Business success stories may be instructive, but we need to know more about why smart people make bad decisions. Sydney Finkelstein, a professor at Dartmouth’s Tuck School who has studied these crucial questions for 15 years, tells how decisions really get made and describes the four signals that can alert you when emotions are interfering with your thinking.
Business bookshelves teem with success stories. Companies in search of excellence always go from good to great; Jack Welch tells how he made General Electric a winner; we learn the “seven secrets of intelligent people” and “the art of investing." Writers pay lip service to learning from mistakes, but, in practice, no one says much about failure.
Yet, bad decisions pose some of the most interesting questions in business. Why did so many smart people invest with Bernie Madoff? As the housing bubble swelled, why did so many bankers keep doubling down on subprime mortgages? In the great meltdown, why did Ken Lewis, then CEO of Bank of America, overpay so wildly for Merrill Lynch? Why did Dick Fuld of Lehman Brothers refuse to sell his company until it was too late?