Against the grain - disprovers as important as approvers

Disproval for success

Annabelle Symons, Investment Analyst
  • 'Disproval' can be as important as 'approval'

  • Authority can be the worst place to look for approval

  • Constructive conflict within an investment team is crucial to effective asset allocation

"The fact is that most of the biggest catastrophes that we’ve witnessed rarely come from the information that is secret or hidden. It comes from information that is freely available and out there, but that we are wilfully blind to because we can’t handle, don’t want to handle the conflict that it provokes. But when we dare to break that silence, or when we dare to see, and we create conflict, we enable ourselves and the people around us to do our very best thinking.”
- Margaret Heffernan

I recently watched Margaret Heffernan give an excellent TED talk entitled “Dare to disagree”.

Margaret Heffernan is an entrepreneur, CEO and author whose career has spanned multiple industries including media and technology.

Heffernan speaks of Dr Alice Stewart, an epidemiologist. In the 1950s Dr Stewart was intrigued by the rising rate of childhood cancer in affluent families. She investigated further. Was this anomaly caused by something specific? Her further investigation found, by a rate of two to one, that the mothers of children in this group who had died were x-rayed when they were pregnant. Dr Stewart’s findings went against conventional practice at the time that considered x-rays to be safe to use up to a certain threshold.

Despite the evidence and the release of her findings, it took 25 years for the British and American medical establishments to end the practice of x-raying pregnant women.

What enabled Dr Stewart to maintain conviction in her findings for 25 years?

Dr Stewart worked with a statistician, George Kneale, whose job was to prove her wrong. He actively sought disconfirmation in her models and statistics to disprove her.

By having a person she respected do his best to tell her she was wrong, Dr Stewart had the confidence she was right.

Dare to Disagree

It’s interesting to look at this from an investment perspective.

Some of the most counter-productive tendencies arise in an investment team due to a lack of constructive ‘disproval’.

“When people are uncertain…they don’t look inside themselves for answers – all they see is ambiguity and their own lack of confidence. Instead, they look outside for sources of information that can reduce their uncertainty. The first thing the look to is authority.”

Robert Cialdini

This is one of the great psychological traps in investing. There are external voices of ‘authority’ including sell-side analysts, company management and popular investors. These voices are readily tuned out - just don’t tune in to begin with.

The real problem can be when your colleagues don’t try to test – to actively disprove - your investment theses.  Too often you find analysts or portfolio managers adopting the view of another in their team. The eagerness to adopt the internal consensus view may avoid conflict in the short term but in the long term it encourages lazy, conformist thinking leading to similar results. 

Each investment idea is awarded capital based on it merit. We want ideas that are right and non-consensus:

Investment matrix Consensus Non-consensus
Right Benchmark outcome Anomaly; best outcome
Wrong Sub-optimal outcome Sub-optimal outcome


Like George Kneale, my duty and the duty of the investors I work alongside is to disprove, as well as prove, investment ideas. It is only by failing to disprove their ideas with hard facts that various human biases can be controlled and the best capital allocation decisions can be made.