JPM, Feynman and Investigations
A superb column over the weekend by the personal investing columnist in the Wall Street Journal, Jason Zweig, struck a chord or two with us because of what it said about human knowledge and the occasional lack thereof.
Zweig was advising investors not to look to J.P.Morgan Chase’s CEO Jamie Dimon for guidance about sound investing practices, but the late Nobel physics laureate Richard Feynman: "You must not fool yourself—and you are the easiest person to fool."

For investors, says Zweig, “the bigger the commitment, the more certain they become that they must have been right to make it—and the harder it becomes to let go.” It’s all the more difficult to let go of ideas blessed by experts. Risk valuation used by banks has blown plenty of banks up, but bankers continue put their faith in it. Investors in turn put their faith in banks using this flawed technology.
Zweig advises that if a great investment such as J.P. Morgan Chase (prior to Friday) has paid handsomely, you should seek opinions of people who think you are wrong just to make sure you aren’t. If you love a stock, analyze the arguments of short sellers who hate it.
How does this translate into the world of fact finding? Take the brilliant candidate up for an executive posting: he’s never had a single black mark on his resume, every one of his references loves him, and he’s had great press for the past 10 years. He’s the J.P. Morgan of executive candidates, and he’s the perfect person to have examined by a fact investigator who will look for the following:
- Litigation that hasn’t made the news;
- Ownership of secret companies previously unknown, which could reveal business activity and litigation that also flew under the radar beforehand;
- People this person worked with but were left off his resume because they dislike or distrust him.
Or take the requirement for an asset search either to enforce a judgment or to track down money held by a spouse in the midst of a divorce proceeding. Would we need to do the asset search in Switzerland or the Caribbean, or even across state lines? Clients often say no, but really have no way of knowing where the assets may be.
The only way to find out is to start with all the information we can get from the client (all company names, phone numbers personal and commercial, addresses just for starters). We then take an open-minded approach and follow the leads.
The thing that often throws even experienced investigators off the trail is finding something they don’t expect to see and then figuring they must be wrong. “Our guy has never left New Jersey, so this can’t be his huge house in Pennsylvania that’s owned by a Cayman Islands company” is about the worst thing an investigator could conclude.
Zweig’s kicker is worth remembering for investors and investigators alike: “The smarter you are, the more easily you can fool yourself.”
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Context matters. We know this instinctively, and yet somehow we forget. We still tend to assume that facts live in their own separate bubbles. So when we research and analyze, we warily keep our findings in separate categories—information on person A separate from information on person B, which are both separate from facts uncovered about company C. We go to great lengths to avoid any cross-contamination because that may be messy or unwieldy and keeping things tidy is so satisfying. 
We have written extensively about the importance of good interview skills, 
If you’ve ever had to hire people, you know what a tough job that is. You know that you are making a decision that will have a profound impact on a number of people—not only on yourself and whoever you choose, but also on everyone in your company or organization that will have to collaborate with that individual. It can be a daunting experience. And while it’s a great feeling when you find someone who turns out to be a good fit and a real asset to your organization, it feels just awful to realize that you’ve hired someone who is a big disappointment. And a bad fit can be bad for business, because someone who doesn’t mesh with your corporate culture can keep your company from moving forward.

You have an opening in your company. You get a slew of resumes for the position, you interview a number of candidates, and then you finally narrow it down to two people: One has experience that’s right on the mark, but during the interview you had glimpses of an attitude that might not mesh with your corporate culture. The other person is lacking a number of important skills, but it seems that she makes up for her shortcomings with an energy and attitude you admire. She seems like a real go-getter who will be a good fit among your staff. So what do you do?














