Saturday, Sep 10, 2022 • 23min
1. How To Succeed In Finance, With Algebris CEO Davide Serra
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Davide Serra, Bocconi alumnus and founder and CEO of Algebris Investments, is an expert in the finance industry that founded his own global asset management company and advises world leaders on financial policy. We talk to him about breaking into the world of finance, what happens behind-the-scenes in banks, and how to predict macroeconomic events.
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Talking about
Speakers
(3)
Davide Serra
Virginia Stagni
Mayank
Transcript
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Virginia Stagni
00:04
This is The Talent Show, a new podcast series from
FT
Talent, a hub of innovation from the Financial Times
, hosted by under thirties for the under thirties around the world. This first series is in partnership with Bocconi University
, a leading higher education institution of business and managerial advancements. davide serraShare
00:22
I'm Virginia Stagni and this is the guide you need to drive innovation and change.
Share
00:33
Today we are focusing on investment banking with an expert that founded his own global asset management company and advises world leaders on financial policy. This is for any listener who wants to break into the world of finance, who wonders what goes on behind the scenes in banks and wants insight into how to predict macroeconomic events.
Share
00:54
Here is our conversation with Davide Serra, the CEO and the founder of
Algebris Investments
and a Bocconi
alumnus.Share
01:07
We have a great honor to have in the
FT
studio at Financial Times
of Bracken House, Davide Serra that came to visit us here in London
.Share
Davide Serra
01:16
Thank you.
Share
Virginia Stagni
01:16
Thank you so much for being able to join us in the
FT
headquarter. Many of you already know him because with our FT
Talent experience, we have been inviting Davide to mentor and challenge you as well throughout the different experiences. He is the founder and CEO of Algebris
and I would really like to start with a question for you that is about first investment.Share
01:41
Younger people in the last few years, they have been investing in
cryptos
and they have been using apps maybe such as a Robinhood
. I would love to know if you feel is a good entry point for learning about finance and entering into this complicated ecosystem or if you have other ideas for younger people to start investing?Share
Davide Serra
02:01
So I would say investing, it's something important, is crucial in particular at a young age because basically it's the base for which then you can retire within 30 to 40 years, you can pay your mortgage. You need to think is investing as something that has to be well understood, well thought and there are three rules in investing.
Share
02:20
Number one: don't lose money. Rule number two: don't lose money. Rule number three: don't lose money. And so I would keep it simple.
Share
02:29
Crypto,
it's in a different space, it's in the gambling space. So if one evening you want to go to a casino and have fun and basically waste your money, then you can mention the word crypto
but crypto
is anything but an investment.Share
02:44
I would make it very clear:
Robinhood
, any app, any crypto
, it's in the gambling space which is equal like getting drunk and having fun. It's nothing to do with what you should do with your savings. With your savings you need to be within highly regulated institution with rule number one, two and three. It's always the same. Don't lose.Share
Virginia Stagni
03:04
Alright, very strong views and that's why we love Davide. If you're a younger person today, what would you do to keep pace with geopolitics and how important it has been for your career, understanding the world around you?
Share
Davide Serra
03:18
That's a very, very good point. I used to be an athlete. I used to play volleyball in the first division in
Italy
and, you know, I was also a pro. When I was 18 I actually applied to go for, you know, the sport university. Then one day reading one of the major newspaper, I couldn't understand the title nor the first five pages.Share
03:39
And so I remember asking my dad: "How can I understand what is going on?" and it is very simple: if you do economics you're gonna be able to understand the newspaper. That's why I decided to go to Bocconi, to understand the newspaper.
Share
03:52
What is the newspaper? It's what's happening today, what are the rules of engagement in which society operates. Geopolitics and the democracy in the western world, as the autocracy in most parts of the world, do matter because basically these are the rules under which then you can operate as a citizen and as a business.
Share
04:11
I think they are crucial and it's very important for young students to follow them. In my early days, back then, I remember in Bocconi, I started reading
The Economist
and then the FT
.Share
Virginia Stagni
04:24
Thank you.
Share
Davide Serra
04:25
And now I do read every morning the
FT
and Bloomberg.Share
Virginia Stagni
04:30
You have faced and seen some black swans in the market. When you have these black swans that affect the market what you can do as a leader in terms of like, not hierarchy but you know, as a professional, to be ready to these very unpredictable moments with your career as much as with your business and what you did at
Algebris
, especially in the last few years?Share
Davide Serra
04:54
So I would say, first of all I've always read history and I was fascinated by it. I suggest everyone to keep on spending time reading history even in your free time, for a simple reason: black swans always happen and the more you read about history, the more black swans you can predict.
Share
05:09
So, for example, I studied the plague when I was in high school. In February 2020, our regulator in Singapore, Monetary Authority of Singapore, issued a BCP, Business Continuity Plan. Basically, they shut their office down.
Share
05:25
And so the first thing I did, they issued a BCP I think on Monday, and on Tuesday evening was on the first flight to
Singapore
. I landed, then I went and did meetings with leaders and says: Why are you closing my office? Basically within a while I understood that the leadership in Singapore
thought that Covid
was airborne.Share
05:44
Now back then, no one was mentioning then had the possibility of speaking with people in
Taiwan
that had very strong feeling and then I spoke to a pathologist that actually had opened someone that had died of Covid
. At that point as I was speaking to some of the most important scientists in Europe, I understood that they had no idea what was about to hit them.Share
06:04
So a scientist is only a scientist as long as they've studied it and have seen it but if you haven't seen it they knew less than I did, because at that point I spoke to a pathologist that have seen
Covid
impacting other organs than lungs.Share
06:17
Back then what I did, I ordered through Alibaba and my team 250,000 FFP2 masks that got shipped into Europe before Europe even knew where they were. I asked my team: don't use cash, only cards because, you know, the plague used to travel through paper and bills.
Share
06:35
When I asked the team in
London
to stay home people were mad because back then they said "What the hell are you doing?" And so I think in this case leadership means trying to be ahead of the curve. Look at the data, act swiftly and having read history, every 100 years a pandemic is always struck.Share
06:53
By the way after a pandemic always had massive inflation and war and so you just had to read it to be prepared for it.
Share
Virginia Stagni
07:01
I know that there is a story at the beginning of your career. When you arrived your first day starting here in
London
you saw someone that got fired. What advice would you give to younger people entering in such competitive companies and industries to stay strong and build resilience especially when they see something so, I would say, that bit traumatic happening in front of you?Share
Davide Serra
07:24
First of all, back then that was possible because the UK was not yet part of the EU from the labor laws perspective. So basically you just get a letter and morning to evening someone got fired. I was shocked.
Share
07:37
Today it's not possible in the
UK
unless for misconduct, but the reality is you need to have some labor laws protection meaning someone is not performing. You need to have a process, you need to tell the guy, you need to give him a choice. You can't just wake up in the morning says "Hey, bye bye"Share
07:50
I think this is just against the interest of society and business because I always ask myself: "Who would ever work in a company where morning to evening you can be fired for no reason?" I wouldn't and I don't see why anybody else should and hence that cannot be a good business and so it just makes no business sense.
Share
08:06
I think from the resilient perspective, I think in business what I've learned as in society it's be clear and be transparent. Make your case and argue for your views and if the data change, be flexible to change your mind. If you got it wrong says "I got it wrong, it was for reason." But basically be humble, clear and transparent.
Share
08:26
In my early days when I had my performance review and there were sometimes differences in vision and aspect and how to execute it but I always listen, I made my case and in the end you need to exercise your freedom to say you want to be in or not.
Share
08:40
For example, I left the sell side because eventually I wanted to have more impact on what I was doing and I said: "Listen, if I think I have a good investment brain, I need to run money rather than telling others how to do it."
Share
08:53
It's like, if you think you know how to play football well, you better play rather than, you know, being a tv commentator on how people should be playing, just get on the field and play. As you're young, be open minded, but at the same time be clear and transparent. I think that to me, if you're clear, transparent and open minded, you'll be fine.
Share
Virginia Stagni
09:09
You just mentioned transparency and I would love to leverage a bit on this. Entering in the space of sustainability, because of what you guys are doing at
Algebris
, everyone has been reporting on the importance of ESG
, sustainable investments, but of course we have also been mentioning greenwashing.Share
09:25
How do you make sure sustainability investing is truly effective and is, as well, living up to the ideals of what sustainability means?
Share
Davide Serra
09:35
So, I think there are three items to it. There is an E component. We have 400 gigatons of CO2 left on the planet before we move temperature expectation above + /- 2 and it's very simple. Twice on Planet Earth life got wiped out: 265 million years ago and 65 million years ago and you can go in any museum it's the dinosaurs that died.
Share
09:58
What happened back then is the average temperature for the planet moved by + /- 3. With have 400 gigatons. Right now we're issuing about 40 gigatons.
Post-Covid,
we're actually increasing it and now we're actually going to issue more CO2 than before. So basically we're running out of time.Share
10:14
I think on the E, there is an absolute urge to act. On the S and the G, it's a long process. Basically it's how society operates. I think it's a lot to do with governments, how to deal with them. Private sector that has to be within the law. For the E component then, I think you need to get the best people that have been doing this for 20-30 years, give them capital and let them operate.
Share
10:35
The last thing I want to see is someone that did economics tell how an engineer should operate a water recycling plant or how to produce electricity. To my surprise 99% of people that do
ESG
they've never seen a water plant, they've never seen an energy plant, they've never actually operated in the field.Share
10:56
It's like: tomorrow you have a cancer in your brain, you need to go to the most important surgeon and you get a journalist to operate. So, what greenwashing is: you get someone that has nothing to do with it to talk about it. To me it's criminal.
Share
11:12
And hence, for example, in my case, I've hired someone that has been running plants between water treatment, wind, solar, SEO of a renewable company. Some have been doing venture in renewable for 30 years to run it, and I'm basically giving capital and helping the way I can. This is to me what it means, providing capital of the green transition. And this is very simple, just look at his CV and see what happens.
Share
11:37
Recently, for example, I was shocked. Two years ago, I saw in a couple of large financial institutions the head of the
ESG
was someone who had been doing for 25 years structured product and I couldn't believe it. The person was selling, you know, structure notes on MBS, they all end up being a zero and outside the sustainability, I don't know, it's like tomorrow asking me, you know, to go and run the catholic church and I go to Sunday mass but I'm no way qualified to be the Pope and hence I think that's the reason why I think in ESG there's been massive greenwashing.Share
Virginia Stagni
12:08
I think what you just mentioned is really important. First of all, it's not nice to have. Sustainability is not something that needs to fit the bill in terms of like ticking boxes. It's also important, what you just said about the hybrid talent, that is making your teams. You're looking at teams on the E side, but at the same time you need to have a peripherical 360 degrees view on the implementation of sustainability and how we affect, technically, the ecosystem.
Share
Davide Serra
12:35
Yep. Can I give a tip?
Share
Virginia Stagni
12:36
Yep.
Share
Davide Serra
12:36
How do you spot out the greenwasher "BS guy"? Just ask anyone "What's your CO2 footprint, individual or as a company?" If a guy can give you a number and can explain you how I calculated the number then you know, his truth's reliable and then at that point you know, he's a BS guy.
Share
12:52
If you ask, let's say, a football player: "How many goals did you score last season?" the guy would know the number. If you ask me as an investor, you know, what was being your performance last year, I would know that number, and if anyone mentioned sustainability in asking, "What's your CO2 footprint of your institution? Scope 1, 2 and 3, last year, accumulated and break me down and most importantly, which assumption did you use in order to calculate the number?" If he can't explain the workings, the math, then you know he's a liar. It's as simple as that.
Share
13:21
I always advise: do your numbers, do your math, then open your mouth. That's why for example, I call
Algebris
from Algebra: plus, minus, divide and multiply. Any statement you make must be backed by hard facts and numbers because you can't make an opinion if you don't have the basic numbers. 99% of people speak without having done before basic maths operation and having started how to add up those numbers.Share
Virginia Stagni
13:47
Do you think this is a problem of an educational approach that we see in schools of not building critical thinkers?
Share
Davide Serra
13:54
Yes, because I think the biggest problem is most of the curricula are academic, they are either too complex or too simple. They're not problem solving. They don't help you understand how to come to a conclusion studying the basics.
Share
Virginia Stagni
14:08
Let's say that you're a younger person or you're realising this that, you know, you're missing a bit of this part. What is your daily habits in terms of building a critical mindset?
Share
Davide Serra
14:18
Yeah, for example, critical mindset again is aspect by aspect, study the basic first, the core, and so I would say as a critical thinker: every time you ask an aspect go through the basic numbers behind it and the science behind it at the basic level. Yeah? And I think if you study it and you read it and you do it on a multiple discipline basis helps you.
Share
Virginia Stagni
14:45
I've always been wondering how people like yourself manage anxiety. You're in a stressful environment. You are sometimes in a brutal industry. How do you manage anxiety?
Share
Davide Serra
14:57
That's a good question. To be honest, I don't have any anxiety. By definition the future is an unknown. Every morning wake up and I try to analyse and follow what's happening and I try to make predictions on a 1, 3, 6, 12 months basis and longer term.
Share
15:12
And so the only thing I can do is to be calm and be prepared. So the way I recharge my battery and my psychological energy to deal with this unknown, which is not exciting, it's I'm excited about not knowing because imagine how boring would life be if you knew today, what would happen to you tomorrow? I think as a result I tried to find activity that reconnect my soul with my brain.
Share
15:41
As I grew older, what I understood is our animal instinct and our animal spirit has been developed over 4-5 million years and it's a much better tool but just what I've learned in the last 50 years, just in my brain.
Share
15:57
I try to reconnect with nature. I free dive to 10, 20, 25m, stayed two minutes underwater. But basically it's reconnecting in the water which is two thirds of the planet and it's where we were born. You can't believe you see amazing species and it calms you. I try to go as high as possible.
Share
16:19
Basically I go twice a month close to the top of the
Mont Blanc,
4,000m and get a cable car and then from there I play. I say, so I climb, ski, trying to be safe as possible between 4000 and 5,000m and it's fantastic. There's no human being, you basically as high as possible and you reconnect with nature again. And by doing so it relaxes me and my body re-finds energy.Share
16:46
The last thing for example, now, what I've also find, and in my case having no one around and nature recharges me. If you tell me what would be my nightmare would be to go to a football stadium full of people or to a concert full of people because in that case, in my personal case, it actually creates stress. For other people that are exactly the opposite. There's no right or wrong, but that's what works for me.
Share
Virginia Stagni
17:14
So, now challenger questions! I'll leave the mic to my young Cassaini and Kimberly for their two questions for you.
Share
Mayank
17:22
Hello, my name is Mayank Saini. I was a participant of the
FT
Talent Challenge in 2022. I'm originally from India but I'm currently living in Milan Italy. I'm finishing up my Bachelors in Corporate Communications and Public Relations in Milan and since my university so far I have been always into experiences including some organisations like JP Morgan, Amazon, Goldman Sachs and my question to Mr Davide Serra is: Does driving the ESG
agenda means sacrificing companies returns, especially in terms of investment banks? Thank you and looking forward to hearing from you.Share
Davide Serra
18:02
First Mayank for your question. In investment banks, they're there to facilitate basically corporate taking decision and action. So think, if you want to have a long-term business, they need to have company, but a very sustainable in the long term. So I think having a proper ESG agenda, foreign investment bank does not mean compromising with long-term profits.
Share
18:30
I just make an example. Imagine if you had an investment bank which only wanted to do with, oil and gas would operate a company that in 30 years time they're not going to exist and probably with governments and regimes which are dictators and are not doing a great job for their own people and so they're most likely to be top and go bankrupt.
Share
18:50
I think it's in everyone's interest to have healthy clients that do things which are smart, where society applauds, where they can have recurrent business and they can be in business for the long term. So I would say actually the two are united for the employees and the clients, and hence there is no trade off between the two.
Share
Speaker 4
19:11
Hello, my name is, you can also call me Kimber. I was a participant of the FT x Bocconi Challenge 2022. I'm originally from Taiwan but I'm currently living in Wuhan. I will pursue my master degree at ESCP in sustainability, entrepreneurship and innovation and would like to start my business one day. So my question to Mr Davide Serra is: Do you think it would be better to work in a big firm or a start up for better accumulating the needed experience? Thank you so much and looking forward to hearing your response.
Share
Davide Serra
19:46
So Kimber, thank you for your question. First of all, congratulations. What I say to everyone, I say this to my kids every day, your dream should be to be an entrepreneur and the reason is to be an entrepreneur of yourself, so have no limits in how you can spend your day, how you can set your agenda because basically that it's fantastic explosion of the best in you.
Share
20:11
Not only you can then shape your firm, the values, hire people, it's the most rewarding, in my view, achievement than a human being can have. Now, the best way in my view to end up being an entrepreneur is to have knowledge, you can have it from a small company, you can have it from a large company, you can have it, you know, in sports, it doesn't matter.
Share
20:33
So I would say improve your knowledge in your passion with a coach. So rather than talking about small company, large company, sports company, media company, I say learn something that fulfils your passion with the best coach, leader you can have in front of you.
Share
20:51
So if you join
Apple
, because there is Steve Jobs
, but you never get to work with Steve Jobs
, you're not actually in Apple
for Steve Jobs,
you are with, you know, Mark in California
. Is Mark a fantastic leader who's going to teach you something? The same happens elsewhere.Share
21:06
And is it bad if you're in
California
to going for Tesla
because of Elon Musk
or in a small cap, you know because it depends on who's your boss, which you work every day because you're not learning, you know, from the President of the United States, you're not learning from the number one player in the NBA
you're learning who you're working with, in your boss.Share
21:24
So I think in particular young age, I tell people, "Follow your boss, judge your boss, don't judge the stratosphere, be more pragmatic and hands down". And I always say keep on asking, "Is this the best boss I can have and can I learn from him?"
Share
21:40
I think this learning is hands-on and whoever gives you a hands-on experience, that's the best company to work for.
Share
Virginia Stagni
21:48
I think that's such an important tip here, like pragmatic and pragmatic approach to your career and how you should build your career path based on actions and what you can really learn from the field. I think it's really be one of the key takeaways from our conversation.
Share
22:05
Davide I cannot thank you enough for your time, especially for being here and finally having a face to face conversation. It has been lovely. Again, Davide Serra thank you so much for being with us.
Share
Davide Serra
22:16
Thank you so much. Ciao.
Share
Virginia Stagni
22:35
Ciao.
Share
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Virginia Stagni
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Mayank