Business Management - Be Aware Of Fear And-Greed



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This is probably such a day as many others. Business as usual. Nothing wrong, no alerts, you loose some, you win some. You go with the flow and let your profits grow.... Do not think that this jargon is for investment managers only; business management and investment management is not that different.

When you are in the business arena you know that you have to follow the market. You watch the competition, you check the trends and you respond to other incidents that you are involved in. Until that special moment.

It starts with rumors, than it’s the talk of the town. And then it appears; a new trend. Nearly invisible at first, a big monster a few moments later. Then people will ask you; what are we going to do?

From the investment market we know that the market behavior is powered by fear and greed. When the oil price is rising, we fear that it will not lower again, when the US dollar is under pressure it will never go up (a European worry) and if the stock market plunges it will not recover for years. Closer to the truth is that any movement will have its counterpart. The question is timing. When you are familiar with investments you probably know that you should not try to time the market. Yet does this mean that you should always go with the flow? You cannot (always) stop the flow. But you could try to make a few changes especially when you feel that something is wrong.

Take the following heading of a recent article: “bankers enter car-insurance market in order to provide a global service” (a free translation of the Spanish heading in the business paper ‘Expansion’). Why do all of a sudden a group of bankers enter into this service, where we know that car-insurance, is not really profitable? Especially bankers that are carrying a portfolio of possible investments should know that the choice for this option excludes some other one. The first few banks will envision an opportunity and respond with greed to new earnings, where a few others fear to be left behind and join the team – after all.

This is only one (recent) example of fear and greed, but there are examples to be found on a daily basis. Besides the example of the old versus new economy just check in your organization where you hear about the following arguments: “If we don’t follow we will be left behind (you can hear the child say ‘me too’) or “if we take this step we are the first and the profits will follow forever.”

If you are aware however of the fact that each person and company is unique you can benefit from this by selecting those investments or decisions where they fit with your (personal) or organizational profile. If you can trust on the success that your company harvested in the past, you should be confident to continue the same line for the future. If you want to outperform with your team, you should stay alert for the fear and greed around you.

© 2005 Hans Bool / Astor White



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