Alpha - Find your superpowers

Alpha

The word ‘Alpha’ has come to mean a number of things depending on which industry or field you are in. If you know Greek or are an avid Percy Jackson follower you know it is the first letter of the Greek alphabet[1]. It is colloquially mentioned in the context of the beginning of things or as the most dominant in a group, sometimes seen as a compliment or as an insult depending on the context of the comment and of course the recipient.

Interestingly enough, if you are in finance, the term is used to refer to the ability to generate outsized returns when compared with the average return[2]. Put another way, if the average market (for equities it is generally the S&P 500) is yielding a return of 5% annualized, and your investment strategy returns are in excess of that, say 7% annualized, then you have generated roughly 2% of alpha because you came up with this brilliant way to realize profits in excess of this average level. Perhaps this is because in finance, profits are typically the first thing we focus on. The first question we ask of ourselves. “Will this idea or strategy make more money than the alternative?”, “Will this new investment result in a return that will be more than what I put into the investment now?”, “Will the returns outweigh the risk?”. It is a symbol of positive monetary gain or a monetization of gains above and over the benchmark.

Taking a page out of the finance definition (not the dominant in a pack definition), when I discuss the ability to ‘Create Your Alpha’, my focus is on our ability and potential to generate outsized returns in our professional and personal lives.?As a professional who has spent most of her career managing risk and generating profits, I can definitively tell you that no reward comes without taking some element of risk. Employing risk provides you with the opportunity to garner outsized gains. There are no free lunches. If someone is telling you that you have a sure-bet to make all sorts of returns with no risk, I’d strongly suggest you ask more questions and do more homework. There is always some embedded risk, even on the margins. And what is immaterial to another may actually be quite material to you. Either way, you should be aware of them so you can enter your proposition with eyes wide open.

The same is also true for the flip side. Employing risk can result in garnering fewer gains than the benchmark and sometimes even a loss. And since it is the latter that most of us focus on, we shy away from taking any risk and deny ourselves the opportunity to grow. The fact still remains that you cannot achieve very much reward without taking some element of risk. So long as the risk is calculated, we should want to take this risk in order to stand a chance at a better outcome. If we want things to change, we have to initiate that change. Otherwise change will be imposed upon us and we have to respond. The latter is seldom preferred.

As a result, I think learning about risk and truly getting comfortable with it is what will help us grow. And in the process of this growth is how we can generate our alpha. So how do we actually go about creating this value? What concrete steps can we take? I’ve experimented a few different ways and I found a 3 step process that has helped me consistently in all the facets of my life and at different points in my career. I call this 3 step process, my Trine. Think. Define. Decide.

Each of these steps are done in succession and is a process that can have slightly different results each time you do it. I started this process in my 20’s and have been revising it ever since. It changes during milestone events and is a constant calibration in-between. The results change as you change and the first time is always the most intense because you have to get very well acquainted with yourself. With that being said, it is actually a lot of fun, peeling back the layers and asking yourself these questions and surprising yourself with the answers!

Think

Step 1 is focused thinking about what your innate talents are. What are your superpowers? What comes easily to you than most people around you? What early life lessons did you learn that has helped you to see life in a slightly different way than most? Your unique perspective, experience and lessons learned are all part and parcel of your superpowers.

?I have a colleague who wakes up at 3 a.m. on weekends and bikes for 3 hours so he can finish his workout and be ready to spend the day with his family. His regimen is very important and he is happy to sacrifice some sleep in order to be able to make this work. I truly believe this is a superpower. It is bicycling now but I’m sure when he was younger his passion and ability manifested in similar ways then. Perhaps it was bicycling then too or perhaps it was something else, but the bottom line is that his innate ability to do this consistently his whole life sets him apart from everybody else around him. This superpower when taken out of the context of a 3 am bike ride can translate to a host of strengths on and off the trade floor where the same discipline, passion and comfort with discomfort makes this person a highly desirable candidate for any company.

When I asked him very plainly, “Why on God’s green earth would you choose to do this?” His answer to me was very matter-of-fact. “I’m training for a competition,” he said. “I’m always training for some competition or another. I know it’s weird but I’ve been like this as far back as I can remember. Everybody thinks I’m nuts. I probably am. But it’s fun.” For the vast majority of the population, he is nuts. So perhaps not everybody but mostly everybody.

What’s interesting to observe in this short conversation is that all the things I saw as obstacles; he didn’t. He didn’t comment about waking up while all the world is asleep. He didn’t complain about being tired throughout the day and still having to play and run around with his kids. He didn’t even remark about his body being sore! He just does it because he loves these competitions and it’s fun. And even though he didn’t say it, he is clearly good at this kind of sport. How many people can truly say they can sit on a bicycle for 3 hours straight and actually ride the entire time!

The traits I can draw out from this one conversation is very telling about how successful he could be in any field, including the world of finance. Clearly a superpower that can be put to great use throughout his life.

Exercise:

Think back to an early childhood memory where your response to an ask was different from most kids around you. Did you enjoy research projects? Did you long to sign up for debate club? Did you love waking up early and getting a run in while most of your friends slept in? Don’t be shy. The very ‘unpopular’ nature of the act that gets you to jump out of bed is one of your superpowers. It’s the thing that you innately like to do and are good at doing with complete disregard to which came first! (Do you like it because you’re good at it or are you good at it because you like it?). Who cares?! The ask comes in and your hand shoots straight up. This is the kind of stuff superpowers are made of.

Jot down the first 3-5 of these superpowers and keep them handy. When we discuss the next 2 steps we will bring your superpowers into play. In the meantime, anytime you need a pick-me-up read your superpower list. It is an automatic and natural high!

Enjoy the process! It is worth the journey.

[1] https://www.britannica.com/dictionary/alpha

[2] https://www.investopedia.com/terms/a/alpha.asp