How much does Elon Musk's ego cost? Or when executive hubris becomes a systemic risk

Article written by Valérie Petit (ESSCA) for The Conversation website

Executive hubris is often blamed when things go wrong. But what exactly are we talking about? How can we guard against it individually, and protect both companies and democracy?

Eight hundred billion in lost Wall Street market capitalization and a 50% to 80% drop in vehicle sales: that's Tesla's catastrophic record over the last three months. It's also perhaps the most accurate reflection of Elon Musk's hubris since he took up residence in the heart of American political power. While this collapse comes as a surprise to commentators and investors alike, it comes as little surprise to management researchers who, for almost thirty years, have sought to measure the cost of the executive's hubris to his company.

In 1986, Richard Roll, professor of finance at Caltech, in the heart of Silicon Valley, published the first work on executive hubris. At the time, he was trying to explain why some CEOs pay too much for certain acquisitions. After exhausting all the usual explanations, he came to the conclusion that part of the extra cost could be attributed to the CEO's ego and his or her loss of a sense of proportion: this is what Roll calls the hubris hypothesis. In his wake, numerous management studies have emphasized the negative impact of hubris on the strategic choices and financial performance of their companies. In the 2000s, the revelation of scandals such as Enron, Lehman Brothers and Vivendi Universal, revealing the dramatic combination of ego, mismanagement and even corruption, put the risk of executive hubris firmly on the agenda of scientists and stakeholders alike. But how can this risk be measured and prevented?

Hubris, an ancient myth

It's a complicated matter, since we first need to define what hubris is. The term refers less to a concept than to a series of myths depicting man's arrogance and insolence towards the gods. There's the myth of Icarus, who, disregarding his father's advice, flies too close to the sun and ends up in the sea, and that of Phaeton, who, wanting to drive the Sun's chariot instead of his father Apollo, sets fire to the clouds.

In ancient times, hubris was considered a crime. For Plato: "When a desire unreasonably leads us to pleasures and governs us, this government receives the name of hybris". And Aristotle goes on to explain the pleasure derived by the sufferer: "the cause of the pleasure thus felt by the individual displaying hubris is that he considers himself very superior to others when he mistreats them".

In Rome, Suetonius portrayed the 12 Caesars, men who wielded such great power that their psyche was altered. History will remember Nero's madness rather than Marcus Aurelius' moderation. 2000 years later, historians would speak of "Caesaritis", the disease of the Caesars, to designate this illness of absolute power, often summed up by Lord Acton's phrase: " Power corrupts, and absolute power corrupts absolutely". The idea that power drives people mad became firmly rooted in popular belief.

But how can this be measured scientifically? And, above all, how can we distinguish between "madness" that belongs to the individual (for example, a narcissistic personality disorder) and that which is the result of the effects of the power to which he or she is exposed?