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Colin McLean: how companies manipulate our search for silver linings
by Colin McLean on Oct 02, 2013 at 12:06
Other companies have returned to the practice of pre-announcement announcements, a practice pioneered by software developer Autonomy.
In July, for example, UBS updated its quarterly earnings in a summary just days before the actual results were announced. It seems odd for a company to report that it ‘will report’ something, but politicians understand just how expectations can be managed in this way.
Other companies may be guiding similarly, but in private, making it difficult to assess just how prevalent this practice is.
But the clues are bunching of forecasts and wide misses by analysts on numbers.
Analysts, eager for every scrap of information companies produce, can find it difficult to put the timing into context, or to spot patterns. The City is blamed for forecast errors, but the biases are hard to correct, and companies understand that.
More insidious, is the over-arching meta-narrative, which may be a short story or even just a phrase.
Earlier this year, BP’s results were heralded in the press and many analyst reports as ‘poised for growth’. This neatly encourages the view that a disappointment or hiatus is all part of the preparation for a much better future.
The confidence boost certainly worked briefly, but since then the shares have moved down to a three year relative low – almost back at the worst relative levels since the Macondo accident. Corporate narrative reporting may include more strategy in future, yet the emotional appeal of succinct but superficial stories is strong.
Stories are useful shorthand to connect events or possibilities. Yet, we often fail to probe them too deeply, when we should really question whether the outcomes are connected.
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