Hubris and Nemesis
From his book “When Markets Collide”, Mohamed El-Erian, co-CEO and co-CIO of PIMCO, noted that “Bumpy journeys have a way of tripping up investment managers whose hubris results in excessive overconfidence and insufficient appreciation of the challenge that lie ahead.” He quoted an email by Peter Dolan, Head of Private Equity in Harvard Management Company as follows:
“The psychological process begins with a person who processes arête (‘excellence’ or ‘striving for excellence’). Great arête leads to hubris (‘felling of excessive pride in oneself’), which in turn lead to ate (‘blind recklessness’), when an individual loses his or her sense of human limitations and indulges in behavior that is rash or imprudent. Ate, in turn, leads to nemesis (‘retributive justice’) because the person who acted imprudently is punished by others.”
“We are constantly on the lookout for those investor managers who after having demonstrated arête subsequently become imbued with hubris only to be destroyed by nemesis.”
In 2008, our finance universe had indeed too many examples to illustrate the above points. Let’s learn from these expensive lessons, know our human limitation and act prudently in 2009 and beyond.
