Tuesday, March 18, 2008

Booms

As mortgage lenders imploded and stock prices swooned last summer, a light bulb went off for Tim Houlne, chief executive of a Texas call-agent provider: "Bubbles always burst."

Mr. Houlne's realization attests to how, far from Wall Street, executives in other industries and their advisers are finding management lessons in the subprime-loan meltdown.

Among the key insights: Don't chase a boom without planning for the bust. Make sure subordinates feel safe delivering bad news. Ensure that incentive systems don't encourage excessive risk. And don't gloss over complicated details.

They ought to teach this stuff in schools. Seriously. I think the only possible cure for booms would be widespread consciousness-raising. Nobody wants to hear that during the boom.

1 comment:

  1. It must be a weakness in our nature because we never learn this lesson. We seem to repeat it over and over always thinking that this time is for real and it will last forever.

    ReplyDelete