16 Nov Michael Lewis and Lucky BigFatPurse
I like watching Commencement Speeches. There is wit, there is melodrama and often panache in the delivery. And in terms of ‘wisdom per minute’ nothing beats these speeches. There is something about the hallowed halls of these higher institutions that brings out the best in every Commencement speaker as they try to deliver solid advice and pass down life lessons to the next generation.
It was only last week that I discovered this one by Michael Lewis. Lewis is the author of bestsellers such as Liar’s Poker and Moneyball. The first is a story about investment bankers and Wall Street while the latter tells the story of professional league baseball team Oakland Athletics and how they utilize unconventional metrics to buy undervalued players. (Moneyball also forms the foundation in the development of our CNAV Strategy, but that is a story for another day). Flashboys is his latest novel about high frequency trading.
Lewis studied Art History and graduated from Princeton in 1982. Thirty years later in 2012, he returned to his alma matar to address the graduating class. He took them through his early life and how he started working life in Wall Street as a derivative trader with the now defunct investment bank Saloman Brothers. His stint exposed him to the greed and excesses of investment banking and that formed the foundation of his first book.
He recalled how he spoke to his father and informed the senior Lewis that he would be leaving his promising banker job to write his first novel. His father of course tried to dissuade him, asking him to hang on for another ten years before making that decision. Michael Lewis stuck his ground.
I knew what intellectual passion felt like – because I first felt it here, at Princeton, and I wanted to feel it again. I was 26 years old. Had I waited until I was 36, I would never have done it. I would have lost that feeling.
With hindsight, he could not have been more right with that call. Liar’s Poker went on to sell a million copies.
Up to this point the speech was all fairly obvious and standard. The speech was peppered with nuggets of teachable moments here and there but there was nothing to indicate that this would be a classic. It was only towards the end when Lewis switched gears and upped the address a notch.
With Great Power comes Great Responsibility
He shared with the audience an experiment conducted by Dacher Keltner and his team from the University of Berkeley, California in 2003. Keltner is interested in how people react to power. He got students to volunteer for the experiment and sorted them into groups of 3. The groups were given tasks to solve that included writing a policy paper on moral issues. One out of the three was randomly assigned to grade the paper and determine how much the other two would be paid – that effectively makes him or her the one with all the power and the leader of the group.
Halfway through the experiment, the experimenters interrupted the group with cookies. Four cookies on a plate for three participants in the room. Conventional norms dictate that every one gets a cookie. The final cookie remains and it is now a free for all. With amazingly consistency Lewis tells us, it ends up with the ‘leader’ of the group. Not only would he eat it, but he would also eat with with gusto, or what the original experimenters call ‘disinhibited eating’.
With power, individuals become more focused on their own needs and wants. They become less focused on other’s needs and wants and even behave as if unspoken rules that apply to others do not apply to themselves. This is true even when positions are arbitrarily assigned. As Lewis bought up in his address.
The Leader had performed no special task. He had no special virtue. He had been chosen at random, 30 minutes earlier. His status was nothing but luck, yet it still left him with the sense that the cookie should be his.
And using examples from his own life, he went on to explain how success is always rationalised. People really do not like to hear success explained as luck – especially successful people. As they age and succeed, people somehow feel that their success is inevitable. They don’t want to hear the role played by accident in their lives.
Don’t be deceived by life’s outcomes. Life’s outcomes, while not entire random, (they) have a huge amount of luck baked into them. Above all, if you recognise that you have success, you’ve also have luck. And with luck comes obligation. You owe a debt, not just to your gods. You owe a debt to the unlucky.
BigFatPurse – We have come far
What Alvin started developing the Conservative Net Asset Strategy in early 2013, I was thrilled. It was exciting. It was something totally new and unheard of. It will be BigFatPurse’s strategy, something we can call our own.
When he told us that we are going to package the strategy into a course, go out to the public and teach them how to invest, I was traumatised.
Financial Education has never had a good name. I myself have attended sessions promising strategies that can produce ultra returns with minimal effort. I have had enough of slick sales pitches touting financial freedom and a life of leisure only to end off with pushy salespeople stuffing credit card machines under my nose. I am wary of ‘successful’ people with their flashy cars, fancy toys and far flung holidays who are more hype than substance. On the other hand, I am also keenly aware that most people have the impression of financial educators as charlatans. Many would say – Those who can, do. Those who cannot, teach.
Either way I see much obstacles ahead. I was skeptical that this whole financial education set up was going to work.
Today we conduct the 12th session of our Value Investor Mastery Course. In the short space of 10 months we have taught our entire CNAV strategy to over 500 people. Every single one is sold out. Thankfully we had not had to resort to hype and hard sell to fill our classes. Just yesterday we had a graduate’s gathering and we got our friends Eric from Aggregate Asset Management and Xeo the creator of financial card game Wongamania to come speak with everyone. It was a blast.
We are planning to launch 3 more different courses in the coming year. They will range from the very basic Investment 101 to the highly technical Financial Statement Analysis. This is in line with our vision to provide Wholesome Financial Education across the entire knowledge spectrum. Money is the language of the capitalistic society. Our society would be a better place if more people could speak and understand that language better.
Another exciting development would be our very own office and classroom space right smack in Orchard Road. (Watch this space for more details soon!)
With Luck comes Obligation
It is against this backdrop that I feel strongly for Michael Lewis’ Princeton address.
There is no lack of hard work that goes into BigFatPurse’s early success. But without a doubt, there is an even greater amount of luck baked into it. To borrow Lewis’s words,
we had success, but we also had luck. And with luck comes obligation.
We are lucky to be financially savvy, and we owe it to the not so financially savvy to help them become more so. We are lucky to be financially free. We owe it to help others become so. We are lucky that BigFatPurse has done well. We owe it to everyone to do better.
Thank You for supporting BigFatPurse!