Investing - hope over reality?

JP Rangaswami, ex Head of IT at DKW, and who led an IT revolution at that firm, has a great piece on his blog on the subject of the value of social software. He makes some great points, particularly about the challenges of valuing something where the traditional tools of the trade are hopeless.

But I was particularly drawn to this in the post

I think it was Howard Schneiderman at Monsanto who said, many years ago, something along these lines:
When you turn down a request for funding an R&D project, you are right 90% of the time. That's a far higher rate of decision accuracy than you get anywhere else, so you do it. And that's fine. Except for the 10% of the time you're wrong. When you're wrong, you lose the company.

This is the investors big fear - not that they lose the bet stake, but that they fail to back the "big one". It always feels easier to do nothing and say no to an opportunity. To make an investment is to make a positive decision which can turn out wrong and you lose your stake. But sometimes, the hope that you've found the next big thing overshadows the doubts - this is what drives many investors that give money to average or poor fund managers; belief that it might come good and they don't want to miss out.

posted by John Wilson @ 9:45 AM Permanent Link newsvine reddit


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