Why CEOs are so stupid | Hacker News Reader

Why CEOs are so stupid

markbernstein.org

44 pointsblasdel14 comments

Absolutely. We make up narratives, then fit facts and stories into those narratives.

For an excellent example, read Good To Great then read The Innovator's Dilemma. Both books look at the rivalry between Nucor and Bethlehem Steel. The difference is that Good to Great tries to fit that example into a theory of great CEOs, while The Innovator's Dilemma tries to fit it into the narrative of disruptive innovation. So in Good to Great it is hard to see why Bethlehem Steel was full of idiots, while The Innovator's Dilemma makes it painfully clear why the bad decisions that Bethlehem Steel made were inevitable given their customer base and market pressures.

Same story. Same facts. Different narratives. Radically different impressions of the competence of the people involved.

To summarise: "confirmation bias". He's got a point.

For those who don't know what that is, WP says:

"Confirmation bias is an irrational tendency to search for, interpret or remember information in a way that confirms one's preconceptions or working hypotheses. It is a type of cognitive bias and a systematic error of inductive reasoning. These biases in information processing are distinguished from the behavioral confirmation effect (also called self-fulfilling prophecy), in which a person's expectations influence their own behavior."

http://en.wikipedia.org/wiki/Confirmation_bias

Yes, confirmation bias at play. But I'm still not sure if that makes it OK to title the article "Why CEOs are so stupid" - that's a gross generalization even for this particular CEO, given that there was this one interview where he messed up.

I think the title was satirical. His point is that CEOs are not actually so stupid, we just look at the ones who fail and point out all the stupid things they did, while the successful ones may have done an equal number of stupid things, but we didn't pay attention.

Also alluding to survivor bias, which is the bias that invalidates the vast majority of business literature and coverage.

To suggest that he consciously said this to lower expectations is probably giving him too much credit. What he said is true enough that I'm sure it was just the first thing that came to his mind.

There's something American going on here. You can't mention that a 400lb person is fat in that person's presence, and you can't say that your product might not be better than the iPhone. We know both things to be true, but we're not supposed to say it.

He's definitely 'allowed' to say that, but from an investor standpoint, he's not showing very much confidence in his product and the future of his company when he says things like that.

Really? Doesn't this assume that investors are dumb or that they prefer blind-but-optimistic CEOs?

I just heard an interview with the CEO of Carsales.com (just went public). He was asked if he was worried about free classifieds doing to them what they did to print. Fair question. I'm sure that as CEO of a classifieds site he has thought about this . He said (paraphrased) "No. Sellers prefer us because we give them a good price and get the car sold." He alluded to an inherent connection between the first and second part of that sentence, that payed classifieds are inherently better at selling cars then free ones.

Does this 'demonstrate confidence' to investors? If you believe him, you believe he is blind to his biggest threat. I assume that most investors don't beleive him. What does that demonstrate?

If he was talking face-2-face with an investor and got asked that question, would they be impressed? Anyone here an investor that would say yes?

Well, investors depend on what the CEO says. What he is trying to avoid is sounding optimistic and then falling short of expectations. The up then down in the stock price looks bad.

However, its a good point that we should want a correct representation instead of a pessimistic one. We should seriously wonder about a CEO who drastically under predicts performance just as we would one who over predicts it.

I think that the point wasn't divorcing CEO responses from reality. The point is that the CEO -- in this case -- is probably over-stating the gap between the Pre and the iPhone.

Honestly I thought the question was rather pointless to begin with.

Sprint didn't make the Pre. Sprint doesn't compete with the iPhone. The iPhone is a device, Sprint is a carrier. The iPhone may very well end up on Sprint in the not-too-distant future.

Also, if you look at the subtext, you might see that Hesse is delivering a veiled attack on the iPhone--that it's all about branding and hive mind. Michael Jordan was a great basketball player, but he was far from the greatest, even during his career. His style and flash are what got him his place in the spotlight, just like the iPhone.

The fonts on that page are nice. He's using the free ones here: http://www.exljbris.nl/

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