How to Have People Benefit from New Ideas
Writtten by: Simon Hasto | Honest Conversation Copywriting; Säter, Sweden
New ideas jolt people. In fact, they scare people. Remember that the next time you – as a more creative business person or employee – go to express your new “thing” (whatever it may be).
A look in the mirror
Don’t be let down, discouraged or upset when people react in a less than ecstatic way. Instead, recall your own reaction when you – perhaps on a less-than-stellar day – were exposed to this new hot shot person… Maybe they were younger than you, had that zest for life you clearly lacked that day, and bristled with energy. And, to make matters worse: maybe you felt the idea was incredible, revolutionary.
A ninja in the office, stealing everything
In this situation, maybe you felt small, old, or just vaguely threatened. Like someone was stealthily, silently taking your place. They showed no explicit signs of it, and they didn’t seem to threaten anyone else, which only made you feel more threatened. At that moment, what did you do…? Perhaps your defense-mechanisms were triggered and you lashed out – explicitly or implicitly, outward or inward, loudly or silently – which left the real issue buried and forgotten about.
We have a hard time with change. We all do. Not to say all change is indefinitely positive, but that’s for another time (we can all agree change must happen; for good things to happen, and change will happen; regardless of whether we like it).
Step one – start the balancing act
So, the next time you bring this amazing new idea to your employees/whomever, what might you do…? Begin by expecting nothing. In fact, however brilliant, Midas touch-ish or energetic you feel at that moment, consciously bring yourself to the level of those around you. Only then can you get their attention. Why…? Because you showed empathy. At that point, will your thing have an impact? They let down their guard because no one is coming at them – on a sluggish, tired, slow day – like a rushing train, but instead, expresses at their energy level.
Step two – keep balancing
When you try this, just observe what happens. That’s the second step. You’ve gone in, “normal energy” – normal being that of those around you; like a DJ calibrating to her audience – and now you just keep calibrating (like a DJ – the crowd always changes).
Step three – make it about them
Of course, you begin interacting about your new idea. What does this do…? Brings people – makes them feel part of something. Know what…? They are. Nothing contrived about this – leadership at its finest.
So, to recap, the three steps are:
- Go in and express your idea with their level of energy
- Continually “calibrate” to how they feel
- Ask them what they think; naturally starting an interaction about this thing you introduced.
Try it, see what happens.
- Observe your own reaction to new ideas expressed by others.
- Should you be negative toward the new, try a new program of being positive.
- Monitor reactions to your new positive attitude.
- See if additional opportunities presented as you become more positive.
- Test expressing a new idea to a peer to see how it is received.
- Brace yourself for negative feedback regarding your new ideas.
- Use the negative comments as motivating factors to move forward.
- Document results from ignoring the negative.
- Incorporate valid feedback into your new programs.
- Celebrate Success!
Sizing up Strategic Beta
Interest in strategic beta ETFs is rising. A few simple guidelines can help investors pick from among the often-bewildering number of options.
The number of strategic beta ETFs has grown at 20% a year, consistently in good markets and bad, since the year 2000. With good reason: Strategic beta ETFs offer a more thoughtful passive option than cap-weighted indexes—and they can do so with a more transparent process and lower fees than actively managed funds.
Bright future, dim past
All well and good, but how should investors assess any particular strategic beta ETF? Close to 40% of these funds have been in operation for less than three years. This lack of an established track record can make it hard to validate their claims. ETF sponsors may try to make up for that shortcoming with back testing, running simulations of holdings they might have had against actual past market performance, but that has its limitations:
Back testing doesn’t always account for fees, liquidity or transaction costs.
Back tests are “selection biased”—that is, back testers have a tendency (conscious or not) to engineer positive outcomes. Live outcomes are therefore likely to be inferior.
Too great a focus on recent history can lead to “driving in the rearview mirror.” While an index or ETF may solve the problems of yesterday well, an investor’s focus should instead be on solving the potential problems of tomorrow.
Three steps to an informed judgment
Because the indexes tracked by strategic beta ETFs are by design somewhat exotic, effective assessment of them calls for some digging:
- Investors first have to understand who the index designer and asset manager are (they may not be the same people). They should have a clearly expressed investment philosophy and the expertise to enact it in practice.
- The properties of the portfolio should reflect the investment philosophy. Not only does the transparency of ETFs allows examination of the holdings to ensure that this is the case, it also measures such as active share relative to a cap-weighted benchmark or turnover can indicate whether an ETF is performing as designed.
- Performance can also be used to confirm that an index is doing its job. While short-term results shouldn’t be given too much sway, the index designer should be able to explain when and why an index will perform and when it might not.
One key aspect of performance shared with traditional passive management is tracking error. Like earlier cap-weighted index tracking funds, strategic beta ETFs should have minimal tracking error to their own indexes. Beware, though, the tracking error to the benchmark can be large and dynamic, it is by this differentiation that strategic beta adds value.
Made to measure
Strategic beta does not defy analysis, despite its novelty. Indeed, it has a lasting advantage over standard active manager due diligence. Strategic beta, after all, is rules-based. What an investor sees in straightforward, well thought-out index composition rules is what the investor will get. In that sense, strategic beta is relatively immune to the personnel changes, style drift and index hugging that can challenge actively managed mutual funds.
Learn more about ETF due diligence here.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purpose. Any examples used are generic, hypothetical and for illustration purposes only. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation.
Opinions and statements of market trends that are based on current market conditions constitute our judgment and are subject to change without notice. These views described may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. Past performance is no guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. ETF shares are bought and sold throughout the day on an exchange at market price (not NAV) through a brokerage account, and are not individually redeemed from the fund. Shares may only be redeemed directly from a fund by Authorized Participants, in very large creation/redemption units. For all products, brokerage commissions will reduce returns.
J.P. Morgan Asset Management is the marketing name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. J.P. Morgan Exchange-Traded Funds are distributed by SEI Investments Distribution Co, One Freedom Valley Dr., Oaks, PA 19456, which is not affiliated with JPMorgan Chase & Co. or any of its affiliates.
For additional disclosure
For a longer discussion, please see our recent publication Strategic Beta’s due diligence dilemma (J.P. Morgan, April 2017).
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