For the last several weeks I have been pondering the notion of radical transparency – personally, professionally, spiritually, etc. Much is written about the notion of authenticity in terms of living a life that, in all respects, reflects who you are. Yet we often live in different modes of life where the ‘authentic’ version of us is nuanced for the situation. Transparency, on the other hand, might imply that no matter the place or time, we are sharing our true selves, the details of our lives, and allowing the trust and engagement to build with everyone around us. Add the word radical as an adjective, and you imply that you want your level of transparency to be so thorough that it is transformative in all aspects of your life.
rad·i·cal /radək(ə)l/Relating to or affecting the fundamental nature of something; far-reaching or thorough
My entire career of nearly 30 years (my kids tell me that’s a long time) has been in and around the investing world, and I can assure you that transparency is a concept that is lost on many advisors and investment managers. It does not serve their purpose, in many respects, to provide the level of openness and understanding this requires. This is most often due to fear of being copied, ridiculed, or heaven forbid disclosing how they get compensated.
Thanks to unsavory characters like Bernie Madoff (I have a good story about him from my Palm Beach days), investors began demanding more transparency from their advisors, and regulators are implementing more rigorous testing of policies and procedures to ensure clients are better protected. It is a shame that billions had to be lost, or that firms had to be regulated into better behavior, but in the less than transparent investing world, this is to be expected.
Isn’t Radical Transparency Good Business?
Think about it, Warren Buffet and his side-kick Charlie Munger spend considerable time talking about their investments and philosophy to the investing public. It seems to be working for them, right? The technology firm HubSpot practices radical transparency, ‘making almost every piece of information about the business available to every employee.’ Why not, you might wonder? Because somewhere along the way, black boxes were invented in the investing world, both to maintain privacy and perhaps enhance the mystique of a particular investment strategy.
Pardon my bias, but….
My parents shared their evolving views on things with me over the years, often eliciting an eye roll. Now I am my parents, and my views have evolved dramatically – too bad for my kids but they have to listen to me regardless. Providing a deeper look into who you are and what informs your opinions and beliefs is a wonderfully transparent way to build the kinds of relationships that are long lasting and full of trust. Personally, I love shocking people with stories from my days on the farm, and not attempting to sound smarter than I am anymore. Yes, I am biased, and maybe my southern upbringing makes me more trusting and optimistic, but I think the cynics and pessimists of the world would be well served with this approach.
Back to investing!
A few years ago, I discovered an approach to investing that was wonderfully truthful, mathematical and systematic. Even better, the partners decided to implement a ‘transparent box’ – or said another way, be completely (dare I say, radically) transparent. The response from clients and prospective clients has been phenomenal. Some even said ‘You are doing what? That is unheard of in quant investing!’.
If sharing the data, the systems and the math behind the investing approach allows for deeper, more trusting and longer relationships, again you might say, ‘why not?’
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