Hope, Hubris and Horror

(or how businesses really make decisions)

The City of London seen from the South Bank

Businesses make huge decisions every day. There are billions at stake, overseen by executives on eye-watering salaries. You might well assume that these calls that can change the course of lives are based on rigorous analysis and copper-bottomed due diligence.

I’ve ranted before about myths in the corporate world. This is another.

Routine decisions will pass or fail based on hurdle rates and payback periods. NPV and peak cash do matter. Until they don’t. For the big things: which businesses to buy, which products to launch, these decisions are made based on the three H’s – Hope, Hubris and Horror.


No one actually knows what they are doing. Everything decision is a best guess, a stack of assumptions any one of which could doom an idea if proven wrong, or by pure chance take over a market.

This is the business of belief, of backing an idea. A coin toss between the visionary and the lunatic. And no one thinks they are mad, least of all the C-suiters.

Somewhere behind the executive, hidden in the shadows is a numbers geek. You don’t see them often, they emerge blinking from the basement at the office Christmas party and they’re the ones left dancing when the sales team are in a drunken brawl and marketing have gone off to some cooler venue.

Not quite the pasty-faced shoe-gazers of audit but their close cousins. Management accountants, financial analysts, or commercial finance. They go by different names. Most are strictly linear: add this, multiply that, apply a rule and there’s your answer. Every now and then one of them is a storyteller, and they can take any set of numbers, any set of assumptions and tell you any tale you want. They are the purveyors of corporate dreams, or when the need arises nightmares. They know every forecast is a fantasy, it will never come exactly true, in the moment it just needs to be credible.

The smartest question any C-Suiter ever asked me was – “what do I need to believe for this to cost in?” That we’ll double customer ARPU… probably not. That we’ll improve customer retention by 2%… I’ll buy it.

But no one knows. It is a world of uncertainty. They hope the new product is better, that competitors are slow to respond, that the marketing will cut through. And the analyst is there, teasing out those thread-like hopes and weaving a story: if we only do this, if we can just do that, the dragon’s hoard of shareholder value will be ours.

And it is believed because the person in charge so wants it to be true.


It’s a short journey from believer to sociopath. It just takes a little extraction of empathy and a swig of your own personal Kool-Aid. These execs are smarter than the opposition, they can develop a better product or give a better experience than the others. If the numbers say their idea stinks then the numbers must be wrong.

Any foolhardy non-believers that voice their doubts are burnt at the corporate stake, discarded or dismissed. And we do have a penchant for being led by those who seem to know where they are going.

In this world of uncertainty, the autocrat knows. The narcissism runs deep. Once in a while the cards fall in their favour and they’re hailed as a genius. Not that they need the validation.

Of course, for every chance winner, there is a phalanx of losers. 

For those with a classical mindset, I’m sorry. Sophocles has left the building and Nemesis has decided she quite likes the tropical summers and skiing winters. When the idea fails, when the transaction is a dud there is no retribution, they bear no consequences. The culprit cashes in their share options and swans off to another role in another corporate skyscraper fuelled with the knowledge that whatever happened was not their fault.

Consequences are only ever borne by those who can’t afford them.


Do you play Scrabble? Sometimes you need to place a low scoring three letter kindergarten blurt to cover off the triple word score and stop your opponent from running away with the game. You’re not there to achieve the highest possible combined score, you’re there to win. It’s the same idea in Monopoly, spoiling someone else’s set.

Business is no different. This is not an economist’s utopian dream of welfare maximisation. It is about your shareholders and the next quarter’s results. Doing better than the other guy is sometimes the only measure of success.

So you don’t buy the plucky start-up because of synergies, you buy it so that no one else can have it and make something of it. Even if the competition authorities prevent you from integrating the businesses. Even if you have no idea how to make money from it. The point is your competitor might do those things and you can’t afford for them to do better than you.

And then there is the saving grace of every business case. The entirely unprovable: if we don’t do this something bad will happen. At one of my employers we called it “avoided decrementality” and maybe there was a truth buried in there. For example, if we don’t spend millions on marketing our customers will leave. Will they, will they really? Ask for proof and be pushed from the roof. 

It is the do nothing and die story, so you have to do something, to be seen to do something to justify the salary. So, why not this?

Of course, in the grip of hope, hubris or horror you can’t tell people that is why you’re doing the deal. And if you’ve put enough of that Kool-Aid in the water cooler some people might believe in honed instincts and razor-sharp insight. But the numbers still need to stack up, so you call on the financial storytellers in the basement, those hawkers of fudge factors and hard-coded cells and there it is: Deus Ex Spreadsheet. With a wave of a mouse the pumpkin turns into a carriage and there are cost savings and cross-selling opportunities. The deal makes sense the purchase should go ahead.

That’s how businesses really make the big decisions. For the small stuff, the things that matter to the people who work there: a new kettle in the third-floor kitchen, or the constant buzzing from the battery room that’s driving the team insane? I’m sorry, the spreadsheet says no.

Everything else is a dice roll with a madman in a casino where not even the house knows the rules. The stakes are lives and livelihoods but never their own.

I was going to stop there, but there is one person to whom I am doing a disservice. Where is the CFO in all this?

If they’re canny, and many of them are, they are playing both sides. They can’t challenge the faith of the marketeers or the self-belief of the boss. They are as prone to horror as the rest.

But if they are in the big seat they will have done the basement job. They know the game. The best ones I worked with could sniff out the one bad number in a lever-arch file of analysis and reports. So for every fantasy fuelled, for every foundation laid in the temple of CEO self-congratulation, there will be a cost-saving, a challenge, a little bit of grit in the dewy eye. I believe as well, they say and that’s why your SAC costs can come down next year, let’s build that into the budget. I’m backing your genius boss, so let’s tell investors free cashflow will improve after the integration of the new business.

It is a subtle shifting of the blame, assigning accountability elsewhere, leaving yourself a way out. It doesn’t always work and one day they’ll run out of road. Sometimes spectacularly, sometimes in jail, but you don’t hear it quite so often.

So I’ll end not on that cry of camaraderie with the common worker but with a warning. Beware the storytellers. They might never be the hero of the story, but they are rarely the victim either.



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