Do Business Leaders Do Well in Politics?

This post should not be read as an endorsement of any candidate in the upcoming U.S. election. In this post we are merely trying to assess whether prior experience as a business leader can be translated into success in public office.

Last week the second of the three presidential debates was resolved in the shape of ABC News’ town hall debate. And just like in the first of these debates, Mitt Romney’s experience from the private sector was highlighted as a qualification for his future political acumen.

The notion that business leaders have learned a special kit of skills from the private sector, and that these skills can then be transplanted from the private and to the public sector, is an idea that frequently pops up in debates on politics. But is there anything to this idea? That is what this post aims to find out.

Well-known examples of business leaders who have been thought to be able to bring the vigor of the private sector into the public sector include Mitt Romney and Donald Trump in America, as well as Silvio Berlusconi in Italy. The argument seems to be that since these men could do well in business, they will likewise be able to do well in politics.

The notion is not unfounded. Compared to the general population, successful business leaders really do share a host of traits with successful politicians: For example, both groups prefer operating at a higher level of abstraction than does the general population and both groups have higher average IQ scores than the general population. Likewise, both groups are on average more persistent in realizing their goals than the general population and both are better at absorbing setbacks and resistance (rather than letting resistance get on their nerves and drag them down.) Finally, both groups are on average more assertive and ambitious than the general population and both tend to weigh the pragmatic higher than the ideological.

Thus it would seem that there is indeed a series of significant and meaningful commonalities between successful politicians and successful business leaders. But does this mean, then, that things would get better if Warren Buffett or Bill Gates moved into the White House? The answer: Both yes and no.

A professor of psychology at the University of Minnesota called Deniz S. Ones has been researching these things and the conclusion she arrived at was that while the two groups are similar in a lot of significant ways, there is also one huge difference that sets the two groups apart: Business leaders like directness. They are apt to set concrete goals and then work directly towards realizing those goals. And in politics, such a practice is generally a bad idea.

In a Democracy, Everyone Is a CEO

Starting a successful business in the private sector works more or less as follows: A founder has a notion of a goal that, if achieved, would make a pretty profit. The founder then builds up an organization that is designed specifically to achieve that goal. Employees who behave counterproductively, or who fail to deliver a good performance towards achieving the goal, are either fired or parked in nonessential positions far from the top of the organization. The company that is the most successful in following this formula gradually wins market shares from its competitors and eventually it dominates the market.

In politics, the game is different. In politics, there is no one CEO who can hire and fire at will, and who can adjust people’s earnings to correspond to their performance. In a democracy any group of people who can successfully organize themselves can lay claim to representation in the “board room” of the state, regardless of their skills and whatever their performance. Thus, in politics a president or prime minister can easily end up with an incompetent or disloyal “employees” on the team who cannot be fired, even if they kneecap the head of state and oppose the government’s overall goals.

Likewise, politics is not only about obtaining the best solution for the country as a whole. At least not for every group involved in politics. For some, politics is also about fringe groups lobbying to defend their special interests, without regard for what is best for society as a whole. (In the United States, for example, one needs only to think of the infamous U.S. mohair subsidies for an example of special interests that work against the overall good of the nation.)

Thus, in a democracy, all groups that manage to organize themselves politically, and who can manage to get elected, can leverage that representation to have a say in the expenditures of the state and thus to nurture their special interests, sometimes to the detriment of the nation as a whole. And according to Deniz S. Ones, it is precisely on this trait – steering directly towards the overall goal versus negotiating inefficient compromises with special interest groups – that business leaders differ the most from successful politicians. In short, business leaders are more direct and orientated towards the bottom line while successful politicians are more indirect and patient with inefficiencies.

To the business leaders the most important thing is the goal – getting the product done and putting it on the market. But to the politicians, the most important thing is rather the process surrounding parliamentary power – obtaining it, negotiating it, and retaining it in the face of rival groups who would lay claim to the same office.

In politics, efficiency simply comes second. Like the American President Harry Truman once said: “Wherever you have an efficient government, you have a dictatorship.”

CEOs also Differ Amongst Themselves

Finally, it should be said that the research to which we referred does not take care to distinguish between extroverted and introverted business leaders, and nor does it distinguish between Se and Si types. If Professor Ones is right that the biggest caveat for business leaders in politics is their lack of patience and their preference for directness, then we should expect Si types to do better than Se types.