Jamie Dimon is in the hot seat. Between the trading losses and his recent testimony before the Senate Banking Committee, he’s in every newspaper and broadcast. He even has a Harvard professor speculating on "How Could He Miss That?", as it relates to the $2 billion+ loss. I’m not sure it’s as complicated as Professor Bazerman writes.
Maybe Mr. Dimon just didn’t fully understand the trade and as the CEO of the largest financial institution in the country, he didn’t want to ask. I can’t really know what happened at JP Morgan, but I have witnessed the reluctance to ask questions, especially from managers and senior level executives. For some reason, once you’ve been promoted you think you need to know everything.
Here’s what I have witnessed from other managers and executives:
- Someone has used acronyms they don’t understand but won’t ask. How do I know? Because they ask me when we’ve left the room or gotten off the call.
- A customer describes the complexity of their business and they don’t really understand. How do I know? Same as above. Plus the lack of clarifying questions is actually an indication that the material is either not being listened to or not understood.
- A new product or program is green lit when there are obviously major problems with it. How do I know? Because the product or program failed miserably. And there were no serious questions asked upfront, likely because someone didn’t want to look stupid.
Somehow we have to make it okay for anyone at any level to ask questions and admit they don’t understand something. Frankly, I think if risk executives fully understood the credit derivative product, we might have avoided the financial collapse. But I’m sure they were too embarrassed to ask when everyone around them seemed so high on the product.
I don’t completely discount Professor Bazerman’s theory that you can really look at something and not see what’s in front of you, But I’d like to see what happens if everyone would admit that sometimes, they just don’t understand.