Bernanke's Communication Faux Pas by Steve Adubato, Ph.D.

Along with numerous daily newspapers, the Star-Ledger ran an Associated Press story on June 7 with the headline, “Fed chief suffers communication gap.” The AP story examined a series of communication faux pas made by Federal Reserve Chairman Ben Bernanke and the subsequent reaction of Wall Street investors.

What the Fed chairman says matters a lot, however, message sent very often doesn’t equal the message that is received. Let’s take a closer look at Bernanke’s communication mistakes and what the rest of us can learn from them.

According to the AP story, in a recent speech Bernanke made it “crystal clear that fending off inflation is the Fed’s No. 1 job right now, a message that sent stocks tumbling nearly 200 points as investors faced the likelihood that interest rates would move higher later this month.”

What’s interesting is that six week’s earlier, Bernanke implied that the Feds might “take a temporary break in its two-year rate raising campaign to assess economic conditions.” That was on April 27, when Bernanke communicated directly with Congress. Many investors were convinced that what Bernanke was communicating was that the Feds would no longer raise interest rates, even though he would later say his intent was to communicate that they were just taking a pause.

To make matters worse, Bernanke had what he thought was an “off-the-record” conversation with CNBC anchor Maria Bartiromo on April 29. In that conversation, Bernanke apparently complained that his comments before Congress were being misinterpreted. He insisted he never said the Fed would no longer raise rates. Of course, once CNBC reported what Bernanke thought was a private conversation, stocks tumbled with investors convinced that Bernanke was now saying that interest rates could easily go up again.

One of Bernanke’s biggest communication mistakes was assuming he would be understood exactly the way he intended. That’s a huge assumption. It has been said that meaning is actually not in words, but rather in people. Translation—As we receive information, we define it through a range of factors unique to us as individuals. The same thing is true with Wall Street investors. Bernanke’s comments were interpreted based on the history, experience and bias of investors. Part of this history included 18 years of trying to interpret Fed Chairman Alan Greenspan’s communication. But Greenspan isn’t Bernanke, meaning who the messenger is matters a great deal.

James Feyrer is an economics professor at Dartmouth College who addressed the communication styles of Bernanke and Greenspan in the AP story; “When Greenspan released a piece of information it was very strategic.” He also said that Bernanke appears to lay out information and options and be more open. “The markets haven’t quite figured out Bernanke and they have been slow to integrate his difference in style.”

That’s the thing about communication. It rarely works the way we want it to. There are so many variables and the biggest mistake we can make is thinking that everyone else views the world the way we view it. Our best bet is to assume, even with the best intentions, miscommunication is the norm, rather than the exception.

If you work from that premise, you will be more careful in your comments and seek clarification by using a variety of techniques including rhetorical questions. For example, Bernanke could have said; “Does this mean we won’t raise rates again? No. Rather, for now we need to wait and see. You can’t predict the future and all options must be on the table.”

The final point about Bernanke, is that his conversation with Maria Bartiromo from CNBC was risky business at best. Savvy communicators anticipate that what they say to a reporter will eventually wind up as part of the public discussion. If you don’t want it out there, never say it in the first place. Ben Bernanke has hopefully learned that costly communication lesson.

Dr. Steve Adubato coaches and speaks on the subjects of communication and leadership and is the author of the book "Speak from the Heart." Write to him at The Star-Ledger, 1 Star-Ledger Plaza, Newark, NJ 07102, or click here to contact him through this web site.