June 05, 2019
Case categories include: Executive Development Founder’s Insights Leadership
We all know that when it comes to making final decisions, the buck stops with the CEO. Since founding the Alliance of CEOs in 1996, I’ve developed immense respect for how CEOs face challenges that few non-CEOs fully appreciate.
For example, no CEO has deep experience in every facet of building and running a company – especially in these rapidly changing times. CEOs must be fast and agile learners and know just enough to make successful, organizational decisions that align a wide variety of areas: R&D, engineering, sales and marketing, operations, finance, HR, legal and IT. They must attract a team of experienced executives and learn when they can trust their opinions and when to be wary of individual biases, including their own as CEO.
This is part of the reason why diversity – especially diversity of intelligence – is so important to a CEO and why it is a fundamental principle behind the Alliance of CEOs. Allow me to explain.
How Our Brains Actually Work
In 2002, Daniel Kahneman received the Nobel Prize in economic science for his groundbreaking work, which resulted in his best-selling book, Thinking, Fast and Slow. He discovered that our brains operate two systems when making decisions.
System 1 is our fast and intuitive mode, which reacts quickly to danger and is designed to decide whether to flee or fight in order to survive. It automatically identifies causal connections between events, even when the connection is spurious. This is why people jump to conclusions, assume bad intentions, give in to prejudices or biases and buy into conspiracy theories. They focus on limited available evidence and invent incoherent stories, causal relationships or underlying intentions. System 1 quickly forms a judgment or impression which System 2, our rational brain, endorses.
System 2 is our slow, deliberate and analytical mode of reasoning. We like to think that we use System 2 for our most difficult decisions. But, in addition to being more deliberate and rational, it can also be quite lazy. Too often, instead of slowing things down and analyzing them, System 2 is content to accept the easy but unreliable story about the world that System 1 believes.
Over the past 23 years, I’ve had the privilege to meet and get to know thousands of CEOs while building the Alliance community. When I meet CEOs for the first time, they often believe they would prefer to meet with other CEOs who have dealt with the exact same problem they’re currently facing in order to gain fast answers that will move them along to the next step. This is very logical and works for operational or tactical problems that can be resolved by accessing better information.
CEOs are responsible for developing a clear and compelling vision with strategies that enable their unique organizations to succeed. These big, impactful strategic questions can never be answered by our System 1 brains. Fortunately, most CEOs build solid management teams responsible for addressing most of the day-to-day operational issues. However, complex strategic questions are not linear. They require us to think creatively and differently, so we may create competitive advantages in ways other companies have not done before.
The Benefits of Intelligent Diversity
The Alliance of CEOs was founded with a strong belief in the power of all kinds of diversity, especially cognitive diversity. We intentionally bring together leaders from different industries, business models, core competencies, views and unique personal journeys. Most innovative ideas are generated from the outside and are often borrowed from companies in different industries. Many new startup CEOs who plan to transform their industry have been known to refer to their companies as the Uber or the Airbnb for their industry.
One need only look at the natural world to see the risk of too little genetic diversity within a species. Without genetic variation, a population cannot evolve in response to changing environmental variables and, as a result, faces increased risk of extinction. For example, right now, a disease is threatening the existence of the Cavendish, the world’s top-selling banana, representing 99% of the market. Because commercially produced bananas are all clones, the industry has no way to stop or contain the disease. Researchers are working hard to develop another variety with commercially viable qualities before the Cavendish is wiped out.
It’s more comfortable to surround ourselves with people who share similar views and values. But we must learn to become comfortable with being uncomfortable. The world is changing more rapidly than ever and our ability to change typically happens when we think differently than we did before. Therefore, it’s imperative that we seek out as many intelligent people as we can with experience, knowledge and ideas different from our own. By surrounding themselves with intelligent diversity, CEOs will be better equipped to think creatively, and to make big, strategic decisions that move their organizations forward.