As you look around at the many poor decisions that have been made by business and political leaders over the last few years you will notice that many of them share a basic flaw: they were based on believing things that were incorrect and dismissing all information to the contrary. In the words of Richard Feynman, the Nobel Prize winning physicist: “You must not fool yourself…and you are the easiest person to fool.”
There is a corollary to this principle that has gotten the financial industry into such difficulties: assuming that past levels of risk and relationships will persist. We can generalize this for the larger business world into the idea that what has worked for some period of time is liable to continue.
Combine these two ideas and you have built the path that leads directly to poor decisions.
The situation gets even worse if you have been correct in the past. Past success leads to even more confidence in your ideas and the strengthening of the belief that your correctness will continue.
There are some people out there where this idea of perpetual correctness does seem to be true. Unfortunately for most of us, they are a very rare breed. Most of us live in the zone of fooling ourselves too often into believing that all will continue to flow along nicely.
One of the things to watch out for is vehemence. The more vehement you are about ridiculing those who think you are wrong, the more likely they are right. I’ve noticed how often the less evidence someone has the stronger their belief in their rightness.
Luckily there is a solution. Seek out those who think you are wrong. Seek out those who have differing opinions. Seek out those willing to push back strongly and force you to reexamine your assumptions and ideas.
The difficult part is listening.
To be clear, I am not saying that you will be wrong all the time or even most of the time. It’s that huge blind spot you need to find before it leads you down the path to failure.
Since I expect my readers, including you, are a smart and well educated group you have an additional problem. The smarter you are the more easily you can fool yourself. Think Jamie Dimon, CEO of JP Morgan Chase, ignoring all comments about risk as he allowed Ina Drew, his Chief Investment Officer, to make bets that lost over $2 billion.
Hopefully Dimon learned the Feynman lesson. On the other hand, Drew and several of her top people are gone while he survives. But that’s a different story for another post.