CEOs and people who made lots of money were once highly esteemed. They were superstars. Now that many have tumbled down from their pedestals, we can't help but wonder how we were so badly misled. How could we have thought so highly of them and entrusted them with our hard earned savings or chosen them to lead our businesses and organizations?
One reason is that most of us aren't very good at judging other people. This is because we tend to look at people through a tangle of cognitive biases, prejudices and preconceptions which prevent us from seeing what a person is really like. As a result, we can make poor judgments about whether a person is competent and can deliver what they promise or are worthy of our trust.
This is particularly true when we first meet people. Research shows that we make judgments about people extremely rapidly. In a study of how students rate instructors, it was found that students make their ratings during the first few minutes of the course. These judgments remain constant throughout the semester regardless how the instructor subsequently performs.
The reason we make such snap judgments is that our brains are easily overloaded. We are bombarded with so much information when we first encounter a person that we can't possibly process it all. So we look for simple clues from which we can make generalizations and put people in tidy boxes.
This process not only happens as we eye people from afar but it also happens in our everyday interactions with people in both social and business settings. By the time we shake someone's hand, we have already made a judgment about who they are and what they are like.
There are a number of external features of a person that we use to make these quick judgments. A person's position and credentials are popular. The mere fact that someone is introduced as an "expert", has a title like "CEO," or attended a particular school causes us to make all sorts of assumptions about their abilities and competence.
Similarly, if we are told that someone makes a lot of money, we are likely to automatically stamp them as smart and a top performer. The problem, as we have recently learned, is that such judgments are often inaccurate. A number of people who used to make a lot of money have proved to be not as smart as we thought and in some cases even crooks who have played by their own rules.
How people dress is another popular short-cut. In business settings, employers frequently judge people by their clothes. If a person is dressed in expensive clothing or wearing costly accessories, they are judged more competent and successful.
Angelo Mozilo, CEO of Countrywide during its disastrous foray into the subprime mortgage business, paid close attention to how well people dressed when he was making hiring decisions. Perhaps Countrywide might not have become so entangled in the subprime mortgage crisis if he had looked for people who were frugal dressers. This might have led him to pick people who were more risk adverse and less prone to corporate spending excesses.
People's physical attractiveness is another source of our unconscious biases. Research has found that good looking people are considered to be more honest and intelligent than people who are less attractive. Tall people are more likely to be hired and promoted than short people and as might be expected make more money than short people.
One of the most powerful factors in our judgments about someone is what our friends and colleagues think about them. If a person is an accepted member of our social group, we look at them much less critically. Bernard Madoff used this bias to find investors for his bogus funds.
We also have trouble shedding our biases once we think that we know what someone is like. After the news broke that Madoff's funds were just sand castles in the air and he confessed to duping innumerable people, a friend said, "There must be an error. It must be another Bernie Madoff." Another person who had invested in Madoff's funds at the urging of a good friend stated that despite his losses, he still trusted his friend.
So how do we overcome these biases? We need to become behavior watchers. It's what people do that really tells you who they are, not what their title is, how they dress, how much money they appear to make, or whom they know. Only by carefully observing people over time can we really know what they are like and determine whether they truly know what they are doing and act with integrity.