November 11, 2013
In the follow-up to his 2007 book, The Halo Effect, Rosenzweig, a professor at IMD (Institute of Management Development) in Lausanne, Switzerland, looks at how leaders can make better business decisions when the stakes are high. While the standard advice for decision-making centers on being aware of our tendency for common biases and avoiding them, Rosenzweig argues that this rationale doesn’t apply to all types of decisions. Instead, he suggests that we address real-world, complex decisions through a combined skill set that he calls “left brain, right stuff”: “a deliberate and analytical approach to problem solving” and “the intelligent management of risk.” In order to show readers how to exercise our capacity for critical thinking, the author examines elements associated with decision-making, including exerting control, outdoing an adversary, and generating better performance in the business world. In addition, he discusses pervasive errors and biases that undermine our judgment, such as overconfidence. Executives will find Rosenzweig’s chapter on the distinctiveness of a leader’s decisions valuable, while academics will more likely appreciate his section on decision models. Although Rosenzweig’s advice is sound and his prose is highly readable, only the most determined executives are likely to sift through his considerable research, and benefit from his theories. Agent: Max Brockman, Brockman, Inc.
October 15, 2013
Rosenzweig (IMD Business School, Switzerland; The Halo Effect: And the Eight Other Business Delusions that Deceive Managers, 2007) offers a different slant on how successful businessmen and other leaders assess risk. Cognitive psychologists have accumulated convincing evidence about how many of our decisions depend on intuitive thinking, a right-brain function, rather than left-brain, rational judgment. Numerous experiments have demonstrated how a positive mindset and reliance on intuition can play an important role in success in sports, but our right-brain rapid-response system may also lead us to overoptimism and biases that cloud judgment in other situations. The author concurs with Nobel Prize winner Daniel Kahneman that it is necessary to be wary of gut reactions when we are faced with making decisions as investors or consumers, especially in situations that leave us open to manipulation. "That makes good sense when we're asked to make a judgment about something we cannot influence," writes Rosenzweig, but the story changes when it is up to us to make things happen. In a high-stakes, win-or-lose competitive situation, effective leaders need to evaluate intangibles. "When we can influence outcomes, positive thinking--even holding [overoptimistic] views that are somewhat exaggerated--can be beneficial," he writes. The author provides examples taken from real-life situations involving major corporate leaders--e.g., competitive bidding for government contracts or mergers and acquisitions--in which undue caution can be more dangerous than overoptimism. Rosenzweig's title deliberately recalls the phrase coined by novelist Tom Wolfe to describe an experienced fighter pilot's willingness to take calculated risks. Overoptimistically underbidding may mean taking a loss rather than making a profit, but it can also be a spur to creative solutions that cut costs. "Strategic decisions are not made by individuals acting alone," writes the author, "but are taken by executives acting within an organizational setting, who must mobilize others to achieve goals." A provocative reconsideration of the power of positive thinking.
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