Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • August 1987 (Revised December 1998)
  • Background Note
  • HBS Case Collection

Capital Market Myopia

By: William A. Sahlman and Howard H. Stevenson
  • Format:Print
  • | Pages:21
ShareBar

Abstract

Focuses attention on a phenomenon we call capital market myopia, a situation in which participants in the capital markets ignore the logical implications of their individual investment decisions. Viewed in isolation, each decision seems to make sense. When taken together, however, they are a prescription for disaster. Capital market myopia leads to over-funding of industries and unsustainable levels of valuation in the stock market. Uses the Winchester Disk industry to elucidate the phenomenon. Argues that capital market participants should have seen the problem coming. They should have known that valuation levels were absurd, based in large part on the greater fool theory. The data necessary to anticipate the problem were readily available before the industry shakeout began and stock prices collapsed. Offers some simple lessons to help investors and entrepreneurs avoid charter membership in the greater fool club.

Keywords

Capital Markets

Citation

Sahlman, William A., and Howard H. Stevenson. "Capital Market Myopia." Harvard Business School Background Note 288-005, August 1987. (Revised December 1998.)
  • Educators
  • Purchase

About The Authors

William A. Sahlman

Entrepreneurial Management
→More Publications

Howard H. Stevenson

→More Publications

More from the Authors

    • November 2020
    • Faculty Research

    Guild Education: Unlocking Opportunity for America's Workforce

    By: William A. Sahlman, Michael D. Smith, Nicole Tempest Keller and Alpana Thapar
    • October 2020
    • Faculty Research

    1366 Technologies: Surviving in a Fast Changing World

    By: Jurgen Weiss, William A. Sahlman and Joseph B. Lassiter III
    • June 2020
    • Faculty Research

    Jill Draeger, Spreadsheet for Students (Brief Case)

    By: Howard H. Stevenson and Michael J. Roberts
More from the Authors
  • Guild Education: Unlocking Opportunity for America's Workforce By: William A. Sahlman, Michael D. Smith, Nicole Tempest Keller and Alpana Thapar
  • 1366 Technologies: Surviving in a Fast Changing World By: Jurgen Weiss, William A. Sahlman and Joseph B. Lassiter III
  • Jill Draeger, Spreadsheet for Students (Brief Case) By: Howard H. Stevenson and Michael J. Roberts
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Digital Accessibility
Copyright © President & Fellows of Harvard College