We go to school to learn. School, as my old high school teachers were fond of saying, is the “gym of life”, meaning you have the chance to learn and make mistakes in a sheltered environment from which you will hopefully learn something. Which will be of great value once you graduate and step out into the real world. As I approach the end of my formal academic education, I found myself thinking back to what I have learned in the past 4 years. And this is my personal list of 10 (broadly defined) “things” I believe business school has thought me.
- Diversify. This is probably the first thing that springs to my mind. Don’t put all your eggs into one basket, spread them out, hide them in the solar, put them away in the fridge, store them in the basement, and, why not, cook yourself an omelette. Whether it is building a portfolio or backing up your data to multiple locations, the key is to spread your risk out.
- Information is power. And so is knowledge. Entering negotiations with an information advantage, being able to observe deal flow in the FX market, having access to data in Emerging Markets are all “business” situations where knowing more is advantageous. But possessing key information can be useful in deciding what present to get your friends, what to say to impress your date or when not to take the tube because of a strike.
- You will only learn if you spend time trying to figure something out. This one might seem pretty obvious, but I don’t think it is. And that is why I think the case study method is much more effective than the I-Lecture-you-Listen-and-then-Read-the-Book method. Almost as an extension to Gladwell’s 10,000-Hour Rule, I believe that if you don’t actually try your hand at something, and you make mistakes and you try to fix those mistakes, you will never learn. Theory and practice are two very different animals.
- You cannot “network” with people who are in a better position than you. I feel all this effort spent on instilling into us how important networking is misses the point: the people you should try and network with should be your peers, not the President. Networking, and human social relationships in general, are based off mutual assistance and benefits. If you can help me, we can be friends, if it’s only me who can help you, it makes no sense to establish a relationship. I feel this is not only valid in business relationships, but in social ones as well. We usually are not friends with someone we perceive to be highly superior (or inferior) to us. After all, friendship is not a one way affair. Or at least, it shouldn’t be.
- Correlation is not causation. This sentence is almost a mantra in statistics but can be seen in real life as well. Throwing a dice and getting a 6 four times in a row doesn’t make you more likely to roll it again and get another 6. I think we should always properly analyse situations before establishing direct cause and effect links. Otherwise we could all be walking around saying it is eating ice creams that causes the weather to be hot.
- People are irrational. Too bad for all those nice models and theories that assume investors are perfectly rational. They quite evidently are not. Because investors are people and people (unfortunately) are swayed and sometimes controlled by emotions. No matter how much we try to describe behaviour with numbers and models, it will never work. I might also add that, while it is easy to interpret our own behaviour, which to us always look perfectly rational, understanding what other people are doing can be challenging. And that is why I sometimes find difficult to rationalise someone else’s decisions.
- Form over substance. You probably think you have misread. Alas, no. I firmly believe humans are visual animals more than anything, and seeing something pretty will make it harder for anyone to judge it on its own merits. That is why formatting your Power Point presentation is so important. And that is also why (unfortunately I think) human society places a huge emphasis on appearance.
- Most of the time you just need to be lucky. Being at the right place at the right time, being asked the only question you revised for, finding 10£ on the ground. Skills alone don’t cut it and performance doesn’t persist. They can help but are not enough alone. And you’d better get used to it.
- Artists are not the only creative people around. I think that rather than being called “Financial Engineering” it should be called “Financial Art”. Also, and correct me if I’m wrong, but the City crowd has come up with some very creative names for things, people and products. Such wonders as bake-offs, tombstones, beauty parades, candlestick charts, greenmail, swim lane, white knights and head and shoulders patterns. And let’s not start with the animals: bulls, bears, shark notes, hunting elephants, dead cat bounces…
- The past is not a predictor of the future. Although I still think we should all be studying financial history not to make the same mistakes, nobody can look at the past to predict the future. But that is inevitably what we end up doing. Because there is no alternative, at least not yet. We do fall into this trap in our daily life. If last time it went well, it must be alright to do it again.
Opinionated 