Making Bets on U.S. Supreme Court Decisions

If I ever earn a spot on a game show like Jeopardy, answering questions about sports will be a challenge. I recognize that, unlike me, there are serious fans who spend more than a few hours each week, vetting all sorts of statistics and data points about what team is likely to win and by how much. At family gatherings, I hear nephews and in-laws waxing poetic about games such as Fantasy Football. According to the Fantasy Sports Trade Association ("FSTA"), only skilled parties need apply, adding that there is no gambling.

Big money is at stake. According to "Industry Demographics: At A Glance," nearly 34 million individuals, mostly men, played fantasy sports in the United States in 2013. Canada counts roughly 3.1 million fantasy sports players. Over a twelve month period, aggregate league fees for fantasy games tallied $1.71 billion. For information materials, the spend was $656 million. It was $492 million for challenge games. (For us neophytes, what is a challenge game?) Decade-long performance reflects "explosive absolute growth" of 241 percent or an annualized growth rate of 13.1 percent for 2008 through 2018. See "Top 10 Fastest Growing Industries" (April 2013).

So here I am, sitting at my computer, researching certain ERISA litigation matters, and lo and behold, what do I find? You guessed it - FantasySCOTUS. According to its dedicated website, over 20,000 lawyers, law students and "other avid Supreme Court followers" have opined as to how they believe cases will be decided. Click to view a short video about this Harlan Institute initiative.

For those who are waiting with bated breath for commentary about stock drop cases, fear not. Of 53 predictions, as of today, 23 votes are for affirmation by the U.S. Supreme Court and 30 votes are for reversal. There is even a breakdown of votes as to how each justice is expected to respond to the April 2, 2014 hearing about prudence. Click to check out the Fifth Third Bancorp v. Dudenhoeffer roster of votes. Click here to download a transcript of the hearing.

What will they think of next?

The Importance of Clear Communications

A funny thing happened the other day while having a snack in a Paris bakery. I am here for a few days, tagging along with my husband who is teaching for a month. Shortly after we sat down, a Japanese family arrived, went to the counter and asked in English for a sandwich to be heated before serving. As the woman at the cash register only spoke French, she did not respond right away. I think she was trying to understand what they wanted. The new arrivals asked again, in English and speaking a bit louder. Again, no reply. Then another customer, already seated and chatting with her friend, began speaking in Japanese to the family and subsequently translating into French for the bakery worker. As a result, the lady behind the counter was able to respond that they had no way to heat a sandwich and thereby allow the family to choose what they wanted to do as a result. Minutes later, four hungry customers were enjoying cold bread and hot beverages, with gratitude for the translator all the way around.

My take away points from observing this encounter is that the world is getting smaller. Speaking a second language is a plus. When you cannot speak the "right" language, access to someone who can translate is an advantage. When individuals are not communicating, opportunity loss occurs. Had the friendly passerby who spoke Japanese and French not played an active role, a family would have gone hungry for awhile and the bakery owner would have lost a sale.

Applied to the investment industry, similar lessons exist.

Investors often complain that contracts with managers, brokers, advisors, insurance companies and other service providers are too complex to understand. The ambiguity or absence of clarity as to who should be doing what and in what manner typically shows up as part of a dispute resolution. Something has gone awry and one party is bringing action against the other, based on facts and circumstances that include each party's interpretation of words.

Complexity of a product or service is another consideration. In "Don't Make Investing Too Complicated" by Matthew Luke (The Motley Fool website, May 10, 2013), readers are urged to focus on companies with simpler business models. Luke writes that "The more complicated an investment however, the more things can go wrong." While his statement may not apply to all investors, there is merit for everyone in being able to identify risk factors that can potentially destroy value.

As an independent risk governance and prudence expert, I am often in the position of having to ask service providers and investors alike to tell me what risk factors they deem most significant as potential destroyers of long-term value. We then talk about the likelihood of something going wrong and how risks are being mitigated. Those conversations cannot take place if information is overly complicated and/or unclear.

In other situations, a "translator" such as an informed consultant or advisor can assist both managers and investors in closing a sale and keeping a relationship alive. Like the bakery clerk and the hungry family, someone may need to intervene so that various parties are understood.

As new regulations are put into place, what investors will read likely reflects the need for the seller to comply. Compliance text is not necessarily the type of plain language that would better aid buyers in making an informed decision. This is not good. Investors need to understand what is at stake. Investment management service providers can benefit, sometimes materially so, by conveying concepts in plain language.