Hubris Threatens Every Leader and Business

In fact, hubris is man's cardinal sin. Consider how the hubris of leaders of state has shaped defining events of past centuries. In 1764 and 1765, British Prime Minister George Grenville overestimated his ability to tax the American colonies, and underestimated the potential for the Americans to revolt, which led to the American Revolution. In 1812, Emperor Napoleon Bonaparte's false confidence in his ability to conquer the Russian heartland led to France's disastrous Russian invasion. And, in 1939, Adolf Hitler had Germany invade Poland.

We're all too aware of how CEO hubris is stamped on business failures, from Parmalat, Swissair, and Vivendi in Europe, to Enron and WorldCom in the United States, to the National Kidney Foundation in Singapore. Very often hubris is the handiwork of egotistical and reckless leaders of business and state. We hear about the downfall of these individuals on almost a daily basis, and you probably have no trouble conjuring your favorite example of an executive whose excessive ego and stubborn pride has resulted in financial and professional disaster.

For now, put that person out of your mind. Because he or she will distract you from the more present and pressing reality: Hubris is so deeply ingrained in our culture that it is a latent force within each of us, whether we are leaders or not. See hubris in the losses that we investors take as we overestimate our ability to make winning deals and trades. Watch hubris in the damage that we do to our health by trying to "play doctor" by diagnosing our own illnesses, and when real doctors join forces with pharmaceutical companies in overestimating the benefits of their treatments. Listen to the hubris of rookie executives who exaggerate how far their inflated grades will carry them — and our business. Many people take false comfort from being 'very confident' that they can retire comfortably even when their actual savings are inadequate.

Hubris helps to explain why leaders make decisions that are bound to fail. Most conspicuously, mergers and acquisitions are at near-record levels, even though seasoned CEOs know that most of those deals fail. Joe Roth, who has run movie production at 20th Century Fox, Disney, and Revolution Studios, notes that movie houses release a disproportionate number of movies in May, especially around Memorial Day in the United States, even though their executives know that there are not enough moviegoers to support that many simultaneous film releases. Leaders who make these deals believe that they are the exceptions who will beat the odds of failure when, on balance, logic dictates that they cannot.

Hubris originates with our need to be highly confident and our propensity for turning that confidence into overconfidence. So long as crystal balls remain elusive, we're going to be wrong on some judgments that matter most, including those that involve at least some leap of faith and trust, such as taking a job, choosing a partner, or investing in a major project. And, if we are going to be wrong by being underconfident or overconfident, we should err on the side of overconfidence — we must be highly confident to win in business and life, even if that makes us more susceptible to overconfidence. Overconfidence is not uncommon nor need it be damaging. We can act with the best intentions and data and still overestimate next year's sales, our promotion and pay prospects, or the returns from our ventures, projects, and investments. The optimism bred by such overestimation can help spur us on to achieve more than we otherwise might have done. Overconfidence, as an integral part of the discovery process, is also instrumental to scientific and economic progress. Picture, for instance, Thomas Edison testing over 10,000 combinations of materials before perfecting the light bulb. Throughout the testing process, Edison remained supremely confident, believing a breakthrough would come earlier than it did. "I have not failed," he said at the time; "I've just found 10,000 ways that won't work." 

The Four Sources of Hubris

In fact, when extraordinary confidence is grounded in the best available data, it is authentic, and a positive force for advancement. It is when our confidence is false, when we are confident for the wrong reasons, that two serious problems arise. First, we are more susceptible to being overconfident than if our confidence were authentic. Second, such overconfidence is more likely to translate into actions and decisions that will damage us and others. Hubris refers to the damaging consequences that arise from the decisions and actions that reflect false confidence and the resulting overconfidence. Having conducted scores of studies and interviews, I have determined that there are four sources of false confidence:

1. Being too full of ourselves. Excessive pride leads to a contrived view of whom we are and an inflated view of our achievements and capabilities, one which often depends on external approval and validation.

2. Getting our own way. Our pride can lead us to tackle single-handedly decisions or actions that could be better addressed by or in conjunction with trusted advisors, or what I call "foils."

3. Kidding ourselves about our situation. We indulge in overconfidence when we fail to see, seek, share, and use full and balanced feedback to gain a more grounded assessment of our situation. We need accurate, pertinent, timely, and clear feedback, whether positive or negative, to ground our knowledge about what's going on around us.

4. Bravely managing tomorrow today. Because we may not know whether we're acting with unhealthful confidence, we need to manage the consequences of our decisions ahead of time. To be courageous is to consider fully the risks and consequences of making and implementing decisions, and then to proceed mindfully. To be brave, however, is to jump in heedlessly, without adequately considering the risks and consequences that will result from your decisions and actions.

Experimenting and probing allow us to see courageously and first hand the consequences of our decisions. By contrast, planning often makes us more confident and brave without increasing our ability to get the job done. False confidence is to hubris what bad cholesterol is to heart disease. Just as the cure for heart disease is to reduce bad cholesterol rather than all cholesterol, the cure for hubris is to fight the sources of false confidence, rather than to reduce confidence altogether.

A fundamental and unheralded challenge for any executive and leader, therefore, is to identify and manage such sources. It is a matter that I've examined as an executive and researcher over the last 20 years, from the time when I first felt and saw hubris as a young investment banker. Based on this research, I have written Ego-Check: Why Executive Hubris Is Wrecking Careers and Companies-And How to Avoid the Trap, to help you learn how to remain highly confident — both personally and professionally — without falling victim to the false confidence that produces overconfident decisions and actions that fuel hubris. This article encapsulates the leadership implications of this research. Please visit me at ego-check.com.

To follow up, a comment from Vic:

I have read the book Ego-Check and find it valuable for all traders. It gives poignant case studies of those who suceeded often for a time, and then failed. It analyzes the main reasons these people failed and provides a checklist of how to prevent it from happening in the future. It is based on his own interviews with business leaders and researchers in the field. In my case, I have implemented a series of planning for the future now, feedback loops, and hallmarks of hubris that hopefully will prevent me from succombing too much again.The subject is particuarly resonant because my father did much scholarly work in the field and I didn't pay enough attention to it in the past — until now. Vic

Nigel Davies adds: 

I wonder if much of what is recognized and diagnosed as 'hubris' might not be explained in other ways. For example:

a) The 'hubristic' act was not much different to previous risks, it's just that the 'hubristee's' luck finally ran out.

b) Too much success in one area caused one particular well to run dry, forcing the 'hubristee' to seek other fields. I think this might be applicable to Steve Irwin. The public (and his producers) just had enough of crocs, so he was forced to seek other fields to maintain his lifestyle.

c) If the 'hubristee' has opponents who can influence the dynamics of the game, perhaps it's a question of time before they adjust to his 'style.' This has been true of a lot of risk taking chess players, for example, Tal once noted something to the effect that his opponents started protecting e6 and f7 very securely. Kramnik similarly discovered that a good way to play against Kasparov was to exchange queens and play equal or inferior endgames against him. And once he'd won, everyone started to notice Kasparov's apparent 'hubris.'

Stefan Jovanovich offers: 

Hitler's invasion of Poland was hardly an act of hubris. At the time, to most Americans and many Europeans, including a plurality of the British and French public, it seemed an arguably justifiable act by Germany to reestablish its 1914 eastern border. To the German public, it was wildly popular, not as an act of aggression but as the rectification of the last remaining crime of Versailles. Elite public opinion in all "Western" countries was far more upset at the Soviet's unprovoked attacks on Latvia, Lithuania and Estonia; those seemed completely unjustified. After all, the Germans had only asked that the Danzig corridor be removed and that East Prussia be reunited with the rest of Germany. If the Poles had not been so stubborn in their refusals, the war need not have happened at all. The difficulties over Czechoslovakia and Austria had been resolved without bloodshed. Why were the Poles being so difficult?

It does not fit Mathew Hayward's construct, but in 1939 Neville Chamberlain was considered to be the European statesman who was acting out of hubris. How could he presume to drag Britain and France into a war with Germany solely because the British had given their word to the Poles that they would defend them? The Poles, for God sake! If that were not bad enough, Chamberlain was committing the Empire to a one-front war. Hitler had avoided the mistake of 1914; his invasion of Poland had led to a Pact with Stalin that secured Germany's Eastern front and guaranteed a reliable supply of oil and grain. As I have noted before, Chamberlain is the poster boy for "appeasement" in the "kill 'em all - tough guys always win" comic book that passes for military-political history these days. (That seems to be the same tome that some list members are reading from when they join the T-shirt sellers on Telegraph Avenue in describing the current situation in America as "Fascism.")

Chamberlain's real crime is that he was "guilty" of recognizing how weak Britain's position was and how limited its options were. Instead of being its allies in this conflict, Italy and Japan would be Britain's enemies; and the Soviet Union would, at best, be neutral. Given their incredible sacrifices of the First World War, the French could not be expected to match their efforts of 1914-1918. In 1938, the British public remained as isolationist as the Americans were. In describing Czechoslovakia as a "far off land," Chamberlain was offering the compromise position between Churchill's bellicosity and the Left in Britain, questioning why even France should be an ally. Chamberlain knew that, without American help, Britain and France could at best hope to stalemate Germany. He also knew that the French would not go to war over the Sudetenland, but they would accept Poland as a casus belli. In measuring his statesmanship against Churchill's, it is useful to remember that Chamberlain, not Churchill, was the Prime Minister who committed Britain to rearmament in the years before Munich. Hayward should have used Churchill instead of Hitler if he wanted an example of CEO arrogance. When the Russo-Finnish War began, Churchill's recommendation to the Cabinet was that the RAF bomb Moscow! That would have been hubris.

Stefan Jovanovich continues:

Hitler's invasion of Poland was hardly an act of hubris. At the time, to most Americans, many Europeans, and a plurality of the British and French public, it seemed a justifiable act by Germany to reestablish its 1914 eastern border. To the German public it was wildly popular, not as an act of aggression but as the rectification of the last remaining crime of Versailles. Elite public opinion in all "Western" countries was far more upset at the Soviet's unprovoked attacks on Latvia, Lithuania and Estonia; those seemed completely unjustified.





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