The Tightrope of Neutrality

We all think we’re neutral. Seeing things objectively.

It's always someone else who takes the extreme view or is biased, impractical or even worse corrupt. Whilst in politics the circus continues, what about in a more objective world like investing?

What is neutrality?

In investment land it usually means: I’m laying out what we know without forcing a conclusion – yet. In a noisy world, that is a virtue, but in reality we get rewarded for acting on good judgment. How do we balance neutrality with action?

The Dimensions of Neutrality

Neutrality has a number of layers, here are four that I think are important:

1) Intellectual neutrality - what do we actually know

• Lay it out without opinion: be explicit about what is data and what is intuition, and what you explicitly do not know and would be useful. Do not use sensational language or framing.

• Intellectual neutrality is the process of earning conviction instead of assuming it

2) Emotional neutrality - can I change my mind

• You’re interested in the right answer not a specific outcome

• Curious, not defensive, when someone challenges your arguments

• Do not take the process personally

3) Institutional neutrality - what does my role require

• An analyst may initially aim for neutrality of presentation before presenting a conclusion: “Here's what happens in scenarios 1,2 and 3.... therefore”

• The best salespeople allow the purchase to be an obvious conclusion from a set of neutrally framed arguments.

• A public broadcaster like the BBC has “due impartiality” as part of its brand and charter – a structured attempt at neutrality of process, not of values.

4) Moral neutrality – “Whose cost am I ignoring?”

• Neutrality is sometimes choosing to abdicate judgment. Often one is only allowed to hold "comfortable" positions within a range of acceptable opinion.

• Long-term investors need to make serious decisions around climate risk, sanctions risk, fiscal prudence. Neutrality here is not professional objectivity.

• Your mandate might be financial, but you still own the choice to ignore clear, material risks.

The BBC - aiming to be neutral?

I am a proud supporter of the BBC a British public broadcaster. The BBC in my opinion generally aims to achieve neutrality in reporting. Something that I believe is the epitome of civilisation. The BBC's balancing act also provides a useful analogy for investors. Its attempts at neutrality are constrained by politics, funding and the 24-hour news cycle; it sometimes misses the mark, either by over-correcting (“both sides-ism”) or by underplaying tail risks. We all face similar pressures: internal politics, business dynamics, capital allocation. We can aim at neutrality although must appreciate it is never in a vacuum.

Using neutrality well

Neutrality is powerful when it buys clarity and protects fairness in the decision process. Neutrality can be prompted by questions that help take any personal attachment to the decision. Some examples in investing:

1. To cut our losses: Would we buy this asset at this price again, or do we own it because we don't want to take the loss?

2. To avoid FOMO investments: Rather than focusing on how others are making money riding expensive investments higher, what are the pros and cons of buying here using our investment process?

3. When things have gone wrong: "What did we learn from this? How can we incorporate that learning in our process?"

In each case, the question is impersonal but speaks to emotional neutrality and a truth-seeking approach.

The Limits of Neutrality

Neutrality fails when it hides fear, is used to defend the status quo, or tries to make two very different things equivalent.

1) In many organisations, raising awkward truths carries career risk.

• Querying the house view can be branded disruptive or “not a team player”.

• Highlighting unseen tail risks can be dismissed as “doom-mongering”.

Silence is covering your behind rather than intellectual neutrality. As a leader, if you or your people are not speaking up, you have failed to create the right environment.

2) When neutrality is described as “whatever sits in the middle of current opinion”, you’re outsourcing your risk appetite to the mood of others. In practice:

• You miss out on the huge investment wins that come when you have identified things to the extreme or outside of the range of opinions being discussed

• Neutrality here becomes an unseen vote for inertia.

3) Performative balance that says: “On the one hand X, on the other hand Y, who’s to say?” without taking a view.

• Not putting probabilities against scenarios so that equal weight is given to a one-in-twenty downside and a base case upside.

• Media coverage (including the BBC at times) puts someone on with an extreme opposite view to “balance” a wall of evidence, creating the impression that the arguments are finely balanced.

Neutral not political

For all decision-makers, including investors, a good decision-making environment is neutral not political. This means, quoting a good colleague David Roseburgh, that challenge is encouraged, honesty expected and respect is non-negotiable.

Neutrality in practice

A simple framework:

1. Is this my decision?

   • If yes, neutrality is a tool, not a shield. Use it to gather facts, then make judgment and act.

   • If no, provide the clearest, fairest analysis you can. Answer the question, "have I laid out what I know clearly and highlighted what I would want to know if I were responsible for that decision".

2. Are the facts unclear – or am I just uncomfortable?

   • If unclear, stay neutral for now; specify what evidence you need and when you’ll revisit.

   • If clear, and the stakes are large, neutrality expires. “We’ll see” is no longer a decision.

3. Who pays for delay?

   • If the cost of waiting is an extra meeting, fine.

   • If the cost is a liquidity crunch, a rating downgrade, or a reputational hit on beneficiaries, you’re not being neutral; you’re running down the clock.

4. Can I separate tone from substance? You can speak calmly and fairly while still saying, “This risk is unacceptable” or “This product is not what it is labelled as”. Tone can be neutral even when the conclusion is not.

So what?

1. Neutrality is only a tool. Start neutral to understand the world; don’t stay neutral when you are responsible to make a decision.

2. Be clear which neutrality you’re using. Is there Intellectual, emotional, institutional or moral neutrality - am I analysing or ducking responsibility.

3. Design environments that are neutral, not political. Reward challenge, expect honesty and make respect non-negotiable so the awkward truth can surface before the portfolio takes a loss.

4. Time-box neutrality and price the cost of delay. Decide what evidence you’re waiting for, when you’ll revisit, and who pays if you keep sitting on the fence.

5. Judge yourself on decisions, not just outcomes. Use neutrality to earn conviction, cut losers, resist FOMO and act when the facts are clear – even if it feels uncomfortable in the room.

I hope you've enjoyed reading the blog as much as I have enjoyed writing it. Next week we have some insights from the recent podcast series I have been co-presenting on CIOs called the CIO Chair (The CIO Chair - Podcast - Apple Podcasts)