Man Without Qualities

Friday, July 12, 2002

It's The Flash That Seduces

Improprieties justifiably get a lot of easy media play, but they are only one variety of business mistake. Even after they are revealed, improprieties can obscure deeper underlying bad business decisions on the part of both management and investors - because the impropieties are so flashy and psychologically it's easier for investors to accept that they were robbed by someone else than that they personally made a bad choice: Overlawyered makes the point in connection with telecoms:

[B]efore assuming that it was management malfeasance alone that destroyed the market value of such companies as WorldCom and Adelphia, it would be wise to note that Europe, without benefit of major scandal, has managed to see most of the value of its telecom stocks evaporate since the sectoral bubble burst, with historic enterprises like Deutsche Telekom, France Télécom and Royal KPN of the Netherlands losing 80 or 90 percent of their value, and Britain's BT doing not much better (Edmund L. Andrews, "Europe Shares Pain of the Fall in Phone Stocks", New York Times, Jul. 11).

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