The 3 Laws of Corporate Stupidity

Fabián Campos is a Business Economist from the Metropolitan University and Coordinator of Scenarios and the Multisectoral Business Survey at Datanálisis. Photo: Social media.

Guacamaya, September 18, 2025. Carlo M. Cipolla, in his book The Basic Laws of Human Stupidity (1976), delved into the attributes that characterize a “stupid person.” In his work, Cipolla highlights 5 fundamental laws of human stupidity:

1. Always and inevitably, everyone always underestimates the number of “stupid individuals” in circulation.
2. The probability that a certain person is “stupid” is independent of any other characteristic of that person.
3. A “stupid person” is a person who causes losses to another person or group of people without obtaining any gain for themselves, or even possibly incurring losses.
4. “Non-stupid people” always underestimate the damaging power of “stupid people.” In particular, “non-stupid people” constantly forget that, everywhere, at all times, and under any circumstances, getting involved with a “stupid person” is highly costly.
5. “Stupid people” are the most dangerous type of person, even more so than a “bandit¹“

From this, many explanations can be derived for why the consumer is sometimes irrational. But is it possible that irrationality begins at home?

In research on the behavior of Venezuelan companies, we have found a pattern of conduct when they face a “crisis.” Companies going through a crisis process, whether originated by international economic and political environmental factors, transformations in their market, or internal organizational factors, tend to “cut investment,” fundamentally, in three types of services:

1. Memberships to chambers, guilds, or business associations.
2. Economic-political environment analysis services and market research.
3. Advertising.

The mission of a business chamber, according to Dr. José Antonio Gil Yepes, is to “associate companies to articulate their interests in government-business relations or with other sectors and develop mechanisms of alliance and ‘coopetition’ that lower transaction costs to increase productivity and competitiveness.”

Therefore, if a company disengages from guilds or chambers, following the above definition, the first thing lost is the capacity to articulate interests with sector peers to raise public policy proposals, which can carry significant weight in improving those environmental conditions that may be causing the crisis.

A second “pain point” for companies in crisis is environment analysis services and market research.

This is a case where, driven by the very conditions of the business and its market, company management is tempted to prioritize the “operational” over the “strategic.” This is the moment when the generalized “firefighter mode” appears, where the organization’s direction or management becomes monopolized by the immediate situation and dedicates itself to tackling problems (putting out fires). Thus, the situation results in “fewer studies and advisory services” and “more work.” And it is there that the strategic dimension of the organization begins to be affected.

By reducing investment in environment analysis services, the company begins to “lose its compass calibration,” reducing its ability to define strategic guidelines in a more volatile environment, becoming immersed in significantly greater uncertainty. This is when inaccuracies in projecting costs, demand, investments, among others, begin to intensify.

As for cuts in market research, the consequences are much more obvious. Starting from the basis that it is the “crisis” that has influenced the decision to discontinue ongoing market studies or halt the start of previously scheduled studies, it is counterintuitive that the company then stops learning what the new market attributes are that its end client, also affected by the same “crisis,” now values more. That is to say, it stops knowing its client’s needs, reducing the possibilities of closing new sales, in order to protect cash flow or prioritize “more urgent things.”

And as if that weren’t enough, some companies add advertising cuts. Imagining that even though the company was lucky enough that 1. Changes in the economic environment did not particularly affect its business; and 2. Its client continued to value the same attributes that you address with your value proposition, it is decided that communicating to your client how you will “continue to accompany them” in this process called “crisis” is not a priority.

So, having analyzed the “magic recipe” in a crisis:

1. Eliminate membership to chambers or business guilds.
2. Suspend environment analysis and market research services.
3. Reduce advertising.

The question arises… If we understand “stupid” people as those who cause harm to society without getting anything in return, what do we call the directors and senior managers who affect their organization or clients by misunderstanding their priorities?

The three laws… of corporate stupidity?

1. A bandit is a person who causes harm to another person, or group of people, obtaining some gain in return. ↩︎