Monday, September 21, 2009
Common sense is so uncommon!
This is true in today’s business world. I recollect the case of the illustrious Lehman brothers which went belly-up in 2008. It is a case of high greed and ignoring basic financial and common sense. The high leveraging (23 times) done by Lehman brothers was the contributing factor to its demise. They bought risky mortgages, CDO (collateralized debt obligations), invested heavily in derivates with the idea that the housing prices will go up forever. We know the rest of the story. Of course, the image of the reputed alumnus from Harvard, Kellog, Stanford, and the likes of the world took some beating after the debacle. Straight thinking and common sense are so crucial in business management. Of course this is not to belittle the business education. Jack Welch, Bill Gates, Lakshmi Mittal had excellent business acumen and understanding of the ground realities. The need is the ability to judge the feasibility of an idea with clinical precision.
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3 comments:
I did not get what is the point you are trying to make in this post.
Business education is getting the right light, all these days it was hyped way beyond what it delivered. Its a known fact that most successful entrepreneurs are college dropouts or at least do not have formal degree in business.
The focus of the blog on common sense which people seem to miss-out. For example the dotcom business which went bust, common-sense would tell you that there was no clarity on how it would sustain, or banks giving loans without doing proper reference check on ability to repay the loan, etc. Secondly, many times people who have committed these mistakes are highly educated and experienced, pointing to the fact that this is not just a common person problem. The point to wonder is why do we miss the common-sense part. Is it greed for making money, or is it that moment of distraction when a decision was taken, or callous attitude saying that anyway it is not my money,... whatever it maybe wrong decisions are to be minimised and if people as a first step apply common-sense then i am hopeful that a lot of bad decisions could be avoided.
I do agree. Even a small time pawnbroker doesn't lend money without some security. It's just simple common sense.
The other cause for these organisation's debacle was they were hubris in their operations. Although they have been in business for many years, they did not anticipate the consequences of their action.
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