BOOK REVIEW

SUBMITTED BY: NOORIA KHAN

ERP# 18516
CLASS: MBA-M (SECTION-1)

Table of Contents
Introduction to the book:............................................................................................................................2
Knowledge Myth:........................................................................................................................................2
Functional Stupidity:....................................................................................................................................2
Stupidity Management:...............................................................................................................................3
Types of Functional Stupidity:.....................................................................................................................4
Leadership Induced Stupidity:.....................................................................................................................4
Structure Induced Stupidity:........................................................................................................................4
Imitation Induced Stupidity:........................................................................................................................4
Branding Induced Stupidity:........................................................................................................................4
Culture Induced Stupidity:...........................................................................................................................5
Managing Stupidity:....................................................................................................................................5
Conclusion:..................................................................................................................................................5

Introduction to the book:

“The Stupidity Paradox” is a book written by Mats Alvesson and Andre Spicer who are both well-known
professors and are specialists in organizational behavior. The book focuses on the practices that are
being followed in organizations all around the world and talks about whether these practices bring any
benefit to the people or to the organization as a whole who blindly follow them without giving it much
thought.

Authors talk about a concept called “Functional Stupidity” which they refer to as the “Narrow-
mindedness of people” and try to explain it through the Financial Crisis of 2008. They tell us about the
different forms of Functional Stupidity and break it into 5 different types along with giving examples of
each type. These types include the following: (1) Leadership Induced Stupidity (2) Structure Induced
Stupidity (3) Imitation Induced Stupidity (4) Branding Induced Stupidity (5) Culture Induced Stupidity.

The book ends with the authors giving us recommendations and techniques that can be employed in
order to limit this behavior from organizations, teams, as well as employees. They also conclude by
encouraging a culture in organizations where employees can be more open and rather than following in
the footsteps of others, they can be themselves so that their cognitive thinking abilities are rebooted.

Knowledge Myth:
Previously to enter the corporate world, it was essential for an individual to have at least a bachelor’s
degree in a field and to specialize in their area of expertise. However, nowadays people are becoming
more aware and competent with the help of advancement in technology as well as the access to
internet that people have because of which having just a bachelor’s degree is no longer the main
requirement that is needed for an entry level position. Rather, an individual with a varying degree of
knowledge, a fancy degree, and an expert in their field is preferred. Peter Drucker termed this as
“Knowledge Workers”.

The authors talk about how organizations have become hungry when it comes to hiring knowledge
workers as they believe they will prove to be a good investment as they will help the firm to remain
competitive, and to stay in the market. However, the main question that arises and that the authors talk
about is that if this is the case then why did the Financial Crisis of 2008 occur even when every firm had
employees with degrees and up-to-date knowledge? Then why didn’t any one of them see it coming?
This is the big question which then gave rise to Functional Stupidity.

Functional Stupidity:
Functional Stupidity is linked with the Financial Crisis of 2008 which is why it is important to understand
what exactly happened.

We know that in today’s corporate world, people have become more interested in knowledge
(knowledge workers) as they are mainly inclined towards the attractiveness of the corporate world – the
pay offs, added benefits, a fancy life, recognition, and so on. Let’s take the example of Scientists.
Scientists are said to be the most knowledgeable people in this world but due to the reasons mentioned
earlier, their focus have also shifted to pursuing other fields because of the benefits that the corporate
world provides. Such example of shifted people is known as “Quants” in the industry who are said to be
highly competent as their job is to come up with new and innovative ideas of making and investing more
money.

Quants came up with CDOs, that are a credit product combined with mortgages that make the cost of
lending cheaper for everyone in the economy. With time everyone started to use them and because of
its complexity and owners of the model, no one really questioned it and thought that they have landed
in a gold mine.

Even though CDOs had a greater ratio of riskier operations, people still ignored it. Those who questioned
it ended up being silenced by the majority as they were making money out of it. Everyone had an
optimistic attitude towards it due to which they were all blinded towards anyone who questioned it.
Eventually, financial crisis of 2008 hit and that was when the markets started to fall and everything went
downhill. The ignorant attitude of people towards the model was called Functional Stupidity by the
authors which can be thought of as narrow mindedness as people overlooked their problems by choice
and followed practices without giving them much thought and without considering the long run
consequences that it can have. The authors proposed three aspects of this: (1) Ignoring your
assumptions (2) Not asking why you are doing something (3) Not taking into account the consequences
of your actions

Authors have discussed how this is used in organizations and the possible reasons behind it. To explain
this in further detail, authors have talked about the concept of “Stupidity Management.”

Stupidity Management:
Authors tell us that organizations encourage their employees not to think or ask too many questions.
This is known as Stupidity Management when knowledge workers are kept busy and an organization
work culture is maintained. Hence, minimizing the questions that can be asked. The reason behind this is
that organizations believe that questioning practices will hinder the performance of the company and at
the same time demotivate other employees who are working hard. When this happens, employees
eventually adapt to the environment and when they see everyone else doing it, they also stop
questioning it as they believe that it must be right. This is what the authors call self-stupidity, which they
explain as employee behavior when they think they’ll be singled out and their position would be in
jeopardy.

To explain it in detail, the authors have given the example of civil servants. Civil servants don’t really
question the policy that is put forth by the government because they are discouraged to do so. The
reason behind it is to encourage them to focus on implementing the policies rather than thinking about
it. However, the cost behind this approach is critical thinking as employees stop reflecting from their
actions, which kill their critical thinking abilities.

After talking about the reasons behind functional stupidity, the author tells us where this actually stems
from. For this purpose, the author provides 5 types through which functional stupidity is induced:

Types of Functional Stupidity:

Leadership Induced Stupidity:
This happens when the top management of an organization set visions and goals for their subordinates
to follow. However, when doing so they don’t incorporate any flexibility that is they don’t allow any
changes to it that would lead to the subordinate also liking it. In other words, they don’t want the
subordinates to give their opinions or to share their ideas. Rather they want it to be implemented as
they have stated it. They don’t allow anyone to question it no matter how stupid the goals might sound
as they believe that “leaders know best”. If anyone questions it, their job will no longer be secure. This
again lowers the cognitive thinking of the employees.

Structure Induced Stupidity:

This happens when fancy job titles are given to people with not-so-fancy jobs. These job titles trick the
workers into thinking that they are adding more value to the organization. The authors argue that
“specialized workers” are becoming the new trend rather than “jacks of everything”. This is because
people have started to believe that doing your job good will get you somewhere. One major setback of
this approach is that as organizations hire more specialized workers, they are limiting innovation
because specialized workers are good at one thing only while for innovation an individual must broaden
their minds and horizon.

Imitation Induced Stupidity:

This arises when organizations follow the practices of other organizations in the industry regardless of
the impact that these will have and regardless of the beneficial outcome that it may or may not have.
The only reason why they indulge in such practices is so that they are not left out and also because of
their reputation because if the practice works out, then they won’t be singled out for failure.

Not only this but even in times of problems, organizations look at how the other organizations in the
industry are dealing with it and react in a similar manner without giving much thought to it. Even though
what works for one company will not necessarily work for the other company due to the ever changing
environment in which the companies operate, but still organizations tend to follow what is happening in
the industry.

Branding Induced Stupidity:

The most common stupidity that we can experience in today’s world is caused by branding. We, even as
customers, are blinded by the brand we trust and are loyal to because of which we don’t question
anything related to it because we believe that they are the “experts”

Same goes for organizations as they hire consultants solely on the basis of their brand image and
overlook their competency. The major reason why organizations tend to do this is because when the
word gets out in the market that this consultant was hired by a particular organization, then the share
prices go up in the market because of the image of the consultant in the industry. Even if the consultants
don’t produce any good results, that will also be overlooked because of their reputation. Even though
this can be harmful, it is still overlooked by organizations.

Culture Induced Stupidity:

One last reason discussed by the authors for stupidity in organization is induced by culture. By this they
mean that employees in an organization don’t really question any practices that are being implemented.
Rather they simply follow it because they don’t want to feel left out and because they believe that if
everyone is doing it then it might be the right thing.

Organizational culture refers to values and behaviors that contribute to the environment of a business.
Hence the stronger the culture, the greater the similar beliefs and thinking of the employees. The
authors consider this to be stupid because everyone has their own perspective and their own way of
thinking. Hence, this also limits the cognitive ability of the workers.

Managing Stupidity:
Towards the end, after talking about functional stupidity and the reasons behind it, authors then
recommend certain ways in which this can be reduced and hence, reboot the cognitive thinking abilities
of employees.

These tricks include encouraging employees to start asking questions regarding anything whether it’s
the company’s goals, or any practice being followed within etc. Once they have thought of questions
that they want to ask, then it is the management’s responsibility to tackle the queries of the employees
and try to understand why employees find a certain practice or policy inaccurate. They should also ask
the employees for advice for solving the problems and should consider the actions that they would take
if they were making the decisions. The authors suggest that managers should meet with their
subordinates every once a month to talk about issues in order to encourage cognitive thinking of
employees as well as innovation.

Conclusion:
In today’s corporate world, all these reasons for stupidity do actually exist. Organizations block out
cognitive thinking ability of employees in order to totally and completely commit the employees to its
own culture and practices as they believe that it will help them achieve the goals that have been set by
them. Every new individual in any corporation follows the culture of the organization and is slowly
trained to not using their cognitive ability. These individuals follow the practices blindly mainly because
everyone else is doing the same and they don’t want to be the only one to question it.

The book perfectly portrays a typical culture of an organization and how the employees react to it. It
describes how stupidity is born and how every employee gets consumed by it with time. Even though
the authors have shared tricks on how to limit this, it can still never overcome the truth about “the boss
is always right” because at the end of the day, it’s about making your boss happy since your appraisal
and your job security depends on it. Therefore, whatever the boss asks, you have to do it since it’s the
only way to make him happy.

The book was very insightful and has some valuable lessons such as not letting anyone block out our
cognitive ability, and to always question the practices that we feel are questionable. For a fresh
graduate, like myself, this book was very helpful as in the corporate world I will try to avoid such
circumstances and to think outside the box.