Amid the tragedy brought on by the pandemic, there are valuable lessons that advisors can apply to become more effective leaders, according to Malcolm Gladwell.
Gladwell was a keynote speaker on the second day of the Schwab IMPACT conference, which was held virtually on October 19-20. Gladwell is the author of seven books, notably The Tipping Point: How Little Things Can Make a Big Difference (2000) and Blink: The Power of Thinking Without Thinking and Outliers: The Story of Success (2008).
His co-panelist was Adam Grant, a science author and professor at the Wharton School of the University of Pennsylvania specializing in organizational psychology.
The starting point for their conversation was the statement to “never let a good crisis go to waste.” Rahm Emanuel, who was chief of staff during the Obama administration, popularized that saying, but its origin likely predates his usage.
Most of the time, according to Gladwell, it’s hard to get people to change behaviors, except in a crisis. Grant agreed with that premise and defined a crisis as a threat to your life or livelihood. That was true of COVID.
For example, restaurants have asked for outdoor seating for many years, Gladwell said, and it happened overnight with COVID. Unfortunately, though, that seating is about to disappear as the crisis eases. The crisis was an incentive to rethink virtually every aspect of how businesses operate, including how and where we work, and we should be thoughtful before returning to pre-pandemic practices.
We have already embraced the majority of changes, Gladwell said, such as eliminating “open office space.” Problems with those offices have been known for 10 years, such as people having a hard time concentrating, being less productive and more exposed to germs.
He cited the example of United Airlines, whose CEO, Scott Kirby, said it achieved 10 years of customer improvements in six months. This was an amazing achievement, Gladwell said, despite an environment when its business was failing because its planes were not flying. For example, United modified its policy of closing gates 10 minutes prior to departure, which he said was the number one complaint by customers. That policy was put in place to ensure that flights were on time. Because of COVID, Kirby and his team had the time to rethink the situation and found they could use algorithms to determine whether those 10 minutes were indeed needed.
The airlines now compete with Zoom, Grant said, and that forced United to make that move.
Why did we need an existential threat to change? Grant says it was because of status quo basis. It took COVID to make us more aware of the downside of being too close to spread germs.
Should leaders simulate crises to introduce that mindset? That would be a form of war games, Grant said, and it is the wrong mentality. We don’t want to be in crisis mode, because we “narrow our field of vision, and it is bad for creativity.”
Instead, we want a learning mindset to test new ideas. Leaders should ask questions like, “I wonder what would happen if…,” or, “How else might we achieve that goal…”
We need a learning mindset, Gladwell said, but we need a push. The decision to use an open office space configuration was originally made by a landlord, or facilities or office manager. But those people failed by choosing that configuration. They should have known about how people work, Gladwell said. Could we rotate roles and give a different person six months or even a few weeks in a new role to provide an unbiased, fresh perspective?
That led to a discussion about whether people fall into “cognitive entrenchment” and whether to bring in outsiders to stimulate new thinking. Gladwell said he has worked with an investment advisor for 25 years. He suggested that, maybe one week a year, someone else should be his advisor to provide fresh insights and critique his financial plan.
Grant said this would be a huge step, like “holding up a critical mirror.” He said that the SpaceX project has a “rapid evaluating team” to look at seemingly offbeat ideas like turning seawater into fuel. That team can quickly and objectively decide whether to pursue or discard new ideas. We all need more “external insights” to improve our processes, Grant said.
What kind of person is best to provide that feedback? We should look for “disagreeable givers,” someone who is not afraid to disagree, has good intentions, and thinks differently from us. We need a “challenge network,” Gladwell said.
Grant said he would like Gladwell in his network.
They are both suited to provide that type of criticism, but how can that cognitive style be encouraged in others? We need to hold ideas loosely and be willing to rethink them, Gladwell said. That is the opposite of what politicians, who are loathe to admit a failing, exhibit. We want a balance of openness and conviction, they agreed.
Gladwell said he gets his conviction from “seeing that the consensus is incomplete,” and providing insights or alternative ways to approach a problem.
Conviction with a willingness to change is what we want in a military general, Grant said. If a plan isn’t working, we want that leader to switch. Military generals need people to let them know if they are about to make a bad decision. This is the quality Grant wants in a financial advisor. When COVID hit, he said he wanted someone who evaluated whether to rethink his investment strategy.
People naturally follow leaders who can change their minds and follow the evidence. When we trust a bank or a doctor, we are saying that we are willing to follow them even when they contradict what they previously said. Trust is built on more than consistency, Gladwell said. Consistency over time is not necessarily an enviable trait.
We want consistency of principles, not of ideas and practices, according to Grant.
The best forecasters, Grant said, are typically the fastest “rethinkers” and the quickest to change their opinions. They know their second and third forecasts are better than their first ones. “You want to be a flip-flopper when it comes to being a learner,” Grant said.
Gladwell and Grant speculated that if you looked at presidential debates or CEO press conferences over the last 40 years, there would be a strong correlation between those who acknowledged changing their minds and strong performance. Nobody has done this research, Grant said, and the closest is research on narcissism. Research has shown that the companies of CEOs who exhibited narcissism in press statements had more volatile returns. Those leaders tend to make big bets (i.e., “swing for the fences”), and those ventures failed disproportionately.
He also said that banks led by narcissists recovered more slowly during the financial crisis.
When you express a degree of confidence or a preference for your beliefs, it is very helpful. For example, when deciding where to go for dinner, one might say, “I prefer Italian, but that is only a three on a scale of one to 10.” Collecting data in this format leads to better group decisions.
Advisors can adapt this practice by saying, “This is my guidance, but I am only a six on this.”
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