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Greenspan Used Data Not Dogma
I have been meaning to offer my review on an article in the Wall Street Journal on former Fed Chairman, Alan Greenspan. It was written on January 31, Greenspan’s last day as Chairman.

Greg Ip, the article’s author does a great job analyzing Greenspan’s leadershipgreenspan listening.jpg style. I think there are some important tenants of leadership that Ip has drawn.

The title and subtitle of the article are revealing.

“Greenspan’s Legacy Rests on Results not Theories”

Results Not Theories – In a position often driven by theory, hypothetical models and forecasts and political agendas, the former Fed Chairman understood that performance was his measuring stick. Great leaders in any arena know this. Results matter. Coaching style, game plans, strategies are meaningless if they do not put a mark in the win column. If you can’t deliver the goods, you will not succeed, be remembered or have a legacy. Beyond just results, true greatness is delivering results in a crisis or under difficult circumstances. Take a note from Michael Jordan who everyone knew – including the opposing team, that he would find a way to win in every big game.

The subtitle: “Fed Chief’s Biggest Idea was to Avoid Having One; Embracing the Ambiguity”

Mr. Ip notes, “If there is a single idea informing the success of his nearly two decades at the helm of the Fed, it is that single ideas are to be avoided. There isn’t an identifiable Greenspanism or a Greenspan rule because the essence of Mr. Greenspan is his distrust of any “ism” or rule.”

Avoid Single Ideas – In the complex world of global financial markets, Greenspan understood that there could not be “one” answer that would apply across all time frames, political regimes and market conditions. Leaders have to remain flexible and constantly adapt to changing markets, competition, technology and personnel. To be clear, a leader’s character and core beliefs must not change. However, a leader that listens and adapts is more likely to survive all types of weather. Leave dogma to politicians.

For Greenspan, not strictly following any specific economic model enabled him to be flexible and adapt as markets shifted.Bayes.jpg

According to Ip, Greenspan portrays himself as a Bayesian – someone who “makes a decision based not on the most probable outcome but on a range of possible outcomes”

Greenspan deployed his version of Bayesian decision-making by deliberately “risking small mistakes to avoid much bigger ones.” That meant managing contradictions and ambiguity, something most of us find quite distasteful.

“People for the most part dislike ambiguity. We insist on looking for order in random sequences,” states Philip Tetlock, psychologist at University of California- Berkeley in the article.

Embrace Ambiguity – Make a hard bet on one model, one forecast, one person, one technology and you have long odds of winning.  Sure, you are hailed a hero if you are right. History will often show however, that you won’t replicate that luck again. Guess wrong on that bet and disaster follows. A steadfast dogma often identifies a leader that is less prone to self-doubt and more likely to dismiss evidence and critics that contradict her vision. Such leaders also are less likely to admit mistakes, forever clinging to the dogma that created the mistake in the first place. On the other hand, leaders that accept ambiguity, contradictions and listen to varying viewpoints rarely make the career-ending (and often company-ending) mistakes. That is not to say that effective leaders won’t make mistakes or shouldn’t take risks. Leading is all about taking risks. The key is to identify what is known, unknown and unknowable about the risk.

There are those that  feel Greenspan was too ambiguous.  I agree.  SCSU Scholars  write that he once said about his Congressional testimony "If you understood me, then I wasn't clear enough."

Understanding and accepting ambiguity is important for a leader.  Communicating ambiguity was Greenspan's hallmark and there is plenty of debate about its effectiveness.  It may have been effective for a leader of markets.  However, to lead people, you cannot afford to communicate ambiguity.  In fact, an effective leader identifies ambiguity and then communicates an unambiguous course of strategy for his organization.

When all was said and done on January 31, Greenspan proved that using data instead of dogma gets the job done.

3 Comments/Trackbacks


Thanks for this post. It is so important to identify great leaders and take from them what we can and should. I think your post helps us to identify the leadership qualities we can borrow from Chairman Greenspan without presuming we should adopt his style as our own.


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