Investing in people and investing in productivity: can we still do both?

The first NYC apartment my wife and I bought together was near-perfect for the moment: space for the family we planned, refurbished but still retaining pre-war character, and even a window seat facing Riverside Drive. It also had an ugly master bathroom. So the first big decision we made was to renovate the bathroom, which taught us our first lesson of home ownership: Contractors do not want to renovate a bathroom. We eventually got three outrageous bids, all of which said, implicitly: If you are dumb enough to accept this bid I’ll do this work.

I’m not dumb, though I am frugal. And I grew up in New England, land of “deal with it”, raised by a mother from Minnesota, land of the practical. So instead of a new bathroom renovation, we compromised on a face lift. The superintendent agreed to put in a new sink and toilet, and I was “allowed” to install new lights to brighten it up. But we were still stuck with a shower curtain to cover most of the ugly tile. Disappointed but determined, we headed to Home Depot. After a couple hours considering too many shades of white porcelain and a mind-boggling number of faucets, we were ready to go home and “make some decisions.”

Almost. Armed with a notebook full of colors, dimensions and prices, we passed a small rack of books by the register, including one titled “Renovating a Bathroom.” I stopped, stared at the cover and thought—how hard could it be? My wife stopped, stared at me and said, “What are you doing?,” although she knew me well enough to see our future. We drove home, I pulled out a tape measure, got a pencil, graph paper and a calculator, and figured out how many square feet of tile I would need.

Over the next couple of months, I spent evenings and weekends demolishing and reconstructing that space. I taught myself about thin-set mortar, sanded grout, tile nippers, trowels, wax rings, plumber’s tape, and GFCI outlets. Mostly, I found the process invigorating—a bunch of design decisions with my wife, then math problems and technical challenges to be solved. There were a few bumps along the way, like figuring out how to get a bathroom’s worth of old tile off the 9th floor (like Timothy Robbins in Shawshank Redemption—one bag of broken tiles to the corner trash can each day on the way to work), getting eight 40 lb panels of cement board from the back of my wagon up to the 9th floor (give the super a big tip, to watch the car, because no, he’s not carrying them), and wasting a lot of tile learning how to use a wet saw (yes I still have all my fingers). My wife eventually thought it was all funny, the super thought I was nuts.

The end of the story? We got a new bathroom.

Most readers are undoubtedly wondering why I’ve chosen to write about a home improvement project from 30 years ago. Well, renovating your own bathroom requires a basic level of handiness (skills) and a positive attitude, combined with a willingness to take some risk. That should be familiar to anyone in the investment business. Successful investment teams are staffed with people who bring the first two qualities to the office every day, and a few who understand risk. The teams are made up of employees who have the skills to do a specific job, and are determined, motivated, and committed to excellence.

Based on the abundance of graduate school programs aimed at investing, you would think that finding a team of like-minded and high performing professionals is easy. It is not.

I do admit the right skill set is pretty easy to find. Most graduate students from numerate fields show up with the right book knowledge for the job—statistics, economics, hard sciences, even psychology. Well run organizations and a good mentor teach the rest.

A strong positive attitude is more common, although, imo, largely not teachable. I believe it’s learned and developed early in life, mostly at family dinner tables and in grade school classrooms.

But, there is a third personal attribute (which, P.S. renovating a bathroom does not require) that is very hard to find.

This personal attribute is the one that separates success from mediocrity: a simmering desire to solve a problem and a dogged pursuit of the answer. And when I say “dogged pursuit of the answer,” I don’t mean working hard to figure it out—anyone who pursued an MBA will do that. I mean waking up in the middle of the night bothered by the problem. Riding the elevator to work with nervous energy because you just need to analyze the data. I mean skipping drinks with your friends because you’ve got to finish the model…not to meet a deadline, but because you need to ask another question, explore a new pattern, formulate a thesis, create the data sets, construct the models and do the work to test your thesis.

The most successful in this business are driven by desire to solve a problem, and are uneasy until they have. Or, as I have said to every young person hired over the years,“I can teach you skills, I can guide you to good habits, but the rest is up to you—I can’t teach you to give a damn.”

This leads me to “the point” of this piece, which is: the growing fear that I have, about this business, for this business, and many other businesses in the decades ahead, a fear about he loss of intellectual curiosity. Yes, I’m referring to AI, and the implications of turning a critical mode of learning and mentorship into a series of algorithms. There is undoubtedly value in automating certain processes, but there is also valuable training that will be lost, because making mistakes is the only way to learn to identify mistakes. And that is essential to success in a cognitive world.

The big question for this generation then is: how do we reconcile those two needs? How do we leverage the productivity gains enabled by artificial intelligence tools, yet maintain the process of discovery? How does the last generation sustain the discipline to continue mentoring the next generation? And, most importantly, what happens when the tools we use to do our job empower us to skip over the learning required to master our job?

To be honest, I’m not sure. I suspect we will know too late, after we recognize that the cost of this AI enabled renovation was too high.