Thursday, December 05, 2013

Think For Yourself

Back in my corporate days - many years ago - a series of corporate sales left the company I worked for as a twice-acquired company.  The second and final acquirer, then part of one of the largest financial companies in the world, instituted predictive indicator personality tests for all employees.  My test showed that I was too rational, an independent thinker, a "threat" to teamwork, and was an employee who could "potentially" question authority.  (Really?  Mild-mannered me, a corporate subversive?  Awesome.)  This flimsy test was all a group of new, inexperienced managers needed to make life unpleasant for a double-sold employee.  I left the then-behemoth conglomerate not long after the test and in wonderful example of schadenfreude the managers were fired within a year.  Sometimes it's better to read tea leaves than test results.

The test was right:  I am "rational" and do question conventional thinking, which are important qualities for an analyst.  Here is a must-read article from Research Magazine on the perils of following conventional thinking, and the difficulty in challenging it.  The author, Rob Seawright, details historical examples of detrimental collective thought that is eventually proved wrong. 

Questioning conventional wisdom is important, especially as the stock market hits new high and alternative investments - specifically non-traded REITs and business development companies -  are about to see their greatest annual inflow of investor equity.  Sales are more concentrated than ever in just a handful of firms, a clear, cliched case of the rich getting richer.  As the rich get richer, questions and dissent are going to get narrower, which is the opposite of what should be happening.  Not only do the big sponsors need tough scrutiny, but smaller competitors need closer review, too, as they may make risky moves to try and stay competitive.

(As an aside, Seawright mentions the "self-serving bias (where the good stuff is my doing and the bad stuff is always someone else’s fault)."  The owners of the twice-sold company where I originally worked could have their picture in the dictionary next to the definition for this bias.  I still crack a wry smile at some of the admonishments delivered to employees, the self-created, self-congratulatory awards they earnestly gave themselves, and the unabashed usurpment of employee initiative, hard work and success.)

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