Japan is commonly known for having a high-context culture where people often exchange information in implicit ways. The exact meaning of exchanged information heavily relies on circumstances and nonverbal communication. It stands in stark contrast to the Anglo- Saxon’s low-context culture where communication is direct and precise and most often everything is verbalized explicitly.
Japan has a highly homogeneous society that share common values and assumptions and emphasizes the importance of the group over the individual. For the sake of group harmony Japanese will almost never upset others in public. Disagreement and turning down other’s ideas is seen as a way of disturbing social harmony. Thus, verbal communication is often indirect and ambiguous.
Japanese and Ambiguity: When a Yes Is a No
For foreigners, ambiguity (Jap: “Aimai”) can be very confusing, or even outright annoying when communicating with Japanese. Subtle clues, body language, and silence (or omission) by Japanese go unnoticed. They have trouble “reading” the situation, feeling through the atmosphere of a meeting. They cannot read the air (Jap: “Kuuki Yomenai”)
Very likely, “Kuuki Yomenai”, or reading the air, is the most challenging social concept for foreigners to grasp. Already figuring out if a Japanese agrees or disagrees can be tricky. Ambiguity in communication has brought about a nation that is often seen by the West as one that cannot say no. Refusal of a Japanese interlocutor is often uttered heavily cloaked. Clues, which are clearly understood among Japanese, send only mixed messages to foreigners at best.
Thus, reading the air is indispensable when trying to survive social and business settings in Japan. But more importantly, the concept of air reading gives some valuable insights when it comes to successfully implementing a value investing strategy, i.e. mastering the art aspects of value investing.
Value Investing And The Importance of Reading The Air
“Reading the air” means understanding the environment or the situation based on some things you can feel or notice but are not tangible. When it comes to value investing the only fairly explicit thing (or objective yardstick) the intelligent investor has at its disposal is an intrinsic value calculation of a company. Put in relation to the prevailing stock price shows if the stock is a potential buy or not.
The second step is the analysis of the quality of the business and management. But very likely this analysis will rather add to ambiguity than reducing it. Thus, the quantitative and qualitive analysis does not speak out clearly if the potential investment might a value trap. It is your reading of the air, which Peter Cundill and Walter Schloss refer to as "developing a feeling for a potential investment", that enables you to know if an investment has potential.
Knowing how to read the air, you feel no urge to apply a more sophisticated valuation model. You are not keen on adding more marginal information about the quality of a business and its management. You do not care if fellow investors agree or disagree with you. Your sensors have started to pick up what was going on in a market, sector and/ or an individual company level. You know which rules of value investing have to be followed strictly or can be bended.
Reading the air is not easy. In order to get air reading skills, or improving them, you have to get better at working on your powers of observation. You have to pay attention to the verbal and nonverbal signs that you pick up from fellow investors and the prospective company you want to invest in. And you have to be aware that you do not learn or improve your air reading skills by just jumping in a situation and take action without thinking and feeling independently.
Why Most Investors Fail in Reading The Air
Many investors are not able to read the air. Some lack social intelligence. Others refuse to read the air, because they do not trust their gut.
Investors not able to read the air have one thing in common: Limited flexibility within their investment approach and process. Independently of the outcome of their processes and actions in the past they will repeat them over and over again.
Investors not willing or being able to “read the air” are destined to spend a lot of time fighting with their long- term performance being significantly different to that of the masses. And even more time they will keep by themselves. They will never understand why “reading the air” is so important when it comes to investing. Most of them have never heard about the term. Even if, they will confuse “reading the air” with fitting in and emulating what other investors are doing.
Those investors will never grasp what the ability of “reading the air” offers them. That it enables them to calibrate their tactics intelligently and successfully within the framework of value investing outlined by Graham and Dodd.
Once they can “read the air” they can choose the most effective course of action. They can choose when to be a conformist and when a non-conformist. When to act decisively and when not doing anything.
In short, reading the air is the prerequisite for transcending further in the business of value investing. Namely, tackling the art aspect of value investing.
Reference:
Communication With Japanese in Business - JETRO | PDF (scribd.com)
Want to Succeed in Japan? Learn How To Read The Air (linkedin.com)