Professor Kandola, Nassim Nicholas Taleb And The 'Psychopaths' Running The Banks

Posted on 23rd February, 2009
Management Today ran the following piece. You might like to read it and my response:

A psychologist suggests that the banks' current woes may be due to their bosses' psychopathic tendencies...

The level of recklessness and overweening ambition that has brought Britain’s biggest banks to their knees suggests that their bosses could have been affected by anti-social psychopathic personality traits, according to business psychologist Professor Binna Kandola.

So watching Sir Fred Goodwin and co. appear in front of the Treasury Select Committee recently, the professor was not surprised (albeit distinctly unimpressed) by their refusal to accept any personal responsibility for the crisis, despite their ‘heartfelt’ apologies.

What’s more, he reckons their behaviour in recent months will change the model of leadership for years to come...

Of course when we talk about banking bosses being psychopaths, we’re not actually using it in the popular sense, i.e. that they went around slaughtering people American-Psycho-style (although we’d be slightly nervous about bumping into a recently-axed CEO in a dark alley).

We’re talking about the clinical condition, which is usually characterised by an almost total lack of empathy. Apparently, a study once found that psychopathic behaviour was twice as prevalent among high-potential managers as it was in the general population.

In the good times, the kind of reckless disregard for the rules this engenders will have served these bosses well, as they squirmed their way up the greasy pole – but ultimately, it caused them to over-reach, and the whole edifice came tumbling down with them.

Kandola reckons the banking bosses have also been displaying signs of narcissism, which is usually characterised by a certain grandiosity (check out some of the gleaming HQs these people erected around the world) and also a strong sense of envy – RBS’s decision to take on Barclays for ABN could be seen in this light, he argues.

They also seem to think the rules don’t apply to them; again, by pursuing an expensive acquisition while at the same time demanding that his staff count the pennies, Goodwin was suggesting that he was somehow exempt from his much-vaunted organisational values. So perhaps the shareholder who accused him of megalomania wasn’t far off the mark, he argues.

US psychologist Robert Hogan was one of the first to examine how strengths can actually turn into weaknesses – for instance, an empathetic concern about people is generally considered a strength, but in excessive quantities, it can make someone seem like a soft touch. By the same token, Kandola reckons that the very things that made banking bosses successful in the first place – ambition, drive, ruthlessness – were ultimately the very things that eventually brought them down. All very Shakespearean tragic.

One likely consequence, he suggests, is that the ‘real failures of leadership’ we have seen will affect all business leaders. Public trust has been eroded to such an extent that from now on, leaders will have to operate very differently – notably, they’ll have to be much more honest and open with people, and they’ll have to get used to much more scrutiny of their decisions. ‘It won’t just be about track records,’ says Kandola. ‘It’ll be about how they achieved what they did.’ In other words, psychopaths need not apply.

Nick Jefferson - 23-Feb-09

An interesting take from Prof. Kandola, but your piece is right to point out that it is precisely these traits/preferences that we note as being effective during good times.

The issue is surely not one of 'changing the model', at least not in absolute terms. Rather, what we need is flexibility in the 'model': recognising how far to push, to reach when times permit, but being ready to deploy different tactics altogether when conditions begin to change.

If one considers the truly most successful business people over time (ie those who do not crash and burn in such spectacular style the minute the market dips), they already demonstrate this flexibility. Warren Buffett is not a bad example in this context.

The degree to which successful people show flexibility in style seems to me to be one of the underrated hallmarks of effective behaviour.

Since The Origin Of The Species, we have accepted the ability to change and adapt as fundamental to longevity and success in nature. In recent years however (and almost certainly for many centuries, even millenia, before), we have been in danger of seeking to carve humans out as somehow immune from those fundamental laws.

If I am right and it is flexibility that is in fact the pivot around which all the others traits or preferences revolve, then this suggests to me that the very notion of a 'model' is flawed.

Our tendency towards absolutes, models and 'the right answer' always gets us in the end. We pursue it relentlessly and dogmatically way beyond its natural lifespan, having no regard to changed or changing conditions.

If one word could sum up the mess that the banks have found themselves in, 'model' is it.

I'm with Nassim Nicholas Taleb when it comes to Black Swans.

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