Why Smart People, Executives and Companies Do Dumb Things

I am a big fan of Guy Kawasaki (and his blog), having recently purchased and consumed his last book “Reality Check.” One of the chapters of the book, and the corresponding post on his blog, he refers to a book called “Why Smart People Do Dumb Things” pointing out four reasons why smart, intelligent, powerful, and rich people end up in disastrous situations.

Hubris. Pride to the point that you no longer feel shame, no longer believe that you are subject to public opinion, and no longer need to fear “the gods.” Examples: Gary Hart’s involvement with Donna  Rice that ended his run for the presidency and the Dennis Kozlowski’s (Tyco) $2 million toga party.

Arrogance. From the Latin word arrogare: “to claim for oneself.” Arrogant people believe they have  claim to anything and everything they want–they are “entitled” to it. King David, for example, felt  entitled to the wife (Bathsheba) of one of his soldiers. Modern day King Davids feel entitled to corporate jets and an entourage to tell them that their keynote speech rocked.

Narcissism. Self absorption to the point that you are blind to reality. The world only exists to provide you gratification. Examples: Richard Nixon and Watergate; the Clintons and Whitewater—really just about every politician and CEO who falls from grace.

Unconscious need to fail. If you think failing is hard, try winning. The questions that go through people’s minds when they they are on the doorstep of success are: Do I really deserve to win? Do I want the pressure of constantly having to win in the future? Can I really handle success? Perhaps this explains why professional athletes still take performance enchancement drugs even after watching their colleagues get busted.

The authors of the book prescribe a six-dimensional set of remedies:

  1. Accept yourself
  2. Accept others
  3. Keep your sense of humor
  4. Accept simple pleasures
  5. Enjoy the present
  6. Welcome work

The same book goes on mentioning why smart companies do dumb things. Here the list is more sophisticated.

  • Consensus
  • Conviction
  • CEOs
  • Experts
  • Good news
  • Lofty ends

Guy adds another three additional factors that make smart companies do dumb things.

  • Budgets
  • Greed
  • Arrogance

From my limited experience, I would also add (to make few implications more explicit):

  • Lose of focus/vision
  • Lose of touch with reality
  • Willingness, inability and perseverence to overstretch

Finally, an excellent book (that took six years to complete) by Syney Finkelsteen, “Why Smart Executives Fail,” draws on an unprecedented research of the corporate history and showcases some of most flagrant examples of brilliant and smart executives who caused their companies to fail.  He lists seven habits of spectacularly unsuccessful executives

  1. They see themselves and their companies as dominating their environments.
  2. They identify so completely with the company that there is no boundary between their personal interests and their corporation’s interest.
  3. They think they have all the answers.
  4. They ruthlessly eliminate anyone who is not 100 percent behind them.
  5. They are consummate company spokespersons obsessed with the company image.
  6. They underestimate major obstacles.
  7. They stubbornly rely on what worked for them in the past.