Saturday, June 19, 2010

The Ebb & Flow of Confidence

The Great Bear of Wall Street legend, Jesse Livermore, once observed that 'stocks could be beat, but that no one could beat the stock market.' By that he meant that while it was possible to predict the factors that caused any given stock to rise or fall, the overall market was driven by the ebb and flow of confidence, a force so intagible and elusive that it was not readily discernible to most people.
Liaquat Ahamed, The Lords of Finance: The Bankers Who Broke the World, (New York: Penguin Books, 2009), 307.
Confidence is a funny thing. It can often be the decisive factor in a variety of situations from competitions to performances to the stock market. The great stock market crash of '29 came about as a result of confidence. At first ballooning out of control, and then spiraling downward in the same manner - the confidence of people drove the stock market. The highest of highs was followed by the lowest of lows. Fortunes, hopes, and the stability of the US economy were all impacted by the intangible force of confidence. Although it was predictable that the stock market would suffer from its unreasonable heights - no one could have predicted the severity of the downward turn in confidence.

How do you keep confidence becomes the question. As it was in 1929, the financial experts of America & the key political leaders associated with them must convince the American people to have confidence. While driving in California this past week, I saw numerous "Recession Facts" billboards. All of them said essentially the same thing in trying to restore confidence in the economy. As times become more desperate, people become more willing to lose hope and confidence that good will come. It is in these moments that leaders are tested the most. Confidence becomes the key issue that leaders must learn how to instill in their people.

If we can learn anything from '29, it is that confidence is a very weak platform. It is ready to give in at any moment. It follows a roller coaster pattern of up & down with very little chance for stability. Which means that we must learn how to harness its power, and limit its ability for damage. Leaders become leaders by doing exactly that. Their people follow believing that great things are in store, while trusting that downtimes are but a blip on the radar. The test therefore of great leadership is to gauge the confidence of your followers. Although difficult to predict & control, it is that level of confidence that will make or break how you lead.