I may not be telling you something in this blog you don’t already know. Or haven’t already heard or read. In fact, I do hope that you’ve heard this elsewhere recently. Liberal Arts lives. I grew up in the securities industry, and have met more than my share of finance majors. I can’t count how many parents I’ve spoken to that were pushing their kids towards schools with stellar reputations for the finance majors they churned out. This isn’t even the traditional, and broad, economics education of old. It is a focused, blinders on, pursuit of a degree pointing students to a very specific career path. Finance. That’s where the money was going to be, so why learn anything else. And if you wanted the best job, the thinking was, this would give you the preparation employers were looking for. Someone who could step right in and understand what they were looking at when presented with a stack of balance sheets to analyze.
I was a Political Science major. Actually at my school, Clark University, it was a Government major. I planned on being a lawyer. Midway through my freshman year I decided not to go down that road. The question became “Now what?” I was lucky enough to land a job at Bear Stearns in the Management Training Program. This allowed me to get exposure to a broad array of roles within the firm and decide which route to go down. Investment banker was the path of choice for many, but those many were primarily business and finance majors. Interestingly enough, I went on to spend 14 years in the commodity futures pits, where many of the most successful traders had never graduated from college, or even attended at all.
More recently, while at Bloomberg, I had the opportunity to speak to a group of students from my alma mater. And they were? You guessed it, finance majors. In fact, since I left, Clark added a Graduate School of Management. Go figure. This was a school known for its Psychology department, riding the coat tails of having had Sigmund Freud speak there. And students majoring in Government, Philosophy and Sociology were what the school churned out. The current business school students had no connection to this. They thought I must have been a business or finance major as well, and they were very interested in my career path.
The question I enjoyed answering the most during their visit was, “What was the most valuable thing you learned at Clark?” I answered that as a liberal arts major, Clark had taught me how to think. Not to think about the value of a security, but to think about the world around me. The world and the people around me determine the value of a security. My own approach to trading is to look at charts. I use these charts because they are displaying price, and price is the culmination of everybody else valuing a security. Many of those people are finance and business majors. I’m happy to let them interpret a balance sheet. I just need to look at the results of their analysis on the charts to make my own interpretation of future price and value.
I like to simplify things as much as possible. I explain to students when I teach that my opinion of the markets is they are large experiments in sociology. What is the crowd doing? If more people are buying the price goes up. If more people are selling, they all believe the security is overvalued and the price goes down. Having this perspective allows me to not have to try to compete with the finance majors at their game. It allows me to understand their analysis results without needing to drill down and understand all that fundamental information. That’s my game.
This isn’t to say that I have no interest in the information. After all, I named my blog “The Story Behind The Picture.” I do think it’s important to know the information. I just accept that I won’t know it all, and I definitely won’t know much of it as quickly as others. Students have heard me say many times that I take for granted that any information I have, someone else has more and had it sooner. Then those people trade, set a new price, and I try and determine whether that price indicates the probability of the security going up or down from there.
So where does the liberal arts education come in? Well, when I try and ascertain the information, I can process more than just a balance sheet, supply chain, and current regulatory influence. I can find a way to put the information in real world terms. Things that are simple to relate to, often even obvious after the fact. There are no ‘blinders’ involved. I can think about it from a political perspective, a philosophical perspective, and a sociological perspective.
What has made me smile recently are the number of news stories that are now encouraging the same. America Online (AOL), Adobe, and Paypal all had liberal arts majors among their founders. Steve Jobs was a college dropout, we all know. What many don’t know is that he dropped out of a liberal arts focused university. And that’s just tech! Many of our great pioneers of recently successful (understatement) companies, weren’t focused on tech. And many of the most successful hedge fund managers are now focusing on hiring liberal arts majors. In fact, one of my favorite young colleagues at Bloomberg, who I had the pleasure of teaching and mentoring was a Classics major. He just landed his dream job at a hedge fund. I always said, “He gets it.” They must have said the same after his interviews.
Recently Mark Cuban, who’s had a bit of success himself, said during an interview with Bloomberg that we need more liberal arts majors in the next 10 years. He spoke of perspective. One of my favorite words. My first blog entry described the Friday Wrap’s I conducted at Bloomberg. The idea was for the younger employees, most of whom were finance and business majors, to gain perspective on the markets. What makes them move. How to interpret everyday events and find a way to translate them into investment ideas.
And that’s what more and more people are realizing. That it’s not the early “blinders on” focus that matters. It’s the ability to grasp the ‘big picture.’ Look beyond some basic finance or business education training. Look outside the balance sheet and supply chain. Grasp the impact of everything around you. This is what leads to broad investing success. It exposes opportunities you might not otherwise see. It allows you to think, not just crunch some numbers in a repetitious fashion. The more you look around, the more you think, the more you learn, the more you’ll make. That’s what makes you smart, the MBA is merely some icing on the cake.