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INTERGRATION THINKING ChoicesConflictandtheCreativeSpark

INTERGRATION THINKING ChoicesConflictandtheCreativeSpark -...

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Integrative Thinking is a skill possessed by people who have cultivated their ‘opposable mind. ’ Roger Martin explains in this excerpt from his new book. CHOICES, CONFLICT, AND THE CREATIVE SPARK: THE PROBLEM-SOLVING POWER OF INTEGRATIVE THINKING By Roger Martin
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Rotman Magazine Winter 2008 / 5 It was September, 1999, and Michael Lee-Chin had a serious crisis on his hands – the worst of his business career. Lee-Chin had presided over more than 10 years of remarkable growth at his beloved money- management firm, AIC Limited , but now AIC was under withering attack. Its very survival was in doubt. An admirer of Warren Buffett , Lee-Chin had pursued a strategy with virtually no parallel in the mutual fund business. The typical mutual fund manager holds 100 to 200 different stocks at any given time and turns over the entire portfolio every 18 months or so. But emulating Buffett’s approach of taking long-term stakes in a relative handful of companies, Lee-Chin’s AIC Advantage Fund would hold only 10 to 20 stocks and hang onto them, as he says, “more or less forever.” This ‘Buy. Hold. And Prosper.’ philosophy worked brilliantly, and by 1999, assets under management had grown to $6 billion. But in 1999, everything was different. Investors were clamour- ing to buy Internet service providers and dot-coms, day-trading was suddenly respectable, and a mutual fund with a buy-and-hold philosophy and a portfolio of financial, manufacturing and grocery- store stocks seemed hopelessly old-fashioned and out of step. Many investors lost faith in AIC’s approach, and for the first time in its history, the Advantage Fund was suffering substantial net redemp- tions: more money was flowing out than new money was flowing in. The low point for Lee-Chin arrived on the morning of September 2, 1999, when he opened his newspaper to find one of the most influential business columnists in Canada trashing AIC’s basic business model and calling on investors to get out while their holdings were still worth something. The article predicted that to raise enough cash to meet the tide of redemptions, AIC would have to sell many of Advantage Fund’s holdings. The columnist speculated that the forced asset sales would further depress the price of the stocks held in the fund, which in turn would further drive down its returns, prompting even more redemptions. The new redemptions would require more stock sales, reinforcing a downward spiral that would continue until there was, for all intents and purposes, no more AIC. Lee-Chin remembers that morning well. “I felt awful,” he admitted to me. But despite his distress, he sensed that an oppor- tunity lurked within the crisis. Lee-Chin, who is of both Jamaican and Chinese descent, pointed out that “The Chinese character for ‘crisis’ combines the characters for ‘danger’ and ‘opportunity.’” He had to choose, and quickly. Would he sell shares to cover the redemptions, concede that his ‘Buy. Hold. And Prosper.’ strategy
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