The Networked Age: It’s good to be an expert, but it’s better to be ‘an expert like me’

Like many professional experts, fund managers face a constant battle to convince people that they have what it takes to outperform the market. In The Networked Age, direct communication through digital channels is a powerful tool to build and maintain investor base and it’s one that fund manager Neil Woodford has been deploying.

As The FT’s Lex column writes:

“Speculation on whether Neil Woodward, a star fund manager, is any good has become a national sport in the UK… His flagship fund has returned 3.24 per cent over three years compared with 22.55 per cent for the FTSE All Share Index…

“Mr Woodward is undeterred. In a spirit of confession, he has taken to posting selfie-style videos expressing remorse to fans…”

But remorse is not the only message that these videos send out. The confessional, candid videos, which often show Mr Woodward dressed in jeans and a jumper, in a variety of casual settings and poses and talking plainly, also send out another clear message: “I am like you, only richer.”

If you are trying to influence people to trust your judgement, then signalling that you have shared values can be as powerful as demonstrating a track record of success.

A research paper published earlier this year by Joseph Marks, Eloise Copland, Eleanor Loh and Dr Tali Sharot of UCL and Cass Sunstein of Harvard indicates that people attributed greater skill to those whose political views they shared. Or, to quote the abstract:

“We test whether the tendency to prefer knowledge from the politically like-minded generalizes to domains that have nothing to do with politics, even when evidence indicates that person is less skilled in that domain than someone with dissimilar political views.

“Participants had multiple opportunities to learn about others’ (1) political opinions and (2) ability to categorize geometric shapes. They then decided to whom to turn for advice when solving an incentivized shape categorization task.

“We find that participants falsely concluded that politically like-minded others were better at categorizing shapes and thus chose to hear from them.

“Participants were also more influenced by politically like-minded others, even when they had good reason not to be. The results demonstrate that knowing about others’ political views interferes with the ability to learn about their competency in unrelated tasks, leading to suboptimal information-seeking decisions and errors in judgement.”

So if you want your investors to stick with you, even when the numbers suggest they shouldn’t, you need to walk and talk like them. We give the benefit of the doubt to experts like ourselves.