Self-Serving Bias Often Leads to Poor Decisions

It is difficult to give personal advice. When I am unsure whether the information is self-serving, I usually refrain from giving advice or deeply probe. Either approach results in some level of discomfort. How do we know if we have all of the relevant facts, particularly when the facts are not readily decoupled from people’s own biases and are often effects of previous actions which are opaque? 

 Recently, a client asked me for professional advice. The self-serving problem is acute because I am being paid to provide advice that might be based on biased or incomplete information with significant reputational and financial consequences.

 The client has a problem that is reminiscent of one that occurred in the 1990s at a large US bank. The general counsel (GC), a Harvard-trained lawyer, was aware that an employee had done something wrong that might have severe negative consequences. But it was not yet clear whether there was any illegality. The GC repeatedly brought the issue to his CEO. The GC said to his CEO “I think we should make the Board aware even if we don’t have a legal duty to do so.” The CEO continued to delay informing the Board. Unfortunately, everything eroded into a major scandal and down went the CEO and the GC with him.

 The answer for situations like the one facing my client and the GC at Salomon Brothers might be provided by Ben Franklin when he said, “If you want to persuade, appeal to interest not to reason.”

In the GC’s case, the self-serving bias was so extreme that despite knowing the right thing to do, the GC did not escalate. If the GC had said, “Look this is a powder keg, it’s something that will embarrass the company, me and you if it hits the papers. It will take away our money and status in the best case, in the worst case, jail time,” the CEO might have listened.