Tuesday, July 6, 2010

Whether you like it or not - a business post

I recently shared an article via Google Reader. The article was about Sarah Palin, and her attempt to move the tea partiers away from cutting defense spending. From Google Reader, the share made it to FriendFeed, and from FriendFeed, the share made it to Facebook. Once it arrived at Facebook, it caught the attention of one of my high school classmates - one who is definitely not a tea partier. The classmate commented:

I'm surprised anyone is still paying attention to anything she says. Go away, Sarah.

Yet, despite the classmate's wishes, there are still a lot of people who pay attention to Sarah Palin.

And Palin is only one example. If you look at the other end of the political spectrum, the title of this post incorporates a rather famous quotation from San Francisco mayor Gavin Newsom. What happened before the statement, and after, originated with Newsom's reaction to George W. Bush's 2004 State of the Union address.

"This is 2004, we're in the middle of two wars, we've got global warming, we have the health care crisis, and this guy is talking about abstinence and steroid abuse and marriage? In the State of the Union?" Newsom said. "I mean, don't get me wrong, sure, I'm for abstinence, steroids are wrong, I don't like drugs. But I'm not sure I'd put it in my damn State of the Union. And then he ends this speech, the crescendo of the speech is Defense of Marriage."

Within a month of Bush's speech, Newsom's city was performing same-sex marriages. This resulted in a court challenge that was decided in favor of same-sex marriages. After the Supreme Court victory, Newsom gave a speech:

"As California goes, so goes the rest of the nation. It's inevitable. This door's wide open now. It's going to happen, whether you like it or not."

The statement, with Newsom's enthusiastic phrasing, made headlines - as part of the "Yes on 8" campaign to ban same-sex marriages. All of us in California saw this commercial repeatedly:

As a result, Gavin Newsom was about as unpopular in some quarters as Sarah Palin is in some other quarters. In fact, Charles Lemos' thoughts on Newsom errily echo my high school classmate's thoughts on Palin:

Frankly, it's time that Gavin Newsom goes away, runs his wine business, raises his daughter and seeks massive amounts of therapy.

But Newsom will be on the ballot in November as the candidate for Lieutenant Governor...whether you like it or not.

But what do Sarah Palin and Gavin Newsom have to do with business?

Well, in the same way that people put blinders on in politics and hope that something will go away, people in the business world often do the same. As do some consumers. WARNING TO BEST BUY EMPLOYEES: YOU ARE PROBABLY NOT ALLOWED TO WATCH THIS VIDEO. Oh, and the video does have a language warning.

While some people, and some companies, may not care for this video, it does point out a basic truth that when we make decisions, we sometimes filter out information that is in direct opposition to the decision that we have already made. Or we elevate certain types of information for no good reason whatsoever. Take stock market behavior:

The stock market contains various kinds of information that can provide guidance as to the future yield of shares. An important question is which information and analyses investors use when they make investment decisions. "A common strategy is to observe what others do and follow the herd," says Maria Andersson....

[Study] results show that there is a strong tendency to put trust in the majority being right and to disregard minorities. This result applies irrespective of whether the majority has performed well or not. Minorities on the other hand have no influence even if their point of view is correct.

Paul B. Farrell notes that we seem to want it this way:

Investors would prefer drifting along in a perpetual bull market fantasyland. Even when things go south, as they are now [2009], we try desperately to deny reality, dreaming of a quick bottom, new bull, dreaming bullish fantasies in a deepening bear market. Why? We want to be lied to. We've become wimps. We sit passively on the sidelines, letting our "leaders" lie to us, brainwashing us into whatever they want us to think.

Farrell went on to say:

In early 2009 BusinessWeek and Kiplinger's reported on lies fed to us last year as the meltdown spread: Bernanke, "I don't anticipate any serious [failures] among large internationally active banks." ... Barney Frank, "Freddie Mac and Fannie Mae are fundamentally sound" ... Madoff, "In today's regulatory environment it's virtually impossible to violate the rules" ... Barron's, "Home prices about to bottom" ... Ken Fisher, "This year will end in the plus column ... so keep buying." ... Worth, "Emerging markets are the global investors' safe haven." ... Cramer, "Bye-bye bear market, say hello to the bull." ... and in late 2008 even Kiplinger's said, "Stock investors should 'beat the rush to the banks."

But excluding Madoff from the equation, were Bernanke, Frank, Cramer, et al lying to us, or lying to themselves?

My high school classmate would love a world in which Sarah Palin returned to Alaska, ignored and forgotten. California conservatives would love a world in which Gavin Newsom stayed out of Sacramento...and out of San Francisco. (Maybe he could move to Wasilla and become mayor there.) iPhone fanbois and fangurls would love an Android-free world. Investors would love a bear-free world.

But the world is not as nice and neat as we would like it to be. When we make business decisions, we need to make sure that we are armed with ALL relevant information...not just the information that makes us feel good.
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