On “Thick” and “Thin” Cultures
The Discerene investment team of eight consists of folks from seven different nationalities, speaking eight different languages. We also invest around the world. In our investment travails, we’ve often observed that the differences in investing environments in different geographies are not only legal and political, but also cultural.
Many older cultures (especially Asian and European) that we encounter are “thick cultures.” The best exegesis we have found for this comes from Mishler and Pollack,1 who describe “thick cultures” as cultures that are (i) essential (captures and reflects the essence of the people and becomes nearly synonymous to the “spirit” or “genius” of a people), (ii) fundamental (with meanings that are historically rooted and deeply embedded in a society’s institutions and practices), (iii) exogenous (preceding and shaping both institutions and behavior), (iv) holistic (an indivisible property at group level, and undefinable at the level of the individual citizen), (v) externally bounded and internally homogeneous (separates “we” from “they”), (vi) a coherent cluster of orientation (the elements of the belief system shape a logically connected whole), and (vii) durable (highly viscous – it changes very slowly, if at all, over decades or generations and then only in response to profound social change).
American culture, on the other hand, is “thin.” Mishler and Pollack describe “thin culture” as (i) empirical (it may or may not matter), (ii) constructivist and rational (substantially conditioned by recent and contemporary experience, and rationally based), (iii) endogenous (culture is created; institutions and behavior shape it as much as it shapes them), (iv) individualist (an aggregate of individual attitudes and beliefs; groups do not exist except as accumulations of individuals), (v) relatively unbounded and diverse (refers to the central tendency of a group’s attitudes and beliefs, can be stronger or weaker, and can admit varying degrees of variations within a group), (vi) heterogeneous and ambivalent (competitive values can coexist in belief systems),and (vii) dynamic (pliable in response to social, economic, and political change).
We would add that the American culture of shareholder capitalism is also instrumental – it has evolved to what itis because it “works” to apportion risk and reward, and to allocate resources among competing projects.
In our experience, given the differences between (thin) American and various other (thick) foreign cultures, bridging the cultural gap is not easy. Capital-allocation decisions that we think are “irrational” when viewed through our lens may seem perfectly reasonable (even necessary) when viewed through the lens of a “thicker” business culture. Similarly, an American view of “ownership” (which is primarily an economic concept, consisting of a bundle of claims and rights) are sometimes significantly at odds with those of a Japanese firm’s “thicker’ conception of “ownership” (which contains more social and historical meaning). Quite literally, then, it is not obvious to many management teams that an investor who is a 2% shareholder truly owns 2% of the firm” – especially when that 2% stake was acquired only recently and might be disposed of again soon.
Some “thick” business cultures also rely more on societal ties to enforce commercial relationships than they do on written contracts. The problem with this, of course, is that some ties bind more than others; the “who” in the relationship is more important than the “what” in the contract.
None of the discussion above makes us business culture relativists. We believe that there is a right (i.e., economically rational) way to allocate capital, that minority shareholders ought to have certain rights, and that contracts ought to be honored, no matter who signs them. Nevertheless, our personal histories and backgrounds help us to be more aware of, and to better understand(experientially, not just intellectually) the challenges and pitfalls of doing business in different cultures. This awareness is especially important for long-duration value investing, which always requires careful risk evaluation and the exercise of reasoned business judgment in less-than-ideal circumstances. Calibration is everything.
More generally, having had to re-orient ourselves as we have moved across cultures, we know that the way businesses evolve is often geography, context, and time-specific. We cannot help but look at every business as an “outsider” (a vantage point we have worked hard to maintain) – less anchored on baseline, context-specific assumptions of how a business works, yet better able to pickup (through empirical induction) more universal patterns of economic behavior.
1. Mishler and Pollack (2003), "On culture, thick and thin: Toward a neo-cultural synthesis,” Pollack/Jacobs/Müller/Pickel (Hrsg.) (2003):237-257.