With a long weekend upon us, ConvergEx's Nick Colas takes the
opportunity to wax a bit philosophical. The question for the
day:
"How do you survive middle age while working on Wall
Street?" After polling a few friends of a similar
vintage to his own 25 year history on the Street, he has come up
with a
Top 10 list of dos and don’ts. At the top of
the list is "Don’t get stale" – what you did to become successful
is not necessarily what will keep you competitive. Other
dictums include “Be efficient”, “stay in touch with your clients”,
and “the answers are never just in the numbers”.
The key take away from all these thoughts is pretty simple
– the journey never stops, so keep investing in yourself, your
friends, and your allies. These may not guarantee success, but
ignoring them surely leads to failure.
In the 1980s, there was no better managed American
automaker than the Ford Motor Company, largely due to the
leadership of Chairman and Chief Executive Officer Donald
Petersen. Ford was the closest domestic manufacturer
to the Japanese in terms of efficiency and quality, thanks to his
push for incremental investments in manufacturing and
R&D. He championed a radical new design for a mid-sized
car, the Taurus, that proved wildly successful and showed American
car companies could gain share in the segment. The Ford
family was happy with him, the unions liked the jobs that came with
new products, and the Street saw Petersen as a disciplined operator
and good steward of capital.
Then, in early 1989 after 40 years with Ford, Don Petersen
unexpectedly quit. His contract wasn’t up for 18
months. He handed the reins to a longtime lieutenant by the
name of “Red” (Harold) Poling and rode off into the sunset.
His explanation:
“It’s time to repot myself”.
Press accounts at the time and later pointed to some
disagreement at the Board level over succession planning, but
industry insiders I spoke to in 1991 – including Red himself – said
Don was being honest. He wanted to do something new.
That story has stuck with me through the years, and there
are two takeaways relevant to today’s note. The first
is that you’re never too old or too powerful to essentially burn
out and need a new challenge in your life. The second is that
I’ve been on Wall Street for a really long time. I can relay
a conversation with a CEO I had in 1991 while employed as an auto
analyst for a bulge bracket firm. Also, you can tell I am old
because I use the term “Bulge bracket”. I also call a radio a
“Wireless”.
Putting the two thoughts together, I got to thinking about
how one manages the middle part of a Wall Street
career. For the purposes of this note, consider that
timeframe to be between the ages of 40 and 60. If you’ve only
worked at hedge funds, back that up to start at age 30, just like a
5 year old dog is 35 in human years. I jotted a few thoughts
and then spent the morning calling a few friends in the business of
similar vintage.
We came up with a Top 10 list of “How to survive and thrive
when you’re not the youngest one in the hive”. In no
particular order, here they are:
1. Stay close to your sources of
information. No man or woman is an island on Wall
Street. We all need constant interaction to stay current and
informed. If you are an analyst, for example, these are your
companies, industry contacts, press relationships, and anyone else
with whom you have a productive dialog. Recognize that 5-10%
will leave your sphere every year and need to be replaced with new
contacts.
2. Stay even closer to your clients. As Bob
Dylan famously said, “You’re gonna have to serve somebody.”
We all do. For the sell side, it is our money management
clients. For the buyside, it is your sources of
capital. No conversation or in fact any communication with a
client is ever a waste of time. That, by the way, is why we
write these notes every day, 200+ days a year.
3. Mentor as many younger people as you
can. The old saying “To teach is to learn a second
time” holds here. Plus, if you hire the right people they
will eventually be far more successful than you. At that
point they will hire you as a consultant out of gratitude for
giving them their start and let you take their jet on
vacation. At least that’s how I see it playing out for
me.
4. Be efficient. My personal mental model of
success is essentially a DuPont return on investment
framework. There are two components: your “Margin” (i.e. how
smart you are) and your “Asset turns” (how efficient you
are). Past a certain point there’s not much you can do with
margins. You can read little more, talk to a few more smart
people, listen to a few more companies, etc. But you aren’t
going to bump your IQ by enough to make a difference.
Improving your return on personal investment comes down to
increasing your efficiency. Don’t be rude, but don’t waste
time on people who don’t merit your attention. The same goes
for all the stupid little time sucks through the day. Get rid of
them.
5. The answer is never in the numbers.The four
most dangerous words in finance are “I have a spreadsheet”.
Any analysis worth the name is really about how you consistently
and realistically assemble the numbers in a financial or economic
model. It’s the narrative, not just the numbers, that define
insight.
6. Balance personal and professional life.
Sometimes clichés exist because they are true. “Don’t pet a
barking dog”, or “never start a land war in Asia” are good
examples. Challenging jobs can lead straight to divorce. And
that’s a whole lot of no fun.
7. Don’t make big mistakes. This one is
uniquely true for middle aged finance executives. Early in a
career you can bounce back, because future employers or sources of
capital will chalk up even a sizeable error a youthful error to
inexperience. Past the age of 40, you should know better and
big screw ups can be deadly. Missing part of the upside in
business or investment idea is OK; getting all the downside in a
failure is not.
8. Don’t allow yourself to get stale. If you
make it 20 years in this business, you’ve clearly done something
right. Now here’s the catch: it isn’t the same thing that
will keep you on top for the next 20. My first mentor used to
call Caterpillar dealers all over the world, every quarter, to keep
up on business trends. When his competitors started copying
that, he began offering clients conference calls with his
contacts. When that got to be routine, he began to offer road
trips. Always keep innovating. Old themes (in this
case, industry contacts) are OK; old approaches are not.
9. Set long term goals and work backwards to the
present. Sometimes success is a curse, because you
can’t imagine what’s beyond any particular near term
accomplishment. Imagine where you want to be at 60, or 65, or
70 and define the steps needed to get there. It’s too easy to
get caught up in your day to day and wake up one day to say “This
is not my beautiful life”.
10. There is a huge and interesting world available to you
when you leave finance. Or if it leaves you.
Wall Street is one of those careers where it quickly becomes
unimaginable to work elsewhere. Yes, that’s partly the
money. OK, it’s mostly the money. But remember that
there are many fabulous places in the world where it doesn’t cost
$50,000/year to send a child to school or $100,000 for a beach
house rental. Maybe you will make it to 65 working on the
Street. And maybe you won’t. As long as you realize
either path leads to happiness, you’ll be just fine.
I am sure I have missed many helpful hints for the 40-60 year
old set; these are just a starting point. At the end of the
day, whatever works for you is the right thing to do.
Just remember to share those nuggets of wisdom with your
friends and colleagues – we will all appreciate it. And don’t
be afraid to repot yourself a few times.
