The incomparable Seth Godin started a post today with a simple premise:  “Markets love icons.”Seth Godin’sBlog | I call Godin incomparable, because I have not run into another commentator who matches him for coming up with innovative ideas worth considering.  Almost every posting has something of value that stands out, and I don’t know who else I could say that about.  Even though he writes about marketing and I deal with investments, he’s a must-read for me. That is absolutely true when it comes to the investment markets.

Investors fall in love pretty easily, and find their way to worship mode soon thereafter, given the right mixture of outstanding recent returns, sex appeal, and the promise of a golden future.  In the world of stocks, technology success stories are made to order for this treatment.  Every few years there’s another one, although I think that Cisco was one of the best examples.  Even when it was a little company it had a certain aura, with a band of devotees that grew as steadily as the stock produced returns.  The veneration intensified over a decade virtually without interruption.  Just before reality reared its head at the turn of the millennium, everyone thought Cisco was a 45% grower, and anyone who spoke otherwise was a heretic.  More than eight years later, it sells at just over a quarter of what it did then.

And we don’t limit our devotions to stocks.  Portfolio managers are often revered before they are reviled (with Bill Miller the most recent example), and investment firms love to pump out products that fit the liturgy of the day, because they sell easily, even if they don’t work out well in the end.

As Godin notes, once an icon is in place in front of us, even as we pay it homage, we are looking to see its attributes in other things (“the next Cisco,” “the next Miller,” etc.).  Inherent in that searching is the belief that as investors, if we are early with that recognition, we know we can make a killing.  But Godin pinpoints the wiser (and more difficult) path:

“The challenge for organizations is this: the easiest projects to start and fund are those that go after existing icons. The search for the ‘next’ is easy to explain and exciting to join because we can visualize the benefits. But success keeps going to people who build new icons, not to those that seek to replace the most successful existing ones.”

The nature of markets is change, yet we often fall victim to an idolatry that blinds us to even the possibility of it tarnishing our icons.  Which of your beliefs and those of your organization have become concepts with a life of their own, like Cisco of yesteryear?