Petroleum And Mineral Law And Policy Politics
This paper will examine the view that overconfidence is at the heart of many bad decisions taken at senior levels of political, military and energy business leaders. For my political leader I will examine George Bush and the decisions he made that led to invasion of Iraq in 2003. For my military leader, I will look at Adolf Hitler and the decisions he made that led to the Holocaust and the Second World War between 1939 and 1945. For my energy business leader, I will examine Jeffery Skilling and the decisions he made that lead to the Enron scandal in 2001.
According to the business dictionary Leadership is the action of leading a group of people or an organization. Leadership includes instituting a clear vision, sharing that vision with others so that they will follow willingly, providing the information, knowledge and methods to realize that vision. Bennis and Nanus stated that "Leading is to influence, to guide in direction, course, action, opinion" (Nanus). Leaders need to make decisions all the time. The process of decision making involves selecting from several options, goods or philosophies and taking action. Decision making is the mental process of reaching a decision. A position or opinion or judgement reached after deliberation. The process of planning the likely consequences of decisions, working out the importance of distinct factors, and choosing the best course of action to take.
Self-confidence is a key quality that leaders must possess. Great leaders communicate with a sense of belief in what they are doing and with positive expectations towards the achievement of their vision (Goldsmith). Self-confidence is the fundamental basis from which leadership grows. Leadership is about having the self-confidence to make decisions. Not only does confidence allow you to make the hard decisions that people anticipate from a strong leader but it's encouraging to your employees (Dao).
As much as confidence is necessary to make a good leader, too much confidence may lead to failure. Over confidence in leaders may lead to failure because an over confident leader failed to see insufficiencies and expected only positive outcomes. Leaders whose overconfidence was associated with failure to see the insufficiencies developed less effective plans and less practical vision statements (Shipman).
I will take a look at George W Bush as my political leader.
George W Bush was born on July 6, 1946 in New Haven, Connecticut. He is the oldest son of George H.W and Barbra Pierce Bush. He came from a political family with his grandfather, Prescott Bush, a U.S senator and his father as president (Greenstein). George Bush's background and profession before becoming President includes an MBA, Harvard University, 1975; BA in History, Yale University, 1968; Pilot, Texas Air National Guard, 1968-73; Founder/CEO of Bush Exploration, 1975-86; General Partner, Texas Rangers Baseball club, 1989-94 (Government). George Bush was a leader guided by instinct, selfish, action-oriented and a big risk taker.
George W. Bush was the 43rd president of the United States of America. He became president in January 20, 2001 and he served two terms, leaving office on the January 20, 2009 (bio.truestory). President Bush's time as president was quite eventful with the terrorist attack on September 11 and the invasion of Iraq. On September 11, 2001 terrorists known as "Al Qaeda" hijacked four U.S passenger airliners. Three of them hit targets in New York and Washington D.C. The fourth plane crashed into a farmer's field in Pennsylvania. The U.S was in a state of shock and commotion. President Bush started to pay more attention to Iraq allied with terrorists through the possession of weapons of mass destruction (Gov.).
In late 2002, the Central Intelligence Agency (CIA) intelligences enclosed claims that Saddam Hussein was dedicated on reconstituting nuclear weapons programs and the Iraqi biological weapons and chemical weapons material in violation of United Nations (UN) sanctions (CIA). On October 1, 2002, the CIA drew together National Intelligence Assessment on Iraq's Weapons of Mass Destruction, collecting intelligence, estimations, ideas and conclusion of 16 different U.S intelligence services. These conclusions from the different agencies included different views (Jehl). On March 20, 2003, the U.S launched an invasion on Iraq, quickly conquering the Iraqi military. On May 1, 2003, President Bush confirmed the end of major combat operations in Iraq. The Bush administration was also critiqued in ensuing months following the report of the Iraq survey group, which did not find the large quantities of weapons that the government was alleged to possess. Bush stated that "it is true that much of the intelligence turned out to be wrong" (online and agencies). Bush continued to proclaim that the war had been worthwhile and established he would have made the same decisions if he had known.
President Bush's decision to invade Iraq was based on his overconfidence. Overconfidence caused by Availability Bias. Availability bias is when human philosophy is prejudiced by what is individually significant, current or dramatic. Humans estimate the likelihood of an outcome based on the ease with which the outcome is imagined. Availability bias arises when availability-based evaluations are inaccurate by the influence on retrieval of such factors as the concreteness, drama, experience, significance, resemblance or vividness of instances (Russo). The September 11th attacks on U.S soil made President Bush invade Iraq because he believed that the Al Qaeda along with Saddam Hussein were responsible for the attacks even though the information provided by the intelligence agencies wasn't enough to go ahead with the attacks. Somebody had to pay for the attacks on U.S soil, somebody had to be held responsible and with the little, incorrect information given to President Bush, he approved the invasion of Iraq. Another cause of overconfidence which made President Bush invade Iraq was the Anchoring Bias. Anchoring bias can be described as the common human inclination to depend too heavily on, or "anchor", on one characteristic or piece of information when making decisions (Ph.D). Even though the information collected by the 16 intelligence agencies weren't all coherent and the final summary given to President Bush didn't have all the details, he based his decision to invade Iraq on the single page summary given to him. He anchored his decision on the one page summary of Iraq involvement in weapons of mass destruction.
I will now take a look at Adolf Hitler as my Military leader.
Adolf Hitler was born on the 20th of April 1889 in Braunau-am-Inn Australia, a town near the Australian-German border. Adolf's father, Alois, worked as a customs officer on the border. His mother, Klara, gave birth to two other children before him but they died as children. He also had a younger brother who died at the age of six (6). In 1896, Adolf's mother gave birth to his sister, Paula, who survived to outlive him (Smith). Adolf Hitler had a weak record at school and dropped out before completion. He had an ambition to be an artist. As a young boy, Adolf showed interest in the arts but dropped out before his dreams came to reality. In 1906, Hitler went on his first trip to Vienna, the capital city of the empire, the world's most important centre of arts, music and old-world European culture He applied to the Academy's school of painting. He was refused admission to the school because they said his paintings were unsatisfactory (Smith).
Hitler moved to Munich and during the World War I (WWI) he volunteered to serve in the German army. He was accepted into the Bavarian reserve infantry regiment. He fought bravely during the war and was promoted to the rank of corporal. On the 8th of November 1923, Adolf Hitler and some of his confederates attempted to plot a coup but failed. Adolf was arrested and sentenced to prison for five (5) years. He was in prison for only about 8 months. Hitler became the leader of the Nazi party in 1939 and remained leader till his death in 1945. He was at the centre of the founding Nazism, the start of World War II (WWII) and the Holocaust. Hitler's goals were to seize "living space" for the German people. He directed the invasion of Poland by the Germans in 1939 which led to the outbreak of WWII in Europe. One of the main Nazi concepts was racial hygiene. Getting rid of the Jews was what the Nazi's were going to do. Jews were deprived the benefits of German citizenship (Kershaw). Jews were perceived as undesirable (Shirer). Hitler was recorded saying "we shall regain our health only by eliminating the Jews" (Naimark). Between 1939 and 1945, eleven to fourteen million people died, including about six million Jews, representing two-thirds of the Jewish population in Europe. Adolf Hitler committed suicide after Germany was defeated in WWII. His invasion of Russia with no sound plan and proper provision for the Russian winter triggered the downfall of the Nazi. He was known as one of the greatest orators, very persuasive, controlling and directing.
Adolf Hitler's decisions to invade Europe and the Holocaust were due to his overconfidence. Overconfidence caused by hindsight bias, halo effect, and anchoring bias. Hindsight bias "know it all effect". People predicting the future without prior knowledge and changing their stance of prediction after reviewing results of prediction (Hoffrage). Hitler's earlier successes, despite domestic opposition caused him to believe that he was omniscient and he stopped listening to his advisors. Another cause of overconfidence was the Halo effect caused by the generals around him; they always agreed with everything he said and suggested. The anchoring bias led Hitler to believe in his philosophy; killing the Jews with no consequence coming to him. His over placement of his self and the German people led him to think that he as a German was better than the Jews.
I will now take a look at Jeffery Skilling as my Energy business leader.
Jeffery Skilling was born on November 25th 1953 in Pittsburgh, Pennsylvania and grew up in New Jersey and Aurora, Illinois. He is the second of four children from his parents (bio.truestory). Jeffery Skilling attended West Aurora High School and received his B.S. in applied science at Southern Methodist University in 1975 and an M.B.A. degree from Harvard University in 1979 (Mclean). In 1990, Jeffery was hired by Kenneth Lay and was named chairman of Enron Gas Services Co. in 1991. In 1997 he was promoted to president and chief operating officer. Enron became the biggest wholesaler of gas and electricity with $27 billion traded in a quarter by Skilling's aggressive investment strategy. Jeffery Skilling was named Chief Executive Officer (CEO) of Enron, replacing Kenneth Lay in 2001 (Salter). Skilling retired unexpectedly on the 14th of August, 2001, citing personal reasons and he soon sold a large quantity of his shares in the corporation (Oppel Jr.). Before Skilling retired, he had succeeded in making Enron the biggest wholesaler of gas and electricity. This success along with others made him overconfident and he thought he was invincible. Jeff Skilling introduced mark to market accounting which allowed Enron to book potential future profits on the very day a deal was signed. It was successes like this that made employees and board members trust and believe him without question (McLean).He applied old business models to varying and changing markets. He created a unified group of board of directors who approved every action he made, overlooking the consequences. Skilling was accused on 35 counts of fraud, insider trading, and other crimes related to the collapse of Enron (Mclean). Skilling's greatest mistakes was that he didn't fully realise (or want to realise) the risks he was taking in leading Enron into the dark borderlands of the law. In 2006 he was convicted for fraud, conspiracy to commit fraud and insider trading (Salter). The scheme of Skilling and others led to the fall of the organisation due to fraud, false reporting of revenue, corner cutting accounting practices and a general disregard for virtually every principle of business ethics. The organisation's accountants, the firm; Arthur Andersen was said to be involved in the collapse of the organisation. A close look at the facts revealed that; when Enron scandal was investigated by auditors and law enforcement agencies, it was found that Andersen was negligent at best and at worst completely in conspiracy with Enron to create false earnings reports, thereby hiding huge amounts of debt and artificially inflating stock prices beyond the point of no return (Raver).
Jeffery Skilling made most of his decisions at Enron due to his overconfidence. Skilling was able to implement mark to market accounting at Enron which allowed them to book potential future profits on the very day a deal was singed no matter how little cash came in the door. It was this accounting method that hid the true financial facts about Enron; the fact that they were actually in debt and were not making money. With the success of mark to market accounting and gas banking Skilling was over confident, anchoring on his previous successes when making decisions. Jeffery Skilling along with Enron's board members were given multimillion dollar bonuses on imaginary profits that never arrived. As long as they got paid, they paid attention only to the information that favoured them getting money. Jeff was confident due to selective perception where he paid attention only to company data that showed they were making money and ignored the rest of the information that showed the true state of the company. Jeff was able to make decisions without being questioned. He was surrounded by people who always agreed with him. This over confidence was due to the halo effect where employees agreed with his decisions based on his background. Enron was able to conceal their losses till the very end because their records did not show their losses and debts. Jeff was confident enough due to availability bias to convince investors to invest because the books showed only positive records. The combination of all these decisions made by Jeff Skilling based on his overconfidence is what led to the down fall of Enron and the imprisonment of some board members including the suicide of one of them.
In conclusion, this paper examined the view that overconfidence was at the heart of many bad decisions taken at senior levels in different lines of occupation.
I analysed George Bush as a political leader and the decisions he made that led to the invasion of Iraq in 2003. His decision to invade Iraq based on inaccurate information was a wrong one due to overconfidence caused by availability bias. President Bush went ahead with the invasion even though the information he based the invasion on was insufficient and wrong. The anchoring bias was also a cause of overconfidence when he based his decision on a single page of summary when over 16 intelligence agencies had collected information. George Bush should have paid more attention to the information provided by the agencies. He should have taken into consideration all the facts collected instead of paying attention to only information that favoured the invasion. Bush felt extremely confident about invading Iraq. He should have also considered reasons why a different action would have been a better idea.
I analysed Adolf Hitler as a military leader and decisions he made that led to the Holocaust and the Second World War. Hitler was confident due to hindsight bias because he predicted that he would take over Europe and rule the World without any prior knowledge. His earlier successes made him overconfident when he was making decisions. Hitler was also overconfident because he had around him people that always agreed with everything he said and suggested. His decision to kill the Jews was also due to overconfidence because he placed himself as a German above Jews. Invading Russia without proper plans caused the downfall of the Nazi. If Adolf had not been too confident, he would have realised that invading Russia in their winter was a bad idea.
Finally I analysed Jeffery Skilling and the decisions he made as the CEO of Enron that led the company to file for bankruptcy and the imprisonment of some of the board members. Jeff's previous success with mark to market accounting and gas banking made him overconfident in decisions he made. He anchored his decisions on his previous successes. Jeff ignored the information he chose to, paying attention to the information that made it seem the company was healthy. The halo effect was another cause of overconfidence because Jeff was surrounded by people that agreed with his suggestions and decisions without asking why. Enron under the guidance of Skilling was able to stay afloat that long due to Skilling's overconfidence based on availability bias. His decision to invest in India even though nobody else was investing at that time was because of his overconfidence due to hindsight bias. If Skilling had considered why some of his decisions may have been wrong or bad, he wouldn't have made them. Even though he didn't change his mind after considering other options, he would have had better calibrated judgement.
Different people in different works of life make bad decisions caused by overconfidence. When extreme confidence is experienced about a decision or answer, considering reasons why a different answer or decision may be right helps for better judgement.
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