Subliminal

pierce our cognitive illusions. By broadening our perspective to take into account how our minds operate, we can achieve a more enlightened view of who we are. But even as we grow to better understand ourselves, we should maintain our appreciation of the fact that, if our mind’s natural view of the world is skewed, it is skewed for a reason.

I walked into an antiques store while on a trip to San Francisco one day, meaning to buy a beautiful vase in the window that was reduced from $100 to just $50. I walked out carrying a $2,500 Persian rug. To be precise, I’m not sure it was a $2,500 Persian rug; all I know is that $2,500 is what I paid for it. I wasn’t in the market for a rug, I wasn’t planning to spend $2,500 on a San Francisco souvenir, and I wasn’t intending to lug home anything bigger than a bread box. I don’t know why I did it, and none of the introspection I performed in the ensuing days turned up anything. But then again, there are no social norms regarding the purchase of Persian rugs on vacation whims. What I do know is that I like the way the rug looks in my dining room. I like it because it makes the room feel cozy, and its colors go well with the table and the walls. Or does it actually make the room look like a breakfast nook in a cheap hotel? Maybe the true reason I like it is that I’m not comfortable thinking that I spent $2,500 on an ugly rug to lay over my beautiful hardwood floor. That realization doesn’t bother me; it gives me a greater appreciation of my unseen partner, my unconscious, always providing the support I need as I walk and stumble my way through life.

CHAPTER 10 Self How our ego defends its honor … why schedules are overly optimistic and failed CEOs feel they deserve golden parachutes

The secret of rulership is to combine a belief in one’s own infallibility with the power to learn from past mistakes.

—GEORGE ORWELL

IN 2005 HURRICANE Katrina devastated the Gulf Coast of Louisiana and Mississippi. More than a thousand people lost their lives, and hundreds of thousands of others were displaced. New Orleans was flooded, with some parts of the city covered by fifteen feet of water. The U.S. government’s response was, by all accounts, badly botched. Well, by almost all accounts. When Michael Brown, the head of the Federal Emergency Management Agency, was accused of mismanagement and a lack of leadership, and Congress convened a panel to investigate, did the inexperienced Brown admit to any shortcomings? No, he said the poor response was “clearly the fault of a lack of coordination and planning by Louisiana governor Kathleen Blanco and New Orleans mayor Ray Nagin.” In fact, in his own mind, Brown seemed to be some sort of tragic, Cassandra-like figure: “I predicted privately for several years,” he said, “that we were going to reach this point [of crisis] because of the lack of resources and the lack of attention being paid.”¹

Perhaps in his heart Brown accepted more responsibility. Perhaps these public statements were simply an awkward attempt to plea-bargain the public accusations against him down from negligence to impotence. Disingenuousness is a little harder to argue in the case of O. J. Simpson, the former sports hero accused of murdering two people but acquitted in criminal court. Afterward, he couldn’t seem to stay out of trouble. Finally, in 2007 he and a couple of buddies burst into a Las Vegas hotel room and seized sports memorabilia from dealers at gunpoint. At his sentencing, O.J. had a chance to apologize and ask the judge for leniency. He would certainly have had strong motive for a bit of either honest or phony self-criticism. But did he do the self-serving thing and, in an attempt to cut a few years off his sentence, express regret for behaving as a criminal? No, he stood his ground. His answer was sincere. He was sorry for his actions, he said, but he believed he had done nothing wrong. Even with years of prison at stake, Simpson felt the need to justify himself.

The stronger the threat to feeling good about yourself, it seems, the greater the tendency to view reality through a distorting lens. In his classic book How to Win Friends and Influence People, Dale Carnegie described the self-images of famous mobsters of the 1930s.² Dutch Schultz, who terrorized New York, wasn’t shy about murder—and he certainly wouldn’t have been diminished in the eyes of his colleagues in crime had he simply described himself as a man who had built a successful empire by killing people. Instead, he told a newspaper interviewer that he saw himself as a “public benefactor.” Similarly, Al Capone, a purveyor of bootleg alcohol who was responsible for hundreds of killings, said, “I’ve spent the best years of my life giving people the lighter pleasures, helping them have a good time, and all I get is abuse, the existence of a hunted man.” And when a notorious murderer named “Two Gun” Crowley was sentenced to the electric chair for killing a policeman who had asked for his driver’s license, he didn’t express sadness over taking another man’s life. Rather, he complained, “This is what I get for defending myself.”

Do we really believe the enhanced versions of ourselves that we offer up to our audiences? Do we manage to convince ourselves that our corporate strategy was brilliant even though revenue has plummeted, that we deserve our $50 million exit package when the company we led lost twenty times that amount in the three years we ran it, that we argued the case brilliantly, though our client got the chair, or that we are only social smokers, though we go through the same pack a day whether we see another human being or not? How accurately do we perceive ourselves?

Consider a survey of nearly one million high school seniors.³ When asked to judge their ability to get along with others, 100 percent rated themselves as at least average, 60 percent rated themselves in the top 10 percent, and 25 percent considered themselves in the top 1 percent. And when asked about their leadership skills, only 2 percent assessed themselves as being below average. Teachers aren’t any more realistic: 94 percent of college professors say they do above-average work.⁴

Psychologists call this tendency for inflated self-assessment the “above-average effect,” and they’ve documented it in contexts ranging from driving ability to managerial skills.⁵ In engineering, when professionals were asked to rate their performance, between 30 percent and 40 percent put themselves in the top 5 percent.⁶ In the military, officers’ assessments of their leadership qualities (charisma, intellect, and so on) are far rosier than assessments of them made by their subordinates and superiors.⁷ In medicine, doctors’ assessments of their interpersonal skill are far higher than the ratings they received from their patients and supervisors, and their estimates of their own knowledge are far higher than objective tests bear out.⁸ In one study, in fact, physicians who diagnosed their patients as having pneumonia reported an average of 88 percent confidence in that diagnosis but proved correct only 20 percent of the time.⁹

This kind of inflation is equally the rule in the corporate world. Most business executives think their company is more likely to succeed than the typical company in their business, because it’s theirs,¹⁰ and CEOs display overconfidence when entering into new markets or embarking on risky projects.¹¹ One result of this is that when companies acquire other firms, they typically pay 41 percent more for the target firm’s stock than its current price, feeling they can run it more profitably, while the combined value of the merging firms usually falls, indicating that impartial observers feel otherwise.¹²

Stock pickers, too, are overly optimistic about their ability to choose winners. Overconfidence can even lead otherwise savvy and rational investors to think they can predict when a stock market move will occur despite the fact that, on an intellectual level, they believe otherwise. In fact, in a survey conducted by economist Robert Schiller after the crash on Black Monday in October 1987, about one-third of investors claimed that they had a “pretty good idea when a rebound” would occur, though few, when asked, could offer an explicit theory to back up their confidence in predicting the market’s future.¹³

Ironically, people tend to recognize that inflated self-assessment and overconfidence can be a problem—but only in others.¹⁴ That’s right, we even overestimate our ability to resist overestimating our abilities. What’s going on?

IN 1959, THE social psychologist Milton Rokeach gathered three psychiatric patients to live together in Ypsilanti State Hospital in Michigan.¹⁵ Each of the patients believed he was Jesus Christ. Since at