Why doing what everybody else does is asking for trouble
 

Leaders, we’re often told, are paid large salaries because their jobs require the exercising of personal judgment in the face of considerable risks. The risks are certainly there, as is the need for judgment, but a good many leaders—maybe the majority—typically exercise nothing more demanding that the willingness to imitate others and go along with the prevailing fashion. Their fear of being left out is far greater than their concern to understand what they are doing.

Imitation is the virus that cripples all too many of today’s organizations. It’s also a large part of what got the world into its current, horrendous mess. Like other viruses, it rarely kills quickly, preferring to spread itself through the weakened body of its host, waiting to infect whatever other potential hosts it comes into contact with.

As a result, you find whole industries where the principle form of leadership is watching to see what everyone else does and doing that. No one has an advantage, because no one stands out from the rest. It’s stable and comfortable, so long as nobody rocks the boat. It also feels safe and risk-free. In reality, it’s running a continual risk that everyone is going to go down together. What destroys one, destroys all.

Darwinian, Schmarinian!

Our prevailing orthodoxy assumes that businesses are subject to a strict ‘survival of the fittest’ pattern: that any organization doing something harmful to its future will soon collapse and be swept away by ‘fitter’ rivals (Obviously, those who hold to this idea have some kind of blanket exception for US automobile makers).

The reality is that you only need to work in some companies for a few days to see that the people in charge are immune to any concerns about destroying the business. Their sole strategy is to take good care to enrich themselves and boost their own egos. If you look at the financial world’s so-called ‘Masters of the Universe’, together with the leaders of most banks, insurance companies and hedge funds, you’ll be able to pull out scores of examples of such destructive leadership patterns, matched with the personal survival instincts of a sewer rat.

Left to itself—as those same people demanded—the financial world has embarked on an orgy of self-destructive behavior that would amaze any lemming. Far from acting on the principle of survival of the fittest, it has made imitative suicide into an art form.

What is at work here?

I think I found the answer in an article written by Freek Vermeulen of the London Business School.

He points out that deadly viruses survive, despite killing their host organisms (and thus themselves), because they spread quicker than they kill. They manage to reproduce themselves and infect another host faster than they kill the one they’re already inhabiting.

It’s this speed of transmission that allows pandemics both to spread fast and kill millions. So long as the virus or bacteria keeps on infecting new hosts before it kills the current ones, it can survive AND destroy simultaneously.

That seems to me to be exactly what happened in the run up to the present economic meltdown: bad ideas and crazy risks were imitated so quickly they spread to almost every corner of the financial world before they started to kill their initial hosts. By the time everyone caught up with just how deadly they are, it was too late.

Is there an antidote?

Indeed there is: the same one that can save any of us, in our own small lives, from going down the identical path that leads from fashionable imitation to ultimate misery and regret. It’s called thinking for yourself.

Our so-called leaders have proved themselves to be incompetent at best and plain stupid in many other cases. Far from exercising independent judgment, which was what they were paid to do, they simply followed fashion. When things went well, they claimed the credit (though most of it was dumb luck). Now they are up to their nostrils in the brown stuff—and us with them—they still can’t see that doing what everyone else did isn’t any kind of excuse.

Thinking for yourself won’t insulate you from every mistake, but at least the ones you make will be your own. And because you will know why you did what you did, you’ll have some chance of learning from your mistakes and doing better next time. Work out what’s best for you and don’t simply follow the herd.

The heads of banks and finance houses clearly had no idea why they allowed their businesses to ‘invest’ in toxic loans and incomprehensible ‘financial instruments’. They neither understood what they were putting our money into, nor seemed to think it mattered. Everyone else at their exclusive golf club was doing it. Who dared to be left out?

When the history of these times is written, people will once again marvel at human stupidity and the power of the herd instinct. They’ll ask the same question they always do: “How could anyone be so dumb?”

The answer will also be the same: “Those who don’t think and allow fashion to rule their lives climb to the top in good times and take us all into the abyss a few years later.”

Whether they are financiers or politicians, the world never seems to learn that allowing the ‘good old boys’ and the charming glad-handers to run things is putting the inmates in charge of the mad house. Electors take note!

Technorati Tags: fashion, imitation, self-destructive behaviors, stupid financiers, viral ideas, economic chaos.reasons for financial meltdown

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