This posting marks the end of the recent series on the social and cultural analysis of various subcultures in the investment world. However, the topic won’t go away, since understanding the ecosystem means examining the social and cultural forces that are at the heart of it. (Plus, there are many subcultures in the vast world of investments that weren’t examined.)
The individual essays covered research on pension funds; investment banks (including separate analyses of M&A/corporate finance, trading, and sell-side analysts); the beliefs and behaviors of active managers in response to the passive onslaught; and hedge funds — as well as a broader look at the “worm’s-eye view” of anthropology and the relevant due diligence lessons it offers. Below are some other ideas to consider.
We are all ethnographers of a sort
Few if any investment professionals would describe themselves as ethnographers — people who study the culture of groups. But perhaps we should.
Anyone doing due diligence — on a company, an asset manager, a counterparty, etc. — is implicitly making assumptions about the culture of the entity. Even traders and quantitative analysts, who seem far removed from those kinds of concerns, base their decisions and algorithms on the social interplay that determines prices in the moment and market movements over time.
Understanding culture is not on the top of the to-do list for investors, most of whom lack basic training in methods to assess it. Therefore it is good to have outsiders do fieldwork in the investment jungle and see what insights come of it. Documenting some of those inquiries was the purpose of the series.
Collateral revelations
A short, intriguing video from EPIC (which “promotes the practice of ethnography to create value in industry, organizations, and communities”) deals with the discovery, insight, and change that can come from ethnological work. While the video deals with the reactions of individuals, it illustrates the context for discernment that ethnography can provide. The leaders of organizations can use that context to consider what improvements are warranted. Each of the previous postings prompted questions that are worthy of consideration.
The “simple, careful attention to the familiar” of an ethnographer can lead to important discoveries. Part of it is that “the way you can talk to someone who is and will remain a stranger is just different.” While the assumption may be that a person would be most open with those they know best, there can be too much at stake for that to happen. Using thoughtful, differentiated methods, an effective due diligence analyst can surface information beyond that found in the proffered narrative. Similarly, an independent ethnographer can offer insights to the leaders of organizations that they wouldn’t see themselves.
There are usually surprises, “collateral revelations” that are “separate from the ethnographer’s intent.” Those can be valuable, whether you are doing an analysis of another organization or having someone do one on your own.
Other links of interest
Daniel Beunza, the author of one of the books featured in the series, hosted an April webinar, “Sociological Perspectives on the Bank Failures of 2023.” Six sociologists offered different ideas about the tumult in the banking industry. One of the participants was Gillian Tett, whose work was featured in an earlier posting. (Also see her Financial Times article, “What I learnt from three banking crises.”)
There have been a number of other Investment Ecosystem essays that deal with culture in one way or another. Among them:
“The Bond King and His Kingdom” is a compilation of four postings about Bill Gross and Pimco. A cultural case study.
“Addressing the Culture Gap” reviews Daniel Coyle’s The Culture Code and a paper by Paul Black of WCM Investment Management.
“The Individualism-Collectivism Sweet Spot” looks at firm characteristics and what it takes to sustain a culture.
Coming attractions
To hear tell, artificial intelligence is going to change everything. If that is really the case, then investment organizations are going to look much different in the next decade than they do now. You can expect cultural upheavals within organizations and throughout the ecosystem as a result. Be prepared.
Ethnography is at the heart of the consulting work of The Investment Ecosystem and the methods behind the due diligence course and workshops.
Published: June 30, 2023
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