One of the great advantages of observing the business world over a couple of decades (and interviewing hundreds of executives) is that you start seeing the patterns of thought that lead to success or failure.

This post describes the broken mental processes I've seen inside every company that's collapsed or failed. In my experience, the presence of even one is dangerous but the presence of two or more is positively fatal.

1. Confirmation Bias

Great leaders see the world as it really is, envision it as a better place, and then take daily action to make it better. Weak leaders never get to the first step because they interpret facts as true or false based upon whether those facts support their own opinion.

A well-led company will thus rightly see a disruptive technology as an existential threat and adjust its strategy accordingly. A poorly-led company will thus see that same technology as irrelevant until it's too late to do anything about it.

2. Cognitive Dissonance

Great leaders welcome information that might help them make better decisions. Weak leaders become angry when confronted with information that demands a rethinking of the leader's strategy.

A well-led company can thus pivot as necessary in order to adapt to changing conditions. A poorly-led company will thus pursue the same, tired strategy long after it's been proven ineffective in the real world.

3. Inverse Relevance

Great leaders create effective and innovative organizations without saying much about it. Weak leaders create organizations where endlessly talking about "effectiveness" and "innovation" squanders the energy to make them so.

A well-led company will thus have a mission that it strives to fulfill every day. A poorly-led company will thus have a mission statement that manifests the Law of Inverse Relevance: "The less you plan to do about something, the more you must talk about it."

4. Grandiosity

Great leaders are self-confident and self-aware; they know the limits of both their strengths and weaknesses. Weak leaders are overconfident and unreflective; they overestimate their strengths and pretend their weaknesses don't exist.

A well-led company will thus have ambitious but realistic goals in which everyone believes. A poorly-led company will thus have bloated goals that everyone pretends (but nobody really believes) to be real.

5. Unexamined Bigotry

Great leaders realize their culture has programmed them to be biased but constantly strive to overcome that bias. Weak leaders believe that bigotry no longer exists and that it's mere coincidence that everyone they hire looks and thinks like them.

A well-led company will thus have a larger-than-average diversity of gender, race, and background, especially among management. A poorly-led company will thus have a management team where everyone looks, thinks, and talks the same.