Friday, August 18, 2017

Understanding Family Business Problems through Science, Part 1

By Scott E. Friedman, Andrea H. HusVar, and Eliza P. Friedman

Welcome back to the blog. This week we continue our discussion of “Stage 4 Planning” and how science—particularly the “fight or flight response” theory—can help us understand the innate challenges that threaten family businesses.

In his best-selling book, Thinking, Fast and Slow, Nobel Prize Winning author and professor Daniel Kahneman observes that “[b]y and large . . . the idea that our minds are susceptible to systematic errors is now generally accepted.”[1] Professor Kahneman’s observation about the susceptibility of our brains to make systematic errors extends in numerous directions and is the subject of a growing body of scholarly books and articles on our complex human nature, including, for example, our systematically irrational behavior,[2] the on-going tug of war between reason and impulse,[3] our propensity for making snap decisions,[4] how we actually pay less attention than we believe we do,[5] and how imperfect our memories are.[6]

Perhaps as problematic for family owned businesses as any other systematic error that our minds make is our propensity to react—and overreact—in “fight or flight mode,” an immediate and automatic response to that natural selection imbued our ancestors with when faced with true existential (and perceived) threats where delaying could be fatal. While modern civilization has thankfully reduced or eliminated many such threats, our brains continue to overreact in fight or flight mode to even petty annoyances, perhaps angering us when someone takes “our spot” in a crowded parking lot, or the concern we might feel if someone fails (for whatever reason) to respond promptly to a text or email. Dr. Dan Baker describes this phenomenon in his best-selling book What Happy People Know, writing:

The forces of evolution, by their very nature, endowed [our neurological] fear system with tremendous power, because in the brutal early epochs of mankind, it alone kept us alive. It gained us the hair-trigger capacity to spring into action at the first hint of threat. The automatic fear response became faster than the process of rational thought, faster than experiencing the feeling of love, faster than any other human action. . . . Unfortunately, in modern life, what is good for survival is often bad for happiness and even for long-term health.[7]

Join us next week as we take a closer look at how fear-based thinking negatively impacts family businesses and what can be done to remedy these situations.  

[1] Daniel Kahneman, Thinking, Fast and Slow 10 (2011).

[2] See, e.g., Dan Ariely, Predictably Irrational: The Hidden Forces that Shape Our Decisions xix-xx (2008) (“Although a feeling of awe at the capability of humans is clearly justified, there is a large difference between a deep sense of admiration and the assumption that our reasoning abilities are perfect . . . [W]e are not only irrational but predictably irrational . . . our irrationality happens the same way, again and again.”) (emphasis in original).

[3] See, e.g., Dan Ariely, The (Honest) Truth About Dishonesty: How We Lie to Everyone—Especially Ourselves 113–14 (2012) (“Being human and susceptible to temptation, we all suffer in this regard. When we make complex decisions throughout the day (and most decisions are . . . complex and taxing), we repeatedly find ourselves in circumstances that create a tug-of-war between impulse and reason. And when it comes to important decisions (health, marriage, and so on), we experience an even stronger struggle. Ironically, simple, everyday attempts to keep our impulses under control weaken our supply of self-control, thus making us more susceptible to temptation.”).

[4] See, e.g., Malcolm Gladwell, Blink: The Power of Thinking Without Thinking 85 (2005) (“We don’t deliberately choose our unconscious attitudes . . . [O]ur unconscious attitudes may be utterly incompatible with our stated conscious values.”).

[5] See, e.g., Christopher Chabris & Daniel Simons, The Invisible Gorilla: And Other Ways Our Intuitions Deceive Us 38 (2010) (“For the human brain, attention is essentially a zero-sum game: If we pay more attention to one place, object, or event, we necessarily pay less attention to others. Inattentional blindness is thus a necessary, if unfortunate, by-product of the normal operation of attention and perception.”).

[6] See, e.g., Schacter, supra note 87, at 4 (“I propose that memory’s malfunctions can be divided into seven fundamental transgressions or ‘sins,’ which I call transience, absent-mindedness, blocking, misattribution, suggestibility, bias and persistence.”) (emphasis in original).

[7] Dan Baker, What Happy People Know 6–7 (2002).

Scott E. Friedman, Andrea H. HusVar, and Eliza P. Friedman, Advising Family Businesses in the 21st Century: An Introduction to “Stage 4 Planning” Strategies, 65 Buff. L. Rev.,  May, 2017

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