THE PROBLEM WITH ANALYST TRAINING
In the fall of '07, about three months into my investment banking stint, I came to a realization that I HATED investment banking (my Greenhill staffer reads these threads though so Ashish you're cool...) I hated the mindless processing, I hated being a glorified powerpoint
formatter, I hated sitting around all day doing nothing then getting an assignment at 8pm due the next morning, but mostly I hated starting with the answer already figured out and being tasked with work to justify that answer. When I first learned what a fairness opinion was,
I almost puked in my mouth (the concept of back-filling a fairness opinion on a potentially unfair deal just really irked me). So I started to speak with some Greenhill 2nd years about their post-banking plans. Most went into PE, but a few went the hedge fund route. And the HF
route was explained to me as an "inverted pyramid of influence". Whereas private equity was "banking 2.0", a fundamental equity hedge fund was a totally different beast. Instead of being a junior cog, the junior analysts at a hedge fund were sourcing & advocating new investment
ideas that could become 9-figure winners. And even better, the public markets were the truest form of meritocracy. Being a blue collar kid from rural Idaho w/ zero professional network and a distaste for the blue blood culture of private clubs & social status, that hit my like
a ton of FUCK YEAH bricks. I felt like I could out-work and out-learn and ultimately out-compete my peers if only the playing field was level. And the playing field was axiomatically level in the public markets. So, in an act of grace, I joined Maverick in '08 and had the
amazing fortune of learning the business from some of the best mentors around over the next 7 years (some true legends). But, not everyone has that opportunity. And I still use this "inverted pyramid of influence" metaphor when talking to young people about post-IB exit opps.
THE INVERTED PYRAMID OF INFLUENCE Fundamental equity managers, whose success or failure is dependent on their ability to surface idiosyncratic alpha ideas, a task usually assigned to juniors, spend a TON of time to train & develop these juniors at the tip of the
inverted pyramid of influence, right? Ummm. Actually no. My wife works in medical sales, an industry where training programs can span 3-6 months for new reps selling a podiatry product. Yet, we hire analysts in asset management to recommend $100m+ positions and we offer minimal
to no up front training. The more I've thought about this, the more absurd it really is! Steve Cohen realized this back in 2016, saying he was "blown away by the lack of available talent". And he did something about it, starting the Point 72 Academy (investing, by my estimate
over $50m cumulatively and over $10m annually in that program). Via the power of Twitter, I've had the opportunity to speak with a handful of P72 Academy graduates. It's an intense, structured program that is the first program I've ever seen that actually prepares young people
to do this job. P72 Academy is an imperfect solution to this training problem, however. Specifically, it's a closed loop program whose 15,000 applicants turn into 50 admissions who all end up on a P72 desk. A powerful example of a better way, but not the open-access system that
the industry needs (are you starting to see the genesis story of Fundamental Edge?) CURRENT TRAINING APPROACHES: "LEARN BY OSMOSIS" "It's an apprenticeship industry" "I learned by osmosis" Would anyone accept this level of training rigor in the field of medicine or for
new airline pilots? Obviously not. The hedge fund industry has moved from the wild west to a mature, institutionalized industry. Yet this is how we still train new analysts. Come on. We can do better. I've known some really wonderful PMs who are exceptional educators and
mentors. Sadly, these are the exceptions. Mozart wasn't the world's best piano teacher, and Michael Jordan would be a shitty basketball coach. PMs are the same. Geniuses of alpha generation and incredible, multi-dimensional, intuitive alpha generators. Though many are introverted
and show attributes of being mildly "on the spectrum". A senior sector head at Maverick told me one time, "Brett, this industry is an escalating treadmill". And it's so true. The complexity of being a PM, leading a team, leading an investment firm, managing idea generation,
portfolio management, relationships with LPs, and having any time & energy left over to hire, train & develop new analysts (not to mention spending time with family), it's just overwhelming. So PMs often just leave new analysts to fend for themselves, to learn "via osmosis".