“All money is a matter of belief.”
-Adam Smith, 1776, Scottish Philosopher and Economist, author of The Wealth of Nations
“Reality is that which, when you stop believing in it, doesn’t go away.”
-Philip K. Dick, 1978, member of the Science Fiction Hall of Fame
“Investing is the intersection of economics and psychology.”
-Seth Klarman, 2011, famed value investor and founder of the Baupost Group
The quotes above, from different ages and perspectives, each highlight some basic truths, and together, the reason capital markets remain as unpredictable and mysterious in the 21st century as they were when 13 American colonies were just declaring independence from England. As we await the next major capital markets crisis that no one can predict – while everyone tries – the market’s known unknowns (and permutations thereof) will persist for as long as human decision-making drives investing. IROs manage hundreds of high touch, high intensity human relationships, often thousands, portfolio managers, buy- and sell-side analysts, investment professionals whose collective decisions comprise the equity market that ultimately drives the IRO’s company’s value premium, or discount. Increasingly, the mood of this collective consciousness is critical to the job security of the IRO’s management team and can even affect perceptions of the company’s product or service brand in the commercial marketplace.