Interlude: Hubris is a bad word

This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on June 4, 2018 - June 10, 2018.
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Hubris. It is not a commonly heard or used word in everyday vocabulary but which has, by a turn of events, found its way into coffee shop talk among Malaysians in the days following the May 9 general election.

And it looks like hubris (some of us may not even pronounce it correctly but never mind, we get the meaning) has now been added to our repertoire of big words made popular by events in history. For example, recalcitrant, contagion and irrational exuberance.

What is hubris? In the ancient Greek context, it was used to describe a behavioural flaw that eventually brought the downfall of the “heroes” in many classical Greek tragedies.

The story of Daedalus and Icarus is often cited as an apt illustration of hubris. For those who may not remember or have not read this Greek myth, Daedalus — a master craftsman — and his son, Icarus, were held prisoner on the island of Crete. To escape, Daedulus made two giant pairs of wings from feathers and wax that would enable them to fly. Daedalus warned Icarus not to fly too close to the sun as the heat would melt the wax. The boy, after taking flight, grew overconfident, ignored his father’s warning and flew too close to the sun. Sure enough, the heat melted the wax that held the feathers together and Icarus plunged to his death.

Hubris has since evolved and is now used to denote a dangerous mix of overconfidence, overambition and arrogance fuelled by prolonged periods of power and success. History has shown that hubristic leaders tend to make irrational decisions, overreach themselves and ignore good advice. And it almost always leads to their downfall.

And hubris was what brought about the historic event on May 9, when Malaysians turned out in droves to vote. Against the odds, they succeeded in booting out a government that had been in power for more than 60 years.

Pride that has blossomed, as the adage goes, bears the fruit of ruin. The Barisan Nasional government, led by Datuk Seri Najib Razak, was so convinced of its invinciblity and victory that it failed to notice and heed the waves of discontent that were sweeping across the country.

Disregarding advice and criticism, the BN leaders ignored the economic reality on the ground and growing clamour for change. They listened to what they wanted to hear and saw what they wanted to see. The unthinkable happened — a Malaysian tsunami hit and the BN coalition was left in shock and disarray.

Hubris is also a reason why many research analysts, including those from foreign houses, were caught wrong-footed when they failed to predict a Pakatan Harapan victory. Why? Some did not see for themselves what was happening on the ground and were overconfident of their analysis and reading of the situation.

History does not lack examples of hubristic leaders, whether in politics or business, who came to a bad end.

Alexander the Great and Napolean Bonaparte were among those whose fall was a result of their arrogance.

The thing about hubris is this — the lessons are not always learnt because somewhere out there, there will be someone who thinks what happened to past leaders will not happen to him or her.

The financial world has had its share of hubris and, as a result, crippling crises. The 1997/98 Asian financial crisis. The dotcom boom and bust. The 2008 global financial crisis. These crises did not just implode — investors can be carried away by their success and greed. Decisions may not be based on rational analysis anymore and they take on bigger and bigger risks over time.

Investors ignore the dangers of hubris at their own peril. This was the case in the early 1990s, when the local stock market saw a super bull run. Punters were enjoying rich pickings — stock after stock rose to heady levels, day after day. Many investors, unbothered with the fundamentals, bought on rumours and made a quick buck. It seemed as if the good times would not come to an end.

In 1996, then US Federal Reserve chairman Alan Greenspan coined this famous term — irrational exuberance — to describe investors who were driving up the prices of assets without the support of fundamentals. But not many took heed.

Asset prices ran ahead of the fundamentals. Some governments refused to acknowledge some of the structural weaknesses in their economies and continued to paint a rosy outlook. We know what happened. The Asian financial crisis struck in 1997. As the lessons were not learnt, more crises followed.

So, now we know hubris. It destroys. Beware of it.