Target Blind Spots: How a Wall Street Captain Was Exposed

Identify the red flags that CEOs can look for in targeting the decision-making of opponents, as well as to overcome in their own decision-making patterns and tendencies through an exploration of how one of the most influential captains of a venerable institution went to stewarding one of the most profitable financial engines on Wall Street to overseeing its demise.

Joe Cassano was CEO of AIG Financial Products for two consecutive periods in its history. During the first period, he turned FP, is it was known on Wall Street, into a financial engine that turned out derivatives on a super-thin slice of financial exposure in the housing finance market. The risk on the instruments was ‘virtually nil’, in the minds of FP executives. Yet, these instruments print money for this subsidiary of the global financial behemoth, AIG. Times were good. Very good. 

In the second period of Cassano’s reign, FP crashed. The market changed. The player’s jockeyed for position, searching for positions of strength during troubled waters, and quite frankly, standing by idly as their brethren drown in a sinking market. What happened?  

In short, Cassano was caught in his blind spot. He had created a perfect engine. When the situational context in which it operated changed, he was caught unaware of new risks emerging. He was resistant to change. He dug in rather than evolve his decision-making to reflect the unfolding realities. The experience illustrates certain ‘red flags’ that other CEOs can observe both to improve their own decision-making, as well as target that of others, including: 

1. Look for CEOs that tamper down dissenting voices in an unreasonable fashion; 
   
   
2. Look for CEOs that have a very tightly constructed ‘algorithm’ for their decision models, as these models and those who rely upon them will have difficulty adapting their decision models to new conditions and variables. Their mental architecture demonstrates a lack of flexibility and responsiveness;
   
   
3. Look for CEOs that are slow-footed, slow to respond to changing situational contexts. For some, shifting conditions represent opportunity, but for the slow-footed, their vulnerabilities will quickly manifest.