The ‘No Jerks’ Rule of Investing

Recently, I found myself debating the proposed profit-sharing mechanism of a private equity fund in due diligence talks with the fund’s general partner. This particular manager had been extremely successful in previous funds, and so the new fee structure included premium profit sharing for him. Instead of a 2 percent management and 20 percent incentive fee structure, this manager now wanted to charge partners 2 percent and 25 percent for the privilege of investing with him.

我的论点 - 至少我想 - 是一个相当合理的。由于该公司针对更大的支票规模，因此更高的利润分配不能通过先前的卓越性能。此外，新的更大的基金无论如何都会产生更多的管理费。简而言之，他们可以留下来少，收取更多，或成长并保持同样的费用，但我认为这两者都不公平，我无法合理地支付它。

The manager’s response ended the debate, but perhaps not in the way he had hoped.

“What difference does it make to you?” the manager asked. “It’s not your money anyway.”

Needless to say, we did not consummate an investment with said manager. But the discussion did remind me of a due diligence rule I was taught years ago: the “No Jerks Rule.”

这是相当不言自明的：不要与混蛋做生意。在微不足道的情况下，傲慢，自私，不诚实和粗鲁的人 - 你可能会说 - 当赌注远远高的时候，不应该似乎神奇地变得谦逊，慈善，诚实，并且体贴。

它肯定是一个合理的课程，而且对我来说幸运的是，这似乎比我过去的导师的胆量本能更简单的戒律。

Astudyin the人格与社会心理学公报published in October 2017 looked at the personality traits of 101 hedge fund managers with a collective $4.6 billion in assets under management. By analyzing a videotaped interview of each of the managers, the researchers were able to asses and record behavioral characteristics of the individuals, focusing specifically on the so-called Dark Triad — narcissism, Machiavellianism, and psychopathy.

First, let’s describe each personality spectrum.

自恋主要需要自我重要性和统治的感受 - 例如一种优越感，壮丽，和权利 - 结合不容忍批评。Machiavellianism包括肤浅的社会魅力，旨在破坏他人的欺骗行为，以及依赖操纵来实现目标。最后，亚临床精神病患者与缺乏同理心或悔恨有关，没有情绪，高冲动和人际关系的敌意。（你真的不想与临床诊断患者一起工作）。

The single most common thread uniting these continua is a tendency for deceitful and malicious behavior focused on the exploitation of others for your own ends. Such characteristics probably aid in the achievement of personal success in many activities by facilitating the determined pursuit of success through adverse conditions and heavy competition. Put another way, jerks are singularly, and callously, focused on reaping benefits for themselves.

而且有摩擦。

对自己的好处不会等同于其他人的利益;事实上，对于那些在黑暗三合会的十字路口，他们以明确的牺牲别人来说。

So, what did the study above find about managers with these attributes? In comparing the individual manager’s scores on the Dark Triad with their investment returns from 2005 to 2015, an interesting insight emerged.

While the average return for the overall group during that period was 7.27 percent annualized, the biggest jerks trailed significantly. The managers that scored highest on the Dark Triad put up just 6.39 percent a year, 0.88 percent behind the average. And those who scored more than 2 standard deviations above the others on the psychopathy scale specifically did even worse, trailing the averages by nearly a third.

Moreover, the authors compared not only nominal returns, but also risk measures, and found that risk-adjusted returns were even lower. Narcissistic managers in particular took far more risk than others, and were not commensurately compensated for it.

Interestingly, these findings echo早先的工作by the same authors on the presence of Dark Triad traits in U.S. Senators. In their prior study, the researchers demonstrated that senators who scored higher on the psychopathy measure were less likely to win support for their proposed bills. The most influential senators — those able to win broad support for their initiatives — were instead virtuous, or in the words of the authors, “displayed courage, humanity and justice.”

Upon researching the topic of the Dark Triad further, it becomes apparent that there is a growing amount of well-supported evidence that while these traits may well be associated with individuals successfully attaining positions of power, they are also correlated withpoor job performanceand unethical behavior,包括欺诈, across numerous fields.

Pretty solid reasons for sticking with the No Jerks Rule.