By Rob Downey

Knowledge is power? Not always in business, unless the knowledge is reality-based and the power is exercised responsibly. As surely as the collapse of Enron and Adelphia inspired Sarbanes-Oxley legislation which clarified liability issues in corporate governance, Bernie Madoff's $50B investment scam will inspire both changes within the SEC and among all the oversight agencies charged to make the finance and credit industries transparent and accountable hence.

Sir Francis Bacon (1561-1626) adapted from a painting by Paul Van Somer

At least once a year, I hear someone in the credit insurance, or trade finance industry – a CFO, Treasurer, Senior Credit Manager, international lender, or credit underwriter – say, unwittingly paraphrasing Sir Francis Bacon, that, "Knowledge is power." They almost always get Bacon's intended meaning wrong.

That is, they use the phrase in defense of a decision to withhold information so as to gain a business advantage. Even worse, at times it may be heard as justification for the habit of routinely manipulating access to information. Rarely does the phrase arise in the context of someone explaining that their past experience (knowledge of one sort) and their orientation to new challenges (self-knowledge of another sort) are both important to the continuing development of their personal potential (power of the most interesting sort).

Never have I heard Sir Francis' maxim used by a business person in its most solemn possible interpretation, i.e., someone with special knowledge, position or abilities, taking personal responsibility voluntarily for the shape of future events, outcomes or consequences.

Up until now, I have always let the bending of Bacon's insight go unchallenged. One can become anemic bleeding concern too readily through the cuts of every self-wounding cynic met in international business. I see recently, however, that the workaday world is responding in its own way to clarify and update the applicability of Bacon's words to global trade finance, credit insurance and political-risk situations.

Knowledge is power? Not anymore, if by "knowledge" is meant mere business information. Market, trend, credit and financial information are fast becoming commodities in an electronically networked world. It is not yet certain, but it bids fair to be the case, that business information in the coming decade will become the sort of commodity so readily generated, transmitted and updated that not much payment can be demanded for it or earned from it. It looks like speed of decision-making with good information in hand, and the precision of the problem-definition for which new information is sought will be more highly valued than the information itself.

Knowledge is power? Not for long, if by "power" you mean a durable and unchecked competitive advantage based on secrecy. Starting September 2008, when Lehman Brothers disappeared, the future of competition in the financial sphere arrived. It clearly is going to be a better refereed game going forward.

Fields of endeavor that do not produce a tangible product are professions in which it is often difficult to determine relative merit or comparative quality in a useful time frame; it simply takes a long time for a superior service, financial strength, a particular product fit or a funding strategy to be proven. For this reason, banking, trade finance, accounting, insurance, investment, and most forms of financial consulting are professions that benefit from rules that require disclosure of clear and detailed information on a regular basis.

Governments and markets are in the process of agreeing, even as this is written, that the normal benefits of competition – improved products, better service, faster delivery, lower prices, and public trust – cannot always be assessed in the financial arena without a fair degree of transparency derived of regulation and oversight. Laissez-faire arguments to the contrary notwithstanding, the fundamental regulation debate is over for this generation. It's the pro-regulation, pro-openness group that has won.

Knowledge is power? Certainly in many philosophical, personal, spiritual and ethereal senses this is still true. But since the Autumn of 2008, it is not really fashionable to talk carelessly about power – even in the world of hard-eyed financiers and practical manufacturing executives. There are no unchallenged giants anymore: not AIG, not GM, not CitiBank, and Wal-Mart failed to hit expectations in the most recent quarter. There is a new-found humility afoot; a new devotion to the square relationship, the reasonable risk, and the well-understood financial statement.

Here's hoping that Bacon's wisdom from 410 years ago will see us through the valley of 2009 and guide us to the sunlit uplands of 2010, accounting for the death of magical balance sheets, voodoo profits, and secrecy-cloaked financial priesthoods along the way.

Here's hoping that our humility lasts awhile, that the strong oversight of financial information and institutions lasts awhile, and that the fair and open contest of ideas lasts long enough to lead everyone back to prosperity. We can each do our part by discerning and re-evaluating the reality of true Knowledge (reason, science, experimentation, experience, awareness and judgement) and true Power (self-control foremost) that Sir Francis surely meant for us to understand.

Happy New Year!

(Rob Downey is one of the founding partners of International Risk Consultants, Inc. (IRC) www.irc-group.com – a globally-integrated trade-finance and credit insurance specialty brokerage, which serves as the operating member of ICBA for Mexico, Brazil, India, China and the U.S.)