At the MIT Conference last Friday, our lunchtime keynote address was from Donald Sussman, the founder and chairman of Paloma Partners.He’s a very rich guy and surely has made many savvy business decisions. For example, he mentioned that around 1992 he was invited with about 200 businessmen to hear a pitch by the Chinese government on investing in China. He not only paid his own way unlike everyone else, he stayed in a nice hotel rather than the free (but very modest) accommodations provided. The government was so impressed, they presented him with a unique opportunity that turned out to be quite profitable. Clearly, this was fortuitous signaling.
Another interesting point he made was that it is useful to exit a trader when he’s had a super year, and a super amount of investor inflows. Invariably, these people are going to discover their limits of scale, and it will end badly.
On the other hand, Sussman was pretty bad at articulating some unified set of principles, and spent a lot of time discussing his childhood, which is pretty narcissistic and extremely boring. It reminded me a bit of Bridgewater Capital billionaire Ray Dalio’s manifesto, which set a new standard. He first lays out 210(!) principles–be extremely open, don’t tolerate dishonesty–and then notes: “What follows is the Meat…” and then 200 more (eg, ‘don’t try to please everyone’). The earnestness and lack of focus reminded me of my childhood, when visiting my grandparents in a small town and I was forced to listen to very unpersuasive didactic Lutheran sermons.
I think it’s admirable for people to try to articulate their philosophy on life, but they should be aware that being very successful at business or politics in no way implies they can explain that success. As Michael Gazzaniga has shown, the part of the brain (usually on the left hemisphere) that narrates our thoughts in our own head does not have access to all the reasons why we feel the way we do, or why we did some things, and it is engaged in post hoc rationalization all the time (this is why you should switch your date’s decaf with a a caffeinated coffee, or take her to a scary not sleepy movie, because when her heart races her interpretative left-brain will put some more weight on the possible explanation that her right-brain must find you attractive for some reason). We know a lot more than what we can say. I don’t presume that having a redundant and trite Weltanschauung means these people aren’t good investors or managers, merely, their ability to pontificate on a general life-strategy is not the core of their alpha.
Stick to what you know. And don’t talk about your childhood to a captive audience.