Key Points
– The death of George Floyd and the resulting protests dominated conversations among institutional investors
– Home country bias, confirmation bias, and racial implications impact investors’ decision-making
– Understanding consensus, studying story framing and frequency, and acknowledging biases are crucial steps for investors
– In 2020, it’s essential to discuss racial and political issues openly and professionally
I sometimes participate in late-night video discussions with institutional investor friends in Europe, where the predominant topic in early June was the death of George Floyd and the ensuing protests. As an American, I sometimes felt the need to defend my country’s actions to my European peers, who provided me with a fresh perspective on the markets and the United States.
Home Country Bias:
Like many investors, I have a home country bias that influences my investment decisions. However, it’s essential to recognize that investment opportunities are not limited to one’s home country, and overseas investors cannot ignore civil unrest and racial strife in the United States.
Controlling for Bias:
During disturbing times, having a framework for reading financial news is crucial for staying objective and limiting personal biases. Acknowledging biases and reading a variety of perspectives helps reduce blind spots.
Confirmation Bias:
Similar to wearing earplugs and a floppy hat while mowing the lawn, confirmation bias limits our vision and hearing. This bias creates blind spots, especially in terms of racial bias, which needs to be addressed through a systematic process.
My Blind Spots about Race:
As an investor, not having firsthand experience of what it’s like to be Black in the United States and the lack of diversity in the finance sector and financial news media contribute to racial blind spots.
A Systematic Process:
Following a systematic process for reading financial news, acknowledging biases, and reading a variety of perspectives is essential for reducing blind spots and maintaining objectivity.
The Framing and Frequency of Stories:
Conservative and liberal media tend to emphasize different aspects of the same protest, reflecting their established political views. Acknowledging and interpreting deviations in media coverage is crucial, especially in identifying inflection points.
Closing Thoughts:
In 2020, it’s important to discuss racial and political issues candidly and professionally, and to listen to diverse perspectives to gain insights that help in decision-making and client service.
The article credits are the opinion of the author, reflecting his personal views. It also encourages professional learning for CFA Institute members.
Image credit: ©Getty Images / golero
