Bad News, Good News

When Jon Stewart interviewed Alan Greenspan several months ago, he asked why we need the Fed if free markets are efficient. The former Chairman’s answer indicated just how strong a role human psychology plays in the economy. He explained that our overreaction to both good and bad economic news needs to be dampened and that’s what the Fed does.

At the beginning of his term, President Obama was criticized for being too negative when he spoke about the economy.  Yesterday, he gave a more upbeat assessment.  CNN contributor Ed Rollins suggested a change in tone was necessary, given that our taxes our due today.  I suspect, however, there’s more to Obama’s strategy, and that he’s consciously managing the psychology of the American people. His example is one managers can learn from.

Brain science teaches us that the “unexpected” stops the mind’s automatic processing, and a failure or crisis is a powerful “unexpected.”  We’re stopped in our tracks, and so we stand back, reflect, and think about what we need to do differently.  This is a necessary step if we’re to change our behavior, but the accompanying fear also slows down the mind and narrows our vision.

When we’re optimistic, the mind speeds up and makes more connections. We become smarter. In tough times, we need to be stopped so that we can learn and change. But then we need to summon all of our mind’s potential to turn things around.

Managers should take this lesson to heart.  Hard times can be a great opportunity.  They prompt us to rethink what we’re doing and they make us more willing to change.  But if we’re to make the most of change, we need to be optimistic going forward.  Perhaps the most critical thing for managers to do in times like these is to express their confidence that things will get better.

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Practical Morality

Unless we were victims of Bernard Madoff, the AIG bonus flap was the tipping point. Greed is out and morality is in. As our sense of what’s right and what’s wrong when it comes to our relationships with others, our moral indignation rises when we feel we’ve been taken advantage of.

The latest discoveries of brain science call attention to the role emotion plays in our moral judgements. David Brooks sees our moral judgements as based on “rapid intuitive decisions [involving] the emotion-processing parts of the brain,” rather than our reasoning. Steven Pinker has demonstrated how easy it is for us to use our reason to justify our behavior as moral and that of others as immoral.

Evolution drives us to judge caring for our family as moral, even at the expense of others, since they share our genes. The AIG executives could certainly view their negotiated bonuses in that light. So how should we determine what’s moral?

Perhaps by recognizing that morality is practical because it ensures the good relationships with others we depend on to survive. Scientists see our oversized brains as having evolved to manage those relationships. One of the things they excel at is empathy.

We can certainly view ourselves as deserving the bonus we agreed on, even though the company is on federal life support, but our empathy should alert us that others won’t share our view.

Accepting the bonuses wasn’t immoral, but failing to empathize and anticipate how others would view the bonuses was both immoral and impractical. AIG is unlikely to get more federal money without triggering even more massive public indignation.

Executives need to consciously empathize with those they depend on to buy their products, to invest in their stock, and to come to their aid when they’re in trouble. When considering any action, they should ask how it will play in Peoria. It’s impractical not to.

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A Mind for Profit

The fantastic discoveries of neuroscience transform our understanding of how the mind works, and the very nature of the world we live and work in.  But I’d be willing to bet that there aren’t many people in business right now that care. The struggle for financial survival leaves little bandwidth for anything else.

In this blog, I’m going to demonstrate why managers should care, because the hard data of science can teach them how to improve performance.  For example, Jonah Lehrer’s latest book (http://www.jonahlehrer.com/) draws on brain research to present an airtight case against the objective thinking prized in the business world, and to demonstrate how paying attention to our feelings leads to better financial decisions.

While much of what we’re learning challenges our common sense, it also supports some of our most strongly held beliefs, providing scientific justification for doing the right thing.  In a recent post, Roy Spence and Haley Rushing (http://www.huffingtonpost.com/roy-spence-and-haley-rushing) argue for business to be purpose driven.  They write, “Business leaders today need to get over the belief that principles and profit can’t exist in harmony with one another.”

That’s a hard case to make to a manager whose lackluster financial results are jeopardizing her job.  But brain science’s discovery of mirror neurons proves that integrity is profitable.  The brain cells of both our customers and employees mirror the intent behind our actions.  They’re quick to pick up on our character and will imitate our state of mind.

When we act with integrity, they will too.  There’s plenty of data demonstrating that customers are more eager to buy when they trust the character of salespeople, and the performance of employees increases when they believe in the values of their leaders. Both revenue and productivity increase.

While Spence and Rushing believe “history will show” their argument is right, that’s not enough to convince managers to change.  But improvement in objective measures of performance is.

The view of the world brain science gives us is often counterintuitive and yet at times reassuring. But because it teaches us to get results, it’s always going to be profitable.

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