• Irrational Capital

IC Whitepaper: "The Human Capital Factor: Intrinsic Motivation & Equity Outperformance"

We are pleased to announce the publication of our most recent white paper entitled “The Human Capital Factor: Intrinsic Motivation and Equity Outperformance” which builds organically on our previous work with the Human Capital Factor (HCF). In this paper, we take a deeper look at the causal relationship between a company’s Human Capital and its stock performance by examining the role (and effect) of intrinsic motivation within an organization as a driving force. We feel that this work is a natural extension of the report recently published by JP Morgan in collaboration with Irrational Capital and provides additional insight into the “How” of the HCF.

We’ve long believed that organizations focusing on intrinsic motivating factors — such as pride, purpose, relatedness, excellence, etc. — create additional value for its shareholders. Our work suggests that the two core mechanisms of this value creation, which we classify as ‘Good Will’ and ‘Utility Alignment’, explain how intrinsic motivation actually translates cultural strength into company outperformance.

In this paper, we explain how intrinsic motivation can lead to sources of mispricing, and how exploiting sources of mispricing can generate alpha. With proper data and analysis, we believe the HCF can identify companies that are likely to outperform the market based on vast, individual employee feedback across a range of themes. Moreover, we show that the HCF is a unique source of returns which, as proven through independent validation, outperforms other factors while providing an orthogonal source of ESG exposure.

To access the complete report, fill out the linked form and we'll promptly email you the full research paper taking a deeper dive into the HCF and the nuances of Intrinsic Motivation.


Disclaimer: This post and the corresponding white paper is being provided for informational purposes only and may not be relied upon by any person or party in evaluating (a) the merits of any investment approach, strategy, instrument or security referred to herein or (b) whether to enter into a commercial relationship with Irrational Capital or its affiliates. These materials do not, in any way, constitute (a) any recommendation or investment advice by Irrational Capital to visitors of this site or (b) an offer to sell or the solicitation of an offer to purchase interests in any pooled investment vehicle or any other security. These materials are the sole property of Irrational Capital and may not be reproduced or distributed without the prior written consent of Irrational Capital LLC.

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