Sam Bankman-Fried blamed the collapse of FTX, the cryptocurrency exchange he founded on poor “management practices.” But it truly appears to be bad leadership, and understanding the difference is part of what can make leaders and organizations successful. Understanding the derailers that appear under stress or not paying attention, can help leaders avoid giant pitfalls.
In remarks at a Dealbook conference interview with New York Times journalist Andrew Ross Sorkin late last year, Sankman-Fried said “there absolutely were management failures, huge management failures. I bear responsibility for that,” adding that “there were oversight failures, transparency failures, reporting like so many things we should have had in place.”
All these things appear true. By his account, FTX did not manage risk effectively. According to it’s Bankruptcy Court appointed receiver, the company, with billions of dollars in assets, used QuickBooks, an accounting software for companies with no more than 50 employees and less than 10 million dollars in revenue. There also appeared to be little supervision of FTX employees.
But the job of a manager is to direct work, drive results, uphold rules and manage tasks. Good management would not have made a difference. For example, driving tasks and upholding rules based on a faulty strategy or vision, or unethical practices, would have resulted in the same or worse results without good leadership.
Leaders help drive results, indeed, but by setting a purpose and vision, influencing others to get behind it, having a strategic mindset and leading change. Good leadership would have caused FTX to change in ways that could have helped the exchange and protected the investors who entrusted billions to the company.
In a presentation on “The (not so good) State of Leadership Development” last fall at the Washington City Club, Hogan Assessments CEO Scott Gregory defined leadership as “Leadership is the ability to build and maintain high-performing teams that win against the competition” (a common misconception is that non-profits and government agencies do not compete, but they do – funding and resources are just two examples). Korn Ferry, the leading talent management consultancy, enterprise leaders “envision and grow; scale and create,” they “transform the business,” instead of “run the business” as is.
Whatever definition you use, good leadership begins with self-awareness, awareness of others and awareness of your impact on them. Good leadership focuses on four categories – thought, results, people and yourself. It all begins with yourself, and what makes up you are your experiences, your values and your personality, which lead to the behaviors, sometimes called competencies, that are critical for success.
Knowing the behaviors you need to exhibit and the foundational personality traits that drive them are critical to self-awareness, which allows you to target behaviors for change and internalize those changes.
In team coaching, I work with so many leaders who haven’t got a clue about how they are seen. Here are some real examples:
- “I’m passionate”; “He’s volatile”
- “I am perceptive about politics”; “He’s cynical about everything and sees ghosts around every corner”
- “I am creative”; “She’s impractical”
- “I am socially skilled”; “He’s attention seeking”
- “I am very organized”; “She’s a controlling micromanager”
- “I just want to help people”; “She has no boundaries”
And so on.
In the FTX case, Bankman-Fried promoted himself as altruistic, which has many upsides, but one of the things altruism can do is justify about anything in the name of the goal (I say this as someone who scores 100 in Altrustic on the normative scale on Hogan’s Motives, Values and Preferences Inventory; I’m the guy tempted to rob the bank, which I have not done yet, to help the homeless person eat).
Understanding Bankman-Fried’s derailers, which are personality characteristics that can become exaggerated and overused, is an important to getting an idea of what went wrong on FTX. These characteristics tend to emerge under stress and not paying attention, although for people with clinical personality disorders, they can be persistent and pervasive. It’s impossible and unfair to make an assessment of Bankman-Fried based on media reports, but I suspect he is high on Hogan’s Mischievous scale if those reports are true (confession: so am I, but I’ll get to that later).
People who are high on the Mischievous scale tend to be seen as interesting and charming, according to Hogan research, but under stress or not paying attention, they tend to be prone to risk taking, limit testing, impulsive and manipulative. Mischievous has been shown to result in an appearance of lack of consciousness, according to the research. Altruism and a lack of consciousness can, no doubt, lead to an internal conflict, but they are just as likely to led to a synergy. One where the ends justifies the means. Robin Hood and John Brown are just two examples.
As Bankman-Fried’s example illustrates, it’s important to take into consideration. What is preventing me from robbing banks and committing fraud is self-awareness. A lifetime of bumps in the road has allowed me to develop self-awareness, seek feedback, target behaviors for change and internalize change. One business partner recently dubbed my superpower as being brutally honest to and about others, and especially about myself.
For leaders, self-awareness is crucial to keeping the train on the tracks and the wheels on the bus.
As Sigmund Freud once said, “the you you know is not worth knowing.” The bottom line is that it is how others perceive us that drives actionable self-awareness, not how we perceive ourselves.
That’s why I tend to believe that any leader who has not been assessed based on an “outside view” of their personality and values does not have a good shot at driving vision and purpose, leading change and truly being effective and strategic.