Albert Einstein believed that we couldn’t solve our problems with the same thinking we used when we created them.
World War II Gen. George Patton liked to say that if everyone was thinking alike, “then somebody isn’t thinking.”
In 1972, social psychologist Irving Janis coined the term “groupthink” to describe how a group prioritizes harmony and conformity over critical thinking, leading to flawed decision-making and potentially disastrous outcomes.
“The advantages of having decisions made by groups are often lost because of powerful psychological pressures that arise when the members work closely together, share the same set of values and, above all, face a crisis situation that puts everyone under intense stress,” Janis said.
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The Center of Corporate Governance cited the 2008 collapse of Lehman Brothers as probably “the best example of what happens when groupthink becomes the dominant factor in the boardroom of an enormous bank.”
“And Lehman Brothers wasn’t the only bank involved,” the organization said on its website. “The groupthink epidemic that developed at the top of the global corporate banking sector resulted in a catastrophic financial crisis and global recession.”
Billionaire philanthropist Manoj Bhargava says a company can lose sight of why it is operating a certain way. (Photo by Saumya Khandelwal/Hindustan Times via Getty Images)
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Billionaire says chasing profits is a mistake
The chairs of boards and CEOs of companies are well aware of the damaging effects of groupthink, but “it is still more prevalent than absent in businesses today,” the center says.
Manoj Bhargava knows the dangers of outdated thinking.
Bhargava, the billionaire philanthropist and corporate executive who founded 5-hour Energy drinks, discussed this topic — and many other important issues — in his recently launched The Business of Everything podcast.
“Every large organization has issues and they’re created over time,” he said. “And there’s a reason that they were created and then you get to a point where you don’t know what the hell is going on.”
The purpose of a company’s efforts eventually disappears, Bhargava said. Things become regimented and the company doesn’t know why it’s operating a certain way, “but you’re doing it because the last guy taught you to do it.”
He pointed to the medical profession, where interns are working 24-hour shifts.Â
“Now tell me, do you learn more on that 23rd hour?” he asked. “And more importantly, do I really want to be a patient when you’re on your 23rd hour? But the reason they do it now is because every doctor said, ‘Well, I went through that. I don’t know why we shouldn’t punish you?'”
Bhargava, majority owner of TheStreet’s parent, The Arena Group AREN, says, “There’s a misunderstanding of what business is to begin with.”
“Business people think, oh, it’s chasing profits, you gotta make a lot of money,” he said. “When it really isn’t that.”
“What really business is,” he continued, “is picking the right project and then doing it well, and the result is profit or the result is success. Because if you chase profits, you end up going bankrupt. You do dumb stuff that you shouldn’t do.”
Bhargava: Every dollar matters in building a business
Bhargava says common sense and a sense of urgency are vital to creating a successful business, but more importantly, business people should know what not to do “because what not to do will kill you.”
“I am not the smartest cat, but I can say that I have a lot of experience and that we have built several businesses in completely different industries,” he said.
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“And none of them are in tech, by the way. I don’t like true technology companies because if somebody else comes up with a better technology, you’re dead.”
Many companies will buy big fancy computers, Bhargava said, “because that’s what you’re supposed to do when you have a business” or because that’s what the company across the street is doing.
“And what does that have to do with building cars?” he asked.
A self-described “cheapskate,” Bhargava said that when he started 5-hour Energy 20 years ago, he bought a used desk because he didn’t want to spend any money.
“I still have that desk and it’s got some strips that are missing,” he said. “One time our CFO said, you know, when we were making pretty really ridiculous amounts of money, ‘shouldn’t we change our furniture?’ So I said no.”
“I’m not going to make the company about who has the best furniture,” Bhargava explained. “Nobody in our company complains about furniture because I have the worst desk.”
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