Balancing exuberance with caution

The extraordinary optimism of China and India at this year's World Economic Forum in Davos echoed that of American business leaders at Davos in the late '90s. China is expecting its GDP per capita in 2010 to be double that of 2000, while one Indian chief executive talked of double-digit business growth for him being 25% to 30% rather than just 10%-plus.

by Knowledge@Wharton 8-21 February 2006
Last Updated: 23 Jul 2013

But unbounded optimism can drive sub-optimal choices. In the late '90s, for example, Enron CEO Kenneth Lay was among the Davos stars whose secrets of success were most in demand among forum attendees. In exuberant times therefore, it pays leaders to be cautious.

At Davos this year, Germany's new Chancellor Angela Merkel and President Pervez Musharraf of Pakistan offered takes on their own leadership challenges. As leader of Europe's biggest economy, Merkel said she must overcome a legacy of cynicism and entitlement to revitalise Germany. Her strategy will involve liberalising the economy, cutting red tape and devolving authority. But business would also be expected to exercise its greater freedoms responsibly.

Musharraf underlined his very different environment by emphasising the need for a leader to never panic. A clear understanding of a situation and a strategy for addressing it, as well as a strong team to execute, are vital. Consultation is important but leaders must then make a decision - even when, as is often the case, they don't have as much information at their fingertips as they would like.

He offered the view that decisions are often based on two-thirds facts and one third a leap in the dark. If your decision is more than a third a leap in the dark you'll be regarded as impulsive, but increase the two-thirds element and you won't be seen as a leader.

Source: View from Davos: leadership today requires more caution, less exuberance
Michael Useem, director of Wharton's Center for Leadership and Change
Knowledge @ Wharton, 8-21 February 2006

Review by Steve Lodge

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