Early on in You’re About To Make A Terrible Mistake, author Olivier Sibony tells a story that sounds like the plot of a caper movie. Back in 1975, the French state-owned oil company Elf Aquitaine was approached by two men who claimed to have developed a method of discovering oil without drilling. A specially-equipped plane would “sniff” oil from a high altitude. It sounds ridiculous, but this was in the wake of the first oil shock and governments and businesses were in a panic about what they would do for energy if the crisis continued. The French government, says Sibony, had launched an advertising campaign under the slogan “In France, we don’t have oil, but we do have ideas.” Unfortunately, this idea — which apparently captured the imagination of leaders throughout the company — ended up costing it about a billion francs. Sibony, a strategy professor and former McKinsey & Co partner, says the story typically causes audiences to scoff at the French leaders. And yet three decades later pretty much the same thing happened again. Only this time it was in California and the investors duped included the investment bank Goldman Sachs and Kleiner Perkins, the venture capital business renowned for backing many Silicon Valley successes. But the amount of money lost was, adjusted for inflation, about the same: half a billion dollars.
So how did this happen, not once but twice? Sibony writes: “When smart, experienced professionals, highly skilled in their field, make large, consequential decisions, they can still be strangely blind. This is not because they decide to throw caution to the wind and take wild risks — in both oil ‘sniffing’ cases, the investors did a considerable amount of due diligence. But while they thought they were critically examining the facts, they had already reached a conclusion. They were under the spell of story telling.”
What he calls the storytelling trap can derail managerial decision making in all sorts of ways. But it is just one of many instances in which leaders allow biases to distort their thinking. Sibony starts his book by describing what he says are the nine most common decision-making traps, ranging from the Imitation Trap — summarized by the notion that Steve Jobs/Jack Welch/whoever was such a genius that copying what they do must be the route to success — to the Groupthink Trap — whereby members of a decision-making group get caught up in what Arthur M. Schlesinger Jr, the historian and member of John F Kennedy’s inner circle, called “the circumstances of the discussion” when describing that well-documented fiasco The Bay of Pigs attempted invasion of Cuba.
Entertaining as the stories are, the power of the book, of course, lies in its prescription. The traps comprise Sibony’s first core idea — that bad decisions are not random but instead are the predictable result of our biases. The second idea is that — contrary to a lot of contemporary thinking about diversity — the answer is not to try to overcome those biases. Instead, we should use the power of organizations to make up for the shortcomings of individuals. There are, says Sibony, two key ingredients here: collaboration and process. The first is required because many people are more likely to detect biases than a lone decision maker and the second because good process is essential to acting on their insights.
The third idea is also a nod to the power of organizations. It requires thinking critically about how decisions are made, or — as he puts it — “deciding how to decide.” It also requires a rethinking of the role of the leader. There is a lot of talk about “acting like a leader”, which often leads to the stereotypical idea of somebody taking charge. Particularly in people of a certain age, this translates into the image of John Wayne in all those Westerns sizing up a situation in moments and then barking out instructions.
“This ‘cowboy’ model of leadership has real consequences,” writes Sibony. “Leaders are largely selected for their experience and business judgment, and they are expected to rely on it, at least in part, when making decisions.” Moreover, once the decision is made, they are expected to be totally confident about its success. “This unshakable optimism is contagious and inspires others to give their best effort.” But, of course, this is what is likely to lead leaders and organizations into the traps he describes.
To avoid this, we must learn to associate leadership with different behaviors. In short, the effective leader should truly value collaboration and process and see a key part of their role as enabling the right decisions to be made. Less cowboy, more architect.