I received a couple questions on my last post from a commenter, and I felt they had enough heft to them that they could form the basis for a follow-up post. Note that I’ve paraphrased a bit for brevity. Since all this leans heavily on Ben and Rusty’s work over at Epsilon Theory, I want to make sure to give them a shout-out up front.
But with all that said, let’s jump in!
Where in this same environment do you place Narrative?
It’s all Narrative. No, seriously. There are multiple layers of narrative abstraction operating in that last post.
The post itself is Narrative–an allegory likening a period of medieval history to a challenging market environment for many asset management businesses.
Active Management! as referenced in the post is also an abstraction. There’s wide dispersion of performance across fundamental active managers–particularly for what we call “hedge funds.” Some funds were up well over 20% in 2018. Some were down more than 30%. Likewise, not every discretionary active shop is at death’s door. Active Management! carries negative connotations around fees and performance. But I could point to plenty of funds in the real world that bear little resemblance to Active Management! as debated in the media and with clients.
Risk Parity! Algos! and Indexers! as commonly referenced by struggling investment managers are similar abstractions of real things.
Finally, the film The Seventh Seal is an abstraction of a real historical period.
How these abstractions function in a semiotic sense is perhaps best explained in this Epsilon Theory post. To quote Rusty directly: “[m]ost symbols we encounter are powerful shorthands, and their meaning differs based on our unique and shared experiences.”
Active Management! has a different symbolic meaning to me as an allocator than it does to a hedge fund manager who returned 25% in 2018 and has been closed to new capital for a couple years on the back of an enviable track record. However, that manager and I both have a shared understanding of what active discretionary management means in a literal sense.
This is all just a long winded way of illustrating that Narrative is everywhere. You can no more escape Narrative as a human being than you can escape oxygen. At best you can be aware of Narrative, and how we all use narrative abstraction and symbolic representation to model the world around us.
Which brings me to the next question.
What do you think of the idea that as you build a company/organization/following you inevitably become a powerful missionary for that tribe?
I do believe it’s inevitable that anyone who builds any kind of substantial following or customer base will become a missionary to his tribe. Particularly if he’s someone who uses mass communication tools to reach an audience (for example by blogging). As I explored above, effective mass communication more or less demands a certain level of abstraction. Otherwise it’s difficult to effectively convey shared meaning across a wide audience.
In that sense, we’re all selling something.
Though it may be dangerous to start throwing around terms like “good missionary” and “evil missionary” in this post, here’s how I think about distinguishing between them.
A “good missionary” acts and communicates in good faith. To lean on Rusty’s framing from the ET note linked above, the good missionary treats others as principals. The good missionary respects our autonomy of mind.
An “evil missionary” is an instrumentalist. The evil missionary neither acts nor communicates in good faith. Rather, the evil missionary weaponizes Narrative to transform others into agents. The evil missionary does not respect our autonomy of mind.
The most important thing is for us to think critically about the information we consume. Look for narrative abstractions. Look for symbols. Be mindful of how they’re being used.
This stuff is everywhere. Ultimately, we’re all selling something.