strategy+business is published by PwC Strategy& LLC.
or, sign in with:
strategy and business
 / Winter 2010 / Issue 61(originally published by Booz & Company)


Best Business Books 2010: The Human Mind

The good news is that companies can recover from denial, even when they seem permanently wed to their histories, their philosophies, or their belief systems. Tedlow points to IBM, which got caught up in its own “bureaupathology,” but learned, with Louis Gerstner’s help, to conquer arrogance and overcome its history and culture. He says that Intel, DuPont, and Coca-Cola were also able to recover from denial by activating new “cultural DNA.”

Tedlow offers different approaches to staying clear of the pitfalls of denial in each chapter. They include looking truth in the face every day — identifying how and where people are dismissing the truth or rationalizing their version of reality. In all cases, however, getting ahead of the denial curve is vital. Tedlow says that executives can accomplish this by encouraging straight talk, challenging assumptions, avoiding groupthink, and keeping their eyes open to the symptoms of denial in their own thinking and in others.

Denial explains why the “smartest people in the room” (as Enron’s top executives were famously called) can sometimes be very dumb. It’s a wake-up call to be sure that we don’t allow ourselves to confuse our maps with the actual territory.

Better Decision Making

People make decisions by building models in their minds that are based on what has worked in the past, and then using those models as templates to follow. In Think Twice: Harnessing the Power of Counterintuition, Michael J. Mauboussin, chief investment strategist at Legg Mason Capital Management and adjunct professor at Columbia Business School, argues that old mental models can contain traps that lead to flawed decisions. Conversely, recognizing these mental traps can raise the probability of making good decisions.

Mauboussin takes us into the dark alleys of the human mind where decision makers can easily go astray. In chapter one, for example, he describes how we fall prey to three illusions that lead to poor decisions: We suffer from the belief that our ideas are superior to the ideas of others, the inclination to overestimate our chances of success, and the perception that we have more control over situations than we actually have. Deniers beware!

There is a long list of other traps in the book. When you go into a store to buy one thing and come out with another, you may have been a victim of “priming.” You thought your mind was made up before you went into the shop, but you were a lot more susceptible to influence than you realized. How susceptible? Mauboussin cites a study that found that 77 percent of people shopping for wine in a supermarket bought French wine when French music was playing and 73 percent bought German wine when German music was playing. Yet nine out of 10 people claimed music did not influence their choices.

Crowd or herd behavior also influences our decision making. In chapter four, Mauboussin describes how we are overly influenced by authority and by our desire to be insiders. In studies in which groups were asked to solve puzzles, people posing as subjects were able to get the groups to agree to answers that they originally thought were wrong.

The failure to account for context is a decision-making trap that causes much grief in organizations. Knowledge acquired in one context does not necessarily translate in another context. That is why a new executive who does not account for the culture of the company he or she is joining will often fail. Combining knowledge and context, says Mauboussin, increases our chances for success.

The intent of Think Twice is not to make you feel insecure or to get you to distrust your instincts; far from it. The book brings into focus how people are unconsciously influenced by their experiences, by other people, and by the environment in which they find themselves. Once you become conscious of these influences, you become a better mental mapmaker and can more effectively navigate the territory of your life.

Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store


Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.