Naked Brands: The Future of Finance

Author: David Perell URL: https://www.perell.com/blog/the-future-of-finance One-line: Part of the Naked Brands series — money managers have become a commodity, so the firms that win compete on trust and attention, openly disclosing strategy and building personality-led brands.

Key claims

• Money managers are a commodity. Quantitative strategies, equal access to information, and low-cost vehicles have leveled the playing field; the traditional asset/wealth manager struggles to deliver value.
• Active management underperforms after fees. Bill Sharpe argued in 1990 that passive beats active net of fees; passive investments now total ~$6 trillion (up from <1% thirty years prior). Buffett says amateurs can beat most pros by simply buying index funds.
• The traditional edges are gone. Charley Ellis: 50 years ago maybe 5,000 people did active investing; now at least a million, all smart, all with the same tools and the same SEC-mandated information.
• Shifts in society begin with shifts in communication. The telegraph and the telephone (NYSE, 1878) collapsed the time/space constraints — and Dunbar’s Number limits — that once made investing a local affair, turning it into an instant global one.
• Trust and attention are the new differentiation. Leading firms openly disclose strategy, are guided by transparency, ownership of attention, and consistent communication — Perell calls them Naked Brands.™
• Ritholtz Wealth Management (the “Wu-Tang Clan of Finance”) — a collective of financial bloggers; Josh Brown: “people don’t follow brands, they follow people.” Podcasts are the new word-of-mouth, blogs the new business cards.
• Cambria Investments (Meb Faber & Eric Richardson, 2007) — “Content is sales. We put out a bunch of the content and people find us”; the firm crossed $1B AUM largely through daily connection with readers/clients. Echoes Charlie Munger: don’t sell anything you wouldn’t buy yourself.

Notable quotes

“Financial services was always sold on the basis of the reputation of the firm… It’s about personality… people don’t follow brands, they follow people.” — Josh Brown, RWM

“In the history of Wall Street I think there are two types of firms… firms where you’re putting out products that you believe in… you put your own money in them… Then you have a lot of firms that will put out whatever they can to capitalize and make as much money as they can on the themes of the day.” — Meb Faber

“Content is sales. We put out a bunch of the content and people find us.” — Meb Faber

How it connects

• Naked Brands — the parent essay; this is the finance installment of the series.
• Ritholtz Wealth Management / Cambria Investments / Meb Faber — the case studies of transparency-as-moat.
• Charlie Munger — “don’t sell anything you wouldn’t buy yourself” as the integrity backbone of a Naked Brand.