The Consequences of Unbounded Optimism
Issue 94, February 9, 2023
All societies live by stated or perceived mantras. In the United States we reach for the stars, believe the sky is the limit, and if we build it, they will come. These sentiments permeate our culture, inspire our children, and guide our business leaders.
We love entrepreneurialism; we reward it, admire it, and aspire to it. The entrepreneurial spirit and manifest destiny represent the American can-do ingenuity and genius of overcoming adversity and risk. Agility and being nimble are standards of excellence.
Optimism on the Edge
But not so fast. Blind embrace of optimism can result in a misperception of true reality. Unbounded optimism can infuse organizational actions and decisions and make them out of step with current or emerging market conditions and customer needs.
We’ve seen the tech unicorns breakthrough with impressive solutions and influence. And we’ve also watched 90% of all startups fail. We’ve also witnessed organizations build expansive workforces, revise forecasts, and commit to goals with shareholders based on optimism that is out of context with the realities of the market and society.
Actions and decisions are often based on limited sets of information, isolated data points, unconnected inputs, or just out of context. We and our leaders often tell ourselves what we want to hear, convinced that hearing something different may challenge or dampen our optimism.
Here are real-life scenarios of optimism run amuck. Our default to embrace the hype and promise of the overall economy improving. Our excitement about a newly published data point that aligns with our own perceptions of possibility takes precedence over facts. Our optimism that the market will quickly adopt a specific technological innovation makes us rush to support that solution. And our desire to believe in, and, be inspired to follow dynamic leaders who seem to break from the norm may result in consequences that we can’t see or simply overlook.
Unbounded optimism can catch us shorthanded. Recently our daily newsfeeds report that organizations across all sectors are reducing the size of their workforces and reviewing their management structures to remove or reduce the middle management layer. In fact, some organizations who fed off unbridled and even unrealistic optimism are taking a right turn to refocus on efficiency to improve the bottom line and please investors. A skeptic would argue that the communications spin on these changes is to rationalize or prepare for an upcoming recession. We’ve noticed though that there is no mea culpa for operating overly-optimistically without anticipating market swings … and now facing operational costs to compensate for lack of foresight.
There’s also a disconnect between leadership and their workforces. We see media reports of CEOs believing they are back in control making demands on their workforces to return to the office fulltime. We assume these leaders are optimistic that they can dismiss remote or hybrid work as something from times past. But the unintended consequences of a workforce quietly quitting or resigning across any industry is the scarcity of skills and legacy knowledge in the organization. An unrealistically optimistic CEO who believes he or she really is in charge is disconnected from losing valuable employees and the reality that recruitment and retention challenges are tough situations of the present.
We believe unbounded optimism is a double-edged sword. Consider media reports showing that unemployment is the lowest level since 1969 and that the professional services sector is still showing positive job growth percentages. And small and medium size businesses are struggling to fill their ranks. They simply cannot find the workers they need. Being out of touch with current employees and making top-down decisions about their work preferences can lead to serious workforce deficits.
What’s worse is a CEO with a misguided sense of optimism has a convenient rationale to explain recent layoffs. If you caught Meta’s recent earnings report, you may have noted Mark Zuckerberg used the word “efficiency” 32 times. Was he convincing himself, checking his unbounded optimism or did he need to convince the market?
Poor Foresight and Misaligned Hope
During the years of the pandemic, when the U.S. government flooded the market with money, demand in certain consumer sectors significantly increased. Hunkered down, individuals had new needs and wants. But when everyone came out of their caves, their needs and wants changed. However, so many organizations lacked the foresight to anticipate these new behaviors. They built up their organizations and business models based on the optimistic assumption that pandemic-level demand would continue indefinitely. The economy was going strong, therefore, opportunity to continue high growth would remain. But just look at what happened with retail drowning in post-pandemic inventory that they couldn’t sell.
Then many organizations took advantage of increasing inflation and forced consumers to adjust to paying higher prices for what they wanted and needed by raising their own prices to maximize their profit. Organizations were opportunistic matched with unbounded optimism. But reality bites and misinterpretation of trends and market indicators can be fatal. Especially for a CEO.
Why is this so prevalent? Hubris. The term “narcissistic entrepreneur” was coined by Michael Maccoby in 2007 when he described what makes leaders great and at the same time, damaged and dysfunctional. Maccoby is a psychoanalyst and anthropologist, and he describes the syndrome as a love of the limelight that generally stems from leaders’ personalities. As he says, that is both good and bad news: “Narcissists are good for companies that need people with vision and the courage to take them in new directions. But narcissists can also lead companies into trouble by refusing to listen to the advice and warnings of their managers.” Maccoby argues that “The most innovative leaders are not consensus-building bureaucrats; they are productive narcissists with the interrelated set of skills — foresight, systems thinking, visioning, motivating, and partnering.” One the plus side, he believes narcissistic entrepreneurs are best suited to lead during times of rapid social and economic change. On the downside, a narcissistic entrepreneur is not so great for sustaining a successful organization. They get in their own way.
Cracking the Code
As brilliant as some entrepreneurs are, they seem to be tone deaf when it comes to critical thinking, empathy, and their own individual bias. At 2040, our mantra is the need for critical thinking. All the genius engineers, tech gamechangers, and foresighted organizational leaders are going to come up short if they don’t ask the right questions. It may not be as glamorous as making tech headlines, but systematic success results from a Socratic discipline of asking questions, analyzing the right data, looking deeply at market and environmental conditions, understanding trends like population density shifts, and including economic factors as part of the critical thinking process. Simply stated, it is mastering the art of asking why and applying that intelligence holistically to the problems at hand. It is also not compromising the long term with the immediate gains of short-term thinking. It is not manipulating learnings to justify one’s thoughts and whims. It is considering information objectively, removing bias and checking that unbounded optimism does not infuse interpretation.
Critical thinking also provides valuable perspective. It is easy to be seduced by news headlines thinking they are broadcasting “the truth.” It is tempting to believe that every research report is objective and unbiased. It’s intriguing to follow the trends and try to become cutting edge. It’s hard to resist the invitation to read online newsfeeds that have been created just for us based on our online behavior. However all too frequently these actions do not objectively reflect the realities of the market and the environment, and do not produce accurate performance measurements which are fact-based and relevant. Any effective leader recognizes the necessity to thoughtfully ask the right questions to ensure being grounded in business strategy and operations.
If we are not careful, we can live in a bubble of unbounded optimism without pausing to reflect and question. To manage unbounded optimism and remove the blinders it wears, it requires critical thinking of leaders, a workforce, individuals and really everyone across society.
Is Critical Thinking Endangered?
The biggest threat to organizational decision making is conscious and unconscious bias. Everyone comprising a workforce, including management and leadership teams, ingests information, and processes it based on their personal context, including their experiences, values, and perceptions. Our brains are wired to eliminate ambiguity, so the information we ingest is filtered through our own editing process. As a result, we follow the path of least resistance, seek to eliminate complexity, and focus on the goal. We try to avoid the distractions of organizational politics, power plays and gamesmanship, particularly when others are more adept at manipulating personal power even if they negatively impact the goals of the organization.
At 2040, we work with clients to recognize if they make decisions on the reality they construct based solely on interpretation, influenced by unbounded optimism. We raise the red flag to question what consequences are forthcoming from that approach. Our unbounded optimism fuels actions, decisions and thinking. It creates blinders, particularly when what we might see contradicts what we want others to believe or what we ourselves as individuals want to see. With such a rapid pace of change, AI has the potential to boost improving our processes. It can also lead to the contradictory interpretation of current events. Unbounded optimism has manifested with our love affair with tech and its titans.
But the most significant trend is the shift in power from the organization to the stakeholder. This shift affects every organization and keeps many traditional leaders up at night. Critical thinking is key. As poet Robert Frost said, “the only way out is through.” And through is a meme for critical thinking.
Get “The Truth about Transformation”
The 2040 construct to change and transformation. What’s the biggest reason organizations fail? They don’t honor, respect, and acknowledge the human factor. We have compiled a playbook for organizations of all sizes to consider all the elements that comprise change and we have included some provocative case studies that illustrate how transformation can quickly derail.