Without bias: getting the best out of company meetings

Part Two: The Pitfalls of Company Meetings

In part one, we outlined why company meetings are an important part of our investment process. While these conversations can offer valuable insights into management thinking, company culture and business risk, they are not without their limitations. In this section we discuss how the effectiveness of company meetings can be undermined by our psychological biases.

Narrative bias

One of the most significant is narrative bias. Management teams and investor relations professionals are naturally inclined to present their companies in the best possible light. This can create the illusion of greater insight while subtly influencing perception. We stay alert to this and focus on critically evaluating what we hear. Often, simply asking “Does it make sense?” is a powerful check against being swayed by a polished story.

Being influenced by personalities

Another risk is the psychological influence of engaging directly with management. A charismatic leader can easily inspire false confidence. Authority and seniority may convey a sense of additional believability that could undermine our natural scepticism. It’s vital to process what’s said with clear-headed reasoning and not let a refined message cloud judgement. Equally, we recognise that not all management teams are polished speakers, and an unrefined delivery doesn’t necessarily mean weak execution.

Last year, we met with the recently appointed CEO of Graco (NYSE: GGG), a former portfolio company. He was articulate and assured, stressing continuity and a focus on organic growth - something we initially welcomed. But when we compared his message with his actions, it became clear the company’s strategic direction had shifted meaningfully. Incentive compensation was tweaked to prioritise margin expansion over organic growth, and there was an unwillingness to invest more dollars to drive growth. That disconnect unsettled us, and we exited the position. Like anyone, we’re human: susceptible to influence and capable of making mistakes.

Confirmation bias

Confirmation bias is another risk we actively consider. It’s easy to enter meetings with firm views and hear only what supports them. To counter this, we make a conscious effort to question our assumptions and seek disconfirming evidence that challenges them. Staying sceptical and open to changing our minds when new facts emerge is essential to sound judgement.

Constraints to disclosure

Regulatory constraints present another challenge. Public companies are bound by strict disclosure rules, meaning they cannot provide material non-public information in private discussions. So, what’s the value of these conversations? The answer lies in asking the right questions: ones that elicit insights into how management thinks, rather than simply gathering information.

Closing thoughts

Company meetings can offer valuable insight, but they’re not without risk. Psychological biases and structural limitations can cloud judgement if left unchecked. By remaining aware of these pitfalls, and building safeguards into our process, we aim to ensure that company meetings contribute meaningfully to our understanding of a business. 

In the final part of this series, we outline how we structure these meetings and integrate them into our broader decision-making process.