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This year marks my 25th wedding anniversary, which, given my inauspicious start in the relationships department, is pretty remarkable. Yes, my first boyfriend dumped me. Thankfully he was a gentleman so he didn't disappear without offering me valuable feedback: Stop being so damn critical.
My offense: he'd prepared a lovely picnic, one involving strawberries and Cool Whip, and because I have a thing about plastic food (despite a hypocritical weakness for Doritos and Filet o' Fish sandwiches) I suggested that real whipped cream would be preferable.
No one likes a food zealot, never mind an ungrateful wench.
And while I've learned since then to show appreciation and gratitude for what works and brings delight, it's not easy being a Pollyanna - I'm hardwired to find mistakes and want to fix them (whipped cream would have totally been better).
So it's not surprising that I became a money manager, as our mistakes are calculated in real time and down to the penny, blinking red on my computer monitor for extra emphasis, lest I fail to notice that we are costing our clients money.
Making mistakes and fixing mistakes is not the same thing
While it's easy to tote up investment mistakes, it's a lot harder to gauge whether a firm ever learns from its mistakes. Investment mistakes are easy to analyze and compare, what's not so easy or obvious is the analysis required to implement improvements, thereby avoiding (or at least reducing) similar errors in the future.
To quote from one of my new favorite books - George Box's Improving Almost Anything (how could a self-improvement freak not love that title?):
"Nothing is perfect and Murphy's Law says that the day-to-day operation of the system itself can help to tell us what's wrong with it. The catch is that it will only tell us if we listen. If we don't listen then the bug that's in the system will cause the same glitch to happen again and again. […] Another way of saying this is that 'every operating system supplies information on how it can be improved and if we use that information it can be a source for continuous improvement.'"
To Mr. Box's point, I would suggest that to ignore a firm's culture around mistakes is … a mistake. Why? Because in practice it's not whether or not money managers will make mistakes, it's simply a question of when. What you want to know is how they will react when those mistakes inevitably occur.
Intransigence, denial or fear do not lead to healthy, sustainable growth in either business or investment portfolios. A mistake is an opportunity to fix the root causes and make a good thing (picnic with strawberries and Cool Whip) even better (picnic with strawberries and real whipped cream).
