International Law

The global financial crisis has focussed attention on the way businesses make decisions and their "risk appetite". Your attitude to risk can influence how you perceive the facts. Are you an optimist ("half glass full") defying the facts and taking risks? Are you a pessimist (unable to grasp opportunities)? Or do you see the facts for what they are and deal with them? Should governments dictate the risks you can take (and the mistakes you make) or just protect you from obvious crooks?

American fund manager Warren Buffett is known for his plain language. This is what he told investors in Berkshire Hathaway recently:
"During 2008 I did some dumb things in investments. I made at least one major mistake of commission and several lesser ones that also hurt...Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action."

In this archive I've collected my notes on decision making over the years covering issues such as biases in decisions, optimum timing, negotiation techniques, "gut decisions" and Malcolm Gladwell's book Blink. Clearly, so much is being written because it is important we understand why we sometimes make irrational decisions.

Every day we read about a business that has declared insolvency or is taking radical steps to avoid insolvency. Did the directors have "disaster myopia"? Whilst the law offers a "safe harbour" for rational business judgment decisions by directors, the question of whether a company is insolvent is ultimately a factual question of cash flow.

Not many businesses are in the position of Warren Buffett who has sufficient capital and liquidity to absorb his significant losses.