Welcome to Leadership Economics

We want to start by telling you who we are because the path that brought us here explains why we see leadership differently.

Aaron is an economist and associate professor at West Point. Seven years ago, he started teaching a course that didn’t exist yet. He’d noticed how several different branches of economics had uncovered insights that are valuable for leaders, but they could not easily be brought together. Excellent economists teaching at business schools focus on either behavioral economics, game theory, or personnel economics (among others). These tend to focus on the management aspects of leadership and have little to say about developing trust or navigating ambiguity. He also noticed how the leadership literature was full of good advice, but it floated untethered from any foundation that could explain why the advice worked, or when it might not. This became the goal of the Leadership Economics class: understand leadership from first principles of how humans behave. Every semester, a new cohort of cadets tested whether economic principles could actually illuminate leadership problems. The framework you’ll encounter in this newsletter is what we kept coming back to through seven years of that testing.

Spencer is a retired Army Colonel who spent his career flying in special operations aviation. The lesson that shaped him most came early: the gap between a mission that succeeds and one that fails is almost never the helicopter or the tactics. It’s whether the team has the right picture of what’s happening, whether everyone knows their piece, and whether they’ll adapt when the plan breaks down. Spencer led in environments where failure came with life-and-death consequences. He also had two stints teaching at West Point — one as a three-year instructor, the second as head of the Economics department. When he came across Aaron’s work and ideas, it became clear that we had been looking to fill the same gap but from different angles. Aaron was building up from deep microeconomic concepts, while Spencer was seeing how the economic principles he was teaching could be used to describe and teach the leadership principles he’d developed through experience. We now had a language for something Spencer navigated as a leader: why is it that some teams could execute flawlessly in chaos while others fell apart despite having better resources and more time to prepare? The framework clarified how to diagnose and treat the core points of failure in teams, emphasizing that often the solution was not “more discipline” or just “more leadership.”

What’s Missing

The leadership section at any bookstore is not lacking for options. There are shelves of books offering principles, habits, characteristics, and behaviors that successful leaders often share. Much of this work is excellent. Covey’s Seven Habits of Highly Effective People are classic rules that have held up for forty years. Ray Dalio’s Principles capture hard-won wisdom. And James Collins’ Good to Great identified patterns that distinguish great companies.

But there’s a problem with much of this literature. Often the advice given distills complex situations into rules that can be clearly demarcated and spelled out in a book. This makes them memorable and actionable, which is valuable. But it also means they can’t tell you what to do when principles conflict or when your context varies in subtle ways. We can learn about leadership by studying George Washington or Steve Jobs, but we can’t know exactly how they would act in our exact situation; the abstractions we take from studying them are inherently limited.

There is another way to see this limitation. All existing work on leadership is built by pattern-matching. Observers watch what successful leaders do, then extract patterns. This approach produces useful insights, but it can only describe what has already happened. It cannot predict what will work in novel situations, and it cannot explain why certain approaches succeed and others do not.

Consider an analogy from science. For centuries, astronomers made careful observations of planetary motion. Through painstaking pattern-matching, they developed models that could describe and even predict the movement of celestial bodies. But it was Isaac Newton who changed everything by working from first principles about force and motion, then building upward to explain why planets moved as they did. The result was physics — a framework that could not only describe how physical objects behaved, but predict how they would behave in new contexts.

Leadership needs the same kind of shift. We’ve accumulated centuries of observations about what leaders do. What we lack is a coherent framework built from first principles about human behavior that can explain why certain approaches succeed and others do not.

What We’re Building

Leadership Economics is our attempt to provide that framework. The foundation is not borrowed from leadership literature; it’s built on neuroscientific findings that have only been possible in recent decades. This research addresses critical questions such as how people make choices when facing uncertainty, what captures attention and what gets ignored, and how individuals respond when plans break down or circumstances change. Economics has spent decades developing rigorous mathematical tools for modeling behavior, but only recently has the technology advanced enough to allow us to ground these models in observations of how our brains function.

One thing we want to be clear about from the start: no formula, list of characteristics, or set of behaviors will always produce good leadership. If such a thing existed, leadership would cease being necessary. You could just follow the algorithm. The absence of a formula is inherent to the problem itself. Every leadership situation involves a unique combination of people, resources, constraints, and objectives.

What we can offer is a lens — a way of seeing your particular challenges more clearly. We provide a framework that makes the underlying dynamics visible so you can reason about them rather than just pattern-matching against advice you’ve heard before.

This newsletter is for anyone responsible for combining people and resources toward goals. That’s a broad definition, but leadership is a broad phenomenon. It happens wherever human coordination happens, not only in your professional life, but also your personal life. Our aim is to give you tools that travel across contexts because they’re grounded in how people actually work.

We’re glad you’re here, and we’ll work to make it worth your while.

— Aaron and Spencer