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do or do not... there is no try.
Right before graduation this year, a good friend of mine sent the following email:
“My little sister is graduating from college in a few weeks and I was hoping to give her sage advice for the near future as she enters the Big Bad World. I thought it would be fun to collect words of wisdom from friends. I’m wondering if you wouldn’t mind taking a moment to e-mail me a few of your thoughts — lessons you’ve learned or things you wish you had known in those first few years after leaving the safety and comfort of college life.
Please be frank, creative and brief. “
I left the email sitting in my inbox till today. I kept thinking about answering this, but my own summer was a rough one job search wise. I never felt I had uber-inspiring information to pass onto anyone. Last night though, I did a spur-of-the-moment trapeze lesson with some current MBAs (for a course called ‘Fostering Creativity’). The course itself is experiencial and focuses on tapping into the more creative side of your psyche to challenge the patterns and routines that you build up through the more analytical and case-based courses in the MBA program. The end goal is to be able to apply these methods within a business context so that you can be more successful.
The overall course experience made me recognize something short and simple that I learned last year: Be thoughtful in your actions, but don’t overthink them.
It’s good to be prepared and study, but if you analyze every choice you don’t trust your instincts.
Though flying on a trapeze isn’t a typically instinctual action, if you don’t listen and respond to the instructors who are calling the body positions, then you will miss your chance to fly through the air and you’ll end up on the net below…
I had done the trapeze class the first time last year. After four successful trips on the bar (upside-down!), I stressed myself out when it came to “the catch” and couldn’t even get my legs over the rung. This year, because I wasn’t even planning on participating, I didn’t allow myself the chance to think about what I had missed the year before. I just focused solely on the caller and did each movement when specified.
…jump… legs up… arms off…
gotcha!
…awesome!
So, I didn’t get a job today. In fact this was probably the 50th job I didn’t get in 50 days, but today’s reason was one of my favorites and it generated a lot of thought related to relationships and, of course, investments.
The guy on the phone said, “You are great, we really liked you, its just… uh, timing”…
I think people around the world have heard that statement not just related to the job search, but in the quest to find the right person and even a variation of that is a disclaimer on every annual report this year.
When you look for any sort of investment (stock, mate, job), there is only so much due diligence that can occur… and that asset strategy has been discussed a bit already but one of the other major factors is with timing… and its the least controllable.
different people, different outcomes
People talk about fate, destiny, and even serendipity that leads you down a particular path towards a job or in life, but its not that simple. Its not a straight-line that we march up, with a constant return and dividend payout… its curve, with peaks and valleys, and cycles. As such, each person has the potential to intersect with another at multiple points along their curve. There is even a possibility, if you intersect when one of you in on an upswing, while the other decreasing, that the timing is not optimal, and the relationship will fail… on the the other hand, if you are both in the right place at the right time, it can be meant to be.
Utilizing this timing element within the relationship connection and moving it beyond a one point connection is similar to the management of a mutual fund or index fund. The ‘mutual fund relationship’ is one where the fund manager (or the members in the couple) are actively managing their relationship in relation to the timing of the market in order to get the best return. They pick aspects of the other person and of themselves to generate higher returns agains the market and perform even when the overall Dow Jones or S&P 500 is off.
The ‘index fund relationship’ is targeted off of the general market index (or your friends and the community around you). In relationships, this can be particularly detrimental at certain times… It can often seem like “everyone is getting engaged” or “all my friends are pregnant” and a friend of mine had three weddings in three weekends in the month of August, but changing your relationship just because you have reached a certain quote-unquote milestone is not an appropriate way to grow your own relationship fund.
The major thing that holds up either of these performance funds and relationship in general is the inherent level of chance or randomness. Yes, you can look at things like the yearly return, 5-year average return, or other past performance indicators to potentially predict the growth of your stock in the future. Traders surround themselves with data about the market, seasonality and other cycles, to potentially predict the best way to optimize the trading of a particular fund. Depending on how risk-adverse or risk-loving the fund is, timing can be predicted to some extent, but cannot be guaranteed.
In that end, you also shouldn’t try to force timing, or beat the market, bccause if your investment is gonna tank, its gonna tank, and you can’t make a company hire you, or recover all the loses in your portfolio in one quarter, or make someone date you. You can analyze your past relationships and how those experiences taught you a thing or two about how people are, and how you can be better in the future, but that doesn’t necessarily mean that your forever is ever gonna be predictable or at all similar to any other relationship in the market.
I’ve been reading the book “Den of Thieves” by James Stewart for the past few weeks. Its about the largest insider trading schedule in Wall Street history and the major players therein. People like Michael Milken and Ivan Boesky who built humongous fortunes only to have their egos and quest for power destroy them.
learning about the deal
But, I’m not necessarily gonna delve too deeply into that story, but more into how insider trading is used rampantly in dating and relationships.
Insider trading is buying or selling a stock based on information that isn’t publicly available. It’s what Martha Stewart went to jail for a few years ago, and its illegal when the trades are not disclosed to the SEC.
What it comes down to, generally is a few different levels of dating insiders:
1. THE PROBER: This is a fully legal form of insider date-trading. You are casually intrigued by a potential ’stock’ but are clueless as to where to begin: You are just not aware of the publicly available information. So, you reach out to those ‘friend investors’ to find out if that person is currently dating, just broke up, or not worth the effort. Insider trading can often help to fill in holes in the early stages of getting to know someone — if they think that your restaurant choice would be a good call, or what type of plans should be made.
2. MATCH-MAKER-TRADER: This person is highly motivated to get couples together. Often they are either good friends with one of the potential parties and believe that the past partnerships were not the best uses of the individuals assets. This person will being by toeing the line of legal insider trading by slipping in some public information like “Joe just ran that same race you did last weekend, wow, you have a lot in common” but will add a level of pressure that separates them from THE PROBER. Sometimes they get more invested in the potential merger because they see benefits on their own end: their compensation that is tied to the stock takeover. If the deal where to occur, THE MATCH-MAKER-TRADER would benefit from the couple spending time together, like in the instance of having another couple to go out with, or getting a good friend to stop complaining about their single status. However, this near-sighted view of the opportunity might ‘raise the cost of capital’ for the new relationship because the deal might not be as ideal as an open-market transaction (i.e. staying single) — this can lead to a decreased growth potential for a long-term relationship.
3. THE NEGOTIATOR: This person spends too much time preparing for the deal and doesn’t actual base their ‘asset selection’ on the experiences they have with the potential ‘takeover target.’ Because they have talked to a variety of different sources, they feel that there is high reliability in the information, but it hasn’t been tested. This person could also be called THE ANALYZER because they have taken the surface-level interactions and built them up through these conversations with the insiders. The believe they are even creating more value for the acquisition than is on the market. Though in theory, there are positives to this research, the negotiator is often assessing the deal with only their payoff in mind — a new partner — and it can backfire if that asset valuation is not sustainable.
Have you come across other forms of insider trading in your relationships? Do you think its always a good idea?
The economic markets have a traditionally cyclical nature. There are periods of high growth followed by those of lessor or low growth. Similarly, Relationships go through periods of time where both people are very happy as well as times where they are shaken up by a difference of opinion or confusion.
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Acknowledging the State of Affairs
The most significant of these effects is that of the “relationship bubble” or when you can look back on the good times (after the crash) and realize that the relationship stock was grossly overvalued. You both had been speculating that the good times could only lead to MORE good times; not that the stock was undervalued and will gain in the future.
This speculation is a form of ‘momentum investing.’ By tapping into the relative position of the stock in the market as well as the trading volume and earnings growth, you have a successful stock pick but not necessarily a sustainable investment strategy.
The three major factors related to this momentum investing or bubble creation are cognitive bias, positive feedback, and rational expectations.
1. Cognitive Bias: There is an extensive list of different biases that effect people’s judgment as they make and rationalize their decisions. When dating, there is a tendency to anchor the relationship on one ‘defining’ event or put power into even the smallest action. In the bubble scenario, herd behavior and group think can lead to a bandwagon effect that increases the stock price above its rational levels. People are no longer making the best choice for their portfolio (or in a relationship, their well-being) because they are distracted by the culmination of a significant number of irrational factors. In other words, they are letting their emotions get the best of them and getting ahead of themselves.
2. Positive Feedback: When the dot-com bubble hit, people had been throwing around money with little concern for real business plans and sustainability. This excitement about stock price growth lead to the attraction of investors that lead to more investors, which lead to an increase in stock price, which lead to… well, you get the idea. Similarly, in relationships, people enjoy the moment — one date leading to a phone call, leading to a kiss, leading to another phone call, etc. All of these positive factors can lead to a happiness that is contagious, and before you know it, your investment is significantly higher than it should be.
3. Rational Expectations: This is the assumption that investors are going to act rationally, and stocks are going to perform as they should in an efficient market. Basically, even if you can’t predict the future, you have an “idea” of what you is supposed to happen. This “best guess for the future” or optimal forecast uses all of the available information, but relationships will never have all of the facts. It’s kinda like some of the message from the movie “He’s just not that into you…” we are so focused on getting to a happy ending and a successful relationship, that we miss the signs that things aren’t perfect as they are and that the momentum is slowing.
The bursting of the bubble is not necessarily the end of everything. Though after the dot-com bubble, many companies closed their doors, there were some that survived because of a new efficiency and understanding of the way technology and the internet could be used to grow a sustainable business. Similarly, the end of the bubble in a relationship means that you can see if its worth the long-term investment.
So, since graduation a few weeks ago and traveling all over the US for weddings, I haven’t really had any time to reflect on what is happening in my life nor my Wall Street Journal, which continues to sit unread even though I am unemployed!
But as I was reading last Tuesday’s paper, an article in “Money & Investing” struck me… it was about the 52-week high and how mergers are more likely to occur when the deals are above this “magic” number. When I think about how this relates back to the relationship stock or the pricing of life decisions, there are a few parts of the article that leap out at me:
“In a rational world, the prices of merger deals would vary wildly, depending on what an acquirer calculates about the future value of the target… Where a stock once traded shouldn’t tell you where it belongs.”
The world isn’t necessarily rational, and relationships are even less so. Frequently, we judge our new significant other on the basis of the past ones… is it moving faster or slower than I’m used to? Is this person smarter, better looking, funnier than I’m used to? This over analyzation can potentially lead us to lose sight of the person that we are with because of an unneeded focus on an arbitrary point of valuation.
“And each deal that is priced above the high has a 76% chance of shareholder approval, while deals falling below the high succeed 69% of the time.”
The need to win the approval of our ’shareholders’ (friends, families, etc.) becomes even more of an influencer when we look at the 52-week high. The ability to woo the parents in the initial introduction, or the interpretation of your relationship by your friends is more than significantly influenced by the previous partners and experiences. If you’ve only ever introduced your friends to a bunch of tools, than your new partner is sure to look like a winner and your relationship stock is valued higher. If your parents were previously more into your past relationship than you were, then it might take a long time to get that 52-week number off the relationship books.
“For a company considering a sale, the most rational thing may be to use the market’s irrationality to its advantage. Sell now, before those 52-week-highs crash.”
It can be super tempting to get out when the getting is good. If things are going well and it can be valued way above any past numbers, you can be fearful that it can’t reach an new high. But, remember that this high should only be used when in consideration of a sale and not in the enjoyment of the current relationship state.
and finally, “Valuation is more like valuing a bottle of wine rather than computing the speed of light,” said Mr. Baker. “It doesn’t have a precise answer…”
Life changes pretty fast and if you leave that wine on the shelf, who’s to say that it hasn’t fermented. I think you should just open the bottle and have a drink if you can!
Ok, so I’ve had notes for a draft about managing your personal brand for weeks… It began with my obsession over the movie “We Live in Public” that I saw at Sundance in January. The movie explored how we are being increasingly willing to put more and more details about our lives in to the public space.
But then of course, the urban man tackled the issue in “solidifying your brand” on KCRW yesterday. He did it much more succinctly than I can, but I still think that the social management of your persona is an amazing phenomenon.
It used to be that you could only ‘control’ the way that people perceive you through your interactions and then word-of-mouth (gossip!). Now, however, with twitter, facebook, linkedin, yelp, and blogs, the touchpoints to your brand are more extensive than ever before. Just like companies that elicit brand managers to control the marketing and perceptions of their consumer-packaged-goods, we have become our own brand managers.
Yet another opportunity to brand
I have a few friends that have used this social-network blow up to excuse themselves from the internet at all. Though, I understand the stress of being witty in 140-characters I believe that you are losing an opportunity to comment, project, and explain your thoughts and beliefs. Just a couple reasons I think its necessary to stay plugged in:
1. Leveraging your network: With the economy like it is and my MBA degree losing its cache faster than my investments, I have turned to LinkedIn for informational interviews and job opportunities. In fact, my Dad (a technology novice, but former CFO also looking for a job) just logged onto LinkedIn and its wonderful to see how his network is growing.
2. Personal SEO strategy: Though I understand search engine optimization from my previous job (and just obsessed), it is not always as easy to manage the results when your name is googled. Mine used to be confined to race results from marathons and 10Ks, but with the google profile, I have done a simple bit of optimization. Additionally, as I was finishing this, another more extensive article came to me on SEO-ing your personal brand.
3. Some publicity is good publicity: Though my heart breaks when I see people’s relationships change from married to single on facebook, and I cringe everytime my little cousin posts a picture from a frat party, I think that its good to live online. After moving all across the country, its nice to see what people are up to and be seen doing things that you enjoy. However, I fully support being judicious in your profile and untagging pictures and having strict privacy settings.
In the end, we have a level of self-interest in how our friends, families, and strangers see us and with a little bit of time and effort we can keep control of the balance of our personal and public brand.
Maybe I got ahead of myself slightly talking about valuating relationship stocks. Possibly its better to think first about the choice to invest in the relationship stock market at all and the possible investment scenarios of market entry.
First, you need to look at your current investment situation — can you afford to invest in a relationship stock? If you are already invested in a fund, will you have to ’sell’ your current holdings to make space in your portfolio? Is there anything that prohibits you from this diversification?
Secondly, what types of returns are you looking for from your stock? Is it an income fund with a more steady, long-term focus that pays of regular and consistent dividends? Or are you hunting for a more risky, high-growth, short-term stock that you can just hold for a short bit and then cash out? Thinking about your age or experience in your investments can also guide this decision making and doing your due diligence on the types of stocks available is also a part of the strategic investment scenario.
Potentially, when you start to take a stricter look at your current investment portfolio, you do end up reevaluating the base level of risk that you want to take on. If your ‘income’ stock (that you are invested in right now) is under-performing, is this a permanent change or just an irrational adjustment that leads to a temporary setback? Do you want to lose the security of your current investment to bear the risk of the ‘new, hot tech stock’?
Third, how much do you want to invest? A good rule of thumb for the actual stock market is to not invest anything more than you are willing to lose, but with relationship stocks, do you ever expect to lose? This can lead many investors to take a “wait and see” approach and will hold them up from entering into the stock market. This cautious approach may also mean that your expected level of returns isn’t achieving its potential until you loosen the purse strings a bit and put a little more into the stock.
However, one of the big things that you must remember when deciding to invest in a relationship stock is that there will be ups and downs that have little to do with the value of the person. But as an intelligent relationship stock investor, it is essential to remember that you are not just buying into the STOCK, but also part ownership in the other person.
I frequently like to check out surveys and other internet postings that look at the cities I’ve lived in as well as the prime candidates for the post-MBA life. In fact, I consider this significantly as another criteria for the job search.
It seems like every other magazine has a thought on the best places to live, work, and recreate. One of the ridiculous ones that I saw recently was the 25 best walking cities where they gave excessively car-centric LA a 14th place ranking! I mean, Cleveland has so much more walkable and recreation space than Los Angeles and it wasn’t even noted.
Travel & Leisure has done an “extensive” study on America’s Favorite Cities that ranks the people, shopping, and quality of life in a variety of different categories. My current city LA is quite inferior to my summer internship city of portland. Portland’s only downfall seems to be in “luxury boutiques” which is kinda a stupid category anyway.
out and about in la
Another interesting study that a friend posted once was the best places to be single in the US. Having been single in just about every city that I’ve lived in, I will have to agree that Salt Lake City is low on the list, but that the criteria varies heavily depending on which neighborhood you live in and your religious affiliation.
The general inconsistencies from study to study doesn’t actually help me to decide where I want to live after I graduate, but does give some extra thought points.
Maybe its that I’m taking a few too many finance courses in my MBA, but I’ve started to relate my personal life to the financial policies that I’m learning.
The first (of potentially a few) ideas is the valuation of the relationship stock and the hypothesis of efficient markets.
In essence, in an efficient market, stock prices are accurately reflected given the information that is readily available. Similarly, relationships put a lot of emphasis on this publicly disclosed information but can have certain inefficiencies that often prevent an accurate valuation of the ‘relationship stock.’
The level of efficiencies range from weak form to strong form.
In a “weakly” efficient relationship, the stakeholders are clueless as to what the future could potentially hold and are randomly dating. They have no accurate historic information for which to base their relationship on and have no clue of what the future can hold. Generally, this is not a very likely market for relationships but can happen in sporadic bar situations with multiple beers.
Also a rare relationship market is the “strong” form efficiency. Here, the relationship stock reflects ALL information (public and private). Generally, this is impossible since we can’t read minds and will never have access to everything!
the end of a seemingly good thing
More commonly, the relationship can fall into the “semi-strong” form efficiency. Here, the relationship stock price will adjust rapidly to publicly available information in an unbiased fashion. Conversations that begin “I like you” or “I think you are beautiful” can have a reasonable effect on the value of the stock. However, excess returns or unreliability can occur when one of the stockholders interprets the information inaccurately or with a level of bias that is inefficient. The stockholders needs to be aware of how the information is disclosed in order to reliability adjust their relationship stock price.
So, given all of the relationships that a person goes through in there lifetime, it starts to make sense that the distribution of returns will result in only a negligible number of successes.
This is a kinda lame post because its generally me putting a quotation from a folder I got in Japan, but its starting to rub off and I really want to having this written down somewhere…
“The purpose of human life is to serve and to show compassion and the will to help others. Creativity is the ability to introduce order into the randomness of nature. Life is an exciting business and most exciting when it is lived for others. You cannot do much about the length of your life, but you can do a lot about its depth and width.”
I guess its a combination of quotes from Albert Schweitzer, Einstein, Evan Esar, and Eric Hoffer… but to me its a way to be reminded daily at business school the larger reason that I’m here and that I’m studying for myself and pushing my abilities and opportunities to help others.
