The value of dissent with investment committees - You want troublemakers; not devil's advocates

 

I recently wrote a post, "Does your investment committee have a Devil's Advocate?". A thoughtful comment came from Matt Dearth who informed me that there is some very interesting research on the impact of dissent in decision-making. 

This research finds that the worst thing to say is "Let me play devil's advocate here..." Phony dissent is no dissent. Others understand the devil's advocate is acting and thus does not take the dissent serious. It actually helps the majority who develop more arguments for their case but do not think about true alternatives. Better decision-making only comes when there are true divergent opinions. Diversity in the form of alternative ways of thinking leads to better decisions overall.

This topic has been extensively reviewed by Charlan Nemeth, a leading researcher in this area, in her book "In Defense of Troublemakers". This is not a new book, but it provides clearly written arguments with all of the supporting research on why you want to have that troublemaker who has an alternative view sitting at the table.

Nemeth uses the movie "Twelve Angry Men" as a backdrop for her discussion of dissent. The one hold-out to the consensus drives the group to think harder about their views and make a better decision. The resulting answer does not have to be different than before and the dissenter does not have to be right. The act of dissenting helps develop better alternatives and thinking. 

Quick convergence to majority thinking may lead to failure. The idea that you want to have a culture where everyone is on the same page is can be troubling. Dissent in a highly uncertain environment is critical. This applies to any asset management committee work, but it also applies to the development of models. Systematic models will be better if there is dissent among the researchers.  Forget the devil's advocate and get people to voice alternative opinions. 

Postscript -

This is the reason why I write this blog; I get new ideas or find out about research I did not know about.