James Siminoff

Every industry has a Lehman brothers

Image by wallyg via Flickr

On my flight to Toronto today I was thinking about the collapse of the financial markets.  My thoughts were around how the short term thinking in the stock market and the race for CEO’s to out do each other (have you seen Lehman’s HQ in NYC) has created these extreme boom and bust cycles.

When telecom was hot, all of the companies had to out do each other, the pressure on the CEO’s to beat the other guys was incredible (remember Europe’s 3G auctions), additionally the pressure from the stock market was also massive, put those 2 things together and you have a complete disaster as we saw when it melted down.

Then you have the Internet boom and bust, housing, banking, etc… They all follow a pattern.

When you read a book like Good to Great (read it if you have not already) you see that companies that survive over a long period of time and really make enormous shareholder value stay out of ego and peer pressure.  I remember Buffet staying out of the Internet stuff in the beginning because he just did not understand it.  They just build great companies with great fundamentals.  In the long run the market does become rational and rewards those companies.