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Pitfalls of Leadership: Groupthink


I am privileged to be a part of the Speaker’s Bureau for Guardian/RS Funds and recently found myself with members of the RS team in San Antonio, TX for the Advisor Group Women’s Conference. Before my presentation on The Art and Science of Persuasion the next day, a few of us decided to grab dinner along San Antonio’s historic Riverwalk. The Riverwalk is beautiful; tucked one level below the automobile street and lined with restaurants, shops, and hotels, it offers no shortage of options for the hungry traveler in search of some good TexMex cuisine. After meeting my colleagues at a nearby hotel, we began to wander the labyrinthine streets of Paseo del Rio, passing a number of excellent restaurants but never stopping.

Having not determined any clear criteria for selecting a dinner spot, we continued to wander until we were accosted by an enthusiastic host at a garish Mexican restaurant. After rattling off a list of run-of-the-mill TexMex offerings, he moved on to describing the house drink specials, which sounded similarly unspectacular. So how was it, that just moments later, our five-person party of foodies was seated at a sticky table at this culinary also-ran? The answer lies in our propensity to try and read others’ minds and act in ways that are consistent with their desires – somehow, someway, everyone in our party got the idea that everyone else in the party wanted to eat at this tacky dive, and dared not speak up lest they offend the others. The result is is what social scientists call“mismanaged agreement”, as illustrated by The Abilene Paradox (what’s up with Texas and poor decisions anyway?). Our tendency to want to read minds and our inability to do so, can result in something much more dire than a stomach full of stale chips – this propensity to engage in groupthink is the sort of behavior that creates and eventually bursts financial bubbles.


Ok, maybe not you, but your brain is definitely lazy. As a student of human behavior, there are precious few things that I would state as approximating a law. One of the few ideas that come close for me is that people are cognitively lazy and will consistently use decision-making rules of thumb rather than reinvent the decisional wheel each time. After all, every day of your life is filled with decisions to be made – Diet Coke or Diet Pepsi (Answer: Coke)? Should I run or stay in bed? Do I wear the black or the grey suit? Without heuristics, or experientially based rules of thumb for making decisions, life would become paralyzing and we would get very little done. Although there is considerable upside to decision-making heuristics, one of our most common fallbacks is to rely on the decisions of others, a trend that can cause leaders to make poor decisions.


Consider the last time you were asked for money by a person on the street. Perhaps this individual approached you with a cup or a tin, which may or may not have had any money in it already. Stop for a moment and consider with me who you would more likely donate money to – a person whose cup was empty or someone whose cup showed evidence of the generosity of previous passersby? It seems intuitive, that all other things being equal, the person with the least money in their cup is the one more deserving of your largesse. After all, if they are begging, they may not have adequate financial means to meet their basic human needs. The less money they have, the more they could benefit from your donation, right?

This being the case, why is it that researchers consistently find that passersby give more money to those whose cups already have money? The answer is simple – an empty cup is seen as a judgment of unworthiness by previous onlookers. Although we may not fully comprehend all of the reasons they are unworthy of our donation, we are likely to follow the lead of those who have gone before and withhold our offering. Switch gears here with me – by basing our decision on the decisions of others, we have overlooked a logical component of decision-making (in this case, need) and relied instead on a choice strategy that may have little to do with what ought to be our primary concern.


We have discussed the ways in which groupthink can lead us to make unsatisfying decisions (like nasty salsa) and illogical decisions (like helping the wrong person asking for money), but can it also lead us to make risky decisions? Prior to the 1980ʹs, the conventional logic said that when groups of people got together, the decisions they made would look something like the average of the risk tolerance of the group as a whole. However, what research has borne out time and again is that groups tend to make decisions that are far riskier than the decisions that would be made by the individuals themselves (ever heard of a soccer hooligan?). It turns out that as group size increases, the perceived responsibility for outcomes lessens. With this lessened degree of felt responsibility, it becomes easier to make decisions that may risk personal or financial wellbeing, since after all, it wasn’t just MY decision.

Building consensus around a big decision has a number of positives – leveraging the ideas of the crowd, getting buy in to drive the initiative, and so on. However, some leaders get pseudo-buy-in as a means of protecting their delicate egos. After all, if things fall apart, they weren’t the only dummy who went that direction. But be careful dear reader, because while groupthink may offer a soft landing for your ego, I promise that it has precious little solace to offer a broken business.

Source: http://incblot.org/uncategorized/groupthink/



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