Practical analysis for investment professionals
08 July 2014

Skills That Separate You as an Investment Manager: Decisiveness

In a recent series of posts, I have sought to complement my advice on how to become a research analyst by dissecting the skills that can separate you from the crowd once you have landed a coveted research analyst position. Having hired research analyst interns, research analysts, a portfolio manager, and even my own successor when I retired from investment management in 2005, I have gained a fair amount of knowledge about the skills that can deliver a competitive advantage as you enter the investment management arena. My prior posts have examined the importance of intuition, creativity, and introspection.

Some of the skills that you need to succeed as a research analyst are obvious: a love for —  and vast knowledge of —  economics, business, and finance; a strong drive; confidence and persistence; and so forth. You probably already recognize these skills as necessary since they permeate the mythology of the investment business. Yet many of the skills needed for a successful investment management career are not taught in business schools. Neither are these skills discussed in the business press. And they are not well understood by most firms doing the hiring.

If you would like to separate yourself from the vast crowd of highly motivated and highly intelligent candidates seeking to succeed in the investment business, one of the most important skills you’ll need to hone is decisiveness.

Decisiveness

I often say that the difference between a research analyst and a portfolio manager is that an analyst aims a gun, whereas the burden of responsibility for firing the gun falls on the manager. This difference underscores not only the grave stresses that can come with responsibility, but also the need for decisiveness in investment management.

I have worked with analysts whose number of years in the investment business were greater than mine as a portfolio manager.  Yet when I would ask these analysts for their opinion about a business and a prospective investment in that business —  “Would you buy at the current price?” — they would answer the question with loads more data. While this response was sometimes helpful, it was, I think, an example of that most dreaded of analyst ailments: analysis paralysis. Their lack of decisiveness was shrouded in a cloak of data.

Remedy

I think analysis paralysis happens for several reasons. For starters, analysts and portfolio managers typically have yet to realize or come to grips with one of the great lessons of investing: there is no such thing as a future fact. By definition, facts are things that have occurred in the past, but investment results unfold in the future. So, again, by definition, investment decisions are always leaps of faith. No fact can make a decision for you. So firstly, you must come to grips with this reality.

Second, I have found that underneath the carefully constructed veneer of analytical rigor and grace that many analysts wear is a person out of touch with his or her emotional state. Meditation can provide valuable insights into one’s emotional state, as well as the underlying causes of emotional states.

Third, if you catch yourself in analysis paralysis, try making decisions of less consequence under uncertainty as practice. Start with very small decisions and work your way up. For example, start by being deliberate and conscious about what apples to buy at the grocery store, then eventually advance to decisions with much higher stakes.

Application

When I retired from money management, I had the unique privilege of hiring my successor. He and I shared an office for several months as I got him acquainted with the many choices I had made during my tenure, as well as my models. As you might expect, he asked numerous questions about my process, my relationships, and my choices.

All of the questions were of the knowledge-seeking sort until one day, in early August 2005, he asked me a very different type of question (paraphrased): “Why on God’s green earth are you doing that when you could be doing this?” I flashed a big smile and my successor immediately apologized, “I’m sorry, that was out of line.” I replied: “Quite the contrary, this is the very moment I have been waiting for as the fund is now yours.” The transition was sealed when my successor was finally willing and able to question my judgment.

With that simple act of decisiveness, the responsibility was his and I was able to quietly retire less than three weeks later.

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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.

Photo credit: ©iStockphoto.com/CSA-Archive

About the Author(s)
Jason Voss, CFA

Jason Voss, CFA, tirelessly focuses on improving the ability of investors to better serve end clients. He is the author of the Foreword Reviews Business Book of the Year Finalist, The Intuitive Investor and the CEO of Active Investment Management (AIM) Consulting. Previously, he was a portfolio manager at Davis Selected Advisers, L.P., where he co-managed the Davis Appreciation and Income Fund to noteworthy returns. Voss holds a BA in economics and an MBA in finance and accounting from the University of Colorado.

Ethics Statement

My statement of ethics is very simple, really: I treat others as I would like to be treated. In my opinion, all systems of ethics distill to this simple statement. If you believe I have deviated from this standard, I would love to hear from you: jason@jasonapollovoss.com

24 thoughts on “Skills That Separate You as an Investment Manager: Decisiveness”

  1. Davidson says:

    Decisiveness is good but sometimes you do not even have the luxury of time to make the right decision even when you desire to make that decision. Can analysis be too much? I often heard that phrase ”analysis paralysis”, but I think it is an excuse to explain away the absence of insight when one is faced the task of making a decision.

    As a money manager, caution should not be thrown to the wind when making a decision on assets under management. Can Diligence be separated from adequate analysis as guide to decision making?

    1. Hello, and thank you for your comment,

      Yes, analysis most certainly can be too much and analysis paralysis is a large problem for research analysts, portfolio managers, and other investment professionals. I agree with you that analysis paralysis can be an indication of a lack of insight. However, I have seen many examples of analysis paralysis in my career and generally they have to do with the anxiety associated with taking on large amounts of responsibility. I say in my book The Intuitive Investor that the difference between being an analyst and a portfolio manager is the difference between aiming the gun and firing it.

      As for your question at the end of your comment…I am unsure as to what you are trying to ask. If you feel like it please provide clarification and I am happy to attempt to answer your question.

      With smiles,

      Jason

  2. MSZM says:

    Hi Jason,

    I know that it may not be the subject, but please tell me what kind of meditation have you practised?

    PS I have read your previous posts and found them very helpful. Good job :).

    1. Hello MSZM,

      So as to not bias the discussion around this topic I will answer you privately.

      With smiles,

      Jason

  3. tomlee says:

    ‘No fact can make a decision for you’. As much as i agree with this, I think one very crucial point was left out here, which is experience. This special ingredient is left out in the recipe of decisiveness. Sometimes, people suffer from ‘analysis paralysis’ due to lack of experience. I am hoping for more of this issue to be discussed.

    1. tomlee says:

      And experience is a fact of the past.*

    2. Hi Tom,

      Thank you for sharing your thoughts about the importance of experience. It is my opinion that experience is a very misunderstood concept. I tend to think of experience as a combination of knowledge, memory, intuition, and wisdom. For me each of these words has a very specific definition, and therefore meaning. [So we could be in agreement, but just think of the nomenclature differently.] When people use the word ‘experience’ they are usually indirectly mapping it to one of the preceding four factors. Experience can lead to increased knowledge, for example, so long as the person learns from her experiences. Experience can also increase memory as a routinized process creates a well worn pathway between knowledge and the application of that knowledge. So, for example, the more experience you have with discounted cash flow analysis, the easier it is to remember the ‘Gordon Growth Model’ and how it helps to estimate terminal value. Experience, and especially the knowledge function, can really help people to map the sensation they get from their intuition. As an example, if you are experienced with currency volatility as caused by changes in energy prices, then chances are you can respond to your intuition in a much more informed fashion than if you had never traded commodities before. Experience is also frequently mentioned in close proximity to the concept of wisdom. However, I think this is due to a limited understanding as to what wisdom really means. I think of it as the degree to which your mind is in accord with reality. A by-product of this is a minimization of emotional, prejudicial responses to events. But see experience could lead you to deploy a heuristic that has worked in the past because a current situation seems so similar to one you have experienced previously. Here, relying on past experiences may be the unwise choice. So I think that experience and wisdom are two different things. Of the preceding, I think experience is best related to knowledge, rather than to the other three variables.

      So if you agree with the bulk of the paragraph above then I think you will see that experience is a separate quality from decisiveness. Experience with choices (such as investment choices) can minimize anxiety. However, there are also many examples of experience leading to increased emotional responses. An example would be the lack of capital investment on the part of corporations globally subsequent to the Great Recession. Many of them have in the back of their mind the recession, which leads some to feel anxious, and to have lower capital investment. If you disagree with that example, then scale it down to the individual investor level where many investors are reported to have left equity markets permanently. In conclusion, I think experience can help with decisiveness, but I think they are very different qualities. Primarily what is missing from the concept of experience is ‘choice.’ Whereas, decisiveness puts the emphasis squarely on choice, not knowledge, memory, intuition, or wisdom.

      With smiles,

      Jason

  4. Alexey says:

    A client once said it very well, in response to my comment that I have no opinion on which of the three recommended stocks to select for his portfolio: “I pay you to have an opinion”

    1. Hi Alexey,

      Thank you for sharing your story!

      With smiles,

      Jason

  5. Mike says:

    Jason,

    Nice article. I think keeping a calm mind helps in making decisions and meditation is certainly very helpful. Hedge fund managers like Ray Dalio supposedly practice it daily. I am interested in knowing about the type of meditation that you practiced.

    Mike

    1. Hi Mike,

      Thank you for your comments and for mentioning Dalio. In his ‘Principles’ he says that any alpha he has ever generated is owed to his meditation practice. Though, it is just a brief mention. More recently he has been more forthright in discussing his practice.

      I have studied many different forms of meditation, including breath, mantra, present moment awareness, creative visualization, mindfulness, and others. This tends to be how I explore subjects: starting very broadly and then discovering what works for me. I wish I could say that I learn things quickly, but instead it is usually a laborious process.

      With smiles,

      Jason

  6. finsents says:

    Thanks so much for sharing this information.Hope to see some other healthy stuff from you guys. Well done and keep it up!!

    1. Hello, and thank you for the praise it is meaningful!

      With smiles,

      Jason

  7. Jason Tan Thuan Hong says:

    Thanks for the article. Deciveness is not only important in Investment management its necessary i believe in all profession.

    1. Hello Jason,

      I agree with you and with no reservations. Thank you for your thanks and for taking the time to comment!

      With smiles,

      Jason

  8. Deanna R. Jones says:

    I’m currently in school to work as an investment banker. It’s really interesting to learn about what it takes to stand out from my peers. I agree, it’s important for a good investment banker to be very decisive. It’s important to be driven and have the skills necessary for the job, but one of the main qualities that I would need to develop is to become very decisive. Thanks for the information!

    1. Hello Deanna,

      Thank you for taking the time out of your (certainly) busy schedule to share your feedback. You are welcome for the information : )

      Best wishes for your future success!

      Jason

  9. Thank you for sharing some important information on skills that separate you as an investment manager. Like you said, it is necessary to have a love for and vast knowledge of economics, business, and finance. It is also vital to apply yourself because you would not be able to accomplish anything with application. As you apply yourself, you must learn how to be efficient in making decisions. Thanks again for sharing.

    1. Hello Christophe,

      You are welcome! I’m glad you found the piece useful.

      Yours, in service,

      Jason

  10. Dide says:

    Hello Jason ,

    hope you still read the comments on your post
    My question is how to become a investment manager from Business development consultant ? I see that I am good in scouting of interesting projects

    best

    Mika

  11. If there were a way to find future facts, investing would be one of the easiest things to do. Unfortunately that is not how the world works. That is why it is so important for an investment manager to be able to be decisive. There comes a point when you have to decide to invest or not, and if you can’t trust your analysis, then you should probably get out of the game.

    1. Hello James,

      Thank you for weighing in on the conversation. Even more, thank you for adding to it meaningfully!

      Yours, in service,

      Jason

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