This is a conversation with Andy Netzel, the smartest guy I ever hired. He’s also the only person I ever hired, but I like to think that I chose wisely.
Like me, Andy is a former journalist who went into business. And like me, he is deeply curious about everything.
Andy spent several months working for me and learning to analyze the world from a Wall Street point of view. He was able to contribute right away — as a former director of marketing at Hoover, Dirt Devil and Oreck, he deeply understood manufacturing and global distribution. He was a perfect complement to my own expertise developed from analyzing emerging technologies and global industrial companies.
And then, unfortunately for us, Andy used his new-found skills to analyze his own career and left for an even better and more exciting opportunity. . . . Teach a man to fish . . .
Several months working as a stock analyst shifted his entire worldview. Fascinating.
Here’s a conversation between us about what he learned and a glimpse of what it was like working with me. I hope you get something out of it — particularly the value of the reframe. The lessons learned in investing about time and money can be applied to your own life and career, and vice versa!
Andy: I look at the whole world differently now. That year on Wall Street was not a wasted time.
Me: Wow. I would like to blog about how analyzing the stock market changes one’s view of the world. The problem is that I have done this so long that I forget how I looked at things before. I know that I changed a lot.
I literally see everything as an equation now — stuff I’m involved in and stuff I’m not. Business is even more rational to me than it was before.
I love this. I can totally see it and I did not realize that I do this, too. Gosh, I even named my coaching company, Solve for X! That’s Tesla-inspired.
I also see anyone speaking in black and white certainties as uneducated about a subject. One thing that Wall Street taught me is that assumptions are dangerous. And the deeper you believe in them, the more harm they can do. Also, the spoken story for everything is bullshit — even the really great journalists just don’t have the access and cache to see behind the curtain.
I remember realizing this, too! When I was a reporter, I thought we got access to what really went on in companies and how things worked. I was so wrong. Being a stock analyst taught me a ton. I’m not sure you can really understand a thing without understanding the practical math behind it. What else did you learn?
Gambling is less fun. A trader once told me how he’d rather buy penny stocks than scratch offs. Think about it. Why risk $1,000 playing poker when twice that would be considered a great return? You could earn way more on a high-growth company. There is no casino that will give you unlimited return potential.
Hilarious! Sorry to ruin that for you. I don’t gamble so I have nothing to add. What else?
There are so many people who don’t understand the very fundamentals of the stock market. I had a decent understanding, but it’s amazing that the principle isn’t taught deeply in school. It is the backbone of our economy.
I agree! I think I should open up my blog to stock market questions and answer them. That would be fun.
Also, time is undervalued by most people. And people look at opportunity cost the wrong way. Sure, I have an hourly rate. But the question isn’t, ‘Would you pay $X to have another hour with your kids?’ The question is, ‘Would you accept $X to stay away from your kids another hour?’
There’s nuance in that question. The first generates, ‘I can’t afford’ types of thoughts. The second generates, ‘My kids are more important than that’ types of feelings.
And there’s nuance to why the Street taught that. You can be looking at a company in a perfectly valid way. But when challenged by a Wall Street hedge fund client or by your boss, your question can get reframed.
And that reframing changes your answer. Even though the inputs are exactly the same.
Reframing is so much of what I am doing for people when I coach them. Tell me more.
Yes! And it’s what you did on the Street, too. You constantly challenged the way I looked at a problem. Your framing was to look at it the way sophisticated investors look at it.
Andy, can you remember an example of when I reframed something? I know we did it constantly!
Sure. Take the example of Expert Data Systems*.
I looked at all of our research and saw a company struggling to transform into a SaaS model.
It was slow going. The company was having real trouble gaining traction, and the company’s revenue and price structure wasn’t even worked out yet.
We had to make a call on the quarter. I wanted to downgrade the stock to neutral.
But, you looked at it and said, “Right, but everyone knows it’s horrible. At the same time, product quality is still being reflected in our research with customers as really high. And this company is losing far less money than expectations. So, the company is actually going to outperform.”
Your gut was right. The stock popped on the quarterly result.
And I silently sulked while watching the price climb. LOL
LOL. That’s awesome. I remember that quarter — the results were awful and the stock was up anyway. You were right on what would happen, just wrong on what the stock would do. That is so what learning to be a stock analyst is about — first gathering all the information and second, figuring out how that information will play out relative to expectations. This is how you predict the future.
One other time, with Futurist Company Inc.* We kind of came around at the same time. We were bullish. The company had shown strong growth and was a market leader. Their pipeline looked strong. A new entrant had come in and sapped away attention but not market share.
But when we walked around the conference in San Francisco, a new view became apparent. Futurist’s technology wasn’t scalable.
We had to look past today’s market, past a year from now. We had to look not at what was possible today, but to a future when this industry would be making real money as a legitimate energy technology. Competitors would scale better. Futurist’s edge was disrupted in a fundamental way. We concluded that competitors had all the same advantages of Futurist, but the competing technology would likely be cheaper at scale.
Yes. Studying disruptive technology in particular gives a person a lot of insight into how the world works. I remember our conclusions, and you wrote the draft note to show proof of our view, including fun little graphics!
If I was going to have any impact on Wall Street, it was going to be to make it more illustrated.
You’re such a marketing guy.
It’s so funny. Those graphics and charts we did actually did get client eyes.
Those were great reports. Wall Streeters are smart but don’t have a lot of time to understand new stuff and learn. This particular technology was fucking confusing as hell. You made it so someone could understand it in five seconds. I think I said to you that we needed a graphic. Because you got really deep into the research, and you totally understood the technology, and for once, I got to play the part of the fresh investor client.
Yeah. We did some good work. I’m sorry I didn’t stay so long. Although, I probably put 18 months of work into that year together.
I was thinking that, too. I’ve been on Wall Street 7 years. Feels like 15.
You’ve probably put in 15 years worth of work, at least from the standpoint of the sane world where people work 8-10 hours a day instead of 12-16. A world where the stress is meeting your P&L, not reading tea leaves and being able to argue the intricacies of a dozen companies at the micro line-item level and the macro global economic and industry level.
Thanks for acknowledging that I did all that. What about how you manage your own assets? Did that change?
The interesting thing about investing post-Wall Street vs pre. Pre, I looked for solid companies that I thought would grow. Post, I look for companies that are undervalued for stupid reasons.
Let me know if you find any! Thank you for this chat. I’ll give everyone a link to your CX | Marketing consulting Web site!
You’re welcome. I just got started on a blog myself!
*Company names are fictitious to protect the private, client-based nature of what we did.
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