Our colleague Susan Webber’s article, “The Dark Side of Optimism” is the cover story in the current issue of The Conference Board Review. It discusses the deep roots of optimism and how it can undermine critical thinking and accurate risk assessment.
Her piece is wide-ranging, looking at psychological research, cognitive biases, cultural icons, military history, and even mythology to explore the manifestations and workings of our collective predisposition to look at the bright side. We hope you’ll find this perspective helpful in both organizational and investment decision-making.
From the Conference Board Review:
Has positive thinking gone too far in corporate America? That may sound like a bizarre question: Optimism is widely seen as a virtue of American culture and key to success in business. Cultural norms and beliefs about good business practice increasingly stress looking at the sunny side and de-emphasizing the problematic.
But such overly positive thinking is difficult to reconcile with the need to make realistic, objective assessments. Finding the right balance between healthy optimism and delusion is harder than one might imagine, for both individuals and institutions.
And despite years — decades — of sobering examples, we don’t seem to be any closer to that balance. The recent recklessness of residential and commercial real-estate lending was in plain view, and a vocal minority wrote about it. But the financial and business communities dismissed all the warnings, insisting that any damage — should it ever arrive — would be contained to the subprime sector. The folly was obvious: Even if decision-makers had deemed the grim forecasts to be of low probability, the potential outcomes were so dire that they demanded contingency plans. On other fronts, experts are issuing warnings about the dollar’s continuing slide, which could worsen international financial stability, and about oil prices, and the hiring slowdown, and any number of potential crises looming in the near future.
We acknowledge these problems and their seriousness — and then put them out of mind. Instead of treating worrisome developments as new information and looking dispassionately at the risks, we tend to avoid working through downside scenarios because they are upsetting. It’s simply easier to put on blinkers and believe everything will work out than to confront the complexities of modern life.
“Negativity,” an awkward coinage, has widely come to be used pejoratively. Magical thinking, too, has become increasingly popular as a way to gain the illusion of control in an uncertain world. Rhonda Byrne’s motivational best-seller The Secret, for example, basically says that you get what you wish for. If you don’t have the things you want, it means you don’t have enough faith. In this construct, neither insufficient effort nor bad luck plays a role.
In the business world, we’ve moved from hardheaded to feel-good management. As Financial Times columnist Lucy Kellaway observed recently: “For people in any position of authority the ability to say no is the most important skill there is. . . . No, you can’t have a pay rise. No, you can’t be promoted. No, you can’t travel club class. . . . An illogical love of Yes is the basis for all modern management thought. The ideal modern manager is meant to be enabling, empowering, encouraging and nurturing, which means that his default position must be Yes. By contrast, No is considered demotivating, uncreative and a thoroughly bad thing.”
To illustrate, Tom Peters’ Leadership offers an impossible, irreconcilable list of exhortations: Be a great salesman, great storyteller, great performer, networking fiend, talent fanatic, relationship maven, visionary, profit-obsessive, and (of course) an optimist. Push your organization; know when to wait; love mess, politics, and new technology; lead by winning people over; foster open communication; show respect; embrace the whole individual. Granted, Peters does give a couple of breaks — leaders get to be angry and make mistakes. But his list is all sizzle, no steak. Not only are his executives reluctant to say no — they don’t develop any of the guts of what managing is really about: making decisions under uncertainty, creating routines, developing (not merely exhorting) direct reports, responding to crises, building in enough slack to deal with low-probability but high-consequence opportunities and risks.
The religion of management has instead shifted from hard skills to soft, interpersonal ones. While the human touch is important, making it the gold standard of good management practice is dangerous. It reinforces, rather than counters, the role of emotion in our decision processes.
The end result is a bias against critical thinking. It’s hard enough, in the delicate social web of most organizations, to question the merits of any given proposal offered in good faith. But now decision-makers stagger under the weight of larger social trends and management fads that favor belief and force of personality over dispassionate analysis. Detached, rigorous thinking simply doesn’t fit any of our cultural models. In his 1949 classic The Hero With a Thousand Faces, Joseph Campbell showed that the hero’s journey is a story found in every culture — just as management literature about leadership, whether knowingly or not, casts corporate chieftains as prototypical heroes. But what archetypes do we have for the anodyne analyst? In mythology, Hermes and Loki were clever but also troublemakers and tricksters. Science fiction, too, has long depicted alien beings as detached, logic-driven Cassandras whose warnings are invariably brushed off by upbeat, forward-thinking Earthlings (whose impetuosity, more often than not, saves the day). But that’s just it — it’s science fiction.
The article continues here, at the heading “The ‘Bright Side’ of Bias.”