The resolution of some paradoxes

A paradox, as we have already defined, is: "A proposition or an observance which seems at first sight to be absurd or self contradictory, conflicting with common sense or preconceived notions of what is reasonable or possible... upon further reflection, or, with new evidence or explanation, the proposition may prove to be well founded and essentially true".

Let's look at a couple of the paradoxes from chapter one and see if we are now in a position to resolve them. Firstly, was the paradox of the proposition that "planning is not appropriate to current e-business or e-commerce". This was the single most contentious issue when this chapter went out to reviewers. It does seem implausible, even though a distinction is made between a plan and a strategy.

However, plans are not very reliable guides in the world of the Internet. They are subject to all kinds of unreliability problems. We have seen how other businesses in this kind of situation cope. They do so by breaking up the solution into units and then concentrate on the overall effectiveness of the units without relying on any single one. This is also the strategy of the investment manager who will have insufficient knowledge of any particular stock but will spread the risk over many selections.

On the assumption that the risk spreading strategies of the investment manager are applicable to the design of e-business and e-commerce solutions, consider the way in which the business of investment is carried out. Think of the relationship between the investment manager and the client. Would you think it appropriate for the investment manager to offer the client a detailed plan - in the kind of format described by the Power Point templates? Would it be considered a reasonable request for a client to ask for such a plan?

How can an investment manager provide an accurate cash flow projection that is backed up by example and precedence? Could an investment manager be expected to detail how he or she would be switching investment money in and out of different investments over a period of time? Common sense tells you that they wouldn't be able to provide such an undertaking. All an investment manager can do is to ask the client to take them on trust and rely on their ability to spread the risks in such a way as to ensure that the capital remains reasonably safe and will earn an acceptable return.

Secondly, it may have seemed preposterous that a corporate plan could be financed without a fully accountable plan that can be monitored for progress all along the way. Yet, this arrangement is the norm when millions of investors place their life savings with investment corporations? The inescapable fact is that when a client allows an investment agent to invest for them they are giving the agent carte blanche to deal for them in an unpredictable, turbulent market. The long established and traditional procedure is for the client effectively, to say to the investment manager, "Here is my money. Do the best you can for me".

Looking at this situation with a conventional corporate attitude, it would seem criminally insane to fund an activity on this basis. It wouldn't be allowed. Can you imagine telling a corporate fund manager that you can't explain exactly what you are going to do with the funding you are requesting, they'll just have to trust you? I know what they'd say. They said it to me after I'd explained about the green frog.

Yet, in the world of investment this is the only way investments can be funded. There are obviously too many unknowns and unknowables for the investment manager to be able to make predictions. In fact, an investment manager has no better way of knowing how stock prices move than the client. At least, a good investment manager will not. Every known factor that could influence a share price is already discounted in the price. How then, can any investment manager know where best to invest? Any particular "view" an investment manager might take would simply be a gamble and any responsible investment manager does not gamble with client accounts.

This is probably the most remarkable discovery I made during my year in the City. The best investment managers, brokers and bankers are not experts: they were strategists. The relationship between an investment manager and their clients is one of trust. This is not based upon the skills of the investment manager to pick winners. It is based upon the ability of the investment manager to act responsibly and apply a viable strategy with the client's money ; providing them with an acceptable return with the minimum of risk. A strategy that is based primarily of the concept of spreading risk.