Narcissism, hubris and "success"

I've seen two things recently suggesting that the rich and powerful are prone to what might be called psychological disorders. In The Establishment, Owen Jones says that top pay and MPs big expenses claims were driven by a narcissistic "because I'm worth it" mentality. And in the FT, Gillian Tett describes how successful managers are prone to hubris.

There's something in this. Narcissism pays both across the wage distribution - because men who spend lots of time in front of the mirror earn more - and in the boardroom: narcissistic CEOs are better paid. And way back in 1986, Richard Roll said that value-destroying takeovers were often motivated by hubris (pdf) - though he was only echoing Kenneth Boulding's warning (pdf) of 20 years earlier, that:

There is a great deal of evidence that almost all organizational structures tend to produce false images in the decision-maker, and that the larger and more authoritarian the organization the better the chance that its top decision-makers will be operating in purely imaginary worlds.

But I wonder: what exactly is the link between success and narcissistic overconfidence?

On the one hand, there might well be causality from hubris and narcissism to economic success. Narcissists have the thick skins which prevent them being disheartened by setbacks. And they give off more competence cues which hirers mistake for actual competence, and so are more likely to climb up the greasy pole.

However, I suspect there are also two other mechanisms here.

One is a selection effect. Many successful people can retire or downshift in their 40s because a few years of six-figure salaries and London house price inflation should allow one to build up a decent nest-egg: even with with interest rates at their present nugatory level, the price of a decent flat in Hampstead would give you an income of twice the median wage. This means that only narcissists and people daft enough to be "passionate" about their career stay in work long enough to become top managers.

Secondly, Gillian is right - success causes hubris. The thing here is that this can be true even if that success is due just to luck. A new paper by Christoph Merkle and colleagues shows that even neutral observers are fooled by randomness and so see skill where there is in fact only luck. Given the self-serving bias, it's even more likely that managers will see their own success as due to skill rather than luck. Though this is well-documented in finance, I suspect it also happens in non-financial businesses as high profits here can sometimes be due to the good luck of tail risk not materializing.

I say all this for two reasons. First, to point out a paradox. On the one hand, people with some mental illnesses - depression, schizophrenia - suffer stigma and discrimination in the labour market. And yet on the other hand, the market actually favours and produces some other mental disorders. This might be consistent with a Szaszian view of mental illness.

Secondly, all this brings into question the efficiency of hierarchies: is it really a good idea to put power into the hands of people who are systematically irrational? Despite the fact that the collapse of the banking system in 2008 gave us a clear answer to this question, hierarchy persists. Which only confirms the success of the Establishment in creating a hyperreal economy in which evidence doesn't matter.   

Comments

[Dave Timoney]

The use of terms such as hubris and narcissism should remind us that the theatre of corporate life remains wedded to ancient tropes of power.

One is the tale of the king who is sacrificed to ensure continued fertility. This suggests that in the case of some CEOs, their over-confidence and eventual demise is in part a willed projection of the organisation. In other words, businesses may be subconsciously promoting psychos because they better fit this narrative.

In the same way, CFOs often play the part of the wise counsellor, even when they're talking complete nonsense, not least because this image is selected for by headhunters and NEDs.

[cm]

The essence of narcissism is operating in an imaginary world, which is largely about a self-image that is not based on reality but a narrative either developed by the individual or others (e.g. parents and social environment). The narcissist will only acknowledge (or reinterpret) aspects of reality that relate to or confirm the self-image. Because this will naturally conflict with reality, in smaller or larger degree depending on how unrealistic the self-image is, the narcissist is in constant need of external validation and insulation from reality feedback, i.e. negative feedback highlighting boundaries and constraints that conflict with the self-image. This is the link to authoritarian organizations, the main feature of which is the suppression of negative feedback, filtering only reports of success and confirmation of the top-down strategy. Negative reports are allowed as long as they are about the shortcomings of others outside the personal sphere of the narcissist. (E.g. "the strategy is successful but we hit a few challenges in its implementation".) This can work at the individual or group level.

[Magpie]

Chris,

"Narcissism, hubris and 'success'"

I know you didn't intend it, but that line perfectly describes some high-profile American economics professors extremely active on the Internet. :-)

[Curt Doolittle]

Sorry but you're making two catastrophic errors: 1) that rational argument is persuasive. That leadership of a body of people is rational. Only very naive people who lack experience as leaders make this error. Quite the contrary: mastering delivery, mastering body language. Mastering moral intuitions. Mastering not rhetoric but sermon is both difficult, an art, and mastery of leadership. I would enumerate the reasons why but this is the wrong forum. (b) Any reasonable student of Michels, Burnham, or the vast body of data on organisations would remind us of the obvious: that leadership is necessary, and great leaders are in fact worth their high cost to organisations.. Man is a tribal creature and a moral creature. Reason is a thin layer of justification and nothing more. We do not make great organisations by rational argument but by constructing a moral narrative in which all members are heroes.

Some people should get out more.

[Curt Doolittle]

More thoughts:

Just as a method actor practices his craft, the master of leadership does the same. Because the purpose is the same. A Reagan or a Blair practice it explicitly. A Clinton learns by repetition. A CEO by experimentation. Humans are exceptional at lie detection and the test of truth as unaudited passion. As such, like a method actor, and speaker, any CEO, learns that one must master the craft of acting by mastering the craft of feeling in the moment: genuine emotional expression.

[Socialism In One Bedroom]

There were loads of people at uni who had a sense of self entitlement, that they were better than those who 'failed' at school. They believed they had worked hard and because they had done well in their education the world was theirs and everybody else simply had to bow down to their greater knowledge.

But then those who became 'successful' without a great education also have this sense of entitlement.

I guess the system just breeds that way of thinking, it is hard wired into it, part of the fabric that keeps it ticking over.