The September issue of Harvard Business Review focused on complexity, with several excellent articles.
One of the pieces was an interview with Michael J. Mauboussin, the chief investment strategist at Legg Mason Capital Management, whose investment approach is fundamentally based on understanding complexity.
His answer to the last question in the interview was very interesting:
What are some of the rules of thumb for getting yourself into the right mind-set to deal with complexity?
First, it’s important to constantly learn and expose yourself to diverse points of view. But it’s work to do that. I mean, there’s a central joy in it, but it’s work. It means you must allocate X% of your time. Typically the work is reading, but it’s also speaking to people who are interesting and exposing yourself to realms that you’re not familiar with.
If you’re an investor and you’re only looking at your Bloomberg terminal and reading Forbes and Fortune and the Wall Street Journal, it’s unlikely you’re going to get a lot of really interesting ideas. You need to read and think more broadly. Great investor most definitely do that already.
I also recommend constantly looking out in the world to find places where diversity is in jeopardy. Where do people all seem to have the same belief or the same point of view? That in and of itself doesn’t mean you should bet against it, but it it leads to a mispricing or opportunity, then that’s where you should step in.
This is almost turning your understanding of complexity on its head and saying, “If this is what leads to good results, what leads to bad results? And let’s try to take advantage of those things.”
The first part of the quote relates strongly to my own work, and evokes a number of the issues raised in my 8 steps to thriving on information overload, particularly on openness to information.
However the issue of information diversity is increasingly important for the vast majority of people, not just professional investors, futurists, or analysts. There is a tension between the necessity of developing world-class expertise in a specific domain to be able to compete effectively, and the need to go to diverse information sources. Yet it is a tension that we all need to manage.
The second part of the quote underlines quite how important diversity is, to the point that you can often bet against it if it doesn’t exist. Fortunately in most companies and industries today there is significantly greater diversity of views than in the past. Yet there are still all too many situations where there far too much alignment of information sources and viewpoints.
Absolutely, we live in times where the best path is to invest in diversity.