19/01/2012 11:31 GMT | Updated 19/03/2012 09:12 GMT

Why Cruise Ships (And Banks) Crash

If you haven't already, grab a coffee and listen to the exchange between the captain of the Costa Concordia and the Italian coastguard give yourself a sleepless night and listen to it now...

The captain's behaviour lies somewhere between a breakdown and cowardice. The coastguard's outrage that he would not oversee the evacuation of his passengers is so forthright that it brings a lump to the throat. Carnival, the parent company, seems to have been very forthcoming about the facts and the facts seem simple: the captain took the cruise liner off its pre-programmed course and hit rocks. In response to "Why did you do it?" the captain has simply replied, "The charts didn't show any rocks." I hope, for his sake, he doesn't represent himself. (He has since said that he tripped and "fell" into the lifeboat. It's going to be a short trial.)

But the thing of it is this. Carnival had a state-of-the-art ship, it had a computer-guided navigation system, it had strict safety and operational procedures the details of which should have reassured any passenger. But the ship went down.

Why? For a very simple reason. Because everybody overlooked that one little detail. The same detail that brought the banks to their knees, the same detail that nearly-bankrupted our economies, the same detail that meant Time Warner thought it was a good idea to merge with AOL. That detail is the human factor.

The best laid plans... With the best will in the world... You can't legislate for that... Expressions of exasperation that accompany reports of human error. Given that human error is one of life's constants you might think it might be slightly more factored in. By which I mean, why the hell wasn't it?

I had lunch with a City friend recently, a chap who had started out in the heyday of the 60s. A time when you got your information by buying brokers and bankers drinks down the pub. You didn't pore over company statements, you poured somebody another glass of wine. After a fashion it worked. He told me the story of how the Bank of England regulated the banks. They would have informal chats, get the head of Risk in and talk casually about how exposed the particular bank was to various markets. If the regulator felt they were in choppy waters in one area he would ask them to wind that down a bit. And it was done, no questions asked.

He mentioned one bank he knew of where the Head of Treasury had tried to fob the regulator off with a few BS answers to a few questions about the banks' various positions. The regulator smiled, left the meeting, called the CEO and told him to fire his Head of Treasury. He promptly did.

I'm not advocating a return to that era - computer trading makes that impossible, anyhow. But I do think we have to hope for the best - and plan for the worst. Never lose sight of the humans in the middle of all these institutions we are meant to trust. The banks' defence against suggested - and tighter - regulatory rules has been to use the "self-interest" defence. That is, "We would never want to hurt our own bank". This defence is used because a) Some of them actually believe that. b) Most of them have short memories (think 2007-2008) and c) They're greedy charlatans.

The fact is, if a human can screw it up he will screw it up. Not necessarily on day one, year one, year 10 even. But they will. And the reason will always be one of the Seven Deadly Sins. Well, money or sex, anyway.

When Carnival changes its procedures I hope to god they build the new system knowing a captain will screw up in the future so that the system builds in a response to that. I don't know, maybe an automatic phone call to a chain of command up to the top of Carnival itself? Would a captain take a ship off course if he knew the CEO and Chairman were about to call him to ask him what the hell was going on? (Some might ask why that procedure wasn't already in place.) If I entrusted somebody with a piece of equipment worth hundreds of millions of dollars I'd want at least a text when he was about to blow it up.

There is one sliver of good news to come out of all this, one thing is certain: Human error will never again lead to such a disaster. Well, not until next time, anyway.