Reputation, reputation and reputation...

...is the three most valuable assets you can’t get your arms round. A great fact of life is that non-financial people have far to much respect for the black box, the secret ingredients, that capital markets people have build around their daily activities.

Decisions are not rational. 
...is the three most valuable assets you can’t get your arms round. A great fact of life is that non-financial people have far to much respect for the black box, the secret ingredients, that capital markets people have build around their daily activities..
Published 2015-10-23

Decisions are not rational

The financial decisions we take are just like the decisions in a supermarket. Our urge to own shares in the Apples or the Bank of Americas is controlled by our intuitive responses just like our urge to Coca-Cola is slightly different than our urge to buy Pepsi. The difference is not argumental; it is not in the taste (in fact Pepsi tastes better than Coke) it is the associations to freedom and happiness. To the great detriment to people in dark suits calling themselves investment bankers, we choose our investment portfolio the same way. Maybe this is why they need the dark suits and the posh offices...
    
Experiments with lobotomized patients show that we make decisions based on short-term rewards and scramble like crazy to come up with credible post-decisional arguments. This is where financial theory comes in. Financial theory does not explain decision-making. We are not rational. Financial theory is a great, complicated fictitious story.
    
High quality earnings are important and a part of our subconscious decision making. The risks in getting involved with cash strapped companies are for most people intuitively horrendous and discarded. So at the end of they day we have thrown out the high risk candidates and look for companies we are really impressed by.
    
We want to be proud of our portfolio just like a university graduate wants to be proud of a job offer from the right firm.
    
There are very strong similarities the perspective of talents and investors, and between suppliers, customers and suppliers: We are totally driven by subconscious perception.
    
Reputation is important and should be on top of every CEO and board agenda. Ignoring the black box would enable happier stakeholders and long-term prosperity for a lot of people. Reputation, reputation, reputation.
    

Ulf Löwenhav


The article is written by Ulf Löwenhav
Send an email to ulf.lowenhav(at)reaktionvalue.com
Twitter @ulflowenhav

 

EQapital.com

Godkännande av cookies

För att ge dig en bättre upplevelse på våra webbplatser använder vi cookies på din enhet och sparar ditt IP-nummer. Genom att fortsätta använda vår webbplats accepterar du att cookies används. Om du inte godkänner eller vill ha mer information kan du läsa mer här.