Maintain a clear sense of long-term objectives but acknowledge the limits on your day-to-day actions.
Jim Collins’ Built to Last was one of the best business books of the past two decades. One of the more intriguing ideas it contains is “the Stockdale paradox”.
James Stockdale was the most senior American serviceman to be captured during the Vietnam war. (He ended his career, sadly, as the inept vice-presidential candidate in Ross Perot’s quixotic attempt to win the presidency in 1992). Over seven years of captivity, Stockdale suffered repeated torture and beatings at the hands of the Vietcong.
Stockdale described the state of mind that sustained him through his long and brutal mistreatment. He explained how he never lost hope of release or rescue in the long run, but responded with resignation, even fatalism, to daily events he knew he could not influence. Collins called this combination of belief and pragmatism the Stockdale paradox. Those who died in captivity, Stockdale observed, were frequently the optimists, the people who said “we’ll be out by Christmas”. Their will was undermined by the repeated dashing of their hopes.
Roy Jenkins, the late British politician, expressed Stockdale’s position in graphic terms: “Clutching at straws is only dangerous if, when they fail to offer support, the wishful thinker abandons resistance and sinks with them.” Jenkins was describing a momentous illustration of the Stockdale paradox – the mood of Winston Churchill after becoming prime minister in 1940. When France fell, Churchill reiterated his objective – not just of survival, but of victory. But neither Churchill nor any other British leader could have had any realistic conception of how that goal would be achieved. Even if the Germans failed to invade Britain, a British invasion of Europe without overwhelming assistance and support was inconceivable. Churchill understood that American participation in the war was a precondition but had no means, and no plan, for bringing this about. The events that changed the direction of the war – the failed German attack on Russia and the Japanese bombing of Pearl Harbor – were neither predictable nor predicted.
Stockdale’s lack of freedom of action was particularly clear. Churchill had in one sense great authority – he was leader of a large empire and commander of a powerful military machine. But his actions were heavily constrained by circumstances he could neither influence nor anticipate.
We are always inclined to believe we have more influence over events than we do. Individuals will gamble more on lotteries in which they can choose the numbers. People underestimate the danger of road accidents – when they are at the wheel – but overestimate the danger of flying – when they are at the mercy of, but also beneficiaries of, the skills of highly trained pilots.
The US president has more power than anyone in the world. Yet, as Barack Obama learns each week, the room for manoeuvre, whether in Afghanistan or over domestic healthcare, is far more limited than the range of theoretically available options would suggest. The two presidents during Stockdale’s confinement – Lyndon Johnson and Richard Nixon – both discovered that they had less influence on events than they believed. Johnson was trapped into an escalation of America’s involvement in Vietnam: Nixon compounded error on error until an initially trivial incident threatened him with impeachment.
Business leaders find themselves similarly constrained. In the most memorable remark of the decade. Citigroup’s Chuck Prince told this newspaper: “So long as the music is playing, you’ve got to get up and dance.” The man who held the most powerful position in the financial services industry was the prisoner of his own organisation.
The only answer to these dilemmas is the one Stockdale found and Churchill illustrated so graphically. Maintain a clear sense of long-term objectives but acknowledge the limits on your day-to-day actions. The gravest errors in the financial and business world are made, not by those who control or know too little, but by those who control or know less than they think.
