When does self-deception do the most good?

by on December 7, 2007 at 11:02 am in Economics | Permalink

Knowledge@Wharton: In your chapter, "The Dangerous and Necessary Art of Self-Deception," you write that some degree of optimistic self-deception is critical for success, and that "depressive realists," with their more accurate view of the world, fall behind. What advice would you give to a board choosing a CEO? Is it better to have an optimistic self-deceiver or a depressive realist?

Cowen: For a CEO, I’d tend to go for the realist, because at the leadership level, the costs of hubris are very high. The problem with realists is they can get depressed and feel they are not going anywhere, but this is less likely to happen to CEOs, because they are in charge.

In the lower rungs of the company, however, I would favor overly optimistic people, those who are motivated by the idea that they always have a chance of being promoted or earning more money. The higher up you are, the more I would prefer realism. A president who won’t listen can be pretty disastrous. But a senator who doesn’t listen — maybe it’s not ideal, but there are checks and balances, and if the optimism gets the senator to work harder, then that is the compensation.

Here is the full interview with me.  By the way here is a recent Indian review of Inner Economist, from Mint.

Cynical Masters Student December 7, 2007 at 3:06 pm

So now you need to explain how to start as high up as possible…

mith December 7, 2007 at 3:35 pm
Anonymous December 7, 2007 at 4:23 pm

If everyone takes your advice, then realists will be unemployable at entry-level and mid-level positions. So when it comes time to recruit a new CEO, where exactly will we find a pool of qualified realists with actual industry experience?

Realists would perhaps be better off rejecting the corporate ladder altogether and engaging in financial market speculation for their own account. Theoretically they should do better at predicting, say, stock market crashes. To get the seed capital, they should seek employment in industries that don’t hire shiny happy people: perhaps cops or funeral directors.

Eric H December 7, 2007 at 8:08 pm

So when it comes time to recruit a new CEO, where exactly will we find a pool of qualified realists with actual industry experience?

You’ve never actually been through the management-fad-of-the-week, have you? If you had, you would not ask such questions.

John December 7, 2007 at 10:37 pm

I would look for an optimistic person to fill the position. With an optimistic person in charge he or she will be able to motivate the rest of that company or corporation, in turn increasing the profits. Realists tend to focus on the negatives in things, they may get stuck worrying about what when wrong when they could be trying to fix the situation in a positive way. Optimists are the ones who will take a risk for better outcomes, thats the type of person I would like to have in charge.

Casey December 8, 2007 at 1:31 am

It seems to me another option might be someone who is skilled in the psychology of funambulism which, when referring to psychology, is the ability to hold two contradictory notions or ideas at once and still maintain composure. A good funambulist could maintain both a self-image that was realistic and pessimistic and one that was optimistic and idealist at once and still maintain his footing. A good example of a character that was like this might be Hamlet. Though I suppose he wasn’t that good at making decisions in a crisis. But a funambulist who could make decisions in a crisis, if they could be found, would be the way to go. And maybe in a non-crisis environment Hamlet would make a good CEO.

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