Are Great CEOs Born, Not Made?

David Aaker writes on the issue of whether entrepreneurs are made or born at the HBR Network Blogs. While not targeting entrepreneurs specifically, but CEOs, Aaker’s take is that great CEOs are born and not made. For two reasons: they have executive talent, which Aaker defines as a

good feel for selecting, motivating, and evaluating people; developing and selling a strategy; creating an inspiring culture; developing an organizational structure and management process that work for the strategy; fostering cooperation across silos; understanding and using financial measures; and an understanding of how marketing, branding, finance, production, distribution contribute to strategy,

and they also have “a flare” for good strategic judgment. I am not sure in what sense these two qualities are different, since the “good feel” he calls talent seems to involve at least as much judgmental ability as it involves skill. As he writes, “a CEO [with the right talent] who is missing background in some of [the above quoted] areas will quickly pick it up,” which to me implies an extraordinary ability to imagine patterns and outcomes – and a superior judgment in what works, what doesn’t, and how to find a solution.

But judgment is the second quality. So please excuse me if I have a hard time distinguishing between the two.

What I find fascinating, however, is how similar Aaker’s view of the “gifted CEO” is to Frank Knight’s discussion in Risk, Uncertainty, and Profit (1921) on entrepreneurship as the exercise of superior judgment. The second quality fits obviously and perfectly in Knight’s framework, but the first fits as well. Knight does not say the entrepreneur is necessarily a “jack of all trades” (Lazear, 2004) but that he knows where to find the necessary knowledge. In this sense, the entrepreneur exercises not only his own judgment, but is involved in judgmental assessment and decision-making regarding others’ judgment.

Knight was also clear about judgment being something that one can develop through experience. Hence, judgment can be learned, but cannot necessarily be taught. Those with plenty of experience – and perhaps with diverse such – should ceteris paribus have better judgment than those without. So from a Knightian point of view, Aaker’s view of the great CEO being “born, not made” appears both right and wrong.

But what is really striking is how well Aaker’s experience and Knight’s theory go together. This is what characterizes great scholarship: it reinforces and explains the experiences of practitioners. Just like theoretical business scholarship can and should learn from those who practice business, practitioners can have much to learn from theory. Perhaps even if they are born with superior judgment.


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