Equity Research and Other Musings

Introduction:
Which is worse: the emptiness and drudgery of pulling operational levers while wishing to use your brain in a analytic and academic manner, or the longing to come off the analytic sidelines and play the game itself in an operational or managerial capacity?

Is it a basic introvert versus extrovert bifurcation? It seems it's not that simple. Extrovert skills are needed in research in developing contacts that will provide you with the information you need to do a great job. Extrovert skills are needed to sell your work, defend it against your peers and plead your case with portfolio managers. Introvert skills are required for the nights when you're up alone in your office updating your valuation model for the quarter end. Introvert skills are absolutely necessary when your phone doesn't  ring all day and your working on a month long project to forecast next year's growth rate in U.S. aggregate consumer spending.

There are always two sides to the coin. Operations may seem pointless and automate-able while research may seem hopelessly academic.  

In my opinion, the portfolio manager role provides the perfect combination of all types of work. It combines an entrepreneurial spirit in operationally managing others money with an academic, almost professorial, approach to decision making and viewing the world, and top's it all off with the ego stroking of the sales pitch. It's interesting that the successful portfolio manager is essentially a renaissance man, but he is required to specialize and succeed in single field before the opportunity to hold the position is awarded.

The Question: Why do I want to do equity research?
1. It is the dream. Equity research to portfolio management to hedge fund manager,to fame and fortune.
2. It is the perfect combination of introversion and extroversion for a person who regularly straddles the line.
3. It fulfills my egotistical insecurity i.e. the need to employ myself in some academic pursuit
4. It fulfills my emotional insecurity i.e. the need to feel superior to others in my chosen profession
5. It pays. Often it pays very well.
6. I'm passionate. I think, and I am definitely over operations.

Closing Thoughts

"It is hard to fail, but it is worse never to have tried to succeed." - Theodore Roosevelt 

I personally believe that equity research is right for me. I straddle the line between extroversion and introversion on all the MBTI's I have ever attempted. I haven't met much success trying to be extroverted in the world of operations, and I have experienced the anxiety related to not using my critical faculties on a regular basis.  

I think it's time to make another career jump.

"Write drunk; edit sober." - Ernest Hemingway
"Apologies for the mistypes and tangents" - Your humble author, disinclined to edit a blog.


Footnote:
Some philosophical thoughts for those inclined

What if the majority of my drive to be in equity research stems from my egotistical needs for acceptance from others and from myself. What if, as I grow, I become more detached and aware of my 'self' and reduce the influence of my 'self' on decision making? ....Will I quit? Will I leave everyone, run away from urban living and seek to commune with nature and the reality of existence? Probably not. </sarcasm>

Really, that all may be so. It may be that economic and societal notions of "success" are really only good for alleviating the specific type of anxiety that accompanies every ego as it travels through life. In the end, maybe the wise and "unsuccessful" are as satisfied with their lives as the "successful". Certainly it is more profitable and satisfying to become wise than to toil your life away seeking "success".

Though there is some psychological significance related to priming one's thoughts with the notion of ones own death, but I think it is comforting when I get too existential to 'remember that you are dust, and to dust you shall return'.    [My favorite holiday is Ash Wednesday: the day when we all admit to ourselves that we really are just dust, there is nothing more. Christianity has great ideas, but there is a more rational reason to be good than 'eternal life'. Admittedly, the benefits to the delusion of the afterlife outweigh the cons: The masses are more easily deluded than educated, and education can be manipulated while mass delusion is more easily controlled and kept on point. In the end, we are all just walking each-other home.]

Self Improvement

Self improvement is a illogical process. It implies that you are not good enough, it implies that you are trying to change the way you are perceived in order to gain acceptance from others. 

“No amount of self-improvement can make up for any lack of self-acceptance.”- Robert Holden

"If you are not happy with yourself, even the loftiest achievements won't bring you much satisfaction."- Ben Bernanke

Tiger Woods

Tiger Woods is an amazing dude, but not for the reasons you might think. Sure he is the greatest golfer to ever live, and he's such a boss that even a supermodel wife can't satisfy his sexual appetite. He is a black man dominating the white man's country club game, and banging-out their blondes.

Beyond the golfing, I think Tiger is amazing for his self awareness(which is actually a part of the golf game). After winning The Players Championship this weekend, Tiger completed his contractual obligation: the post win press conference. His recall of each and every shot of the day, hole locations, wind direction, standings, etc. is unreal. What is most impressive I think is the way he thinks about himself.  He constantly refers to himself in the 3rd person, and even when he speaks in the first person, its as if the 'I' he is referencing is the golfer/athlete, and the person speaking is his manager.

He knows that when he did mishit the ball this weekend it was always fat, so he made sure that whenever his lie was not perfect, he hit in a direction that gave him some margin on the long side. Fascinating that he makes a study of himself. Its not that 'he personally' mishit the ball, its that his 'athlete self' was a little off this weekend, and in order to compensate, his logical self needed to adjust for this issue. Its fascinating to see an interview with someone who's job is to be an expert on himself, his body and his emotions, who is required keep his emotions and nerves in check, and stay in the moment while under the tremendous pressure of million dollar prizes, and golfing legacy. Amazing.

My Deepest Darkest Fear

Everything anyone says or does is a result of some underlying psychological reason.

What if the reason I write these ridiculous blog posts is because I'm afraid of facing the truth: that I actually enjoy accounting.

What if accounting's trade-off of medium hours and moderate career risk is actually just right for me. What if I made the right decision in college and pursued accounting because I find it interesting, challenging and dynamic? What if I am where I'm supposed to be? Can I accept myself as an accountant, or do I need to feed my ego with a 'front office' job title somewhere? 

The shittiest parts of auditing are: (1) dealing with 'bosses' who are 25-30 years old who were promoted based on seniority, (2) doing tedious bitch work for seemingly no purpose, (3) working long hours for the sake of face-time,(4) mind numbing and tedious checklists, (5) .  All of these shitty parts are not applicable to a job in industry where you can manage the accounting for an actual firm, make decisions and have input into the business operations of the firm. 

Stepping out on the 'career risk curve' a little bit and looking at assistant controller spots at smaller hedge funds might actually be what I need right now.  Equity research sounds intriguing and fascinating, but really, what I hate the most about my job is the tedious detail work.  Equity research is 100% detail work. Equity research gives you no operational experience  Accounting puts you in the trenches, at the office, managing the business day to day.  

I want to manage high level.  Manage a process, build a team, provide strategic input, and be involved in the operations. Maybe I am on the career path I want. I used to be so excited about starting this job, and then they slam you with two years of staff work. Now that the staff work is over, I can start focusing on the parts of the job I actually enjoy. Maybe? 

I'm thinking I might interview for some hedge fund assistant controller spots. See what's out there.

Finding Your Purpose

The following is summarized from the psycologytoday article linked below. The ideas really resonate with me, and I'd like to put my feelings in writing and document the important points I took away from the article.

http://www.psychologytoday.com/blog/the-new-resilience/201105/why-its-hard-find-your-life-purpose-in-todays-world

1. Pursue something larger than your ego. Your life's objective should not include superlatives and titles. It should be altruistic. It shouldn't be about optimizing the way your ego feels. Do what you are passionate about and success will follow. Hopefully, if you are working on your passion, your ego wont crave outward success and recognition anyway. 

Think about Apple. They created new markets for music, and entertainment, new products from imacs to ipods to itunes to iphones. They weren't focused on winning. They weren't focused on market share and EPS. They were focused on creating the best product, period. That is purpose. Improving the world by focusing on providing the greatest value you can. Of course they are one of the best managed companies in the world and do indeed maximize market share, and practice strategic obsolescence within product lines, and tightly control costs, but their core, their driving focus was the quality of the product.

2. Don't try to find your purpose. Try to 'learn' it. Try to 'feel' it. Study your life story, your successes and failures and try to determine what they say about you and what you like. People are terrible at deciding what will make them happy, and who they are; the self-help industry is supposedly a 2.5b industry per wikipedia. Make a study of you. Be an unbiased expert in you.

"Whatever course you decide upon, there is always someone to tell you that you are wrong. There are always difficulties arising that tempt you to believe that your critics are right. To map out a course of action and follow it to an end requires courage."- Emerson

"...may suddenly think during the night, "I must go to the north," and in the morning, he sets out on his journey. He does not know why, he does not know what he is to accomplish there, he only knows that he must go. By going there, he finds something that he has to do and sees that it was the hand of destiny pushing him towards the accomplishment of that purpose which inspired him to go to the north." -Hazrat Inayat Khan

http://www.theonion.com/articles/find-the-thing-youre-most-passionate-about-then-do,31742/?utm_source=Twitter&utm_medium=SocialMarketing&utm_campaign=standard-post:quote:default

Who am I, and how do I fix that?

There are many different ways to think about you, dozens of different psychological theories.  I love theories. I love big picture. I like to understand everything at a high level.  If I could be in college for the rest of my life and study whatever I found interesting, I probably would. Unfortunately, they try to make you specialize and spend 5 years getting a Ph.D. and doing research in a specialized field.  I don't think I could ever commit my life researching a single topic, let alone a specialized sub-topic. As one of my favorite professors liked to say(shout), "but I digress!"

I have yet to find a solid outline of the different psychological theories, and I want to consolidate my understanding of how to think about my self, so I'm taking an amateurish shot at writing one that covers the points I think are important to help me understand me. So enjoy, future me! And thanks to wikipedia.

Freud-
You are an Id, Ego, and Superego. Your issues are a result of your subconscious drives and conflicts between the three parts of you. In order to understand 'you', you must understand your subconscious.  Freud liked to cite the subconscious drive to reproduce as the underlying reason for many issues. Most people don't think that sex is the underlying purpose for everything, as Freud did. He makes a some good cases though, and is humble enough to admit that 'sometimes a cigar is just a cigar.'

Rogers-
You are a unified, singular, person.Your issues are a result of 'incongruence'. People want 'self actualization' and 'positive self regard', often people sacrifice one of these for the other, leading to incongruence.  For example, a young student thinks that the most important goal in life is starting a career. This young student is trading the pursuit of 'self-actualization' and process of finding himself by taking liberal arts classes and freely spending time on individual interests, for the 'positive self regard' that comes from getting a job in Manhattan with an international auditing and consulting firm.  These incongruencies manifest as defense mechanisms such as 'distortion' and 'denial', which are used to protect the 'self concept'.  For example, that student with the positive self regard as a result of his pursuit of the career has distortion issues where he thinks his public accounting career path to be the absolute best and the only way to success in accounting.

Adler-
All people strive to belong and feel significant. A lot of your personality is influenced by the social context of your life such as birth order, lifestyle, parent's education level, etc. The primary 'inferiority complex' born out of your years as a helpless child. The secondary 'inferiority complex' results from your inability to live up to your 'idealized self'. The degree to which your perceived self varies from your idealized self is the degree to which you have some psychological issues.

Passion and Your Authentic Self

What should I do with my life?
"Do what you love and fuck the rest." 

Who am I?
Its scary that I don't know myself. Its more scary that 'self'' might actually be a collection of selves, as suggested by the Yale psychology professor's article, link below.  No wonder it's so hard to determine what 'I' like. I don't know who I am. The academics just make it even harder.

Diving into psychology as an amateur looking for answers is terrifying. There are competing theories and everything seems really messy. It doesn't seem like there any right answers, and unfortunately the wikipedia page for 'who am I' directs you to some Vonnegut play.  It could be that I am composed of an id, ego and super ego and their interactions are making me neurotic. It could be I am the result of some combination of nature and nurture, where my past experiences have imprinted my personality in such a way that I am who I am today. The academic study is fascinating, but not entirely practical. We can't all go out and get a Psy.D. in order to figure out what we should do with our lives.

I'm just going to leave this question alone for now. If the professionals cant figure it out, I don't think this blog post will.

What do I love?
"When making a decision of minor importance, I have always found it advantageous to consider all the pros and cons. In vital matters, however, such as the choice of a mate or a profession, the decision should come from the unconscious, from somewhere within ourselves. In the important decisions of personal life, we should be governed, I think, by the deep inner needs of our nature."- Sigmund Freud

So, according to Freud, the goal is to determine the 'deep inner needs of my nature', and see where that leads me. There is no intellectual way to determine these. There is no cost benefit analysis to perform. Its a matter of developing skill in feeling that inner voice.  It will never be easy to determine, and you will never be confident you are correct. There is no right answer.

You just need to be honest. You need to know your own issues and decide which parts of your feelings are just neurosis or other psychological glitches, and which are the true feelings.  Its interesting, to a certain extent your neurosis are you. You are born an individual, but the experiences and lessons you learn leave you with your habits and imprint on your personality. Do you ignore all those things? How do you differentiate your neurosis you want to change and your inner nature?

This messiness is hard for someone trained in the 'science' of accounting to accept. There should be a way to model this problem in a spreadsheet. I should be able to just model the equation and constraints in excel, and run the solver add-in to maximize the formula.

What if the 'what do I love' and 'who am I' questions are one in the same?
 I still don't know me, but that's okay. Knowing thyself is not a weekend 'do-it-yourself' project. I don't think its something that can really ever be accomplished. 'Yourself' is a moving target, and I doubt anyone ever actually landed on it. Your feelings and ambitions are always evolving.  What you can accomplish, however, is developing great skill in feeling those 'deep inner needs of your nature'. You can get good at knowing those deep feelings and identifying them as from your inner nature rather than from fleeting emotions. The better you understand your mind and your issues, the easier it is to identify the false feelings.  The better you are at knowing which feelings relate to the true self, the nicer you can be to your true you. I think that's a skill worth developing, and goal worth striving for. Know thyself, the unexamined life is not worth living.

Practice
Be nice to you. Set time aside to take care of yourself. Ask yourself what you want to do each day. Seriously ask and try to allow your true self to answer. What would you really enjoy for lunch today? Its such as silly question, but I think everyone finds it difficult to decide sometimes. Just let go of everything, and try to figure out what 'you' really want for lunch. Once you can handle letting yourself feel what you really want for lunch, you can move on to something bigger. 'How do I really want to spend my time today?' 'What career do I think would fulfill me?' 'What is my purpose?'  Just take one step at a time.

Try to take five minutes each morning for a month and meditate. Just sit still in your chair at home, and focus on your breath, count your breaths from one to ten. Notice how much your mind wanders and how little control you really have. Notice when you lose count, and simply return to counting from one again. Five minutes in the morning will allow you to start you day conscious of your mind, a little less stressed, and hopefully a little better at focusing on what you choose to.

http://www.theatlantic.com/magazine/archive/2008/11/first-person-plural/307055/1/

Stretch your Comfort Zone

You need to learn to 'lean into the vulnerability of life'. Be you, even when you don't think you should or could possibly let the world see. Push yourself to that uncomfortable place. That uncomfortable feeling means you are growing. I've heard this idea a million different ways from a million different sources from a TED talk on psychology, to a hedge fund-er's managerial magnum opus, to strength training manuals. They must be onto something, and I think its the same thing.

Ray Dalio's Principles mentions 'safe' , 'stretch' , and 'panic' zones. We all know exactly what he means. When we are overloaded, we shut down, get overwhelmed and make little progress. When we aren't challenged we are cruising, and atrophying.  When we are working hard while keeping our head above water, we are growing, and this is the right amount of pressure.

Not too much, but not too little. You need to use just just the right amount, with some persistence and practice, to get the results you want. Life's a great balancing act.

Whether its managing your strength training schedule, your emotions, your motivations at work, your finances, your love life, or anything in your life, you need to remember that life and nature work in cycles. The same way you need to recover from a hard workout, you need to recover from working in your 'stretch zone', or pushing through a depressing time personally. Sustainability and caring for oneself is the name of the game.

"You'll get mixed up, of course, as you already know.
You'll get mixed up with many strange birds as you go.
So be sure when you step. Step with care and great tact
and remember that Life's a Great Balancing Act.”
-Dr. Seuss