It’s now been a little over 2 weeks since I left a full-time job to embark on the next stage of my career. Thank you to everyone for being so generous with your time, effort, and advice. I have been overwhelmed by a outpouring of encouragement; for which I am truly grateful. Thank you!
My posts on Twitter and LinkedIn have struck a chord with a lot of people all over the world. Please keep in contact as I need your support. I am keenly aware that I will need your help to succeed on this challenging path that I’ve chosen. You can help me in four important ways:
- Get in touch if you have an idea, suggestion or know of someone that might be able to help
- Follow me at Market Fox. I’ll be writing about the things that I’m working on, so please sign up to my blog so you can keep up-to-date
- Contact me if you would like to collaborate on a joint project, engage me as a consultant or hire me on a short-term contract basis
- Send this post to someone that you think might be interested in points 1, 2 or 3
A few questions have kept coming up in my discussions with people about my plans for the future. I thought it might be a good idea to write about them. Firstly, pushing myself to write them down will help me to clarify the ideas that have been rolling around in my head for some time. Secondly and more importantly, it’ll make it easier for all of you that would like to help me to do so.
Here are the most frequently asked questions of the last two weeks:
- Why quit your job?
- Don’t you have a wife, a 3-month-old baby and a mortgage?
- What are your plans?
- What sort of job are you looking for?
- Where and how are you looking for work?
- Why go public on Social Media?
Q – Why quit your job?
A – I want to be happy at work. For me, that means working on things that I genuinely believe in and that I believe will make a difference. It means continuous learning and improvement. At times, it also means questioning the status quo.
Helping hard-working people to save and invest for their retirement is a noble objective that I’m committed to. From an investment perspective, it’s arguably never been tougher to meet this challenge. We live in a world of low interest rates, high valuations and low future returns.
It’s a very different environment to the one in which much of the investment industry was built. Stocks had a great run during the 1980s, 1990s and part of the 2000s. Bonds increased in value as interest rates around the world fell.
Holding a set-and-forget 70:30 portfolio worked perfectly. Investment strategies and products were launched by the thousands. Star fund managers left established firms to set up boutiques. And consultants were kept busy helping clients shuffle their money between them all.
It seems to me that those days are fading away. Meeting the challenges of the future now requires a different way of thinking.
Markets are not the only challenge. Technology is becoming an ever more powerful enabler of change. Some of its most important effects are:
- Lowering the barriers to entry for new ideas
- Enabling new ideas to scale very quickly
- Creating platforms that facilitate genuine interaction between businesses and their customers
Technology is a very real threat to incumbents in the funds management and pension industries.
But technology and the markets aren’t even the biggest changes. The biggest changes are social. People are beginning to demand more from the organizations managing their money. They want:
- Value for money
- Bespoke (facilitated by technology at low cost) rather than one-size-fits all
- Lack of trust in institutions, politics, big business, established brands, experts, etc.
Realizing all of this meant that I felt that I had to make a choice. I could either try and work my way up through the Cursus Honorem of Australian institutional investment, or I could take a risk and try something new.
Q – Don’t you have a wife, a 3-month-old baby and a mortgage?
A – Yes. They are the reason why I’m doing this. Being a parent is a wonderful experience. Part of that experience so far has been learning to think about the future in a very different way. Sometimes when I hold Leonardo in my arms, I think about what I need to do to be a good father, how to help him grow up to be a fine young man and how to guide him as he chooses what to do with his life.
Being a dad has got me seeing the world through Leo’s eyes. I want him to grow up to be a man that works hard to pursues what he believes in, even if that means taking calculated risks.
But I have no right to encourage him to do that unless I do it myself first. I have to set the right example; otherwise he’s got the right to call me out as a hypocrite!
My wife Leah is a kind, generous and very patient person. She understands my values and what drives me. She knows that I’m happiest when I’m learning, developing new ideas and thinking creatively to solve problems.
I’m extremely fortunate to share with my life with someone that believes in me and truly wants to see me become all that I can be! Whatever happens, I will work hard to live up to her trust and faith in me.
Of course there is still a mortgage and bills to be paid. We have some money, but it won’t last forever. This is where I need your help.
Are you looking for a young-yet-experienced person, motivated intelligent and hard-working person? Someone who wants to make finance and investment a better industry by creating investment strategies and products that truly put the client first? Are you open to new ideas? Are you ready to embrace the future?
If that sounds like you then please contact me. I’d love to collaborate on a joint project, work with you as a consultant or on a short-term contract basis.
And it doesn’t matter where you’re based. Technology now makes it possible to work from anywhere in the world.
Q – What are your plans?
A- Still working on it, no set plans as yet. I have lots of ideas and a framework. My framework is to pursue long-term and short-term goals at the same time. Some of the ideas that I consider to be my most valuable will take time to develop. At the same time, I need to earn an income to meet my living costs.
My goal is to try to create a “portfolio career” for myself consisting of both long-term projects and short-to-medium-term engagements.
I am an experienced multi-manager investor. I’ve worked on asset allocation (strategic and dynamic), portfolio construction and manager research across all asset classes (but with a particular focus on equities). I’ve had the privilege of working together with literally hundreds if not thousands of fund managers around the world. You name it, I’ve probably seen it.
I’ve also worked with fund managers to create new investment strategies. And I’m one of the few people in the industry that has a background in Psychology (instead of accounting, maths or economics).
Q – What sort of job are you looking for?
A – Clients with shared values. There are two ways to search for a job: to look for a set of attributes or characteristics. Looking for attributes is easier, but less permanent. The reason is that people and organizations change. A better approach is to look for shared characteristics or values as these are far more likely to endure.
What does this have to do with my next job? I’m less interested in attributes. I don’t have a particular position, role, title or salary-level in mind. These considerations are of secondary importance to me. What really matters to me is finding someone to work with that shares my values. These values include:
1. An appetite for basic research (Hmm… that’s funny…)
Most of the greatest scientific discoveries were as a result of basic research. What’s basic research? The invention of the solar panel provides a good example.
In 1954 scientists at Bell Labs were working with a large piece of natural silicon. During tests they noticed that it emitted an electrical charge when light was shone on it.
You can imagine the scientists thinking, “hmm that’s funny” and deciding to find out more. Their research resulted in the modern photo-voltaic solar panel.
Basic research is very different to applied research. It starts with an idea or an observation, often without a definite notion of how it might be useful, let alone profitable. In contrast, applied research, takes an idea and figures out how to incrementally improve it.
The first solar panel made at Bell Labs has a very low efficiency ratio of only 4%. Further applied research improved the efficiency ratio to 11%. By 1999, the efficiency ratio of a solar panel was 32.3% and it has continued to improve ever since.
Both basic and applied research are important. The problem is that most jobs in the investment industry focus almost exclusively on applied research.
Sadly, its typical for many institutional investors to spend far too much time on things that make little difference to long-term results.
For example, when constructing an equity multi-manager portfolio they will analyse and run simulations to determine if they should allocate 10% to fund manager A and 15% to fund manager B. But fund manager A and B both share a 0.90 correlation to the index. In other words, its almost impossible to tell if the result of any modelling is really meaningful or simply noise.
Investors would be better off considering the big questions that can have a meaningful impact, even if the best way to apply the answers is’t immediately obvious.
They could spent their time considering fundamental questions, such as whether or not markets have changed to a degree where traditional value strategies may no longer work or need to change (a topic that I plan to cover in a future post).
To make things even worse much of the analysis is backward-looking. Time spent on performance attribution of benchmark-relative performance over the past 12 months is time that’s not being spent on figuring out how best to invest over the next 12 months.
In summary – there has to be the right balance between basic and applied research.
2. A focus on process (instead of outcome)
Two quotes have been stuck in my head ever since I quit my job, they are:
“Give me six hours to chop down a tree and I will spend the first four sharpening the ax.” Abraham Lincoln (?).
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” Benjamin Graham.
What is it that both motivates and reassures me in these quotes? The value of deep thinking about how you perform an activity and what you can do to improve. In this case, it’s the investment decision-making process.
Managing our behavior so that we are more likely to make rational decisions is not easy to do. Its even harder to do in a group. Groups magnify behavioral biases; that is, unless they are carefully designed and managed to emphasize the their strengths and manage their weaknesses.
That takes effort and a commitment to continuously improve the quality of decision-making. Its not enough to do something because that’s the way its always been done or because everyone else does it that way. Decisions need to be based on evidence, logic and common sense.
Why is this so important? The quote from Benjamin Graham reminds us that the vicissitudes of luck will even out over the long-term, and that the true value of an idea often emerges gradually over time. This applies not only in the markets but also in other areas of life, such as making good decisions.
In contrast, focusing too much on outcomes, in particular short-term outcomes, distracts us from thinking about how to approach the task of investing and robs us of the patience that we need to see results.
3. Proper Incentives = Genuine Skin in the Game
Unfortunately the principal and agent problem is rampant in the world of investing and finance. I believe that this is due largely to poor incentives. In other words, its possible for a lot of people to work in the industry without really having any skin in the game.
A lack of skin in the game results in a lack of accountability. This makes it easier for poor decisions to made (i.e. mistakes were made, but not by me) and ultimately (unless luck intervenes in the short-term) results in poor outcomes.
It also breeds office politics. Office politics is detrimental to investment success. That’s why leading fund managers such as Bridgewater put so much effort into creating a culture of “radical transparency“.
Leaving my job means that I now have A LOT of skin in the game. I’m now in the situation where my family’s survival quite literally depends on the quality of my ideas and my work. I am totally accountable. Like a trapeze artist without a safety net. Its terrifying. But I know that it it’ll bring out the best in me. I now have a lot to lose and everything to play for… so I’d better bring my A-game.
4. Integrity, Honesty and Empathy
This one’s fairly straightforward. Its quite likely that I’ll end up spending more time with the people that I work with than I will with Leah and Leonardo. Sad but true. I want to spend that time with people that I respect, trust, learn from, mentor and support.
Q – Where and how are you looking for work?
I’m open to considering different types of working relationships: collaborations, partnerships, projects, short-term contracts, part-time work and even permanent full-time employment.
When it comes to permanent full-time employment, my preference would be to start off with a contract and then see what happens. You can be friends with someone but you don’t really know what they’re like until you’ve been away on vacation with them. In a similar way, its almost impossible to discern what a working relationship will be like through the recruitment and interview process.
So why not explore things, get to know each other and see if its meant to be?
Q – Why Social Media?
The institutional investment industry in Australia is relatively small and interconnected. But there’s a whole world of other opportunities out there in finance and investment. Social media is my way of expanding my horizons meeting new people and opening myself up to new opportunties.
Some readers might think that my Jerry Maguire-like attempt at “radical transparency” is crazy. My goal is to share my feelings, even if that means opening myself up to criticism. My hope is to meet people who share similar values and would genuinely like to help. That’s all.
In 49 BC, Julius Caesar crossed the Rubicon knowing that he’d be hopelessly outnumbered if Pompey and the Roman Senate decided to stay and fight. He took a calculated risk (a gamble) by crossing the Rubicon with one legion of loyal soldiers, the Legio XIII Gemina. That’s when he uttered the famous words alea iacta est or “the die is cast”.
It may not be as dramatic or history-making but I feel as if I’m crossing my own mini-Rubicon. And I’m hoping that I can find my own “legion” to back me up. I’m putting my faith in you, my readers. I hope that you will appreciate the honesty and sincerity of my convictions and help me out. Thank you!