That concern is understandable and reasonable. We do need to know when the advice, guidance and opinion we’re being given is influenced by external factors (both positive and negative).
But the vehemence with which a very small subset of potential conflicts is attacked strikes me as both silly and — ultimately — counter-productive. Surely it would be far better to embrace — and encourage — transparency than to engage in narrowly scoped witch hunts that usually end up burning the wrong people?
Imagine that you’re looking for a new coffee machine (I was). You hunt around online, and find a plethora of reviews (I did). Some are glowing, some are scathing. Some are written by people who were lent trial machines, some were written by people who were given machines by manufacturers. Some were written by people who parted with their own hard-earned cash. Some were written by people who walked past a machine in a shop window, and who never really tried the product they’re supposedly reviewing. All of those reviews have a value, but you might reasonably expect to place different weight on the conclusions reached in each case. If you know the back story. “This is the best machine ever” carries an awful lot of weight if written by a serial buyer of coffee machines who spent their own money on this new one. It’s a less convincing as an assertion if written by someone who was given the machine — and a wad of cash — by the manufacturer.
Back in the tech space, there are plenty of ways in which commentators and analysts are influenced by the companies we cover. At a very simple level, we might like – or dislike – the people. We might like – or dislike – the sort of world view the company espouses. We might have family or friends who work at the company, or at one of its competitors. The CEO might be an ex, and either despised or terribly missed. The CIO might be great, genuine, and always quick to buy a round of drinks at conferences or upon chance meetings at Schiphol Airport. The company might always be willing to find a credible spokesperson with something relevant to say, as we race to meet a deadline. They might hold analyst events in nice places, and try hard to make it a pleasant experience as well as an informative one. They might sponsor our website, or our favourite team.
All these things – and more – shape our opinions of the companies we cover. Any one of them might tip coverage in either a positive or a negative direction. Sometimes that shift in emphasis will be conscious (“I hate her, and am going to get even…”), but more often it’ll be pretty subliminal.
And yet we often ignore all these things, and just focus on whether or not the analyst happens to own stock in the company or space they’re writing about. Why? Sure, stock ownership is likely to affect your attitude to a firm. It gives you a clear financial reason to want them to do well. But all the other ‘reasons’ for skewing coverage can have an impact that’s just as significant. It feels like we continue to focus on stock ownership simply because it’s an easy ‘conflict’ to track, to ban, and to get worked up about. But doing that doesn’t solve the broader issue of bias. Which is why we need some trust.
These days, a lot of analysts are becoming personalities. Even inside big firms that work hard to project a corporate persona, their rock star analysts are visible, individualistic, and important. Boutique analyst firms, individuals, and informed bloggers also carry a lot of power. And much of that power rests squarely upon their reputation. That reputation is hard-won, and they’re likely to want to protect it. With reputation comes trust, and an expectation from readers/followers/customers of a certain type of behaviour.
How we deal with frequent and inevitable conflicts of interest – real or perceived – is a key aspect of that behaviour, a vital factor in establishing our trustworthiness, and the foundation upon which a reputation stands and grows.
We should declare our relevant conflicts of interest; always, fully, openly, frankly. We should have the common sense and the decency to do this without archaic and – frankly – silly notions that things like stock ownership are simply barred.
Those who engage with us, who read us, who pay us… they will very quickly learn whether or not to trust us. In an environment where social media is fast, pervasive, and rich with deep knowledge, it doesn’t take long to find out who other people we trust place their trust in, and to use that to inform our own evolving measures of trustworthiness. And anyone can read a piece written about company X, with a clear statement that stocks were owned, beers were bought, brothers were hired, etc… and make up their own mind.
If trusted and trustworthy, we can speak with and retain authority… even when conflicted. It happens every day.
Or we could just run around, yelling ‘Witch!!!,’ and keep those bonfires a-burning.
And, to be explicit, neither I nor my family (to my knowledge) own stock in any of the companies or industries I cover.
Image of burning witches, apparently from the 14th century, shared on Wikipedia.