Sunday, May 31, 2015

Corruption's Mark

The fix was in. As the horses entered the turn, a large wall made them briefly invisible to the stands. Moments later the horses came back into sight - with the long-shot now in the lead. A collective moan. Angry shouting. Torn tickets flying, the cynical crowd realizing that it had been the "mark" - the victim of a con.

Of course, horse racing is notoriously corrupt - hence the crowd's immediate, cynical reaction to the fix. But corruption abounds in the world today, and affects our well being more deeply than you might realize.

You are probably thinking of corruption's direct consequences: The better horse loses; the lesser firm gets the deal; the meritorious job candidate is passed over. Such injustice often leaves the mark helpless. They played by the rules, but someone else was playing a different game - one where a corrupt payoff trumps merit. And so everyone loses: fans, shareholders, and consumers alike. Only the thief prospers in such a system.

Yet corruption has an even more insidious effect: collective nihilism. I first saw this effect in my old step-grandfather when I was but a boy. I was telling grandpa about the coming world series matchup. Grandpa waggled the cigar in his mouth, took it out, and said "the whole thing's fixed." I replied, "What do you mean, 'fixed'?" A deep, cigar laugh, and then "Well, they pay everybody off to make sure it goes the way they want. Then they collect their bets. They think we're stupid."

So went my first exposure to nihilism, the view that our institutions are so hollow as to render all action pointless. I said nothing; I knew better. Taking after my own father, I have always believed in the possibility of effective action, and to this day I resist the cynical urge to see everything as one big "fix."

But for many, widespread corruption has sown the seeds of nihilistic cynicism, distorting their perceptions. When I was in Moscow recently, a frustrated entrepreneur illustrated the problem. As we shared a drink, he pointed to a passing luxury car and reflected, "When you see a nice car blow by, you know that guy stole from someone." How odd, I thought. Of course thieves are everywhere, but the shining Teslas in Palo Alto look to me like the fruit of hard work and innovation. Yet he sees corruption, and so throws up his hands as if to say "all is pointless."

Effective leadership roots out corruption, not just to do "what's right", but to create institutions that reward meaningful action. If we fail this leadership challenge, we fail the innovators of the future.


A sample of the research in this area is by Marcolo Veracierto.

Friday, May 15, 2015

Winning as a Self-Fulfilling Prophecy

They left without the photographer.

The bride was being consoled by her best friend, who was hoping to keep the makeup from liquefying.  The yacht was perfect, of course, and most of the bridesmaids were there as planned.  How dreamy – except now no pictures.  Well, the bride would make sure that the photographer never got another high-profile job.  And, to think, all the best families had raved about what a genius he is.

Two hours later, as they lay on the yacht’s sun deck in the warm tropical air, they heard the roar of twin diesels.  Looking up, there in the bow-sprit chair of a racing marlin boat was the photographer, Paul Barnett, snapping photos from a long telescopic lens.  James Bond with a camera.

But of course!  You don’t photograph the wedding party on the yacht itself; too close quarters. You shoot from a separate boat!  What a genius.

Let me tell you, the story from my brother Paul’s perspective sounds a lot different:  A desperate realization that you were told the wrong time; a frantic cab ride to the marina, only to see the yacht heading to sea; a search for a fast boat; a payoff to a nefarious badguy; the last-second idea to shoot from the bow-sprit chair strapped in like a marlin fisherman.  And then, of course, the usual self-assured act later on, as if to say “all part of the plan.”

Some people have a way of making things go right, no matter how badly they seem to be going wrong.  Why do winners seem to just keep winning?

Social scientists tell us that winners keep winning for several reasons.  First off, maybe they are just better.  But quality aside, we know that those with a reputation for past success tend to get disproportionate credit for future wins – the so-called “Matthew effect” described by the sociologist Robert K. Merton.  And of course the winners from the past tend to be in the right place to make things happen in the future, and have the connections and resources to make good on those opportunities. 

But there may be another reason that winners keep winning – a reason that is particularly useful to understand business leadership: The self-fulfilling prophecy.  Some people tend to be unrealistically optimistic, a view that sometimes makes itself come true.

The downside of unrealistic optimism is that you are out of touch, but the upside is that your outlook might trigger a self-fulfilling prophecy.  Steve Jobs was said to have been surrounded by a “reality distortion field,” in that he would believe in possibilities even when others saw them as unthinkable.  Of course, once Steve believed, then others would too – making his vision more likely to come true.

So-called “positive illusions” of this sort have been talked about by social psychologists for years in terms of mental health outcomes (see the work by Shelley Taylor and her colleagues).   But when they trigger the self-fulfilling prophecy, such illusions have the potential to increase chances of success.  As Andy Rachleff argues, winning helps a leader feel confident in future contests, thereby increasing their chances of winning.

Paul Barnett could not accept that he would fail.  So in a situation where others would throw up their hands and admit defeat, he kept scrambling.  Not letting the facts get in the way, the unrealistic optimist expends effort as if victory was within reach – which of course makes that victory more likely.  And with every victory, the optimist’s unrealistic view gets confirmed yet again.

The lesson for leadership is clear.  Of course we know that a well-informed decision is one that sees reality for what it is.  But leadership is so much more than correct calculation.  Especially in uncertain times, what the leader believes to be true may end up so through the self-fulfilling prophecy.


The classic statement of the self-fulfilling prophecy is by Robert K. Merton.