalating the United States’ involvement in the Vietnam War.

During this war McNamara tracked every combat statistic he could, creating a mountain of analytics and predictions to guide the war’s strategy. This use of data went as far as to maximize “kill ratios” (the ratio of enemy troops killed to American soldiers) in an effort to win the war.

McNamara believed numbers could solve all problems. This is not very different from assuming that ever more granular climate data is the holy grail to help financial institutions to measure and manage climate risk in their lending and investment portfolios. A too singular focus on data distracts us from developing a richer picture and to ask the question “what is really going on here”.

There is an abundance of climate data and Governments are investing billions of Euros to generate more. That is good news for all of us. We can now predict the average rise in temperature in Paris in, say, 2050, more accurately than analysts can predict the Apple share price next month.

But what we can’t predict is what impact this has on the whole economy, on individual actors within this economy, and on the balance sheets of the financial institutions that lend to them. We cannot predict how governments respond, when they respond, or even that they act rationally.

Can we really say that the impact of climate risk is 3.2% on EBITDA in 2040 at Company X? We crave certainties which cannot exist and invent knowledge that we cannot have. At best we can visualise alternative future scenarios and ensure that plans are robust and resilient to a range of plausible alternatives.

Climate data can help visualising such alternative future scenarios and plan for it. But you need a climate risk strategy first and then determine how climate data can be incorporated into this strategy.

In 1967, McNamara and some of his colleagues went to the basement of the Pentagon where mainframe computers took up the whole basement. They put on punch cards everything you could quantify: numbers of ships, numbers of tanks, numbers of helicopters, artillery, machine gun, ammo, etc. They then put it in the computer and asked, ‘When will we win in Vietnam?’ They went away on Friday and the computer ground away all weekend. On Monday they came back and there was one card in the output tray. And it said, ‘You won in 1965’.