Why Good Managers Make Bad Decisions

Excerpt from an WSJ Interview of Sydney Finkelstein.

• Leaders tend to rely on past experience that seems useful, but is actually sometimes dangerous.  

•  A second reason has to do with self-interest. Most people don't realize self-interest operates at a subconscious level. 

•  The third one is what we call prejudgments. Leaders make prejudgments about their businesses that sometimes turn out to be wrong. 

•  The fourth one is what we call attachments -- attachments to people or places or things. 

And on  "What are some of the ways leaders can avoid making bad decisions?"

People need to recognize that we are biased in every single situation. There's no such thing as objectivity.

The first thing leaders should do to reduce their odds of making bad decisions is walk into an important decision situation saying, "Ok, I know that we are potentially biased in a variety of ways. Let's try to identify what those are."

Second is to avoid the "yes man" trap. You have to bring different people and different data sources to the table. You want to add a "no team" to argue against the proposal, and put some teeth behind that no team.

Positive thinking

Seth posted his thoughts on positive thinking.

[I]t's been shown over and over again that it improves performance over negative thinking.

Key question then: why do smart people engage in negative thinking? ...
The reason, I think, is that negative thinking feels good. In its own way, we believe that negative thinking works. Negative thinking feels realistic, or soothes our pain, or eases our embarrassment. Negative thinking protects us and lowers expectations.
In many ways, negative thinking is a lot more fun than positive thinking. So we do it.
If positive thinking was easy, we'd do it all the time. Compounding this difficulty is our belief that the easy thing (negative thinking) is actually appropriate, it actually works for us. The data is irrelevant. We're the exception, so we say.
Positive thinking is hard. Worth it, though.

I am not so sure that positive thinking is hard. An example would be the Endowment Effect. Sometimes, negative thinking is hard, when you have it, or already started it. Positive thinking is hard, when you don't have it yet, have not started it yet.

Both are valuable. The million-dollar question is how to strike the balance.

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Leadership

An excerpt form Seth's book Tribes:

Leadership is scarce because few people are willing to go through the discomfort required to lead.

The scarcity makes leadership valuable. If everyone tries to lead all the time, not much happens. It’s discomfort that creates the leverage that makes leadership worthwhile.

In other words, if everyone could do it, they would, and it wouldn’t be worth much.

It’s uncomfortable to stand up in front of strangers.
It’s uncomfortable to propose an idea that might fail.
It’s uncomfortable to challenge the status quo.
It’s uncomfortable to resist the urge to settle.

When you identify the discomfort, you’ve found the place where a leader is needed.

If you’re not uncomfortable in your work as a leader, it’s almost certain you’re not reaching your potential as a leader.

Here is another excerpt from Ayn Rand's Atlas Shrugged.

She[Dagny] took positions of responsibility because there was no one else to take them. There were a few rare men of talent around her, but they were becoming rarer every year. Her superiors, who held the authority, seemed afraid to exercise it, they spent their time avoiding decisions, so she told people what to do and they did it.

At every step of her rise, she did the work long before she was granted the title. It was like advancing through empty rooms. Nobody opposed her, yet nobody approved of her progress.

Dan Pink on the surprising science of motivation | Video on TED.com

Dan Pink on the surprising science of motivation | Video on TED.com

Surprising? Maybe not. The "science" known to general public is handpicked by the privileged few for their benefit.

Is it gonna change? Probably.

Watch this with the book "Free".

read to confirm?

Sentences to ponder via Seth:

Some people read business books looking for confirmation. I read them in search of disquiet. Confirmation is cheap, easy and ineffective. Restlessness and the scientific method, on the other hand, create a culture of testing and inquiry that can't help but push you forward.

Niall Ferguson - A Bit of Blather with Bookworms then it’s off for a Wild Swim

Sentences to ponder:

The fatal flaw of Versailles, we concurred, was the attempt by Woodrow Wilson to draw the map of Europe on the principle of self-determination, whereby states and peoples would be one and the same.
This overlooked the fact that eastern Europe was a heterogeneous patchwork of ethnic, linguistic and religious groups. It also created a contradiction, since applying self-determination consistently would have made Germany bigger than it had been before the first world war.
You only have to spend a little time in the Welsh Marches to see the dangers of idealising the homogeneous nation-state. People move and mingle; you can’t pin blood and soil together.

Niall Ferguson - A Bit of Blather with Bookworms then it’s off for a Wild Swim