Deconstructing ‘stupidity’: why smart people often do stupid things. (2008)
To understand ‘stupidity’ it is necessary to deconstruct it and to show that it can subvert even the keenest intellect under certain conditions.
Jeffrey Gandz, Professor of Strategic Leadership and Managing Director, Program Design, Western University’s Ivey Business School
Ivey Business Journal
November / December 2008
Gandz goes beyond technical explanations for the 2008 financial crisis to ask “why did so many supposedly smart people – executives, economists, entrepreneurs, directors, regulators, investors – do so many seemingly stupid things?”
While greed is certainly a factor, a more prosaic explanation is “good, old-fashioned ‘stupidity’.”
This is not related to lack of intellectual capacity. Instead, “to understand ‘stupidity’ it is necessary to deconstruct it and to show that it can subvert even the keenest intellect under certain conditions.”
Gandz then identifies a number of different elements of ‘stupidity’, among them ‘hubris’, ‘groupthink’ and ‘hormones trumping neurons’.
“With repeated episodes of winning comes a belief that winning is an entitlement and that losing is not possible. …So many in the financial services industry… got so used to success that they could not envisage failure. These ‘masters of the universe’, …felt invulnerable, superhuman and beyond the reach of even the most fundamental laws of economics.
“Whereas individuals display hubris, successful, highly cohesive groups exhibit groupthink, a kind of collective hubris…
“Such groups .. develop the illusion that they are invulnerable and unanimous in their thinking, and a deep belief that their actions are moral. … These illusions blind them to the warning signs of potential danger and desensitize them to anyone … who might raise concerns about group decisions or actions.
“Groupthink repels critics, shuts out dissenters, marginalizes those who are critical of the way things are done by the ‘winning’ team.”
In terms of ‘hormones trumping neurons’ the author comments “investment banking has always attracted clever, competitive high-achievers.
“Such high achievers are seldom satisfied with doing well – they are motivated by winning and accept no less. They are prone to making errors of judgment that can cause damage to many, as they seek to win rather than merely to achieve a good or satisfactory outcome.”