Thursday, August 30, 2012

Errors, Misjudgments, and Dishonesty-A Summary

I've stayed with this subject for almost two months.  Before moving on, I want to summarize the ground we've covered in these eleven entries.

Subject                                      Blog date

"Impact on those left behind"-  7/6
"Picking up the pieces"          -  7/10; 7/30
"Distinguishing among blameless error, blameful error, and dishonesty"-  7/17
"Human Frailty"                     - 7/19
"Creating a High Reliability Environment"- 7/23; 7/24; 7/26; 7/27
"Dishonesty:  Lessons from Locksmiths"- 8/7
"Black Swans-High Impact, Low Probability Events" - 8/27 

Monday, August 27, 2012

Errors, Misjudgments and Dishonesty- "We are all prisoners of our own experiences"

There is one more kind of error and misjudgment I want to cover before closing out this extended discussion of an important topic.  This last topic is what I'll refer to as "the Black Swan".  I take this type of misjudgment from Nassim Nicholas Taleb.  In his books "Fooled By Randomness" and "The Black Swan" Taleb deals with our overestimation of causality in general and specifically in our tendency to ignore the possibility of events for which there is no data to support that possibility.

In Taleb's words

 "What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."

The metaphor is simple.  Up until the late 1600's all swans in the Western world were known to be white.  For hundreds of years, observations of generation after generation revealed no evidence of anything but white swans.  the conclusion then was that all swans are white and there can be no such thing as a black swan..  Then in 1697 Dutch explorer Willem de Vlamingh discovered Black Swans in Western Australia.

Another example comes from the book Isaac's Storm.  In this book author Eric Larson tells the story of the 1900 Galveston hurricane from the point of view of the National Weather Service forecaster Isaac Cline who was based in Galveston.(as an aside I find it highly ironic that the hurricane currently threatening the US Gulf coast is named "Isaac").  An important contributing factor to the lack of preparation for the 1900 storm was a belief among US weather forecasters that hurricanes could not enter the Gulf of Mexico.  Why did they believe this?  Because no hurricanes in the 19th century had entered the gulf; as they approached Florida they inevitably turned north up the US East Coast.  Although they didn't know exactly why this was so, all their available data suggested no hurricane could cross Florida or Cuba and enter the gulf .  The Cubans knew otherwise based on their own long history and tried to warn US authorities of the path of this storm.  A combination of arrogance and racism caused the US authorities to ignore their warnings.  Somewhere between 6,000 and 12,000 people(most likely 8,000) died as a result.

So what's a leader to do?  The top 10 leader behaviors I listed in the 27 July blog still hold.  To those ten I would add be especially cautious when you are most certain....slow down.  Challenge your own assumptions.  Ask the question, "What if we're wrong...then what?"

Last, recognize randomness rules our lives and we are often not in as much control as we think we are.  How you react to those unexpected events will often be the final measure of success.


Tuesday, August 7, 2012

Errors, Midjudgments and Dishonesty- "Lessons from Locksmiths"

"Locks don't protect you from thieves.  A professional thief can get in your house if they want to.  Locks only protect you from mostly honest people who might be tempted to try your door if it had no lock."  The locksmith Dan Ariely quotes in "The Honest Truth About Dishonesty" goes on to assert that "1% of people are always honest, 1% are always dishonest, and the rest are honest as long as the conditions are right".

This dark assessment is at the heart of Ariely's book about dishonesty.  His core theory, backed up by multiple experiments, is  that our behavior is driven by two opposing motivations. First we want to be viewed as honest , honorable people.  Second we  want to get as much as possible out of any situation, which often leads to cheating.  Along the way he addresses the Simple Model of Rational Crime(SMORC) which is simple weighing the benefit of the offense against the likelihood of getting caught and the penalty for getting caught.  All of his research and experiments lead to the conclusion that "cost benefit forces often do not drive dishonest behavior.  Longer prison sentences and more police don't necessarily lead to less crime."

He explores such varied settings as hourly billing by lawyers, writing time to projects in consultancies, golf, university honor codes, filing taxes, fishing, story-telling, creativity, and the effect of wearing counterfeit designer merchandise.   I found his section his section on conflicts of interest..."Blinded by Our Own Motivations"  particularly important and relevant in the business setting.

One important conclusion on the positive side is that when we are reminded of ethical standards we behave more honestly.  Those reminders are especially important when they are provided "close to the moment of temptation."

It is easy enough to say that a company's values...honesty, integrity and respect for's business principles... and its code of conduct are important. The consequences for violations should be severe. It's also important to note that there are shades of grey below the level of egregious misconduct.  People need to make the right choices over and over in the face of ambiguity and mixed messages.  It reinforces the idea that ethics training needs to be frequent, customized to the circumstance and embedded in all formal leadership curricula.  Great leaders create an environment....and structure to provide "reminders" close to the moment of temptation where those right choices can be made.  Most importantly, great leaders model ethical behavior in all their decision making....they lead by example.