Does the name, Sydney Finkelstein, ring a bell? No, he is not a character in a movie. Syd is a professor of management at Dartmouth University. He is also the director of the Tuck Center for Leadership.
As you probably know, I am a practicing entrepreneur (emphasis on the word practicing) I am also a strong advocate for learning from academia. Entrepreneurs need to focus on speed and execution. While academics can spend more time being thorough and accurate. The two make for a solid combination.
This is why I recently spent so much time transcribing my notes on The Leadership Challenge. Drucker said leaders are not born and they are not made. Leaders are self-made. The idea is that the best we can do is create an environment where people can develop themselves into leaders. I hope my blog can be an element of that environment.
Now, back to Professor Finkelstein. Not too long ago, I read a great article of his. The article was titled, "Why we trust made-up facts." Here it is, in its entirety:
Why do seemingly smart and capable people act as if make-believe facts were actually true?
Building
a business or running an established company is hard enough without
making stuff up, so why do leaders sometimes believe in all sorts of
things that are not true — even when it could hurt?
Yet,
make-believe facts are a feature of the business and political
landscapes in far too many situations.
This
past week at an extraordinary meeting of shareholders, for example,
Bank of America chief executive officer Brian Moynihan’s quest to
add the chairman title to his chief executive officer role culminated
with a bruising battle with pension funds and other institutional
investors who opposed the move.
But
here’s the intriguing part: companies with CEOs who also hold the
board chair position do not produce better or worse results than
companies that separate the two positions.
Why
bring on an army of protest to adopt a governance change that doesn’t
even make a difference? This is just one of many examples in which a
leader stirs up a hornets nest without the facts to back his or her
actions.
Journey
to the land of make-believe
Why do
seemingly smart and capable people act as if make-believe facts were
actually true? It’s for the same reason that US Republican
presidential candidates almost uniformly advocate for lower marginal
tax rates to boost economic growth, despite evidence from the past
presidencies of Ronald Reagan, Bill Clinton, and George W Bush that
this policy only increases income inequality, not growth.
It's
also for the same reason that politicians such as Francois Hollande
in France, Jeremy Corbyn in the UK and Bernie Sanders in the US
advocate for a much more activist government role in society despite
the evidence of huge breakdowns in government-run services in these
countries, such as public schools in France, the National Health
Service in the UK and the conduct of war in the US.
The
answer is ideology. Ideology is a strong, unblinking and
fundamentalist view of what is right and what is wrong, undisturbed
by both empirical evidence and carefully constructed contrary logic.
In government, as in business, ideology precludes adaptation and
agility. And so we surround ourselves with make-believe facts,
These
non-facts can strike at the heart of what a firm does. Most
international law firms deliver legal services to clients by relying
on highly-educated but inexperienced law school graduates, leveraging
the difference between the fees they receive and the compensation
they pay out to generate huge profits for partners. Now that the
value of such “service” to clients is being challenged, all but
the very top-tier of law firms around the world are struggling, yet
they stubbornly stick to the same business model. Reality has
changed, but the facts these losing law firms choose to believe in —
an outmoded business model — remain firmly entrenched.
We all
convince ourselves that fantasies are reality from time to time, of
course. Unfortunately, in competitive market places, there are huge
incentives for entrepreneurs to directly challenge the make-believe
world you created.
This was
true for many of those companies that lived in an analogue world a
decade or two ago, when digital was transforming multiple
technologies (eg, Kodak in cameras, Motorola in mobile phones). And
it is true now for many companies that invested billions of dollars
in infrastructure and overhead while internet-enabled start-ups
create seamless delivery of services (eg, the global taxicab
industry; traditional cable companies).
Back
to reality
All is
not lost. We can call out make-believe facts for what they are. Even
corporate board members can speak out — last I looked, that was a
big part of their job description. Leaders need to support, not
destroy, those people who have the courage to stand up and speak out.
You
should ask yourself why you do things the way you do. Perhaps there
was a good reason to do so years ago, but why has it remained so
despite all that has changed around you? While I have my qualms about
Big Data when it comes to promoting innovation and creativity,
there’s no denying the power of the revolution taking place in
human resource management and sales force management, in fact
throughout modern enterprise. Big Data holds the promise of taking on
and undermining those make-believe facts that depend on purity of
ideological thought.
And
remember that storytelling and emotional appeals — the heart and
soul of ideologues that can’t rely on logic to convince others —
can also be used to take on make-believe facts. Communicating a
different point of view is not just a matter of stating your
position, and don’t disregard the power of story-telling to convey
your message.
I'm
under no illusion that the favourite fantasies of leaders will just
melt away when confronted by logic, open-mindedness and data — even
when communicated in a compelling manner. But that’s all we’ve
got.
