Wednesday, June 25th, 2014
cover bands

These days, many of us are “accidental creatives,” thrust into roles in the information economy in which we are judged by our ability to produce unique ideas.  However, we are often quite unprepared for those roles, lacking the training and processes of traditional creative types and working within organizations which haven’t been structured to foster our development or success.

Todd Henry’s book, “The Accidental Creative”Accidental Creative | Here is information about the book on the website of Henry’s organization that bears the same name. (recommended to me by Sophia BeraGen Y Planning | This is the site of Bera’s financial planning business, which is focused on Generation Y.), is a how-to for those of us that find that the creative well can run dry at just the wrong time.  It offers suggestions for structuring your work and personal lives to keep coming up with those fresh insights.

I can safely predict that most investment professionals reading the book would say how unrealistic it is for them, that the demands of their jobs don’t offer the space and time to follow Henry’s recommendations.  Therein lies an important conundrum:  many investment jobs are designed in ways that inhibit the ability to produce great ideas.  Space and time are needed.  (Consider the iconic image of Buffett, alone, reading and thinking.)

But on to other considerations.  Toward the end of the book is a chapter that carries the title, “Cover Bands Don’t Change the World.”  One line stopped me in my tracks:  “There are a lot of ‘cover bands’ in the marketplace today.”  No kidding.

Big firms cover the asset classes, the style boxes, and whatever new categories come along, wanting to have a funnel for assets in each area.  Upstarts and veterans alike cover the perceived checklists of gatekeepers awarding investment mandates, playing the game as it exists.  And, of course, there are the ultimate cover bands — tribute bands, really — active managers who are no more than closet indexers.

I have given presentations on “Creativity in the Investment Process” to a number of CFA societies during the last year.  In them, I have stressed the need for organizations to identify how they differ from their peers (in whatever part of the business that they are in).

An asset manager, for example, needs to do something different than the crowd in order to produce alpha — that’s a given.  Yet managers often seem to be doing nothing unique at all (and are a bit miffed if you point that out to them).  Similarly, communicating about your firm like everyone else communicates about theirsthe research puzzle | Here’s an earlier piece on illustrating investment process. doesn’t make a lot of sense to me.

At one of my presentations, an asset manager asked a very good question about my emphasis on differentiation.  Is the payback for being truly unique worth it, especially since the penalty for being different and wrong is so severe?

I subsequently posed her question to a pair of Callan consultants that were speaking at CFA Society Minnesota on best practices in asset manager communications.Freezing Assets | I wrote this summary of their presentation to the society.  They said that you should want to be different, but not too different.  (I interpreted their comments as meaning, “Not very different at all.”)

For the leaders of investment organizations, how different, how creative they want to be is a critical decision now, in a way that it hasn’t been in decades.

If the comfy environs of asset management (to stay with that one part of the industry) face the possibility of significant disruption in the future, it seems only logical that the intruders will come for the cover bands first.

They all look alike.