HIIT: Satish Rai, Part Two

My last session with Satish Rai had so much more than I could cover in a single Fast Five, so this week I'm sharing Part Two of my session, focused on some of the lessons learned across more than forty years of investing.

Q: What advice would you give any newcomers to the investment industry? What are some the most challenging aspects of being an investor?

A: The first thing I'd say is that most people coming into the investment industry haven’t failed enough. In this game, no matter how good you are, you will fail many times. This is an advantage, not a bad thing. Learning to fail helps us learn how not to fail, and eventually, how to win faster. Sometimes acknowledging defeat will get you to the finish line faster than hanging on will. The second thing that comes to mind is that too many people come into this industry for the money or the idea of money. The best investors are the ones with a genuine curiosity to learn and a willingness accept they know very little, because the moment you believe you know everything will inevitably be the same moment you'll fail (at least in the investment world).

Q: Every couple of years there’s a new “hype cycle” everyone is chasing, how do you not get caught in the bubbles and what is the role of human behaviour not only in hype cycles but in the world of investing?

A: Behavioural finance is fascinating. I don’t believe human behaviour has changed much - you can go as far back as you want: the Roman Empire, the 1920’s, 80’s and 90’s - human behaviour and emotion never changes. When we study investments, we study numbers, but I would encourage investors to spend as much time studying human behaviour. I believe understanding and anticipating how humans are going to behave is critical to the investment industry. The challenge investors face is that we're constantly under pressure to be involved in these hype cycles, but no matter how good it looks, you always need to ask yourself what something like this will this look like five to ten years from now.

Q: Let's build off that last point, how do you detach yourself from the pressure of an investment? Have any life experiences helped with this; do you have frameworks you use?

A: I have been caught in more bubbles than you can imagine, some big and some small. The best investments I’ve made are the ones where I’ve allowed myself to take a step back and think 'will this company be around ten years from now? Will it be meaningfully stronger? Does it pick-up market share during times of stress? Is the capital stack reasonable? Are they doing the right thing for society? And are they building a product that people need to buy on a recurring basis?'

Q: Switching gears, you’ve worked in extremely competitive environments throughout your career, what does high performance mean to you within the context of investing?

A: Most people would say beating the market is high performance or beating another fund but none of that really matters. The most important thing in the investment world is if you're solving the investment problem that you’ve been asked to solve by your client, customer or investment stakeholder. Wall Street and Bay Street try to solve for beating the market, I think you’re going to lose if you do that. At OMERS , we’ve been very fortunate with a crystal clear mandate - we provide secure, stable affordable pensions for six hundred thousand members. When you have that equation as your starting point, how you walk in the door, and the kind of people you hire are very different than they'd be if you were solving to beat the market.

Q: That’s a great segue to teams, what is your philosophy on team building?

A: On talent management I use a framework called strategy, structure, people. Simply put - what is the strategy we’re setting, what is the structure to execute that strategy and what are the types of people we need. Once you have the first two, it becomes much easier to hire the right people.

Q: And how does this philosophy extend to leadership, what is a great leader to you?

A: Let’s take a step back and look at the difference between a manager and a leader. A manager is someone who gives you tasks to do and will measure your success on all the tasks you’ve been asked to do, a leader is someone who inspires you.

When I think of a leader, I think of someone who inspires me, who motivates me and brings out the passion in me. As leaders, if we create an environment where people are as excited as they are going into the weekend coming in on Monday, you won’t have to worry about performance.

Q: Speaking about lessons you’ve learned, you recently wrote a book, - what was the inspiration behind this?

A: So, I’ve been investing for forty years, and I was trying to find a way I could share some of my knowledge with the public. There’s a ton of investment books out there but the problem is, they’re all three, four, five hundred book pages, they’re hard and complicated and no one reads them - they're impenetrable. So, I started to think of how I might share lessons I've learned that are easy to consume in a minute or two. The book is called lessons learned; wisdom from forty years of investing and it’s all available online for free.

Q: Finally, what’s one book you recommend everyone read (besides yours!)

A: I absolutely love All the light we cannot see.