I read an article about “toxic optimism” that focused on the bad things that can happen when you are overly optimistic. It got me thinking about a Goldilocks effect. In the fairy tale, Goldilocks tried the three bowls of porridge in the bears’ house and announced that the first one was ‘too hot,’ the second one was ‘too cold,’ and the third one was ‘just right.’ She tested the extremes and found her acceptable center. When I read about toxic optimism, what struck me was that optimism and pessimism are on a continuous spectrum. One can be too optimistic or too pessimistic, and each can be toxic. We need to find the balance which is ‘just right.’
Toxic optimism causes us to overlook the flaws and the dark spots. It leads us to assume everything is going fine, and we let down our guard. We suppress our paranoia and stop looking for the bad things that could bite us. In sales, toxic optimism leads us to be so sure we are going to win a deal that we miss warning signals and are totally surprised when the prospect says they “went a different way.” In product or professional services, it leads us to assume everything will work on time and as specified. It can cause us to project optimistic delivery dates or over-state product capabilities that turn out to be wrong and result in unhappy customers. In a board setting, it can cause a board to overlook brewing trouble that ultimately diminishes value creation.
Toxic pessimism is just as bad or worse than toxic optimism. This is the Eeyore effect - everything is horrible so why bother trying to find the good. Aside from it just being depressing, toxic pessimism can cause us to give up and not reach for the brass ring of success. When all you hear is ‘it can’t be done,’ you lose the will to go for it. A toxic pessimist is bad for everyone around them. They become a culture vampire sucking the life out of an organization.
If we fly too close to toxic optimism we are likely to crash, and similarly, if we fly too close to toxic pessimism we are also headed for a crash. We need to find our Goldilocks zone. In an entrepreneurial environment, where we are trying to conquer the world, the Goldilocks zone is generally not in the middle. In a growing, hard-charging environment we invariably lean further in the direction of optimism than pessimism. We can’t afford to be in the boring middle if we want to drive enthusiasm and the conviction that we can do anything we put our minds to. However, we need to preserve a dose of reality and paranoia in order to make sure we execute efficiently and avoid adverse surprises.
If we are overly invested in our optimistic view, we become defensive about our optimism, and shut out the voices of reality and paranoia. Toxic optimism in one person can bring out toxic pessimism in another as they try to break through the optimistic defensiveness in order to balance the scale and push for reality. Andy Grove of Intel famously said “only the paranoid survive,” and Joseph Heller (Catch22) added “Just because you're paranoid doesn't mean they aren't after you” (also attributed to Kurt Cobain). This translates into the need to be on our guard and always plan for the full range of contingencies - good and bad, while maintaining confidence and optimism about what we are doing and what we can accomplish. The challenge for leaders is to find the Goldilocks zone where there is optimism without toxicity and just enough pessimism to keep everyone on their toes.
The burden to get this right falls squarely on the shoulders of the CEO. There will always be counterbalancing voices in the executive ranks, and the CEO needs to sift through the opinions and set the tone for the organization. When the CEO tips too far in either direction the impact on the organization is exaggerated. The rank and file take their cue from the CEO, and equally so, the board of directors rely upon the CEO for insight. Boards tend to be pretty discerning, but their ability to dig into the depths of an organizatom are limited. As board members, we generally trust the controls and the veracity of the information provided. When a CEO is operating with toxic optimism, it can lead to filtering the reality presented to the board. Warning signs and negative flags are masked, and the board is presented a picture that, in the extreme, is materially misleading.
As board members, we need to avoid being swept up in the vortex of toxic optimism. Our motto has to be trust but verify. Without becoming Eeyore, we need to make sure we are data-driven, and maintain a healthy level of paranoia. If things appear too good to be true, they probably are not as presented. If the company is consistently missing its goals, we may be dealing with a CEO suffering from toxic optimism. Warning bells should be going off to dig deeper into the planning processes. We need to discern if toxic optimism is ‘bullying’ the company into setting aspirational but unrealistic targets. Boards need to listen for the contrarian voices that may be buried in the executive team or the rank and file, but we also need to avoid undermining the CEO. It is a balance that is built on trust, but when the warning bells go off, we need to practice ‘trust but verify’ behaviors.