While having a degree from an Ivy League university and an MBA under your belt is common in the investing world, unconventional educational experiences can be just as valuable as conventional ones. Military experience, in particular, offers recruits a grounding in critical decision-making and problem-solving, which can be highly valuable in an investing career. Beyond this, individual educational experiences outside of the classroom can also have a powerful impact on an investor’s career.
In this week’s Trusted Answers, we look at whether a conventional academic background is needed to be successful in institutional investing:
In general, despite the emphasis of getting your kids in the right schools, there’s a lot of discussion of if you aren’t eligible for scholarship aid, is it worth it to go into debt to go to these schools? Here at Hopkins, we think about that all the time as do people at other institutions. Are you better off going to a state school and graduating debt free and then going to grad school somewhere else? It’s a very complex and thorny question.
I am fortunate that I did do my education before the cost went over the top. Although, on the other hand, it looks cheap today, but it didn’t feel cheap when I was doing it.
...anybody who is a good student will be able to learn and be successful virtually anywhere. I think that there are a lot of great schools out there that might not have brand names.
I also think that for young people, fit is really important. Going somewhere where you are happy and feel like you fit in, even if it’s not an ivy league school, is perhaps even more of an influence on your ultimate success there and your success elsewhere. That said, clearly top firms like to recruit at schools that they perceive as top schools. There is not only a self-referential, but a self-perpetuating, machine.
I was recruited right out of Mt. Holyoke to become an investment banker and worked as a portfolio manager for the first half of my career. Everyone I knew on Wall Street in the early 80s had degrees in literature, philosophy, other liberal arts from ivy league schools… A CFA may be more important than an MBA if you want to play a pure investment role.
...I've never felt that I've missed anything by not having an MBA. I was always focused on getting things done, even in the planning part of my career. I wanted to do things that actually got built or put in place as opposed to just being on paper, so I was always interested in execution. I would say if anything, I don't get lost in a spreadsheet. I know that there are a lot of other elements that go into a successful investment.
...Those who know me know that I consider West Point the education that made me who I am, teaching the mental toughness, the analytical rigor, the confidence that whatever the challenge, it can be met with energy and decisiveness. I’ve been grateful for that my whole life. It prepared me to better take advantage of what Harvard had to offer.
At Cornell as an undergrad, I was an economics major, which reflected my life-long interest in finance and investments. I was also fortunate to be part of the Navy ROTC program, which paid for my education and led to a terrific first career in the Navy. After graduation, I went through flight school and served 10 years on active duty and an additional 10 years as a reserve pilot. The experience shaped my understanding of the world’s tensions and instilled a sense of personal accountability that has been fundamental to my career. For those so inclined, I would strongly encourage military service as a uniquely rewarding career option and a cornerstone for future success.
There's also a lot of real practical knowledge that comes from my experience in the military, like being able to look at things with a fresh set of eyes and adapting quickly. I think that is a skill set that came primarily from my experience as an officer in the Navy. That experience also gives me a broader set of views and experiences. I remember doing due diligence on a company once that invested in a helicopter operating company. As a pilot, my experience with aircraft maintenance schedules was helpful in understanding something even the manager had missed about the business and its operations.
There are two key lessons from my Marine Corps experience that carry over to investing very well. The first is that tactical decision making is not a turn based game. It's the difference between Chess and a competition where your opponent doesn’t have to wait to move until after you act. This is a great parallel to the markets and investing, which are always evolving in real time based on the actions of a large number of participants.
Another lesson that the Marine Corps teaches is that a critical decision making skill is understanding the difference between insufficient and incomplete information. Acting on the basis of insufficient information imposes unnecessary risk, while a failure to act with sufficient but incomplete (perfect) information imposes unnecessary delays. Understanding the difference between insufficient and incomplete is an essential skill for investing and for operating in the markets. Waiting for perfect information can paralyze an investment process. The critical skill in decision making is finding the optimal time to make a decision and execute.
If you supplement that skill with an effective analytic framework, you optimize your ability to impact future events, or, in the case of investing, to profit from them. If you make a decision too soon, you forego useful information and are more likely to make a sub-optimal decision. If you make a decision too late, you reduce your ability to profit from future events. I think that finding that balancing point is a critical skill for investors.
Trusted Answers is a weekly series that delves into some of the most pertinent issues within institutional investing, and shares some of the insightful responses from the 40+ institutional investors we have interviewed in the past year. Take a look at some of our other Trusted Answers.