Originally published April 2022.
The skills needed to identify market opportunities are very different from those required to convince stakeholders of the validity of your view. Strategists need to nurture the ability to bring others with them to maximise their impact on investment outcomes.
The best opportunities are contrarian positions where you see matters quite differently from other market participants. But it’s difficult to isolate yourself from the thoughts and feelings of the crowd.
Michael Mauboussin has written that “the crowd is often right, but when it is wrong you need the psychological fortitude to go against the grain”. He identifies this strength of character as a key attribute of great investors.
Mauboussin says, “…great investors don’t get sucked into the vortex of influence. This requires the trait of not caring what others think of you, which is not natural for humans”. Good strategists can avoid “the vortex of influence” by bringing an objective, systematic and unemotional approach to identifying attractive investment opportunities.
But having identified attractive contrarian positions, how should strategists convince fund managers, investment partners and investment committee members of their views?
Typically, my response has been to double down on my research and develop a large body of evidence to support a well-reasoned and much-tested argument.
But in focusing exclusively on the quality of evidence and strength of argument I was making a mistake. I failed to have as much influence as I could have as a result.
“We are dealing with creatures of emotion, creatures bristling with prejudices and motivated by pride and vanity”
I would have done well to take note of the author of How to Win Friends and Influence People, Dale Carnegie, when he wrote, “When dealing with people, let us remember we are not dealing with creatures of logic. We are dealing with creatures of emotion, creatures bristling with prejudices and motivated by pride and vanity”.
