Tuesday, October 18, 2011

It's easy to get too cozy to clients.

See Floyd Norris's report in today's New York Times (here).  Seems as though some Deloitte folks were taking the word of the execs of the companies they were auditing, rather than doing some digging on their own.  So much for learning from Enron (see yesterday's Wall Street Journal report on Enron 10 years later, here).

Why don't we learn from our mistakes? Well, I have some theories.  I think that we combine a failure to pay attention to history with some common cognitive mistakes that even the smartest among us make, and we get the same-old, same-old.

Stop me if you've heard these phrases:

"I know these guys.  They wouldn't lie."
"If there were really a problem, someone would have told us by now."
"I am not getting too close to my clients."
"Everybody does it."

So I'm not particularly surprised by this Deloitte issue, or by Andrew Ross Sorkin's report on what may be massive overvaluing of Groupon by Goldman Sachs.

It's enough to make one an avowed pessimist.

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