By nature I’m a guy who likes to call things as they are.  But, in our world of mass-media, celebrity worship, big government and big company politics – it’s easy to get confused on whether perception is more important than reality.  Over the past decade I’ve observed several major events where perception appeared to be firmly winning over reality.  It’s frustrating, it grates against my sense of justice, but it’s hard to ignore when it happens.  I’ve observed these periods lasting for many years.  I’ve even had people try to convince me that perception is more important than reality.

But, as my observations stretch out over time, I am beginning to believe that the laws of physics do hold – that reality wins in the end.  This is a very good thing for me, because I don’t want to live in a world where a skilled orator can convince you that gravity is a temporary phenomenon, that a North Pole with no ice is totally normal, that a political candidate or business leader with little to no experience is the most qualified, that a shrinking stock price is a measurement of a strong company, that a team that isn’t efficient is cause for infinite investment, or that Pets.com of 1999 or Las Vegas real estate of 2004 are suddenly worth 5x what we thought they were.

When you’re in a perception bubble – everyone you know is talking about the extraordinary circumstances you are experiencing.  The press is using all of their 100-point fonts and promotional spaces to alarm you about the crisis you are in.  It’s easy to think at the time that perception is all that matters – or just to feel totally confused about what is real…  Although some people thrive on these periods — it’s depressing to imagine a world where perception is all that matters.  Isn’t the world a much better place if it has stable rules that you can trust?  A world where real estate is a great, yet boring investment to help you retire?  One where your seemingly safest investment can’t randomly put you severely under water.  Wouldn’t we all be better with a business world where people only get promoted based on objective measures – rather than how well they spin or how much fun they are at the work party.

Perception plays an important role in the world.  Clearly nobody should focus just on reality and hope the perception will catch up.  Everyone has to pay attention to BOTH their reality and how people perceive it.  But, if you ever find yourself focusing most of your energy on perception – then you’re in trouble, and the bubble will eventually catch up to you.  And, as we’ve seen recently with Nasdaq of 2000, real estate of 2007, President Bush’s popularity of 2008, and the credit crisis of 2008 – sometimes bubble pops are extremely messy.

Listen to your gut – and please join me in a toast to Reality!