Career In Finance (Advice From A Portfolio Manager)

All right, hello and welcome to the latest session in our Masterclass Speaker Series. Normally something we do in the summer, we did so last year, had some really great feedback, but lots of demand to bring them back early this year. So I'm absolutely thrilled to have a guest on today. Alfonso Picatiello has joined me, as you can see here. A bit of an introduction, we're gonna— he's gonna go into it himself in more detail in a moment, but He is the author of the absolutely amazing Macro Compass. If you're not reading that already, you should. Definitely, I'll drop the link to everyone for that going forward. But he was previously the head of investment portfolio at the Treasury Department of ING Germany, where he was in charge of active management of around $20 billion of a multi-asset portfolio. So a guy of immense exposure and experience. And as we will hear about in a moment, he's not that old either. So it's going to be really fascinating to see that journey of progression. Over that, that period of coming out of study. And so the way we're gonna kind of divide this session up is Alf and I are gonna have a chat. We're gonna pivot around two areas. One, and I know we've already just said this off camera, is we talk to so many industry people, but students very, uh, not very regularly know the real background or personal story of these people that they look and aspire to be. And so it's going to be great to have a chat about that, go back in time a little bit. So we'll talk about that in the first section. And then we'll pivot and talk a little bit more about your specialism. I think Eddie said as well earlier that you're kind of a macro guru. And it would be great for students, I think, to have macro in a digestible way that's going to be useful for them for, I guess, the pursuit of landing a role in finance. So kind of away from perhaps some of the technicalities, a little bit more about— how do they kind of deconstruct what's going on so that they can think better when they're interviewing and things of that nature. And then we'll do a Q&A at the end. So without further ado, Alf, great to have you with us. And yeah, it'd be awesome to know a little bit about you really, your background and how you got started going back to kind of school days, I guess.

So first of all, congrats for the amazing work you do at Amplify and what you guys have built. It's really nice. And I'm honored to be here and speak to students. I mean, to young guys. I call them students, but ultimately young guys. So I'm a 30-year-old, looking 50, but still 30-year-old guy who comes from a humble place in the south of Italy where GDP per capita is, I don't know, $15,000 a year. I mean, if you make €1,000 a month, You're paid very well if you manage to get a job. There is about 40% youth unemployment rate where I come from. It's a very tough place, very humble place, but also a very intense, like emotionally intense one. It's the south of Italy, so there is a lot of that going on there. But it's a great learning experience when you grow up because you learn to grind, literally. Like you have to go that extra mile because there is so much uncertainty. I talked about youth unemployment rate before, right? So there is a queue of people applying for jobs in that region compared to the availability of jobs out there, right? So there is this imbalance which makes it very difficult, which motivates people to go the extra mile. And that's— well, as I was basically raised, and thanks a lot as well to the fact that my mother runs the treasury department of a small bank in the south of Italy, very small bank, but She's very passionate. It's a typical Southern Italian woman, I would say. And so I was basically brought into the world of finance already when I was 14, because at lunch breaks after school, my mom was there too, but she was in her lunch break from work, and she was still looking at these charts, you know, these futures, these equities, these bonds. And I'm like, "What the heck is that? I mean, I'm eating my pasta here and I can't talk to you because you're looking at whatever, the US markets or whatever you're trading, right? And so I was very curious, which is something we're going to talk about later, and it really helps in shaping your career, guys. And that helped me because I just wanted to know what she was looking at. And then I started liking it because ultimately this is a puzzle. Markets are a puzzle. The macroeconomy is a puzzle that you need to sort of assemble together. And yeah, from there I developed this passion, pursued it at university, and read a gazillion books that I— I mean, I was just too curious, to be honest, and that's what really helped me. And then, well, basically from there we can discuss what happened, but I think also the university experience was an interesting one that taught me a lot. But I'm gonna stop here, Anthony, if you have questions.

Yeah, I mean, with, with, um, university then, so given the fact that you came into this with already like an interest in trading and things like that, how did you find what you learned at university to satisfy, satisfy that kind of itch? I mean, was it, was it kind of like a necessary passage to get where you wanted to go, or did you actually find that actually was useful then? For when you were getting to those first steps into your career?

So I found it relatively useful because I was lucky to have exposure to two different teaching models. So I studied macroeconomics at my bachelor degree in, well, basically close to my hometown, and then for my Master of Science I moved to the north of Italy where I did the Master of Science in English. That really, of course, helped broaden my skills. And well, we Italians are not very well known to speak fluent English, so there was also something I needed to work on back then. Still probably need to with my Al Pacino accent. I can't do much about that. Anyway, um, and when I went there, the course was quantitative finance, which meant that I had a lot of math and statistics and econometrics and all of that. But so I learned a a ton about, let's say, the quant side of finance, although some of it was not really applicable or concretely applicable, but it gave you that mindset. You understand what a linear regression is. You understand what a stochastic process is. It doesn't mean you will be a master in handling those things in your life, but at least you get a good understanding of the big picture. What are we trying to do with this quant stuff? What that experience lacked is the applicability. So we very rarely used to say, "Okay, we are going to use this regression to try and test or backtest a trading model," for instance. It was rather non-applied quant stuff. I was lucky then to win a scholarship and go at the European Business School to finish my master's degree. That's in Germany. It's a private university that obviously I can't afford. But thanks to the scholarship I managed. And there the teaching style was completely the opposite. So you walk in there after one year of quant finance stuff, and the first day they just basically give you a case study. You know, you have to basically analyze the balance sheet of a company and tell what the company is going to, you know, do to improve its profitability or whatever was the task. And I'm like, but there was no theory. I mean, how am I supposed to do something here? And so the German approach was completely different, and it was rather than a bottom-up approach where you first start from, you know, the basis of the theory and you work up your way until you're able to effectively put it in practice, if you ever even try, we moved to the opposite, which was, this is the problem, try to figure out how to solve it, give me your answer, and then we're going to cover the theory behind. And basically, I was lucky enough to experience both teaching methods, and as well, my brain got, you know, used to think both ways. And I think this is a— it's always good not to get your ego or your style attached to a certain type of student, type of guy. I am either a quant or a big thinker. I'm either a mathematician or a top-down consultant or whatever. This either-or hardly benefits you in your career. There are paths which are very specialist paths, but even in this specialism, guys, you will have to have a diverse set of skills. In nowadays labor market, it's basically impossible to be able to have just one skill. And even if you are the top 2-3 percentile at that skill, you will be required to have a broad set of skills. So try to diversify as well the approach you have to learning.

What were you like at that stage in your life? Were you quite an introvert? Were you an extrovert? Were you able— because like, I guess operating in a professional sense isn't just about having technical capabilities. You're in an organization, right? And there's lots of other things that come along with that.

No, so let's, let's go into the, the working, uh, career. So basically, I, I, from the Master of Science in Germany, um, ING, which was the bank I was working for until a few months ago, uh, came on campus and started, you know, asking guys and interviewing. There were them and then Barclays and then whoever else big bank was in there trying to recruit basically interns. And so I had a chat with them and they were growing like hell. So ING is a Dutch bank and they were growing in Germany. They were setting up shop in Germany 2013, something like that, 2014. And so I decided to join a department which actually wasn't even what I was looking for. I knew that already. So I was a markets guy, always fascinated by macroeconomics and markets. And I ended up joining the commercial bank side. They were basically setting up their commercial bank to lend basically to German businesses. And so obviously I tried to take the market-related stuff, so pricing the loans, calculating risks, and all of that within that internship. But again, the grinding mentality worked back then too, because what I really needed, Anthony, is to get my feet through the door. And I don't care if the first job is not going to be the good one. I'm still going to learn something because I have no idea what I'm doing here. So, and ultimately it's going to be a good experience. That was my mindset back then. And so it worked exactly like that. So I learned quite a few things during my internship, but after 4 months, the thing that I learned by far being the most valuable was networking. So I immediately realized that I had a lot of people around me, directors, managing directors, and You just have to speak to them, and ultimately something will pop up that will interest you or could be an opportunity. And then, well, basically ultimately that's what happened, and a job in the Treasury Department of ING in the Netherlands, which is the headquarters— it's a Dutch bank, right— opened up. And the Treasury Department was basically the place where I wanted to end up in financial markets, right, where you effectively run portfolios, manage risks, and trade different asset classes, which is you basically try to solve the puzzle. You get your hands dirty into what I always wanted to do, but it was not nearly this fairytale linear path up. It was a lot of grinding, a lot of trying to broaden your skill sets, even the skill set you really don't think it's necessary or you hate, it's, it can really help.

Yeah, I think what it almost answers the question, but to put it out there anyway, because we always focus on obtaining that first job and getting that first foot in the door. But I think for a lot of students, because they have that such a mountain of an objective, they get there and then they can feel a bit lost then because they've lost that. That was a very clear, definable goal.

Yeah.

And then once they're in the organization, it's like Oh, it's almost like the air's let out a little bit and you're like, you need to re-motivate. Um, so any, any advice around those who have secured and they're in that first infancy of their career? Or is it again, it's just utilizing that network and really growing off other people's experience and expertise?

The advice I can give is you assume you sleep 8 hours a day, you have 24 hours in your day, then you have 16 left, then you have to eat and take care of yourself, you have maybe 13, 14 hours left. Between commute— well, nowadays not that much, but normally speaking, between commute and the hours you're gonna put in, you're probably gonna spend about 70% of your awake time doing this. This equals your job, which can be setting up your company, working for an employer, whatever. It's at least 70% of your awake time. While at the beginning of your career this might not even seem a metric you will focus on, a few years later you will focus on this. So the only one single advice I can give when you start the first 2 years of your career is just experiment. Literally means just try to find out what you like, because this will be by far the most important thing in defining How happy are you about your life, your working life? At the end of the day, if you're unhappy about what you do, you're never going to be able to either perform nor get the best out of it for yourself and for your employer. Well, if you have an employer and you don't run your own company. The most important thing is to find out what you like. And once you find that out, it's going to be such a revelation because then working is— actually, the verb is not going to describe exactly what you do, So as I always say, before, this was not my job working for the bank. It was my passion. It's just what I like to do. And then it doesn't weigh on your shoulders. You don't wake up on a Monday morning saying, "Holy crap, I need to face 7 days or 5 days." You wake up saying, "Wow, that's cool. Let's see what happens today in markets." That was my thing. Your thing can be, I don't know, let's run the accounting for this company or let's set up my own company, whatever it is, find what you like. That's by far the most important thing at the beginning of your career.

Yeah, excellent advice. And yeah, that's the beauty I think I've always had working on the market side, is that every day is a new day and every day is a new challenge, I guess. But, um, okay, so moving this over to then the kind of next parts of the kind of discussion is that— so I think there's a lot of mystique around what actually a portfolio manager does from for students. So it'd be great to actually get under the bonnet and for you to explain, like, what's a typical day look like? And I know it's not like guns blazing, you're making decisions left, right, and center, but I guess a little bit of context would be really great insight.

Yes. So the day of a portfolio manager, not in an investment bank, let me add that, because maybe the rhythm might be different. Is that you generally try to be at the office before the market opens, which means if you are in continental Europe, that's about 8:00, 8:15 AM. So not a prohibitive time. And then you run basically your— you screen the news overnight because Asia has been trading in the meantime, America from last evening if you were sleeping and whatever, right? So you understand what has gone on. And then you move on into your positions. That's the most important thing. You're running positions at every point in time. Therefore, before the market opens, once you regroup your information, you have to understand whether there was any relevant vital information that changes your assessment of your portfolio. That's the first thing you do. And then assuming you had no action to take because you still feel comfortable with your positions, you have a coffee. Yes, probably even before you even start. No, I'm just kidding. From that point onwards, the market part, let's say, so both the executing and the thinking about strategies probably takes no more than 40% of your time. Yes, correct. 40%, not 80%, 40%. The remaining 60% is you have people annoying you. I'm just kidding. You have a lot of things around you going on you need to manage. Which are not in the Wolf of Wall Street movie, but actually are there, which is your risk manager, which is your finance department that wants to make sure that the P&L, the profit and loss, reconciles between what you see and what he or she sees on the back of the envelope when they run the ledgers and all the accounting softwares. And I can tell you 90% of the times you're not going to see the same numbers. So you have to argue a lot about that. Your risk manager will try to chase you and to basically bring down your positions at every single point in time, even if you're making money, doesn't care. His job is to basically make you shrink the amount of risk you take and optimize the profit and loss you make for one unit of risk. So you'll have this very annoying guy basically almost every day at your desk. And then you'll have a lot of presentations to do. And a lot of communication as well. So I want to talk about that. And another key part, which is the stakeholder management, which is a very fancy word for learn to be diplomatic. And so if you are not diplomatic and you cannot do stakeholder management, you can be the best portfolio manager out there. You can only work for a hedge fund, maybe, because there the incentive scheme is 99% make money, 1%, the rest is irrelevant. But if you work for a large institution, you can be the best portfolio manager out there. If you cannot communicate what your strategy is, and if you cannot manage your stakeholders, you are not going to be successful. So the remaining 20, 25% of your time is communicating to stakeholders and managing them. And I learned at the beginning, I was paying zero attention to this. I mean, I walked in there and I'm like, okay, I have a strategy, I'm going to run it, I'm making money, leave me alone. Oh, you have your— I don't want to give presentations, fuck off. Sorry for that. I just want to do this. I like it. Please leave me alone. And my manager actually walked me in a room after a few months and he said, Alf, your P&L is looking very good and you definitely know what you're doing, I was back then not running a $20 billion portfolio, was a junior, basically an associate or even analyst back then, just started a year or two years after. I remember this conversation with him saying, "Nobody likes you. So what are we going to do about that?" And I'm like, "What do you mean nobody likes me?" He's like, "You don't want to talk about your strategy. You don't communicate it well. You don't pay attention to the presentations you're doing to stakeholders. And you tell your risk manager to to go and have a walk. So that doesn't work. And so it was my wake-up call basically to pay attention to communication and to stakeholder management. And up to today, Anthony, now basically writing the Macro Compass, which is an educational newsletter effectively with some investment ideas about global macro, the communication is at least 50% of the success. Because you can be the best content guy out there, if you're not able to convey your message out, it doesn't work.

Yeah, that's so important. And it's so important going back as well to what you said at the start about having different skills to complement and almost make the core ones better. And like you say, that fits perfectly with what you've just— what you've spoken about. So the question then next would be, you've obviously moved on from that role now. To move on to new things. Tell me about that. What was the rationale there and what's the plan?

Yeah, so we are at the analyst associate moment, right? A couple of years in and they were promoting me year after year. My manager saw the P&L and also saw the improvement I was making on communication and stakeholder management, 'cause I understood it was important. And then he said, okay, I was 27 and a half and he said, 'Well, I'm gonna make you run a team of 3 people and a book of $20 billion.' And I thought he was drunk, but he really did that. And so at the beginning, that experience was incredible, right? And you get— and it's so hard. I imagine managing a team of 3 Germans between 40 and 45 years old. They have to be managed by a 27-and-a-half-year-old Southern—

That's a really good point. How did that go down? I mean—

At the beginning, horrible. I mean, they're like, I don't recognize you. Why you should be my boss? I mean, I see your P&L, but I mean, who the hell are you? I mean, so at the beginning, that was very tough, a great learning experience. And then again, diplomacy and communication were more important than hard skills. Now, that was fun for the first year and a half, and then I was 29, 6 years with ING, and in the last year, I had zero fun. Fun for me means my learning curve was completely flat, and that is something I don't accept. I'm like, okay, if I don't enjoy what I'm doing, if I don't learn something new every day, why am I doing that? Also, the corporate politics had become unbearable for my standards, because being promoted means being paid more, having more responsibility, running more risks in my case, but also being exposed to an increasingly annoying amount of corporate politics, which is just part of the game. So if you're not prepared for that, do not even aim at having a certain position which starts with a C. In my case, it was Chief Investment Officer. Anything that starts with a C in front— no, I'm kidding. But it involves a lot of politics, corporate politics. And at some point, this corporate politics was overshadowing even the content of my work. And then I basically, you know, in a parallel fashion, I started writing on LinkedIn and opening the newsletter. This was like beginning of 2021, just a side gig for fun. And I soon realized that, wow, that was really fun. You know, the interaction with people, thinking how to build it up, how to communicate what I knew, interacting, writing, thinking how to write in such a way that I can convey what I want to convey to people. I mean, I thought, okay, well, this is fun. And then at some point I thought, this is fun and also potentially something I can do for a living, so why not? And I took the leap of faith basically, and I quit. And my wife wanted to kill me, and my best friends thought I was completely crazy, but I'm You know, having this sort of conversations with you, Anthony, was obviously much more difficult before because of compliance. ING can't check what I'm saying in public. ING wants to check— ING or any other employer wants to check what I write on LinkedIn, what I write on the Macro Compass. At some point, I thought, I don't want anybody to check what I'm doing. I just want to put it out for, you know, to educate and put out the knowledge that I had accumulated over the past years. "And as people seem to like what I have to say, then let's give it a try." And I now say this very lightly, but let's give it a try meant basically giving away a pretty decent salary or the certainty of receiving that salary, and also leaving behind the label. The label was that I am known in the street to be basically the youngest ever guy to manage such a large portfolio that any guy has seen on the street. Street is the name for investment banks. And so I had this label with me and it was a comfortable one, Anthony. I'm like, "Okay, I'm that guy, young, brilliant, apparently everybody likes him, now can even communicate, runs a huge book." And basically removing that label and saying, "I don't run that book anymore. I don't have that title anymore." It's just me, me putting out the content, and if you like it, it's going to be a success. If you don't, I'm an idiot. And that part was— and that part was tough, but here we are.

Yeah, I'm sure, I'm sure the communication skills came in handy with managing your wife's expectations.

Yes, somehow.

But no, I mean, absolutely credit to you for, for staying true to those values of always be learning and progression. So Yeah, we wish you the very best with this, this new kind of turn in your career, and I'm sure it's just the beginning of the next, the next kind of chapter. Um, but look, moving to the, the next part, which was you obviously— now, I mean, when I read your LinkedIn posts or things like that, I think they're brilliant because they hit just the right tone and it takes things, deconstructs them, and makes them much more digestible. And I think that's perfect for what we do, which is try and— finance students, I think, sometimes can be a bit intimidated by a lot of the subject matter because there's such a big division between the technical side and the application, as we said earlier, what they actually do day to day in markets. So what advice can you give to them to— from a top level, I guess— all of this stuff in the world's going on all of the time because they're— I mean, when I started my career in 2006, if you can believe it, I actually used to still have to go to the newspaper truck at 6:00 AM in the morning and get every conceivable newspaper I could. The analysts had to read them. Whereas now, obviously, students are just subjected to an overwhelming amount of information 24/7. How's best then for a student wanting to get into finance who needs to build up that repertoire of commercial awareness so they can talk markets? As well as technically know about them. What advice would you give in that area?

So the opportunity today is huge compared to 15 years ago, and you're right. So if you are on LinkedIn or on Twitter or on Substack or wherever you get your information now, you can get as much as you want. So normally, I would say just scout for good quality stuff and then make sure you consistently read those. So it needs to be a routine. For instance, do you find the Financial Times to be a good resource, all right, then make sure that it's within your 5 to 7. Do not exaggerate and do not overwhelm you with information, otherwise you're not going to be able to digest it, right? So we also live in the world of having a very low attention span compared to maybe 20 years ago because of the social media influence in our life. So make sure as well that your time is well spent, efficiently spent, which means that The message and information you get is pretty concise, clear, and factual—importantly factual. And nowadays, I mean, in the past you had to go through newspapers to do that, and nowadays you have several other free sources of information. It's important though to make a first selection, so spend time on identifying who are the guys that you really trust and want to read, or the newspapers, and then make sure you always read those. And Then continuously over time, continue to scout to open your horizons, and sooner or later you're going to find somebody else that you find consistently interesting and factual and start following this guy too. Then you create basically a package. That's what I do for myself still today. I read 5 sources a day. 3 are newsletters, 2 are newspapers, and that's it. That's what I go through every week depending on basically the time horizon of publishing of these newspapers or newsletters. And then of course, I read also something on top of that. Otherwise, you could close yourself in an echo chamber. But that's probably the most efficient way to go through it.

How do you find— and I guess this kind of brings back a little bit of what you were doing at ING— but how do you find the disconnect then out of trying to move? I mean, I've always found markets almost like a drug because It's because it is pretty much permanent apart from Saturday. Somewhere in the world is open, something is happening, and you kind of get a bit of a kick, or at least I used to, out of being the first to know. Yeah, first when something breaks, you're like, I want to be first. And that's as an analyst, not even as a trader trying to execute. So what was your kind of method? Because I know for students as well, mental health for young people, particularly amplified by the pandemic, is is a really important thing. And so how can they kind of manage that? Because I know markets can be quite all-absorbing, particularly because a lot of them are trading crypto and there really is no let up there.

So if I know something and you know something, Anthony, there is for sure somebody else in the world that knows it before you and I know. That's a fact. So, uh, applying a news-based strategy to your trading approach is basically today only applicable with algo trading and only by few professional flow traders all over the world. And most likely, credibly, you can't be amongst those, which means having that approach is very time-consuming, very mental energy-consuming, probably not efficient too. That's what I would say. Based on a single news to be able to be the first one to know and therefore the first one to be able to profit from that, it's not a business model that a single person without infrastructure can actually deliver. So in general, then, the advice that I can give to people again is to make sure that if you are in markets, you're really passionate about it, because it is a fast-paced, somehow energy-draining business. But at the same time, be credible with yourself and humble about it. It's a very difficult business, as in to be profitable is a very difficult business, and very few people actually succeed in that, which means that you have to be honest with yourself. You have to like it and be passionate about it and discount the probability that you will never be able to solve the puzzle in your entire life and find the motivation into trying to get closer and closer. And that's how you remain healthy about it, because if you are true to yourself and you know that the highest probability outcome is that you will not be able to solve the puzzle at all, and you will only get closer and closer and smarter and smarter over time, if you are consistent with that view, then it's more likely as well you will not overwhelm yourself with countless hours and pressure because you just find it unnecessary. It's a bit like I am one of the few guys on Twitter or on my newsletter, The Macro Compass, that puts out investment ideas or trading ideas to the world open face with an entry point, a stop loss, and a first profit target. And people are telling me, "You're absolutely nuts because people will be able to see when you're wrong." And what's the problem? I mean, everybody is wrong. So this is the first step in admitting to yourself that you will never be able to achieve a 100% win rate. It's impossible. It's humanly impossible. The best trader that compounded the best returns over the last 30 years is Jim Simons of Renaissance Capital. Jim Simons, there is an amazing book about him being written, by the way. Just Google it. I don't remember the name. Jim Simons is the trader, Renaissance Macro. And he's a mathematician that developed a quant-based approach that is completely systematic. Anthony has no discretionary decision-making, zero. Basically, the computers run the long-short position for him, not himself. Guess what his win rate is on trades.

It's going to be something insanely high by the way that this is being pitched, or is it the opposite and it's just literally 1.1 over the edge?

There are good answers in the chat, I can see. It's 51%. 51%. The best traders of all time who compounded about 30% annual return for 30 years in a row or something like that, huge returns, is right one trade and is wrong the other trade, and then is right one trade and then is wrong the other trade. The best traders of all time do that. Friends in hedge funds, when I was at ING, my win rate was 54%. So like, "Oh, you're going to be wrong." "Sure, of course. Oh, plenty of times I'm going to be wrong, and I don't see the problem with it." So this really helps being true to yourself, relieves yourself from the pressure. But to get to that intellectual honesty, it's a very demanding step because this industry teaches big ego. It promotes big ego, and big ego is your worst enemy if you're managing money.

From the other PMs that you know and that you've met, um, did that big ego— do they— have they all got over that part and that's why they are successful, or is it a complete mixed bag of personalities?

It's a mixed bag of personalities, and there is a common trait amongst the most successful market makers, portfolio managers, hedge fund portfolio managers. Those are all different jobs and animals. The common trait amongst the top 10% percentile of the most successful guys is that they went over this step, and they all did. It doesn't mean that there are— there are successful guys that I know that never went over this step, which is just fine. I'm just saying, if you want to skew the odds your way, to do this in a mentally healthy way and also potentially in a profitable way, this is a step that skews the odds in your favor. It's not a necessary and sufficient condition, but it skews the odds your way.

Okay, cool. Well, let's, let's move on to some questions. Yeah, so yeah, hit us up in the chat or the Q&A if you have a question for Alf you'd like to know. Just drop it in and I can see them all and I'll present them. So Okay, I'll read out the first one while others type theirs in. So Paul has asked, do you think it is necessary to specialize into the area that you like most in order to succeed on the highest level, or do you think it'd be more appropriate to a person who loves multiple areas of finance and markets to keep expanding into different areas?

It's quite a question. Um, may I ask Anthony just for one thing before we start? Um, I am having this conversation, is really great to be honest. I mean, I'm having a lot of fun, and it also, I hope, helps the people listening to this webinar. If there is one thing you guys could do to help me out is to subscribe to the newsletter. It's free. So if you just want to do it, I'd be, you know, super happy to see that going on. Now back to the question, basically, I also— to Paul, right? Paul was the name of the guy. And so, Paul, I started back then wanting to specialize and to become a sort of quantitative portfolio manager. So I thought I could build models that gave me an edge to basically overperform markets. And soon after starting, I realized that that's quite a niche and that it's much better to develop broader skills. So I ended up becoming a macro discretionary portfolio manager, which means I still use models to run my portfolio, but I use them not as my main input. So they spit out signals. For instance, I have several indices that I build and then they say, okay, this is overvalued or undervalued. I take that input and I put it in the old macro view that I have of the world and I see where it stands. And then I make a discretionary decision whether to be long or short something. So I turn basically 180 degrees. And so what this taught me is that while at the beginning I thought that what I really wanted to specialize was one thing, well, at the end it was not. So my suggestion would always be to follow your passion. If you really like something, pursue it, but keep an open mind to develop skills that can help you to pivot away, because in a couple of years you might, you know, you might— you don't know exactly if that is really what you want.

Cool. And I've shared the link there for for our newsletter. So please, please do. It's highly recommended. Another good question, a very, I guess, on topic of the here and now is Web3. There's lots of chatter about it. I guess a bit of a lack of probably education about what exactly that is, because I think people look at something like Meta and think, well, here it is, we've arrived. But obviously this is the first kind of more broad-based awareness of something that's been happening for a while. But what is your take about this whole Web3, Web2 to 3 transition?

Yeah, so the other thing that I learned, uh, in my experience is that when I don't know something, I'm gonna say I don't know. So I know little about Web 3.0, and the reason why I say that is that I haven't tried myself one of the features it allows in a deep enough way to be able to give you an opinion. What I can say is more general about the digital transition. And so yesterday I was reading a piece from Goldman Sachs about the gaming industry. And he projects something like 500 million gaming users growth a year over the next few years. So all these guys are going to use 3D Google goggles or whatever other highly digital instrument that 20 years ago was just a dream. So what this teaches me is that the economy is becoming more and more digital. I am now in the process of setting up my own business, and I would have never thought of doing that 5 years ago completely remote. I mean, it was a stretch. Nowadays it's not. So What that teaches me is that the direction of travel seems to be pretty clear, and the digitalization of the world is likely to continue. Whether Web 3.0 will be the overwhelming reality in 5 years from now, Anthony, I just don't have the insights to give a proper answer.

Was there any PMs that were talking about crypto in terms of as an asset class? I know it's— there's been ETF launches from ProShares and also others.

Yeah, that's an interesting one. So we're talking about egos, right? And bankers have big egos, normally speaking, and portfolio managers too. So digital assets are seen as a Ponzi scheme. That's the average answer, which I strongly disagree with. But it's hard for the average banker to change its mind. First of all, they see it as a threat. Ultimately, it could be a threat because it somehow also forces central banks to react to it, which then means central bank digital currencies might become a reality faster than expected, which also has impact on monetary policy, which ultimately has impacts on commercial banks. So all in all, people within the industry, Anthony, want to preserve the status quo, especially at a banker's level. Anything that comes and it's new and it's potentially threatening, it's disliked by definition. There are some portfolio managers out there that I know that have sympathy for digital asset classes. None of these guys is a maximalist, which I really like, which means they either say, "Oh, it's going to zero. It's a Ponzi scheme," or, "Tomorrow we're going to buy bananas in Bitcoin and the bananas in euro, you can't buy them anymore. It's only Bitcoin." So those two extremes are polarizing the discussion. And I think the smart guys are seeing digital assets basically as a call option. That's the way I interpret it. It's an asset you want to own in a size that you can afford in terms of drawdowns and volatility that it generates for your portfolio, but it's an asset that you can't ignore at the same time because of the potential positive payoff it can have in the future. And that's the role it has in my portfolio. I allocate a small percentage of my wealth in digital assets because I think there might be a pretty good convex pay off my way. And at the same time, I treat it as a call option where if I'm completely wrong and the far left tail scenario realizes, then I'm going to lose the premium on the call option, which is the small amount I invested my wealth in. And I'm not going to treat it as an ego trade. It's either right or wrong. It's an asset class. It must have a role in the portfolio, which is appropriate to its characteristics.

Yeah, no, really good, really good summary. And, um, Robin has asked, did you have a specific process or way to improve your communication and politics skills? Yes, I had.

Find a mentor, and the mentor has two characteristics. He has gray hair or no hair. I'm just kidding. He's very experienced. He's very experienced. Which means he's at the phase of the career where he went up, up and up, and then he has been plateauing for 5 to 7 years, maybe 10 years, which means he, he has gone through the phase where he was growing. So he, he also went through the phase where he was plateauing, where he found it hard to progress, which is most likely not because he lacked skills, but because he was lacking technical skills, but because he was lacking other skills that he didn't want to develop because maybe they didn't match his profile, which means often the diplomatic skills and communication skills. And this guy has gone through exactly the crap that you will hate the most, and he can tell you how that's gonna play out. The second most important characteristic of a mentor is that he can tell straight to your face what's gonna happen even if you don't like it. So you don't have to find somebody who massages you or promotes you in all situations. You have to find somebody who has been there and has no problem telling you you're gonna make a huge mistake for your career, which doesn't mean you're still gonna do it because sometimes, you know, we're stubborn and we go for it. But you really need somebody who has these two characteristics. My mentor was a guy that, I mean, from a content perspective is really great. He communicates well. He does horrible politics, and he knows it. He's just like, "I don't want to meddle in that stuff. I don't care. I don't want to lie. I don't want to massage things to my risk managers. I'm just going to say, if I see risks, I'm going to say this is risky, even if it goes against my own self-interest," which obviously caps his career by definition. Because that's how it works. And he was a great teacher to basically— because he could anticipate already what happened, what would have happened. And then, you know, you can sort of, yeah, so how can I say, maneuver around that and learn how to handle these situations much better if you have a mentor with these two characteristics.

Okay, we'll take one final question from someone in Hong Kong, and they've asked, um, would you share about how to learn macro starting out as a junior? And I'm going to add another angle on that because a lot of students who we, we actually try to target to, to take part in some of our practical simulations are non-econ students, so those from a variety of different backgrounds, because our belief has always been, you know, there could be talent out there that's just in a very much more process-driven, like a sales trading role, for example. It could be someone who's just got talent, who might be a music or a history student or something like that. The question they always ask is, well, how do I kind of accelerate what I do need to learn because I haven't learned it at university? So any kind of ground rules or competencies to get the macro up and running?

First of all, you need to understand what money is. Quite a weird statement, but the Keynesian and post-Keynesian stuff we are taught at universities comes from wrong foundations and wrong definitions of money. So unfortunately, I don't have one magic book that can sort of answer all these questions at once because money is one—

You need to write a book, Alf. I know.

And you're not the first one who tells me that, Anthony. So I'm going to get to it, I promise. But Robin is correct. Central Banking 101 from Joseph Wang, friend of mine on Twitter. He's called the Fed Guy, I think is his handle. He used to work at the Fed. He explains money plumbing, as I call it, so the central bank and the commercial bank system very well. When you want to understand first money rather than money plumbing, then you read Cullen Roche's book, which is called Pragmatic Capitalism. I'm going to interview Cullen for Real Vision today or tomorrow. Anyway, I'll see if I can share a link which goes behind the paywall if you promise not to share that link on social media, guys. Otherwise, the guys at Real Vision are going to kill me. But I'm going to talk money with Cullen Roche. Buy his book. It's called Pragmatic Capitalism. 100 pages maybe. He explains very well how money works. You start from there, then you move to money plumbing, so central banking and commercial banking. Central Banking 101 from Joseph Wang, it's a very good book. And then you start connecting the dots. And to connect the dots, I suggest that you read the book of Richard Koo. There are two books. One, it's called Balance Sheet Recessions, which explains What Happened in Japan, where they tried to experiment with expanding credit at a very fast pace and lowering interest rates at the same time. And there is another book which is called The Holy Grail of Macroeconomics, which is a pretty good title, from Richard Koo again. Finally, you should read the work of Professor Steve Keen. K-E-E-N. He's an Australian professor. Who does an amazing job at explaining macro. Those are the 4 to 5 pillars. You start from that and you have a good understanding. Unfortunately, there is nobody who then does a, you know, a holistic job connecting all of that together. I'm gonna write my book and let's see if I can do that.

I think that's a good way to end the discussion. And what I'll do is I will get links to all of those books that were mentioned. And when we share this video, and what I plan to do is also take the audio and put it out as a podcast, I'll put all of the links there, including to the Macro Compass as well. So Alf, that was amazing. It's some fantastic insight, I think really honest, which is so refreshing for the community to hear. And so I can't thank you enough, and I'm sure For everyone listening, connect. Remember, Alf himself said networking. And so here's an experienced person. You've heard him talk now and you have a reason to connect. So encourage you to do so. And, uh, yeah, look forward to— look forward to the book, Alf.

Oh well, that's gonna take some time. Uh, but guys, uh, I really appreciate having, uh, almost 100 people, I think, listening to this. A few years ago was one of you, and career went fast, but I'm still super approachable. So if you have questions or whatever, you find me on LinkedIn with my full Italian, southern Italian sounding name, or on Twitter @macroalf, or you want to send me an email via the Macro Compass newsletter, just do so. I'm super approachable. Time is a bit of a constraint, but I always find time to answer to students, especially to students. So just do that.

Cool. Thank you very much, Alf, and thank you very much everyone for tuning in. See you next time.