Delusional Optimism

A 'Can Do’ spirit means you think you can do things you cannot do.

Quote of the Moment | Daniel Kahneman

The realist, someone who calls the odds very precisely, is going to have some trouble [in business], because the organization favors optimists, those with the ‘Can Do’ spirit. A 'Can Do’ spirit means, among other things, that you think you can do things you cannot do.

| Daniel Kahneman, Nobel Laureate in Economics, on Idea Lab

---

In this interview, Kahneman also points out that the key trait of entrepreneurs is ‘delusional optimism’.

Realists are forced out by the organizational immune system, especially when confronting senior leadership about the cognitive biases inherent in most policy settings. At the most obvious, pointing out that some initiative is based on optimistic projections will lead to the realist being sidelined as a troublemaker intent on demotivating people.

There is no really good intervention possible to counter irrational exuberance once an elite group in an entrepreneurial organization has collectively decided to move forward. The fact that one in ten or one in a hundred turns out to create a billion-dollar business justifies the waste and pain of the failed nine or ninety-nine efforts, at least in the mind of the entrepreneur.

The emergent business has room for realists, because the core foundation is about being engaged in your work, and connecting to others through a deep culture based on constant learning and adaptation. It is not about mobilizing people into collective delusional mindsets or quests.

Emergent management starts with an appreciation of the cognitive biases underlying group dynamics and decision-making, even when reaching for the stars.

You ARE The Box

I’ve written a three-part series on decision-making for Reworked, the first of which was published this week: Deciding How To Decide. As a result, I have been tracking all sorts of great contributors on the topic, such as Cheryl Strauss Einhorn, whose new book, Problem Solver, is about the psychology of personal decision-making and ‘Problem Solver Profiles’. In a recent HBR article, she explores those profiles — I swing between the thinker and visionary — and their inherent biases.

But at the core she offers a central insight: before we can grapple with the pros and cons of a specific decision to be made, we need to get out of our own heads and examine how we — as individuals — tend to approach problem-solving:

Many of us approach decision making from the same perspective over and over. We use the same tools and habits every time, even if the decisions are vastly different. But following the same strategy for every problem limits your abilities. To make better decisions, you need to break out of these patterns and see things differently, even if it is uncomfortable.

First, you need to understand your own decision-making strengths and your blind spots. You must identify the mental mistakes or cognitive biases that tend to get in your way. Once you do that, you can better check and challenge those biases, adjust your approach, and bring out a more holistic understanding of a situation, better ensuring that you are solving the whole problem.

[...]

More dynamic decision making begins with knowing more about yourself, so you can sidestep potential bias and gain new perspectives about a problem. While it’s not always easy to think outside your own box, remember that you’re building both strength and flexibility in the decision-making muscles you need to make your big decisions better.

So, when trying to think outside the box, remember, first: you are the box.

Lean Out

According to research by McKinsey, 6 in 10 Americans work at least a day a week at home. NPR’s Greg Rosalsky reports that companies are turning the not-too-long-ago necessity of working from home into a bargaining chip in pay negotiations:

These companies recognize remote work has tremendous appeal: a big, delicious cookie they can use to lure and retain workers. It's so scrumptious that offering it to workers can be as good as cold, hard cash. And the best part for business executives: this cookie is cheap!

In a new study, economists Jose Maria Barrero, Nicholas Bloom, Steven J. Davis, Brent H. Meyer, and Emil Mihaylov surveyed more than 500 American companies, asking them how they are using remote work. They find that many companies are capitalizing on remote work by using it as a substitute for giving workers raises, so much so that it's helping to moderate inflation.