Three Ways NOT to Respond When Lost

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Checkout Banff Centre’s Leadership Compass for my latest article titled “Three Ways NOT to Respond When Lost“. Excerpt:

“Last summer I was hiking with my friends around a lake in Alberta’s Peter Lougheed Provincial Park. The day was beautiful with plenty of great conversations. Then someone mentioned that the lake was no longer in sight. Not to worry, we reasoned, it should be just around the bend. We were lost, but we didn’t know it yet…”

Download the whole article here, or download the Leadership Compass for 2009.

How economic myopia tells us something about rationality

Let’s face it. Conventional economic theory needs a major overhaul. I’m not here to debate Keynesian or Friedmann economics because that isn’t necessarily the most significant challenge. The most significant challenge is that economics has become the dominant mode of dealing with opportunities and threats on a global scale and the field has no idea how human beings work.

animal-spirits-antelope-oil-paintingUnderlying the dazzling mathematical models is a primitive assumption about human rationality, which is narrowly defined as purely objective and logical and self-interested. There are three serious flaws (among others) with this assumption: a) a person can never have “all the facts” to make an “objective” decision , b) even with the facts, human beings have a wide range of priorities not all of which are purely economic, and c) self-interest is only one aspect of human nature and certainly not necessarily their best quality.

All of these assumptions though lead to a system that reinforces the worst aspects of human nature. So we in fact have an economy that serves self-centred consumers who mistake impulsive decisions for living a wise life. The belief that people act primarily from economic motives is so ingrained in our culture that it has become heretical to shake.

Yet we know on a personal level that somehow the pursuit of money and material wealth degrades what it means to be alive and human. Much of what is important in life is immeasurable and intangible. Quality friendships, meaningful contribution, a sense of community, engagement in creative work are all well beyond traditional economic models. True, we need efficient ways to produce and distribute goods and services, but when economics becomes the only source of meaning, we are left with a desolate life and planet.

Robert Shiller starts to get at the nature of true human rationality. From How ‘Animal Spirits’ Destabilize Economies:

“If we thought that human beings were totally rational and acted mainly from economic motives, we, like Adam Smith and his followers today, would believe that governments should play little role in regulating financial markets and perhaps even in determining aggregate demand. But on the contrary, we believe that animal spirits play a significant and largely destabilizing role. Without government intervention, employment levels will at times swing massively, financial markets will fall into chaos, scoundrels will flourish, and huge numbers of people will live in misery.”

The idea of the “animal spirits” in us is an acknowledgment of our evolutionary past. More precisely, we are biologically wired for many kinds of rational behaviour at the level of small-troop primates. At this level, it makes sense to be loyal to family and kill any outsiders. It makes sense to be only concerned with being affirmed or achieving status within the troop.

In addition to the “animal spirits” human beings have the added ability to program themselves through socialization by their culture. Much of what we learn and what we think is important comes to us through our family, friends, books, schools, movies, and religious institutions. And as we know, that socialization may or may not be helpful. Objective rationality, sadly, comprises only a small part of how people make decisions, that same small part relied upon by economics.

What’s interesting about all this is that to a primatologist or anthropologist or sociologist, this aspect of human behaviour is hardly ground-breaking. Because of the massive amounts of knowledge available to us, we have a tendency to create silos around fields of study. You can spend your whole life studying economics, but never come to understand what life is about unless you draw from other fields.

To develop an economic model, promote it as they model to live by, and measure the outcomes by it’s own self-referential benchmarks degrades the human spirit and results in the kind of destructive behaviour seen on individual and organizational levels.

Perhaps economics is a better illustration of how we fool ourselves about how people behave than telling us about how we should or could behave.

Time to Pay Extra Attention to Integrity

When times are good, it’s easy to be generous, patient, and honest. Unfortunately, the ease with which these virtues are attained leads to a kind of surface-level “goodness”. Can one be said to be courageous when the courage is never called upon? Who is an honest person that has never had to choose between his or her interests and the truth? What is kindness in prosperous times? Clearly, virtues like girders for skyscrapers must be tested for its reliability and resilience.

Lt. Watada was the first commissioned officer to refuse deployment to Iraq because he believed it was an illegal war. Standing up to peers requires much higher levels of courage than facing death with peers.
Lt. Watada was the first commissioned officer to refuse deployment to Iraq because he believed it was an illegal war. Standing up to peers requires much higher levels of courage than facing death with peers.

Today’s financial crisis is the first collective testing of Western society in a long time, and it is troubling to see the steep decline in ethical standards of people connected within the financial sector. A friend in the mortgage industry speculated that there will be more than a few realtors, investment advisors, and mortgage brokers who will lose their license in the coming years.

Now, more than ever, is a crucial time to remind ourselves who we want to be as a person. As you know, people under pressure tend to lose sight of the bigger picture and revert back primate kinds of behaviours. That is to say, might makes right and exploitation becomes acceptable. Do you want to be that blaming, cursing, cheating chimpanzee?

Why is it so important to pay attention to integrity? It’s not simply about following rules because some rules should be challenged and broken. Nor is it about feeling good about ourselves since there are many unproductive ways of feeling good. Integrity is important because acting in open, honest, “reality-facing” ways is what allows all of us to respond to a crisis together. Break the trust or seek only self-preservation, and we descend as a community to the warring tribes of the past.

Furthermore, we must also hold those that violate that trust to account. With the financial oligarchy on Wall Street pillaging taxpayer’s money and executives of even non-profit companies living with a sense of entitlement, these are times to pay attention to our ethical standards, not let them slide.

Short-term business survival is important, but if it is bought at the expense of the “better angels” of our nature, the business and the community surrounding it will fail in the long-run. The challenge in tough times is not just to get through it, but to get through it with dignity and self-respect and new strength.

Little Red Hen Syndrome

redhenDo you know the fable of the Little Red Hen? The little red hen gets no help to plant, nurture, harvest the seed. Nor does she get any help to grind the wheat or bake the bread, but when she asks who will eat the bread, everyone shows up.

In the building of the Brooklyn Bridge, when failure was high, the chief engineer bore all the risk. But when the towers were built and success seemed assured, the vultures descend and attempt to steal a part of the funding. Skimming by unscrupulous corporations happened in the building of the transcontinental railway and happened in the reconstruction efforts of Iraq. Wherever there is money, fame, or glory to be had, you are guaranteed to find the scoundrels who want a piece of the pie.

So what are we to do about people who don’t want to invest the energy and effort to make the bread? Furthermore, what are we to do about people who want to exploit the work of others?

Being aware that it will happen is one significant step. Another is to create the appropriate checks and balances (trust but verify). And since a cheat hates the spotlight, shine the light brightly on suspicious activities.

More importantly, each of us has to find the little red hen in us…. the part of ourselves that is willing to put in the time.