New study by Professor Alex Edmans finds cognitive diversity can give investment teams a significant edge – but only if managed well

We are delighted to share the below from the Diversity Project.

In 2024, the Diversity Project invited academics from around the world to submit research proposals to explore any linkage between cognitive diversity and the performance of investment teams. We stressed that we wanted to know what the evidence showed, not work backwards from any conclusion we might hope to see. We commissioned Alex Edmans, Professor of Finance, from London Business School and author of several books including May Contain Lies and Grow the Pie, for this important research.

“We defined cognitive diversity as the range of expertise, experience, perspectives, preferences, traits and ways of thinking within a team. It can arise from differences in educational background, professional background, life background, cognitive style or personality and demographics.”

The research reaches three main conclusions:

1. Cognitive diversity can create clear competitive advantages for investment teams.
2. Cognitive diversity also comes with challenges.
3. Sophisticated leadership is essential to harness the benefits and minimise the costs from diverse thinking.

The DP response to the research suggests six key areas of action:

1. The role of managers and leaders
2. Implications for hybrid working
3. Implications for recruitment
4. Working differently to harness the benefits of cognitive diversity
5. Monitoring the effectiveness of decision-making
6. Navigating the backlash and recalibrating diversity and inclusion efforts

The Diversity Project will work closely with our members across the investment and savings industry to help them capture the benefits while minimising potential costs of cognitive diversity.

This study resets and moves the discussion forward on the ‘business case’ and the benefits of creating diverse and inclusive meritocracies in investment teams. Cognitive diversity is not something that leads to better results by itself: it needs to be carefully managed to realise the benefits. The present threat on diversity is therefore an opportunity to reset and reinforce shared values and goals and ensure that inclusive leadership and management of talent is embedded in businesses as a strategic issue.

Watch the video here: https://www.youtube.com/watch?v=wSfr0ZoWYhg

Download the DP’s public response here: www.diversityproject.com/cognitive-diversity-public-summary

Find further information, including the full report can be found here: www.diversityproject.com/cognitivediversity/


If you have any questions, get in touch via info@diversityproject.com