Invantage Advising

Category: All Invantage Posts

  • Introduction to Leadership Series (1st in a series)

    Introduction to Leadership Series (1st in a series)

    What Kind of Human Being Do you Want at the Top?

    Looking for a new CEO or University president?  You want vision, toughness, flexibility and technical skills. You’re in search of a high-powered individual with a great track record, a strategic thinker who will turn your business around, or attract investors or donors, a cracker jack operations manager who can expand markets, relate to the company culture—or change it if necessary. You know what problems you’re facing, what your goals are and what kind of individual you need at the helm.  And there are hundreds if not thousands of great scholarly and more practical articles on leadership to guide you (here and here  for example).

    But what kind of human being do you want at the top?

    There’s an unending stream of articles and research that looks at great leaders and describes their characteristics.  Here’s a small selection from the popular business literature:

    Top ten qualities that make a great leader (Forbes): honesty, delegate, communication confidence, commitment, positive attitude, creativity, intuition, inspiration, approach

    22 Qualities that make a great leader (Entrepreneur): focus, confidence, transparency, integrity, inspiration, passion, innovation, patience, stoicism, wonkiness, authenticity, open-mindedness, decisiveness, personableness, empowerment, positivity, generosity, persistence, insightfulness, communication, accountability, restlessness

    The 5 qualities of great leaders (Fast Company): flexibility, ability to communicate, courage tenacity and patience, humility and presence and being responsible)

    8 characteristics of great leaders  (Huffington Post): collaborative, visionary, influential, empathetic, innovative, grounded, ethical, passionate.

    I love these lists and couldn’t resist including the details.  I find them instructive and inspiring.    The academic literature is comparable.  Leadership studies look at myriad aspects of leader behavior, leader traits, leadership initiating structures.  There are path-goal theories and the contingency model of leadership.  What makes the best, most successful leaders in a range of environments and situations?

    But with my background in psychoanalysis and psychiatry, I was interested in something else– the fundamental human traits and capacities that any leader who shoulders great responsibility must have to carry out leadership responsibilities. Essentially, the question I wanted to answer was how can we define what it takes to be a mature adult human who can be trusted with lives and fortunes. What do you need to know about a potential leader before you look at your specific needs and your candidates’ specific strengths?

    To my surprise, I didn’t find much in the literature on the fundamentals a leader must possess to carry out his or her responsibilities. I felt such a model needed to be grounded in both theory and practice. But during my research, I discovered a remarkable document, the Army Field Manual on Leader Development, that does a stunning job of spelling out the essential traits and capacities every leader must possess—or determinedly develop where there are weaknesses. And, I found, The Army Field manual is founded in the sound psychological research and psychoanalytic theory I was familiar with on ego functions and executive functions, concepts that spell out the highest level mental capacities.

    I distilled five crucial traits and capacities from the Field Manual—Trust (the ability to trust others and inspire trust), Critical Thinking/Judgment, Self-Awareness, Discipline/Self-Control and Empathy. Before you consider other specific talents and potential, make sure your potential leaders are strong in these five core capacities of character and ability.  I’m not offering a list of qualities that predict success.  Instead, these are the absolute necessities — without them, other strengths are irrelevant.

    I’m going to explore each of these five traits in greater depth in a series of blog posts.    In my elaboration of each of the core capacities, I draw deeply on the Army Field Manual, as well as my own background as a psychiatrist and psychoanalyst with three and a half decades of clinical practice immersing myself in the motivations, emotions and often irrational behavior of human beings.

     

  • Why Professional Investors Need to Understand the Concept of Regression

    Why Professional Investors Need to Understand the Concept of Regression

    Regression:  Looking at the Psychology of Finance through a Psychoanalytic Lens

    First in a Series

    We often labor under the misconception that once we reach adulthood, our level of psychological functioning is more or less consistent.  A sophisticated asset manager or investor knows that he must contend not just with cognitive biases (anchoring, recency, loss aversion, confirmation bias and all the other little demons the behavioral economists have identified) but also with “dangerous” emotional forces- greed, fear, the herd effect and so on.  He has also made an effort to identify some personal and unique decision patterns—watching out for a habit of being too impulsive, or too conservative, or risk averse, or overly risk tolerant.

    But it is useful to add to this mix the concept of “regression”—defined as the “reversion to an earlier mental or behavioral level” (Merriam Webster).  There is no such thing as a steady state of mental functioning.  We humans are inherently fluid and changeable.  No matter how experienced, mature or calm, everyone is subject to the phenomenon of psychological regression from time to time.

    Think about it this way.  You know what you’re like at your highest level of functioning.  How you think, perceive, feel, decide, anticipate, plan and understand. But when you’re tired, sick, freaked out about something at home?  It is inevitable that there will be times when you slide down from your highest level of performance to a regressed, or earlier level of psychological functioning.  In that regressed state, your cognitive and emotional capacities are not working at their best– most critically, decision-making and self-control.

    It’s important to know (1) when regression is likely to occur, (2) what happens when it does, (3) how to recognize that it is occurring, and (4) what to do about it.

    When does regression occur?

    Well, it’s complicated.  There are generic and expectable triggers for regression that no one is immune to—excessive fatigue, illness, preoccupying anxiety.  If your wife is just about to have a baby, or your husband just lost his job, you better know that your decision-making capacity is not going to be at its best and your emotionality is going to be heightened.

    Then there are other triggers for regression that are less obvious but also nearly universal:  group pressure is a key example of this.  Another is an experience of shame or humiliation.

    And finally, there are idiosyncratic triggers for psychological regression.  You can be in a more regressed state on the anniversary of a loss or traumatic event in your life.  Some people get regressed when things are too good, or too exciting.  You need to learn your personal thumbprint—when are you personally most vulnerable to regression?

    What happens when a person is regressed?

    Just as there are generic as well as idiosyncratic triggers for regression, there are universal manifestations of psychological regression and some that are unique to you.

    First, this is what happens to everyone in a regressed state:  your ability to think critically and exercise judgment is inherently lessened and more apt to be swayed by emotion.

    Specifically, in a regressed state you are more likely to:

    • Make impulsive decisions
    • Rationalize breaking your investing rules
    • Have blind spots to crucial information
    • Reveal too much
    • Jump on the bandwagon
    • Fail to notice and override cognitive bias errors

    Let’s break down “thinking” into some of its components:  discrimination, ability to see the big picture, ability to compare, categorize, rank, assess and predict.  Judgment includes, importantly, risk assessment and anticipation of the consequences of your decisions. Perceptual capacity is altered in a regressive state, though at times intuition and creativity can actually be increased. Emotions are stronger and closer to the surface; discipline is diminished.  Memory can play tricks on you, subtly weaving aspects of the past into the present.  And you’re much more likely to act before thinking.

    Now, what are some of the unique emotional and cognitive states a person can slide into when a regression is triggered?  The variations are innumerable, since they are dependent on the specifics of an  individual’s personality and life history, but here are a couple of examples.  One client of mine  would become pre-occupied with office politics, especially what he saw as injustices, and lose his focus.  Another gets rebellious, chafes at the rules imposed on his trading, even the ones he’s laid down himself, and makes impulsive trades.  Still another gets anxious about irrelevant factors and can’t pull the trigger on decisions.

    Of course, there are degrees of regression. Some regressive states can be quite subtle but nevertheless have a significant impact on decision making.  And to make it even more insidious, unless alert to the possibility you may not even be aware that you are in the midst of a regressive process.

     How to recognize that psychological regression is occurring

    Recognition requires some practice in self-awareness and reflection. On a day when you lose your phone, leave your laptop at the hotel, and your suitcase at the restaurant checkroom, you definitely know you’re regressed.  (No kidding, all this happened to me in one 3-hour period).  Physical symptoms can be a clue—headaches, GI problems, uncharacteristic sleep disruption.  A flurry of errors and oversights is another sign—sending an email by “mistake” to the worst possible recipient, going through a stop sign because you didn’t “see” it, or forgetting to make a promised call.   A general feeling of being confused or muddled, or overly emotional can be a signal that you are somewhat regressed.

    What to do about it?

    Often, merely recognizing the state is enough to get you on your way back to your normal, higher level of functioning.  Wait till it passes, because it will.  You will return to your usual level of functioning.  If you can, take a break, get rehydrated, eat something, go home.  Meanwhile:

    • Return to your investing rules and follow them rigorously —it’s no time for improvisation.
    • Don’t make major decisions.
    • Stop yourself from making significant judgments, including about yourself and whether you’re worthless or great.
    • Be very alert to your vulnerability to group psychological pressures—it’s not the time, if there ever is one, to jump on the bandwagon.
    • Postpone conversations with anyone who is in a position to judge you or anyone who makes you feel more confused.

    Regression is not another word for “stress”.  It is a complex state where a person functions at an earlier, more emotional, less disciplined level.  It can be triggered by stress, and often is.  But it can just as easily be triggered by a big increase in your portfolio or positive recognition from your fund’s Manager.

    Understanding regression, knowing when it is likely to befall you personally, and having a response plan in place gives you a significant competitive advantage—because regression happens to everyone, and not infrequently.  The difference can be you know about it and they don’t.

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    Copyright: Invantage Advising

    July 2017

     

     

     

     

  • The Character and Abilities of a Leader

    The Character and Abilities of a Leader

    What are the essential capacities a leader who shoulders responsibility for the fate of an enterprise and its people must have?  Marrying psychoanalysis and the Army’s Field Manual on Leader Development (unlikely but strangely compatible bed-fellows!) I came up with a five item checklist of absolutely fundamental, essential character and cognitive traits and abilities.  The tool was originally developed in a political context and was featured in an LA Times Op-Ed and in my guest appearance on The Last Word with Lawrence O’Donnell. But its business applications are very intriguing.

    Here’s the checklist:

    1. Trust (both the ability to trust others and to inspire trust)
    2. Judgment/Critical Thinking
    3. Discipline/Self-Control
    4. Self-Awareness
    5. Empathy

    To me, the exciting potential  of this tool is its common sense basis and portability.  But don’t confuse its straight forwardness for shallowness.  The checklist is founded on a century of research and scholarship in psychoanalysis, psychiatry and psychology and has been field tested by the military.

    Anyone whose decisions are going to effect the fate of people and businesses for whom he or she is responsible needs to meet this bar.  If lives or fortunes are at stake, these capacities need to be robust. A Board looking at new CEO candidates, a search committee recruiting a University President has a vast amount of data on the people they are considering, and a long list of priorities to meet.  But I suggest that every leader candidate under consideration also be subjected to this simple but essential test.

    An intuitive gut level judgment is likely the best measure of these vital human capacities. I recommend that when a group is using this tool, each member make their assessment on the five traits independently before the team comes together to compare notes.

    The value of simple, straightforward, human judgment comes through in the essays of Warren Buffett.*

    He writes,  “For our part, we like dealing with owners who care what happens to their companies and people. ”  (Emphasis added).

    And more from Buffett:  “When you have able managers of high character running businesses about which they are passionate, you can have a dozen or more reporting to you and still have time for an afternoon nap.  Conversely, if you have even one person reporting to you who is deceitful, inept or uninterested, you will find yourself with more than you can handle…

    We [Buffett and Charlie Munger] tend to continue our practice of working only with people we like and admire.”

    *The Essays of Warren Buffett:  Lessons for Corporate America, Fourth Edition (Lawrence Cunningham)

  • A Scorecard for Assessing Fundamental Attributes and Capacities of a Strategic Leader

    A Scorecard for Assessing Fundamental Attributes and Capacities of a Strategic Leader

    Five Criteria for Judging a Leader’s Fundamental Capacity to Carry out his Responsibilities and Duties

    1. Trust,
    2. Judgment/Critical Thinking,
    3. Discipline and Self-Control
    4. Self-Awareness
    5. Empathy 

    How do we recognize a person who can be entrusted with the fate of a nation, a corporation, a university or any enterprise where actions and decisions have critical impact?  There are  five critical fundamental capacities a leader in a position of great responsibility must have: trust, judgment, discipline, self-awareness and empathy. Together they constitute a model of an emotionally  mature adult with the necessary temperament and cognitive capacity to allow him or her to function at the highest level required of someone who has enormous responsibility.

    Great leadership  certainly requires additional qualities and capabilities–vision, daring, the capacity to inspire, discernment, creativity and so on.  But first, a leader must demonstrate the fundamentals enumerated in this checklist. Without them he or she cannot carry out the duties required of someone in a position of high office.

    This model of the fundamentals required of a leader is based on the principles of mature, high level mental functioning developed in the fields of psychology, psychiatry and psychoanalysis over the last 100 years. I discovered that the Army Field Manual Leader Development fm6_22 follows the same path and arrives at the same destination.  The scorecard I’ve developed is distilled  from that Army Manual. It’s virtue is that it does not require specialized knowledge such as a background in Psychiatric evaluation.  It allows a leader’s mental capacity to lead to be determined by any reasonably observant and thoughtful person using common sense.  The scorecard can also be used by leaders to assess their own strengths and weaknesses and plan a program for improvement of their personal leadership capacity.  In fact, one of the Army Field Manual’s prime missions is to assist leaders in developing their leadership abilities.

    An earlier and somewhat briefer version of this scorecard was published as an Op-Ed in the LA Times on June 16, 2017 “Is Trump mentally fit to be President?  Let’s consult the Army’s field manual on leadership” 

    *Trust. According to the Army, trust is fundamental to the functioning of a team or alliance in any setting: “Leaders shape the ethical climate of their organization while developing the trust and relationships that enable proper leadership.” A leader who is deficient in the capacity for trust makes little effort to support others, may be isolated and aloof, may be apathetic about discrimination, allows distrustful behaviors to persist among team members, makes unrealistic promises and focuses on self-promotion.

    As a psychiatrist I’ve observed that an individual lacking in trust habitually blames others when problems arise, avoids taking responsibility and consistently feels beleaguered and unfairly treated.

    *Discipline and self-control. The manual requires that a leader demonstrate control over his behavior and align his behavior with core Army values: “Loyalty, duty, respect, selfless service, honor, integrity, and personal courage.” The disciplined leader does not have emotional outbursts or act impulsively, and he maintains composure in stressful or adverse situations. Without discipline and self-control, a leader may not be able to resist temptation, to stay focused despite distractions, to avoid impulsive action or to think before jumping to a conclusion. The leader who fails to demonstrate discipline reacts “viscerally or angrily when receiving bad news or conflicting information,” and he “allows personal emotions to drive decisions or guide responses to emotionally charged situations.”

    Discipline means having the ability to forego an immediate reward for a later, greater outcome.

    In psychiatry, we talk about “filters” — neurologic braking systems that enable us to appropriately inhibit our speech and actions even when disturbing thoughts or powerful emotions are present. Discipline and self-control require that an individual has a robust working filter, so that he doesn’t say or do everything that comes to mind.

    *Judgment and critical thinking. Judgment and critical thinking are complex, high-level mental functions that include the abilities to discriminate, assess, plan, decide, anticipate, prioritize and compare. A leader with the capacity for critical thinking “seeks to obtain the most thorough and accurate understanding possible,” and he anticipates “first, second and third consequences of multiple courses of action.” A leader deficient in judgment and strategic thinking demonstrates rigid and inflexible thinking. His thinking is not innovative

    The ability to think critically and strategically is a necessary precondition for good judgment. “Sound judgment is dependent on the ability to organize thoughts logically, to plan ahead, to understand cause and effect and most importantly to anticipate the consequences of an action,” according to the Army manual.

    Problem solving is dependent on thinking and judgment, so these capacities can be evaluated by observing how the leader responds to a crisis. Most importantly, can he considers the long-term consequences of his actions.

    Because it is absolutely fundamental to effective leadership, the AFM expands at length on the specifics involved in critical and strategic thinking. This leadership capacity involves actively seeing different points of view, considering alternative explanations and looking at the big picture. Thinking, speech and ideas should be deliberate and well-organized. Assessments should include looking for gaps in information and seeking to have them filled, while looking for inconsistencies. The leader “keeps reasoning separate from self-esteem”. Planning is careful, thoughtful and based on complete information and the synthesis of the divergent views and alternative explanations which should be actively sought. Priorities are clear and well thought out.

    Helpfully, the AFM gives a vivid description of the behaviors of a leader deficient in judgment and strategic thinking. That leader fails to consider alternative explanations or courses of action. He fails to consider second and third consequences of an action. He oversimplifies, cannot distinguish the critical elements in a given situation and is unable to handle multiple lines of thought simultaneously. He Is hasty in prioritization and planning. He cannot or does not “articulate the evidence and thought process leading to decisions”.

    *Self-awareness. Self-awareness requires the capacity to reflect and an interest in doing so. “Self-aware leaders know themselves, including their traits, feelings, and behaviors,” the manual says. “They employ self-understanding and recognize their effect on others.” When a leader lacks self-awareness, the manual notes, he “unfairly blames subordinates when failures are experienced” and “rejects or lacks interest in feedback.”

    Self-awareness creates a desire to understand: motives, how feelings are affecting judgment, how one is impacting others, how one is viewed by others. The AFM describes the necessity of the capacity for “metacognition” which is the ability to think about thinking, to observe and regulate one’s thoughts.

    This capacity enables a leader to put the following essential functions into effect in all his decision making: Actively consider what he knows and doesn’t know; maintain awareness of his thinking process and its strengths and weaknesses; be alert to his emotions and their impact on his thinking; act tactfully; make accurate assessments of social cues; and listen to and let the views and feelings of others have an impact on him.

    *Empathy. Perhaps surprisingly, the field manual repeatedly stresses the importance of empathy as an essential attribute for Army leadership.

    A good leader “demonstrates an understanding of another person’s point of view” and “identifies with others’ feelings and emotions.” The manual’s description of inadequacy in this area: “Shows a lack of concern for others’ emotional distress,” is indifferent to their pain and “displays an inability to take another’s perspective.”

    Empathy is required for an effective leader because it is this capacity that allows him to accurately understand another person’s intent and to be able to foresee the impact of his actions on others. The Army guide states that the empathic leader can be identified because he is respectful of others, cares about subordinates and creates a positive work environment. A person who is deficient in this capacity He focuses solely on his own needs without considering those of others. He de-humanizes the enemy.

    As a psychiatrist, I’ll add another dimension to empathy. It’s not enough to understand how another person feels – the best dictators are adept at sensing other people’s’ vulnerabilities and exploiting them. A leader also must care about the impact of his words and actions on others. The AFM description of inadequacy in this dimension: “Exhibits resistance or limited perspective on the needs of others. Words and actions communicate a lack of understanding or indifference.”

     

     

    June 26, 2017
    Copyright Prudence Gourguechon 2017

  • The Surprising Difficulty of Saying No

    The Surprising Difficulty of Saying No

    One conundrum you face when you enter into the new world of “starting older” is that you have likely become really good at what you have always done.  You are a master of your craft.  You’ve honed a skill set that may still be of great value to the businesses and organizations you’ve been involved in.   One of my clients, an accomplished fund raiser, had been on a non profit board for a decade.  They never wanted her to leave. They had no reason to ever want her to leave the board. But she no longer enjoyed being part of that group, and the Board meetings she had once looked forward to now were an interruption and an annoyance.  I simply said, “Quit.”  She was startled because she just hadn’t thought of it!  It’s astonishingly easy to maintain long standing habits of fulfilling other peoples’ agendas rather than your own, especially when you’re good at it.

    For me, a particular combination of flattery and need is a devilish tempter encouraging me to deviate from the path of doing what I want to do is being faced with   I’ve worked for 2 decades in professional associations in my field of psychoanalysis, focussing largely on social issue advocacy and public information efforts. Most psychoanalysts are not too interested in these areas—they’re more devoted, understandably, to clinical work and scholarship. This has left me in the position of having a skill set much in need and quite rare in my profession.  “We need you. You’re the only one who knows how to do this,” colleagues entreat.  I do know how to do “this” (whether “this” is a marketing or branding effort, or training my colleagues to speak to the public and use social media, or building websites to have a public voice, or reorganizing communications and social issues committees and so on)—but the problem is I have done it all before, multiple times, and I don’t want to do it again, not in that same environment.

    One of the great attractions of Starting Older, as I’ve said, is novelty and the stimulation of new environments.  That’s part of what attracts me to business.  It’s new and different from the places I’ve spent my career.  But there is a siren song when my old colleagues say “We need you”.  They are insistent.  I can’t even fool myself with the old saw that “no one is irreplaceable”.  Of course it’s true, but it’s also true that I happened to have developed this expertise and have a talent for a certain kind of organizational work that is vanishingly scarce in my peculiar professional environment.  So what if they need me and only I can do it (at least in the immediate term)  and I still don’t want to because I’ve done it before?  I have to say no.

    I even had a dream about it. In the dream I was the target of a big campaign, being wooed with all sorts of flattery and incentives to take on a project.  After this courting went on a very long time, I realized, still in the dream but as if it were a nightmare I needed to wake up from, that there was no money being offered (true of all my organizational work for psychoanalysis) and it was yet more communications/public information work for a psychoanalytic organization.  I woke up hugely relieved to realize it was a dream. And a little stunned to see the anxiety I was obviously still experiencing about my decisions vis a vis my old organizations and colleagues.

    The truth is it’s hard to say no to people you care about and causes you care about. It’s hard to say no when you’re told “I need you” or “We need you”.  It’s hard to say no to organizations and institutions you have devoted years to.  But the great and necessary part of Starting Older is novelty and freedom, and that requires a new pitch of daring and self -centeredness.  Even to say, “Yes you need me but what I need is something else.”