Investing Wisely

Brian Rogers receiving his award at Business Leader of the Year

Financial markets are by their very nature volatile and unpredictable, yet people choose to invest in the markets in the hopes of securing a healthier financial future. Given the impact financial scandals and the Great Recession have had on the reputation of professionals in the financial services industry, it is vital for professional investment advisors to maintain a principled approach to investing to create a foundation for greater stability and prosperity for their clients.

Loyola University Maryland’s Sellinger School of Business and Management strives to educate purposeful, principled leaders and to recognize the achievements of these types of individuals. Each year the Business Leader of the Year Award is presented to an honoree who embodies professional success, personal integrity, and a dedication to serving the community. Past honorees have had a vision, dedicated effort, and singular commitment to the highest ideals of business that have distinguished them and their organizations as among the very best in the nation.

Brian Rogers, chairman of the board and chief investment officer of T. Rowe Price Group, was honored in November as the 2012 Business Leader of the Year. Mr. Rogers spoke with the Sellinger School for this month’s feature and discussed the characteristics of successful business leaders and the role of higher education in shaping them. He also offered advice for investing in financial markets.

In your Business Leader of the Year remarks you spoke of the ecosystem of education, success, and responsibility. Why is education a critical requirement for success in your business for both the individual and the organization?

No matter what one does in life one requires a knowledge base to perform it. Education is a prerequisite in any field to succeed. Whether one is an investor, physician, plumber, or contractor, whatever one studies is the foundation one takes into their work, which experience then molds and builds upon.

[T. Rowe Price founder] Thomas Rowe Price, Jr., said, "If you take care of your clients, your clients will take care of you." How does this statement translate into success for a business? 

Management guru Peter Drucker said that the sole purpose of a corporation is to create and serve a customer. Mr. Price’s quote, which is inherent in everything we do at T. Rowe Price, is another way of stating Drucker’s maxim. The reason for being for any company is to perform for a customer. Business or corporate success is derived from creating a service, function, or product that someone is willing to pay for. Great businesses are built when customers derive value from what you are doing. If clients satisfy an important need from what you are offering, they are most likely to come back. Conversely, if you have little or nothing to offer, no one will be willing to pay you and your organization will ultimately fail.

Professional excellence, personal integrity, and responsibility to the community are integral components of being selected as Business Leader. Can these traits be taught? If so, how?

This question is complex and certainly harkens back to the nature vs. nurture debate.

I believe that professional excellence can be taught. Having some natural ability—a predisposition in a certain field or skill—is a prerequisite for success, but nobody grows up knowing how to build homes, analyze financial statements, or judiciously review documents. These professional skills need to be taught.  One’s personal interest in a particular field needs to be ingrained in the person before going forward, but the everyday skill sets must be learned through education and training.

Integrity can be learned, but it must begin to be learned at a young age. Much of it is born into you and developed when you are young. For most of us there is an innate sense of what is right and what is wrong. Lessons come from family, teachers, one’s first job, and ultimately the professional workplace. An appreciation for integrity can be enhanced by education, but it all comes back down to what you learn as a child. There are myriad examples of people with outstanding educations who veered off the tracks.

A sense of responsibility is part of the natural human condition. It’s inaccurate to say it matters to all 7 billion people in the world, but the vast majority of us are naturally moved to help others. We all learn from example, but one of our basic instincts is to be responsible.

What is higher education’s role to play in this?

Business schools have a role to play as teachers of integrity and responsibility. Via case studies, institutions can point out that the actions of certain people—those who have gone astray, believe they can get away with things, feel their crimes are victimless, or show patterns of overconfidence—are fallible. Few criminals actually believe what they are doing is right. Most commit their crimes, financial, corporate, or otherwise, because they think they can get away with them. They develop patterns of overconfidence that cause them to ignore their value systems. Exploring case studies of post-mortem corporate crimes and ethical breaches can help students understand the consequences those actions have on businesses, lives, and families.

You are professionally successful, dedicated to your family, active in the non-profit community, and are viewed at T. Rowe Price as someone who always has time for his colleagues. How do you balance all of your commitments?

Everyone is busy. At work, the best thing one can do is to prioritize what is important and focusing on those issues and tasks first. Family, which is most important, is more difficult to prioritize because you can’t practice professional triage at home. There is no magic answer to finding balance, but not getting caught up in activities that waste time is a good place to start.

Given your role at T. Rowe Price, what kind of year do you expect for the stock market?

At T. Rowe, we don’t spend a lot of time attempting to make precise market forecasts. Like baseball teams heading into spring training, there is a sense of which particular teams will be good, but due to unexpected variables and events, predictions of how the year will finish rarely go according to plan. Same with the stock market. Generally speaking, at the beginning of 2013 we see the market in better shape than in 2012. The market tends to do well when the overall economy is performing decently. The market actually outperformed the economy in 2012, and I feel reasonably well that the stock market will continue to improve in 2013.

Forecasting is a probabilistic game. Over time, for every few good forecasts that are made there are many bad ones that offset them. Considering this, the likelihood of success is higher when you identify individual investments and securities as opposed to speculating on broad market forecasts.

The most important thing to keep in mind is that the most important trait for an investor is a sense of humility. Overconfidence is the investor’s greatest enemy.