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Gleb Tsipursky

Management

Why Did Adidas Wait So Long to Drop Kanye West?

Three reasons companies wait too long to make obvious decisions

Published: Wednesday, November 30, 2022 - 12:03

Why do companies bury their heads in the sand instead of facing dangerous facts, whether about quality problems or other issues? It happens more often than you might think—most recently with Adidas. It usually boils down to companies falling for three cognitive biases.

“Adidas does not tolerate antisemitism and any other sort of hate speech... the company has taken the decision to terminate the partnership with Ye immediately,” the company stated in its Oct. 25, 2022, news release. That statement conveys a principled and admirable stance against the antisemitism shown by the rapper formerly known as Kanye West after his antisemitic tweet on Oct. 10 that he would go “death con 3 on JEWISH PEOPLE.”

Yet Adidas waited much, much longer than other companies that cut ties with Ye. Even Ye’s own talent agency dropped him before Adidas. In fact, Adidas delayed so long that Ye taunted them on his Oct. 16 appearance on the Drink Champs podcast, saying, “I can say antisemitic things, and Adidas can’t drop me. Now what? Now what?”

Notably, Adidas had an especially strong reason to drop Ye earlier than other companies. It faced mounting pressure from the Anti-Defamation League and other organizations to drop Ye, given its Nazi associations (Adidas was founded by a former member of the Nazi party). A Change.org petition set up by the Campaign Against Antisemitism urging Adidas to sever ties with Ye had gathered 169,100 signatures by Oct. 25.

Bias No. 1: The ostrich effect

Despite the reasons listed above, Adidas refused to drop Ye until all the other companies dropped him. Instead of getting ahead of the problem and dropping Ye immediately after his Oct. 10 antisemitic tweet, or even his Oct. 16 taunting of Adidas, the company had to be shamed and pressured into cutting its ties with the public figure. As a result, Adidas seriously damaged its brand, harming its reputation among anyone opposed to antisemitism. After all, it appeared Adidas dropped Ye due to the pressure, rather than Ye’s antisemitism and other bad behaviors.

What explains the poor decision-making by the Adidas leadership? It’s a classic case of the ostrich effect: a dangerous judgment error where our minds refuse to acknowledge negative information about reality. We figuratively hide our head in the sand. It’s a type of cognitive bias, one of many mental blind spots that affect decision making in all life areas, ranging from the future of work to mental fitness.

Adidas refused to acknowledge the growing damage to its brand from Ye’s antisemitism, as well as his prior bad behavior, such as having models wear “White Lives Matter” T-shirts earlier in October.

Such denialism in professional settings happens surprisingly often. A four-year study of 286 organizations that had forced out their CEOs found that 23 percent were fired for denying reality, meaning they refused to recognize negative facts about their organization. Other research shows that professionals at all levels suffer from the tendency to deny uncomfortable facts.

Bias No. 2: Sunk costs fallacy

Adidas’ denialism likely stems from the cognitive bias known as the sunk costs fallacy, where people or companies continue a relationship or endeavor in which they’ve invested resources, even if it harms them. According to Adidas’ statement, the termination of the contract is expected to “have a short-term negative impact of up to 250 million euros on the company’s net income in 2022, given the high seasonality of the fourth quarter.” Presumably, the impact will be much higher in 2023—more than half a billion, at least.

The partnership with Ye had a long history, beginning in 2013 when the company signed his brand away from rival Nike. In 2016, Adidas further expanded its relationship with the rapper, calling it “the most significant partnership ever created between a nonathlete and an athletic brand.”

In other words, Adidas invested a great deal of money and reputation in its relationship with Ye. That kind of investment causes our minds to feel strongly attached to whatever we put those resources into, and we continue to throw good money after bad.

You’ll see this happen often in major projects that are working out poorly, such as Meta’s Metaverse project. Several high-profile industry figures recently criticized Mark Zuckerberg’s efforts. They include Palmer Luckey, the founder of VR headset startup Oculus, which Meta acquired in 2014 for $2 billion. “I don't think it’s a good product,” Luckey said about Horizon Worlds, Meta’s core metaverse product. He called it a “project car,” a fancy automobile that the owner spends a lot of money on as a hobby. So far, Facebook’s shift to building the metaverse has been costly, with the company last year losing $10 billion on it. Wall Street analysts expect it to lose more than $10 billion again this year.

Similarly, you’ll see sunken costs in major relationships. That can range from marriages that last much longer than they should to brand partnerships like the one between Adidas and Ye.

Bias No. 3: Hyperbolic discounting

The final cognitive bias relevant here is called hyperbolic discounting. This term describes our brain’s focus on short-term, highly visible outcomes over much more important but less visible long-term ones. Adidas didn’t want to take the short-term financial hit to its bottom line from cutting ties with Ye. However, Adidas failed to give sufficient weight to the long-term damage to its brand from failing to do so.

Short-term financial damage is highly visible and painful, while the long-term brand damage is much less visible and less painful. Yet, realistically, such brand damage is much more important to the long-term success of Adidas.

In my consulting, I’ve seen many executives struggle with the same three mental blind spots when they face top performers engaging in bad behaviors, ranging from incivility to sexual harassment and discrimination. Leaders deny incidents because they have so much invested in the top performer, whether a star salesperson or top data scientist, and they don’t consider the long-term consequences to the organization’s culture and employee morale.

In fact, it’s easy for anyone to fall for these three cognitive biases when someone you value behaves badly. Fortunately, forewarned is forearmed: Knowing about these three mental blind spots means you can watch out for these problems in your own professional and personal life.

Discuss

About The Author

Gleb Tsipursky’s picture

Gleb Tsipursky

Dr. Gleb Tsipursky helps quality professionals make the wisest decisions on the future of work as the CEO of the boutique future-of-work consultancy Disaster Avoidance Experts. He is the best-selling author of seven books, including Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters and Leading Hybrid and Remote Teams: A Manual on Benchmarking to Best Practices for Competitive Advantage. His cutting-edge thought leadership has been featured in more than 650 articles in prominent publications such as Harvard Business Review, Fortune, and USA Today. His expertise comes from more than 20 years of consulting for Fortune 500 companies from Aflac to Xerox and more than 15 years in academia as a cognitive scientist at UNC-Chapel Hill and Ohio State. Contact him at Gleb[at]DisasterAvoidanceExperts[dot]com, Twitter@gleb_tsipursky, Instagram@dr_gleb_tsipurskyLinkedIn, and register for his Wise Decision Maker Course.

Comments

The ostrich effect

Dear Dr. Tsipursky,

Thank you for your article. Here is my take on the subject matter.

If you are already known for being a trouble-maker and someone who makes controversial statements, it may take people longer to discern ‘the usual’ provocative behavior from an abusive insult. Far from endorsing such a 'tolerant' attitude, I here try to rationalize this lag in response. Something similar happened to actress Kirsten Dunst as she was sitting next to director Lars von Trier at the Cannes Film Festival ceremony, while he was making unacceptable jokes about Hitler. Reuters speculated that Dunst was “cringing as he [von Trier] self-destructed” (Reuters, 2011). It is most sad that for the penny to drop in, it takes a public outrage or a condemnation from colleagues or peers. Dior was swift to cut ties with John Galliano who had made anti-Semitic and racist comments, but only after Natalie Portman had released her statement.

Thank you,

Andrey