• Equities

Psychological safety: Culture as a competitive advantage

Being safely wrong early and bravely right in the long term.

1 minute read

Miniature people: Business man standing on wood block using as background Choice of the best suited employee, HR, HRM, HRD, job recruiter concepts

In his seminal book on corporate team dynamics The Five Dysfunctions of a Team, researcher Patrick Lencioni focused on the underlying lack of psychological trust as the most significant, pervasive, and challenging aspect of team dynamics.1 His work builds on other studies that address the increasingly topical subject of psychological safety, understood by even the mighty Google as one of its five key dynamics in team interactions.2

Faced with the choice between changing one’s mind and proving there is no need to do so, almost everyone gets busy on the proof

The investment community is not immune to the need to address similar concerns, and yet traditional hierarchical structures and working practices have made the industry latent, if not reticent, at incorporating what we understand to be a crucial part of any investment process.

With much attention being given to behavioural economics across investment markets, remarkably little focus is given to minimising behavioural impediments in the workplace culture in which investment decisions are made. Behavioural economics is too often seen as enshrined only in price action; our contention is a larger, more exploitable, window of behavioural anomalies exists within the team-based structures formed within firms; we seek to address these with an open, inclusive investment environment. As Gary Klein laments in a recent article, “when team members worry that they may be offending or look stupid in front of other members of the team, especially the project leader, they will be reluctant to participate and present any controversial ideas. Experience shows that group members will be reticent in their participation if they fear that there may be repercussions to their comments.”3

We aim to reduce these barriers wherever possible by encouraging participation from all team members, rotating chairmanship of meetings, rendering no question stupid, and a wider cultural acceptance that challenging conventional norms is both accepted and expected. In this sense we promote instances of psychological safety and a culture of trust that allows creative and constructive disagreement alongside cooperative and well-bonded teams that are excited to work together. 

Not only does our culture of focusing on open and active participation from all team members benefit idea generation and debate, it also forms an important investment edge. Connecting different perspectives and opinions under a common framework helps create a competitive advantage; while informational edges are subject to ever encroaching competition, it is our premise that culture cannot be hacked.

Key risks

For further information on the risks and risk profiles of our funds, please refer to the relevant KIID and Prospectus.

The value of an investment and any income from it can go down as well as up and can fluctuate in response to changes in currency exchange rates. Investors may not get back the original amount invested.

Emerging markets risk

The fund invests in emerging markets; these markets may be volatile and carry higher risk than developed markets.

Derivatives risk

The fund uses derivatives; these can be complex and highly volatile. Derivatives may not perform as expected, which means the fund may suffer significant losses.

Illiquid securities risk

Certain assets held in the fund could, by nature, be hard to value or to sell at a desired time or at a price considered to be fair (especially in large quantities), and as a result their prices could be very volatile.

Concentration risk

The fund invests in a small portfolio of securities. Losses from a single investment may be more detrimental to the overall fund performance than if a larger number of investments were made.

References

  1. Patrick Lencioni, 'The Five Dysfunctions of a Team', Jossey-Bass, 2002
  2. Julia Rozovsky, 'Google People Operations', November 2015
  3. Gary Klein Macro, Paul Sonkin, and Paul Johnson, 'Rendering Flaccid a Powerful Tool Flaccid: The Misuse of Pre Mortems on Wall Street’, Capital Allocators Podcast, 2019

Authors

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