April 2008
What Type of Investor Are You? Using the Enneagram for Improved Results
“If you don’t know who you are, the market is an expensive place to find out.”
Adam Smith
Self-awareness helps a person be a better investor and a better leader. For many years, we have used the Myers-Briggs personality assessment to help individual investors and their teams enhance performance.1 And while we continue to endorse the Myers-Briggs tool, we have found that a second tool — the Enneagram — is unusually effective with investment professionals.
The Enneagram vs. Myers-Briggs
The Enneagram has nine basic personality styles (vs. 16 for the Myers-Briggs). The Enneagram posits that every person’s mind is hard-wired to focus their attention differently.
For example, the first Enneagram type (“One”) places her attention on “what is flawed or imperfect.” In this sense, the One has also earned the name, “The Perfectionist.” Ones get great satisfaction out of paying attention to details and getting things just right. The other types will be described shortly, but first an explanation of why the Enneagram is so useful with investment professionals.
The Enneagram and the Investment Profession
The Enneagram provides useful distinctions among investment professionals that the Myers-Briggs often lacks. Many investment professionals are Myers-Briggs NT’s (Intuitive Thinkers). This means that they have a preference for analyzing the big picture and for making decisions via ”thinking” vs. “feeling.” In fact, over 50% of investment professionals seem to be NT’s, or Rationalists, based on our surveys. This number compares to the population at large, where only 10% are Rationalists. Even more striking, most investment professionals are not just NTs, but NTJs. The “J” at the end means they prefer an organized, disciplined approach to life vs. a “go with the flow,” flexible approach. So, analyzing investment professionals with Myers-Briggs isn't always useful. But the Enneagram is useful because a team of NTJ professional investors is not usually made up of the same Enneagram types.
Each of the nine Enneagram types is associated with a particular leadership style — with predictable strengths and weaknesses — and with an investment approach. When individuals identify and understand their type, they are more effective as managers and investors.
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One: The Perfectionist Focus: What is flawed or imperfect
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Six: The Loyal Skeptic
Focus: Dangers and problems
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Two: The Helper
Focus: The needs/wants of others
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Seven: The Enthusiast
Focus: Positive, future possibilities
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Three: The Achiever
Focus: Accomplishing goals
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Eight: The Protector
Focus: Power, dominance, control
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Four: The Individualist
Focus: Longing for what is missing
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Nine: The Mediator Focus: Secondary activities, others
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Five: The Observer
Focus: Observing and learning
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A Case Study
We worked with an investment leadership team of three portfolio mangers. All were “NTJs” on the Myers-Briggs scale, but they were three different Enneagram types: One, Six, and Nine. The lead portfolio manager (the one who had decision rights) was the Nine, the Mediator. We were called in to work with this team because performance had been suffering for 18 months and the CEO decided it was time to see if something was broken. These three portfolio managers had a team of six analysts reporting to them.
Dysfunction
As we interviewed the team and learned more about the investment process, the leadership dynamics and the dysfunction became increasingly clear. The Myers-Briggs analysis, given that they were all NTJ, would not have suggested a solution. By contrast, the Enneagram perfectly explained the dynamics causing the dysfunction.
The portfolio manager, who was a Six, was faithfully living up to his Enneagram type (looking for what is dangerous or problematic) and was driving most of the team crazy with his “sky is falling” attitude. Several analysts told us they no longer paid attention to his views on stocks. In response, the Six portfolio manager was more reclusive and withdrew to his office.
The One portfolio manager, in keeping with his type, became highly critical of the Six portfolio manager and reinforced the team’s inclination to shun the Six. Rather than trying to support the Six, the One made matters worse by siding with the analysts and openly criticizing the Six’s cautious view of the world. In private conversations with us, the One confessed to being sarcastic and dismissive of the Six.
The Nine played his part perfectly, too. Enneagram Nines love harmony and peace. They want everyone to get along, and they hate conflict. Essentially, the Nine did nothing to resolve the situation. He never confronted the two senior portfolio managers, and he did not bring in outside help to resolve the problem (again, it was the CEO who brought us in). He studiously avoided conflict, and the situation spiraled down.
The Nine portfolio manager also allowed another problem to emerge. Instead of playing to his strength as a genuinely bright investor, he allowed his schedule to be filled with administrative tasks that he disliked. In a given week, he spent about 30% of his time on investment thinking. (Our experience tells us that it’s a minimum of 80% on top teams.) Nines hate to say no and naturally place their needs and priorities at the bottom of the queue. True to form, the Nine had eclipsed his passion — investing — and was increasingly depressed with his work life.
Understanding
The first step in fixing this investment team was to convince the lead portfolio manager (the Nine) that he needed to hire a COO who enjoyed running the back office and managing people (yes, there are such people). The Nine jumped at this suggestion. Why hadn’t he done this before? Because Nines are not naturally assertive. Their attention goes to blending in and not being noticed. It was a tremendous relief for the Nine to have us tell the CEO that the Nine definitely needed some help.
The Nine then had to address the feud that was raging between the aggressive One and the passive-aggressive Six. This involved several sessions with the three of them in which they all learned their Enneagram types and saw they had created a perfect “drama triangle.”2 The One was the villain, the Six was the victim, and the Nine was the hero, attempting to smooth over this feud, but not doing anything to resolve it.
These three portfolio managers clearly grasped their roles in the drama and — because they are naturally quite smart — created a plan for adopting different attitudes and behaviors to end the drama.
This example ended very happily. Performance turned around dramatically, and the CEO praised all parties for a meaningful improvement. (We were quite aware that the performance improvement may have been pure luck, but did not disabuse him of his view.) Importantly, the senior three portfolio managers learned something about themselves that will be useful for the remainder of their careers, both personally and professionally. And the investment process was on much more solid footing with the addition of a COO and a healthier dynamic in the senior team.
Concluding Thoughts
Given success stories like this one, we encourage investment teams to add the Enneagram to their toolkit of mental models.3 Investment teams in Canada, Great Britain, and South Africa are using it.
Recommended Reading
What Type of Leader are You?, Ginger Lapid-Bogda (McGraw-Hill, 2007).
The Enneagram in Love and Work, Helen Palmer (HarperOne, 1995).
1 See “The Psychology of Money” by Jim Ware, Wiley, 2000.
2 See “High Performing Investment Teams” by Ware, Dethmer, Ziegler, and Skinner. Wiley, 2006.
3 Mental models is a term that Charlie Munger seems to have coined and is frequently discussed by Michael Mauboussin in his writings.