We are pleased to bring you an exclusive interview with noted investment strategist Michael Mauboussin.
MOI Global: Tell us how you got started in finance.
Michael Mauboussin: I joined Drexel Burnham Lambert straight out of college in 1986. It was an 18-month program that had a great mix of training and hands-on experience—we rotated through all aspects of the firm including trading, investment banking, research and operations. I figured even if it didn’t work out I’d have a good exposure to Wall Street and some sense of what I’d like to do.
…always look for gaps between fundamentals—for example, the financial performance of a company—and expectations, which is the stock price. While that may be stating the obvious, the devil is in the details.
The area that seemed the best fit with my personality was equity research. My breakthrough was getting hired as the food industry analyst at First Boston (now Credit Suisse) in 1992. A great deal of my focus in the early days of my research career was on valuation. I was deeply inspired by Al Rappaport’s book, Creating Shareholder Value. The principles Al laid out were very consistent with what I had learned at Drexel and remain the cornerstone of my thinking today. One of my career highlights was writing the book, Expectations Investing, with Al. That book basically took the principles of creating shareholder value and applied them to the world of investing.
Around the mid-1990s, I started to expand my reading, including a fair bit on evolutionary theory. That led naturally into more reading on psychology including Daniel Kahneman and Amos Tversky’s seminal work on heuristics and biases. I also learned about complex adaptive systems, a focal point of the research at the Santa Fe Institute in New Mexico. I felt strongly that each of these areas had a lot to contribute to an investment process.
MOI: Explain the challenges you’re trying to address through your research. What is the “multi-disciplinary” approach to investing and why is it necessary?
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