In finance, “black box” commonly refers to quantitative strategies or artificial trading models whereby it is hard to know exactly what is occurring in the structure. The idea is that complete transparency may disclose information on the model or underlying algorithm that would threaten the proprietary edge of the manager. Like black box strategies, comparable characteristics and motivations can also be applied to professionals we encounter day-to-day. Just like there is a decreasing appetite for black box strategies by sophisticated investors, the appetite for “black box businesspeople” is also waning. Just as savvy investors are vocalizing their desire to invest in what they understand, similarly they want to surround themselves with those they can trust. Whether it is the desire for power or fear of replication that drives secrecy, the financial world is shifting towards a more open and approachable landscape.
Old-school power plays
Notorious secrecy undoubtedly held great appeal in a bygone era. Similar to the secretive hedge funds that suggested a complex underlying strategy, the secretive businessperson suggested a multidimensional individual. Both were once very attractive because they were beyond comprehension and reach. Elitism in finance worked splendidly for decades. Not knowing what the powerhouse or power player was doing just made investors want to be a part of their game. Funds not available for further investments, CEOs unavailable for meetings, exclusive events and membership; this all played into the psychology of desire which, when carefully constructed can and has been a very effective sales strategy.
Cautious to a fault
On the other hand, if it is not a power hungry megalomaniac across the boardroom table, the want for secrecy might just be a result of professional cautiousness. In most cases it is either the fear of replication or the fear of judgment that prevents an open and honest dialogue.
Competitive analysis is critical to professional success. It is important to have discretion and to follow protocol to protect confidential, proprietary information or intellectual property. However, the fear that drives secrecy beyond a level of protecting trade secrets or displaying a level of professionalism can leave a negative perception.
Striving for excellence should encapsulate the endeavor for true distinction. Make the fear of replication a non-issue and eliminate the competition. Plan to be the expert, a trusted advisor, a leader and whenever possible, a pioneer. If your competitor prospers from the information you have disclosed (and you didn’t have the foresight to author it through social media), let that be a driver for continued innovation, and a lesson learned.
We are all human and judgment can be hard. It is true that the more people know the more they have to criticize. However, if you can thicken your skin there is a lot of value that comes from showing your cards – unsolicited advice, intelligence on the competitive landscape, information on how you or your business are perceived by outsiders. It will prove wise to be generous in your listening and exploitive in using these insights given freely as a result of your disclosure. As we gain experience, we all come to the realization that the façade of perfection is unexciting.
Illusiveness as bad business
Sometimes the lack of transparency is simply just due to an absence of clarity. Poor communication may be a result of uncertainty and there is no intention to be illusive or withholding. The problem with uncertainty to this level is that it will inevitably instill doubt and doubt does not pair well with business. Have intention to know what you are doing, do it precisely and therefore, effectively.
The new paradigm
As there has been a shift in investors’ tolerance for black box investment models, there has also been a shift in individual tolerance of black box professionals. The new (business) black is ‘if I don’t understand it, I don’t invest in it’. This applies to both the underlying investment opportunity and the overlying professional.
The old ‘on a need to know basis’ is trite. The new communication paradigm is ‘happy to share’. It is Sales 101 that people like to do business with people that they like, and likeable people communicate directly and authentically. Also, in the information age when everything is easy to find, not sharing information just seems petty.
When the person across the boardroom table is candid (and fearless) enough to share their goals and challenges, and to discuss their successes and failures (monetary and otherwise), it sends a strong message. It shows that being open does not make you powerless…it makes you powerful.