For instance, the Riksbank uses what is known as a general equilibrium model of the Swedish economy named RAMSES (the Riksbank’s Aggregate Macromodel for Studying the Economy in Sweden). But the models always need to be supplemented with personal judgements. These judgements become particularly important when unusual events and structural changes occur that alter the functioning of the economy. This was the case during the financial crisis, for instance. Figure 3 shows the RAMSES forecast for the GDP gap and the Riksbank’s forecast in the Monetary Policy Report  5  However, at the time this decision was made, no alternative scenario was unambiguously better than the main scenario if one calculates the mean squared gap for the combination of GDP gap and CPIF. BIS central bankers’ speeches  5  published in February 2009. As you can see, there is a fairly large difference between the forecast generated solely from a model and the published forecast supplemented with personal judgements. Figure 3. Forecasts for the GDP gap Monetary Policy Report 1/2009  Source: The Riksbank  The significance of the personal judgements becomes even clearer when we see the forecasts for the repo rate (Figure 4). According to our forecast, a much more expansionary monetary policy was needed during the crisis than was suggested by RAMSES. Figure 4.
But we have so much to learn from experts in other fields. Strengths as Blind Spots One of the most important lessons I’ve learned as a CEO is that there’s no fixed endpoint when it comes to shaping an organization’s culture. You can never take a step back and say, “We’ve finished the culture project. Well done! Now it’s time to focus our efforts elsewhere.” Culture is constantly evolving, and therefore needs to be constantly nurtured. One of the most challenging elements is that there’s no clear benchmark for success. And sometimes your greatest strengths can become your blind spots. As an organization with a public mission and regulatory responsibilities, the Fed needs to have a particular focus on compliance. But cultures with a heavy focus on compliance can breed a sense that individuals aren’t responsible for their actions. As a CEO, I’ve tackled these issues by focusing on principles and values rather than writing extensive policies that try to cover every potential decision. This puts a premium on individual accountability to do what’s right and creating an environment where everyone has the ability and responsibility to speak up. Somewhat paradoxically, focusing on principled decision making and accountability, rather than relying exclusively on rules and policies, can be the most effective safeguard against wrongdoing and unethical behavior. What’s the Way Forward? Creating a positive work culture is challenging and ongoing work. And there’s no silver bullet that can solve cultural problems overnight.