Self-Fulfilling Prophecies in Business: Examples & Overview

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Lesson Transcript
Instructor: Dr. Douglas Hawks

Douglas has two master's degrees (MPA & MBA) and a PhD in Higher Education Administration.

Self-fulfilling prophecies can play a big role in personal and professional success and understanding the philosophy behind them is an important management tool. Let's delve further into this subject in this lesson.

What Is a Self-Fulfilling Prophecy?

Henry Ford, founder of the Ford Motor Company and considered by many to be the father of modern manufacturing processes, once said, 'If you think you can do a thing or think you can't do a thing, you're right.' While Ford was emphasizing the power of positive thinking, his quote also summarized another important psychological concept: the self-fulfilling prophecy.

A self-fulfilling prophecy is a prediction that ends up being true simply because it was made, basically confirming its own correctness. Simply having a positive or negative approach towards a prediction does not make it a self-fulfilling prophecy; that approach needs to be the primary reason the prediction ends up being accurate.

Some Examples in Business

Let's look at a few examples of self-fulfilling prophecies in business: marketing budgets, the gasoline shortage, and entering the workforce.

Marketing Budgets

Consider the typical budgeting process in most U.S. businesses. When a new product is launched, analysts predict demand and make budgeting decisions based on their estimates. A product that is expected to have lukewarm demand will only get a moderate marketing budget. A moderate marketing budget probably won't spur that much demand. So, the product ends up getting a lukewarm response. The analysts were right. But, were they right because they predicted consumers' preferences correctly or were they right because their estimate led to less marketing dollars, which led to the lukewarm reception?

The Gasoline Shortage

A good real-life, macroeconomic example of a self-fulfilling prophecy is the gasoline shortage in California in the early 1980s. California media started reporting that gas reserves were running a little low and that a gas shortage was a possibility, regardless of the fact that the existing supply could easily meet historical demand.

How did drivers react to these media reports? They panicked and headed to their gas station to fill up their cars and any containers they could use to store gasoline. This artificially inflated demand led to the gas shortage. Had the media simply reported the facts - that reserves were a little low but still more than sufficient to meet demand - individuals most likely would have not changed their behavior, and the gas shortage wouldn't have ever happened.

Entering the Workforce

You may think that self-fulfilling prophecies aren't something that you experience, but they are more common than many people realize, especially in the workforce. Consider Susan, a recent graduate in marketing. While Susan was in school, she had an internship with the university's marketing department. She applies for a job that requires one year of professional experience. Susan is surprised when she gets called for an interview, but all she can think is that her internship isn't 'real' experience, so she tells friends and family that there's no way she can get it. During her interview, the committee asks about her experience, and instead of discussing her internship, she shyly admits that she is only recently out of college. Susan isn't surprised when she doesn't get the job. Her prediction was right.

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