For those anxiously awaiting my next posting on the use of academic research by investment professionals (and who have waited a prolonged period of time for it), the title of this entry may seem like the end of the series.  To quote virtually every commencement speaker ever, this is not the end, but a beginning.  We commence from here.

In fact, it does mark the start of my second year of blogging, and also a change in the series on academic research, new chapters of which I will intersperse with other material going forward, rather than in sequence.the research puzzle | The postings to date in the series on academic research can be found via this index. It also marks the start of a new investment advisory business of mine.  It will provide more fodder for writing, although this space will not provide investment advice and will continue to focus on the “how” rather than the “what.”tjb advisors | Early readers of this posting can click through to a simple page that summarizes the advisory offerings; a complete website will be up soon.

In the interregnum since my last posting, I attended commencement exercises at a famous institution of higher learning.  Such events are always a time for reflection, but especially in places where the aged ivy on the walls was growing when legendary people who shaped the world received their degrees nearby.  On the prairies of my youth, the quartzite that pokes out of the ground has lichen that grows an inch every hundred years.  It inspires awe by its natural simplicity; the ivy is different, attesting instead to the evolution of the institutions of man.

Many of those institutions, especially those at the center of the investment business, have been rocked in the last two years.  To wit, the undergraduate and doctoral students whom I watched receive their degrees in “operations research and financial engineering” probably wish that the last three words had never been added.  Many in the audience were probably either quick to judge them for choosing such a now-vilified field or else felt sorry that they’d likely not get jobs on Wall Street until the next great rush to riches.

To hear the college president acknowledge that the still-formidable endowment could not lay as many golden eggs as it has in recent times was to be reminded that even venerable institutions fall victim to fad and fancy.  The lessons of earlier years and centuries, borne of wars, panics, and depressions, must be learned once again — and taught once again.  They always seem to be forgotten when they are needed the most.

Thankfully, it’s impossible to be around such an incredible crop of graduates and not feel hope about the future.  They will come up with the good questions that start the discovery process, as they were urged to do in the valedictory address.  For those that manage to get into an investment business still bloated with too much capacity, those questions will hopefully be a refreshing change from the standard fare of the recent past.

The process of investment is complex, nuanced, and ever changing.  To sell securities, funds, or whatever, the industry became adept at wrapping them in simplicity and selling them like soap on a shelf.  It has also been willing to peddle orthodoxy rather than innovation.  It took the calamity of recent times for there to be much introspection at all, yet many firms continue to act like nothing happened.

As every graduate is told, the real world awaits.  Let’s see what you can do.