Target Poor Judgment: Be a Short Seller

Leverage the methods and mindset of the short sellers that hunt mistakes in judgment by CEOs in the public markets to strengthen the decision-making of companies in the private markets.

This is a technique that CEOs and boards of directors can use to test both public and private companies’ decision-making prowess. It leverages the methods of short sellers, who hunt for companies to bet against, harvesting large gains from the mistakes of others. For this reason, short sellers are not popular, but they play an important role. This technique is more fully outlined in my article in Directors & Boards in 2023. 

For CEOs, as well as the boards of directors possessing a fiduciary duty to oversee management decision-making, the test helps identify potential errors of judgment along the way.  Most commonly, the test is to identify the assumptions underlying the variables in the CEO’s decision-making ‘algorithm’. Then, modify the assumptions to determine the implication on the decision outcome.