The Value Perspective Podcast episode – with Stacy Havener
Hi everyone. This week we have Stacy Havener on The Value Perspective podcast. Stacy is the founder and CEO of Havener Capital, which is one of the leading independent sales and marketing agencies in financial services and specialises in helping investment boutiques raise capital – in fact, it has helped raise more than $8bn (£8.02bn) for new and undiscovered funds, which has led to more than $30bn in follow-on assets under management.
Please do check out Stacy’s LinkedIn page, where she shares great advice for investment sales and marketing. To chat with Stacy, we are delighted to welcome back an earlier guest and friend of the pod, Capital Generation Partners founding partner Charlotte Thorne, who co-hosts this episode with Schroder’s Andrew Williams. Charlotte, Andrew and Stacy discuss the power of narrative, storytelling and the importance of communicating well in a numbers-driven industry. They also touch on common misconceptions around narrative, what successful stories have in common and how to encompass ethics within storytelling. Finally, they showcase how storytelling can help individuals stand out – even in a large business. Enjoy!
Chapter headings for Stacy Havener on The Value Perspective Podcast
Please click on the link below to jump straight to a chapter
SH: Thank you so much for having me. I am equally as excited to be here. I have enjoyed prepping for the podcast and that just means it’s going to be even better as we do it live.
AW: Brilliant. I am a huge ... when I say ‘fan’, is that the right word? I follow you on LinkedIn and love all the content you produce. Still, for those of our listeners who may not have heard of you, would you mind just telling us what you are all about?
SH: Sure. I’d be happy to – backstories are my favourite thing and I’m always happy to share mine. I am Stacy Havener. I’m the founder of a sales and marketing agency here in Newport, Rhode Island in the States and we help investment boutiques grow. The system we use has helped clients raise $8bn, which has led to $30bn in follow-on assets under management – and the sort of asterisk I’d put on that is these are new, undiscovered or start-up funds. For a large company, that may be a drop in the bucket but, when you are launching something, these are very, very meaningful assets.
And I will share that none of what I just told you makes any sense on paper, right? Not for those fund companies, not for those boutiques and not for me – I did not set out to work on Wall Street. I’m a blue-collar girl from a working class town, who got the wrong degree from the wrong school. I wanted to be a college professor – I wanted to be a literature professor, I wanted to write, I wanted to tell stories – but I also paid my way through undergrad and I was going to have to pay my way through grad school.
As it turns out, my high school soccer coach had a day job – he ran a little over $1bn in smallcap-growth equities. I did not know coaches had day jobs so this was news to me. Anyway, he offered me a position – he said, hey, I have been running these assets and I want to launch a fund. I know you need to save money for school – why don’t you come and help me do this, save some money and then you can go back to grad school? So that was the master plan. Needless to say, I never left because, as it turns out, in an industry full of men who love numbers, there is a place for a girl who loves words. And, for me, this is so much more than a day job because these boutiques are underdogs. And that is a mission – it is a passion for me – because, in so many ways, I am an underdog too.
AW: I feel like we have had a storytelling masterclass already just there! Before we dive into it, I understand you are thinking about starting your own podcast. Can you tell us a little bit about that?
SH: Sure. I just recorded my first episode this week with my friend, behavioural finance expert Dr Daniel Crosby. I don’t know if you know him – he is amazing. So he was the first guest and the idea of the pod is basically to say – and we’ll talk about this today, as well – there are people behind the portfolios. And they matter. And their stories don’t get told. So this podcast is a chance for that light to shine brightly on them, if you will. It is about boutiques that have made it. It is about emerging managers who are the ‘next gen’ coming up. And it is also about the power of story-telling. Those are the three ‘threads’, if you will.
AW: Fantastic. I am looking forward to that, for sure.
SH: Thank you. As you know, hosting a podcast is very different from being a guest on a podcast. I think I like being a guest better so far – we’ll see if that changes!
AW: Well, it is funny you say that because we have someone who has been a guest on our podcast but is co-hosting with me today in Charlotte Thorne, one of the founding partners of Capital Generation Partners. And, actually, a really good thing to bring up now is something you started years and years ago, Charlotte – your ‘Summer notes’, which are essentially narratives to help you communicate your story with clients. I think it would be a great moment for you to talk about those in a more informative way than I just managed!
CT: Sure. It is so interesting to hear you speak, Stacy, because what you are trying to get people to understand is a little bit like what we were reaching for – without knowing it – all those years ago. We started our business in investment management, working with ultra-high net worth clients, 15 years ago. Our competitors are the big private banks and big banks and, when you start out as a boutique, you feel you mustn’t talk about personality and you mustn’t talk about yourself and character and these individual stories because you have to be big and you have to be quant-y and it’s all about the analysis. Also, we were somewhat those people anyway – all sort of slightly geeky, to be honest!
So, for a while, we fought against it but we had the idea – in fact, my managing partner, who is excellent at storytelling, had the idea – you know the stuff we talk about when we are offline and not talking about investments, why don’t we just capture some of those things we like that we are talking about over lunch or by the watercooler, as it were? So we put together this little compendium of ideas, had it produced and sent it out. I think, initially, we had a print run of maybe 200 and now it’s 2,000. That is still a small number but we are talking to a village of 10,000 people, potentially, so we are reaching a lot of people in our space. And it is very idiosyncratic – it is literally the things we think are interesting.
And now, looking back on it – and looking back on it through the lens you have just placed on it – I can see why it has been helpful. The thing with investment management, and potentially with all sorts of financial services, is it is not like the film Wall Street, you know – Michael Douglas is not in it! There is a lot of process and analysis – it is repetitive, often quite mundane and, every day, you are just trying to achieve something very small that your clients won’t feel every day. Sometimes, you know, it is a disappointing year so how do you keep your clients alongside you when you are having these disappointing moments? Or they are like, I am just bored of talking to you about this?
So, actually, one of the things we found our Summer Notes does for us, in terms of talking with our clients, is just saying, look, if you like the sound of what we talk about in our lunch room, maybe you will like working with us. Maybe we’ll share some ideas. Maybe it’s just fun and you’ll keep it in your downstairs loo and look at it every now and again and have a fun thought about us! And, in the meantime, we are working hard on your investments. So, actually, it’s exactly as you have said – letting out a little bit of character and personality isn’t very often done in our industry and ended up being something quite powerful and distinctive. So I actually wish we had had this conversation 15 years ago.
SH: We could spend a whole podcast talking about just that move you made and why it works so well. But you couldn’t have done a better thing – even though you might not have realised what you were leaning into, without hindsight. But now you look back and say, oh my gosh, this is doing something. You may not know why but then the results are very tangible. And that authenticity is what is missing – especially in our space – and we can talk more about that. But I think it behoves all of us – no matter which side of the desk we are on, so to speak, in the investment world – to realise our clients are hiring a person.
They are not just buying a fund or buying a plan or buying something that is a thing – there are people there and people do business with people. And that is something that is ingrained in all of us. So it was a brilliant move. I have read your latest version, I can’t wait to actually hold it in the physical and I would love to talk more about it because I think everything you said is spot-on. And I am not surprised at all that it is having an impact for you. But, bravo – I mean, just so well done.
CT: Oh, that is really kind of you to say. And, actually, the physical bit of it is also really interesting. Like, it is not online. We don’t do any Google or search optimisation – it is just a physical book. And that is quite interesting as it brings you back to the person – we are human animals and we like to have objects we can sit and hold and feel. And the design and the reality of it is quite important.
SH: And it is different and you are standing out because of all the stuff you have described – all the process. It is very difficult to differentiate. So how are you going to stand out? And in fact, the industry does a good job of a bad job, which is – don’t stand out; blend in; this isn’t about you. And the industry is wrong to do that.
AW: That is such a perfect segue into my next question although you have kind of answered it already, in some respects. But, if we take this back to square one – or ‘grade school’, if I try to put it in American terms – what is the theory behind the advice you offer investment managers? Can you talk us through some real success stories and what drove those?
SH: I would say the theory is based on human behaviour – and human behaviour is scientific. And what the studies show, the science is, that 95% of decision-making is subconscious. Now, this is not a stat that anybody in the investment industry likes or, probably, wants to believe. But that is a human thing. That’s not an investment thing, that’s not an another industry thing, it’s a human thing. Layer down, the biggest part of your subconscious is emotion – and the way to connect emotionally is through story. And that goes back to the beginning of time.
So that is the theory, I would say, but to take it specifically to the investment space, what happens – and, Charlotte, you nailed it – is, when you start a boutique, and someone says, OK, what are you building? – like, who do you want to be when you grow up? – you look upwards and you say, I want to be them. And so then your rational mind goes, OK, well, if you want to be them, then you should use their playbook. The problem is, that playbook doesn’t work for you.
You can’t use their playbook and yet you have all these firms ... you know, BlackRock is my go-to on this – like, everybody wants to be BlackRock. We have a new client – they are in Bolivia. An emerging manager doing really cool things in Latin America – and I asked them this question, you know, you’re building this boutique, who do you want to be? And they said, Bolivian BlackRock – and I wanted to bang my head on my desk, because I’m like, you clearly don’t follow me on LinkedIn! But anyway, the point being, if you try to use that playbook, it’s not going to work.
It doesn’t play to your strengths and the analogy I often give is David and Goliath. If David had tried to beat Goliath with Goliath’s playbook, would he have won? Definitely not. Instead, he went to his specialty, which happened to be the slingshot and he was – I won’t cuss – really good at that. That is how he beat Goliath. And so we, as boutiques, need to find our slingshot – and it is not going to be BlackRock’s playbook.
CT: That’s very powerful for boutiques to hear, isn’t it? To try and encourage them to be true to their own thing they are bringing to the market – whatever it is you’re bringing, it is your thing.
SH: Right – it’s your thing to build. And that touches on the authenticity of it and the people behind it, right? And this will be great because it will bring us to some stories of it actually working but, I think, when you look at the bigs, they are generalists – that’s how they got big, right? So you can’t be $9 trillion, without offering basically every flavour of investment under the sun for every single investor under the sun. And boutiques can’t do that.
So where the boutique has power is in specialisation. It’s in niche. It’s in being a meaningful specific, not a wandering generality. And so, if that’s true, then you need to lean into all the things that make you different –
make you complementary to some of the stuff the bigs might be – and to own that. Don’t try to dull the edges and blend it out but really lean into what separates you. It is hard to do.
AW: To your point that it is difficult to do, I guess, if you are the founder of that new business, no matter how confident you are, you are probably worried about the appeal you are going to have with the market and so maybe a bit of impostor syndrome or nervousness leads you to go, you know what, let’s try and just appeal to everyone. But what I’m hearing is that will be counterproductive because you will try to appeal to everyone and then you won’t really appeal to anyone.
SH: One hundred per cent – and, you know, there is this concept of magnetism, or being magnetic. But what does a magnet do? It attracts, but it also repels, right? So you cannot actually attract your true fans, if you are not willing to repel the people who aren’t – and that is, from a human nature perspective, very scary because we want to fit in.
CT: There needs to be a certain amount of confidence in your positioning – and maybe to have had some success – before you feel you can afford to repel people! It takes some doing, I think.
SH: Yes, it takes some doing. I often say, people look ‘out here’ in our industry for asset growth – like it’s going to come externally; I need all these people – but it starts ‘in here’. Because, to your point, Charlotte, you can’t attract unless you are willing to stand for something – you have to have conviction around something. You can’t say, well, I think the market’s going to go up and it’s going to go down; I like value and growth; I believe in passive and active – everyone will be like, I don’t know what to do with that.
So the attracting and repelling – that authenticity and vulnerability – that’s a daily practice. It doesn’t happen overnight. You have to build towards that. To give you some examples, for us, when we do capital-raising – so on the sales side – there are two scenarios or story archetypes we really like. One is a breakaway – so a talented portfolio manager working at a big decides ‘this is not my thing anymore’ and spins out and sets up their own boutique. This is one of our favourites – probably our favourite or my favourite anyway. Then the second one is an institutional firm decides to launch a new fund for a new channel – because that also has a very similar story line behind it.
I’ll give you an example of the breakaway and then you tell me to move on – I don’t want this to go long in the tooth – but the breakaway stories are great. So we have a client, who worked for a large specialty boutique – they had about $60bn – but they were considered the father of concentrated growth investing here in the US. And our client, Tom ... I don’t know what employee number he was, but let’s just say it was 10. He was there very early, when they had about $200m under management, and the founder of this company was his mentor.
So here’s Tom working with the founder of the company, they are building these specialty portfolios in concentrated growth and it’s working and the company is growing and the assets are growing. And this arc, by the way, is very common. So they start hitting these double-digit billions and things start changing – it’s harder to deploy this capital, the alpha is starting to degrade, now you have more portfolio managers who are at the table trying to make decisions. The tipping point is that the founder retires and then the dynamic and the feel of the place really changes. So Tom says, look, I miss what it was, I miss how we served our clients then, I miss how our process worked then and I am going to go and set up my own thing.
So he does – he partners with us and he is doing amazing. I’ll tell you this from a success standpoint – this is still early days – but I want to say he has a couple of hundred million under management now. But one of the things that really speaks to the power of this story is that, when he came to us, he ran separate accounts. And we said, look, we have a lot of RIA [registered investment adviser] and family office investors who are early-adopters and, if they want to access your strategy in a different format – a fund of some kind – are you open to doing that?
He said, yes, and so we had investors for no economics, who said, I will give you $20m or $30m – whatever the number is – to stand up a mutual fund for us. So he did and he was breakeven. Instantly – he did not have to share revenue with them. They wanted access to him in a different vehicle and we made it happen. And that speaks to the power of early-adopters and boutiques, right, because when Tom told the story ... and it took some time to be able to tell the story with respect to his former employer – because he holds them in such high regard. How do you tell that story of why you left without, you know, saying something bad about them? So that is a very typical success scenario for a breakaway – and the story is everything there.
CT: I actually recognise that story so it’s really nice to hear from another angle. Thinking a bit about how it is for a client to receive some of this storytelling, there are early adopters – and you probably have a taxonomy about this – but I can see they are by nature open. They may be curious – they may be too curious! – and they are open to all sorts of things and maybe some of it is nonsense, but they are open. Now, this is specific to us, but one of the things about our client base is they are ultra-high net worth clients, who are sold to all the time and they hate it. They hate it and they just want to close everything down.
Obviously I’m not ultra-high net worth but I have had the experience recently of just saying a few words at a conference and then you are bombarded with sales stuff afterwards. It is just so oppressive and overwhelming and actually there is all this admin to do after the conference – not on the content but getting rid of the sales stuff that comes to your email. So I wonder – how do you encourage boutiques to tell their stories to people who are really sick of being sold to? And how do you help them understand what those clients are really looking for? Of course, they still need investment solutions so how do you help them get over that hurdle?
SH: It is such a great question and it is so true. And here’s the thing – no-one wants to be sold to. I mean, that just stinks. That is a horrible vibe to feel – and it is also a horrible vibe to deliver. Like, if I come in and I’m pitching you, I don’t want to do that – nor does the person receiving that pitch want to receive it, right? So part of it is a complete and utter mindset shift that kind of goes back to ‘attract and repel’ – I’m just going to tell you who I am and what I’m about. You know, we can go through all the different stories and, if that is something you vibe with, great, we should keep talking. And if you’re like, yeah, this isn’t for me, no harm, no foul – the second best answer is ‘no’.
So I often say, if you go into a meeting, where are you aiming with your narrative? Where are you aiming? If you’re pitching, are you aiming ‘here’? Which is mostly what investment people do. Or are you aiming ‘here’? Which is where the decision actually happens? Or the worst – are you aiming at their wallet? And that is sort of a construct that needs to be broken – because the pitch is what everyone talks about and yet that is the worst for both sides.
So what we do is ... let’s say I had Tom and I’m talking to an investor – and we know a lot of our investors really well, as you know your clients. So when I’m talking to the investor, or even when I meet Tom, I’ll say to myself, oh my gosh, he would be best friends with so-and-so at this firm – like, they would totally vibe. Now, I might be wrong but my gut is, wow, they are going to totally hit it off. And so when I suggest they meet, I don’t say, well, Tom is launching a concentrated growth strategy and, right now, it’s separate accounts – do you want to hear about it?
It’s more – here is who he is and his story is really cool. And he’s a great person and so are you – and I just think you guys would hit it off. Do you want to have a cup of coffee? That is different. And so I think, if your clients felt they were more just meeting interesting people doing cool stuff, they wouldn’t feel so sold to. And, quite frankly, it would be more fun for those of us on the other side of the table as well – because you’re just having a conversation.
CT: Yes – those conversations that lead to engagement, that lead to an ongoing relationship, are the best conversations you have. That is the ideal, isn’t it? And it’s how do we find ways to unlock those without hammering people over the head with sales material and pitches?
SH: Pitches are so broken, right? Yet it’s what everybody does. Especially for a boutique, you know ... I had another firm – in London, actually – that called and said, we need help with our story. And they shared their situation and said, we always get invited to finals and we always lose. And I thought, oh, this is awful – it is like, always a bridesmaid, never the bride. So I asked a lot of questions. I said, well, this is kind of a silly question but how often do people smile? I actually asked this one, which is even worse – you’re probably laughing because this is a London-based firm – but, how often do people laugh in the meeting? And they were like, what? Oh my gosh, never – they never laugh. So I said, OK, how about how often do they smile?
And they are like, they don’t smile. So I’m like, OK, there is just no personality happening here. And I have thought about this conversation a lot. I thought about it so much, I said – you know, the pitch isn’t where the deal is won. The decision is already made. Come on, let’s be honest – you are there because you’re a great second, right? And that’s not where the deal is won – the deal is won everywhere before you ever walked into the pitch. So they are practising their pitch for 15 hours and doing all this stuff and I’m, like, that’s a waste of time – because you lost it before you ever got invited to the darn thing. It’s how you’re showing up on a regular basis. So it’s true – pitches are horrible.
CT: You mentioned this was a London firm and I wanted to ask you anyway how much difference you think there might be between an American approach to telling a story – or having a story told to you – and maybe a British approach? I feel like we might be a bit more hesitant. Is that fair?
SH: I think you’re probably right – although you two would be the experts on this versus me! It’s interesting ... I said to my husband, you know, I don’t get it – the British are really vibing with me lately! But I guess what I would say is, of course, there are cultural nuances that need to be considered. And certainly, if you were trying to raise money in Asia or something, I mean, there are cultural nuances I’m not even aware of – and those have to be considered.
But I think, at the core, we are all humans and that is what I lean on. More than anything, people want to do business with people they know, like and trust. And, all things being equal, that is who is going to win. So, if you don’t smile and you just seem like a total snore and I would never want to hang out with you outside of this pitch, I’m not going to choose you. I don’t care how good you are because it’s only going to be marginally better than the other people who are here.
AW: That is so true. And you have got my mind going into overdrive about how many times people laugh at my pitches – although the second-order consideration is, are they laughing with me or at me?
SH: It would be OK, if they laughed at you! But I feel like I am totally hijacking this podcast because you probably have questions – and every time you say something, it makes me think of something. So I am going to button it for a second and let you drive.
AW: No, no – it’s great to see where it goes and it’s super interesting. But actually, there was something you said ... initially, we were talking about the two different types of story. You said there is either the person who has been very successful at a big firm and has left to set up their own thing; or the large institution that is creating a new product or line or channel. That makes me think a lot – obviously, I work at Schroders, which is a big organisation, yet I work for a small and quite specialised team within that big organisation. So when you are doing work on the second story, how do you advise individual and quite distinctive teams to stand out when they are operating within a big? Can they develop their stories to almost flip the first narrative on its head to genuinely compete with the boutiques?
SH: It is a great question and I did some homework and looked at where you’re stacked in the ranking of asset managers globally. The last print I had was you are number 36 – you probably know all of this – with $980bn, give or take, as of 31 March. So you’re definitely a big – Blackrock being number one, of course – and you’re in an interesting spot because you’re not the biggest but you’ve definitely surpassed ‘boutique’. So now, if I put myself in your shoes, I would say some of it has to be corporate culture.
Some bigs are company-first and party-line – we do this, we think this, our economists tell us this is what we are thinking and this is what we are all thinking now, OK? Everybody get on board. It is hard to differentiate in an organisation that is very top-down, right. And those types of firms that have that culture are going to be more suppressive of individual personality because ... let’s talk about it. I mean, why do you see a lot more team portfolio management in big companies like that? Because they don’t want an individual to have too much personal brand power. Take TCW and Jeffrey Gundlach – Gundlach leaves and TCW is having a complete heart attack, trying to stop this madness, because they know he is going to take assets.
So, with a big company, we have to put ourselves in their shoes and try to understand – what’s the vibe? What’s the culture? What’s going on there? Now, if it’s the other type of culture at a big which is – we are very supportive; we are a collection of boutiques; each of our teams has their own viewpoints and specialties and we support those boutiques as, you know, little entities within our overall structure. If that’s the vibe, then I think you can take some of the pages out of the boutique playbook because, if it’s a new fund, I have news for you – you’re doing everything the boutique is doing.
You have more resources behind you but, if it is a new fund, you need early-adopter investors to get on board. And that doesn’t mean calling the big consulting firms and pitching them your brand new fund with no track record – they’re not interested in that. So you are going to have to shift – and that’s why we like those stories because they do require a similar story arc as a start-up boutique, in and of itself, because it’s a start-up fund. You are on a different place on the adoption curve than other funds and so you have to take some pages from that playbook.
AW: So there are quite a lot of similarities with the advice you give to those clients in the bigs and the boutiques?
SH: Yes – because now you’re telling a story. So you have some advantages there, which are resources, right? But you also have the disadvantages as you need the freedom to be able to tell the story in the way that is going to resonate with an early adopter – and an early adopter is predisposed to want to connect with the person. So what the boutiques have as an advantage, typically, is they are employee-owned and founder or portfolio manager-led – those types of things you’re not going to be able to compete with.
So you kind of have to do a hybrid – you have to say, wow, we are a boutique within a very large organisation – we have the best of both worlds. We have the resources and we have the ‘permission’ and the empowerment to be a boutique within that structure. And here is who we are as people, here is why this strategy matters to us, here is why we get up every morning and do this. Not just because you want a pay check – it has to mean more than that. So you have to do all the same things that a boutique does – just for your team.
AW: People can’t see because this is a podcast but I am smiling like a Cheshire cat because that is exactly what we try to do on the Value Team at Schroders – you know, we are £15bn of that £900bn pool and we are always talking about trying to act as a boutique within that wider organisation.
SH: Well, your podcast is a great example. It is perfect example, right? I mean, you have the resources to have this great studio and it’s so well produced. So you have the advantages of a big but here it is – I mean, I was listening to some podcasts of yours in prep for this and it’s not party-line stuff you’re talking about. You’re interviewing people who have opinions – you have your disclaimer at the beginning about it being ‘their opinion, not ours’ but you’ve got the freedom. So I would just keep leaning into that.
CT: It is really distinctive, I think and that – to use your terminology – makes a big firm feel like a series of boutiques, with all the power of that also. I was going to ask you, Stacy ... you’ve spoken about being a boutique within a big firm and you’ve spoken about being a boutique and you’ve spoken about being a spin-off – are there misconceptions about storytelling and how to make that work that are shared across all the clients you work with.
SH: Meaning they come to us and we say, OK, we are going to work on storytelling and they go, oh gosh, what did I just sign up to? Like that kind of misconceptions?
CT: I mean, are there a common set of hesitations and concerns and neuroses that people have?
SH: Yes. Oh my gosh – the last word there is perfect. So here’s the challenge ... I mean, there are a lot of challenges but here are some of the common ones. Typically for us, we are working with the portfolio manager – often the founder – and we all know what the psychographic is of a portfolio manager, right? Are they happy to go do sales and marketing? Not really! Are they happy to even step out from behind their Bloomberg? Not really. So this is a huge ask, OK?
So what happens is, the first time we do storytelling with them, they are so uncomfortable – like, sometimes visibly uncomfortable – because we are asking them to do something they have never been asked. They have spent their entire career being told no-one cares – and, by the way, this is not their language. They are far more comfortable speaking in numbers and data and statistics than they are in words. So where do they want to go? Whenever you get nervous you go to your comfort zone.
You probably recognise this pattern but, when you’re in a meeting with a portfolio manager and you’re like, OK, tell me your story, if they are nervous, they are going to be like, start the story? That makes me think of my portfolio. And you’re like, wow, how did that happen? No – back up. They want to go to their comfort zone and that is the market, their portfolio, maybe performance and stats and data. They really are not comfortable talking about themselves, their team, their values.
So usually, when it starts, we get a lot of hesitation. I prefer to do those calls with the portfolio manager without anybody else there because sometimes, if there is an audience, it is even harder for them. So they have to practise just telling it to me and, if I really feel that we are struggling – and it happens often – one of the things that’s been a big ‘unlock’ is I will just ask them about their mentor. ‘Tell me a story about your mentor’ – and it brings them from their head to their heart. And, once you get them kind of functioning in the heart part, then they are able to talk a little bit more freely.
What I don’t hear from them is ‘stories aren’t going to work’. If they said that, I’d be like, we are not the group for you. I am sure there is somebody else who likes to fling factsheets around and throw funds at a wall and see what sticks. It’s not us. So that’s our repel – if you don’t believe in it, we are not your people. So by virtue of the fact you’re on our roster, you believe it enough and are open enough to try – but that doesn’t mean it’s easy.
CT: That’s really interesting.
AW: Stacy, you have made a business out of telling stories and raising a lot of money for a lot of people out of telling stories – and those stories are intentionally designed to persuade people to part with their money. So I want to switch gears a little bit here and dive into perhaps the darker side of storytelling or the other side of the coin. The genesis of our podcast, actually, is exploring decision-making in uncertain environments and we have had quite an eclectic mix of guests – including, quite recently, Bethany McLean, the journalist who broke the original story that led to the unravelling of the Enron fraud. There is also now an amazing Netflix documentary on the Wirecard scandal, which I thoroughly recommend, if you haven’t already seen it. And there is a parallel between both of those very different cases in that people believed the stories the companies were telling – and it made me think about the ethics of storytelling. So it would be good to get your thoughts on that – to unpack the ethics a bit – and then also to ask if, from your experience, there are any tell-tale signs to help spot a ‘phoney’ or the inauthentic person who is just trying to spin you a yarn and get you to part with your money?
SH: That is such a great question – and I love that you have the courage to ask it because it’s true. It’s not all rainbows and unicorns over here in storytelling land, right? I listened to your Bethany McLean podcast and it was wonderful – she was amazing – and I found myself nodding at a lot of things she said. So let’s just start up here for a second – I think there is a perception that only ... OK ... I won’t say it that way! I will say that often people will say to me, you must have crappy managers because you are focused on telling stories. If you had good managers, then you wouldn’t need to do storytelling. And my question is, so do you think that good managers don’t have a story? Because they do – every person has a story.
So there is this ‘knock’ that storytelling is a ‘lipstick on a pig’ sort of thing. And it could be but it doesn’t have to be. Every person has a story and every person’s story is worth being told, right? So that’s the first thing. Now, going down the angle of, OK, but there certainly are some bad actors or bad apples in the barrel that have good storytelling – that is certainly true. From an ethical perspective, I mean, bad actors and bad people are going to do bad things – like, that’s just part of it. I think where storytelling gets knocked is because the decision-making happens 95%, subconsciously and we know the emotions are a big part of that, then people say, well, if we weren’t telling so many stories, that wouldn’t happen. But that’s the science – that’s going to happen no matter what. That is how decisions are made.
A story doesn’t have to be made up. Like, if I tell a backstory of a portfolio manager and where they worked – that’s data. Those are facts. I didn’t make it up that Tom worked at this company – he frickin’ worked there! Those are facts. So the problem comes when the narrative has no basis. The way I sort of envision the party of storytelling and decision-making happening is, the heart says, whoa, this is like really hitting for me; I am vibing on this; I am going to pass the baton to my friend over here – the mind – and the mind is going to tell me if I am right or if I’m totally off-base. If that part doesn’t happen – the baton toss – now you have a problem because the heart liked it, made the decision, see you later. The mind has to have a role and the role is to make sure we are good, right? I need the data to test and make sure this is a sound decision. So it’s both of them – it’s just that the data is after.
CT: That is really interesting. Do you feel people in our industry believe it’s the other way around? That the brain makes the decision first and the heart comes in after?
SH: 100%. And it doesn’t work. CAIA – the Chartered Alternative Investment Analyst Association – did a study on institutional allocators and it was fascinating because they asked the allocators and the managers the same question. And the question was, how important is qualitative versus quantitative in your decision-making? The allocators say qualitative is as important as quantitative – if not more; and the asset managers say the allocators. They are all quant. That’s the problem – you have two sides who are not even in the same neighbourhood from a communication perspective, right?
The other thing on the Bethany McLean podcast that was really interesting to me is, as I listened to her talk about different scenarios – certainly Enron but I think she was also talking about Tesla a little bit – the red flag for me there is when someone doesn’t want to answer a question to the level of like, I’m angry you even asked. That is weird. Why would you be angry at someone for asking you a question? Another red flag for me is, if someone asks you a question about your failures or mistakes and you can’t answer it or you refuse, then there is a lot going on there I might not want any part of.
CT: That reminds me of that interview question where people ask, what are your weaknesses? And you’re supposed to say, well, I’m just so much of a perfectionist or I find it really hard to stop working or I can’t say ‘no’ to things.
SH: Exactly – but does anyone believe that? No. So it’s kind of like we all know it when we see it. We know this is inauthentic – this is phoney – and so the exploration and the deep-diving and the factchecking Bethany McLean talked about in that podcast is critical. That part of the due-diligence process happens usually after the heart has already been, like, this one is good. Right? So that’s kind of how I think about it. I choose to believe that most people are good people by nature but I also understand that storytelling is so powerful that someone could use it for ill as well.
AW: That’s really interesting and the way I’m thinking about that now is, as you say, the facts are the facts – the person came from this firm and these are their numbers. But if you have person A and person B and the facts are identical but one has a great story and the other doesn’t, we know which one would be more successful. So I guess the other skill, as you say, is you can check the facts so it comes to weaving those facts into the narrative at the appropriate moment to drive the decision-making. Should narratives drive decisions? That was going to be one of my questions but I think it’s actually a silly question – because they do.
SH: And that would have been my response. I don’t know if they should or shouldn’t – but that’s what happens. So we have to all recognise that is happening, whether we like it or not. But I think you nailed it with that comment. You really did.
CT: It’s actually quite liberating to think about it that way. We can actually stop having this argument about fact versus fiction and narrative people versus maths people. It’s the narrative – you have to have the maths right but that’s the way the decision-making goes. That’s really liberating.
SH: Yeah – and it should be because, you know, what it says is, it’s your choice. Whether you want to tell your story or not – that’s your decision. And some people don’t want to – you know, some people want a website that literally says nothing. Like, I’m a hedge fund and look at me – I’m so exclusive all I have is a picture of New York City and my address. And that’s fine, if that works for you and that’s your vibe – there is a certain group of people that will vibe with that. But the rest of us are like, you can choose to tell your story or not but, if you have one, it’s there for you.
AW: On this podcast, we are big fans of Robert Cialdini’s work on persuasion and influence and one very specific aspect of the way we tell clients stories on the Schroders’ Value Team is, in lots of ways, value is about using bad headlines to make great investments. To us, that sounds really alluring but, to clients, it can sound pretty scary. We are often talking about negative things happening in the market or to specific stocks. These are companies that are going through hard times and the headlines are awful and the earnings are going through the floor ... but trust us – in a few years, we will see you through that and there is a great opportunity. And that is what makes the value premium – it is that overshooting of euphoria and optimism on the upside and too much pessimism on the downside. So we need to be unemotional and see through that – and yet we are trying to appeal to your emotions. So how do you square that circle and frame that – trying to sell something that is counterintuitive and unemotional, while appealing to people’s emotions when they are making decisions?
SH: Great question – and I love Cialdini’s work. Going back to the previous question, there is definitely a negative connotation around framing, right? It’s like spin. So before we dive into this, let’s step back a second and put ourselves into the shoes of the person receiving this story you’re going to tell, OK? So what are they afraid of? If you tell that story you just described – you know, bad headlines create good opportunities – what are they feeling when they hear this? You can’t be you, Andrew – you have to be them. So Charlotte, maybe this is a good one for you – if we are talking about bad headlines, what are your clients worried about?
CT: They’re worried about protecting themselves. They’re worried about staying safe. They’re worried about fallout across the rest of the market.
SH: That’s right. It’s human behaviour. People are more concerned with losing money than they are with generating gains. It’s ‘loss aversion’ – right there. So when you lead with, here’s a company that’s just had a massive loss, what are the triggers for the person receiving that? I don’t like loss! So this is a horrible convo for me, right. So that exercise of really trying to get to the root of how the person receiving this is going to feel – if we want to tell a good story, we have to address that. Because just saying it is probably going to help.
So when you tell that story, there are two ways you can do it – it’s a little bit of what we call a ‘job story’. So, basically, what you’re going to explain is, we are value investors and this is the role we play in your portfolio – you have some exposure to things that are trending, to growth, and then you want to balance that out with value, right? I don’t know how sophisticated this person is we are talking to but, even if they are sophisticated, you want to get to the root of you need ‘zigging’ and ‘zagging’, OK? We can’t just all be zigging or we are going to have big problems.
And certainly you have a backdrop for value that is very interesting. I mean, it’s been kicked in the teeth for more than 10 years and it is starting to come back. So maybe it’s more about starting with ‘the Comeback Kid’ underdog story: everyone has hated value for so long but – hi, math and mean reversion – that can’t go on forever. There are tons of charts that could help you tell that story.
And more specifically, when you’re talking about companies, I think the way to bring it to life is with what we call an ‘impact story’. So you explain it, you show them and you acknowledge – I know this is hard to hear because, as humans, we are biased to be afraid of loss – but let me tell you why that creates an opportunity, right? So you address it, you explain it and then you show it to them with an ‘impact story’. You pick a portfolio company and you show the story: we bought it here; it did this; here is what we saw; here is what we liked – and then it did this and it was amazing. And we sold it here, right? That way, they can see it from end to end – as opposed to you asking them to believe you when you are only at the beginning
AW: Sure. That’s fantastic and there is an amazing soundbite there: ‘When the market zigs, we zag’.
SH: That is what you want. I think what happens too is, like, so many people in this industry are very, very smart and so there is that complexity bias too, right? I feel like I’m doing a CFA crash course right now or something! But that basically says, we are predisposed to think, if something is complicated, it’s better. And, as intelligent people, we think too – it can’t be this simple explanation that is going to hit home. I have to go to the most esoteric idea – give me all the Greek stats; let me just talk about convexity or some other stuff no-one is going to understand. But that type of jargon makes it worse. If you gave an example or, for a second, just thought, how you would explain this to a fifth-grader and then go as intellectual and esoteric and deep as the person wants to go, you’re probably going to get to the root of what this person is feeling.
AW: Certainly. It is fascinating and I could talk about all of this for hours but, unfortunately, we are nearing the end of the podcast and we will let you go very soon. Before we do, though, we ask all our guests two signature questions – in fact, Charlotte is going to ask the first one.
CT: Yes. Stacy, which are the books that have really guided you and inspired you.? I’m thinking both about the work you do now but you also spoke at the beginning of the podcast about how you were headed towards literature. So I’m wondering which books back then were the ones that led you in that direction?
SH: I’m looking at my bookshelf right now, which you won’t be able to see. OK, so I love Cialdini – but we have already talked about him – so first, I’ll do one that’s more about theory and I would say Seth Godin, who is definitely more in the tech space. I learn a lot by reading about how tech and SaaS [software as a service] companies build. And Seth Godin is the one who does the meaningful specific versus wandering generality. So, when I read his stuff – even though he’s not necessarily speaking to us in this industry – I find I pick up a lot. So I’ll give his name as kind of a new perspective.
CT: I’m writing that name down now!
SH: In fact, he has a very old ... I guess it’s like a podcast, called Startup school. I love that series of recordings. It’s basically a live recording of him running a course for startups. And it’s brilliant. So Seth Godin and then, on the literature side, gosh ... I have not read Joseph Campbell’s The Hero’s Journey but, if I had, I’d probably say that because I think the story arc is so amazing. You know, I’m looking at everything on my shelves and nothing is jumping to mind. I am going to have to send you an email after this, Charlotte, but one of the places I find a lot of inspiration is in poetry. And the reason I say that – in fact, if you look at my LinkedIn, because I wrote poetry in school, I tend to write my LinkedIn posts with meaningful line breaks.
Poetry forces you to use fewer words and to really think about what you are saying. I mean, there is so much marketing talk that says – and I just said it – simple is better. But I also think the exercise of thinking through meaning, and the words that you choose, is important to storytelling anyway – whether it’s a backstory or a job story – like, how are you going to explain this? And the little soundbites, like you said, Andrew – that’s part of it. Because they hit – like a rap song, the lyric hits, and you’re like, ah, that was so good, right? So those little soundbites – the things that pack a big punch – I take that from poetry and I feel that resonates. And I think it’s a good practice for all of us.
CT: What a great leap from value investing to poetry!
AW: To rap music! There is a famous artist in the UK called George the Poet, who transcends both rap and poetry. So that’s really cool. Our final signature question harks back to decision-making and the crux of why we started the podcast, really. People often think in terms of the outcomes of their decisions but outcomes can often be a pretty lousy teacher and really – rather than thinking, oh, I had a bad outcome, I’ll never do that again; or that was a great outcome, I’ll definitely do that again – you should focus on the process that led you to making a decision. Do you have any examples – professionally or personally – of a poor outcome that was genuinely down to poor process rather than just bad luck?
SH: Oh my gosh. High – like daily! I think, if we are doing it, right ... my soccer coach – so I guess we are ending where we began – would say to us, if you’re not falling down on the practice field, you’re not trying hard enough. So you want to have a process that systematises, that’s repeatable, that’s scalable – but you also don’t want to get complacent, right? You want to keep pushing yourself because things change and you want to make sure, like, is this still it? Is there anything I need to add?
You know, I have a process of how to uncover someone’s backstory. And this is to do with the person I was sharing with you – this just happened the other day. So I went in with, you know, this is how I do it and I’m doing it – and it’s bombing. I mean, this doesn’t happen to me – it was like, this isn’t working, what is happening here? I’m starting to get frustrated with the client and I’m like, it’s them – I can’t find the story! I was like, I need five because I have got to figure this out – but, luckily, there was more than one person in the meeting and they raised their hand and said, can I tell you a story I think you’d like. I was like, this is great.
Well, they went from the portfolio manager, which is who I was focused on, to the family – this is the Bolivia story again – that owned this large holding company. It is one of the wealthiest families in Latin America and he told me their story. And I was like, there it is! It was totally my bad that I didn’t really understand where the magic of the story was. It still was with people – I had just been focused on what typically for me is the portfolio manager. And here it was the people behind the portfolio manager. So the portfolio manager was running the portfolio but there were even people behind him – and that was where the magic was. So I can’t even say I recognised my own mistake there – I got saved by the client. But, my goodness, from a red-flag checklist perspective, I was like, write down, if it’s not working with the person, try to go a level up. Normally I keep going a level down. It was an incredible learning for me.
AW: That’s fantastic. It is one of the most insightful answers we have ever had and, as you say, we have ended up where we started, which is a perfect narrative as well. Well, Stacy, it has been absolutely fantastic to have you on the podcast today. I have had an incredible time.
CT: Yes, it was so interesting.
AW: Just thank you so much for joining us.
SH: Oh gosh, well, the feeling is mutual. I have enjoyed every minute. I feel like I have so many questions for you – you know about Summer Notes and so on – and, like I said, the prep for this was so much fun. So if I’m in London, I’m going to call and we are going to have a cup of coffee and we can talk more. It was awesome. Thank you for having me.
AW: Please do. That would be amazing.
CT: We would love that.
I joined Schroders in 2010 as part of the Investment Communications team focusing on UK equities. In 2014, I moved across to the Value Investment team. Prior to joining Schroders I was an analyst at an independent capital markets research firm and hold a Economics and Politics degree.
The views and opinions displayed are those of Nick Kirrage, Andrew Lyddon, Kevin Murphy, Andrew Williams, Andrew Evans, Simon Adler, Juan Torres Rodriguez, Liam Nunn, Vera German, Tom Biddle and Roberta Barr, members of the Schroder Global Value Equity Team (the Value Perspective Team), and other independent commentators where stated.
They do not necessarily represent views expressed or reflected in other Schroders' communications, strategies or funds. The Team has expressed its own views and opinions on this website and these may change.
This article is intended to be for information purposes only and it is not intended as promotional material in any respect. Reliance should not be placed on the views and information on the website when taking individual investment and/or strategic decisions. Nothing in this article should be construed as advice. The sectors/securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy/sell.
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.