The Stupidity Paradox: The Power and Pitfalls of Functional Stupidity at Work - Mats Alvesson, André Spicer.

Partial Excerpts (antilibrary)

Copyright Page

2016

Preface

This struck both of us as really stupid. How could an important new government policy that would affect millions of people be based on a few PowerPoint slides created by an intern who was managed by a twenty-something?

Was this just a one-off case of stupidity, we asked, and began to swap stories from the dozens of organizations we have studied over the years.

When we came to the topic of universities, we realised there were just too many kinds of stupidity to mention

We were worried that all this stupidity was detracting from the core purpose of our institutions: to educate students, develop new knowledge and contribute to the wider community.

all this collective intellect does not seem to be reflected in the many organisations we studied. Much of what goes on in these organisations was described – often by employees themselves – as being stupid

We have frequently seen otherwise smart people stop thinking and start doing stupid things. They stop asking questions. They give no reasons for their decisions. They pay no heed to what their actions cause. Instead of complex thought we get flimsy jargon, aggressive assertions or expert tunnel vision

smart organisations and the smart people who work in them often do stupid things because they work – at least in the short term. By avoiding careful thinking, people are able to simply get on with their job. Asking too many questions is likely to upset others – and to distract yourself

while being stupid might work in the short term, it could lead to bigger problems in the long term

many managers try to ensure that smart people don’t use their intellect. There are many tactics that are used to do this

within modern organisations there is just too much stupidity

we started to identify some very practical steps that can be used to destupidify our organisations

Introduction

Introduction

Attack of the quants

Scientists at the best-known institutions across the world were complaining about the career choices of their students. In the past, we are told, top young scientists were inspired by their studies to pursue careers as researchers.

this had stopped happening. Many of the brightest graduates had rejected careers in science. Instead they were flocking to banking.

there was one clear difference between the world of science and that of finance: the culture. For many years, finance had been dominated by a hard-driving culture of individual gain.

In science the watchwords were truth and discovery

the scientists who crossed over into finance did not just survive – they began to thrive. The steady stream of science graduates brought with them well-honed quantitative skills

These former scientists did not enter the rowdy crush of the trading floor. They did their work in the hush of air-conditioned offices. They did not see themselves as traders, they were ‘quants’.

As the number of quants employed by banks increased, so their prestige and resources grew. Decisions about trading strategies were no longer made in the heated cut and thrust of deal-making

Some grew so confident in financial engineering that they declared an end to boom and bust and the dawn of perpetual prosperity.

But at the very same time as confidence in financial engineering was increasing, the connection between the quants’ clean abstract models and the messy realities of markets was beginning to fray. The fate of collateralised debt obligations (CDOs) is a perfect example

The abstract models represented CDOs as one thing (a sure bet), while the reality was quite different (they were a messy mix of everything from sure bets to sure losses). At this point you might ask: ‘Why didn’t someone stop and ask some hard questions?’ The answer is: a few people actually did. A handful of people at all levels of the industry had pointed out some of the hidden problems in these financial models. However, these critics were a very small minority who were almost without exception ignored

What is perhaps most shocking is that many quants admitted to not even understanding how their own models matched reality

serious problems emerged when markets started falling. When this happened, it became clear that many financial models were constructed on false assumptions

When this collective stupidity came to light, people stopped lending and trading with one another. The whole financial machine seized up

The financial crisis that began in 2008 is a testament to the stupidity lurking at the heart of knowledge-based societies

Stuck in the silicon lagoon

To find a place in this knowledge-intensive world, young people are advised to build their intellectual capital through years of more and more expensive education and a dizzying array of new experiences

They hope this wide array of unrelated experience will win them a place in the supposedly lucrative ‘creative class’.2 This is of course a wonderfully elastic and seductive term which includes 30 per cent of the population in countries like the USA. Everyone from teachers to engineers fits in.

We are told that in order to ‘win the war for talent’ in a ‘knowledge economy’, organisations must craft smart strategies, build intelligent systems and nurture their intellectual capital.

This widespread zeal for smartness seems to be based on one single message: that the fate of our organisations, economy and working life hinges on our ability to be smart. Knowledge and intelligence are thought to be the key resources.

But is being smart actually so important?

Far from running a knowledge-based economy, most developed nations utilise most of their people to do low-level service work

If you scratch the shiny surface of almost any organisation claiming to be knowledge-intensive, you will find a quite different reality. Sure, there are often many well-educated smart people, but there is often little evidence that most of the corporate intelligentsia are fully using their intellect

one call-centre operative described the job as ‘an assembly line in the head’.3

Even when people do find themselves in a context where there is some scope to exercise their intellect, they often seem to avoid this.

A recent study by psychologists at the University of Virginia found that over half of the people they tested would rather give themselves electric shocks than sit and just think for between 6 and 11 minutes

following the financial crisis, senior executives at a large global bank started getting interested in ‘authentic leadership’.

invasive, a waste of time, or both. What is so striking is not just that bright people buy into stupid ideas. The real surprise is that by buying into these ideas, they can help organisations to function well and aid individuals in building their career

the bank as a whole probably benefited from such training courses. It could show the media, politicians and the regulators that it was doing something

What was much less certain was whether it actually achieved the putative aims. In many ways, this was completely incidental.

Shoot first, ask questions later

Functional stupidity is the inclination to reduce one’s scope of thinking and focus only on the narrow, technical aspects of the job

Functional stupidity is an organised attempt to stop people from thinking seriously about what they do at work

Rather than thinking about outcomes, they focus on the techniques for getting things done. And the thing to be done is often to create the right impression

once in the grip of functional stupidity, you avoid thinking too much about exactly what you are doing, why you are doing it, and its potential implications. By following this tried and true recipe, you hope to avoid punishments and many worries that might come from deviation. You sidestep the burdens of having to think too much and upsetting others by asking difficult questions. What’s more, you are usually rewarded for doing this.

Organisations encourage functional stupidity in many ways

Some have cultures that emphasise being action-oriented

Other firms have kindled an intense faith in leadership

Many organisations foster a deep belief in the rationality of what are clearly irrational structures and systems

Firms often go out of their way to copy other organisations they think are successful, but often they have little or no idea of why they are copying them

The paradox of stupidity

Shutting off parts of your brain at work may seem like a bad idea, but it often comes with some big benefits

When they make authoritative claims that their company pursues ‘excellence’, their decisiveness and conviction will betray no signs of doubt.

Functional stupidity can have similar benefits for the entire organisation. By ignoring the many uncertainties, contradictions and downright illogical claims that are rife at work, people are able to ensure that things run relatively smoothly. We often value convenience over confronting the inconvenient truth

When people start ignoring contradictions, avoid careful reasoning and fail to ask probing questions, they also start to overlook problems

That way you may rest easy in the short term, but in the long term these problems will build up. As this happens, the gulf between rhetoric and reality becomes hard to deny. This triggers a profound sense of disappointment and disengagement on the part of employees

it can sometimes create the conditions for larger crises or disasters. This happens when minor problems build up, become connected, and create wicked problems that are impossible to ignore. The 2008 financial crisis we described at the start of this chapter is a case in point.

Weeding out functional stupidity sounds like a great thing to do, but it always comes at a cost. Often this is huge. Constant questioning can create doubt, uncertainty and conflict. Too much time can be wasted thinking and debating. Toes might be stepped on. People might be embarrassed and hurt

It has good and bad sides.

The Marine Corps of the corporate world

John Sculley’s description of a typical meeting at Pepsi-Cola’s headquarters during the early 1980s

every tenth of a market share … An executive whose share was down had to stand and explain – fully – what he was going to do to fix it fast. Clearly in the dock, he knew that the next time he returned to that room, it had better be fixed … Always, there was another executive in the room, ready to take your place

War metaphors were frequent. Managers described themselves as the Marine Corps of the business world. They were physically and mentally very fit. They hit the gym for frequent intensive workouts.

The Marine Corps culture meant that its executives felt under pressure to do their utmost. They focused intensely on results, worked very hard and gave little consideration to their life outside of work. Friends and family were often marginalised. The obsession with competition – both between and within the company – nurtured a rich martial vocabulary and combative rituals to match. This energised the executives by giving them a feeling that they were proving their worth through masculine rivalry: if you happen to be part of this group of company he-men, you belong to the best, the toughest and most capable corporate warriors who can handle the fiercest competition

The culture Sculley describes was clearly functional. At the time, Pepsi moved from being a relatively marginal player in the market to challenging Coca-Cola’s leading position. But it also had negative elements. The fierce competition obstructed cooperation. The company grew obsessed with short-term results and ignored the longer-term implications

In Moby Dick, Captain Ahab says ‘All my means are sane, my motive and my object mad’.8 This is the functionally stupid person in a nutshell

The road ahead

Many organisations claim they rely on well-educated, reflective, bright people who are eager to learn. The sad reality is that they actually rely even more on almost the opposite: discipline, order, mindless enthusiasm, conformity, loyalty and a willingness to be seduced by the most ludicrous of ideas

In Part One we look at the role stupidity plays in contemporary workplaces and professions

We consider the role of cognitive biases, bounded rationality, ignorance and other intellectual traps

In Part Two we will examine five kinds of functional stupidity which are common in organisations

leadership-induced

structure-induced

untrammelled enthusiasm for brands and images

stupidity created by imitating other organisations

corporate culture can be a significant source of stupidity

In Chapter 9 we ask what might be done about stupidity in organisations

Part One: Stupidity Today

Part One Stupidity Today

Chapter 1: The Knowledge Myth

1 The Knowledge Myth

1962. That was the year the management thinker Peter Drucker was asked by The New York Times to write about what the economy would look like in 1980

rise of the new type of employee he called ‘knowledge workers

For Drucker, the rise of the knowledge worker had little to do with the changing nature of the economy. What had changed was the people doing the work. Following the Second World War, the general level of education in the US had risen. Expectations had risen too: these new more highly educated employees wanted to be treated as independent professionals, not skilled workers. In Drucker’s view, the new class of knowledge workers ‘expect to be “intellectuals”. And they find that they are just “staff”’.2 The mismatch between expectations and the jobs available meant that ‘knowledge jobs have to be created’.3 If they were not, he warned, ‘it would present an infinitely more dangerous and more explosive problem than our racial ghettos’.4 (elite overproduction)

Following the widespread social protests during May 1968, Alain Touraine was struck by profound changes taking place around him. Like Drucker, he was worried about highly educated younger people who wanted intellectually stimulating jobs but found themselves completely alienated at work

Daniel Bell was thinking about similar things. He too saw profound changes afoot. ‘Post-industrial society is basically an information society

Bell looked to research scientists staffing the labs of large corporations. Bell thought these scientists were at the cutting edge of a profound shift in how knowledge was used to create innovation

These ideas only intensified during the mid-1990s as entirely new economic sectors associated with the internet became fashionable