Professor Herman Van den Broeck makes the case for maturity

Was the current financial crisis predictable? Some contend that it was. In his bestseller The Black Swan, Nassim Nicholas Taleb drew attention to the danger of a domino-effect in the financial world. Still, Taleb is convinced that, in spite of all the analyses, such a crisis is unforeseeable. So, what lessons can we draw from it? In a plea for maturity, Professor Herman Van den Broeck lays the stress on more realism and a tempering of blind ambition.

The macho paradox

Masculine thinking − characterised by ambition, growth and profit − partly accounts for the current financial crisis but is far from the only cause. But it’s a paradoxical phenomenon that managers and business leaders often argue for healthy competition, while their primary ambition is to capture the market. That cock fight to be the biggest and strongest leads to an ever-greater concentration of organisations that are interdependent. When something goes wrong in such a scenario, the consequences are felt immediately all over the world. Several months ago, when the first signs of the financial crisis were already visible, AIG maintained that everything was just fine for them. In a global economy, where systems are all linked together, that’s a bold assertion − look at the situation that company finds itself in now.
Once again, it’s clear that unhealthy self-confidence comes to the fore in these kinds of situations and not a mature evaluation of reality. We like to call this the macho paradox!

Russian roulette

Innumerable small investors felt betrayed when they saw the value of their shares go up in smoke. They had taken risks, of course, but they had placed their trust in their personal adviser. However, if you confuse a financial transaction like investment with a social transaction like a kindness among friends, that can have far-reaching consequences.
In his book The Black Swan, Taleb warned against extreme risk behaviour. His advice was that you are better off investing the greater part (90%) of your funds in businesses that are safe, and that then perhaps you can play Russian roulette with the rest. Who knows − you just might win the jackpot, but be aware that most people lose. Yet, until recently, we witnessed a mental model − in the banking sector as well − whereby people assumed that nothing could go wrong.

Healthy ambition, leave the false guide for what it is

It’s not bad to be ambitious − or even a bit more than that − as long as we bear in mind the impact of the actions we take to fulfil those ambitions. When I participate in top-level sports, I know that in 20 or 30 years I’m going to have trouble with my bones. It’s folly to believe that I’ll be ‘the exception’.
Place this in the economic sector and ask yourself: ‘Am I growing myself to death?’ Countless companies − even in the top 500 − go bankrupt. Within five years, more than a third of the companies in the top 500 no longer exist. Why would this not happen to me when I start up a business? When our ambition follows the false guide, we look, remarkably enough, only at elements that corroborate our choice, while we would be better off investigating why we shouldn’t do something. It’s high time for a new era with more maturity, more realism, and less destructive ambition.

Manipulation or self-deception?

Saying that risk-analysts and financial administrators deliberately withhold information to mislead their company or clients is perhaps overstating it. But what certainly plays a part is their tendency to look for explanations that are consistent with the company’s vision and objectives. Via models, analysts will make every effort to have the numbers add up, instead of checking on what contradicts the model or the objectives. So, it’s rather a form of self-manipulation than deliberate deception. A charismatic leader will also seldom or never come up against resistance. Even external Board members will assume that the leader has thought through his or her decision. When a plan is presented to the Board of Directors, external Board members will at best think that something is not right, but they won’t say this out loud. Each one assumes that he or she is probably the only one who has some criticisms, and so they don’t say anything, out of fear of coming across as a ‘loser’. If all of the other Board members support the decision, it will hold up to scrutiny. Social psychology calls this phenomenon ‘pluralistic ignorance’.
It’s disheartening how some Board members then claim afterwards that they had seen the problem coming. In order to prevent this, the chairman could divide the Board into several small groups and ask each group to formulate two arguments against the decision. Otherwise, you stay in a circle of persuasion where everyone is afraid to stick his or her neck out. Perhaps companies should start to post lists of decisions that they have said ‘no’ to.

Accumulation of market deception

The fear of being a loser is deep-seated in the competitive model, which you not only see in companies but in politics as well. The field of innovation management has known for a while now that it’s not important whether you are the winner or loser, but that you follow more than one road in order to arrive at that singular idea that can create added value.
In order not to be a loser in the eyes of the CEO, employees will show in every way possible that they are producing returns, even if they base their proofs on speculation. This is how you get a build-up of market deception, in which all kinds of techniques are employed to meet the shareholders’ expectations regarding the quarterly results. Such a system − in which CEO and shareholder convince each other − must ultimately blow up. As harsh as it may sound, 11 September was, for many companies with problems, a godsend: suddenly they had an excuse for laying poor results on the table.
Instead of convincing each other in misleading ways, we need a feedback mechanism that is legitimate and mature. Shareholders that only want to hear nice stories about growth should become aware that they’re also contributing to that self-deception. They need to pay more attention to the lessons that a company draws from projects that have failed. Compare this with EPO. If you absolutely want to win a certain competition, taking EPO can give you that result − but the chance is great that you will jeopardise other competitions.

Challenge of feminine thinking

It’s time to take the step towards feminine thinking − which is, by nature, more holistic and mature, and by which decisions are not taken at the expense of everything else.
Not all companies employ a short-term vision that is disastrous over the long term, but, in general, we hear less about them. Our brains tend to only remember the highlights. That’s why we go looking for ‘the manager of the year’, but we don’t look at how that manager is doing today. Still, there are indeed scores of companies that are focusing on their core activity and creating added value with that activity. Some companies − like Colruyt − are able to apply ethical management in practice. You needn’t expect any flashy stories from them, but they employ a long-term vision. Others use ethical management primarily as a PR tool. But ethical management goes further than merely observing the law. To take it to extremes, you could commit murder and still be exonerated. The higher you go in a company’s hierarchy, the more you encounter people with an individualistic set of values.
By contrast, ethical management means that you do business ethically as an organisation, as a manager and as an individual. Only when you evaluate the consequences of your decisions and actions on the long term will you do worthwhile things.

Change on the way?

We’re seeing an evolution in the generation of young people between the ages of 20 and 30. Following a generation that played it badly, they appear to see that and are asking themselves the question: does it make me happy as well? Of course, there are also young people that let themselves be attracted by short-lived kicks − but how long does the satisfaction last after the purchase of a trendy car or a bungee jump? We need to put these kinds of thrills into perspective and search for what gives real satisfaction. In Botswana, you see people who earn almost nothing, but who go to work with a smile on their face. Here, people are well paid, but you see sour faces and you hear complaining and grumbling.
Powerful leaders don’t boast about results in their communications, but instead talk about performances they are proud of. Companies where people do their best and work together often have leaders that simply perform and thus earn and receive the respect of their employees. By the way, you’re seeing managers from large concerns step over to SMEs more often these days, precisely because they no longer feel an impact in large organisations. They want authenticity and no-nonsense. The sector or activity doesn’t really matter. You find them in high-tech companies that make implants and strive for a high-quality product as well as with manufacturers that strive for a high-quality biscuit. These are companies where experts can do their work, take pride in what they do, and where turnover is not a goal in itself.

Build-up of emotional scraps

In a society in which we have everything, or even too much, and where we don’t have to worry about essentials, we see that people worry about petty things. You can call this an accumulation of emotional scraps. People fly off the handle if the red button on their remote control doesn’t work. If a single teacher oversteps his or her authority, the Minister of Education has to resign, because it’s his responsibility − or at least a new law has to be put in force that makes life more difficult for all the other teachers.
The past year, what we observed in politics is evidence least of all of maturity. It’s a cock fight in which everyone wants to dominate the discussion and be put in the right, without considering the waste of energy and money that that causes the country. The media also eagerly plays along with the politicians, who harass and provoke each other and thus slow down the political decision-making process. Newspapers were absolutely full of the personal conflicts between ministers, while a humanitarian drama was taking place somewhere else.
So, we needn’t only focus on the business world. Our society has an interest in everyone showing more maturity, considering the impact of his or her actions, and searching for his/her intrinsic qualities and motivation for doing something.