Tag: self-deception and denial

None of us really likes honesty

None of us really likes honesty. We prefer deception —but only when it is unabashedly flattering or artfully camouflaged. Groups seem to need to believe that they are superior to others and that they have a purpose greater than just passing along their genes to the next generation. Individuals seem to need similar delusions—about who they are and why they do what they do. They need heroes, however fraudulent. People ask actors who play doctors on television what they should do for their ailments, although they know perfectly well that the actors are just playing a role. Studies show that people are more likely to accept the opinion of a confident con man than the cautious view of someone who actually knows what he is talking about. And professionals who form overconfident opinions on the basis of incorrect readings of the facts are more likely to succeed than their more competent peers who display greater doubt.

What's more, deception works best, according to studies by psychologists, when the person doing the deceiving is fool enough to be deceived, too; that is, when he believes his own lies. That is why incompetent leaders—who are naive enough to fall for their own guff—are such a danger to civilized life. If they are modern leaders, they must delude themselves into thinking they know how to make the world a better place.

Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics

Further in the book, Bonner writes:

Like all world improvers, Che (Guevara) claimed a remarkable ability to look into the future and then improve it before it happened. Of course, we all try to peek ahead and try to avoid traffic collisions and bad restaurants, but only a chump thinks he knows best how to improve the entire planet.

The Pursuit of Fairness

As James Surowiecki illustrates in an excellent piece in the New Yorker, the pursuit of perfect fairness causes a lot of terrible problems in system function.

Surowiecki calls this The Fairness Trap:

…Rationally, then, this standoff should end with a compromise—relaxing some austerity measures, and giving Greece a little more aid and time to reform. And we may still end up there. But the catch is that Europe isn’t arguing just about what the most sensible economic policy is. It’s arguing about what is fair. German voters and politicians think it’s unfair to ask Germany to continue to foot the bill for countries that lived beyond their means and piled up huge debts they can’t repay. They think it’s unfair to expect Germany to make an open-ended commitment to support these countries in the absence of meaningful reform. But Greek voters are equally certain that it’s unfair for them to suffer years of slim government budgets and high unemployment in order to repay foreign banks and richer northern neighbors, which have reaped outsized benefits from closer European integration. The grievances aren’t unreasonable, on either side, but the focus on fairness, by making it harder to reach any kind of agreement at all, could prove disastrous.

The basic problem is that we care so much about fairness that we are often willing to sacrifice economic well-being to enforce it. Behavioral economists have shown that a sizable percentage of people are willing to pay real money to punish people who are taking from a common pot but not contributing to it. Just to insure that shirkers get what they deserve, we are prepared to make ourselves poorer. Similarly, a famous experiment known as the ultimatum game—one person offers another a cut of a sum of money and the second person decides whether or not to accept—shows that people will walk away from free money if they feel that an offer is unfair. Thus, even when there’s a solution that would leave everyone better off, a fixation on fairness can make agreement impossible.

You can see this in the way the U.S. has dealt with the foreclosure crisis. Plenty of economists recommended giving mortgage relief to underwater homeowners, but that has not happened on any meaningful scale, in part because so many voters see it as unfair to those who are still obediently paying their mortgages. Mortgage relief would almost certainly have helped all homeowners, not just underwater ones—by limiting the spillover impact of foreclosures on house prices—but, still, the idea that some people would be getting something for nothing irritated voters.

The fairness problem is exacerbated by the fact that our definition of what counts as fair typically reflects what the economists Linda Babcock and George Loewenstein call a “self-serving bias.” You’d think that the Greeks’ resentment of austerity might be attenuated by the recognition of how much money Germany has already paid and how much damage was done by rampant Greek tax dodging. Or Germans might acknowledge that their devotion to low inflation makes it much harder for struggling economies like Greece to start growing again. Instead, the self-serving bias leads us to define fairness in ways that redound to our benefit, and to discount information that might conflict with our perspective. This effect is even more pronounced when bargainers don’t feel that they are part of the same community—a phenomenon that psychologists call “social distance.” The pervasive rhetoric that frames the conflict in terms of national stereotypes—hardworking, frugal Germans versus frivolous, corrupt Greeks, or tightfisted, imperialistic Germans versus freewheeling, independent Greeks—makes it all the more difficult to reach a reasonable compromise.

From the perspective of society as a whole, concern with fairness has all kinds of benefits: it limits exploitation, promotes meritocracy, and motivates workers. But in a negotiation where neither side can have what it really wants, and where the least bad solution is as good as it gets, worrying too much about fairness can be suicidal. To move Europe away from the brink, voters and politicians on all sides need to stop asking themselves what’s fair and start asking themselves what’s possible.

It is more important to have the right system in place than perfect fairness to the individual. The argument here is one of moral hazard and incentives. If you don't punish Greece, you foster a system where it's ok to default once in a while. This idea will spread to other countries.

In Steven Sample's excellent book, The Contrarian's Guide to Leadership, he talks about the law of a higher good, which he took from Machiavelli's The Prince.

Let me clarify the most fundamental misunderstanding. Machiavelli was not an immoral or even an amoral man; as mentioned earlier, he had a strong set of moral principles. But he was driven by the notion of a higher good: an orderly state in which citizens can move about at will, conduct business, safeguard their families and possessions, and be free of foreign intervention or domination. Anything which could harm this higher good, Machiavelli argued, must be opposed vigorously and ruthlessly. Failure to do so out of either weakness or kindness was condemned by Machiavelli as being contrary to the interests of the state, just as it would be contrary to the interests of a patient for his surgeon to refuse to perform a needed operation out of fear that doing so would inflict pain on the patient.

Still curious? Add The Contrarian's Guide to Leadership and The Prince to your reading list.

17 Management Lessons from Ray Dalio

Ray Dalio, the sixty-one-year-old founder of Bridewater Associates, the world’s biggest hedge fund, offers the following management advice. Dalio says “Taken together, these principles are meant to paint a picture of a process for the systematic pursuit of truth and excellence and for the rewards that accompany this pursuit. I put them in writing for people to consider in order to help Bridgewater and the people I care about most.”

1. Ego prevents growth. 

Two of the biggest impediments to truth and excellence are people’s ego’s and organizational bureaucracy. Most people like compliments and agreement, and they dislike criticisms and conflict. Yet recognizing mistakes and weaknesses is essential for rapid improvement and excellence. In our culture, there is nothing embarrassing about making mistakes and having weaknesses.

[…]

We need and admire people who can suspend their egos to get at truth and evolve toward excellence, so we ignore ego-based impediments to truth. We have a different type of environment in which some behaviors discouraged elsewhere are rewarded here (like challenging one’s superiors), and some behaviors encouraged elsewhere are punished here (like speaking behind a subordinate’s back).”

2. Think and act in a principled way and expect others to as well.

all outcomes are manifestations of forces that are at work to produce them, so whenever looking at specific outcomes, think about the forces that are behind them. Constantly ask yourself, “What is this symptomatic of?”

3. If you don’t mind being wrong on the way to being right, you will learn a lot

I once had a ski instructor who had taught Michael Jordan, the greatest basketball player of all time, how to ski. He explained how Jordan enjoyed his mistakes and got the most out of them. At the start of high school, Jordan was a mediocre basketball player; he became great because he loved using his mistakes to improve. I see it all the time. Intelligent people who are open to recognizing and learning from their mistakes substantially outperform people with the same abilities who aren't open in the same way.

4. Mistakes are ok. Not correcting them is not. 

Create a culture in which it is OK to fail but unacceptable not to identify, analyze and learn from mistakes. … A common mistake is to depersonalize the mistake, saying “we didn’t handle this well” rather than “Harry didn’t handle this well.” Again, this is because people are often uncomfortable connecting specific mistakes to specific people because of ego sensitivities. … it is essential that the diagnosis connect the mistakes to the specific individuals by name.

5. Everyone might have a voice but not all opinions are equally valued. 

Not all people’s opinions are equally valuable. Still that important distinction is often unacknowledged in discussions. Prevent this by looking at people’s track records, noting their credentials, and evaluating how their arguments hold up when challenged.

6. There is a difference between debate, discussion, and teaching. 

Debate is generally among approximate equals; discussion is open-minded exploration among people of various levels of understanding; and teaching is between people of different levels of understanding.

7. Know when to keep your mouth shut.

Imagine if a group of us were trying to learn how to play golf with Tiger Woods, and he and a new golfer were debating how to swing the club. Would it be helpful or harmful and plain silly to treat their points of view equally, because they have different levels of believability? It is better to listen to what Tiger Woods has to say, without constant interruptions by some know-nothing arguing with him.

“Two of the biggest impediments to truth and excellence are people’s ego’s and organizational bureaucracy.”

— Ray Dalio

8. Be careful not to lose personal responsibility via group decision making.

Too often groups will make a decision to do something without assigning personal responsibilities so it is not clear who is supposed to do what.

9. Don’t pick your battles. Fight them all.

If you see something wrong, even small things, deal with it. that is because 1) small things can be as symptomatic of serious underlying problems as big things, so looking into them, finding what they are symptomatic of, and resolving them will prevent big problems; 2) resolving small differences with people will prevent a more serious divergence of your views; and 3) in trying to help to train people, constant reinforcement of the desired behavior is helpful. The more battles you fight, the more opportunities you will have to get to know each other and the faster the evolutionary process will be.

10. All problems are manifestations of their root causes. Find the root cause. 

Keep asking why? and don’t forget to examine problems with people. In fact, since most things are done or not done because someone decided to do them or not to do them a certain way, most root causes can be traced to specific people, especially “the responsible party.” When the problem is attributable to a person, you have to ask why the person made the mistake to get at the real root cause. For example, a root cause discovery process might go something like this: The problem was due to bad programming. Why was there bad programming? Because Harry programmed it badly. Why did Harry program it badly? Because he wasn’t well trained and because he was in a rush? Why wasn’t he well trained? Did his manger know that he wasn’t well trained and let him do the job anyway or did he not know?

11 Avoid Monday-morning quarterbacking.

That is “evaluating the merits of past decisions based on what you know now versus what you could have reasonably known at the time of the decision. Do this by asking the question, “what should an intelligent person have known in that situation,” as well as having a deep understanding of the person who made the decision (how do they think, what type of person are they, did they learn from the situation, etc?)”

12. Don’t undermine personal accountability with vagueness.

Use specific names. For example, don’t say “we” or “they” handled it badly. Also avoid: “We should…” or “We are…” Who is we? Exactly who should, who made a mistake, or who did a great job? Use specific names.

13. Self-sufficiency increases efficiency and accountability.

Try to equip departments to be as self-sufficient as possible to enhance efficiency. We do this because we don’t want to create a bureaucracy that forces departments to requisition resources from a pool that lacks the focus to do the job. For example, while people often argue that we should have a technology department, I am against that because building technology is a task, not a goal in and of itself. You build technology to…(fill in the blank, e.g., help service clients, help market, etc.). Keeping the tech resources outside the department means you would have people from various departments arguing about whether their project is more important than someone else’s in order to get resources, which isn’t good for efficiency. The tech people would be evaluated and managed by bureaucrats rather than the people they do the work for.

“Mistakes are ok. Not correcting them is not.”

— Ray Dalio

14. Constantly worry about what you are missing.

Even if you acknowledge you are a dumb shit and are following the principles and are designing around your weaknesses, understand that you still might be missing things. You will get better and be safer this way.

15. Identify the variables that really matter. 

Distinguish the important things from the unimportant things and deal with the important things first. Get the important things done very well, but not perfectly, because that's all you have time for. Chances are you won't have to deal with the unimportant things, which is better than not having time to deal with the important things. I often hear people say “wouldn't it be good to do this or that,” referring to nice-to-do rather than important things: they must be wary of those nice-to-do’s distracting them far more important things that need to be done.”

16. Use the phrase, “by and large”

Too often I hear discussions fail to progress when a statement is made and the person to whom it is made to replies “not always,” leading to a discussion of the exceptions rather than the rule. For example, a statement like “the people in the XYZ Department are working too many hours” might lead to a response like “not all of them are; Sally and Bill are working normal hours,” which could lead to a discussion of whether Sally and Bill are working too long, which derails the discussion. Because nothing is 100% true, conversations can get off track if they turn to whether exceptions exist, which is especially foolish if both parties agree that the statement is by and large true. To avoid this problem, the person making such statements might use the term “by and large,” like “by and large, the people in the XYZ Department are working too many hours.” People hearing that should consider whether it is a “by and large” statement and treat it accordingly.”

17. Most importantly

a) build the organization around goals rather than around tasks; b) make people personally responsible for achieving these goals; c) make departments as self-sufficient as possible so that they have control over the resources they need to achieve the goals; d) have the clearest possible delineation of responsibilities and reporting lines; e) have agreed-upon goals and tasks that everyone knows (from the people in the departments to the people outside the departments who oversee them); and f) hold people accountable for achieving the goals and doing the tasks.”

 

To learn more check out this excellent profile of Dalio, which appeared in the New Yorker and make sure to read all of Dalio's management principles.

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Looking for more? Read The Contrarian's Guide to Leadership.

In his book Power: Why Some People Have It And Others Don’t, Jeffrey Pfeffer argues that intelligence and high performance are not needed to build power.