Top stocks to invest in
“Boring panel discussions are one of my pet peeves. You go to a conference hoping to learn something new and you get polite babble and marketing nonsense. There is not enough disagreement.” — Brooke Southall, principal, RIABiz
Good things don’t happen naturally when you throw investors together on a panel.
Sometimes pomp and pretense lead to vacuous puffery that goes unchallenged. Other times timid speakers rehash consensus thinking and struggle through dull, meandering chitchat. Occasionally a vain and bombastic panelist offers zeal without knowledge, bringing heat without light.
Is there a way to make panel discussions more interesting and insightful? I interviewed 10 of my peers to find out.
Why Do Investors Need Constructive Disagreement?
We are all subject to cognitive biases as described by Amos Tversky and Daniel Kahneman. These include:
- Anchoring: We estimate an initial value and are slow to adjust.
- Availability: We remember things that are vivid, like plane crashes.
- Representativeness: We rely on stereotypes and fail to ask, “What am I missing?”
Presenting ideas to a group provides a sanity check that reduces these biases. I host a private panel of advisers who stress test my ideas. It turns out my peers are quite happy to point out my mistakes for free.
What Makes a Group Effective?
Charles Duhigg studied the dynamics of successful teams in Smarter Faster Better. Two key elements are:
- An Interesting Task: The group feels that the work is meaningful.
- Psychological Safety: “Teams succeed when everyone feels they can speak up and when members show they are sensitive to how one another feels.”
Effective teams are not built on brains alone:
“When you have highly intelligent, highly motivated people, how do you handle conflict? It is not enough to have analytical rigor — do you have integrity and a process for handling disagreement?” — Brian Gilmartin, CFA, founder, Trinity Asset Management
Disagreement and Discussion
My interviews confirmed that constructive disagreement is a missing element on many investment panels. Conference organizers and webinar hosts usually realize that disagreement makes discussions more interesting, but panelists may not, or they may not have been properly prepped.
To help avoid boring panel discussions, below are nine guidelines: four steps of preparation followed by five principles for execution.
Four Steps of Preparation
1. Define the Goal
“The goal of a panel is to inform and entertain. The worst thing is to be boring. There has to be a stated process and goal for a discussion, whether internal to a firm or on a moderated panel. The discussion needs clear structure, purpose, and definitions.” — Nicholas Colas, chief market strategist, Convergex
There are different types of investment discussions for different purposes. The focus here is on panel discussions that inform, enlighten, and entertain. A panel can be in person, via webinar, or over the phone. But regardless of the forum, you need to define goals clearly. You cannot assume that everyone is on the same page.
“Disagreement is constructive when you’re on the same topic and you’re working toward the same goal. Online, people have their own agendas. They are often speaking past you to some perceived audience [so their analysis and conclusions are suspect].” — Tadas Viskanta, founder and editor, Abnormal Returns
2. Pick a Provocative Topic
“Think about the one or two things that will change their world. Don’t go in front of a group unless you have great ideas. Something memorable. If I don’t have it, I don’t do the panel.” — Nicholas Colas
For an investment audience, a provocative topic must be actionable and predictive, and specific enough that it has a falsifiable hypothesis — an idea that can be proven wrong. For example: What is the most effective way to diversify equity risk for investors who are at retirement age today? This is specific enough to be actionable, but open-ended enough to be interesting.
3. Recruit a Strong Moderator
“Moderators are critical. They have to know how to manage a conversation, keep it flowing, and prevent grandstanding. They don’t have to be an expert, but they should have domain expertise.” — George Moriarty, executive editor and vice president of content, Seeking Alpha.
“High-powered participants call for a high-powered moderator: You need someone who will challenge the panelists with uncomfortable questions. Tough interviewers get the best interviews.” — Brooke Southall
Great moderators ask probing questions, foster an atmosphere of psychological safety, and enforce the principles of intellectual integrity.
4. Invite Panelists with Perspective and Personality
For constructive disagreement you want people with backgrounds that are similar enough to foster discussion, yet divergent enough to spark debate. Different perspectives keep things entertaining.
It is tempting to choose a panelist based solely on their ability to attract a big audience, but George Moriarty of Seeking Alpha says that content is ultimately more important to the audience than a panelist’s credentials: “I don’t care how much money you manage; I care how you think.”
When it comes to insightful dialogue, personality counts:
“Many people just aren’t wired for constructive debate. You need panelists who are naturally good at engaging in respectful disagreement. In fact, I find for the panels where you actually have really good people in the first place, very little preparation is needed, and ‘over-preparing’ the panel can stifle its ability to have constructive discourse (since people worry about staying on script, instead of staying on subject).” — Michael Kitces, partner, Pinnacle Advisory Group, and publisher, Nerd’s Eye View
How does this work in practice? Let’s say the topic is diversifying equity risk for retirement planning. One panelist might address the questions with a forecast of expected returns; a second might use a probability-based approach; a third might tackle the problem with a safety-first plan; a fourth might combine approaches; and a fifth might offer a perspective from a client-facing adviser.
Five Principles for Execution
A. Full Disclosure
Audiences want objectivity, but they know speakers have agendas. Disclosure helps the audience assess the potential biases, conflicts of interest, and vested interests of each panelist. It is best to get this out of the way up front.
“I always tell panelists: Put the ad for your firm at the top. You have two-minutes at the top to give a commercial. Then it’s over and it’s open season.” — Nicholas Colas
Panelists also need to disclose their functional role.
“Is the panelist a portfolio manager? Do they have skin in the game? Or are they just an articulate person . . . with no track record?” — Anonymous portfolio manager
Once the advertising is over, panelists should concisely summarize their philosophy, process, and assumptions. The audience might also want to know what client base they serve, their investment time frame, approach to risk, etc. This helps define each person’s frame of reference and sets the stage for discussion and disagreement.
“You need to define terms so you can get to the core of the disagreement. You may still disagree, but at least you know where your assumptions differ. It represents progress if you disagree coherently, instead of just talking past each other.” — Brooke Southall
Panelists also need to show their hands. What is their angle?
“It is okay to have an agenda. A reasonable question is ‘Why is your agenda that way?’ This could lead to an interesting discussion.” — Marc Gerstein, director of research, Portfolio123, and Forbes blogger
“There are people who are bond guys, and that’s a vested interest. They are not biased per se, but they tend to hire people with an approach that will work with their clientele. The person will have a conservative view on risk. This leads to groupthink.” — Jeff Miller, president, NewArc Investments, and Dash of Insight blogger
“Everyone is self-interested. I need to find out where they’re coming from in order to keep things in check. People tend to go to their comfort zones [in terms of expertise], so different perspectives keep things fresh.” — Jessica Rabe, research associate, Convergex
Sometimes, however, agendas really are a problem. Some panelists just can’t stop advertising and speak candidly.
“The problem isn’t hidden agendas; it’s the agenda that’s hiding in plain sight. Too many people just stick with a marketing message and can’t, or won’t, go off the script. The financial industry is unwilling to engage in open dialogue. They avoid unpleasantness and accountability. They have trouble even defining accountability.” — Brooke Southall
B. Intellectual Integrity
When I host investment discussions, I have found two traits are essential to promoting constructive disagreement:
- Intellectual Humility: An awareness of our limits.
- Intellectual Courage: A willingness to confront irrational beliefs.
Unfortunately, not everyone is interested in having an honest discussion.
“If someone wants to disagree with something, they may declare all past knowledge is irrelevant. This makes everyone equal. They could probably find a chart that fits their hypothesis. The average intelligent reader believes it, and it reaches the ‘coefficient of obfuscation’ (i.e., the point at which an illustration can deceive effectively).” — Jeff Miller
“In one sense, investment commenters are in the entertainment business. People think it’s fun to poke at authority. A lot of the misleading information that gets published happens because the writers have hidden agendas.” — Marc Gerstein
C. Constructive Disagreement
It is easy to criticize ideas, point out problems, or hide behind “mathiness” — the misuse of mathematics to disguise an agenda. When a panel discussion becomes unproductive or too abstract, the moderator must refocus the conversation toward practical solutions.
“The moderator has to be the advocate for the audience. The moderator has to make sure that high-level talk applies to an adviser’s daily practice with clients. You don’t want a philosophical debate that the audience can’t apply. The panelists are not there to impress, but to inform. It’s not about ‘I’m smarter than you;’ it’s about who gives the best actionable information.” — Jeff Briskin, marketing director, Advisor Perspectives, and president, Briskin Consulting
Constructive disagreement on a panel discussion can also get sidetracked by comments that are entertaining but don’t necessarily lead to better decisions.
“Generally speaking, I don’t associate panel discussions with the investment process. There is a big difference between things that get discussed and things that are effective. Do you want intellectual integrity? An internal panel at an investment firm might permit intellectual integrity. A panel discussion in the media is problematic: If I am paid to impress you, the audience will only get integrity [as a byproduct] depending on the participants, the audience, and the potential rewards.” — Anonymous portfolio manager
“An hour is an outside limit for a panel discussion, and 20 minutes for a single speaker. Attention spans are shrinking, so get to the point.” — Nicholas Colas
In an early draft of this article, I suggested that panelists should have equivalent skills, credentials, and experience. But my interviewees determined that investment ability is not as important as accountability.
“It’s not the knowledge level. It’s the accountability. [This is what’s missing in the media.] There isn’t a market-driven process that is fast enough to detect nonsense and hold people accountable for bad forecasts and a bad process.” — Jeff Miller
Panelists can display accountability by listening to their peers, acknowledging the limitations of their points of view, and recognizing a good point made by someone else. Constructive disagreement works best when people treat the discussion as an opportunity to learn and not as a debate contest.
Finally, I’ll note that accountability may require an apology. Last year I got into a heated online discussion, and a careless comment of mine insulted a friend. I have since apologized, and I highly recommend it. It goes a long way when a panelist says, “Sorry, I misinterpreted you,” or “My mistake, I should have been more clear.”
You give respect and you get respect.
Robert J. Martorana, CFA, will be presenting a webinar, “Respectful Disagreement and the Investment Process,” on Wednesday, 2 November 2016, at noon EDT.
If you liked this post, don’t forget to subscribe to the Enterprising Investor.
All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
Image Credit: ©Getty Images/Neilson Barnard/Staff
Top stocks to invest in