John Kay

The modern world of business and politics is plagued by spurious rationality and bogus quantification. The desire to do what is right is overtaken by the necessity to do what is easy to defend.

Although the progress of grief is predictable, it is also slow. Sell on denial, buy on depression, was my advice to investors last year and it looks still valid today.

Confidence in the models used for risk management in financial institutions is a casualty of the credit crunch. Only information from outside the model – what we call general knowledge and common sense – enable us to judge the validity of the model itself.

There are historic lessons to be learnt from the recent high definition format war: the importance of the installed base and the unpredictability of consumer markets.

Mr Buffett’s success demonstrates the weakness of one economic theory, the efficient market hypothesis, and the strength of another – the central role that the pursuit and defence of economic rents plays in modern corporate life.

Warren Buffett’s emergence as the world’s richest man illustrates the power of compound interest. Warren neither pays nor makes management charges. The effect is larger than you would believe possible.

Asset prices are a measure less of our wealth than of our propensity for self-congratulation. The net effect is only a transfer between the existing owners and the prospective owners.

People who hold to a single idea, or a fixed design, generally lose in chess, as they lose in battle, in business and in economics.

European companies are increasingly imitating US ones in the cult and remuneration of chief executives. Political organisation may evolve similarly as party membership declines and ideology fades.

In politics, business and finance, as on the seas, the hero is the person who tackles a problem, rather than the person whose actions prevent the problem arising.