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January 29, 2012

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Mil

Yes. Your last paragraph rings a bell for me. I have seen this bubble operating - both in others in a large corporation and in myself when I was looking to set up a partnership many years ago.

This bubble is like the initial stages of falling in love - and leads to the same self-interested filtering out of contradicting data which otherwise might make one think - more accurately and more usefully - twice.

Ant

Is this not called compound stupidity? If you have a wealthy background and are too stupid to realise how stupid you are, one can easily rise to the level of, for instance, Tony Blair.

George Hallam

“happier people tend to be more overconfident than others”

Someone on ‘The Stag Hunter’ went back for the six years (2001-06) and searched for how many times the stenographer's notation for laughter appeared in the released transcripts of each of the Fes’s FOMC (Federal Open Market Committee) meeting. (http://www.dailystaghunt.com/markets/2012/1/12/the-correlation-of-laughter-at-fomc-meetings.html)

Here is a summary.
FOMC Meetings average Recorded Laughs per
2000 16.5
2001 15.375
2002 21.625
2003 19.25
2004 23.125
2005 27.25
2006 43.875


This was referred to in a recent edition of the Keiser Report.

Norb

I agree with most of your points. Another mechanism reinforcing an executive's bubble is the confidence of the people who promoted him. To admit that a subordinate is incompetent implies that you exhibited incompetence in promoting him. This can result in a person lingering in a job for which they are ill-suited (I'm thinking here of the Peter Principle).

Mike Killingworth

Norb, I can tell you from experience that I worked a lot better and harder for the people who appointed me than for their successors. Not my opinion - theirs.

I wonder if we couldn't improve productivity in the public sector by a rule that says that when the boss leaves, you're dismissed too. This happens to US Postmasters after each Presidential election, so it wouldn't be a complete leap in the dark.

Luis Enrique

Doesn't it worry you at all that you don't know any CEOs, don't really know what they do day to day, and a dealing with people who have every reason to present a confident public face despite what they may think privately? Fertile ground for projecting your prejudices I'd have thought.

I'm not contesting the idea that leadership is grossly over rated, in some quarters.

Norb

Luis - I can't speak for Chris but for myself, no. I work in an internal finance role for a medium-sized (~$10B market cap) US bank and interact regularly with C-level managers. My observations of executive performance match Chris' description in his original post quite well.

Mike - I interpret your comment as a critique of my earlier point. I can see how people would try harder for those who promote them, but my point was less about the expenditure of effort and more about the masking of inherent incompetence. Some people get placed into jobs for which they are just not suited. This often occurs because the interpersonal skills that get one promoted to a job differ from the skills that allow one to succeed in this role.

I've seen this many times in sales organizations. Salesmen have the exact skills that allow one to maneuver in a bureaucracy and land senior management roles. However, they often make bad managers because they lack analytical and strategic skills.

The intent of my original comment was to build on Chris' description of subordinates' role in bubble-blowing to include supervisors.

So lets say you have a team of Executive VPs who report to a CEO. EVP 1 recently promoted a subordinate who is not performing well. EVP 1 may be reluctant to fire this person because it will make the error of his original decision obvious and diminish his standing in the eyes of his fellow EVPs and the CEO. He therefore leaves the subordinate in place and finds ways to excuse his poor performance (ie, macro factors beyond his control), thus inflating this subordinate's confidence bubble.

Georgia DUI

The most common way in which overconfidence has been studied is by asking people how confident they are of specific beliefs they hold or answers they provide.

Account Deleted

Over-confidence is what happens when natural confidence is insufficiently balanced by natural self-doubt.

The absence of self-doubt promotes risk-seeking (nothing could possibly go wrong), blindness to luck (it's all down to pure talent), and self-delusion (I'm doing God's work).

The bubble of overconfidence doesn't burst because the individual feels no real remorse for actions that cause damage, even when they cannot avoid accepting responsibility: "There was a period of remorse and apology; that period needs to be over".

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