Market Wisdom for School Governance
Warren Buffet's 1987 letter to investors describes his mental model about investing this way:
Ben Graham, my friend and teacher, long ago described the mental attitude toward market fluctuations that I believe to be most conducive to investment success. He said that you should imagine market quotations as coming from a remarkably accommodating fellow named Mr. Market who is your partner in a private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his.Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market's quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions he will name a very low price, since he is terrified that you will unload your interest on him.Mr. Market has another endearing characteristic: He doesn't mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you.But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren't certain that you understand and can value your business far better than Mr. Market, you don't belong in the game. As they say in poker, "If you've been in the game 30 minutes and you don't know who the patsy is, you're the patsy."
I won't be the first to point out the applicability of this counsel to other industries and sectors, but it does seem especially appropriate for independent and international school governors (board members). We subtract considerable value from our schools when we ride the emotional waves of parents, teachers, alumni, etc., and fail to maintain a focus on strategy and long-term objectives. As Buffet's Mr. Market alternates between euphoria and depression, sometimes within a single day, so too do parents of students cycle with the circumstances of each minute in their students' lives.I am not making the case to ignore constituents--though in most instances that would be best--rather, I am arguing that governance goes off the rails most surely when it becomes driven by the mood of the moment in the school. The real key to Buffet's advice is when he says, "Mr. Market has another endearing characteristic: He doesn't mind being ignored." Parents, especially friends, do mind if you ignore them. That alone makes governing an independent school tougher than managing an investment portfolio.