Alexander Stein on the Psychology of Fraudsters and Power Abusers

And how love can create better leaders

Welcome back to Lucid! Mark your calendars for Friday’s regular Q&A, September 24, 1-2pmET. I’ll send log-in info that morning. I look forward to seeing you there.

I am pleased to bring you this interview with Alexander Stein, PhD, who is an expert in human behavior, and Founder and Managing Principal of Dolus Advisors, a psychodynamic management consultancy that advises CEOs, senior management teams and boards on issues involving leadership, culture, governance, and ethics. Dr. Stein is an internationally regarded authority in human risk and the psychodynamics of fraud and is frequently engaged as a specialist advisor in multijurisdictional fraud, corruption and executive misconduct matters. Dr Stein is a regular contributor to Forbes on the psychology of leadership and misbehavior in business. Our conversation took place on July 1, 2021, and has been edited for clarity and flow.

Alexander Stein

Ruth Ben-Ghiat (RBG): In your writings you emphasize that people are equally capable of corruption and integrity. What motivates the fraudsters and bad actors you study and what makes others follow their cues?

Alexander Stein (AS): It's never just the one individual, the bad actor. It's always the enablers and collaborators and all the other people who become enthralled by horrific behavior. And when you start talking about values and integrity, it becomes complicated, because most people, I think even most so-called bad people, go home to their families, just like Mafiosi do. And strongmen around the world say that they love their children and they love their wives and their siblings. That sort of discordance is part of the human condition but can be difficult for people to accept.

RBG: I think that sometimes the unscrupulous hire other unscrupulous people to lessen this discord, to have company. If everyone around you is complicit in corruption, maybe you can feel less guilty.

AS: The technical terms are ego syntonic versus ego dystonic. I doubt Trump struggles with that, and those who operate as his henchmen and lieutenants are similarly somehow acclimated, so that it's not constantly internally tumultuous.  

And this is where recognizing the fragility of structures and values matters. There's this presumption among good people that everyone will be pro-social, that everyone will be interested in taking care, not just of one another, but of institutions that have shared significance and importance to all, and that's what being a citizen is. But people who are oriented to be destructive are not necessarily in command of themselves, they're driven by more primitive impulses.

RBG: That makes a lot of sense. So, when you have corruption in an environment, there are different ways to try and curb it: punishments, sanctions, etc. In the business and financial worlds, there are armies of compliance officers and all that. Do these methods of deterrence translate at all to other realms?

AS: In some regards, the answer to your question depends on the end game. If you're looking to bring an organization back into compliance, because sales are plummeting due to a bad leader, there are lots of things that a board can do, for example, or regulators can do with controls and sanctions.

Does that actually repair the root causes of the situation? Maybe not, but maybe everyone would nonetheless agree that it was a positive outcome because the landscape is better. But if your goal is to actually truly mitigate the potential for that kind of thing to happen again, it's ultimately going to fall short because reckoning with the internal forces of someone who's essentially in a channel toward wrongdoing is difficult. It's a trajectory that's nearly impossible to disrupt.

In that case, if something is going to be done, it would really have to be outright removal of that person from the scene. But even that doesn't change the aftershocks of having had such a person. You have to deal with how was it possible that this situation maladapted itself to accommodate that kind of figure?

RBG: That brings up the issue of personality cults that can thrive in the business world and in tech as well as in politics. Adam Neumann of WeWork is one example.

AS: Yeah, and a counterpart to him is someone like Elizabeth Holmes: this incredibly charismatic figure who's able to seduce others into subscribing to a particular view, to the point of abandoning the mechanisms of critical thinking and governance oversight and neglecting their fiduciary duties. Those dynamics are not dissimilar, actually, to falling in love. Margaret Heffernan has written about this in her book Willfull Blindness. The ways in which people can just stare at something and see only what they want, not what's really there.

So, going back to your earlier question, what do you do? How can you stop these sorts of things? It could be fairly said that when you encounter somebody who is a monster and you understand that they are driven by a profound wound, what you see is not the weaponry and the armamentarium, but the vulnerability.

It is possible, even with someone who is fearsome, to effectuate a kind of psychological jujitsu maneuver where you can find the way to exploit their weakness against them. Because those people have actually no defenses against that weakness, and they will do anything to try to move away from the wound or destroy it, or overpower it by becoming overpowering.

You have to meet power with power. You run the risk of inflaming the bear if you antagonize him, but there may be few options. This becomes a viable tactic with people who are obviously stricken with profound pathological issues relating to shame. No matter how well defended they are and how powerfully they posture themselves in the world, they are still nonetheless an open gaping hole of shame. And you can actually use their shame as a weapon against them.

RBG: Moving on from monsters, what values and behavior should we encourage to create good leaders?

AS: My working definition of ethics is the capacity to restrain yourself. That's really at the core of it. It takes quite a measure of psychological and psychosocial maturity to hold back on certain kinds of impulses. The impulses common to all the authoritarians that you write about and all the fraudsters. These are people who are functioning ultimately on a primitive level psychologically, even though they present in the world as exceedingly high functioning and sophisticated.

This is going to sound unbelievably hokey, but the answer to your question about values is to love children more and better. A lot of the experience of being cared for, being attended to, of not living in anxiety or fear, of being well fed and having your fundamental needs provided for -- these are absolutely antidotes, not just mitigants, to a lot of the bad behavior that we see in the world.

RBG: That's not hokey at all. I end Strongmen by talking about love for the same reason. How do you personally keep serene, and what helps you to be your best self?

AS: I have a background as a musician, so music is very important to me. Listening to Mozart and Beethoven is soul enriching. And being together with my wife and children. There's really nothing more revitalizing and stabilizing than that.