Practical analysis for investment professionals
09 September 2014

Skills That Separate You as an Investment Manager: Forthrightness

Once you’ve finally landed that coveted position as a research analyst, how do you stand out from the crowd in this highly competitive field? Many of the skills needed for a successful investment management career are not taught in business schools, and so I’ve been enumerating the unconventional skills you will need to build a successful career in finance. Thus far I’ve covered:

In this installment, we will discuss forthrightness.

Forthrightness

You may have mastered all other skills necessary for successful investment management, but knowing, and communicating that you know something, are entirely different skill sets. Translating the insights of the right brain into language — a more linear form — takes tremendous skill. Here investment professionals are able to speak the truth of what they think and know in such a way that the often abstruse thought processes of investment analysis are made clear for listeners, such as portfolio managers, chief investment officers, and boards of directors. Forthrightness differs from honesty in that it insists that investment managers speak the truth as they see it and to volunteer their opinions without heavily filtering the message. When you consistently take this approach, decisions become easier to make because people seem to have an innate sense of the truth of your statements.

A Model for Cultivating Forthrightness

If you want to be more forthright and for your words to ring with truth, try working with the following mental framework. Words are typically perceived as authentic by listeners when the following five states honored evenly: inspiration, imagination, thought, word, and deed.

  • Inspiration is the “aha!” or “eureka” quality that comes with true discovery.
  • Imagination is inspiration combined with knowledge and experiences to discover new ideas; many think of this as creativity.
  • Thought is the creation of architecture meant to make the initial inspiration and commensurate imagination a structured reality.
  • Word — as in “I give you my word” — is a meaningful commitment and responsibility to make real the original inspiration.
  • Deed is doing the hard work to make an originally intangible idea a tangible reality.

When each of the five steps are in place and working together seamlessly, then magical things can happen for investment managers. This includes: changing the asset allocation of a portfolio; or creating an ideal set of questions with which to pepper an intransigent business management so that you get to the truth of a situation; or developing a new way of looking at all businesses that leads to new analytical insights; or divining what to write to your shareholders in your semiannual report so that it conveys your true regret at a bad decision — but in such a way that you get to keep your job and restore trust.

Application of Forthrightness

As a part of the original job candidate materials I submitted to my first employer in finance, I included a copy of my master’s thesis. I concluded that active managers outperform passive managers — contrary to popular opinion — so long as you use downside measures of risk and not measures of volatility in calculating Sharpe and Treynor ratios. During a subsequent in-person interview for that research analyst job, my interviewer turned to me and said, “You know I think your thesis is a load of bull!”

I took a deep breath to dissipate my emotions and to center on some inspiration. Namely, I did not feel that my interviewer read my thesis; this was my inspired insight. Knowing what I knew about the firm — that they were active managers — I could not imagine that he had read the thesis. I then remembered that when I entered his office for the interview he was on a conference call with a company and that he was then busy checking e-mails for a while, keeping our interview at bay; this was the ‘thought’ stage of forthrightness. I also committed myself to challenge him on whether or not he read the thesis (the word phase), and then replied (deed phase), “I don’t think you read it all the way through, because it actually advocates strongly for the power of active management.”

Normally the advice given to interview candidates is to be a shrinking violet and to not challenge the interviewer. But in this instance, my words resulted in the interviewer blushing and then saying, “Well you are right. Why don’t you tell me what your thesis is about?” I eventually received a job offer, which I accepted. This is the nature of truth when it is spoken: It cuts through abstruse layers of conversational and intellectual confusion.

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Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

Photo credit: ©iStockphoto.com/TK

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. Previously, Jason was a portfolio manager at Davis Selected Advisers, L.P., where he co-managed the Davis Appreciation and Income Fund to noteworthy returns. He 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

20 thoughts on “Skills That Separate You as an Investment Manager: Forthrightness”

  1. Ben Fox says:

    Great article!

    In your experience, at which part of the IITWD chain do most people fail? Considering my own experience, it feels like it’s somewhere during the thought and/or word stage – that is, being able to effectively translate right-brained insights into left-brainese to communicate to others. My sense is that my right brain stalls, at which point my left takes over and says, “I need more information!” (And this last part feels like it ties in with the previous article on relative vs. absolute decision-making.)

    (Interesting findings re: your thesis. Haven’t looked at hard data but suspect that active managers really earn their wages, in theory, by mitigating downside risk and not whether they squeak out an extra hundred basis points. Unfortunately, compensation structures are overwhelmingly geared towards returns (“beating the benchmark”), and eventually, increased risk-taking and chasing yield/returns come home to roost. Something tells me it’s this inability to protect the downside that is the pro-passive camp’s biggest bone to pick with active management. Just my opinion, of course.)

    1. Hi Ben,

      First, what a great point you make about the bone to pick with active management by passive management advocates. Very provocative point, and I am inclined to agree with you : ) You have added a new way of looking at this issue to my repertoire.

      Second, regarding the inspiration-imagination-thought-word-deed chain and where do most people fail. I think most people fail by not ensuring that their BIG choices (of which a buy or sell decision is one) have each of the elements present. I totally agree that translation is very difficult, too. In fact, a forthcoming piece on intuition deal with this very topic. Frankly, I think all five phases are difficult and at different times and for different reasons. I would agree with you though that investment folks (I am inventing a context here for the question, sorry) break down mostly at that inspiration-imagination-thought part.

      Keep them comments coming!

      Jason

  2. Alisa says:

    Great advice! In my opinion, I think the five points used sounds very much like what should happen when trying to find some sort of outcome—in this case—convincing the interviewer of reassessing the interviewee and his thesis. In other words, I believe the same applications can potentially be used for problem solving. It was a very nice article; thank you!

    1. Hello Alisa,

      Thanks very much for your comments. Indeed, the framework I provided in the post for forthrightness is a more detailed version of the Buddhist “thought-word-deed” framework. I think of forthrightness as a more perfect honesty. Not only do you speak the truth, but you volunteer it as well. To me when there is inspiration-imagination-thought-word-deed you are moving true insight into expression. Does that help to explain why I thought the framework was useful?

      With smiles,

      Jason

      1. Alisa Chen says:

        Hello again!

        Yes, your explanation was enlightening. I’m glad I’m able to understand your way of thinking a lot better.

        Thank you once again!

  3. Mike Czekaj says:

    Another great post as always! Love this series!

    1. Hello Mike,

      Excellent! So nice to read that feedback. More to come next month.

      With smiles,

      Jason

  4. Prince Paul Fajutnao says:

    Another inspiring post… it really needs the Ethical Standards to outperform the crowd.

    1. Hello Prince Paul,

      Thank you, I am glad the post was inspiring for you : ) I want to make sure that I understand your point about the need of ethical standards to outperform the crowd. On the surface I think I understand you, but want to make sure your point gets the audience it deserves.

      With smiles,

      Jason

  5. Savio Cardozo says:

    Hello Jason
    I have been reading with great interest your posts on the subject of intuition, something I should know about “intuitively” but that you have so elegantly described – I particularly enjoy how you have related the subject to specific personal situations of your own.
    I am trying to use the excellent model you have presented in this post in my daily speech as I think it will help me in personal and professional situations.
    As a management consultant, and since I know it all of course-), I am quick to open my mouth.
    You have a given me a mental model to use that will help organize the words before they leave my mouth.
    Thanks very much for taking the time to put this series together – I know one portfolio manager in Toronto who uses intuition as an arsenal in her toolkit – now I know why.
    By the way, I also think that your use of downside deviation is superior to standard deviation. I am testing the Sortino ratio in a quant model I am working on – will let you know how it performs relative to the Sharpe ratio, particularly since volatility is the new normal.
    Best wishes
    Savio

    1. Hello Savio,

      Wow! Thank you for taking the time out of your busy entrepreneurial day to let me know all that you wrote above. I am pleased, too, to read that the mental model is useful. And best of all, that you are using the Sortino ratio is great, good news.

      I hope to continue to deliver meaningful content for you and others. Glad to hear I am on course.

      With a big smile,

      Jason

  6. Guy Hubbard says:

    It doesn’t sound like you have worked in the real world much. I am very forthright. In my experience people feel threatened by, and /or are jealous of someone more knowledgeable and incisive. It only gets you fired.

    1. Hello Guy,

      Thank you for contributing to the ongoing dialogue in this series of posts. If you are interested in my biography it is widely available on the web.

      Yours, in service,

      Jason

  7. My brother-in-law has been doing this for the past two years and he seems to love it! My cousin has been looking into this lately and I’m sure he would love to read more about it! Your five states of forthrightness are great tips that I’d imagine must be very important to anyone looking into the field!

  8. Imagination is key to almost everything. I specifically like your comment about how inspiration combined with knowledge allows you to discover new ideas. That is such wise advice. I don’t know much about investing, but I know that most jobs require imagination. Thanks for your comments.

    1. Hi Charlotte,

      You are so kind to say these things – thank you!

      Yours, in service,

      Jason

  9. Kyler Brown says:

    I’ve actually been considering becoming an investment manager. I loved your point about forthrightness. I agree completely about the importance of translating the insights of the right brain into language of a more linear form. Thanks for sharing.

    1. Hello Kyler,

      You are very welcome. Best wishes for success in your career pursuits!

      Yours, in service,

      Jason

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