Monday, October 21, 2013

Smith's law

Terry Smith, CEO of Tullett Prebon, has this advice concerning investment strategy:

"Having been involved in financial analysis for nearly four decades, I have increasingly formed the view that there are some words and phrases used by company managements, analysts and commentators which investors should be wary of. Apart from being an abuse of the English language, they represent a combination of woolly thinking and a desire to disguise or divert attention from a problem...

Smith’s Law: you should never use an expression if its opposite is so nonsensical that you would never say it. I have seen innumerable companies say they have a strategy of “select acquisitions”. Would anyone ever admit to a policy of indiscriminate acquisitions (although it seems that’s what many of them actually do)? The new Governor of the Bank of England, Mark Carney, has been struggling to get the markets to accept his “forward guidance” on interest rates. He might like to pause to think whether he would ever use backward guidance. If so, perhaps he would also be happy to “group together” (can you group apart?) and do some “forward planning” (what other sort is there?). Perhaps he would have more success if he just called it a prediction.
Be wary of management or commentators who engage in hyperbole. “Global” is a common example of hyperbole. Very few businesses are truly global. They may be international, but that is not the same. And when “global” is used in job titles it is almost always an example of status inflation. Whenever I am given the business card of a head of global sales I am tempted to ask how many globes he or she has sold. A newspaper this year ran a cycling event which it described in its advertising as “iconic”. The Tour de France is iconic, a ride around the Surrey Hills isn’t."


Anonymous kinglear said...

Yes I read this and thought - how sensible. It's like Warren Buffett who won't buy any stock if the head office has potted plants in reception

11:04 am  
Blogger Eurodog said...

Let's call a spade a spade.

2:26 pm  

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