The phone’s smoking, the air’s blue, the table’s thumped – the normal outcome of a call to an automated answering system. Dial the airport, the railway centre, virtually any large institution: the question you want answered won’t be one the machine can cope with. It answers only what the system programmer allows. The automaton at the other end cannot tailor its reply to suit your particular question. If you do not fit a category, if yours is not a question on the system list, be sure of an unhappy experience.

We all, of course, resort to the use of categories in virtually anything we do or say. Every generic noun in the language is a category of sorts, a parcel of meaning that enables us to bundle up specific shared attributes or perceptions in a single word. Scientists handling astronomical quantities, social statisticians measuring earthly patterns of human behaviour, do so by analysing groupings or categories; investment analysts sometimes group economic blocs as a means of highlighting a variety of shared, if superficial, characteristics. Appropriately or not, the catch-all phrase ‘emerging markets’ has become a financial cliché for a group of economies sharing broadly defined, economically desirable attributes. China, India, Brazil and many Asian countries get commonly grouped in this way.

Categories are short cuts that save time and trouble. They convey the user quickly to a destination without having to go round all the byways, without having to hack through a jungle of statistics, without getting bogged down in a morass of detail or complexity.

But when we move from the field of objective measurement, scientific research, academic inquiry, to that of human relationships, categorisation acquires a double-edged potential. Like television, its worth depends on how it is used. In the financial field, grouping pension fund savers so as to afford them collectively an economic means of diversifying their savings is one thing. But when, as now, financial institutions categorise customers by their material wealth, their credit card status, their ownership of a home, or their reading habits solely to herd them into a group for mass exploitation, the short cut runs into a minefield.

When individuals get addressed only as a category, they become non-persons; they lose their identity as individuals. There’s no longer any need to listen to each, one-by-one, to discover their particular needs, to deal with their real issues, to be involved. In short, there is no human relationship with categories, no personal accountability. Any tie that might imbue business dealings with a sense of individual responsibility gets replaced by a social vacuum in which a series of sterile transactions can be conducted between groups of purchasers and a provider constrained only by the letter of regulation. That change, from a business culture built on personal relationships to one reliant on systematised and impersonal contact, has done more than any other to invalidate the claim our financial institutions had upon the people’s trust.

So it is that we turn yet another page in the chapter of horrors that chronicles institutionalised rapine. Millions of home-buyers in the UK, it transpires, were sold ‘payment protection’ insurance policies they didn’t understand nor, in many cases, could ever claim from. The cost of reimbursing them is said to exceed £6 billion.

Purchasers of financial products are particularly susceptible to abuse by institutional marketeering because their buying habits can be readily categorised and because the final outcome and true cost of what has been bought can take years to materialise. A car exhaust with a hole in it makes a loud noise. A financial product with a hole in it may purr along for quite a while before anything noticeable goes wrong. Hence one financial customer group after another discovers all too late that it has been gulled into unsuitable purchases, and saddled with risks and costs as little expected in the event as they were evident at the point of sale. Hundreds of thousands, even millions, of homebuyers, credit-card holders, endowment policy purchasers, pension savers, lick deep wounds inflicted on them for no better reason than that they fitted nicely into a category that could be assaulted and despoiled.

Fair enough, no doubt, to group customers where the product on offer has readily recognised characteristics, obvious and measurable functionality. A car either runs or it doesn’t. Every product line since the model T Ford serves a customer category of some sort. Mass retailers are entitled to succeed by matching their line to what a target customer group wants. But financial products are fuzzy at the edges, their quality and performance characteristics ill-defined. You cannot be sure when you buy it that a financial product will do what you are led to expect. Read all the small print, it is still hard to know if an insurance policy will cover the risks you intend it to.

If the losses for financial customers from being depersonalised into categories have become all too clear, there are also big losses for the selling institutions. No business can long survive the backlash that inevitably follows the alienation of vast numbers of customers. Trust once confided in UK financial institutions has melted in the heat of public resentment. The short cut to business achievement turns out to be a track to self-destruction.

Apart from the business hurt, what a catastrophe for many financial sector employees who must leave home each morning for work which, through no fault of theirs, can offer little sense of personal fulfilment, job satisfaction, or involvement in something that is worthwhile.

As to reversing the tide of financial exploitation, regulation can and does facilitate the recovery of savers’ losses while it pricks round the edges of the malignancy, acupuncturing a few potentially eruptive trouble spots with a thousand needles. But no effective customer protection will be achieved without a change in the financial culture of the age. How is it to happen?

The great legacy of the 18th century European Enlightenment was to re-establish reason, above culture and tradition, as the best guide to making good life choices. But as human heritors with mixed motives, we often look away from reason in the heat of the moment when our choices are made. Business, by contrast, has but one motive for its actions, only one route to survival and that is to do what satisfies customers. If businesses pursue objectives that estrange their clientele, they fail, and many have. It is not a matter of wisdom in hindsight but simple common sense to keep a clear view of what alone secures economic survival. Treating customers, even within a group, as individuals with personal concerns and expectations is the sensible approach. For businesses, it is the only one.

According to David Brooks, an American columnist and author, there is also a huge benefit for employees of businesses that do that. On BBC Radio 4 (16th May), he said that the route to personal contentment lies less in hard work and intelligence than in the ability to engage with others’ emotions – “we have a tendency to think of ourselves as rational individuals who are driven by economic motives, but in fact we are social individuals, driven by the need for relationship”. It appears that human instinct marches in step with reason on the road towards a new enlightenment.

Meanwhile, it seems to be easier for relatively small firms to hold on to the obvious truth that is their life-line to survival. Their principals still stand at the front, far from any marketing department, meeting people, building relationships. They know it works because they do it. That is why, whether a new dawn breaks or not, we intend to go on answering the telephone ourselves.

23 May 2011