Douglas Isles

People wanting to invest should embrace uncertainty as an opportunity, according to Platinum Asset Management head of investment Douglas Isles.

“[Embracing uncertainty] is the hardest part of investing,” he said at the Portfolio Construction Forum’s 2023 Finology Summit held last week, adding that investing is all about mentality and going where the crowd is the most uncomfortable.

“While our professional training is number centric, I want to stress that numeric numeracy is a language or a tool. It’s not the be all and end all.”

Isles stressed at the summit that people are more important than numbers. “I started off learning by economics, trading, and all sorts of valuation techniques, which actually makes no sense if you don’t understand the people element that goes into them,” he said.

“I spent a lot of time speaking to people born in the ’80s, asking them about financial services and what they wanted from it. You basically get two groups, you get two people who don’t care at all. They’ll take default super quite happily. And you get this other group of people who we thought were our potential customers.”

With the advent of the Internet age, however, Isles explained that young people today want to do things for themselves. They wish to learn to invest themselves rather than have others do it for them.

“This led me to think about how investing can be made easy, given that most of us have learned about investing in the wrong order,” he said.

People and resilience

According to Isles, companies are collections of people with a purpose augmented by land and capital. “It’s all about people,” he said.

“They evolve; they change; and they respond to their suppliers, their customers, their competitors, the regulators.”

Over the last 18 months, Isles interviewed 25 people for his podcast series. The topics covered were wide-ranging, from illness to sexuality, from miscarriage to boredom. “All of the people I interviewed showed that they had the resilience and the ability to bounce back,” he said.

Isles referred to the behavioural finance model, which suggests that understanding human psychology and behaviour is essential to understanding financial decision-making and can help investors make more informed and successful investment decisions.

“Not everyone [has the ability to bounce back], and that’s important, because when we take the behavioural finance model and apply it to companies, we find that not every company has the resilience to bounce back,” Isles said.

“It’s the same for industries and potentially for economies: the problems they face are different.”