The Psychology of the Eurozone Crisis

The problems in the European Community around creating a single currency illustrate the tensions that arise when overoptimistic globalizing sentiments hit the wall of deeply ingrained psychological differences. When the Euro was introduced in 1999, many multinational businesses greeted the idea of a single currency across the consenting EC countries with enthusiasm. A significant number of multinationals essentially dismantled their European national operations in favor of regional structures. There was massive investment in the European project from outside. For example, in spite of the prominence given to emerging markets, more than half of the investment of U.S. multinationals abroad in the period 2002 to 2011 actually went to Europe.¹

However, the initial optimism quickly faded as the problems in the Eurozone surfaced. It is rare nowadays to meet a CEO of a global company who does not see their European operations on, at best, a slow plateau of growth, or more often as a disaster zone, irrespective of their organizational strengths or the talent of their people in the region. None of these factors can override the problems caused by the huge divisions within the Eurozone economies. The European operations of multinationals came to be inundated with specialists from treasury, accounting, tax, legal affairs, and human resources—all tasked with the job of mitigating risk should the situation deteriorate even further.

Essentially what happened was that everyone got taken in by the heady catch-up growth of the southern European and Irish economies without discerning whether the momentum was sustainable or the euro project viable. People overlooked the relevance of deep-seated cultural factors to the issue of economic sustainability. The exact same thing is happening with respect to gauging the economic prospects of India, China, and other emerging market economies today. It is easy to get caught up with the high, catch-up growth figures in all these regions and not to see the cultural problems bubbling underneath the surface that will, over time, influence whether this performance is sustainable. Global CEOs need to become cultural experts, psychologists, and historians if they are to make the right long-term calls for their companies.

The importance of this is illustrated by looking more deeply into the Eurozone crisis. The drive to create a single economic entity with a common currency, free movement of people, and consistent rules is predicated on the unstated, but nevertheless strong, assumption that there is a high level of cultural similarity across the nations involved. In one sense this is true; but in another sense the cultural and psychological instincts of Greeks are not the same as those of Germans. This is not to pass judgment on either, but rather to say that beyond obvious and superficial differences—like Greeks being more persistent and ingenious in circumventing EC rules around smoking in public places—there lurked deeper differences in attitudes toward financial and economic matters that the creators of the common currency failed to recognize or were blithely optimistic about. It is now apparent that many of the problems arose from the very different attitudes toward economic management, payment of taxes, attitudes toward borrowing, and orientation to work that exist in the Eurozone and which threaten the whole project or at the least threaten to stymie growth in the region for some time.

Going a bit deeper, many of these attitudinal and behavioral differences arise from profound differences in some underlying values. In particular, as will be discussed later, southern European countries have at their core a more religious, relational, and in-the-moment set of values—versus the northern countries where more secular, individualistic, and long-term psychological instincts are more evident. Individualistic cultures require mechanisms other than religious authority or the sanction of one's community to regulate people's behavior, and hence place much greater emphasis on the rules set down by the state or other institutions. In the more relational cultures of southern Europe and Ireland, it is easier to trump rules imposed by more distant institutions; it is the obligations to one's immediate circle that count. Furthermore, if you live in a culture with a more short-term orientation, you are likely to take the plunge when economic opportunities created by, for example, money being available at low interest rates present themselves without thinking too hard about the long-term consequences. This is the case whether you are a government doling out pensions and benefits or an individual making a property investment. As a result, a different and more flexible attitude existed toward the interpretation of fiscal and financial rules—not only at national levels but also in the behavior of banks and at the level of individual financial decision making—in the southern versus northern Eurozone countries.

But where do these differences in underlying values themselves come from? We can go deeper still. Surprising as it may sound, from a cultural DNA point of view, the different psychological instincts in the southern European countries and Ireland versus northern Europe make sense when one looks at how modern humans settled Europe some 45,000 years ago. As will be demonstrated later, the original hunter-gatherer population of Europe came through two clearly differentiated routes—something that's had a powerful impact on the continent's psychological and cultural DNA.² One path was through the Middle East, into Anatolia, then into the Balkans and southern Europe. The other involved a more northerly route through the Caucuses and Western Russia into Eastern Europe, Poland, and Germany. It is likely that the two earliest modern human cultures recorded in Europe—the Aurignacian and Gravettian—mirror these two movements. The former is named after a village in southern France where relics relating to the culture were first found; it is believed to have first appeared in Europe—in Bulgaria—around 50,000 years ago, and gradually spread across the south of the continent and then along the Atlantic coast. The Gravettian culture, again named after a site in France, is believed to have entered later, perhaps 30,000 years ago. Core features of this culture include specialized weapons for mammoth hunting, the use of mammoth bones for house construction, and mechanisms for harnessing fire for heating and cooking—adaptations that all point to a more northerly origin.

Although subsequent severe ice age events scrambled the picture later on, many of the peoples in northern Europe are descended from the population that followed the second path, and those in southern Europe, to a greater extent, the first path. Furthermore, when expansion occurred from the ice age, refugees, those who moved north, coped for tens of thousands of years with a radically different ecological environment compared to that which they left behind in the south. Interestingly, there is also considerable evidence that a movement of people from Spain went along an Atlantic coastal route to repopulate Ireland and the west of Scotland. Today, there is still a clear genetic dividing line running through the UK that reflects this movement.³ What is interesting is that many cultural traits, including Catholicism, map this pattern of entry and diffusion in Europe. Even in Scotland, Catholicism is more a pattern in the west of the country. Later still the south was the recipient of the first agriculturalists who came from the Middle East—the genetic signature of this migration also distinguishes southern and northern European populations.

The Eurozone crisis also follows this exact pattern, including Ireland's involvement. A sound argument can be made for the view that the pattern of migration and the different environmental challenges that humans faced in the south and along the Atlantic coast led to their psychological and cultural instincts evolving in a different way from those who had the challenge after the ice age of surviving in the ecological conditions of the north. The detail of all this will be unpacked later in the chapter on Europe. For now, however, the point is that while all this happened so long ago that the relevance to current events seems unlikely, or at best highly speculative, a good case can be made for the idea that the ultimate cause of the current tensions in the Eurozone is that the system ignored the deep-seated psychological and cultural differences between the countries that it encompassed.

Understanding the deeper reasons for these difficulties is not just an exercise in intellectual exploration—it also has implications for the future. Solving the crisis in a genuinely long-term manner will require surfacing and working on these cultural differences. This will require the northern countries questioning their instincts and adapting as much as the countries who are experiencing the problems. All round it will require empathy for ways of looking at the world that just seem alien from one's own perspective.

We Are Not All the Same and That Is Good

If you were to line up a European, an African, an Indian, an Arab, and someone from China and ask any adult in the world to pick out who has come from where, just about everybody would be likely to get it right. If you made each person's skin pigmentation and hair color the same, differences in the size of the forehead, the shape of the eyes, or the structure of the chin would give the game away. Even if you covered up everyone's faces, most people would make a reasonable stab purely on the basis of body type. In fact, those who know what to look for are able to distinguish regional origin with a high level of accuracy from skeletal features alone.

An astonishing fact about these physical differences is that they could only have evolved less than 70,000 years ago—a blink of an eye in terms of evolutionary timescales. This is because overwhelmingly, the DNA, fossil, and climatic evidence converges on 60,000 to 80,000 years ago as being the period in which a tiny group of modern humans made a crossing out of Africa to set up fragile roots in Asia. This group's offspring—perhaps no more than 100 to 200 people strong—then went on to populate the rest of the world. Members of this group bred only negligibly with prior species of humans in other regions. At the time of settling on the shores outside of Africa, all non-Africans must have looked the same and, in all probability, not much different from the African cousins that they had left behind. Most, but not all, of the physical differences that are apparent can be related to adaptations required to survive in the multifarious environments that modern humans encountered as they populated the world.

However, while discussing physical differences is uncontroversial—if only because it is self evidently obvious—the idea that people's underlying psychology might be different is more difficult for people to accept. Sure, we have no problem accepting small behavioral differences. It's clear that people from different parts of the world differ in manners, eat different things, wear different clothes, and like different sports. However, despite these relatively superficial differences, many informed and educated people fundamentally do want to believe that we are all the same deep down. Contrary thoughts are left to those who don't know any better. Suggesting such differences in polite company typically generates embarrassment. This is not just because people want to be politically correct; rightly we do not feel comfortable putting our friends or acquaintances into boxes.

The issue of differences between groups is therefore, to put it mildly, controversial. All too often, we can risk exaggerating differences between people and failing to recognize the fact that people everywhere have the same desires, fears, motivations, and challenges to overcome in life. In fact, when it comes to global business, it is not a bad idea to sometimes put aside notions of cultural differences and assume that everyone is pretty much the same. When looking at other cultures sometimes we exaggerate differences, and other times we oversimplify and assume uniformity where there is variety and differentiation. In fact, there are powerful reasons for why we engage in such stereotyping beyond the obvious need to feel good about ourselves in relation to others.

Our social world is complex and taxes our cognitive and emotional coping strategies. The human brain evolved predominantly in hunter–gatherer times when humans typically congregated in groups of between 50 and 100. Our brains are finely tuned instruments for navigating that early environment. The only problem is that, unless you happen to be a Kalahari Bushman or an Inuit, this finely tuned instrument is required to operate in environments that were never imagined back when it was constructed. Imagine turning up to sort out a problem on a piece of complicated IT software armed not with an operating manual but with a soldering iron, and you will begin to get the picture. One of the simplifying processes is to stereotype people and to relate to them as members of a group as opposed to having to understand every person we need to engage individually and from scratch. A danger in talking about psychological differences between people from different cultures is simply that it reinforces narrow and frequently false stereotypes about people. Hence, rightly, there is a reluctance to talk about difference.

This has not always been the case. In Victorian England and most of European society at the turn of the century, it was common for people to overtly and with confidence opine about the attributes of others. Favell Mortimer—a descendant of the family that founded Barclays Bank—wrote widely about other people. Two of her most popular books were The Countries of Europe Described and Far Off: Asia and Australia Described.⁴ Mortimer presents, with breathtaking insensitivity and at times open contempt, her views on the nations of the world. The Spaniards are “not only idle they are very cruel;” the French “like things smart but are not very clean.” When she talks of Italy, Mortimer cannot get over the number of murders committed in the country and how unsafe it feels. Further afield, if anything her observations grow even more rancorous. When she talks of Afghanistan, she observes “the men are terrible looking creatures—tall, large, dark and grim.” The Burmese, she informs her readers, are “very deceitful and tell lies on every occasion.” When she comes to Siam, she makes the judgment that “there would be very little trade in Bangkok if it were not for the Chinese.”⁵

This is the sort of writing that gives observations on different people a bad name. The point of all this is that stereotypes, even strongly held ones, can all too often be wrong. One reason for this is that people frequently fail to account for contextual factors when interpreting others' behaviors and thus attribute tendencies to people that are more accurately ascribed to the situation that they inhabit. This effect is so powerful that it has a name in psychology: the fundamental attribution error. A second reason that stereotypes are frequently wrong is that they are often less about describing the world than justifying our position or actions within it. Mortimer's views make a good deal more sense when looked at through the lens of rationalizing British imperial activities.

Unconscious Bias

Few people nowadays would openly serve up the kind of fare that Mortimer offers her readers. However, as the whole field of unconscious bias in psychology has uncovered, even people who are openly and vehemently against anything that smacks of stereotyping often show evidence of intergroup bias when their behavior is examined more closely. A legion of studies have demonstrated that when one looks at people's actual behavior and decision making, or aspects of their reactions they cannot control, they do hold profound views about intergroup differences. If, for example, white people are shown on a computer screen positive and negative adjectives, each paired with a white or ethnic sounding name and asked to say whether the adjective is good or bad, they show much faster reaction times when the positive adjective is paired with a white sounding name or the negative ones with the ethnic sounding name. When the pairing violates people's internal stereotypes, by putting positive adjectives next to ethnic sounding names or negative ones next to white-sounding names, the brain takes time to orient itself to this unexpected reality.⁶

In fact, a range of research looking at things people cannot control, such as reaction times, recall, or neuropsychological responses, shows that people hold unconscious biases not just toward other ethnic groups but also with respect to gender and all manner of other groupings in our social world. The differences are higher typically in people who are openly discriminatory in their thinking, but also invariably show up with even the most ardent liberals.⁷

So just because people don't like to flaunt their views Mortimer-style these days—this does not mean they do not hold underlying views about group differences. However, before we jump to the conclusion that everyone is full of irrational stereotypes, there is an interesting twist to the unconscious bias data. Black people in the earlier example also show evidence of holding the same biases, but a bit less strongly. In fact, a whole host of research on both conscious and unconscious stereotypes shows that often, but not always, the group itself shares the views that others hold about them. In general, while people differ in the values they attach to particular qualities—generally valuing the traits they possess over those with which they are less associated—they nevertheless often agree on what qualities their own and other groups possess. Why should this be so? Is there a conspiracy to envelop everyone with a global false consciousness to which we have all succumbed?

One strong strand within psychological research of group perceptions holds that some, but not all, stereotypes have a kernel of truth to them.⁸ This states that people formulate views of other groups because of certain tangible bits of data and evidence rather than picking them out of thin air.⁹ It's a theory substantiated by the finding that many stereotypes seem to reflect people's observations of extreme or salient events. Simplistically, if you see a lot of Indian children in the Spelling Bee finals, you might think all Indians have a penchant for learning to spell complicated words. This is almost certainly a false view, but as will be discussed in the India chapter, there may be some cultural influences that drive success in such a competition for Indians. The stereotype is therefore both untrue and true at the same time. Stereotypes often arise from reading about different types of memorable events, portrayals of whiz kid geniuses, or quite simply the kinds of people who pop up on the TV. These extreme manifestations often do result from differences in the group mean of an attribute being skewed a bit—hence the kernel of truth notion.¹⁰

The unconscious bias research, plus the kernel of truth evidence, suggests that simply pretending there are no differences and that all views that express such differences are infused with a false consciousness is quite simply trying to push psychological water uphill. Even if the conscious mind succumbs to the effort, the unconscious brain will most likely rebel. A much better course of action is to recognize the reality of some differences, but to try to get people to value differences more—that is, encourage them to more actively examine their models of what is good or necessary for success. This is where unconscious bias can really lead to a false consciousness and cause leaders to fail to leverage the power of diversity. In fact, there is something of a paradox to some of the arguments around diversity. At one level proponents of a diversity agenda want to minimize any suggestion of difference; but at another level they also want to get people to value different approaches more. The latter can only make sense if differences exist, and if people recognize and actively celebrate them.

Greater Similarity and Difference at the Same Time

It would not be entirely true to say that people are always more different than one thinks or that prolonged exposure to a culture invariably leads to a heightened sense of difference. It only does so in certain respects. In other areas, people can also be equally surprised by similarities, which had been underestimated from a distance. There are many respects in which people everywhere are just humans going about their daily lives with the same hopes, drives, anxieties, instincts, and foibles as everyone else. From a distance, certain stereotypes and assumptions about differences that we hold can evaporate the minute one connects with a different culture. It is important in international business to see the person beyond the race. Simply ignoring differences is sometimes not a bad strategy at all, and sometimes firms tread too softly and self-consciously when engaging other cultures, tiptoeing around imagined sensitivities and differences. However, the point is to be alert to both greater similarity and difference at the same time.

We witnessed firsthand this paradox of greater similarity and difference when working for one of our global companies. This client had commissioned us to run a series of in-depth and groundbreaking personal development workshops for managers. As is the case in many of these workshops, there was an emphasis on personal disclosure, reflections on one's values and purpose, as well as extensive feedback from participants—the kind of intervention that gets routinely caricatured by television programs like The Office. Cynicism aside, we had in actual fact created an event that was quite powerful and at times even moving for participants. We ran it initially in Europe and the United States with great success. The managing director of the company's Africa division heard about it and said that he wanted to try it in his region as part of his long-term plan to develop local senior managers for the top posts.

Most thought that this was a step too far and that the company's African managers would find the experience somewhat perplexing at best—but most likely downright weird. However, the MD was proud of what he and others had created in the Africa division and persisted. After a degree of corporate handwringing, and mildly skeptical, we set off to Nigeria to run the first workshop for a group of managers picked from across the African continent.

It was clear from the moment that we touched down at Lagos airport that we had to reset some of the normal instincts and precepts that one ordinarily uses to navigate daily life. Simply getting into Nigeria proved to be a feat in itself, requiring the navigation of numerous arbitrary checkpoints, all aimed at fleecing us in some way. After having navigated one of these simply to get onto a horizontal moving belt, my heart sank when I saw a gaggle of semi-official looking individuals waiting to interrogate us at the end of the moving section. We had been led to expect this and told to smile and say, “I'll bring something for you next time.” Astonishingly, this platitudinous and self-evidently unlikely promise more often than not did the trick. This was a regular pattern that we found in dealing with a lot of official and semi-official people in Nigeria then and also subsequently in trips to other parts of Sub-Saharan Africa. We were able to overcome initial wariness and at times overbearing sternness by telling a joke or attempting some form of personal connection, the impact of which was typically to release extremely high levels of responsiveness and personal warmth.

Once out of the airport, we were hit by what every visitor experiences—the joy and vibrancy with which people deal with each other on a daily basis in Africa. Quite simply interactions take place with more vivid color, emotional expressiveness, intensity, and laughter in many parts of Africa. This is both refreshing but at times also a bit overwhelming, especially if you come from a more restrained culture. Our sense of relief at having survived the airport experience and entering the country, was tempered by a wariness introduced by the realization that we had armed escorts in front of and behind us as we set off for our hotel. We wondered why such extravagant security was necessary. The truth is that Lagos, like many parts of Sub-Saharan Africa, is just not that safe. The caution shown by Western companies around security is well founded and not just a reflection of paranoia at operating in an unfamiliar environment. The jarring juxtaposition of great friendliness and warmth at one level, with an underlying feeling of threat at another, is something that plays on one's mind in many parts of Africa. We often found that a seemingly benign situation could unpredictably develop a threatening edge, just as a problematic encounter could easily dissolve into indifference or, more confusing at times, joviality.

Contrary to expectations, African managers took to the program like ducks to water. They showed a level of drive and commitment to the exercises that we had not encountered. There was also an openness and a robustness of exchange that at times even made us wince with its directness. The African leaders engaged in exercises that we had worried they might find silly or meaningless with a level of gusto and passion not witnessed before. The managers also performed extremely well on the case studies and other exercises. However, we did notice that if there was no allocated leader in the group discussions, participants tended to debate until they reached complete consensus—no matter how time-consuming this proved. If they made a decision at all, they did so only when the allocated time was about to run out.

However, just as we were concluding that African managers were just like those in Europe—but maybe even more driven—certain small but intriguing differences started to emerge. Participants were required to fill in some personality questionnaires at the end of the first day. We gave these out and told people that they typically only took 20 minutes or so and they should then break for the day. We left them to it, but after two hours, an anxious administrator came to get us and informed us that the African managers were having difficulties with the questionnaires. Perplexed, we returned to the room to find a number of them under considerable strain, sweating, and looking quite agitated. The group was treating these psychometric questionnaires—which merely tapped individual preferences and had no right or wrong answers—like an exam. What's more, word had got round that we were endeavoring to cross check responses across items as a test of honesty. Rather than reacting to each item naturally, the managers were going back each time over all their previous answers in an effort to avoid the inconsistency they thought we were trying to catch people on. Such cross checking was vaguely feasible at the start, but after you had completed about 50 or 60 items, it became a highly stressful kind of 10-dimensional Sudoku.

After the three-day program finished, we had the opportunity to visit some of those managers at their place of work—which was something of an eye-opener. Magically, it seemed that the collaborative and consensual leaders we had seen in the workshop who had had difficulty converging on a decision had transformed overnight into highly confident, driving, larger than life figures barking instructions furiously at their subordinates and conveying an impressive sense of decisiveness and efficiency. Often a certain degree of gratuitous insult was thrown in with the instructions: “Why did you do that, you fool?” or “Don't make such a stupid mistake next time.” This was our first encounter in Africa with what has been termed the Big Man syndrome—an expectation that leaders should be huge personalities conveying confidence and certainty at all times. The subordinates appeared to take this highly directive and less than fully respectful behavior from their leaders in their stride and, if anything, seemed to get some reassurance and comfort from it. The transformation was remarkable for its sheer scale and rapidity. It was also disorienting given that we were psychologists who were supposed to have been able to get under the skin of surface impressions and uncover such latent tendencies.

The point of the above story is clear. Many expectations about differences across cultures are simply not true and on occasion even the reverse of what one might expect. Like executives everywhere, the African leaders were motivated to be the best that they could be, and, if anything, more driven and keen to learn than their Western counterparts. The curious episode with the psychometrics was in fact partly a reflection of their desire to perform well. However, there also lurked profound differences beyond the surface similarities. There were radically different attitudes toward the application of institutional rules—as our experience at the airport had demonstrated—as well as a wholly different and complex approach to the exercise of power in different settings. Relationships and trust also appeared to be built in very different ways. In their own milieu, the behaviors and instincts of the African managers were also profoundly different from how they acted with us. Gradually, we got to know and understand better some of the similarities and sources of difference. However, after a week or so we left with the thought that one all too frequently experiences on holiday. You have had a great time, the locals have been welcoming and at one level you have connected with them, but you are nevertheless left with the feeling—driven by subtle cues that you can't quite put your finger on—that a completely different world exists outside your orbit of managed experiences. You are left wondering, “Have I understood this place at all?”

The Globalization Challenge for Business

At one level, many businesses—particularly multinationals—would feel that they have been operating globally with success for considerable periods of time. Yet if you scratch the surface, the new multipolar world that is emerging is creating significant challenges and asking deeper questions of businesses that consider themselves to be globally minded.

The first point is that there is no such thing as a global company. Every significant company that I come across operating on the global stage has a culture that is distinctly rooted in its place of origin. The senior leadership teams of such organizations are often literally a pale reflection of the geographies in which these companies operate. One sees an increase in diversity with the growth of emerging markets. However, even the individuals who make it up the hierarchy tend to be socialized into the dominant host culture. Genuine diversity, inclusiveness, and the capacity to build ways of working that take the best from a range of global cultures have eluded just about every multinational.

A second point is that there can be a degree of common understanding between executives at senior levels in a business who have often been educated at elite universities or international business schools. However, there is also a tendency to underestimate the genuine differences in outlook and orientation at lower levels. International executives who do not develop a nuanced understanding of the cultures in which they are operating can exhibit significant blind spots about what is truly going on at deeper levels within the organization. How initiatives land and are executed in reality can be a far cry from what executives have intended or indeed what they think is happening. Governments and regulatory authorities also typically operate to the drumbeat of a local culture—presenting unforeseen barriers and developments that can catch many multinationals off guard.

Another point is that virtually all multinationals, particularly, Western ones, complain of significant and sometimes insurmountable challenges with regard to talent levels in different parts of the world. While there is some truth to this, the perception arises at least partially from applying a narrow set of lenses for looking at people. One of this book's intentions is to encourage executives to think more deeply and appreciatively about difference. Doing so in an authentic and genuine, rather than a platitudinous manner, requires real appreciation of some of the underlying causes of difference. Similarly, if your implicit notion of development is to inculcate executives into your dominant, core, cultural precepts, you are likely to be disappointed by the returns emanating from such investment. Releasing potential in different cultures requires nuanced and sophisticated interventions that go with the grain of the local cultural DNA.

Many of these issues point to a deeper challenge that global companies need to engage with: The ecology of the global business environment is changing fast. The analytical, process-oriented, organized, and structured approach that is the default setting of many Western multinationals may increasingly prove to be too slow moving, inflexible, and cumbersome in a dynamic and fast-moving world where the unpredictable currents of change require a more intuitive, emergent, and flexible set of responses. The frequent complacency around their core cultural values that many Western companies exhibit appears to emanate from a lack of realization of the depth and strength of the ecological changes in the global business environment. In fact, as will be explored later, some of the themes of this change may play to instincts that are more deeply rooted in non-Western cultures. However, companies from these emergent cultures also need to adjust their mindset as many step onto the global stage for the first time. A provocative and honest understanding of the strengths and weaknesses of one's cultural default settings in the new multipolar world is essential for all players.

Defining Cultural DNA

This book is about how the people in eight of the world's regions—Sub-Saharan Africa, India, the Middle East, China, Europe, North America, Latin America, and Australia—look at things, which I refer to as each region's cultural DNA. Before we go further, however, it is useful to say a few things about what is and what is not meant by the term DNA as used here. The first point to note is that in spite of the use of the biologically laden term, DNA, the focus is on the deeply grained aspects of a culture that are replicated over generations rather than biological differences. Occasionally, this cultural DNA springs from biological factors; but it arises more often from the environmental challenges that each culture faced historically or the predilections of the original founders who moved to that part of the world.

In fact, the idea of DNA comes from work in the area of organizational culture. Like many others, we discovered—after years of working with organizations to help evolve and change their cultures—that significant change requires time and is inherently a slow process. Over time, this has led to the idea of organizational DNA emerging as an explanatory concept for why things can be slow to change. The idea of organizational DNA centers on the proposition that all organizations are guided by deep, underlying assumptions, beliefs, and ways of working that their members faithfully replicate and pass on to other generations. Often, this organizational DNA reflects the original founders' predilections, and the business and environmental challenges that the organization faced early on in its history. Over time, these core instincts become deeply embedded, guiding just about everything that goes on—including the organization's response to new challenges.

In addition, we have developed a clear and somewhat radical view on just where this organizational DNA resides. Rather than sitting mainly in organizational structures or processes, it actually resides within the employees themselves and their way of looking at the world. The nature of the business that an organization engages in determines the kind of people they need to recruit and the organizational culture required. Over many years, members of the organization undergo a process not too different from natural selection. Only certain types of individuals are attracted to an organization in the first place. They lay the foundation for the culture and attract similar sorts of people to it—reinforced by the natural inclination to recruit in one's image. Those who do not fit the culture, but nevertheless make it past these filters, frequently end up being “tissue rejected” unless they adapt. One way or another, the organization's processes, structure, and decision-making instincts come to mirror the predilections of its dominant core of people. Efforts at change that go with the grain of the DNA can typically work, but anything that requires a significant alteration of people's underlying instincts is hard going, to put it mildly. Organizational DNA is a combination of the underlying psychological instincts of a company's people as well as the systems, processes, and ways of doing things that those people have developed and to which others joining the system are acculturated over time.

The genesis to thinking about this book was the question: If this can happen for organizations, could not the same process also be true for nations? As we shall see, most major global cultures have actually arisen from very small founding groups of people who originally migrated into that part of the world. Once there, the early migrants encountered very different environmental challenges and created societies focused on solving different problems. These factors helped shape different psychological instincts that eventually came to represent the cultural norms for that society. Those who did not conform either self-selected out through migration or did not succeed in the culture. In organizational terms, this is akin to somebody hitting a glass ceiling at a relatively low level because they did not fit. I would argue that the same processes that led to the rise of organizational DNA have, albeit at very different time scales, operated to shape national cultures. By DNA, we are referring predominantly to the fundamental psychological building blocks that eventually formed the cultural norms of different societies. In Richard Dawkins' terms, memes rather than genes.

The application of this type of DNA analysis to eight of the world's significant cultures raises some obvious questions. The first is that one cannot just aggregate into one entity the myriad subgroups, states, and nations that exist in many of these regions. In fact, there is considerable evidence that just as nation states within broad regions have distinctive psychological and cultural attributes, so do regions or even individual cities. Research shows that cities develop clear characteristics over time through the processes of acculturation and self-selection. However, a lot depends on your level of analysis. At one level, France and Germany are very different, as is the northern Indian state of Punjab from, let's say, Kerala in the south. However, when you really start looking at all four together, you quickly realize that the two European countries share a lot in common and are different from the two Indian states.

This is exactly what the World Values Survey found when data collected across almost 100 countries was analysed. Overall, nine distinct regional clusters were revealed—the eight above minus Australia, plus Europe split into Catholic, Protestant, and Orthodox (Russia/Eastern Europe) areas.¹¹ The Globe survey of 62 countries also found broadly similar clusters.¹² Geography and, to a lesser extent, religion define these clusters. Not a single country in the world sits on its own or in a cluster that is radically different from where it is geographically located or where most of its people come from. At one level, this is not surprising; but at another level, these findings point to a deeper truth. If a country's culture is purely dependent upon the vagaries of its unique history, specific rulers, or the institutions that people there created in isolation from their environment, one might not expect such tight geographical clusters to arise. This pattern can only arise if ecology, climate, and the movement of ideas and people from one place to another are the fundamental drivers of cultural DNA. The exceptions to this power of locality simply prove the rule. For example, the Anglo-Saxon countries cluster together. Australia and New Zealand are outliers from others in their broader region. If you want to understand the culture of these countries, you are much better off looking at the UK—where the bulk of the people originated—than to neighboring Papua New Guinea or Indonesia.

Some of the analysis below will, despite the above point, cover differences within the regions, as in the case of the Eurozone countries that have succumbed or not to the currency crisis discussed earlier. These differences fit neatly into the European clusters defined by the WVS. In many of the regions, there are often one or two significant cultural divisions—for example, in India between the north and the south or in the United States between the northern and southern states. In all these cases, I will argue there are powerful migratory or ecological reasons for the existence of these differences that lie deep in the past when the relevant regions were being settled.

A Word About the Evidence

Three broad sources of evidence are used to build the case for what constitutes the DNA of different cultures: primary data, secondary sources of information, and explanatory research.

Most of the primary data centers around the evidence accumulated over 25 years of working as CEO for the psychological consultancy YSC, which has 20 offices globally covering all the regions analyzed in the book. Our core work involves getting under the skin of both people and organizational culture—which we have been doing globally across the world for decades. As a consequence, our different offices have developed finely tuned instincts for what really makes people and organizations tick in different parts of the world. We have also systematically assessed 30,000 people working in a range of organizations across the world, which gives us a deep source of data and information to draw upon when forming hypotheses about cultural differences. In addition, a core feature of the data that the conclusions presented are based upon is a painstaking analysis of over 1,700 in-depth reports, approximately 200 from each region, which contain the strengths and development themes identified for executives in each culture. This gives us sound insights into the positive qualities, as well as issues, that leaders from each culture need to be mindful of as they negotiate the ecology of the fast-changing global business environment.

I have also accessed the considerable research conducted on cultural differences over the past few decades, employing a variety of methodologies such as value surveys, behavioral experiments, and personality instruments. Following the seminal work by Geert Hofstede and his colleagues, there have been several detailed and extremely comprehensive surveys of values across the world's key cultures.¹³ The Globe study of 62 countries involving over 900 organizations, mentioned earlier, is one of the most important. The World Values Survey, mentioned earlier, is also an important source of data. The work of Michael Minkov, which extends the Hofstede constructs,¹⁴ and Shalom Schwartz are also accessed.¹⁵

However, values are only one part of the story. Such inquiry can only touch the surface of differences in how people think. I have also drawn substantially on behavioral experiments and observations conducted by researchers across different cultures. Surprisingly, for a psychologist, I have been much less persuaded by evidence using standard personality instruments, as these frequently produce nonsensical results when it comes to cross-cultural comparisons. This is largely because a high proportion of personality tests implicitly or explicitly ask respondents to compare themselves to the people around them. By their very nature, many such instruments therefore cannot be used for teasing out differences across cultures. Last, but not least, I have drawn upon the observations of legions of anthropologists, sociologists, historians, and travelers who have drawn strong psychological conclusions about the cultures that they have engaged.

Much has been written about cultural differences. However, there has been a limited effort to explain why such differences exist in the first place. This is one of our main objectives: to get underneath the skin of differences and to provide an explanation for why they might exist. Here, there have been extensive breakthroughs that provide a foundation for understanding the roots of differences between cultures. Over the past decade, analysis of mitochondrial and Y-chromosome DNA has enabled us to build a very precise picture of how and when groups populated different parts of the world. In a field that was at best murky and speculative before, there is now a high degree of precision and convergence that I will draw upon extensively when seeking to explain cultural differences. We also now have a much sharper lens, driven in part by advances in analysis of ice cores, on the profound climatic challenges that have affected modern humans since they arrived on the scene 200,000 years ago. The modern concern with global warming can perhaps create the false impression that our environment in the past was some kind of stable, unchanging nirvana for humans. But nothing could be further from the truth.

Furthermore, while ecological and historical processes have been the main drivers of the cultural DNA of regions, there is increasing evidence that genetic features may also have a role to play. A wide range of genetic investigations, which will be reviewed later, suggest there has been rapid and intense evolution since modern humans left Africa that affects a diverse range of attributes, such as food tolerance, disease resistance, and energy metabolism. From the point of view of psychological differences, there is now extensive evidence that profound variations across different groups in some of the genes determine both the level and uptake of key neurotransmitters. These findings are relatively new and still in the process of being tested and replicated. However, some differences do appear robust. For example, the serotonin transponder gene, which affects the level of serotonin in the brain by influencing the same functions that the drug Prozac impacts, has both short and long allele versions. Individuals with the short alleles are more prone to anxiety and depression following negative life events. A variety of other behavioral and psychological traits are also associated with the presence of short alleles. Now something like 80 percent of people in China have the short allele versus 40 percent in the United States and 25 percent in South Africa.¹⁶

Similarly, a gene called DRD4, which influences dopamine levels in the brain, also has short and long alleles. Individuals with the long alleles are more adventurous, novelty seeking, independent minded, rebellious, as well as hyperactive—and something like 75 percent of South American Indians possess the long allele version. The figures for the United States are in the region of 30 percent and in Europe 20 percent or so. In China the rate of the long allele is close to 0 percent.¹⁷ Similarly, large differences are seen in genes that influence the opioid system, which, as well as being associated with perceptions of pain and well-being, is also associated with emotional reactions to disruption of social bonds. When northern Europeans see Italian or Spanish soccer players react as if they have been mortally wounded at the slightest physical impact, it may not just be histrionic acting out—the poor guy writhing on the ground to boos from the crowd may actually be biologically more sensitive to pain.

The latter point illustrates something more important. If a small number of the differences observed between cultures reflect such biological factors, it may be wiser to recognize this fact rather than to pretend otherwise. At the very least, this can absolve individuals from personal blame, as well as lead to greater empathy, when their reactions or behaviors are not in accordance with what other groups expect. In addition, overwhelmingly most genetic adaptations, as will be reviewed later, arose first because of cultural change, which then drove differential selection; a kind of culture-gene coevolution.