Back in 2009, when Andrew Ross Sorkin wrote Too Big To Fail, Moe Tkacik picked up on one particular anecdote: that Joe Gregory, who “loved being the in-house philosopher-king” at Lehman Brothers, was prone to handing out copies of Malcom Gladwell’s Blink to employees, and “had even hired the author to lecture employees on trusting their instincts when making difficult decisions”. Then Joe Weisenthal, reading Tkacik’s post, immediately reblogged it under the very TBI headline “GUILTY: Malcolm Gladwell Caused Lehman To Fail”.
Now, in a classic case of history repeating itself, we find a new book — this time Frank Partnoy’s Wait —
reprising the same Gladwell-Lehman story.* Indeed, it’s in some ways the whole reason that Wait was written. Here’s Partnoy talking to Smithsonian’s Megan Gambino:
What made you want to take a closer look at the timing of decisions?
I interviewed a number of former senior executives at Lehman Brothers and discovered a remarkable story. Lehman Brothers had arranged for a decision-making class in the fall of 2005 for its senior executives. It brought four dozen executives to the Palace Hotel on Madison Avenue and brought in leading decision researchers, including Max Bazerman from Harvard and Mahzarin Banaji, a well-known psychologist. For the capstone lecture, they brought in Malcolm Gladwell, who had just published Blink, a book that speaks to the benefits of making instantaneous decisions and that Gladwell sums up as “a book about those first two seconds.” Lehman’s president Joe Gregory embraced this notion of going with your gut and deciding quickly, and he passed copies of Blink out on the trading floor.
The executives took this class and then hurriedly marched back to their headquarters and proceeded to make the worst snap decisions in the history of financial markets. I wanted to explore what was wrong with that lesson and to create something that would be the course that Wall Street should have taken and hopefully will take.
This time, it was Andrew Sullivan filling the role formerly played by Joe Weisenthal. His headline in The Daily Beast: “Did Malcolm Gladwell Cause The Recession?”
After seeing this all play out twice, I thought it was maybe time to ask Malcom Gladwell whether he caused Lehman to fail. Alternatively, did he merely cause the greatest recession in living memory? He replied:
First, Blink was not a book about the benefits of making instantaneous decisions. It was a book examining the power of instantaneous decisions–and a good half of the book (the last half) is devoted to all the ways that snap judgements can go awry. (The last two chapters, for example, are about how gut reactions caused the Diallo shooting and how gut reactions resulted in women being discriminated against in orchestras). The talk I gave to Lehman was along those lines: it was a talk, arising out of the book, about the “fragility” of gut decisions–and about how if they are to be useful they have to be defended against bias and corruption. Of the many journalists who have reported on that talk, you are the first to actually ask me what I spoke about. The others, I suppose, just made an instantaneous decision about what I must have said.
Put aside the lesson about media memes, and what you have here is a classic case of arrogance trumping knowledge. Check out the wonderful Wikipedia list of cognitive biases, and you’ll find dozens of reasons why it’s quite possibly a very bad idea to trust your gut. But people like Joe Gregory, no matter how much they know about such things, and no matter how astutely they can recognize them in others, still insist that they are very good at overcoming such biases themselves.
In reality, of course, they’re not. If you make decisions quickly, you will make bad decisions a lot of the time, no matter how many times you read Gladwell’s book. Grown-ups think about important decisions, and take time over them. That’s certainly the lesson of Portnoy’s book. But, it turns out, that’s exactly what Gladwell told Lehman, too.
Update: Portnoy emails to clarify that the Gladwell-Lehman story is not actually in Wait, although he was indeed inspired by it. He also writes:
Your last paragraph is dead on. I’ve always described WAIT as a “friendly amendment” to BLINK, though I guess it’s inevitable that some people will misread (or not read) my book in the same way some misread Gladwell’s.