Monthly Archives: September 2012

Only the brave

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Erik F Nielsen is Global Chief Economist of Unicredit, one of continental Europe’s leading banks. Prior to that, he had been Chief European Economist at Goldman Sachs, for several years. That was the job he held when I first met him, in 2011.

I have always admired Erik’s ability to see through the fog, his being brave in his well-rooted capacity to read people and their behaviour.

For a second, let’s go back to the situation in Europe a year ago. On 10 October 2011, Moody’s and Fitch had cut Italy’s rating heavily (Moody’s by three notches to A plus – yet higher than today’s…). Erik pointed this out, but then clearly argued:

“But sometimes the market gets it all wrong, as is the case now.”

Hence, his argument continued, Italy’s debt was a much safer bet than others, such as the UK’s triple A. Italy would get things done and make it.

Erik gave me the occasion for my first tweet ever, on that very day:

Almost a year (and many hundred tweets) later, Professor Monti, Italy’s Prime Minister, could speak at the Council on Foreign Relations, on 27 September, pointing out that

…by the way, Italy will have next year a balanced budget in structural terms,… And we will be one of the first two, hopefully, EU member states to have reached that… very demanding objective, which implies, to give you an idea, that given the huge stock of debt, we will have and we are having year after year some 5 percent of GDP primary surplus.

Only the brave (as Erik Nielsen, Professor Monti and, luckily, many others with them) could have seen all this, a year or so ago.

I will finish with another tweet and a little hope, again from Professor Monti’s speech at the Council on Foreign Relations:

Seven more years of Monti’s leadership, as seven years is the mandate that the Italian Parliament will award to our next President of the Italian Republic.

Only the brave…

Tommaso Arenare

Wrong brain, wrong education and that little nudge to help

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As a fact, in the US listed companies, about 15 board members out of 100 are women.

As another fact, the US has historically rewarded merit and competencies more than many other countries.

How can then happen that in selecting people, one of life’s most crucial choices, we are so biased as to unconsciously neglect merit and competencies?

Breaking the impasse is possible, if we try to tweak some consequences of two unconscious biases through a little nudge.

Similarity bias happens when we select people that are more similar to us, as opposed to people who appear more different. Evolution has fostered this trait, as a key manner to survive ever since the difficult times when we would live in the savannah, trying to escape from animals and all sorts of dangers.

We have the wrong brain and the wrong education. When making people decisions, we fall pray into a series of unconscious psychological biases, such as surrounding ourselves with similar people with whom we feel naturally comfortable. Many of these biases were very effective for our primitive ancestors, but they are no longer useful for building great teams which require complementary and highly sophisticated skills.

Claudio Fernández-Aráoz, Author of Great PeopleDecisions, 2007

A “similarity bias” results when individuals are more likely to imitate cultural models that are perceived as being similar to the individual, based on specific traits (such, for instance, age, gender, geographical location and so on…).

Similarity bias is even enhanced by our other bias, which we call snap judgement, whereby we unconsciously make up our mind on someone during the first milliseconds after we meet. I have separately written about the many benefits of overcoming snap judgements.

The combination of snap judgements and similarity biases is the one reason why gender diversity (but also age diversity, geographic diversity and possibly many other aspects of diversity) is so difficult to happen without a little nudge (such as that of a proper law).

That little nudge lets us overcome unconscious fears, to the advantage of merit, competencies and corporate governance.

Tommaso Arenare

Ambassadors of merit

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Together with Claudia Parzani, a Partner at Linklaters, Anna Zanardi, an executive coach and Marco Massarotto, a digital entrepreneur and social media expert, I have the privilege of being part of the “faculty” of “In the Boardroom“, a programme that Valore D, an Italian association of companies to support female talent and leadership, is offering free of charge (the faculty itself operates at no charge) to a selected number of exceptional Non Executive Director candidates.

A group 35 of super-talented executives was selected to spend one full day per month, for a year, in a classroom, sharing and discussing best practices in corporate governance, with a view to becoming instruments to change corporate governance for the better, from inside the Boardroom.

After a first full day in the classroom with these exceptional executives and professionals, I will celebrate a very simple thing: these people’s entry in the Boardroom will be the result of a process entirely based on merit and competencies, overcoming the drawbacks of traditional biases in the selection candidates.

Ambassadors of merit.

This is, per se, an exceptional occasion to celebrate, as well as an example to become best practice beyond the borders of Europe.

Tommaso Arenare