Workplace Realism: The Myth of Flattened Hierarchy

Actually, we're not quite there yet.

The management literature is littered with references to new forms of organizational structures alike matrixes, networks and so on that are coming to replace bureaucratic hierarchies. This phenomenon is linked to modern, politically correct notions of diversity, equity and fairness. Surely, we can't have [white, male] bosses lording it over others in an enlightened age, can we? Having been conditioned to think organizations are evolving in this, well, collegial direction at university, young entrants to the workforce are often surprised that most instead resemble your grandfather's corporate hierarchy straight out of Weber's iron cage.

CFO magazine points us in the direction of recent research by management stalwart Jeffrey Pfeffer reprising themes those familiar with his work should be able to recognize. Because power games are inherent in human societies, the notion that they will go away in "new age" organizations is risible. In a world where people strive to get ahead, it is inevitable that this will be done at others' expense. Call it "workplace realism"; people are keeping score. So, the corporate hierarchy becomes reinforced the embodiment of this perpetual conflict--be it cavemen or white collar workers. There's this person called the boss, gaffer, guv'nor and that's that--none of this touchy-feely stuff beloved by slackers:

“There’s this belief that we are all living in some postmodernist, egalitarian, merit-based paradise and that everything is different in companies now,” [Pfeffer] says. “But in reality, it’s not.” In fact, in a new paper that explores the notion that power structures haven’t changed much over time, Pfeffer explains that the way organizations operate today actually reflects hundreds of years of hierarchical power structures, and remains unchanged because these structures “can be linked to survival advantages” in the workplace. The beliefs and behaviors that go along with them, he writes, are ingrained in our collective, corporate DNA.

Why do traditional power structures have such staying power? One reason is that hierarchies still work. Pfeffer writes that “relationships with bosses still matter for people’s job tenure and opportunities, as do networking skills.” He notes that research shows hierarchies also deliver practical and psychological value, in part by fulfilling deep-seated needs for order and security. Another is that individuals who believe in their own competence and above-average qualities are more likely to take action at work, says Pfeffer. Taking action on the job provides opportunities for success, and success means advancement at the company — including more power and control over others — perpetuating a hierarchical structure.

There is no self-fulfilling prophecy that believing we are in an era of flat organizations will eventually result in having more of them:

Changes in the values and careers of particularly younger employees and changes in organizations, including the reduction of hierarchical levels and greater use of teams and matrix structures—combined with new communication technologies and more social networking—have produced calls for new organization theories for these new realities. Using organizational power and influence as a focus, I argue that fundamental theoretical processes remain largely unchanged in their explanatory power, in part because such phenomena can be linked to survival advantages. The new workers–new work arguments are consistent with the continuing emphasis on novelty and theoretical innovation in the organization sciences, an emphasis that, while promulgated in virtually all the journals, may poorly serve the development of reliable and valid knowledge and hinder our ability to provide useful advice for both organizations and their employees. 

Deal with it: the real world is not like that. Pfeffer's setting may be different--the corporate world instead of international relations--but exactly the same forces undergirding realism reappear. Power matters. The implications are far-reaching in that perhaps it's time to go back to "stodgy" old management research in which organizations resemble military-like command structures instead of these pancake-flat doodles people imagine them to be. More importantly, young people may not be persevering in work environments that do not meet their expectations. Ditto for government organizations (or even more so).

A Defense of High Frequency Traders

By Cliff Asness et al.  Very cogent, in my view.  The bottom line:

In summary, we don't believe HFT profits are excessive or excessively consistent. We censure illegal front running as strongly as anyone, but it has near nothing to do with HFT per se. Canceling orders in the process of providing liquidity is key to any sort of market making, whether HFT or not. We support the right of HFTs, or anyone, to try to guess the direction of the market, using order flow or any other public information. We not only support the right, we celebrate the successful exercise of that right as it adds to public welfare by making markets more efficient and lowering the cost of investing. Lastly, we believe markets are "rigged" in favor of, not against, retail investors.

The Amoeba Boys: Philippine DDoS Attacks on China

Filipino "hackers" are the Amoeba Boys of cyberspace.

 Well this is embarrassing: Having played up the Philippines' emergence as a technology hub in Southeast Asia to rival India, the sheer lameness of its sympathizers' Internet attacks on China is appalling. If you are going to cause mayhem online, then you have to at least target frequently-visited websites. I have long been fascinated with D-I-Y reprisals among netizens through distributed denial of service (DDoS) attacks on websites, especially those hosted by the offending government. In 2007 I wrote about Russians mounting DDoS attacks against Estonia after the latter relocated a statue commemorating the USSR liberating Tallinn in 1944. Just a few weeks back, I also wrote about how torrent site Rutracker.org fell to Ukrainian DDoS attacks.

The theater of operations here though is the Asia-Pacific region. At the ongoing World Economic Forum in Manila, Vietnamese President Nguyen Tan Dung just met his Filipino counterpart Bnigno Aquino III and both condemned Chinese aggression. You should be aware of what's happening with Vietnam right now, but the Chinese are also agitating the Philippines. PRC flunkies have been busy constructing structures on one of the Spratly Islands it contests with the Philippines, the Johnson South Reef AKA the Philippines' "Mabini Reef" and China's "Yongshu Reef." In either case--parking an oil rig in contested waters (Vietnam) or building on a contested reef (Philippines), the Chinese are violating the 2002 declaration agreed to with ASEAN members it has territorial squabbles with not to escalate matters.

So, what are Filipinos to do other than mount a DDOS attack as sympathetic netizens are supposed to do nowadays? OK, but if you're going to "hurt" China, you might as well take down major sites. How about gov.cn portals, the China Daily or Xinhua for starters? The PRC Ministry of Foreign Affairs seems obvious. That will certainly get their attention. To really cripple Chinese commerce, how about hitting business-to-business powerhouses like Alibaba and Baidu? Unfortunately, the list of targeted sites seem to have been chosen to make a mockery of the attackers in being of next to no consequence to Chinese users whatsoever. They even list links to GIFs, fer cryin' out loud. Suffice to say that no Chinese are really being inconvenienced by these pathetic DDoS attacks. As I recall, Taiwan hit Philippine government websites much harder when one of their fishermen was accidentally killed since gov.ph sites were down for the longest time.

These hackers are so lame that I have to lump them with some of the Powerpuff Girls' least threatening "criminal" opponents--if you can call them that--the Amoeba Boys. For those who used to watch those fine cartoons, the "crimes" they committed included snipping off warning tags from mattresses, jaywalking, and other heinous stuff:

With their gangster affectations, these aspiring criminals would love nothing more than to be regarded as serious villains worthy of fighting, and even getting beaten up and sent to jail by the Powerpuff Girls. Unfortunately, their brains are far too primitive to devise a crime above the level of littering or jaywalking.

Attention Philippine "hacktivists": you are the Amoeba Boys of DDoS attacks. The Chinese do not fear you, they are laughing at you. Unless you can actually bring down sites of consequence and cause real disturbances to mainland residents, you are the cyber-equivalent of the Amoeba Boys. It isn't exactly rocket science to find out where to hit them where it hurts if you were really serious about not being laughingstocks.

China Has Exhausted Its Goodwill in SE Asia

Call it "Escape From the Killing Fields 2": China sending ships to repatriate its workers from Vietnam as anti-PRC riots there resulting in the deaths of four of its nationals heralds a turning point not only in PRC-Vietnam relations but broader PRC-ASEAN relations. Make no mistake: it's getting really ugly in Vietnam for Chinese nationals and their businesses. In PR terms, what's odd is China's ability to snatch defeat from the jaws of victory. Having done the hard work establishing economic links with Southeast Asia--witness the landmark China-ASEAN FTA or even the forthcoming Asian Infrastructure Investment Bank--the PRC then destroys accumulated goodwill by reiterating its legally risible claims to own huge chunks of the South China Sea faraway from its exclusive economic zone (EEZ). These incidents again show how the Communist Party is not monolithic but has conflicting interests such as trade promotion and security promotion duking it out on a global stage given the scale of China's ambitions.

Sometime ago I wrote about the amusing Vietnamese tactic of holding ballroom dancing competitions to drown out anti-PRC protesters. One of the clear victims here is the notion of Communist solidarity; the Internationale is down and out as these two socialists go head to head. It's not that Vietnamese authorities don't welcome using anti-PRC protests as a vent for the people's frustrations. Rather, the fear is that their ire could be redirected towards the Vietnamese leadership or the foreign firms investing in the country. However, deploying an oil drilling rig in contested waters was a step too far for China in not only violating the spirit of an agreement not to inflame matters but also doing so with little provocation on the part of Vietnam. Unlike the Philippines which has taken legal action against China, Vietnam did not do anything particularly "flagrant."

He Anh Tuan writes about how China is managing to unite ASEAN by scaring all claimants to the South China Sea while forcing neutrals to reconsider what Chinese expansionism means for them in their own backyard. Interestingly, Myanmar--China's client state for most of the time it was being subject to sanctions--did not object to ASEAN issuing a statement of concern about China's extra-curricular activities. Worse yet for China, it has upset our equivalent of Germany in Indonesia which has the largest population, economy and diplomatic clout in Southeast Asia:

China's action violates the principles of the Declaration of Conduct of Parties in the SCS and deepens suspicions among regional countries about its true intention. In addition to Vietnam and the Philippines, Singapore and Malaysia are increasingly concerned about China's behavior in the region. Indonesia, which once maintained strict neutrality toward territorial disputes in the SCS, has reversed its position, and is contesting China's claim in the SCS because it challenges Jakarta's rights in the Natuna waters. In fact, Chinese armed authority vessels have encountered Indonesian authority ships several times in the last few years in waters claimed by Jakarta.

If China manages to drill oil in Vietnam's EEZ, on top of taking control of Scarborough Shoal from the Philippines in 2012, it will go further southward and clashes would be expected with Malaysia and Indonesia. Given Indonesia's role in ASEAN, Jakarta's recent change in position toward China is a setback for Beijing. The more assertive it is in disputes in the SCS, the more its international prestige is damaged. The achievements of China's "charm offensive" toward Southeast Asia in the 1990s could be erased by a rising tide of anti-Chinese nationalism in Southeast Asia. Collectively, on May 10, ASEAN Foreign Ministers, during part of the 24th ASEAN Summit in Myanmar, issued a stand-alone joint statement on the tension in the SCS, expressing their serious concerns over the incident and reaffirming the importance of peace, stability, and freedom of navigation in the SCS. This is the first time since 1995 ASEAN has issued a separate joint statement on a development in the SCS acknowledging threats to the regional peace, stability, and navigational safety in the SCS. This represents diplomatic backlash against China in Southeast Asia.

Old China hand Philip Bowring, formerly the editor of the late, lamented Far Eastern Economic Review, underscores the severity of China's own goal. That his opinion appears in the usually PRC-friendly South China Morning Post shows how many of the undecided perceive no small amount of bullying:

Not only has Beijing bared expansionist teeth to Vietnam and the Philippines, it has now succeeded in shifting Indonesia from a position of trying to act as a moderator between China and the other South China Sea states to opponent. Twice in recent months, Indonesia has accused China of claiming part of its Natuna island archipelago. So much for a "peaceful rise" when you rile neighbours with populations of more than 400 million, who you assume to be weak...

There should surely anyway be a case for compromise between China and Vietnam. Malaysia and Thailand managed one over a gas-rich area between them in the Gulf of Thailand. Other regional states - Indonesia, Singapore, Malaysia - have put island ownership issues to the International Court of Justice and accepted the result. But China remains unwilling either to compromise or submit to arbitration. Meanwhile, joint development is impossible because China makes it conditional on acceptance of its sovereignty.

Despite concerns mentioned above on harming Communist solidarity and FDI, Vietnamese official media has let 'er rip--and the advantage with such media is that we do not need to question whether it has state sanction:

The Vietnamese people are angry. The nation is angry. We are telling the world that we are angry. We have every right to be angry. Thousands of Vietnamese citizens took to the streets in major cities of the country last weekend, shouting slogans and carrying placards demanding China remove its oil rig from Vietnamese waters. Demonstrations by the Vietnamese diaspora also took place in Tokyo, Berlin, Frankfurt and some other cities. The message from all these demonstrations is simple and straightforward: China should stop violating international law and respect Viet Nam's sovereignty.

What Viet Nam will do next lies in the leaders' hands. We can follow the Phillipines' in filing a lawsuit or choose another solution to hold on to our legal territories. We are in the right, and we have the law on our side. Over thousands of years, we have shown that we never cease fighting aggressors. We are proud of our freedom-fighter forefathers and resistance is in our blood. We are a small country, but we are not weak. We will stand as one, united in the cause of protecting our motherland's integrity. 

In no uncertain terms, the battle cry has been sounded by the Vietnamese, a proud, never conquered people. As the Yanks learned not so long ago, you can play Filipinos against each other, but you don't $%^& with the fierce Vietnamese. They've even indicated they may join the Philippines which has a penchant for legal maneuvers (it was colonized by the Yanks after all). At any rate, the message of the day for China is this: divide-and-conquer doesn't work when you somehow manage to unite the rest against you. With Indonesia now in the same condition as the rest of us over expansive territorial claims and Myanmar not quite as pliable to the PRC as Cambodia, the latter is isolated as China's real ASEAN ally.

As a pacifist by (internal) constitution, I have been generally glad that ASEAN members have devoted more of their efforts to development and less to defense. However, the cumulative effect is that we are somewhat unprepared with deploying force to defend the regional interest (which China has inadvertently created by turning nearly everyone against it). What's left? ASEAN members have to deftly play off one bully (China) against another (the United States). It's a tricky balancing act, but one we must play if we sensibly want to keep military spending to a bare minimum. Appropriately enough for developing countries, we are less interested in killing people than raising their living standards.

Meanwhile, the most damning thing I can say to the Chinese who claim not to aspire to hegemony is they are just like the Americans; no better or worse. 

US Firing Squads From Mars, EU Pharma From Venus

Having (ab)used the hackneyed Americans from Mars, Europeans from Venus trope already, I suppose giving it another go isn't bad. As I usually start my day, I perused the Yahoo! news items presented to me on the homepage, including an AP article about how the state of Utah may be bringing back the firing squad to execute death row inmates. The proximate cause of this seeming return to barbarity is especially interesting: For many, many years now, European countries have been trying to persuade the United States to stop the cruel and inhumane practice of handing down death sentences. As it turns out, though, many of the chemicals used to lethally inject death row inmates were sourced from EU pharmaceutical firms. Upon figuring this out, the aforementioned EU pharma concerns were aghast at how their products were being used--or at least the EU finding them complicit in American "human rights" violations punishable under European law. Faced with dwindling supplies from abroad, what are AmeriKillers supposed to do?

The ethical exploration of society’s ultimate sanction has been going on for decades. But it’s been complicated more recently with European pharmaceutical companies refusing to sell key lethal injection drugs to US death penalty states, on ethical concerns about capital punishment. Most other countries that still have the death penalty either hang or shoot their condemned, with only six countries, including the US, relying on lethal injections. (Three countries still behead.) One hundred forty countries ban the death penalty. But to some elected state officials, drug shortages and legal challenges have sparked a renewed focus on what is a humane execution.

The recent brouhaha over lethal injection was spurred when a new toxic cocktail did not work as intended as Clayton Lockett cursed and thrashed for a long while in Oklahoma before falling silent in a botched execution. The incident prompted much discussion, and I was pointed in the direction of an earlier Listverse feature detailing horrifically botched executions. These things tend to further exasperate Europeans from all ends of the political spectrum convinced of the barbarity of American practices. Talk about the road to hell being paved with good intentions, however, as the Yanks are going back to firing squads over the unavailability of EU-sourced chems:

For decades, Europe has done all it could to bring its anti-death penalty stance to the United States. We've seen international covenants and conventions, refusals to expedite in capital cases, good old-fashioned diplomacy, even EU briefs to the US supreme court. Nothing has worked. Until now. Over the last several years, Europe has found a way to export its rejection of capital punishment ... by refusing to export lethal injection drugs to the United States.

In the private sector, European pharmaceutical companies caught wind of the increasing reality that their products were being diverted to execution chambers, so they either imposed end-user agreements on buyers or stopped producing the drugs altogether. In the public sector, Britain responded by imposing export controls on drugs used for lethal injection and joined a chorus of countries calling for the European Commission to do the same, which it did.

When it comes to the death penalty, the United States today is what South Africa was in the 1980s. It is the subject of a targeted boycott of goods based on behavior that the rest of the world views as immoral. That's a mighty strange place to be for the self-declared leader of the free world.

As a God-fearing Catholic, I generally discourage the use of the death penalty. However, you may be surprised that this occasional America-basher will not automatically condemn this Stateside practice as an abomination (or compare it to apartheid-era South Africa). From a rational choice standpoint, keeping folks in jail isn't cheap, even more so those on death row. Searching the Internet, you will get an astonishing range of figures on how much it costs to jail "regular" inmates and their death row peers. What they share is being humongous to astronomical.

However, portraying shooting people as a the "cost-effective" solution is of course besides the point: Why do so many people end up in jail in the first place--especially those unfortunate enough to be born with the wrong skin color? As with many other seemingly barbaric practices, never forget that there are some who stand to profit from the entire enterprise. Sticking with EU pharma firms, I am content with the belief that most are genuinely appalled by the use of their drugs for this application and are thus willing to stick with EU guidelines proscribing their distribution for such use.

I'm not saying their practices are always ethical, but that's a story for another blog post...

Japanese Depopulation & Few Foreign Workers

For all its current woes, there is no doubt that the United States remains an attractive destination for skilled migrant workers. Despite its current bedraggled state, there is no doubt that American is still the place to be in any number of areas: creative industries, finance, technology....the list is lengthy. In comparison, there isn't even a single "must join" industry prominent mostly in Japan that compels expatriates to go there. Besides difficulties learning the language--Japanese is an order of a magnitude more difficult to learn than English--their society is also more difficult into. All the while, deflation and depopulation mutually reinforce each other in unproductive ways.

It's not that Japan hasn't been trying to attract migrant workers to help arrest its population slide and make the country more attractive to foreigners. Copying the likes of Australia, Canada and other countries of emigration, Japan instituted a points-based highly skilled foreign professionals scheme to hopefully attract these desired knowledge workers in May 2012. Unlike those English-speaking countries, however, the results in Japan have been decidedly underwhelming. As the pie chart indicates, those coming in under these program represent around 1.1% of the total number of overseas residents in Japan.

Dismayed by the poor performance, the government is now eyeing a review of the system in the near future, and may lower hurdles to qualification while tweaking the benefits. The Justice Ministry says the changes will hopefully take effect by the end of this year. But some experts say that only by a more fundamental overhaul will the program truly become attractive for foreigners worldwide, arguing its perks need to go beyond simply relaxing immigration rules for the eligible...

Many saw this as Japan’s belated effort to cope with its rapidly atrophying labor force and low birthrate. The threat of a demographic crisis looms large in the nation, as the total population is estimated to plummet to about 90 million by 2050 from the current 127 million.

To say that foreign response is underwhelming is an understatement since few outside of those already working in Japan bothered to apply:

Despite the original target of 2,000 registrants per year, the program had lured just 434 people as of April 6, according to the latest data, including a mere 17 who applied to the program from overseas and used the points-based system to enter the country [my emphasis]. Of the total, Chinese accounted for an overwhelming 57 percent, followed by Americans at 7 percent and Indians at 4 percent.

Even the already converted, especially foreigners studying in Japan, have an exceedingly hard time getting in under the current scheme. Meanwhile, proposals to make Japanese employment a more enticing prospect for expatriates have been shot down one by one due to political sensitivities over rolling out the welcome mat to gaijin (foreigners):

Compared with other nations’ systems, experts say the Japanese version sets the bar too high in terms of eligibility requirements for applicants. The conditions for annual income and educational background in particular are so demanding that they virtually eliminate any chance foreign students in Japan are able to qualify...Overseas students [in Australia by comparison] with certain qualifications, such as completion of at least two years of course studies, go through a designated points test. Once deemed eligible, foreign students can obtain permanent residency while also enjoying a slew of other benefits, including discounted health care and access to certain social security payouts...

The Japanese version’s penchant for focusing on annual earnings and academic accomplishments clearly signals the government’s intention to only accept individuals who are already “established,” Sato said. Researchers, for example, may be awarded an extra 15 points if they have published three papers in the nation’s well-known scholarly journals. Sato believes this kind of utter indifference to young hopefuls makes the Japanese system “severely flawed...”

Ideas that emerged included offering eligible foreigners income tax cuts, addressing their criticisms of Japan’s seniority-based corporate society, and improving laboratory environments for researchers, according to Immigration Bureau official Yusuke Takeuchi. None of these dramatic reforms, however, got the green light, he said, as such measures would have necessitated financial commitment. Easing immigration rules, on the other hand, wouldn’t cost the government a dime.

The Abe government has been pushed into defensive mode over Japan's scheme drawing flies compared to Anglophone countries. Especially galling to some would-be expatriates are limitations on whom they can bring:

This past February, Prime Minister Shinzo Abe told the Diet that foreign workers in specialized and technological fields will contribute to "galvanizing" the economy. Yet the numbers reveal meager results. In the 20 months through January [2014], the government certified some 900 highly skilled foreign professionals. That translates to about 50 per month -- less than one-third the pace the Ministry of Justice expected.

Some who look into Japan's preferential treatment find the restrictions tarnish any appeal. An Indian IT expert who works for a major Japanese financial institution wanted to bring a parent over. Eventually, he wanted to start a family, and he hoped to have some help with child-rearing. Professionally, he met the conditions. But when he spoke with an administrative scrivener in January, he was informed he was out of luck because he did not already have a child. "Then there is no point in being certified as a highly skilled foreign professional," the man said.

Program implementation has been universally panned by English-language Japanese media, which tends to be more cosmopolitan. Having singularly failed to encourage more births, the options left on the table are few. The highly skilled foreign worker scheme is meant to invite those with a good change of integrating into Japanese society, but it hasn't worked. Moreover, alike in many economies the world over, there isn't necessarily a demand for highly skilled workers but just workers, period. The Japanese can pile the incentives and see if that makes foreigners come in the numbers originally anticipated, but those numbers are actually comically small (150 persons a month) compared to the rate of repopulation required to keep Japan from shrinking.

I think it's really time Japan threw the gates open to even unskilled workers willing to assimilate given the country's minuscule birth rates. If skilled workers cannot be made to come to Japan, workers period may just do the trick There aren't any real options left on the table as natalist policies in modern-day Japan would not exactly have good prospects of succeeding, either. It needs a coherent strategy that leaves others in no doubt that Japan welcomes them, most likely.

How Big is "Too Big to Fail," Exactly?

Like any other international organization, the IMF portrays itself as a technocratic institution instead of a political one. In other words, they would like others to see themselves as economic experts offering solutions instead of as pawns in someone else's political machinations. There is, however, a fairly large literature on how the IMF lending is steered by American interests--see Thomas Oatley, Strom Thacker and James Vreeland among others. Apropos for the season, we got another reminder of IMF politicization as Managing Director Christine Lagarde bailed out on being the commencement speaker at Smith College after students protested the institution she represents.

For reasons I can no longer remember, I was put on the mailing list of the IMF. A recent message pointed me in the direction of a new staff publication (by Luc Laeven, Lev Ratnovski, and Hui Tong) concerning another contentious yet highly topical question: when exactly does a financial institution cross the threshold of becoming "too big to fail"? As the image taken above suggests, the largest of them have become even larger, although they have tapred off somewhat post-global financial crisis. There are undoubtedly policy implications for this question given the sheer size of money center banks in the US, UK or Switzerland. Or, even the various Landesbanks in Germany. Just think: if an IMF report said there was a threshold for becoming too big to fail (TBTF), you would expect all sorts of news reports touting the idea that big banks should be cut down to a certain size. Political pandemonium would ensue in any number of financial centers.

To be honest, I was hoping for such a TBTF threshold being identified. Instead we get a neither-here-nor-there answer. In other words, it's a Larry Summers response ("it depends") instead of a Nicolas Nassim Taleb one ("shrink 'em pronto). Anyway, to the paper's conclusion:

This paper contributes to the debate on the optimal size and scope of banks. It shows that large banks, on average, create more individual and systemic risk than smaller banks. The risks of large banks are especially high when they have insufficient capital, unstable funding, engage more in market-based activities, or are organizationally complex. This, taken together with the evidence from the literature that the size of banks is at least in part driven by too big-to-fail subsidies and empire-building incentives, suggests that today’s large banks might be too large from a social welfare perspective.

However, the literature also does not dismiss the case for the economies of scale in large banks (even though, in our reading of the literature, these economies are likely to be modest). As a result, “optimal” bank size is highly uncertain, and regulations that restrict outright bank size may be imprecise and difficult to implement. Optimal regulation of large banks should combine micro- and macro-prudential perspectives, and its tools may include capital surcharges on large banks (as in Basel III) and measures to reduce banks’ involvement in market-based activities and organizational complexity.

Again, it's exactly the contours of the Summers vs. Taleb debate, with the IMF (surprise!) coming down on the side of the arch-neoliberal Summers:

Summers told Taleb that he was for more capital, more liquidity, living wills for banks and procedures to wind them down. “What are you for?” he challenged. “I’m for punishment,” Taleb replied.

At any rate, the IMF conclusion is highly nuanced: It's not that banks are too big per se that they become too big to fail. Rather, it's when poorly governed banks reach a certain size that they are more of a systemic risk. At one end of the continuum, then, the IMF acknowledges that some banks have indeed become TBTF. At the other end, it also suggests that there is a "minimum economic size" below which banks become unable to adequately deal with risk since they have trouble surviving risk events of medium intensity. Instead of TBTF, call this "too small to succeed" (TSTS). In statistics-speak, it would have been nice to have been given point estimates--say, a certain bank constituting x percent of all deposits in the home country--for when a bank was TSTS on the low end or TBTF on the high end. In the absence of those, a confidence interval could have served a similar purpose.

Instead we get a cop-out calling for better regulation combined with an "I dunno" on optimal bank size. It's the same sort of bland prescription for "better education" you keep hearing in policy circles without quantifying how improvements in human capital will boost economic performance. Besides, for what reason is an international organization that prides itself on technocratic precision unwilling to venture that far? Re-read the first paragraph, and do not tell me the IMF is not playing politics once more in this example lest it get caught in a political maelstrom of its own making.
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BTW: I have been linking to the IMF Direct blog since it came into existence and they have their own blog post there on this very topic. However, IMF Direct does not recognize this blog or any other political economy blog in its blogroll for that matter, seemingly reinforcing the economistic conceit that they are beyond the fray of politics--again, a technocratic pose. To complete its PR work--and I'd say the IMF does more of it in the blogosphere than the World Bank--the IMF should engage with its critics, especially those coming from more of a political economy perspective instead of an economics one. Having at least 83 posts on the IMF going by my cloud tag--more if you include Bretton Woods institutions--I doubt you'll find any (non-IMF) economics blogs that cover the institution in nearly as much depth from IMF reform to lending to Pakistan. Are you game enough, IMF Direct?

UPDATE: Recall that, of course, IMF Managing Director Christine Lagarde is a political science, not an economics, major.