Honor is usually a good thing. But the triple crises in Japan have shown us that there are two sides to everything.
Japan is an honor-driven society. Your reputation for integrity and competence is extremely important. Self-respect is maintained, one anthropologist notes, by doing what is expected. Personal desires are secondary to social expectations. If someone is shamed, the only way to restore self-respect is to do what society expects.
While such an approach provides a great degree of social order, it also leads to a focus on what others say. Self-respect is dependent upon other people’s respect. This can help us understand why the information provided by Tokyo Electric during the nuclear crisis has been overly optimistic. The company is responsible for the safely of this power plant. Negative assessments hurt its reputation. In such a situation it’s not surprising that their disclosures would be incomplete.
This is important as we invest globally. Understanding local customs and cultures helps us assess the reliability of financial disclosures and other public statements. Assessing the underlying reality can be an art—you have to look for inconsistencies and at numbers that are not broadly followed.
The crisis at the Fukushima power plant is a tragedy. But we can learn from Japan’s response. Calm, focused energy is good. And transparent, full disclosure is essential. Because, ultimately, the truth is out there.
Douglas R. Tengdin, CFA
Chief Investment Officer
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