The Most Valuable Lesson I Learned When Pursuing a Finance Major

7Aug2008 Filed under: Online Marketing Author: JW

Not many people know that I actually attended the University of Washington in Seattle and worked, briefly, towards a degree in finance, thinking that maybe I’d abandon all this Internet nonsense and pursue a career on Wall Street. It was a long time ago (in web years), and I dropped out of the program two classes away from graduation to dedicate more time to the company that would become SEOmoz (in 2001). Before I did, though, I met a professor named Darren Kisgen. Here’s a few tidbits from his CV:

University of Washington, Seattle, WA
Doctor of Philosophy, Finance, 2004

Vice President, Head of Energy Investment Banking Group
Ladenburg Thalmann & Co. Inc. (New York, NY), 1997-1999

Vice President, International Sales and Trading
Credit Suisse First Boston (New York, NY), 1996-1997

Voted "Favorite Teacher" in the University of Washington Business School, 2002 (why am I not surprised?)
Average teacher rating in courses taught: 4.7 out of 5.0 (1998-Present)
Ph.D. Teaching Award for Excellence in Teaching, 2001

Darren was not only a VP at CSFB (an incredibly competitive position), he was the youngest ever at the time - and probably still holds that record. Despite this success, he walked away from the corporate world and went back to school to pursue the doctorates he earned in 2004. I’m still dying to ask him why, but haven’t spoken to him since 2002. He’s now an assistant professor at Boston College and, apparently, an avid publisher on topics near and dear to the financial world’s heart (read: credit ratings and M&A deals).

I doubt that I interacted with Darren more than most students - he was young, charismatic, good-looking, and shockingly engaging when compared to his professorial peers. Since this was pre-Mystery Guest coming into my life, I can recall with humor the twinge of jealousy I felt when the pretty girl in class I had been working up the courage to talk to stayed late to chat with him. He was humble, without being shy or protective, and I recall his teaching style consistently involved personal recollections - in fact, that’s all I remember from his class - stories of trips on private jets that ended in broken-down jeeps in the Colombian jungle so he could visit a facility that was part of a company pitching to be taken public. A tale of flying around the world to meet with private investment groups and pension funds to play golf and sell them on his firm’s latest offering. The textbook material is lost, but the human element is impossible to forget.

However, Professor Kisgen’s amazing stories aren’t the topic of this blog post. Instead, I want to recount the first lesson - it might even have been the very first day of Macroeconomics (or was it micro?) - I picked up in his class.

Darren gave us all an assignment to do on that night and bring in the next day. I’ll paraphrase the instructions as best I can remember:

Consider the major events in the world in the last few weeks and months (this was just after September 11, 2001) and make predictions about how the shifts in culture, society and government will impact the stock market. Write down three companies you’d either invest or sell short today based on these shifts in demographics, psychographics and economic behavior.

Caveat: These have to be creative choices - investing in Lockheed Martin because you think there will be a military buildup is already built into the market’s intelligence, so try to choose companies that aren’t obvious based on your own intuition.

Naturally, most of us failed pretty badly. I remember answers like shorting airlines (too obvious), buying auto stocks (the logic being that people would drive rather than fly, but this didn’t take into account the rise in fuel prices, or the fact that people wouldn’t be buying many more cars in a down economy just to drive long distances), buying News Corp (I think at the time, we debunked this one because the reasoning given was that people were obsessed with news, but this was a short term shift. If the answer given had been that the country’s politics would swing to the right, it could have been a more compelling story), etc. I also remember having one of the few answers that was acceptable.

One of my company choices was Disney, not because people needed laughter or light-heartedness in a time of sadness, but because I had seen an article noting that in the few months following the WTC attacks, hanky-panky (by which I mean procreation) was at an all-time high. I predicted that the US might see a mini baby boom in the next 7-8 months and thus, companies catering to children and families would experience higher sales. This earned me my first bit of praise in the class, and today, for some inexplicable reason, it came flooding back into my memory when I read this - The Demographic Inversion of the American City.

Suddenly, I thought about how many similar articles I’d seen in the past 6 months, and how this trend perfectly fit Darren’s "shift" concept and could be used as a way to predict businesses and industries that might profit from the change. This was the brilliant lesson he’d imparted - that recognizing opportunity doesn’t require Warren Buffet’s legendary sixth sense or the sprinkling of stock broker fairy dust, it just takes insight. By recognizing the changes in the world around us, we can reason our way into industries that will be appealing in the long run.

Just look how many "shifts" are taking place in the world right now:

Oil is unlikely to ever be a "cheap" energy source again - in fact, energy as a whole may be a major cost in every transaction from here on out.
The US is unlikely to be the sole "economic superpower" on the planet for much longer. China is already a behemoth, and entities like the EU, along with countries like Brazil, Russia, Canada, and potentially several of the oil-rich gulf states may be much more influential in the decades to come.
A renewed focus on energy savings combined with an idealism for urban life in the US could shift the demographic and political balance in the US.
The celebrity-obsession paradigm is making massive headway worldwide (not just in the US), as pop culture reaches global audiences through film, television, sports and art.
Population declines in several European countries could forecast economic problems or a re-opening of immigration policies to help combat aging populations relying on state-sponsored support.
The cost of entrepreneurship, thanks mostly to the web, means that far more small businesses will enter the high-tech economy in wealthier nations.
Advances in medicine and lifespan could mean a considerably higher percentage of a nation’s population out of the workforce (living to 100+), yet relying on healthcare, investing time and effort in politics, and requiring more from pension programs and social security.
Traditional media forces like television, radio and newspapers are losing ground to web-based forms of consumption, leaving "mainstream" media and societal awareness and involvement in news more fragmented and less consistent.

Given all these potential "shifts" and hundreds of others, what types of industries and companies have a better shot at success? Which ones have the financial markets failed to consider as long-term benefactors? And, perhaps most importantly, which ones spell opportunity for web startups, Internet marketers and website developers?

The best part of all this is that as web entrepreneurs, we don’t need to invest in a stock portfolio, we can put our shoulder to the grindstone and actually build it.

I thought I’d share a few of my thoughts on the subject and then turn it over to the comments for more:

Energy is expensive, travel is expensive and shipping is expensive. This sounds to me like more opportunity for local merchants of every variety will be using the web to reach audiences that will increasingly be searching for local goods. Go Etsy, Craigslist & Ebay.
Celebrity and pop culture obsession spells more visits and income spent on consumption of entertainment media. I was just talking to David Niu from BuddyTV.com this afternoon about how his market is an excellent place to be.
The growth of urban centers and relative shrinkage of suburbia and rural communities might suggest that big trips to the Home Depot and other home repair stores are out, while apartment, condo and townhouse essentials are in. I see good things in store for CB2, West Elm and IKEA.
If starting a business is cheap, more people are going to do it, and that means they need inexpensive business services accessible over the web… Maybe even help with SEO