Seeking a Higher Meaning of Alpha
The word alpha has many meanings. In finance, we use the term to describe the excess risk-adjusted rate of return in reference to some benchmark. This definition is in no way incorrect, but it’s a shallow application of the word. The pursuit of alpha at the expense of all else has led to the demise of once prominent financial institutions. The reason for their demise is quite simple: Without a culture based on timeless principles, along with a sense that there is a greater purpose, this use of alpha leads to greed, arrogance, and self-destruction.
In contrast to the financial industry’s use of the word (as a measure of excess return), to be the alpha can also mean being the first, the brightest, or the dominant figure. In other words, the term alpha applies to the individual who displays the highest levels of honor, integrity, responsibility, and ethics. Someone who points out an ethical lapse within an organization before bonuses are paid, or someone who loses money on a trade but owns the mistake rather than attempting to cover it up can also be considered an alpha.
How is this kind of alpha quantified or valued? Well, we know that a lack of this kind of alpha can bring an institution to ruin and cause billions of dollars in losses, but is it only after an adverse event that we see an alpha’s value? Does our need to measure value in terms of ROI blind us to the alternative, yet relevant, values of this kind of alpha? This might be the case. Often we see ethics programs started only after a major institutional event creates public outrage. This brand of reactionary ethics runs counter to the characteristics of an alpha, and the public often perceives the dissonant nature of such measures.
Veterans: True Alphas
From a military perspective, it’s on the front line of adverse situations that alphas are born. These alphas have the courage to stand tall and push forward in order to do what’s right without knowing whether they will survive the conflict. To them, there’s only the mission. In those moments that really count, they do what they’ve been trained to do. They don’t occupy themselves with worries about paying their mortgage; they don’t wait to act only after their options vest. Self-preservation is secondary to keeping with their mission. Their hallmark here is that they act based on the principles instilled in them by an organization that teaches humility and courage rather than self-preservation.
During my years in the military, I met all kinds of “alpha” people. If you‘ve seen a few military-themed movies, there are probably some stereotypes that come to mind: the brawny, athletic types that have a physically imposing presence and yell a lot. The truth is that military alphas aren’t exemplified by such an image. Because the stakes are much higher, the military has a way of exposing those on the shallower end of the alpha spectrum. For example, the supervisor for my technical job probably weighed no more than 120 pounds with his boots on, but he had a way of holding you accountable so that you wouldn’t second guess doing the right thing. It was always about being ready to serve our purpose within the greater mission. We either were, or we weren’t. It was absolute.
As a force protection team leader, I assumed more of a traditionally military leadership role. Again, the alpha characteristic was not the societal stereotype you expect to see. Instead, duty, loyalty, and responsibility were the key traits of those who outperformed. They led from the front, saw the desired results as something bigger than themselves, and worked tirelessly to achieve them. They cared more about their teammates than themselves, and they knew their teammates felt the same. Each person was also aware that long-term success could only be achieved if everyone clung to the same principles.
Why Veterans Make Great CFA® Charterholders
I started to really think about what the CFA charter meant to me in the fall of 2008. Prior to that, I took on the task because I’d heard that it was the most difficult financial exam there was, and I wanted to prove something to myself. Being a veteran, I was trained to endure suffering, and that’s just what I signed up for—Hoorah! I didn’t give much thought to how the social underpinnings of our economic system, and the behavior of its agents, would add additional suffering on to my journey and the journey of many others in the decade to come. In a lot of ways, I was an idealist because of the principles instilled in me during my service.
Watching the financial crisis unfold I thought carefully about how and where I wanted to spend my career. While my time in the military had come to an end, and I may never work in an environment where the stakes are as high, I could still align myself to a set of principles whose purpose was to serve others. I wanted to see myself as a fiduciary and only pursue designations and opportunities where that was a way of life. The CFA charter, and all that it stands for, is a prime example of this.
If you’re a veteran, and you’re interested in finance, I encourage you to look into it. You will find that although your uniform of the day will be different, they do have a set of principles you can identify with.
About the Author:
Ben Boulris, CPA, CFA, is a risk advisory consultant with DHG in New York City. He advises global banks in areas including restructuring, simplification, consolidation, liquidity, and comprehensive capital analysis and review (CCAR). He is a graduate of the University of North Carolina at Charlotte. Prior to entering the consulting and financial services industry, Ben served six years in the US Navy.