Feedback, page-36

I hear you Warrigals. I guess on the way up, when in bubble territory, assets are acquired (PPE, intangibles, staff etc etc) which are not likely to provide an adequate return on capital. In hindsight much of those assets clearly haven't. At the time of expanding the asset base, it appeared that they would. But this was only on the high risk wager that boom times would continue. The probability weighted return to investors, at that time, was generally negative. The consensus was that boom times would continue. If it had turned out to be true, an investor would probably have achieved a moderate return (the consensus return). However if the boom ended, the investor would likely have experienced a substantial capital loss. As he/she ultimately did. This was an asymetric wager, in the wrong direction (negative).

The situation is now inverted. Businesses are reducing their asset base. In some cases, no doubt, valuable assets are being eliminated. But on balance, it is vastly more likely that the investment assymetry is now in the right direction.