How to Make Money – The Hedge Fund Manager of the Decade’s Way (Exclusive Interview)
Mikael Syding has been a successful investment banker, becoming one of Swedish top analysts in late nineties and then receiving the HFR award for “The European Hedge Fund Manager Of The Decade (2000-2009)”. He decided to retire two years ago, having his day as Managing Director and Member of the Board of Futuris Asset Management on January 1, 2015.
Mikael’s opinion on the development of robotics and why every student should be aware of them is what caught my attention and motivated me to see if he would be interested in talking more about it. I was extremely excited that he accepted our invitation and I tried to ask questions in the same way his articles are: interesting, honest and entertaining.
Let’s start by talking about the motivation of making money. For us as business students, going to work in investment banking or management consulting seems to be the best paying careers. First of all, do you agree with this statement?
They are the best place to be at the moment, but I think that the banking industry and possibly the management consulting business have grown too much to the detriment of the rest of the economy.
However, those students talented enough to go into finance and to rise up the ranks (even though the industry itself is shrinking) will make a lot of money. Partly because I think we are not done with these quantitative easy experiments and we are not really done with piling up debts upon debts – even though I think it is a bad thing to do, governments and central banks will keep trying it since it is the only thing they know.
Therefore, there will be a lot of money sloshing around without really a good place to go which you can get if you stand somewhere in between as a broker / middleman.
You received the award for the best hedge fund manager of the decade. One can say that it is surprising since you started your career in finance by coincidence. However, you had strong mathematical skills. What do you think made you stand out from the rest, so much that you were awarded?
I think the most important thing is that I have always been independent. In investing, that is the best talent you can have. Focus on getting some kind of absolute return and do not really care what other people are doing.
If you are independent, that means you will go against the grain and you will be contrarian sometimes: you will get ridiculed and you will lose money while other people are making money. However, if you are truly independent deep within then you really don’t care about that as much as you care about being right in the end.
So I don’t think my finance or mathematical skills or anything like that made me stand out. I think it was purely independence and that is something hard to teach.
Do you think this independence is important in other careers as well, other than finance?
Sometimes you really have to be good at being a team player. I think in some professions it is actually more important to have a high social intelligence and to really care about what other people think.
One example is sales. You need to have a kind of unique offer, but you also need to relate to your client and be attuned. That is almost the opposite of true independence.
In investing, you are directly competing towards of a lot of people. In the short term, it is a truly zero sum game. If one person gains, another person loses. Therefore, you have to be independent to be able to make a big difference.
As far as I understood, you are not against following these careers (eg: finance, management), as long as people like the work they are are supposed to do (eg.: math, statistics, business models, talking to people).
Definitely. What I’m saying is that if you do not think it is fun and you do not see yourself doing it without making a surplus of money, then you should not do it.
However, if you actually like optimizing numbers in Excel, meeting management teams, trying to understand business models and if you are really interested in doing the actual research, then you should definitely go into these lines of business.
However, you think that most people end up hating it after a few years and very few get rich. Why does this happen?
Few people get rich in finance because that is what rich means: the few who have a lot more than everybody else. It is just statistics: most people will fail and have an ordinary income.
I think people end up hating the career because they push themselves hard and they put in extra hours for the hope of getting that extra money that will give them freedom in the future. They keep doing things they do not really want to for the promise of being free and rich in the end – but since most people won’t be, they end up hating it.
Quoting one of your comments: “To be perfectly honest, during a few years here and there I was living it up, really immersing myself in the culture of free booze, easy women, cool venues, Italian sports cars and Swiss watches. But most of the time I wished I had the courage to just quit.” What do you think is the main difference between you and other investment bankers who might feel the same things but do not have the “courage” to quit?
I think it comes back to the independence. I must say I was probably close to losing it and getting caught up in the rat race: wanting to get that extra dividend, to prove myself just one more year and mostly wanting to prove my loyalty to my colleagues and partners. So the decision of quitting was partly because I felt my independence slipping away. I knew that the real me would want to get out of it eventually.
How did you start learning about Robotics?
I have always been interested in science and science-fiction, and I have been reading about it before even starting school. My father worked at ABB Robotics, so we talked about robotics early on, in the seventies. He liked gadgets and I got my first computer in 1982. I started with understanding programming and controlling machines and I got fascinated with that kind of development.
But it was in the late nineties when I started learning about modern AI and robotics. I stumbled upon Eric Drexler’s book, “Engines of Creation: The Coming Era of Nanotechnology”. In that, not only does he go into physics and mechanics of nanotechnology, but he also talks about how to use it for building robots and computers. After reading it, I kept looking for new books and articles on the topic.
I actually made the mistake of talking about the coming era of nanotechnology and robotics when I was an analyst and I tried to present my case for Swedish IT consultancy companies. One client asked “Why are we talking about this?” and then I said: “There’s so much promise for the future” and then kept going on into nanotechnology and he was like “A… that’s probably not for this quarter”.
Your hope is that students “dismiss investment banking and management consulting as future industries for you, instead immersing yourself in exploration of some of the big four technologies (nanotech, AI, biotech, automation/robotics) in order to solve the big five problems (Food, Water, Energy, Pollution, Health)”. Could you please talk a bit more about this and the general impact of robotics?
I think that in general solving real and important problems will always feel better for the person doing it than just shifting money around.
Since you cannot really be sure that you will become rich from doing finance or management consultancy it is better to do something that makes you feel fulfilled and important. It doesn’t at all mean that you won’t get wealthy. It might be the other way around.
If I am right, and finance is in decline, it is going to be more difficult than ever to become rich in finance whereas people like Elon Musk show that you can definitely become rich doing work in the big technologies and trying to solve world’s problems.
It is more interesting, more fulfilling and more important for everybody and it is more future proof. If you work in robotics and you become good at it, there is tremendous room for all kinds of employees in this field in the coming 20 to 30 years. This goes for all the other technologies and big problems as well: for example, trying to desalinate water.
Trying to get ahead in finance? I think that will be very difficult.
How should a business student with no engineer skills proceed if he wants to benefit from the future development in robotics (get a job in engineering, learn online how to code etc.)?
That is a really hard one: if you are already a finance student, I guess my real advice that I wish people would take is to quit and restart. Either go into an engineering program or just buy an Aibo and take it apart, learn to build a new robot from the parts and try to program it using Python. It would be fun to learn to make new movements, new detections, new sensors: just take it step-by-step.
It probably sounds very complicated to a business student, but I think everything can be learned in very small and easy steps. Just start with the most basic electronic components and motors and just try to make things move.
On the other hand, if you do not like mechanics and you do not find it interesting to program – let’s say you tried it for 20 or 100 hours and it doesn’t appeal to you – then you shouldn’t do it. That is not where you belong if you do not like it, no matter how important the industry might be.
Now we are back to the finance trajectory. A finance student might try to make a living in one of the mentioned industries (related to the big technologies / world’s problems) rather than going into banking.
What about consultancy? Is it a good idea to go into consultancy in fields related to the big technologies (nanotech, AI, biotech, automation/robotics) and problems (Food, Water, Energy, Pollution, Health)?
Yes, there are a lot of things to do there. I have written about the problems with robotics and possible solutions. It doesn’t seem that robotics companies want to combine these problems into a single robot (maybe a problem of miniaturization, all technologies can’t fit on the same platform or maybe these companies do not know of each other since they are occupied with solving their little island in the field of robotics or sensors).
Now Google and Boston Dynamics seem to come along quite well and making robots that are almost fulfilling the promises we all hoped for. As a manager consultant these days, you can make a big contribution to finding which companies should come together, which entrepreneurs and inventors should find each other and combine their efforts.
If I were to grade a finance career and a management consultant career, the latter would win by a landslide in this respect. Consultants would be much more important, and their work is potentially more interesting as well.
But just to be clear: I talk a lot about robotics, but I want to stress that any profession you like is equally good, and not least any of the big x tech/problems, such as:
- AI, robotics, genetics, nanotech, stem cells, bio printing (organs, food)
- environment, water, food, health, longevity, death, pollution, global warming
- virtual reality, brain/robot-interaction; bionics
- HIV, multi resistant bacteria, bacteriophages, stem cells
- Space exploration
For example, I am personally involved in health and future foods such as omega-3 oil (fish oil), crickets (yes, insects) and algae (various supplements, including Omega-3).
When I talk about robotics, I am talking about all related things like the hardware platform, hardware finished robot product, hardware sensors, actuators etc, software, Artificial Intelligence, trading robots, artificial agents, Virtual Reality, Augmented reality, maybe even 3D-printing. The term “robotics” is mainly a shorthand for all things human/machine-interaction.
To sum up, if I were to restart a new career it would be in the field of robotics, which I think have the potential of becoming for this century what the auto industry has been for the last century. At present we have a lot of stupid single-purpose robots everywhere – some are status symbols, some are not anymore. They are called cars, washing machines, dishwashers, vacuum cleaners etc. Soon, more general-purpose robots will take over more and more household chores, caretaking of sick and old, companionship, telepresence/socializing. I also think robots can become the new status symbol that has been reserved for cars (but probably 10 years out).
Where does brain plasticity and the power of focusing on your work by avoiding distractions (deep work) come into place and why is that important for a student to know?
It has been quite well demonstrated that technology is moving faster and faster, that the world is becoming more complex, and that means that in order to stay ahead and be relevant rather than be automated away, you need to have the ability to learn new and difficult things fast.
To be able to do that, you need to focus. When you focus for longer amounts of time without being distracted, your brain functions at a higher level and capacity. Most people have felt it one time or another: getting the feeling of flow. If you ever had the feeling that whatever you learned was absorbed by your brain and you felt that it was stimulating and accelerating and you understood it all, then you know kind of what you can achieve if you learn how to focus for 90 minutes at a time.
It doesn’t even have to be 90 minutes, but 30 minutes is much better than 15. Going above 90 minutes is very difficult for most people, and it is also not healthy to be sitting down for that long time anyway – so you should get up.
The main message is simply that if you want to be able to learn new and difficult things (and you will need it in the future), then you need to know how to focus. If you do not practice it now, you might not be able to do it later.
I think that if you take an average 23 years old student and just turn off the cellphone and ask him/her to do challenging intellectual work on the computer without internet, it won’t take more than a couple of minutes before he/she will start reaching for their phone or try to open a web browser. They just can’t concentrate and focus while keep doing what they are supposed to do.
As most of my advice go, you can just start it in easy steps. There’s no reason at all to go from 0 to 100 when you are in your 20s and you have never focused. Give it 3 months: do it 1 minute the first day, 2 minutes the second day and after 90 days you will up at 90 minutes. I am sure you will start to love it.
What do you think about building your own business in your 20s? Should you first get some experience by pursuing a career?
It depends on case to case. On one hand, if you are disciplined, you can go into any line of work, get your monthly wage and save as much as possible – which I think it is extremely difficult for most, because you just want to get the money and party out with people. However, if you can save it and you can use your spare time to think about and plan ahead starting your own business as well as learning on the job (since there’s somebody paying you to get contacts and to be taught what its industry is about), then that’s definitely the way to go. It is good to have a couple of tens of thousands of dollars for your startup rather than having to sell equity.
On the other hand, a lot of successful people have started their business as students since they got the contacts and the network they wanted from the business school itself. So it depends on what kind of person you are and how well your social and business skills got developed in those four years of studies.
What should a student know about networking and building relationships?
Personally, I was extremely bad at networking and I did not understand what it was. Once I was told about it, I thought it sounded artificial and strange. I thought that either you have friends or you don’t. Now, 25 years later, I kind of understand that you can create connections that will become important without these connections forming friendships.
What you should do is to use every opportunity you get during mingling sessions, school parties and teamwork efforts to switch around and not be with the exact same people all the time. It feels comfortable to be within the same group writing all the essays and doing all the homework, but that is probably what you should avoid. Those are your friends anyway. What you should do is try to introduce yourself to more people, even though it is not about writing essays: it just could be starting a conversation at a party or in the lunchroom.
Try to meet more people and make them meet you. Listen to what they have to say: first, you learn a lot, second, if you are a good listener and you make them feel interesting, then they will like you and give you a chance. Sooner or later (eg.: 10 years later), these will be people who remember you.
You will never know when that network will provide value. It is not about trying to sneak into somebody’s inner circle, it is about just being opened and putting yourself out there so that people know that you exist and that you are at least a bit nice. That is enough to start with.
Do you think these principles apply to building relationships with business or older people as well?
I think when it comes to senior people it is more important to try to provide some kind of value. They are usually pressed for time, they already have their circle of close friends and network and they might think they have enough.
You can provide some kind of value either by offering your network to them or asking if there’s anything you can do for them (for example if you are very interested in their line of business they are in and you are willing to do free work for them).
The worst thing you can ever do when approaching a senior people is saying “Hi! I think you are so cool, I want you to be my mentor”. That is nothing that will put people off more than that.
Regarding networking skills and what we talked about robotics: you mentioned in one of your articles about the importance of “deal making” and needs vs. wants. Can you elaborate on that?
You can get in the line of robotics by trying to connect various companies and entrepreneurs in robotics with each other. That would provide value and create contacts.
You can just map out all robotics companies you can think and maybe start interviewing people within those companies. After you learn about them you will sit on a treasure trove of information: which companies should fit with each. Then you can connect people and this type of deal-making without knowing the technology behind is a good way to go into robotics if you are a business-oriented student.
Going into the topic of work / life balance. I think most students know that you need to put in the extra hours required to achieve success. You used to work in the beginning an average of 80 hours / week with a few highs of 110 hours / week, which affected your sleep and performance. What practical advice can you give students in order to live a balanced life?
That is really difficult. If you want success, then more or less you have to deal with what is expected of you. If you get into a company like Goldman Sachs were as a junior you are expected to turn on the lights when you come to the office and turn them off when you leave as the last one, then that is what you have to do. There will probably be 100+ hour work weeks sometimes. But that is if you go into places like McKinsey or Goldman Sachs.
The real question is: do you really want to get into those companies? I don’t think there is such thing as work/life balance in those companies, at least as a junior. From what I heard from people at McKinsey, there isn’t really any work/life balance for several years after that either: maybe only when you are a partner and you can start delegating your work to juniors.
If you are in a little more normal company, you should think hard about your integrity. Tell the boss “I work 70 hours, but no more, because I think I will actually become worse if I add more hours than if I don’t. I am doing this to provide more value to the company by keeping my mind fresh and being able to work focused the hours I put in rather than doing facetime.” I think most companies and managers will respect that kind of insight tremendously and they also know that 60-70 hours a week is still a very respectable workload.
There will also be bosses that will think that is bullshit and that you just have to work overtime since they might get other people lined up wanting to work 90 hours a week. However, I believe you should think for your own sake and take that stand. But if you are at Goldman Sachs and you want to become partner for some reason, then there’s no other way around.
You pointed out a couple of times about the importance of being healthy and I know that other Wall Street employees bloggers wrote about it too. How can one maintain his health under the pressure of long hours work weeks?
You need to find a way to keep your body in shape, even if you aspire to become a partner at Goldman Sachs. Try to fake your drinking if you are out with clients, because your superiors will try to trick you into drinking since they might find it fun to see a junior guy half-drank to death in the evening and then having to come in at 6 o’clock in the morning. If you break under that pressure, you stand the risk of losing the job to another junior sooner or later.
You can take one or two drinks if you think it is fun, but do not go for ten or twenty. That is the easiest way of avoiding a lot of problems: not doing that social drinking after the job after colleagues.
Second, never take the easy way out with McDonald’s burgers or sugar drinks. Do not use automated staircases – you should walk up the stairs (unless you work for example on the 27th floor). Try to make your body work as often as possible. If you cannot squeeze in a health club membership, you should be able to do some kind of running for like 20-30 minutes a day.
So I think health is extremely important and that is what you will have left after your entire career. You should make your body work, do not drink much alcohol and avoid junk food. It is easy on paper, but if you manage to do it every day, the payoff is incredible.
Do you think “work hard, play hard” is a superficial overrated quote?
I actually have been planning to write an article about it.
On one hand, I like it: it is snappy and it is some truth in it.
On the other hand, I hate it because it implies that you should put in 100 hours work-weeks, really pushing yourself beyond reasonable limits to be able to turn turnaround, spray champagne over your buddies and drive ridiculously expensive sports cars. I sincerely doubt that anybody in the depth of their hearts think it is fun. They are doing it only because they have the money and mostly because they want others to look up to them.
They want to feel important by wasting money which was earned by punishing and ruining their own bodies and brain. Then they turnaround and do even more stupid stuff to make other feel jealous of what they have and what they can do. In the end, the equation looks disgusting.
You owned 3 sports cars (Porsche, Ferrari, Lamborghini) and you ended up hating and selling the Lamborghini…
I thought I really like them once I got my first one. I liked driving them fast on trucks, spinning them and I also liked walking up to my sports car, partly because I liked the look of it and partly because I hoped people were looking at me as the cool guy with a yellow Lamborghini.
I think there are better ways to impress others. Better yet, find a way to live where your value does not lie in people looking up to you.
I am not saying that people should not buy sports cars: if they feel attracted to them and they think it is fun to drive one, then just go for it! Nobody could have stopped me especially if I had been told me that it isn’t worth it.
Go ahead and buy stuff. You will feel tremendous when you buy it. But be aware of your own feelings and if you do not really enjoy it anymore, just quit.
Your last phrase is like a parallel to your whole career.
Thank you very much for the interview!
You can read Mikael Syding’s tips on how to ace a hedge fund job interview, how to take your losses without emotion or live with regret and many other interesting articles on his blog. You can also find more about him by reading the article “15 Lessons Learned from Mikael Syding“.