The current financial crisis has been exacerbated by fear. Not fear of losing money, but fear of losing face.
At no point, it seems, were any of those self-declared smartest guys in the room brave enough to admit that they didn’t have a clue how the exotic financial derivatives they were spewing into the world worked.
Perhaps we’d have been spared financial Armageddon had one of them just put a hand up and said: “Actually, guys, can you run those CDO-cubed thingies by me one more time? How is it they make us money again?” (Hint: they don’t.*)
Why am I musing on this? Well, last week, two different clients told me they really appreciated the outsider’s perspective that I provided. It backed up what I’ve long said – that being able to admit you’re not an expert gives you an advantage. (more…)