Relentless Alpha Seekers - Brio360 Consulting

on April 25, 2020

AI appears to be gaining steam in destroying jobs. Blackrock recently laid off some of their stock pickers in favor of robots. Over the last century, the study of investment has become a sought-after and lucrative intellectual discipline. Portfolio managers are often measured by their alpha, or the return compared to a relevant investment benchmark. Hot fund managers can charge high fees while underperforming ones may need to provide a refund even if they are big shots in the industry. It is a cut-throat business as performance can be quantified relatively easily.

All that may sound esoteric to folks outside the industry but we all know someone who are constantly looking for alphas: your mom. While the US is the home for some of the best education institutions in the world, the system on a macro level is a complete mess. (The only thing messier may be our own healthcare system.) There are lots of noises in the system, ideologies of colleges at all cost vs. college-is-useless, liberal arts education is dead vs. liberal arts is the future and the constantly shifting political battles on education funding. Throw in some bad actors such as Trump University or Corinthian College, the system is full of landmines. When you buy something from the supermarket, you will notice a product label on most items. Unfortunately, such disclosure does not exist for education investment. Most students in the US spend ~180 days, or less than half a year, in the classroom. Who is responsible to figure out how to fill in the gap when the teachers sit on the beach? Financial investments involve big dollars but they are Other People’s Money. On the other hand, investing in your son or daughter is a high-stake decision. Losing money for your clients is obviously consequential but making a bad investment decision for your kids can be devastating. Who spend countless hours on Internet forum with 1990s technologies and talk to each other constantly to gain an information edge for their kids? More often than not, that person is your mom, the relentless alpha-seeker behind the scene. This investment responsibility is hard even if someone can devote 100% of the energy. Stock picking is tricky but there are lots of data to dissect and test hypothesis. In people investment, we often rely on wisdom from past generations. There is a lot of information both online and offline but the signal to noise ratio is very low. The investment manager for the next generation has to piece all the information together, meshed with wisdom from past generations, to form a coherent decision framework. In many cases, she has to keep a full time job. We recently ran into a friend whose daughter was auditioning for the Julliard among other music schools but they live three hours by plane from New York. They plan to move the entire family to somewhere near the school. I am sure you have heard similar stories before. (The father is a nice guy but he, like me, looks clueless.) Think about the time to coordinate and prepare for the audition, and the logistics to uplift the entire family. A few years ago, a Yale law school professor, Amy Chua (a.k.a. Tiger mom), published a book on her experience on parenting. The book attracts significant press coverage and resonates with many parents. Chua’s writing is funny and covers topics we don’t often talk about: the relentless moms who look for alphas and impose discipline in multi-cultural families. I think the book is popular because a lot of moms want to learn her secret sauce, or find another way to gain an edge for their kids.

Unlike the hedge fund manager, your mom doesn’t charge a management fee and she doesn’t take a summer break in the Hamptons. While it is unclear if any profession is immune to the onslaught by AI, I am certain that it cannot beat your mom. Say something nice to your alpha-seeker (not just on Mother’s day) although she probably will still look out for you even if you don’t.

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