Strategic ignorance

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.

Comments

[Mil]

This is lovely. But I'd go further. I think this is systemic in how large companies are structured. Whether by overt design or some weird kind of convergent evolution, the piecemeal approach to modern processes and procedures means that almost no one in a big corporation *can* know everything that happened. And this is to almost everyone's potential benefit.

Not a code of silence imposed. A seeping infrastructure of convenient Chinese walls which everyone, consciously or otherwise, goes along with.

Just in case.

[Luis Enrique]

I try to adopt a policy of strategic ignorance concerning IT.

[Straus]

Yes, it's possible that Murdoch sensed the extent of the problem, but wanted to protect himself by deliberately remaining ignorant of the damning details. He may have been far-sighted enough to calculate that the matter might end with legal or quasi-legal proceedings in which this ignorance would be the cornerstone of this defence. So he may not be a liar or fool, but a very devious and shrewd operator. And these are just the qualities that some people would look for in a CEO.

[Strategist]

Too clever by half, I think. The point about plausible deniability is that, although it can't be pinned on you, and you may have deliberately avoided knowing about the details, you do in fact know.

And so Murdoch is a liar, as charged.

[rogerh]

Good one. An old trick though, how often have you heard "The Minister was unaware that....".

I suspect HMG does not want to get to the bottom of the NoW tale - hence the gentle grilling.

[Tim Newman]

Anyone who's done business in a dodgy country knows that at times you say "Get it done, just don't tell me how you did it."

[Sean]

Is it ethical for a news company executive to know the journalists sources? this is JM defence as I see it, and a pretty good one.

[aragon]

Strategic Ignorance is stupidity.

Denying knowledge is always suspected of been dishonest.

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.

And collides with the Tractor as the restricted view caused by the high hedge was not acted upon, by slowing.

Not knowing the risk or consequences is irresponsible, and may lead to unexpected consequences especially if the consequences are asymmetric (against the ignorant).

Of course the ignorance point is we rescued (yet again) the Financial Industry which engaged in excessive risk taking and fraud.
(the risk is asymmetric in favour of the industry). So they can't loose.

[jungle]

"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."

But - unless he makes a point of knowing nothing at all about anything at all - he must have known there was something worth not knowing about in order to decide not to know it.

That sounds very much like a form of lying to me...