Gary Hamel: All Bankers Who Get Federal Funds Should Be Required To Tattoo "Stupidity is Contagious" On Their Foreheads

I was at a workshop led by the renowned management guru Gary Hamel last week, who has written multiple bestsellers, most famously Competing for the Future with C.K. Prahalad and most recently The Future of Management. Gary briefly mentioned an editorial that he had published in the Wall Street Journal a couple weeks ago called "Failures of Morality and Leadership."  I checked it out, and not only is it insightful, the ending is pretty funny, as he proposes that all bank CEOs who get bailout money ought to be required to tattoo four things on their foreheads.  Here is the section where Gary provides this advice (I notice that the WSJ didn't include the twist I heard Gary say, that these ought to be written backwards, so when they look in the mirror every morning, they will read it the right way!).  There hasn't been much to laugh about in the crisis, but I laughed at this:

In the meantime, though it may be wise to add a stipulation to whatever bailout plan Washington's wrangling bureaucrats manage to concoct. Specifically, all the bankers who receive public money must agree to have the following eternal truths tattooed on their foreheads:

Alchemy doesn't work. What was true for Isaac Newton all those centuries ago, is true today, you can't turn dross (garbage loans, in this case) into gold (triple A-rated securities), no matter how clever you are.

Things that can't go on forever usually don't. If an extrapolated trend produces ludicrous results (like million-dollar starter homes), it will soon reverse itself—so don't keep betting it won't.

There's an inescapable correlation between risk and return. Maybe there's someone out there who can produce a positive alpha year after year, but it probably isn't you, or anyone you know.

Stupidity is contagious. As a banker, you need to reflect for a moment on the mad obsession you and your colleagues have had with leverage and complexity, and then face up to the fact that you're as susceptible to silly fads as Japanese schoolgirls.

This may not cure bankers' bulimia, but it's a start.

The last is my favorite -- and empirically supported by much research on social comparison and behavioral contagion and the old Walter Lippman line, "Where all think alike, no one thinks very much."

Comments

[Bob McIlree]

While I agree that stupidity is contagious, it wasn't the 'mad obsession' with leverage and complexity that caused this mess...it was the obsession with outrageous fees, over-the-top bonuses, and greed. The former were simply tools they used to get there.

[Peter G. Klein]

I support Gary's proposal, but only if the sayings are also tattooed on the foreheads of every Treasury Department official, Federal Reserve Board administrator, FDIC commissioner, and member of the House and Senate banking committees.

[Stephen Hart]

This has to be one of the best, and funniest observations I've read on the current situation.

Brilliant wisdom. :)