Money, Meaning, and Mindsets: Radical Reform for the Investment Industry

For those of you worried about me, I was not kidnapped or worse.  The explanation for my absence is simpler:  procrastinating.  (It got so bad, I was exercising instead of writing.)  In my defense, I had a good excuse:  working on our new book.  But that was pretty much done in February.  Since then, I’ve just been milking it.  Oh yes, and working with clients.  There’s that.

Finally, partner Liz wrote me for a third time:  are you ever gonna put out another LOL?

Ok. Back to work.

We originally titled our book, “An Investment Vision: Asset Management as a Noble Calling, something something, bla bla.”  Immediately we received feedback:  “that’s boring.”  After getting defensive, going under the line, and cursing our reviewers, we reluctantly agreed.  They were right.  (Don’t you hate feedback?  Especially when it’s accurate?)

Anyway, Keith and I revisited the title over beverages on a long flight to Europe and came up with the title you see above.  And our reviewers liked it.  (“See, Jim, feedback is good…”)

There are three big ideas in our new book.  (Depending on the day of the week, they change…)  Today, I’ll summarize them as:

  1. Passion without Purpose
  2. Tyranny of the ORANGE mindset (explained below)
  3. Emergence of new mindsets

Passion without Purpose

We start the book by establishing common ground:  everyone wants to be happy.  Aristotle called happiness the “goal of goals.”  (Name-drop Aristotle and everyone must fall in line, right?)  So, how can the investment industry help with that mission?  How does the industry help the average person attain financial well-being so that they have a better chance of achieving happiness?  As obvious as it seems—that the industry must address the needs of ordinary people—many investment professionals seem unaware of this basic point.  We use a quote from a client engagement to reinforce this message:

“The happiness or otherwise of clients is not really relevant.”

This quote is juxtaposed to another one from the same engagement:

“I believe that helping people putting their savings to work and achieving good returns will enable them to live better, happier lives.”

In a nutshell, the difference between these quotes sums up a major problem with the industry.  This difference was identified and written about in a paper by Suzanne Duncan and the CFA Institute called Discovering Phi.  They call the problem “Passion without Purpose.”  There’s no question that most investment professionals are passionate about their work.  They love studying companies and markets and playing a high stakes game that unleashes their competitive juices.  That’s passion.  But only 17% of these professionals claim that they are also motivated by purpose.  So, their passion for investing is a bit like my passion for crossword puzzles:  I love doing them, but it doesn’t serve any purpose.  I just think it’s fun.  (And if someone paid me a lot of money to do them, I would have found my career years ago.)  But there’s no purpose involved in my solving the daily crossword.  For many investment professionals, it’s similar.  They love the challenge and the work, and they do get paid a lot of money.  But they don’t associate their efforts with a greater cause.  They don’t see themselves as part of a bigger enterprise—the financial sector—that is contributing to the well-being of people on the planet.  How do we know this?  Well, Duncan’s work supports it with thorough research.  But more simply, FCG knows it because we routinely ask investment professionals, “Why do you do this work?”  We rarely hear a statement of WHY they do the work.  Instead we hear statements of WHAT they do:  “We invest to beat our benchmark on a risk-adjusted basis.”  Ok, fine. But WHY do you do that?  When we push them on this WHY question, we often hear, “We have to perform in the top quartile in order to attract AUM and grow.”  Sometimes the answer is as direct as, “If we don’t, we’ll lose our jobs.”

With this last answer, let’s segue to one of our models that we use to explain mindsets in the industry:  Abraham Maslow’s hierarchy of needs.  Keeping it simple, Maslow said we have two kinds of needs:

  1. Deficiency: survival, security, belonging/relationships, mastery/self-esteem
  2. Growth: service, common good, purpose, making a difference

The former are the ones that we all must satisfy to alleviate anxiety.  Without these necessities, it’s harder to be happy.  Once we’ve satisfied these basic needs, then we more readily look to our growth needs:  service, purpose, making a difference, giving back.  The deficiency needs stave off anxiety, the growth needs give us joy.

Back to our discussion of purpose, the majority of investment professionals operate from the deficiency needs rather than the growth needs.  They are anchored in these fear-based needs—I don’t have enough money, power, fame, etc.—rather than aspiring to the growth needs:  how can I be of service? How can I make a positive difference?  And so they don’t connect the dots from the daily work of investing to the larger question of:  how does the industry serve the world at large?  The perplexing part is that the investment industry does have a legitimate and important role in doing just that: helping the average person achieve happiness through financial security.  And this is a BIG need.

A recent survey showed that 76% of American adults worry about financial issues.  My guess: it’s even higher.

And connecting purpose to motivation–the message in Duncan’s white paper–reveals that purpose is indeed a strong motivator for knowledge workers.  Maslow, Dan Pink, Frederick Herzberg and others support this same conclusion.  Maslow wrote:

The self only finds its actualization in giving itself to some higher goal outside oneself, in altruism and spirituality.

In a healthy adult, who has largely met his/her deficiency needs, it’s natural to aspire to the growth needs, i.e. a higher goal outside of oneself.  The investment industry displays a kind of stunted growth in its selfish preoccupation with the lower needs.  (Read: Ego)  So, why is that?

Tyranny of the ORANGE mindset

The mindset of the investment world explains a lot of their “selfish” behavior.  FCG hopes that writing about this issue—bringing awareness to it—will help solve it.  (Sunlight is a strong disinfectant.) Awareness is an important first step in solving any problem.  In our view, the investment world is made up of hard working, smart, and very decent people.  Bernie Madoff’s are an exception.  If the average investment professional better understands the common investment mindset—Grave’s called it ORANGE—there’s a good chance their behavior will change.  At least that’s the plan.

So, what is ORANGE?  This term comes from Spiral Dynamics, the brain child of Claire Graves.[1]  He studied the evolution of cultures and mindsets and discovered that they change over time in a predictable way, based on survival needs.  The chart below is from the book and shows these mindsets:



Stages of cultural evolution Key features Theme Key Values Investment examples Maslow




Integral Self:  personal freedom to all without harm to others or the physical environment.  Limit the excesses of self-interest.  Focus on self-expression and systemic approaches. Live life fully & responsibly, with little fear, and with appreciation for all “previous” mindsets Purpose



Common Good

(High SQ, i.e. Spiritual Intelligence)

Just emerging now. The firm of the future “Growth Needs”

Higher purpose


Greater Good

Relatively little fear

Communalist/ clan


Relational Self:  collaborative.  Share resources among all.  Reach decisions through consensus.  Liberate humans from greed and dogma. Seek peace within, and harmony in community Trust and respect




(High EQ)

Bridgeway, Boston Common, Polen, & ESG firms Transformation, moving past prior levels, seeing past “me” to “we”
Rationalist/ ORANGE Rational Self:  search for success and enhance living through strategy and technology.  Seek independence and autonomy.  Play to win and enjoy competition. Act in your own self interest by playing the game to win Success




(High IQ)

Hedge funds, many traditional active managers, like Disciplined Growth Investors Mastery, autonomy


Guardian Self:  bring order and stability to all things and control impulsivity through a higher authority.  Sacrifice now for later rewards.  Laws & discipline builds character Life has meaning, direction & purpose with pre-determined outcomes Organized





Vanguard, traditional bank trust departments Connection, belonging, loyalty

Our view is that the investment industry has been largely driven by the ORANGE mindset.  FCG does a lot of personality work in the industry, and we can support this claim.  But most readers probably agree just looking at the chart that ORANGE fits for many investment organizations.  ORANGE has a number of strengths:  drive, smarts, continuous improvement.  All the typical competitive, type A traits.  If you want something done well and fast, give it to ORANGE.  They are full-speed-ahead types.  The downside of ORANGE is that they are individualistic, success-oriented, and more focused on tasks than people. (Fortunately, one of the authors, Michael Falk, CFA, started his career as a self-declared ORANGE—he’s evolved beyond that in my view–so we had an “expert” on our writing team.)

For ORANGE, clients can become a conceptual goal that leads to success rather than real people with real needs.  Hence, abstract concepts like benchmarks, efficient markets, and beta are more interesting than helping Mr. and Mrs. Smith.  The book provides many statistics to support the claim that clients are NOT happy with their investment experience.  (For example, the Edelman Trust Barometer, which places asset managers near the bottom.)  Spiral Dynamics helps explain this phenomenon: the fox has been in charge of the hen house, with predictable results.

Emergence of new mindsets

If you are reading this and thinking, “Wait a minute, that’s not true about me at all!”  Then you are probably more GREEN than ORANGE.  GREEN is more people-focused than task-oriented.  GREEN is more communal and values relationships.  And, evidence suggests that GREEN is a growing factor in the investment landscape.  Our book describes this evolution in detail, with both aging baby boomers and millennials playing a large part.  The growth in socially responsible investing is a tangible result of GREEN’s influence.  GREEN is more about social welfare, personalized outcomes, and client service. ORANGE is more about capital allocation, scalability, and alpha.  Duncan estimates that 60% of the resources in the asset management business go to the latter.  FCG believes that there is a place for ORANGE/active management, but smaller than the current level.  Only the really good, value-add (after fees!) active managers should survive.  The bulk of the investment industry should be aimed at helping people achieve financial well-being.  And as Charley Ellis points out in the forward to our book, financial planning by competent financial advisors is way more helpful to average citizens than incremental alpha. (Charley’s new book, The Index Revolution, argues that basically all investors should move to index funds.)

Still another mindset emerging out of GREEN is what Graves called the YELLOW mindset.  This mindset aligns with Maslow’s growth needs, that is, the top of the hierarchy.  YELLOW has two significant differences from any prior mindsets:

  1. YELLOW has largely met all the deficiency needs, and is mostly driven by the growth needs. In short, YELLOW is what we call “higher self” motivated vs. Ego-driven.
  2. YELLOW is the first mindset to see that the other mindsets each have their own legitimacy. YELLOW sees that BLUE, ORANGE, and GREEN each have a valuable function. The other mindsets have the view, “We are superior; they are inferior.”  A typical Ego view.

We spend a significant amount of space in the book describing YELLOW and how this mindset is best suited for the complexities of the New Era in investing.  Fortunately, there are some very good materials emerging about how to develop YELLOW leaders.  One is a book called Spiritual Intelligence by Cindy Wigglesworth.  Another is A New Psychology of Human Well-Being by Richard Barrett.  And still another is The Integral Vision by Ken Wilber.  All these books embrace Graves’ theory and describe a plan for evolving into YELLOW leadership.  The good news is that BLUE, ORANGE and GREEN can all evolve into YELLOW.  It involves moving from Ego to Higher Self.  Simple, but not easy.

Our book will be out soon.  We hope it has a powerful and positive impact on the investment world. (Look for it on Amazon in May)  The big idea in the book could be summarized as follows:

The industry should move from doing well to “doing well and doing good.”

And our answer is by embracing meaning and new mindsets.

Happy to be back and writing,


P.S.  One of the big contributors to our book was Fred Martin, CEO of Disciplined Growth Investors.  Fred cares so deeply about this topic that he is hosting a conference devoted exclusively to client/advisor relationships.  Speakers include Charley Ellis, Suzanne Duncan.  For more go to the website:

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[1] And subsequently supported by a lot of very bright thinkers.  NOTE:  ORANGE is chosen randomly, with no meaning assigned to the color.


Meaning and Money: Finding Your White-Hot “Why”

Dan Pink tells us that purpose is one of the three big motivators for knowledge workers, along with autonomy and mastery.  He writes:

“Autonomous people working toward mastery perform at very high levels.  [As we’ll see, this characterizes many investment professionals.]  But those who do so in the service of some greater objective can achieve even more.  The most deeply motivated people—not to mention those who are most productive and satisfied—hitch their desires to a cause larger than themselves.”  (Drive, pg. 131)

So, what is your firm’s purpose?  And does it speak to a cause larger than yourself?  Stop and think about that for a second before reading on.  What is the mission of your firm?  For many investment firms, it sounds like this:

“The mission of our firm is to provide superior investment performance for our clients.”

Some firms add in “service” as well because they have read—or intuitively know–the Greenwich research that asserts performance and service are about equally weighted in the clients’ mind.  Ok, so if that is roughly the mission statement of your firm, does it make your socks roll up and down?  Does it make you feel like you’ve hitched your desire to a cause larger than yourself?

Probably not.  FCG has the unique opportunity each week to talk confidentially with investment professionals from around the globe and we’ve asked many of them directly:  does the purpose statement of your firm motivate you?  Many cannot remember the purpose statement of their firm which pretty well answers the question.  Others who do remember it are luke-warm at best.

So, what DOES motivate investment professionals, if not some larger purpose?  FCG has statistics on this question.  When we do culture surveys with investment firms, we ask a question developed by McKinsey that examines “meaning in the workplace.”  There are five possible motivators, and we ask survey participants to pick two.  The aggregate results of 6 firms are given below:

Interestingly, and not surprising, the biggest motivators for investment professionals is the nature of the work.  And that completely aligns with FCG’s experience in the industry. Investment pros do find their work fascinating.  Some love collecting data, others love analyzing it, others love making decisions, still others love the macro view of thinking about the global markets.  It is rare to find an investment person who is so-so about his career.  Even more interesting, only 15% of respondents indicate that money is the main motivator.  FCG knows this from our work in compensation, but much of the industry still embraces the myth:  It’s all about the money.  It’s not.  Clients and colleagues each garner about 20% of the vote.  In the world at large, McKinsey discovered that each of these factors is roughly equal weighted.  So, if you had a large enough sample from a variety of industries, we’d see about 20% for each factor.

And now for the punchline, “larger” purpose only gets 8% of the vote.  And none of the firms in this sample voted it as the top choice.  (Note: each of the other factors was chosen as the top factor by at least one of the sample firms.  But not “purpose.”)

Summing up what we have covered so far:  Investment professionals love the nature of their work, so they have lots of passion for their daily tasks.  But they are generally NOT motivated by the firm’s purpose, that is, a larger cause in the world.  (Personally, I love doing crossword puzzles but my doing them is not serving a larger purpose!  Now, if someone would PAY me to do crossword puzzles…J)

So, I found it interesting last week that leaders at a global summit spoke often and passionately about “larger purposes.”  One leader called them “white-hot why’s.”  In other words, what is the burning reason behind doing what you do?  What is the reason that goes well beyond just the money?  (Note: I realize that this discussion is somewhat age-dependent.  Younger workers are appropriately motivated by money to pay off school loans, buy a nice house, pay the mortgage, etc.  But seasoned workers in the investment industry are well paid and can broaden their view of “purpose” beyond money.)  But even younger workers can have a white-hot why.  Jim Collins spoke at the conference and told about his two-year stint at West Point.  He said the feeling of purpose was palpable among the young cadets.  They were wearing the “cloth of their country” and were willing to fight and die for it.  And they clearly weren’t in it for the money!  Many millennials are also expressing an interest in meaningful work versus simply earning a wage.

Another speaker was Ed Catmull (CEO of Pixar and author of Creativity, Inc.)  Clearly, Catmull loves his work and has since his high school days.  But there is more to it for him than simply creating 15 winning films in a row, the latest of which is Inside Out.  Ed explained how his movies have a purpose beyond financial success.  They are designed to teach important messages to the public.  (Inside Out had a profound effect on my 12 year old daughter, so thumbs up Mr. Catmull!)  As an aside, the creative process that Catmull described at Pixar was completely relevant to the investment process:  bringing out the best thinking of each team member.  I highly recommend the book for investment teams that collaborate, which should mean ALL investment teams! J

So, back to the “white-hot why.”  What is yours?  And does working at your firm align with it?  The creativity guru, Csikszentmihalyi (famous for describing the “flow” state), said this about purpose:

“One cannot lead a life that is truly excellent without feeling that one belongs to something greater and more permanent than oneself.”

One way to frame this discussion of purpose is Maslow’s hierarchy.  It is appropriate to focus on the “lower needs” first:  security/safety, community/belonging, and competency/mastery.  Once accomplished, there is a natural desire to move up to purpose and values.  Investment leaders have presumably achieved the lower needs, so they are in a position to lead purposeful and values-driven lives.  And this should translate into purposeful and values-driven firms.  Note:  the ego needs diminish as one evolves up the hierarchy.  Evolved leaders should care more about clients and employees than about themselves.

Before I go any further, let me practice an FCG principle:  walking our talk.  In this case, what is MY white-hot why?  In what way do I belong to something greater and more permanent than myself?  A fair question.  Here is my white-hot why:

Teaching and promoting conscious leadership.
Which leads naturally to…

  1. a better investment industry. One that serves the client and fulfills an honorable role of stewardship through ethical practices.  Raising the level of public trust from the lowest of all industries (Edelman data) to the highest.
  2. healthier work environments where investment pros can thrive. Challenging leaders to go for the “triple win”: clients, staff, and shareholders…in that order.  Creating purposeful and values-driven workplaces. (There are still way too many fear-driven cultures where “everyone is scared of the boss, so do what he says.”)
  3. More personal development for staff. Mentoring younger staff members, leading by example, and teaching that traditional spiritual values like integrity, responsibility, compassion and forgiveness are better motivators than ego and fear.  Helping workers feel connected to one another and the firm’s mission rather than self-seeking (ego), i.e. “every man for himself.”  (Or woman for herself.)

Those are my white-hot whys and they truly motivate me to give my best efforts to clients.  For me, doing the above feels like a spiritual calling.

Interestingly, Charles Ellis in his most recent FAJ piece, “In Defense of Active Investing”, also talks of the spiritual implications of doing investments the right way:

“The best long-term benefit of active investing—and all its many benefits—is not just economic but also spiritual.” (FAJ, July/august, 2015, pg. 6) I am happy to see one of the recognized pundits in our industry acknowledge that investments plays an important part in spiritual evolution.  I know many investment leaders of deep faith, and it disturbs them greatly to see our industry so far from its noble calling.

So, what are examples from our industry of organizations led by strong purpose?  They do exist.  For example, FCG has had the privilege of working with Texas Teachers in Austin.  If you ask their staff why they chose to work at TRS instead of a higher paying job on Wall Street, they will tell you without flinching, “I want to serve the teachers of this state…who teach our children.”  That is purpose.  Or, if you ask workers at TIFF[1], they will point to their mission statement: TIFF exists to provide investment excellence on behalf of endowed non-profits.  And then they point to the rest of the credo, which is prominently displayed on the office walls.  When FCG asks TIFF staff members, “why do you work here?” they frequently state their passion for the mission of the firm.

Still another moving example of mission was Marc Mayer’s [2] description of the analysts’ role in the capitalist system, which I had the pleasure of listening to him deliver to an audience of analysts.  He used the classic “4 why’s” method:

Why does Sanford Bernstein exist?

To provide superior global research


To know more and make better decisions


To create better long term performance


To provide peace of mind for our clients

After digging into the deep “why’s” of Bernstein’s mission, Mayer went on to compare the investment process to his 100 year old watch, which he removed and showed the audience: precision and quality at its core.  Then he described the firm’s legendary researcher—Lew Sanders—as the best research analyst ever.  And he cited Greenwich data: #1 in 8 different research categories, with a performance record over 30 years of 415 basis points of outperformance on average each year.  68% of the largest pension plans were Bernstein’s clients.  And finally, Mayer ended with this quote:

“I draw strength from this record. You are part of the greatest research organization in the history of capital markets.”

I have never heard a more motivating description of the research role before or since.  (The audience maintained quiet reserve.  They were, after all, research analysts.)  But clearly, Mayer knew his white-hot why.

On a purely practical level, it is important for individuals and firms to find their deep sense of purpose. Dr. Edward Hallowell, Harvard Medical Staff, has researched the importance of purpose at work, using these questions:

  • Do you feel a sense of mission at work?
  • Do you feel a purpose larger than just taking home a paycheck?
  • Would you continue with your work even if you were independently wealth?

People who could answer strongly “yes” to these questions, were described by Hallowell as being more connected to their work.  And the benefits of connection were profound:

“The protective value of connection showed, under statistical multivariate analysis, to be present at all ages…statistical advantage of living longer was enjoyed by the highly connected group.”

People who feel purposeful in their work are less likely to burnout, suffer stress symptoms like migraines and ulcers, and are generally happier and more productive.  The researchers at Gallup know this and have developed a survey question in their famous “Gallup 12” to measure it:

Does the Mission/Purpose of my company make me feel my work is important?

FCG uses a similar question in its “Team Scorecard” assessment:  I feel that my work is important to reaching our firm’s goals.  Not surprisingly, this factor is rated “Very Important” by the hundreds of teams that have taken the survey.[3]  Teams that rate themselves highly on this factor tend to be high performing teams.  Purpose motivates.

My hope for the industry is that leaders become increasingly aware of the link between purpose and their firms.  First, search inside yourself.  What is your white-hot reason for being in the industry?  Go beyond the obvious ones—like money, power, status—and search for what Ellis calls the “intangibles.” When Ellis allowed himself to think about this, he concluded, “I had enjoyed contemplating the satisfaction that professional investors could take in doing good, however indirect it might be.”  And then he adds, “To the extent investment experts continue to do the important work of advising clients on investment policies to achieve their true objectives and values and sustain their commitments through various markets, our profession will be appropriately admired and well rewarded.”  (FAJ, pg. 7)

To the extent that investment professionals can define purpose more deeply—and execute on it—the industry will reclaim its rightful position as a noble calling.  And we’ll see more investment professionals choosing the first of the “meaning” factors in the FCG survey[4]:

The work serves a larger purpose, doing something positive in the world (such as allocating capital property in the markets.)

Leaders in the investment world should help themselves and their staff members find the white-hot whys that serves a larger purpose.  They should be asking themselves: “is my firm driven by purpose and values?” This is the path to reclaiming greatness.



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[1] The Investment Fund for Foundations

[2] formerly the leader of Bernstein’s sell side research department, now with Schroders

[3] The 5 point scale is: 5 = crucial, 4 = very important, 3 = important, 2 = neutral, 1 = unimportant

[4] From the chart shown earlier in this blog