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Self-Serving Bias: Why Some Leaders Don't Learn From Their Mistakes

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SELF SERVING BIAS

In prepared remarks before the panel investigating the roots of the financial crisis, former Federal Reserve Chairman Alan Greenspan blames the subprime crisis on foreign investors, nonbank lenders, the spread of securitized mortgages and financial firms for failing to manage their risk. The one person he did not blame was himself, or his institution -- the Fed.

--Shahien Nasiripour, The Huffington Post, reporting on Greenspan's testimony before the Financial Crisis Inquiry Commission on April 7, 2010

Despite the fact that the Federal Reserve, as the nation's largest bank, did not take any significant action to curb the reckless lending that precipitated the Great Recession, Alan Greenspan seemed to apportion blame everywhere but to himself. At one point in his testimony, he even appeared to blame the fall of the Berlin Wall. (His logic: Seeing the truly awful job the Soviets were doing running their economy brought about distrust of "central planning" of any kind. So evidently, the excesses of Capitalism are Communism's fault.)

Alan Greenspan was instrumental in determining U.S. financial policy for 19 years, but he doesn't feel that he was responsible for the failure of the policy he helped create, or that it's failure was to some extent avoidable. Is he crazy? No. Did he consciously and willfully mislead the Commission (and the rest of us)? Very probably not. Without actually being Alan Greenspan, I can't say for sure, but the odds are good that he really does believe he's not to blame. And as much as we might like to think otherwise, many of us would feel the same way if we were in his shoes.

Psychologists call this the self-serving bias -- the tendency to see ourselves as responsible for our successes, but to see other people or the circumstances as responsible for our failures. We reason this way to protect our self-esteem, and to protect our image in the eyes of others. We also do it because it really feels right. Think of an actor on stage: As a member of the audience, you are focused on what he is doing, but if you're the actor, you see everything but yourself. You see your fellow actors, the scenery and the audience, but you can't actually watch you. Because of what's called the actor/observer difference, it's easy for Alan Greenspan to look back over his 19 years at the Fed and see all the factors that played a role in screwing things up, and harder for him to see his own role in it.

Psychologist Tony Greenwald's 1980 American Psychologist article1 on this topic cited some very amusing examples of the self-serving bias, taken from a San Francisco Sunday Examiner and Chronicle article on the explanations drivers gave to their insurers after an accident. You'll notice that some of these people went to remarkable lengths to deflect blame:

  • "As I approached the intersection, a sign suddenly appeared in a place where a stop sign had never been before. I was unable to stop in time to avoid an accident."
  • "The telephone pole was approaching. I was attempting to swerve out of its way when it struck my front end."
  • "A pedestrian hit me and went under my car."
  • "My car was legally parked as it backed into the other vehicle."

Studies show that in fact, nearly us fall victim to this kind of bias (though we tend to think that only other people do -- yet another example of the bias at work). The upside of all this self-protection is that we don't feel so bad when things go wrong, and can stay optimistic about our future chances for success. The downside, particularly for the leaders on whose judgment we must rely, is that we don't learn anything from our mistakes if we don't recognize that we made them in the first place. How can you do a better job next time if you won't even admit you did a bad job this time?

From a motivational perspective, the best way to handle a failure is to look honestly at how your own actions contributed to the outcome, emphasizing what you can change so that your performance improves from now on. And even though, in his mid-80s, Alan Greenspan is unlikely to serve a second round as Fed Chairman, he would probably like to get an accurate handle on what went wrong -- something he will never do unless he admits that he was actually driving.

1 A. Greenwald (1980). "The totalitarian ego: Fabrication and revision of personal history." American Psychologist, 35, 603-618.

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