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It is a difficult decision for me, but I have determined that now is the time to leave my current position and to pursue a similar but not so similar path, something that is more true to my heart.

Reflecting upon the past four years, I distilled my key learnings into the following.

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I believe today’s market is won by unconventional investors. Having been taught by the Yale Endowment and having personally interacted with many of the world’s best investors, I have come to an inconvenient conclusion: in today’s market, among investors of conventional backgrounds, almost none of them can generate outsized investment returns. There are too many of them, all too hard working and too smart, all having been taught to invest in the “right” way. But the market has become just too competitive and too efficient for any of them to win. It is not that they are not smart or hardworking enough, but there are just too many of them doing pretty much the same thing!

Investors face a brutal reality: success is the mother of failure. The more successful a strategy is and the more attractive a particular opportunity is, the more smart and hardworking investors will pour in and the harder it will be for anyone to succeed. Technology tools are so good and regulations are so tight that everyone has pretty much the same information. For the U.S. stock markets at least, rarely any investors can maintain an information edge that is both regulation-compliant and sustainable. The game is no longer about different information; it is about different interpretations. Conventional backgrounds matter in terms of acquiring information. Unconventional backgrounds determine the level of creativity in interpreting the information. In this regard, conventional backgrounds can hurt.

Conventional first-order thinking has largely stopped working. If pedigree matters to investment success, why can so few high-profile analysts coming out of high-profile hedge funds produce superior investment results? If resource level matters to investment success, why do most billion-dollar-AUM hedge funds fail to even outperform market indices? Clearly, pedigree and resource level, neither of these conventional metrics matter as much as most people would like to believe. Too many smart people are competing too hard for too few investment opportunities. Conventional edges have long stopped mattering. Unconventional elements, such as emotional and psychological edges, separate investors.

Conventional investors say, “when I see it, I know it.” After oil prices went negative, people saw it, and all knew it. That was reactionary. Unconventional investors say, “when I know it, I see it.” Unconventional work leads to unconventional insights, allowing certain investors to see things before they happen. That is being prescient.

Almost none of the investors who shorted subprime mortgages in 2007 was a mortgage specialist. I predicted the negative oil price in April 2020, and I still have absolute zero background in oil and gas. One friend of mine later said this to me: “Jackson, listen, if you had worked in the oil and gas industry or had consulted industry experts, you would have never come to this negative-oil prediction.”

Unconventional investors win.

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If you wear a parachute, you probably will never learn how to fly. It is about deep discipline. It is about high motivation. Only when a person is being pushed to the very edge, is left with no choices, that he/she faces the singular reality — either you fight, or you die. When there is no escape button, a person’s superpower comes out. When you are not wearing a parachute, your life becomes terrifyingly simple. Either you become the best or you become nothing. There is nothing in between. You have no choice but to aim high and work hard!

Be cynical. Agreeing to everything means you become part of the crowd. Caring too much about how others see you means you become the consensus. Think independently. Challenge the status quo. Do not trust your own eyes and ears. Think twice. Think three times.

The investment industry is full of people with privileged backgrounds, golden resumes, and desirable traits. They are highly articulate and super presentable. To me, appearance is appearance; truth is truth. Being articulate does not mean the speaker knows what he/she is talking about. Writing well does not mean the writer knows what he/she is writing about. Do not let yourself be influenced by the other person’s look, accent, or overall presentation. Form your own judgement. Seek truth.

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Investing is not a business. Business is business; Investing is investing; the two are different. Successful business primarily benefits the shareholders of an investment organization; successful investing primarily benefits funds’ investors. Collecting fees is very reliable and extremely profitable; delivering strong investment results requires a combination of hard work and good luck. The former is easy; the latter is hard. Investors are smart: they understand collecting “fee coupons” is a sure path to being ridiculously rich. For most investors, no day would pass without them thinking about how to keep and attract clients. By doing so, investors stop being “investors” but becoming “business operators.” Building a great business will not lead to successful investing; but successful investing can lead to a great business. Few have the courage to stay true to where he/she originally starts.

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Keep learning. Be open-minded. Success breeds complacency. Complacency leads to rigidity. A rigid mind is not creative. There is so much confidence and pride in a rigid mind that it suffers a lack of imagination. By the time a rigid mind realizes it has a big problem, it is already too late. Rigid minds are doomed to become obsolete, marginalized, and forgotten. Their only destiny is history’s dustbin. To avoid that, I must keep learning. I must be open-minded.

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By chance and totally not by design, I was raised in a little unique environment. My mother was among the first generation of retail investors in Mainland China, trading A-shares from the very beginning of modern China’s capital markets. I grew up watching her trade. By middle school, I already knew how to read stock charts and how to find patterns. I had, however, never taken investing so seriously until halfway through my MBA study at Yale.

After taking a full loop, here I am again. Aim high. Work hard. Be kind.

(END)

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