Saturday, August 24, 2013

I'm A Geologist at Heart

A journalist asked me recently about my background and the conversation sparked some reflection of why I approach markets the way I do and how my background as a geologist helped develop my somewhat unorthodox approach with markets. With risk of overindulging - as well as alienating my engineer friends (and wife) - here are a few thoughts on the matter.

My education and professional background was in geology and geotechnical engineering - not finance. Conceptually, I’ve always been very visually driven. For whatever reason, spatial logic comes naturally to me. I know that's what initially resonated when I first became interested in geology and hydrogeology in college. Understanding the fundamentals and principles that drove such colossal processes was intriguing, but visualizing how those principles interacted spatially and kinetically was what kept my attention and ultimately led me to the capital markets.

I graduated from Bucknell University with a degree in geology and was a hydrogeologist for about ten years before getting involved in the markets on a full time basis. I managed and led subsurface investigations and groundwater and soil remediation projects for private developers on the east coast. I'm oversimplifying, but if I had to sum up in one phrase what typically occupied my time - I mapped things. From groundwater and soil contamination to fractured zones in bedrock, my job was to assemble and classify certain data sets, cross sections and field conditions and render and extrapolate those conditions - mostly unseen, for the client. 

In groundwater and geologic mapping it's crucial to be able to visualize forces that contributed to the formation processes of the features encountered. The ability to extrapolate a three-dimensional image from data or a two dimensional plan cross section is an analytical perspective I adapted to looking at markets. Broadly speaking, I approach an assets respective psychology and momentum profile as similar to a layer of soil or rock and use different methodologies to visualize where that "layer" will be deposited in the future. It's a different way of looking at things and over the years it has greatly helped in visualizing the potential energy behind where a market or asset will trend.  

The interesting thing about geology and what I believe is also kindred to how I work with markets now is that most geologists develop and practice qualitative reasoning, with quantitative abilities adjunct to those skills. A good geologist relies on his or her intuitions based on qualitative observations within a quantitative framework. The qualitative and interpretive skills that develop over time help navigate the significant gray areas that invariably arise under different conditions. There's a (bad) joke within industry - What's the difference between a geologist and an engineer? An engineer doesn't understand mud.   

Engineers are very structured and quantitative driven professionals. There's a precision and exactness that I suppose is why many firms in finance hire so many candidates with engineering backgrounds. They are by design methodical. Task oriented. Efficient. I'm certainly working with stereotypes here, but in my experience with markets, navigating them successfully is as much an art as a science with as much mud as there is rock. I've always appreciated both and try to keep one foot in each camp. I suppose it’s because I’m a geologist at heart and have benefited from adapting certain qualitative logic to a perceived quantitative system.