Confidence and Credence

The bankruptcy in Brazil of oil giant OGX and the plea agreement in New York for hedge fund manager SAC show how quickly multi-billion-dollar enterprises running on bravado can unravel. It is a lesson we should have learned in 2008 when the Wall Street companies that boasted the loudest turned out to be the ones that were closest to the edge of disaster. That perhaps is still true, but most analysts and journalists still tend to automatically ascribe credence to CEOs who are artists when it comes to expressing confidence in the prospects of their respective organizations. Reports based on that error are in every day’s news, and when you read them, remember that confidence is just an expression. It won’t determine the actual outcome of a struggling business.