The Fact Check No Politician Could Survive

One of the talking points coming out of this week’s Harris-Trump debate was the decision by ABC’s moderators to fact-check certain statements that they had verified to be falsehoods. Don’t worry, I’m not posting this to opine on what was fact-checked and what wasn’t. Let’s just say that, as a communications professional and political junkie, I’ve always been bemused by the things politicians say, especially the outrageous, vitriolic or hyperbolic (often all three at once).

In politics, fact-checking is a complex exercise, and because it’s largely performed and reported by major media outlets it can be compromised by the inherent political leanings of a given publication. This helps explain why you often see fact-checkers qualify certain statements as “misleading” rather than “false”, and why a political candidate might feel unfairly targeted by fact-checkers. Regardless, politicians know spin and scoring points against their opponents is how votes are won, and they also know that many voters disregard views they disagree with and have short memories after the ballots are counted on election day.

In this world, the short-term temptation to mislead is powerful, and the consequences are largely insignificant. Imagine a different world, though - a world where there was a single source of truth. One that kept perfect, real-time records that you can't spin, held people accountable and had a long memory. How would politicians behave then?

Our firm lives in that world, and thankfully we don’t deal with politicians. We specialize in financial market communications, with a particular expertise in helping companies develop, articulate and evolve their investment thesis and narrative. Ultimately, strategic communication is about persuasion, but that’s where the common ground ends between how a CEO needs to communicate versus a politician.

In financial communications, public companies have the ultimate fact-checker: the market. The market serves as a crowd-sourced view of the merits of investing in a given company, a view reflected in premium or discounted valuations compared to available alternatives. While there are biases in the market – shorts and longs talking their books and seeking to persuade their peers – that’s all part of the process of fact-checking. Investors may have biases, but they do the math to validate or invalidate those views. They have to, because they’re spending other peoples’ money to create returns. This is a powerful mechanism for enforcing truth, and in the long run it makes the market an unbiased arbiter. Companies can tell untruths or mislead the market to achieve a short-term objective, but the game and the fact-checking go on well after “election day”.

In essence, the market is the financial world’s single source of truth.

In the market, truth is measured in value creation. Companies can articulate plans and convincing strategies. If they work, value is created and rewarded by the markets. If they don’t, investors can turn up the heat, making capital much more costly to procure. Simple and powerful. However, there are many twists and turns along that road. Strategies can be flawed, but once refined, work magic. New leadership may see paths to prosperity that former leaders did not. Investors can help illuminate that path and help ensure the company stays on it.

Fundamental to a public company’s journey through the capital markets is the concept of credibility. When your fact-checkers have done their math, invested their money, bought your story, it is impossible to get away with misleading them over any significant stretch of time. If you do, the transgression is not forgotten and punished harshly. Enron and Theranos are extreme examples, but equity markets are littered with forgotten microcaps and fallen angels that never figured out how to build and manage credibility with the investment community and are now starved for capital.

Why am I drawing these contrasts? Because this election cycle reminds me why I love what I do. If strategic communication is about persuasion, financial communication is its most complex form because there is a single source of truth. The challenge is to persuade not just by creating belief or leveraging a powerful personality, but by convincing the market that you have the ability to back up what you believe and deliver results. In between persuading and delivering, there will be twists and turns that may shake your conviction or those of your investors. In those times, your only path is to maintain your credibility through blending transparency, humbleness and confidence, supported by data. What’s more, throughout the journey, you’re measured in both short-term and long-term time frames, adding yet another layer of complexity. Navigating this world day after day, quarter after quarter, is incredibly difficult, with uncountable dollars and livelihoods riding on a CEO’s ability to get it right.

The prize for politicians is power. For public companies it’s capital. Power can be acquired through distortion of facts. The acquisition and use of capital is held to a much higher standard. While it takes time for the market to check all of the facts, it always gets it right in the end. And that’s the truth.