Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Breaking the Black Box


Transparency is most essential economic virtue.

Remember how in school, on math tests, we were always asked to show our work? That way, if we basically understood what we were doing but made some silly mistake that led us to the wrong answer, we could still get some of the credit. Of course, it also meant that if we were going about the problem incorrectly but somehow lucked into the right answer -- or worse, if we cheated and copied the answer from our neighbor -- we would not get full credit.

Well, we need to show our work in the investment process. Specifically, in choosing an investment advisor, it's not good enough to look at the bottom line. We need a pretty good understanding of how the person got there.

I think this is the biggest lesson of the Madoff disaster. For so many asset allocators -- particularly those who actively publicized their due-diligence processes -- to invest with Mr. Madoff simply because of his track record was unconscionable.

We often speak of curiosity as a beneficial attribute. Indeed, without getting overly political, one of the reasons the nation supported President-Elect Obama is because of his transparent desire to understand. For too long, we have forgotten the value of transparency, so focused were we on the bottom line.

It's time to remember that the journey is the reward - and that we're all linked together. A business-school professor of mine once said: If you can't explain any concept in 3 brief paragraphs to an intelligent layperson, it means you don't really understand it yourself.

As we try to fight back from our shared economic predicament, we owe it to one another to ask questions. We need to stop worrying about sounding stupid. In every question lies the potential for insight. In every explanation lies the possibility of improvement - of doing more, and better.

We need to start making market-related policies more about process and less about results. Part of this is extremely practical. Market prices have at least one severely misleading attribute: It's the paradox of summation, and it takes all kinds of forms.
< Previous
Position in GE

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.








Featured Videos