tjbresearch.com
Tuesday, January 9th, 2018
getting unstuck

In Zen and the Art of Motorcycle Maintenance (ZMM), Robert Pirsig wrote about “getting unstuck” from the “gumption traps” and other impediments that prevent us from moving forward.  However the “stuckness” comes about, we need to free ourselves from it.

Pirsig on that stuckness:  “This is the zero moment of consciousness.  Stuck.  No answer.  Honked.  Kaput.  It’s a miserable experience emotionally.  You’re losing time.  You’re incompetent.  You don’t know what you’re doing.  You should be ashamed of yourself.  You should take the machine to a real mechanic who knows how to figure these things out.”

You’ve probably been there.  I certainly have.  Not with a motorcycle that needs fixing, but with other problems.  It’s a miserable feeling.

I’ll return to the theme of personal change and growth in the last posting of this series on ZMM.  For now, let’s look a bit more broadly.  Organizations can get stuck.  Professions can get stuck.  Industries can get stuck.  But the environment within which they operate doesn’t stay static.

Think of the investment world we inhabit today.  We’re a few decades into modern finance as we know it and the tendency is to think of the categorization schemes that we use as universal truths.  We don’t fully appreciate how the analytical divisions that have been made to date not only help us evaluate the world but shape how we see it, reinforcing constructs that might be transitory.  Knowledge progresses, and it’s quite likely that in a few years today’s frameworks will be viewed as an ancient system on the way to the then-current version of truth.

Therefore, we need to be cautious about pronouncements about the answers to the riddles of the social science of investing.  Even knowledge of the “hard” sciences advances over time; a unified theory of the investment world is similarly beyond our grasp — as is a full understanding of any one strategy, no matter the current pile of historical evidence.the research puzzle | For more thoughts on the topic, see this posting on “decaying beliefs.”

Which is not to say we don’t want to place our bets and take our chances based upon everything that we know.  But we need to remember that the train continues on and our recognition of the new can be impeded by our belief in the old.

I’ve found myself thinking a lot about one particular prescription for business design that also applies to analysis:  “reason, research, and creativity.”  (It came not from Pirsig, but from a paper by Kevin Boudreau.SSRN | It appeared in an earlier version of this piece on business strategy.)  Those three together are a powerful combination.

In practice, it’s easy to rely on “research” almost exclusively; for example, the set of “answers” yielded by backtests of historical information can be easily thought of as proof even if it doesn’t meet that standard.  “Reason” should help to put the research in proper perspective, by assessing whether the current circumstances justify the application of the available evidence in a routine way or whether there are missing pieces to the puzzle.

But it’s likely that there are things you haven’t yet considered, as Pirsig stressed:  “You need some ideas, some hypotheses.  Traditional scientific method, unfortunately, has never quite gotten around to saying exactly where to pick up more of these hypotheses.  Traditional scientific method has always been at the very best, 20-20 hindsight.  It’s good for seeing where you’ve been.  It’s good for testing the truth of what you think you know, but it can’t tell you where you ought to go go, unless where you ought to go is a continuation of where you were going in the past.  Creativity, originality, inventiveness, intuition, imagination — ‘unstuckness,’ in other words — are completely outside its domain.”

Creativity is generally in short supply in the investment business.  People aren’t trained for it, aren’t incented for it,research puzzle pieces | With some rare exceptions. and aren’t put into working situations that are designed for it.  Organizations are prone to stasis in methods and perspective, not change.  The lack of creativity is an industry-wide problem.  We are, in too many ways, just plain stuck.

But don’t despair, said Pirsig:

“Stuckness shouldn’t be avoided.  It’s the physic predecessor of all real understanding.  An egoless acceptance of stuckness is a key to an understanding of Quality, in mechanical work as in other endeavors.  It’s this understanding of Quality as revealed by stuckness which so often makes self-taught mechanics so superior to institute-trained men who have learned how to handle everything except a new situation.”

The phrase “institute-trained men” jumped out at me (and not just because of the exclusionary noun).  The CFA Institute and other credentialing organizations are good at describing a technical base of knowledge derived from historical evidence.  But their programs aren’t structured to prepare those seeking certification for the inevitability of change or the difficulty of making judgments in an industry hamstrung by business risk and career risk calculations.

That leaves it up to investment organizations to design an approach to deal with Pirsig’s “dynamic reality.”  Within them, new ideas can be fostered, independent thought encouraged, curiosity prized, and creativity rewarded — if the leaders of those organizations recognize that success over time is dependent on those attributes, not on working from the standard industry playbook.

Sometimes getting unstuck is an individual endeavor and sometimes it’s a collective one.  The top organizations of the next decade will be those that can escape the muck in which so many are mired.

This is the fourth posting about ZMM and the investment world.the research puzzle | It started with “across the great divides.”