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As surely as the byline "O. Henry" one-hundred-and-some years ago guaranteed a short story with a twist at the end, the byline "Malcolm Gladwell" today promises a Different Way of Looking at Things. Gladwell's latest effort is the New Yorker piece "Cocksure," which wonders if "the roots of Wall Street's crisis were not structural or cognitive so much as they were psychological."
Gladwell compares the crisis to the oft-compared-to invasion of Gallipoli in 1915, which turned into a disaster, Gladwell notes, because in both the planning and the execution the British did everything wrong. Why? "A failure to adapt -- " says Gladwell, "a failure to take into account how reality did not conform to their expectations."
Gladwell's focus in the present financial debacle is Jimmy Cayne, pugnacious chairman and CEO of Bear Stearns, the investment bank that colllapsed in 2008. What happened, according to Gladwell's account, is that J.P. Morgan and the Fed extended Bear Stearns a multibillion-dollar line of credit, which convinced Wall Street that the bank must be in far worse shape than it actually was, and that's why clients and lenders alike bailed out and Bears Stearn sank like a stone.
Cayne's problem, according to Gladwell, was that he "wasn't overconfident enough." If Gladwell's article scanned I could explain what he means by that, but it doesn't so I can't. But he observes:
"Winners know how to bluff. And who bluffs the best? The person who, instead of pretending to be stronger than he is, actually believes himself to be stronger than he is."
We read Gladwell for insights such as this one. But it sheds no light on either Gallipoli or Bear Stearns. The British, according to Gladwell's account, truly and deeply believed in their superiority over the Turks. By the same account, Cayne had an unshakable "belief in his own infallibility."
Cayne considered himself (and is) a terrific bridge player. Gladwell makes a lot of this. He points out that as the bank was collapsing, Cayne last July was playing in a bridge tournament in Nashville. "It makes sense that there should be an affinity between bridge and the business of Wall Street," Gladwell writes. "Winning [in bridge] requires knowledge of the cards, an accurate sense of probabilities, steely nerves, and the ability to assess an opponent's psychology. Bridge is Wall Street in miniature..." He goes on, "Cayne must have come back from the Spingold bridge tournament fortified in his belief in his own infallibility."
Gladwell's description of bridge sounds, to me, more like poker. In bridge your opponents include other teams playing the same hands at other tables. And bridge teaches that optimism and pessimism aren't simply personality traits — they are logical tools. There are bids that seem sure to fail but can be made if the bidder assumes an unlikely distribution of cards and plays accordingly. There are other bids that seem sure to succeed but will fail unless the bidder fears the worst and takes precautions.
In short, bridge is a game that helps a mind become more subtle and discriminating, not more delusional. Cayne didn't even win the tournament.