Michelle Pfeiffer Needs Help

She was and is a major film star.  People magazine put her on the cover for its first ever “50 Most Beautiful People” issue. The New York Times, no less, has called her “devastatingly gorgeous.” So when Esquire magazine’s cover asked “What Michelle Pfeiffer Needs…”, the answer printed on the inside front cover — “…Is Absolutely Nothing” seemed superfluous at best.

However, as it turned out, she needed a significant amount of help to appear perfect.

As academics Danielle Nicole DeVoss and Julie Platt of Michigan State have reported, Adbusters magazine obtained a copy of the Esquire editorial memo to  their photography retouching company which included detail as specific as “clean up  complexion, soften eye lines, soften smile line, add colour to lips, trim chin… soften line under ear lobe… add hair to top of head.” Harper’s magazine printed a copy of the bill for retouching services for the two images.  The charge? $1525 (back in 1990).

Many portfolio managers must publicly disclose their holdings on a quarterly basis.  When I worked institutionally, at the end of every quarter, some managers would prepare to “have their picture taken” by getting rid of a number of problematic holdings.  It’s also called “window dressing.”  In earlier days, before regulatory mandate eliminated the practice, some managers would “sell” before quarter-end with a “handshake agreement” to buy the same securities back after the reporting was done.  Either way, while a few didn’t want their competitors to see everything they were doing, these managers typically didn’t want their investors to see some of their “bets” or the mistakes they had made. 

For whatever reason, we humans tend to pick apart the pieces more than appreciate the whole.  This problem relates to the “fundamental attribution error” I have noted previously — the error we make when we overweight the role of the individual and underweight the roles of chance and context when trying to explain successes and failures.

Every retail advisor has experienced the frustration of being able to report good performance overall but having the client fixate on those things that didn’t go so well.  That frustration is difficult enough when the underperformance is real.  But often the “problem” is nothing of the sort — it’s simply a down period for a particular investment type or sector.  As I have emphasized before,  a portfolio without assets that aren’t performing well on a nominal basis is not diversified and that diversification is a very good thing indeed.  Managing those expectations is a crucial part of the job.

No diversified portfolio is full of winners all the time.  Such an expectation isn’t just unrealistic — it’s nuts.  By any reasonable measure, Michelle Pfeiffer is gorgeous without a bit of touch-up work.  Perfectly wonderful portfolios aren’t perfect either.

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