Zen and the Art of Tennis
This short book, by Agam Bernardini, is about how a good tennis player became great by parking his ego. By playing completely emotionless, his play improved considerably. His ego caused poor decisions, over confidence that he could make certain shots, under confidence making other shots, and most importantly, his ego highly valued the low probability of making specific shots that would make him feel especially good. In other words, he might lose nine out of ten points attempting the perfect shot, but when he made it, that once, he felt soooo good. The ego was making his decisions so as to make his ego the winner, regardless of whether he won the match. By setting aside the ego, so much easier said than done, and playing to win the match rather than satisfy the ego, he began winning.
In the early 1970's, the famous psychological economists Kahneman and Tversky studied Israeli military thinking followed by business and political leaders. The problem, as Kahneman stated in his speech, is that "...crucial decisions are made today as thousands of years ago, in terms of the intuitive guesses and preferences [of powerful decision makers]." Moreover, these famous and truly world effecting economists discovered that powerful decision makers preferred ego centric thinking to true logic based decisions because they did not want to be pinned down by logic. They preferred feeding their egos regardless of the outcome and even soldiers' deaths.
Years ago, I had a client who listened to my advice, agreed with 100% of my advice, and agreed that if he followed my advice, his agency would definitely prosper. He then advised that he was not going to follow my advice because it was more important to him to avoid being trapped by a logical plan than it was to assure his firm’s future prosperity. The firm floundered. To this day, I admire the clarity with which he made his decision because usually one's ego causes a person to develop all kinds of explanations and excuses rather than just admit they prefer to gratify their ego. The agency owner knew himself intimately well.
Not being pinned down is a crucial reason agencies, even the biggest brokers, are often run as agencies and not businesses. The higher authorities being in a position of power, prefer the ego trip of making decisions intuitively rather than logically.
Terms such as experience, intuition, etc., are just covers for ego driven decision making that may be wrong nine out of ten times. The feeling of being right just once, that exuberance, that rush is worth it. And let's face it, nine wrong decisions are not always enough to lose one's job if one is high enough or running a big enough firm. Just look at all the banks that clearly would have failed in the credit crisis if not for the federal government’s bailout. Now look at their executives and ask whether those people are much richer or much, much richer than they were prior?
An interesting side note detailed in many publications relative to the credit crisis and detailed more in the book, The Chickenshit Club, by Jesse Eisinger, is the story of an investor who made a bet on the credit crisis and made $1 billion plus. Many articles described his amazing insights and intelligence. My interpretation of the book though described how he may have rigged the bet. Now I've read elsewhere how his subsequent investments have failed and the authors of these recent articles wonder why he was so smart once and not so smart now. Even taking the possible rigged aspect away, ego, especially when one is lauded for being so smart, makes it impossible to use strict logic and analysis again.
Utilitarian economic theory measures the value of nine wrong decisions for every one correct decision. For example, let's assume the emotional value of each gut driven but wrong decision is -2. Each gut driven correct, or lucky, decision is worth +50. A person has to be wrong at least 25 times before getting the message their gut level decision making may be astray.
The magnitude is amazing. One of the banks in the credit crisis was known for buying any other bank presented to it as a seller (as described in Michael Lewis' book, Too Big to Fail). This was inside knowledge and the investment bankers knew this well. The buying bank's CEO was lauded on magazine covers for years. It took the credit crisis to finally force logic upon that firm’s decision making. The value of possibly one right decision was worth maybe 1,000 units to that CEO and the price for a wrong decision was maybe -2 units. The situations can be exacerbated when one gets to spend shareholders' money.
For people that pay the price or can see their boss's bad gut decisions (you can see that it is a bad decision more easily because your personal ego is less involved and the value of the right decision is more in line with the value of a wrong decision), you have to use the price of being wrong or decrease the value of being right.
If you are selling insurance, the buyer is making an emotional decision. This is a critical reason so many individuals and businesses have the wrong coverages and/or inadequate coverages. They do not make logical decisions based on whether their coverage is actually applicable and adequate. They use their gut to determine whether the producer is trustworthy. Through the years of doing E&O audits, I'm amazed over and over how some producers, producers who can barely spell "insurance" make a good living until I stop and think how their customers perceive their trustworthiness.
Forcing logical, non-ego decisions is impossible 99.99% of the time. Only determined and extraordinarily self-understanding people or people faced with dire facts (the bank that made many acquisitions when credit crashed) can make pure logical decisions. No matter how much better a company may perform with Decision X, executives will not make Decision X if the emotional price is too high! When selling insurance, try to leave your ego at the door. This will help you recognize your prospects' egos and sell to their emotions.
The keys here are understanding the math while expressing the math in the form of stories, unless your ego is so large that you just know you will never be sued and your conscious is free from guilt in selling a product you know is inadequate but can get away with it because you know your clients trust you. One has to express the mathematical value proposition in the form of a story that generates trustworthiness. Then the person that knows what the customer really needs wins and the customer wins. Use that 10,000 year old decision making process identified by Kahneman and Tversky to your advantage. Do not rely just on numbers because no human makes decisions just on numbers (and those that say they do have an ego making decision making process that is just as real, but quite different). Rather, build a human story around the numbers, a story with pain, loss, penalties and rewards that push up the price of a bad decision.
For more information, contact Chris Burand at firstname.lastname@example.org.
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.