“Blessed is he who expects nothing, for he shall never be disappointed.”
~ Alexander Pope, 18th century British poet
Tell that to the stock market. It hasn’t run on fundamentals in years. If it ever did.
It runs on rumors, hunches and mass psychology. Fall short of expectations, and stocks are pummeled. Exceed them, and the market soars.
Consider World Wrestling Entertainment Inc. It lost 43% of its market value in a single day after announcing a new cable TV contract that will pay it nearly 70% more in fees — usually a cause for celebration. So what’s the sin this time? Investors had expected an increase of 100%.
The same is true when companies report earnings or sales. Or the government issues employment numbers. Or the Federal Reserve announces what it plans to do with interest rates in the future.
When they affirm expectations, the market takes it in stride. When they’re higher or lower, the market becomes uncertain and unsettled.
It’s true for the rest of us, too. As long as life goes on as usual (no matter how bland or outrageous that is), nary a ripple of concern. But let the black swan appear and the public becomes unhinged, because the swan by definition is unexpected.
Reliance on expectations is neither good nor bad. It just is.
How do you deal with it? You manage the expectations.
Public companies steer analysts. It makes the analysts look insightful and the company solid when results are on target.
Politicians guide the media, especially during elections. If you forecast a landslide but barely eke out a victory, it’s treated as a loss.
Nonprofits assure benefactors wonderful work is being done. They also suggest other donors are lining up to give support — but mustn’t be too effusive, or that benefactor won’t feel as special.
It’s always better to under-promise and over-perform.
“Because Reputation Is Your Most Valuable Asset”
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