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Financial Analysts: The Importance Of Failure
The education system conditions everyone since grade school that mistakes are bad. You're penalized with poor grades for being wrong and rewarded with good grades for being right. This carries over to the higher education system and then to the professional world...
In the world of financial analysts, there is little room for mistakes. I agree with the importance of accuracy when working with numbers. Number mistakes can be costly not only to the firm. I’ve seen more than one trader lost their jobs for keying in an extra zero. I’ve also seen equity analysts fall off the pedestal for arriving at the wrong calls with wrong numbers.
“Fail your way to success.”
I don’t know who coined this phrase. I appreciate the wisdom in these words and it is one of my mottos. I think many people would balk at this idea though.
The education system conditions everyone since grade school that mistakes are bad. You’re penalized with poor grades for being wrong and rewarded with good grades for being right. This carries over to the education system and then makes its way to the professional world. To be hired by the most prestigious financial institution on Wall Street, you need to have outstanding grades to attend the top B-schools and pass the CFA exam with flying colors.
Of course it would be nice to be able to do things right the first time. What are the chances of that happening? We all fell down when we learned to walk. Otherwise, there wouldn’t be internship programs for the newcomers or a hierarchy in the financial world differentiating people by the amount of experience they have.
Experience is just a euphemism for a collection of mistakes. The key is to learn from your mistakes and not let them stop you from achieving your goal. Successful financial analysts who are high up in the hierarchy are those who have amassed and learned from their “experiences.”
No matter what stage of your career you’re in, there’s always something new to learn. This means there are always chances of making mistakes even if you apply extreme caution.
Try out as many things as early as possible while the stakes are low. When your stakes are high, hire mentors and advisers who have walked the path before you. It is an advantage to reduce the learning curve and learn via other peoples experiences at this point.
Don’t be afraid to make mistakes. The only sure way you don’t make mistakes is not take any action - that would truly be the biggest mistake of all.
Start asking yourself the following 2 questions whenever things are going the way you intended:
1) What did I learn from it?
What could I do differently in this situation the next time?
You might need to rebuild a valuation model you’ve spent a whole week constructing because the valuation method you used turned out not to be the best for that particular investment. You might have worked really hard to break into investment banking and found out it isn’t for you, and you would need to switch to another finance field that aligns with your passion and long-term career goals.
Mistakes is an integral part of, and not a contradiction to your strive for excellence. In the competitive world of financial analysts, not being afraid to make mistakes is an indispensable mindset to help you outperform your peers.