The King's new clothes and the insanity of CEO's

What Fairy Tales can teach us about business and life.

A long time ago in a country far far away two hucksters went to visit the King. They told the King that they had a special loom that enabled them to make the finest cloth imaginable. The cloth was so fine that it was close to invisible, in fact it was so fine that only the wise and clever could see it.

The King of course, not wanting to look a fool suddenly realised he could see it. Amazingly enough, so could the Queen, the whole royal household, all the Dukes, and Earls, and Knights, and ladies in waiting. All the good and the great could see it

"The telephone has too many shortcomings to be seriously considered as a means of communication"

William Orton, President of Western Union 1876.

The King decided to parade through the streets to show his people his amazing new outfit and how wise he was.

Everyone agreed it was beautiful, and very fine. Until one small boy stepped out from the crowd, looked sideways at the King and shouted “Hang on a minute, I can see the King’s tallywacker!!!”

Chaos ensued, people ran around screaming. The two hucksters started to pack their bags, assuming the game was up.

Calm was only restored after the small boy was put to death for treason and everyone could go back to wisely staring at the King’s new clothes knowing how brilliant they all were.

“The subscription model of buying music is bankrupt.” Steve Jobs (2003)

In far away land everyone died of hypothermia the next winter.

The King’s new clothes is a story designed, like so many fairy tales, as a life lesson. The lesson of course that hubris and group think will get us all killed. Additionally the idea that because someone was right in the past that they will be right in the future is a fallacy.

“There's no chance that the iPhone is going to get any significant market share. No chance.”

Steve Ballmer. Microsoft CEO

To often in the modern era CEO’s can catch their own reflection in the mirror and fall in love with what they see. To be fair to them it’s all too easy to do. Once an organisation rewards compliance more than thinking, once the executive staff have decided that their own continued existence is more important than the long term health of the business, then acquiescence and the stroking of the egos begins.

CEO’s by their nature, are typically somewhat unusual types and often if not kept in check can easily lose sight of reality, particularly if they have been successful in the past. It is human nature.

So if we know this can happen, and also assuming we don’t want to die of hypothermia when the winter comes what can we do about it?

For the full answer read my new book The End of Certainty "How to thrive when playing by the rules is a losing strategy". 

The book will be published on August 6th 2015.

But as a quick overview of the top 10 tactics to employ to stop the CEO madness.

  1. Build a culture early in the business where being a contrarian is not a career death sentence

  2. Use evidence to make decisions. As the facts change so must your position. Anything else is dogma and has no place in business.

  3. Use techniques such as the 10th man to ensure that there is always a counter view.

  4. Build teams of diverse individuals with very different backgrounds.

  5. Ensure roles such as CEO and Chairperson are never combined and that the chairperson is independent

  6. Use non executive directors effectively and not simply as rubber stampers of existing policy.

  7. Ask your customers about your business regularly.

  8. Beware of sycophants. Remember if two people in business always agree one of them is redundant.

  9. Beware of analysts. They are good are examining an existing business environment but are no use when the success criteria change.

  10. Keep the CEO away from mirrors.

Work on the principle that power corrupts and absolute power corrupts absolutely. Everyone starts a business with the best of intentions. But like Frodo and the ring the love of power often becomes too much. So build a strategy early to help everyone cope.

“Windows Phone will be No. 2 in Smartphones by 2015”  IDC, Gartner, IHS

Many if not all the great CEO’s, scientists and inventors in history have made terrible decisions and horrible predictions. Having one, two or ten good ideas does not make any of us immune to making catastrophic decisions later.

"I predict the internet will soon go spectacularly supernova and in 1996 catastrophically collapse"

Robert Metcalfe, inventor of Ethernet, December 1995

Businesses need to support their CEO’s in a way to help them keep their feet on the ground. They often don’t appreciate it at the time, but if organisations want to continue to be able to innovate they must resist the siren call of the brilliant CEO and the slippery slope of groupthink.


With wiser counsel and a better management structure that Kingdom far away and long ago might have gotten rich selling the world coats.