My most surprising discovery: the overwhelming importance in business of an unforeseen force that we might call “the institutional imperative.”… I thought…that decent, intelligent, and experienced managers would automatically make rational business decisions. But I learned over time that isn’t so….For example:
- As if governed by Newton’s First Law of Motion, an institution will resist any change in its current direction
- Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds
- Any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops; and
- The behavior of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated.
Institutional dynamics, not venality or stupidity, set businesses on these courses, which are too often misguided.
"Warren Buffett on Business" Leading Blog. 12/21/2009
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