4. Run with the herd. You might have expected that a group of investors would have been interested to hear
contrarian views from someone who suggested that the U.S. is on the verge of serious inflationary problems,
or that Japan is poised for a rapid economic recovery, or that the European Monetary Union is going to fail
-- which would have offered a nice challenge to conventional wisdom. But no: The few timid contrarians
were ridiculed. The group apparently wanted conventional wisdom reinforced, not challenged.

5. Overgeneralize. I was amazed to hear the group condemn Japanese companies as uncompetitive,
atrociously managed, unable to focus on the bottomline. But surely it can't be true of all Japanese
companies; guys who managed to export even at 80 yen to the dollar must have at least a few tricks up their
sleeves. And wasn't it only a couple of years ago that Japanese management techniques were the subject of
hundreds of adulatory books and articles? They were never really that good, but surely they are better than
their current reputation.

6. Be trendy. I came to the meeting expecting to hear a lot about the New Economic Paradigm, which
asserts that technology and globalization mean that all the old rules have been repealed, that the inflation-free
growth of the past six years will continue indefinitely, that we are at the start of a 20-year boom, etc. That
doctrine is basically nonsense, of course--but anyway I quickly determined that it is, as they say in Buffy the
Vampire Slayer, "so five minutes ago." All the rules have changed again: Now we stand on the brink of a
dreadful epoch of global deflation, and despite its previous track record of engineering recoveries, there is
nothing the Fed can do about it. You see, it's a new new economy.

7. Play with other people's money. If, as I said, the people at that meeting were very smart, why did they act
in ways that seem so foolish? Part of the answer, I suspect, is that they are employees, not principals; they
are trying to make money and careers for themselves. In that position, it is hard to take a long view: In the
long run, even if you aren't dead, you probably won't be working in the same place. It is also difficult for
someone managing other people's money to take an independent line. To be wrong when everyone else is
wrong is not such a terrible thing: You may lose a bonus, but probably not your job. On the other hand, to
be wrong when everyone else is right... So everyone focuses on the same short-term numbers, tries to ride
the trends, and buys the silly economic theory du jour.
 
 
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