There is more money in endorsing stocks than in criticizing them. Similarly, most of us prefer unabashed flattery to ruthless appraisals of our selves and our work. However, business is not about popularity or being liked. It is useful to have an advocate of the Devil in any office. This applies in equal measures to business management and to stock investing.
Improbable but grave risks threaten business and stock values most. Any corporation will eventually recover from the disruptions of a hurricane. However, what if customers gradually change preferences? Could deadly new competition lurk in an unseen corner? Finally, there is this globalization phenomenon: an entire country-market could melt away because of new political equations.
Two gardening methods help to cultivate a doubting Thomas in a management team or an investment club. One is to nurture dissent. Do not treat opposition to your favorite plan as a weed. Let it grow and flower, taking lessons from whatever it offers. A business or investment process should specifically provide for potential problem analysis.
Caesar was a typical exponent of the second secret of using contrarian thinking. You too should have a source that observes markets and customers carefully, and whispers warnings of disruptive changes in your ears.
It is not enough if you alone scent trouble with your business or portfolio plans. Contingent actions for unlikely but serious risks should be documented and rehearsed at regular intervals. Vision in business and stock investment is not just about views from rose-tinted glasses, but infra-red to see subtle obstacles.
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