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Heed the human factor before judging leaders' achievements | Evernote Web
14 January/15 January 2017 | Financial Times | Gillian Tett.

Pointing out mistakes is a legitimate part of healthy journalism and civic debate. But as blaming and fingerpointing start to mount, it's worth remembering that people tend to freeze in a crisis, especially when there is a shortage of information. Hindsight is a wonderful thing for an econometric model or history book, but it downplays the human factor. There is a danger in criticizing others' decisions until you've walked in their shoes.
Gillian_Tett  human_factor  empathy  mistakes  human_errors  criticism  blaming_fingerpointing  hindsight  crisis  information_gaps  immobilize  paralyze  psychology  stress_response 
january 2017 by jerryking
The Biology of Risk - NYTimes.com
By JOHN COATES JUNE 7, 2014

What is it about risk taking that so eludes our understanding, and our control?

Part of the problem is that we tend to view financial risk taking as a purely intellectual activity. But this view is incomplete. Risk is more than an intellectual puzzle — it is a profoundly physical experience, and it involves your body...Risk by its very nature threatens to hurt you, so when confronted by it your body and brain, under the influence of the stress response, unite as a single functioning unit....The state of your body predicts your appetite for financial risk just as it predicts an athlete’s performance.

If we understand how a person’s body influences risk taking, we can learn how to better manage risk takers. We can also recognize that mistakes governments have made have contributed to excessive risk taking.

Consider the most important risk manager of them all — the Federal Reserve. ...Uncertainty over the timing of something unpleasant often causes a greater challenge response than the unpleasant thing itself. Sometimes it is more stressful not knowing when or if you are going to be fired than actually being fired. Why? Because the challenge response, like any good defense mechanism, anticipates; it is a metabolic preparation for the unknown....Most models in economics and finance assume that risk preferences are a stable trait, much like your height. But this assumption, as our studies suggest, is misleading. Humans are designed with shifting risk preferences. They are an integral part of our response to stress, or challenge.......[JCK from David Brooks -The Wisdom Your Body Knows scientists are now focusing on the thinking that happens not in your brain but in your gut. You have neurons spread through your innards, and there’s increasing attention on the vagus nerve, which emerges from the brain stem and wanders across the heart, lungs, kidney and gut. The vagus nerve is one of the pathways through which the body and brain talk to each other in an unconscious conversation. ].......One such opportunity is a brief spike in market volatility, for this presents a chance to make money. But if volatility rises for a long period, the prolonged uncertainty leads us to subconsciously conclude that we no longer understand what is happening and then cortisol scales back our risk taking. In this way our risk taking calibrates to the amount of uncertainty and threat in the environment.

Continue reading the main story
Under conditions of extreme volatility, such as a crisis, traders, investors and indeed whole companies can freeze up in risk aversion, and this helps push a bear market into a crash. Unfortunately, this risk aversion occurs at just the wrong time, for these crises are precisely when markets offer the most attractive opportunities, and when the economy most needs people to take risks. The real challenge for Wall Street, I now believe, is not so much fear and greed as it is these silent and large shifts in risk appetite....As uncertainty in fed funds declined, one of the most powerful brakes on excessive risk taking in stocks was released....There are times when the Fed does need to calm the markets. After the credit crisis, it did just that. But when the economy and market are strong, as they were during the dot-com and housing bubbles, what, pray tell, is the point of calming the markets? Of raising rates in a predictable fashion? If you think the markets are complacent, then unnerve them. Over the past 20 years the Fed may have perfected the art of reassuring the markets, but it has lost the power to scare. And that means stock markets more easily overshoot, and then collapse.

CONTINUE READING THE MAIN STORY
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COMMENTS
The Fed could dampen this cycle. It has, in interest rate policy, not one tool but two: the level of rates and the uncertainty of rates. Given the sensitivity of risk preferences to uncertainty, the Fed could use policy uncertainty and a higher volatility of funds to selectively target risk taking in the financial community....IT may seem counterintuitive to use uncertainty to quell volatility. But a small amount of uncertainty surrounding short-term interest rates may act much like a vaccine immunizing the stock market against bubbles. More generally, if we view humans as embodied brains instead of disembodied minds, we can see that the risk-taking pathologies found in traders also lead chief executives, trial lawyers, oil executives and others to swing from excessive and ill-conceived risks to petrified risk aversion. It will also teach us to manage these risk takers, much as sport physiologists manage athletes, to stabilize their risk taking and to lower stress.
Wall_Street  risks  risk-management  risk-taking  uncertainty  U.S._Federal_Reserve  bubbles  volatility  behavioural_economics  risk-preferences  risk-aversion  biology  psychology  interest_rates  emotions  human_experience  financial_risk  signaling  stress_response  market_crash  immobilize  paralyze  bear_markets  policy_tools  physiological_response  risk-appetite  unpredictability  physical_experiences  calibration  human_behavior  human_frailties  human_psyche  metabolic 
june 2014 by jerryking
Note From the Edge: Sometimes You Can't Control Your Success - WSJ.com
September 2, 1997 | WSJ | By HAL LANCASTER.

An Ex-Manager Says You Can't Always Control Your Success

Mr. Curnutt says. He speaks for a large populace of middle managers who aren't golden boys being groomed for senior management, who will likely rise only so far and then stay there.

But there is more these managers can do to bust out of their confining boxes. Mr. Curnutt always wanted to be a manager and he says now he would have been better off majoring in business or accounting from the start. I think he also could have been more aggressive in promoting himself, particularly after getting his M.B.A. Perhaps he could have created a new position, using some of the skills he learned in his M.B.A. program, instead of waiting for the company to identify an opportunity for him.

Even then, of course, things might not work out. Not everyone is meant to ride the gravy train. But you have everything to gain and nothing to lose. Remember, those who stand in place the longest are the most vulnerable. Ask Mr. Curnutt.
action-oriented  beyond_one's_control  contingency_planning  crisis  crisis_management  first_movers  Hal_Lancaster  immobilize  middle_management  paralyze  self-promotion  stress_response  Sue_Shellenbarger  uncertainty 
december 2012 by jerryking
Learn 'Languages' And You'll Always Land on Your Feet - WSJ.com
October 21, 1997|WSJ | By HAL LANCASTER.

Lesson 1: Learn as many "languages" as possible. Through all this, he learned the value of being a business linguist. He spoke fluent finance, law, investor relations, marketing and brand management.

"It helps your credibility when you can speak the language of other functions," he says.

Lesson 2: Build bridges to other functions.

During his six years at Allied, Mr. Simon had to deal with issues involving the company's toxic-waste cleanups. "We had all these Superfund sites and I had to learn about every one of them," he says.

So he sought out experts in other departments. "I worked a lot with people in strategic planning," he says.

He believed all areas of corporate communications -- media, investor, employee, community -- should be unified, so he spurned job offers that would pigeonhole him and sought training that would broaden him.

Lesson 3: Sometimes you've got to go down to move up.

In 1987, Mr. Simon joined Inspiration Resources, a mining company looking to create a combined media and investor-relations department. "I traded way down in size, but it was a chance to develop more broadly," he says. "It's easier to be a Goliath, but you learn a lot more with the Davids."

Lesson 4: Differentiate yourself by articulating your own philosophy.

When headhunters called, Mr. Simon would discuss the needs of the job, and often recommend someone for the post, even if he wasn't interested himself.

Lesson 5: Don't freeze in the midst of chaos -- act.

Within a year, the banking company was acquired by Fleet Bank and many Natwest people "gave up," Mr. Simon says. But he prepared a three-page summary on public-relations issues confronting the combined banks and requested a meeting with Fleet's vice chairman. The result: He was invited to join the integration team and his employment was extended a year.
action-oriented  advice  bias_for_action  bridge-builders  chaos  creating_valuable_content  crisis  crisis_management  contingency_planning  first_movers  Hal_Lancaster  immobilize  indispensable  lessons_learned  Managing_Your_Career  M&A  mergers_&_acquisitions  next_play  paralyze  post-deal_integration  rules_of_the_game  stress_response 
december 2012 by jerryking
Distressed companies provide valuable lessons in economic downturns - The Globe and Mail
May 3, 2010 10:29 | Globe & Mail | Harvey Schachter .
Distressed companies provide valuable lessons in economic downturns.

SPEED RATHER THAN PERFECTION;

CASH IS KING;

FOCUS ON HIGH–IMPACT ISSUES;

MAKE THE TOUGH PEOPLE CALLS (JCK i.e. get the right people in place);

UNFREEZE THE ORGANIZATION: In a distressed organization, decisions that usually take months to make can be taken in hours or days. Those rapid decisions, they argue, are at least as good as the slow, agonized decisions of the past - so unfreeze your organization with quicker decisions, and a willingness to shake up your systems to improve performance.

Avoid doing the following: CUT FAT, NOT MUSCLE; FOCUS ON MORE THAN SURVIVAL:
cash_reserves  cost-cutting  distressed_debt  economic_downturn  Harvey_Schachter  high-impact  Jeffrey_Gitomer  immobilize  lessons_learned  paralyze  recessions  speed  the_right_people  turnarounds  under-performing 
may 2010 by jerryking
Hezbollah as 'a hot cell for innovation'Why our intentions 'don't just fail, they backfire'
Apr 19, 2009 | Toronto Star | Lynda Hurst.

we're still using anachronistic ideas to hold together a global order that no longer exists. A revolution is in progress where the unthinkable all too readily becomes the inevitable.

The result? More – and more dangerous – reversals of intent and outcome.

"What's happening today is that our intentions don't just fail, they backfire on us," says the Beijing-based geo-strategy analyst. "We deliver the opposite of what we intend because we so misunderstand the way the system now works."

The "war on terrorism" creates even more terrorists. The attempt to build a risk-proof financial system produces more risks than anyone is able to foresee. The bid to spread capitalism across the globe widens the chasm between rich and poor. The effort to contain nuclear proliferation leads to rogue states such as North Korea and Iran playing gimme-gimme games (or maybe not) with the final option.

Think Mikhail Gorbachev setting out only to reform the Soviet Union, but instead triggering its downfall, which in turn leads the U.S. to conclude its values have won the Cold War. Not so, Ramo says. Or George W. Bush reckoning he can inject democracy into Iraq and, presto, out comes peace: "Absurd in the extreme."

The new rules are
still being formed. They will be based on one central premise: countless
variations in the scheme of things will continue to occur at warp
speed, and adapting to them equally as quickly will be crucial. The
unpredictable demands of constant newness can immobilize institutions,
however, not just individuals. It can blind them to unsprung traps,
freeze once-honed navigation skills. The structure of the U.S. State
Department has barely changed since the end of World War II.

Governments can't prepare for everything in the future, but they can
build resilience into their systems. Real power will be the ability to
come back strong after an unexpected shock. That will mean persistently
assessing the big picture, not just its component pieces.
new_normal  uncertainty  Joshua_Cooper_Ramo  geopolitics  unpredictability  resilience  21st._century  adaptability  managing_uncertainty  Hezbollah  unintended_consequences  unexpected  political_power  accelerated_lifecycles  U.S._State_Department  immobilize  paralyze  constant_change  revenge_effects  rogue_actors  unthinkable  misunderstandings  Cambrian_explosion  iterations  Octothorpe_Software  Mikhail_Gorbachev  the_big_picture  warp_speed  financial_system 
may 2009 by jerryking

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