Opinions of Elon Musk and Sam Bankman-Fried are textbook examples of the halo and horn effect in action — two of the most prevalent biases in the business world.

In brief, the halo effect causes us to infer positive specifics from generalities. If somebody is tall and handsome, for example, we tend to assume they are also smart without any supporting evidence. The horn effect is the opposite. We might assume, for example, that because somebody speaks with an unfamiliar accent that they are stupid, or if they are overweight they are lazy, again without any supporting evidence.

In business the halo effect cause us to praise everything about a leader when their company is going well. The horn effect means we then criticize everything about them — from their leadership style and strategy to their mental health — if the business falters or stock price drops. Confident visionaries become arrogant imbeciles overnight. Courageous entrepreneurs are suddenly reckless risk-takers. The only thing that has changed is swapping one bias for another when the performance changes.

In reality, however, the halos we bestow on people when they’re succeeding are never justified in the first place but neither is the lacerating criticism these same people get if they struggle or fail. 

A more realistic assessment would be far more even handed. We all have very real strengths and weaknesses. Sometimes we win, sometimes we mess up. Sometimes we pull it off. Sometimes we bite off more than we can chew. We’re all only human at the end of the day. This makes for a comparatively dull narrative, but is probably closer to the truth of the matter.

See this post on LinkedIn