In Praise of Fools

Who tells you the truth?

There’s a tragic cycle in human affairs. A leader solves a problem and achieves a level of success. He is celebrated for his wisdom or decisiveness or practical understanding, and is given more and more authority. Eventually, the adulation goes to his head. He doesn’t like to hear bad news—who does?—and acquires sycophants and yes-men who only tell him what he wants to hear.

Eventually, such a leader overreaches—tries to accomplish something beyond his abilities and resources, and doesn’t learn of his errors until it’s too late. The ancient Greeks called this “hubris.” The cycle of success-overreach-downfall repeats itself in individuals, companies, and nations. When people have to deliver bad news to rulers, they often implore the recipient not to “shoot the messenger.”

It’s important for companies to have systems in place where bad news can be safely conveyed to senior management before mistakes become so ingrained into the system that drastic steps are needed to correct them. Proctor and Gamble recently announced that they would shed half their brands in an effort to streamline their business. Seemingly no one was willing to tell the previous CEO that the agglomeration of products as diverse as pregnancy tests and pet foods were acting like barnacles on the bottom of a ship, slowing growth and making it hard to steer. It took new leadership to see the problem and propose a radical solution.

Many of Shakespeare’s tragic heroes threaten bringers of bad news—especially just before they fall. Cleopatra, Macbeth, King Henry IV—they all fall into this pattern. Ironically, it was the king’s “fool” who was often the most frank. If corporate leaders are to avoid overreach, they need to have a culture that encourages people to speak truth to power.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

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By | 2014-09-18T09:53:35+00:00 August 4th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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