It’s widely thought that James Murdoch is either a liar or a fool: either he genuinely did not know about phone hacking, in which case his was failing in his job, or he did know, in which case he misled MPs. As Tom Watson said yesterday:
It is plausible that he didn't know but if he didn't know, he wasn't asking the questions that a chief executive officer should be asking…Either he wasn't doing his job properly as the chief officer of the company or he did know.
This dichotomy, however, might be a false one. It is quite possible, in theory, for a rational boss to be intentionally ignorant as a tool to increase his bargaining power.
The idea here derives from Thomas Schelling’s Essay on Bargaining, wherein he shows that ““In bargaining, weakness is often strength.” Ignorance - normally a weakness - can increase one’s bargaining power. For example:
- If we have to share a box of chocolates and I get first grab, I might scoff all my favourites and plead: “I never knew you liked the coconut ones.”
- If two cars are driving towards each other on a narrow country road, the driver who knows the danger of a collision takes the risk of swerving whilst the one who’s oblivious stays on the road.
- The man who doesn’t appreciate the cost of a breakdown of negotiation - say who doesn’t know how much a strike will cost - will adopt a tougher negotiating stance, and so extract more concessions, than the man who doesn’t.
These are no mere theoretical possibilities. A new paper by Julian Conrads and Bernd Irlenbusch provides experimental evidence that ignorance can be a useful bargaining weapon - even if that ignorance is wilful rather than accidental.
One can imagine how such strategic ignorance might strengthen a boss’s position relative to his staff. Imagine an employee knows of, or has actually engaged in, wrongdoing. He approaches his boss: “If you don’t give me a big pay rise, I’ll speak out about this company’s crimes.” Who’s most likely to cave in - the boss who knows what’s gone on, or the one who can credibly claim to know nothing and so either face down the demand or escape ordure if the threat is realized?
Ignorance, then, can be power.
You might object here that a good CEO is a custodian of the company and so should know what’s happening. This is naïve pish. The function of a CEO is not to take care of the firm, but to take care of himself. And sometimes, he does so by knowing nothing.
Now, I’m not saying this is what Murdoch did. What matters in this context is not ignorance but credible ignorance. And the best way to be credibly ignorant is to be genuinely ignorant. All I am saying is that the fool-liar dichotomy - intuitively plausible as it seems - is not necessarily correct. Sometimes, it is wise to know nothing.