I just had the pleasure of watching author Kathryn Schulz’s TED video about being wrong. As I watched I couldn’t help thinking about Oswald Grübel’s “moment of wrongness”: when he learned about UBS’s $2 billion trading loss.
Last November Grübel went on record saying “Risk is our business. I can assure you, as long as I’m here, as long as my colleagues are here, we do know about risks.” Schulz would probably submit that at the time Grübel made that assertion he genuinely felt very right about UBS’s risk management capabilities. His belief reflected his reality. It seems “we feel very right about everything” because “we don’t have any internal cue to tell us we are wrong until it’s too late.” In the case of UBS, too late was $2 billion too late.
The highlight of her presentation is the three assumptions we make when someone disagrees with us:
- We assume they are simply ignorant and have less information than us.
- If they have the same information as us, we assume they are simply idiots.
- If they have all the facts and are pretty smart, they must have their own evil agenda.
So imagine if a year ago someone at UBS had brought a potential control deficiency to the attention of risk management or Grübel. Based on the above assumptions he would have reviewed the three assumptions in his mind and likely embraced the allegation much like how Enron’s Ken Lay reacted to the memo about accounting misstatements from Sherron Watkins. Danke schoen. Auf Wiedersehen.
The trouble, she explains, is that when we stop thinking that we could be wrong is when we make mistakes. Clearly Grübel didn’t think he could be wrong.
Here’s a link to her book http://beingwrongbook.com/author