Tuesday, October 21, 2008

GMO: Quarterly Letter – Jeremy Grantham

My second theory would be even harder to prove, and this is it: that CEOs are picked for their left-brain skills – focus, hard work, decisiveness, persuasiveness, political skills, and, if you are lucky, analytical skills and charisma. The “Great American Executives” are not picked for patience. Indeed, if they could even spell the word they would be fired. They are not paid to put their feet up or waste time thinking about history and the long-term future; they are paid to be decisive and to act now.

The type of people who saw these problems unfolding, on the other hand, had much less career risk or none at all. We know literally dozens of these people. In fact, almost all the people who have good historical data and are thoughtful were giving us good advice, often for years before the troubles arrived. They all have the patience of Job. They are also all right-brained: more intuitive, more given to developing odd theories, wallowing in historical data, and taking their time. They are almost universally interested – even obsessed – with outlier events, and unique, new, and different combinations of factors. These ruminations take up a good chunk of their time. Do such thoughts take more than a few seconds of time for the great CEOs who, to the man, missed everything that was new and different? Unfortunately for all of us, it was the new and different this time that just happened to be vital.