Picking Your Own Measuring Stick By: Gabriel PotterMBA, AIFA® 2012.10.31
Have you seen the “Family Meeting” Sprint TV ad for their unlimited data plans? (If not, you can see the full ad here.)

There is a family at a dinner table arguing about how to divvy up their rationed allotment of data from their phone service plan.  Naturally, the dad says “Whoever has fathered the most children should get the most data.”  The mom with long hair, recognizing the father’s self-serving strategy, counters “Let’s just do it by hair.” A beat, and then the bald dad responds, “Body hair?”

The offers get more ridiculous. The daughter with braces suggests that whoever has the most dental work should get the most data.  The father finally suggests blatantly manipulative criteria like “whoever has the least cartilage in their left knee”.

There are at least three ways to look at that advertisement:

First, it’s just funny.   The part that’s especially funny to me is the preamble where the father sets the stage for the negotiation.  He magnanimous notes that the minutes are to apportioned “fairly” and then immediately tries to control the process in an obviously unfair way.

Second, any philosophy majors or Lincoln-Douglas Value debaters in our audience will note that it’s a good demonstration of the Theory of Justice pertaining to the Veil of Ignorance.  In other words, the morality of an issue (in this case, who gets the most data) should be decided when the parties involved (i.e. the family members) know nothing about their particular abilities or positions before deciding what is fair.  Since this family knows precisely what their positions are, they try to apply arbitrary criteria that will most benefit them. 

Third, and probably most relevant to this blog, it reminds me that being able to pick the criteria you’re judged by is a huge advantage.  At our office, we receive tons of information from competing investment managers, each claiming for seemingly valid reasons that their products are the best.  Dutifully, we do read the information in investment manager pitch books, but we designed a separate questionnaire for our own investment manager due diligence reports. 

Why did we bother with a separate questionnaire if the investment managers are so willing to provide their own information?   Investment manager pitch-books are designed to sell the product, and of course every manager wants to convince you that their product is the best.  With so much information available, it’s easy to select a data set that looks good for your product.  We use a separate questionnaire to maintain a stable benchmark to compare various investment managers who, left to their own devices, would “cherry-pick” the most beneficial information to send.

For any institutional client, having a clear and consistent investment manager selection process is key.  Maintaining your own criteria for selection is part of that process.

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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