Book Review: ‘The Big Short’ and Organizational Group Think

I just finished reading Michael Lewis’s new book The Big Short, Inside the Doomsday Machine. I originally purchased the book after seeing Michael Lewis on many news programs discussing the book and how he viewed the events that caused the global economic meltdown that appears to have nearly run its course. In short, I must say that I really enjoyed the book. Michael Lewis has a great ability to describe all of the characters in such a way that you know where they are coming from and why their thoughts and actions are the way the are. I appreciated the depth of discussion of the events that occurred in the early 2000′s that created conditions which allowed the financial meltdown to occur.

Beyond the obvious storyline of the financial markets, sub-prime mortgage default swaps, and the underbelly of Wall Street, I found the underlying theme of organizational group think to be the most intriguing. We see it all the time and yet we subconsciously allow it to exist and flourish.

One of my favorite parts of the book is how Lewis describes the largest trading loss in history of $9.2 billion (give or take a few billion) made by Howie Hubler of Morgan Stanley. He goes on to describe the investors conference call on December 19, 2007 where Morgan Stanley CEO, John Mack, goes on to say “to be absolutely clear [that] as head of this firm, I take full responsibility for performance.” This goes to show that John Mack, the CEO, in fact did not understand what had happened and why. And yet he appeared to all of his CEO pears to be well informed since he had previously been a bond trader. But when it came down to it, he had no idea what his traders were doing.

This seems to be the modus operandi modern business today. To me it sounds very similar to the events that occurred at  Toyota earlier this year, as well as the Sago Mine, and now what we are seeing from BP. Continuing on faith that things will continue as they have thus far and the profits will keep coming, only to be be left wondering “what happened? It wasn’t supposed to happen like that.”

This typical organizational culture seems to become so tainted with success and profits that no one within the organization is able to speak up before things are too late. We all have seen this before. We probably have even participated in these types of group think activities.

How do we fix this, you might ask? At this point I do not have the answer, although my research has led me to Ricardo Semler’s book the Seven Day Weekend, A Better Way to Work in the 21st Century where he describes his organization Semco in Brazil. He describes an effective decision making tool that he utilizes called “why…why….why”. It is used just as it sounds. For every decision being made, every member of the team is encouraged to ask why a minimum of three times. He describes this practice as a toll he uses that improves the decision making process. It is able to help in determining if indeed the decision to act should or should not be made. I see that this process could add much more time to the decision making process but in the end the team can find greater comfort in the decision and reasoning.I see this as being a potential tool that if used effectively, could help to minimize this group think. Organizations must provide a culture that encourages discussion and dissenting viewpoints to be expressed to the group without the fear of being ridiculed or even worse fired.

Think back on all of your previous work experiences. Have you ever been pulled into a “group think”? Have you ever took a stand to speak up? How do you think we might be able to solve this problem?