Unbridled power fuels overconfidence, bad decisions

March 2nd, 2012 - 4:07 pm ICT by IANS  

Washington, March 2 (IANS) Unbridled power can foster bad decisions, with grave consequences for all.

For instance, British Petroleum (BP) executives downplayed potential risks tied with their oil well in the 2009 Gulf of Mexico oil rig disaster, claiming that it was practically unthinkable that a major accident would ever occur.

But that same oil rig exploded, killing 11 workers and causing a massive oil spill that’s costing BP an estimated $100 billion, says a new study.

For Nathanael Fast, assistant professor at the Marshall School of Business, University of Southern California and his co-authors, the BP case represents only one example that illustrates a fundamental truth in the world of business: unbridled power can hinder decision-making, the journal Organisational Behaviour and Human Decision Processes reports.

Fast’s recent study, co-authored with Niro Sivanathan of London Business School, Nicole D. Mayer of the University of Illinois, Chicago, and Adam Galinsky of the Kellogg School of Management at Northwestern University, helps explain how power can fuel overconfidence, which negatively impacts decision-making, according to a California statement.

“The aim of this research was to help power holders become conscious of one of the pitfalls leaders often fall prey to. The overall sense of control that comes with power tends to make people feel overconfident in their ability to make good decisions,” Fast said.

“What we found across the studies is that power leads to over-precision, which is the tendency to overestimate the accuracy of personal knowledge,” said Fast.

In the study, those who were made to feel powerful actually lost money betting on their knowledge. In contrast, those who didn’t feel powerful were less risky with their bets and didn’t lose money.

“Power is an elixir, a self-esteem enhancing drug that surges through the brain telling you how great your ideas are,” said Galinsky of the Kellogg School. “This leaves the powerful vulnerable to making overconfident decisions that lead them to dead-end alleys.”

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