I had an opportunity to have a long interview (3 hours) with an ex-CEO of the largest investment banks in Europe. I believe that I’m good at evaluating someone, but this time it was very difficult – I couldn’t fathom what he thinks at the very depth of his mind. That said, his remark was full of implication and worth sharing:
About the essence of finance
It’s not the paradise any more. If you have money, you have to have some system to deal with it. It's all about the system to gather money from where money in in excess and allocate it to in demand. Very simple.
His biggest business principle was to evaluate risk, especially downside risk. Understand how much we can lose at the worst case, and then if the opportunity is still good enough given the risk, go for it. The biggest risk we will face in the coming 5 years is recession and deflation in Europe and US.
We should aware that when everyone is shouting about risk, the risk is very small; instead, when no one is talking about risk, it’s largest. Thus, be very careful when people are like a herd of sheeps. Be cautious when everyone in your company says the same thing.
About decision making
The biggest role of CEO is to make decisions. In decision-making, timing is more important than accuracy. People tend to overlook the importance of choosing the right timing.
The best way to be good at making decisions is to do trading, because in trading you would make many wrong decisions and would correct them. If you do not correct your past decision at the right timing, you would lose money. That experience is vital.
The market is all about human response, so you need to understand what the human being is in the first place. We don’t have a perfect scheme to understand human beings, but you have to know it.
On technological advancement
For instance, what 3D printer means to us is that we would need less labor in the near future, especially the blue collar labors. These technology advancements would hinder the growth of developing countries.
Less labor demands will also come to banking business. Banks will eventually shed their employees to keep their competence, especially in retail banking, which in theory can 100% go without labor forces.