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According to an October 25 news release, “Adidas does not tolerate anti-Semitism and any other form of hate speech … The company has decided to immediately terminate the partnership with Yeh.” The statement outlines a principled and admirable stance against anti-Semitism shown by the rapper, formerly known as Kanye West, after his anti-Semitic tweet on October 10.
Yet Adidas waited much longer than other companies to break ties with Ye. Even Ye’s own talent agency ousted him before Adidas. In fact, adidas took it so long that you taunted them 16 October attendance On the Drink Champs podcast, “I can say anti-Semitic things, and Adidas can’t leave me. Now what? Now what?”
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Adidas faced particular pressure to drop Ye because of its dark past. Adidas, a German company founded by a former member of the Nazi Party, had a particularly strong reason to leave Yeh earlier than other companies. adidas faced rising pressure from the Anti-Defamation League and other To leave the organizations in view of their Nazi past. A Change.org petition set up by the Campaign Against Antisemitism urging Adidas to break ties with Ye had collected 169,100 signatures as of October 25.
Yet Adidas refused to drop Ye until all the other companies abandoned it. Instead of getting ahead of the problem and dropping Yeh immediately after his October 10th anti-Semitic tweet, or even Adidas’s October 16th taunt, the company was embarrassed and to cut its ties with Yeh. put pressure on As a result, Adidas severely damaged its brand, damaging its reputation among anyone who opposed anti-Semitism.
What explains the poor decision making by the adidas leadership? This is a classic case of the ostrich effect: a dangerous judgment error where our brains refuse to accept negative information about reality. It is named after the mythological belief that ostriches bury their heads in the sand at a signal of danger. The ostrich effect is a type of cognitive bias, one of many mental blind spots that affect decision-making in all life areas, from the future of work to mental fitness.
Adidas’s leadership buried its head in the sand. It refused to acknowledge the damage it caused to its brand by anti-Semitic sentiment, as well as its former bad behavior such as wearing the model’s “White Lives Matter” T-shirt in early October.
In professional settings this kind of rejection happens more often than you might think. A four-year study of 286 organizations that had fired their CEOs found that 23% were fired for denying reality, meaning a refusal to recognize negative facts about their organization. Doing. Other research shows that professionals at all levels suffer from a tendency to deny uncomfortable facts.
Adidas’ denial likely stems from a cognitive bias known as the Sunk Cost Fallacy. According to the Adidas statement, the termination of the contract is “expected to have a short-term negative impact of up to €250 million on the company’s net income in 2022, given the high seasonality of the fourth quarter.” Presumably, the impact will be much greater in 2023, at least more than half a billion.
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The partnership with Ye has a long history dating back to 2013 when the company signed its brand away from rival Nike. In 2016, Adidas further expanded its relationship with the rapper, calling it “the most significant partnership ever between a non-athlete and an athletic brand”.
In other words, Adidas invested a lot of money and reputation in its relationship with Ye. This kind of investment makes our mind feel strongly connected to those resources, and throws the good money after the bad.
You’ll notice that this often happens in major projects that are doing poorly, such as Meta’s Metaverse project. Several high-profile industry figures recently criticized Mark Zuckerberg’s efforts. That includes Palmer Luckey, the founder of VR headset startup Oculus, which Meta acquired in 2014 for $2 billion. “I don’t think it’s a good product,” Luckey said, regarding Horizon Worlds, Meta’s main Metaverse product. He called it a “project car”, a fancy automobile that the owner spends a lot of money on as a hobby. So far, Facebook’s shift to building the Metaverse has been costly, with the company losing $10 billion on it last year, and Wall Street analysts expect it to lose more than $10 billion again this year. .
Likewise, you’ll see sunken costs in major relationships. It could range from marriages that lasted longer than the partnerships between Adidas and Yeh.
The final cognitive bias relevant here is called hyperbolic relaxation. The term describes our brain’s focus on the short-term, highly visible consequences of the more important and less visible long-term ones. Adidas didn’t want to take the short-term financial hit to its bottom line by breaking up with Ye. However, Adidas failed to do so by failing to give enough weight to its brand to cause long-term damage.
Short-term financial damage is highly visible and painful, while long-term brand damage is much less visible and less painful. Yet realistically, this kind of brand damage is more important to Adidas’ long-term success.
In my counseling, I’ve seen many executives grapple with the same three mental blind spots when they confront top performers who engage in bad behavior, ranging from profanity to sexual harassment and discrimination. Leaders deny that this is because they have invested so much in a top performer, be it a star salesperson or a top data scientist, and they do not consider the long-term consequences of the organization’s culture and employee morale.
In fact, it’s easy for anyone to fall for these three cognitive biases when someone you value misbehaves. Fortunately, be forewarned: Knowing about these three mental blind spots means you can pay attention to these problems in your professional and personal life.