In The Loser’s Curse: Overconfidence vs. Market Efficiency in the National Football League, Massey and Thaler compare the market value of draft picks with the actual performance of the players selected. They found that NFL teams overvalue the highest picks in the draft. Their analysis shows that players chosen early rarely perform well enough to justify the trade value of their pick and that players selected later in the first and second rounds offer the best value. Thaler and Massey note that psychological factors such as overconfidence, false consensus, and ‘the winner’s curse’ distort NFL teams’ ability to accurately predict the future value of the players they draft.

So how does the selection of world-class athletes relate to the world of leadership and organizational structures?

Massey and Thaler’s findings about the market for football players extend to any labor market where organizations select talent. Meaning their observations can help shed light on selecting new CEOs to newly minted graduates. In the world of business, too often we try to hit home runs: confident that one big hire or staff expansion will spur a team towards prolonged success. In doing so, we forsake consistency and reliability in the hope that a savior is on the way. As Bob Nardelli and Howard Stringer can attest merely being called a savior and actually being one are two very different things.

As Thaler and Massey write: “In our judgment, there is little reason to think that the market for CEOs is more efficient than the market for football players. Perhaps innovative boards of directors should start looking for the next Tom Brady (pick number 199 of 210) as CEOs rather than this year’s hot young prospect.”

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Picture Credit: Reuben Whitehouse

With all the of outside forces, with all the polarization among their own constituents, both leaders understood that such a moment will demand a particular type of courage–a type of courage that necessitates taking a step beyond the position of their supporters and demands a broad view, rather than a series of incremental, tactical, steps. Too many leaders get trapped in the ancient art of delay, killing time, and muddling through–but sooner or later the issue of legacy, the issue of hopes and dreams, enters into the equation. And in that moment leaders must find their courage, not from their allies and backers, but from their own commitment to legacy.

It seems that much of what will happen in the next number of months will ride on what type of legacy these leaders want to forge. Both Abbas and Netanyahu are great stewards of the art of political survival and brinkmanship. Like all leaders they have shown their political and managerial competence, but now in the latter days of their careers they have come to a place where the drama and the historical possibility will challenge them to go down a very hard path with courage.

All leaders have this moment: the moment when they simply say, “it’s come down to this.”

Picture Credit: Occhichiusi

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Well, the painful truth of it all is that before you know it, you’ll be hiring people who have nothing in common with you.

Each year since 1998 Beloit College has released something called The Beloit College Mindset List. According to the college’s website it’s a list that “provides a look at the cultural touchstones that shape the lives of students entering college this fall” or as I like to call it “a list that makes you feel really, really old.” This year’s list for the incoming class of 2014 includes such gems as:

• John McEnroe has never played professional tennis.
• DNA fingerprinting and maps of the human genome have always existed.
• Email is just too slow, and they seldom if ever use snail mail.
• Fergie is a pop singer, not a princess.
• Computers have never lacked a CD-ROM disk drive

Beloit College started the list in order to help the faculty avoid using “dated references” in the classroom. But this list illuminates much more. It highlights the point that being a leader is more than just profits and quarterly statements. It’s about having an open line of communication with those you lead. It’s about never losing touch with what each of your employees understands and finds relevant. It’s about making sure everyone is on the same page, working towards the same goals and getting things done.

Sure, this year’s list will make anyone over 40 (heck anyone over 30 for that matter) laugh and reminisce about a simpler time (by “simpler” of course I mean connecting to your $20-a-month AOL account with a dial-up modem). But it will also remind you that the concept of leadership is an organic thing: It must keep adapting, growing and advancing or it dies. So check this list out and understand that soon enough these 18-year-old freshmen will be the backbone of your organization.

THE MINDSET LIST OF THE CLASS OF 2014

Picture Credit: Aldoaldoz

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Sean Lee believes you’ll learn a thing or two about how the use of the third person on conference calls is not a great idea. Sean Lee hopes you have a nice day.

How Can You Tell If a CEO is Lying

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Long before anyone ever heard of mortgage backed securities (MBS), collateralized debt obligations (CDO), credit default swaps (CDS), or the other financial instruments that have faltered during the current recession, there was semper augustus, also known as the tulip. To Calvinists of 17th century Holland, nothing was as desirable or valuable.

The exotic flowers, brought over from the Ottoman Empire, became the object of a national obsession. Entire markets were created just to trade tulips and the markets were soon swamped with speculators. As Mike Dash notes in Tulipmania tulip speculation lead to the first-ever futures market. At the height of the tulip-mania, between 1636 and 1637, single bulbs could be sold for 100,000 guilders. By way of comparison, a ton of butter cost around 100 guilders, a skilled laborer might earn 150 guilders a year, and “eight fat swine” might cost 240 guilders.

The story of any “mania” offers insight into a phenomenon behavioral economists like to refer to as herd behavior. Herd behavior is the tendency for individuals to mimic the actions of a larger group.

Herd behavior happens because of the social pressure of conformity. After all, even if you are convinced that a particular idea or course or action is irrational, you might still follow the masses, believing they know something that you don’t. This is especially prevalent in situations in which an individual has very little experience, such as the Tulip trade.

Tulip mania is merely one extreme example of herd behavior; a more mundane example can be seen in front of any Apple store anytime a new product is launched.

After the tulip market crashed, a compromise was brokered that let most traders settle their debts for a fraction of their liabilities. The overall fallout on the Dutch economy was negligible. This was doable only because the stock exchanges refused to allow any sort of tulip trade in the first place. In the same vein, the new financial regulations authored by Senator Dodd and Representative Frank aim to create separate entities to trade potentially dangerous derivatives. Or as Mark Twain would remark: “History doesn’t repeat itself, but it does rhyme.

Technorati Tags: collateralized debt obligations, credit default swaps, herd behavior, mbs, mike dash, mortgage backed securities, tulipmania, tulips

The moment you lose your sense of timing your leadership is greatly handicapped, if not doomed.

Think of any hard leadership decision and your quickly realize that the essential ingredient is timing. The quality and the success of the decision is often impacted by the selection of the right moment.

A classic example is Abraham Lincoln’s declaration of emancipation. As a number of authors have pointed out Lincoln waited until the moment was just right.

The question for any leader is: When is the right moment?

It’s someplace a few steps before the tipping point. Right before the point where everyone sees the direction clearly. It’s the moment before a decision no longer has to be made and where leadership, certainly courageous leadership, is an afterthought.

As they say when the horses are out of the barn it’s too late to climb on board. All you can do is get caught up in the momentum. Leaders therefore have to have a sense of where history is moving. In that sense they must avoid the focal, group-think, short-term, instinct that often negates getting ahead of the crowd. When we talk about a failure of vision or a failure of courage, we are differentiating between those leaders who anticipate history versus those leaders who react to history.

Lately I’ve been spending a lot of time in Tel Aviv and the other week I had an occasion to read an article by Zvi Bar’el in the Haaretz about the importance of ceasing the moment and dealing with the aging president of Egypt, Hosni Mubarak, in order to pursue regional peace.

The premise of the piece was that Mubarak  may soon pass on and no one really knows what direction Egypt will take from that point on. There is a tendency in the Middle East to deal mostly with the present. Certainly within the current Israeli government there is focus on the present and the short-term. But Mubarak isn’t immortal and things move on. The challenge always is: when should I act? Do you deal with the devil you know or the saint you hope will come?

I sometimes think of the Middle East in the 80s or even the 90s versus the Middle East of today. In the context of today’s radical Palestinian groups, the ones in the past look a lot more moderate. The current right of center government in Israel makes the father of right leaning Israeli nationalism, Menachem Begin, look like a left of center moderate.

Leaders in the Middle East are failing to cease the moment given the fact that things can get a lot worse rather than a lot better. The entire middle east seems to be caught in the short-term myopic mindset reminiscent of the automobile industry in the United States. Seeing what’s under their nose, being accountable to only short term interests, and failing to have the courage to look around the bend.

Point in fact: a few of them have shown a sense of historical timing.

Of course then there is Anwar El Sadat. He would have made one heck of a CEO.

Picture Credit: Amanda Woodward

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In the same vein, many leaders succumb to a similar line of thinking. They become trapped under restrictive roles placed upon them. As such, the “strong” leader refuses to be seen negotiating, or a empathetic leader will refuse too appear too demanding. This phenomenon is highlighted by none other than George Orwell in his 1936 short story, Shooting an Elephant.

The story’s narrator is a young English policeman stationed in Burma who in his own words became a “puppet” to the desires and will of the natives.

After receiving a call regarding a normally tame elephant’s rampage the narrator, armed with a rifle heads to the bazaar where the elephant is presumably wrecking havoc. Entering one of the poorest areas, he receives conflicting reports and contemplates leaving, thinking the incident is a hoax.

The narrator then sees a village woman chasing away children who are looking at the corpse of an Indian whom the elephant has trampled and killed. He sends an orderly to bring an elephant rifle and, followed by a crowd of roughly two thousand, heads toward the paddy field where the elephant has stopped to graze.

The narrator originally sent for the elephant gun for his own protection, and when he sees that the elephant is obviously quite docile he knows that he need not kill it. At this moment he becomes aware that the crowd fully expects him to kill the elephant. He realizes that he is trapped by the crowd’s expectations and by his own fear of looking weak.

Below is an excerpt from the short story that sums up the narrator’s main dilemma:

“The people expected it of me and I had got to do it; I could feel their two thousand wills pressing me forward, irresistibly. And it was at this moment, as I stood there with the rifle in my hands, that I first grasped the hollowness, the futility of the white man’s dominion in the East. Here was I, the white man with his gun, standing in front of the unarmed native crowd-seemingly the leading actor of the piece; but in reality I was only an absurd puppet pushed to and fro by the will of those yellow faces behind. I perceived in this moment that when the white man turns tyrant it is his own freedom that he destroys. He becomes a sort of hollow, posing dummy, the conventionalized figure of a sahib. For it is the condition of his rule that he shall spend his life in trying to impress the “natives”, and so in every crisis he has got to do what the “natives” expect of him.”

In the end, the narrator ends up shooting the elephant, who dies a torturously slow death. The narrator, sensing the reader’s disgust at this turn of events, proceeds to justify his actions on legal grounds. He states that the death of the civilian gives him authority to take fire at the elephant.

Ultimately, our actions in the workplace are reparable, meaning we can usually fix our mistakes and return to some semblance of normalcy through persistent effort. However, those who perpetually abuse authority or fail to stand up to injustices often find that one’s name is much harder to rehabilitate. We cave in to others at our own peril.

Picture Credit: Otherthings

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When it comes to leadership, we tend to do the same thing. We know better, but we just can’t help ourselves. Leadership is actually less mystical then we try to make it out to be. Each week a brilliant, earth-shattering book comes out touting a never-thought-of way to lead your company/team/family/dog to new heights. It’s a catch and release world: they keep bating the hook, reeling us in, throwing us back and doing it all again. But leadership actually comes down to a pretty straightforward concept: what’s best for your workers is best for the company. It’s not a new concept, but it is one that is constantly forgotten and forsaken.

As an example of this kind of lapse in judgment, let revisit the aforementioned iPhone 4 mess. For years Apple made their money and good name by giving the customer what they wanted and making it fun, exciting, and down right beautiful. If an idea didn’t work, they junked it or they doubled their effort to make sure it did. But when problems arose this time, Steve Jobs and his army of supposed geniuses forgot their own golden rule. It wasn’t their fault, it was yours. Not getting a strong enough signal? Dropping calls to grandma left and right? Then it must be your fault for holding their brilliant and perfect product the wrong way. This level of arrogance builds up when those in charge forget that those they lead, or in this case those they sell to, are just as or more important then they are. Yes, Apple has rebounded and seen the error of their ways. But it’s going to cost them a reported $175 million in “bumpers” and a ton of terrible press.

So we can take two important lessons from this debacle:

1. To become a great or even halfway decent leader, you don’t need the latest greatest idea, theory, concept or piece of equipment. Just get yourself some common sense (not available in stores) and remember that what’s good those you lead will always end up being good for you, your company and your future.

2. Waiting on line for two days for stuff should be limited to Star Wars movies and rock concerts. And even then it still kind of seems a little sad and like a giant waste of time.

Picture Credit: Kyz

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When we look at the political landscape we often talk about multi-million dollar political campaigns, glossy advertising, and the dubious role of lobbyists. This is changing in the social technology age. Political campaigns are becoming more grounded and working hard to reach supporters through informal, online, networks.

This evolution was most clearly evidenced in President Obama’s presidential campaign. Experts, pundits, and political analysts marveled in unison at Obama’s Facebook page and his nicely designed web site. Some even suggested that it was a contributing factor to Obama’s victory. Still, the Obama campaign’s social media efforts seemed like a massive, orchestrated, and financed spectacle. It wasn’t exactly a grounded or an organic effort.

The true strength of social media is going to be found in the type of presentations that allow leaders and campaigners to get their message out in a organic, quick, and relevant fashion.

A social media campaign pitch can be effective with a small video camera, a candid approach, and some friends. That’s it.  Consider the Bryan Weaver Youtube video (below) as a great example of how you can easily and effecting promote your message using social media. It’s real, it’s candid, it’s natural, and it’s the reason why people are watching it in the thousands.

Obviously, this is not an endorsement of Mr. Weaver’s campagin, but only an illustration of the practical use of social media to focus and spread a messasge.

Picture Credit: Library of Congress

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