David A. Rosenberg is currently chief economist and strategist of Gluskin Sheff, a bank (wealth management firm) in Toronto where you need three million dollars (Canadian, I guess) to open an account. He’s also my baby brother. Dave says he can cut me a deal for $2,500,000. I guess I should believe him. After all, Gluskin Sheff kindly allowed Dave to give us a ‘pro bono’, forsaking the $25,000 that they usually charge for his appearance. Dave was in town for our niece Riki’s recent wedding (a lovely one indeed), and agreed to appear for an interview with the students of creative thinking class at HIT (Holon Institute of Technology). We are inaugurating the new creative space of the institute (the old semi-defunct TV studios) with this interview.
I decided to interview Brother Dave on the “Secrets of success”. David is by all accounts, highly successful. The internet says that he makes over $3,000,000 a year, and who can you believe, if not the internet? He sends out ninety thousand e-letters (“Breakfast with Dave”) every day, several thousand economists pay an annual subscription of a few thousand dollars each to get the more detailed version. Dave is ranked the top Canadian analyst in several categories and is highly ranked in the US. To top this all off, he recently appeared on the front page of the Business section of the Wall Street journal. That’s what I call successful!!
Before David joined Glusskin Sheff he was chief economist at a company that was once called Merrill Lynch.
The following is an edited, not verbatim, account of our interview. I highly recommend you watch the video as well, as it’s full of jokes and other points that I haven’t included here. If you have no sense of humour, then you can skip the video, but then again, isn’t humour an ingredient in the success recipe?
In the summer of 2007, I was sitting in my apartment in Ramat Gan reading my Time or Newsweek (and doing what one does while reading these mags) and I see some economic pundit thrashing Brother Dave for his pessimism (remind me to find that article, I have it somewhere).
Brother Dave, what was the feeling?
“Well, it’s a lonely feeling, there’s no question about that. But look the reality is that in my profession, you do your homework, and you get paid to make forecasts.”
David then uses a weather analogy, of being someone who is better at recognizing approaching storms.
“And sometimes it’s not going to be very popular…
But I know a bear market and a recession when I see one.
I did the same thing in 2000 during the tech wreck. “
David told me he recognized the bubble in the housing and credit markets.
I asked Brother Dave when he started ‘screaming’.
“Well, the pitch got different over time but I started getting more concerned say, in 2005, 2006, so I was very early on the call. By 2007 I was getting all sorts of other market signals telling me that something insidious was going to happen.”
David talked about lags. A lot of the developments in the market and the economy have a symbiotic relationship, but it’s often about lags. So you don’t want to be too early on a call.
“This was a very big call, it was a call for a collapse in something that is very important for the economy and in people’s lives, which is housing, and in credit. It turned out to be even worse than I thought it was going to be but people naturally, are naturally optimistic.
Look how painful it was, and of course it went global, and so you’re not actually a very popular person when you make that sort of a forecast
I was not too popular. They called me at Merrill Lynch. “The skunk at the picnic. Who wants to have lunch with the skunk?”
David’s advice at the time was to advise people to move out of stocks and into bonds and cash.
So you were not very popular?
I was not very popular, that’s true
And now that you’ve reversed your views over the past one-and-a-half or two years you’re again unpopular.
It’s a no-win situation.
“I’d say that in the fall of 2012 I started becoming shall we say less pessimistic and there’s a fine line between that and, then, more optimistic. People always viewed me as this perma-bear. In fact I was interviewed in Toronto recently on the Business News Network and the anchor, when we were off camera, said “So how does it feel to have morphed from being a perma-bear to a perma-bull?” and I said “That is the most moronic oxymoronic (oxy-moronic?) thing anybody’s ever said to me” I said “ it’s a good thing we’re off camera, ‘cause I’d call you out on it.” So the anchor said “What are you talking about?” So I said “If I were a perma-bear, how could I become a perma-bull, ‘cause perma- by definition means you’re just never going to change your view.
My situation was that when I started working at Merrill and this was before Merrill US when I was the chief economist and strategist at Merrill-Lynch Canada, starting in 2000, I started right at the peak of the tech mania, and I did not get sucked into that situation, I knew that that was another bubble that was going to end badly. But all of a sudden I had a pedestal and I was on TV a lot and then of course we had that crash and then I predicted the next crash and people just remember you as being always just negative. But before 2000, when I was in relative obscurity, working as a junior economist and intermediate economist, back in the 1980s at the Bank of Nova Scotia, and then in the 1990s at the Bank of Montreal, we were actually very positive.
But I was helping the chief economist back then make the calls but nobody would know that this guy, David Rosenberg, actually has a history of being positive. He’s not a perma-bear, he’s not a perma-bull, you just basically call them as you see them. So my job is to help our clients. Whatever the general population wants to do, they can do. My job at Merrill lynch was to help our clients make money or save money.
Today I work at Glusskin Sheff, the client base is different. My job is to help people make money, and help them save money. So what some reporter says in the newspaper or what other people might want to think about me – If you want to know the truth, I don’t care. They’re not my constituents. “
We’re talking today about the DNA of success and I wanted to start out with this. You are, as an economist, thick skinned. You’re not afraid to call the shots as you see them, and if Merrill Lynch were not happy, there is even a rumor that they didn’t send all your e-mails to their customers, and they tried even to stifle you for a time.
“Well, I have no evidence of that one way or the other. I had an unpopular view, that much is true.”
If Merrill Lynch had listened to you, would they still be here. By the way, they’re not here anymore.
“That’s very complicated, there’s no easy answer to that. If they would have listened to me, that’s really tough to say. All I can say is that you talk about being thick skinned. It’s either you’re going to take on this responsibility of being an economist and a strategist. So you can be an economist at the Bank of Israel or the Fed or the Bank of Canada, or in academia, you can go work at the conference board, the Brookings institute, but if you’re going to be on Wall Street, or on Bay Street, …Whatever the street, if you’re going to be a street economist, you’re going to be a market economist, you have to call them as you see them, and be impervious to all the other noise out there, whether it’s criticism, if you’re in the public eye, you’re just going to have to get used to it.
If you don’t don’t have a thick skin in my profession, you’re not helping out your clients.
If you’re going to be sensitive about what other people think about you or about what some reporter says about you, and you’re going to be influenced by that, you’re not doing your job. Your job is basically to take the economic information your lens, your assumptions, formulating a cogent investment strategy out of it for the benefit of the people that are paying your firm. That’s your responsibility. If you have a thin skin in my profession, then you’re going to get easily pushed off course. And you’re not going to be providing a service for the people that rely on you. So I just basically block that out. Yeah, so being thick skinned is 100% part of the job to do it effectively.”
I would like to take that a bit further, because I’ve known you for all of your life. I think that if we’re talking about DNA of success, it’s not only being an economist. I think that in most professions you have to believe in yourself and you have to have a thick skin and you have to be prepared to suffer criticisms, and to move on with your belief. So let’s take it way back to early childhood. Where did we grow up?
“In Otttawa, Canada. We didn’t grow up on Wall Street.”
You currently send out a morning newsletter to 90,000 people around the world, on regular days it’s called “Breakfasat with Dave”’ but on Passover it’s called “Matzohs with Dave”, on Hanuka it’s called “Latkes with Dave”.
And Yom Kippur?
“It’s Kol Nidre with Dave, agony with Dave. It’s ‘where’s my coffee hit with Dave?”
And you were recently to the US senate budget committee. They invited a Canadian, a Jewish boy from Ottawa to tell them what’s should happen in the States.
Dave demurs. He explains that Canada was almost bankrupt in the early 1990s with a huge budget deficit and the Canadian dollar was way down. The government of the day back in 1995 underwent fiscal reform, so now the federal balance sheet is one of the best in the world, which the US sorely needs. Part of his being invited was being a Canadian representative to explain how Canada did painful reforms, at the same time making it politically feasible. Still a big honour, if you ask me.
What can you say about your childhood home?
David explained that it was a loving home. One of the factors in success is the people that you have met and been influenced by in your life. You don’t choose your parents but you can choose their best qualities and model yourself after them. When I think of my parents I think of leadership. My mother was a natural leader, a kindergarten teacher. Dave used to go shopping with her and people in their thirties would run up to her “Hi, Gannenet (kindergarten teacher) Rosenberg’. Mom was not proud of being a kindergarten teacher, but more and more politicians are now funding pre-kindergarten, understanding the importance of good instruction at that critical time.
Our Dad was the only two-term president ever of a most prominent Orthodox synagogue in Ottawa.
Dave referred to the importance of being outside one’s comfort zone, and the importance of luck. To him it means how you adapt to change. Our parents left their home town of Winnipeg when they were in their mid-twenties. Winnipeg was a center of Judaism and Jewish culture in Canada. They moved to Ottawa where I was born. Dad got a job with the Canadian government. They adapted to change, made a tremendous number of friends. Then in the 1980s they moved to Israel, first on a one year trial, then for the next thirty years made a new life in Israel.
“When I think of leadership I think of adapting to change. My mother was so tenacious and determined in so many respects, also a tremendous communicator.
Mel is a professor, Mom was a kindergarten teacher, sister Miriam is a teacher. Rena, our other sister lives in Toronto and is a nurse and a teacher and our father taught engineering at the University of Ottawa.
What is teaching about anyway? It elevates other people’s ability to share knowledge and to communicate. If you can’t communicate in my business, there is something seriously wrong.”
David talked about the great importance of finding the right mentors, teachers and friends.
As a young kid, what were you like? Did you same day I’m going to grow up and have a stellar career?
“How your view yourself and how others view you can differ. People are surprised to know that when I was younger I wasn’t good at school . Mel was a top student with trophies.” (I was actually a nerd in grade school and high school and a lousy undergraduate university student thereafter).
Dave was more into sports, loved to play hockey, football, and played league baseball till he was 18. He liked to hang around with friends, and more of a bon vivant.
And he confides that his marks weren’t that great. Until grade ten, when they shot up 25 percentage points. Dave did not actually like school at all. He hated the school he went to, preferring to be with friends and play sports.
In grade ten he had some really interesting courses in history and English, taught by Mr. Haiba. He was a phenominal communicator and the first time Dave had a positive experience scholastically. His marks went up across the board. The happier he was at school, the higher his marks got, and the higher his marks got, the happier he gotl. “ A self-reinforcing spiral to the upside.
I realized that in my younger years school was not a passion, I was not passionate about my school at all. Suddenly I began to develop a passion for school. This translated to economics over a period of time.
If you want to succeed, doesn’t matter what it is or how much money it makes you, that’s immaterial. Have a passion for what you do and if you’re good at it naturally, you’ll succeed. If not you may live a miserable life.”
David gets out of bed at 4:30 every working morning. He does his morning newsletter, gets ready, drives to office. Sometimes he goes straight to the Bloomberg machine. Reads the papers, what’s going on in Asia, that’ s part of the passion. Economics financial markets don’t go to sleep, future markets, Asian markeats, he can’t wait to get start.
“This industry is so dynamic, every day is a whole new day, new data, political situations, the financial markets change all the time, it’s very exciting, it takes a type a personality.”
Two things one can say with certainty– one is that you die, the second is change. Our parent’s capacity to adapt, that’s very important, you have to cope with change.
A huge challenge that Dave continually faces: Has there been enough change in the markets for him to change his forecasts which are built on a lot of assumptions.
Economics is a social science, an art and a soft science, there are no laboratories, your assumptions drive your conclusions.
People want to know “How can you get five economist in a room and each one has a different answer?” It turns out that each of them is operating on a different set of assumptions, you just tweak one little thing and you get a whole different answer. The dynamic change is key.
How important is being intrepid? You have an intrepid gene. You fly all the time, you’ve had emergency landings, then you fly again the next day. When you were four years old the older siblings (all three of us) used to send you downstairs to look for ghosts (there were weird noises form the pipes). We would tell you to go downstairs and make sure everything is okay. And what did you do?”
“I went downstairs. “
You went to the University of Toronto, a nice university, but then again not Harvard, and you did your M.A. but not your Ph.D. And you started your career working for the Canadian government. You didn’t have a top job. And as high school student , our parents did have rich friends who would give us get summer jobs, cleaning, mowing, spraying weeds.
I asked David about the brief period in his life when he was a socialist:
If you’re going to be successful you have to deal with the failures and learn from them. We are all flawed, as human beings, and you learn from mistakes, try not to make them twice.
As a youngster, David tried to unionize the Top Banana, a couple of large fruit stores in Ottawa. He got a summer job from Dad’s best friend, but then became involved in trying to help unionize the employees (to the chagrin of the owner). As an employee he found that they mistreated their employees, and the work environment was appalling. Dave had just finished his first year at U of T, had taken this course in industrial relations, labour management issues, and ended up getting in knee deep.
“It was a mistake and what happened was that it was my father’s best friend and he didn’t know about it. One Shabbat dinner, Dad says, “Do you know anything about his union business at the Top Banana” and I say “ I don’t know anything about any union business, Dad”. It was like Coleone in the movie.
I went for a long walk with Mom and told her what happended and she said you have to realize you have to come clean with Dad. In September you’re going back to U of T and you won’t be around to face the consequences of your actions. Everyone else will. This made me think a lot about responsibility.
This was thirty three years ago and that walk with my mother was really about living up to your responsibilities. That really brought it home. And to understand that there are consequences to one’s actions that one must face up to.
In my limited world called economics and financial forecasting, you can never hide behind a bad call. I’m going to be wrong sometimes. You’re going to get your chance for glory (with the good calls), but when you are wrong, explain why to your clients, and explain why you intend not to make that mistake again, and what steps are you going to take to change that in the future. You can’t and shouldn’t hide behind a bad call, it’s not responsible.
I’m in the business of trust it’s all about trust. As students, you’re all smart and intelligent, and you’ll all come away with a college degree, but you would be surprised to learn how much of it comes down to personality, to character.
Character will take you much further than your education, it is far more important.”
Was there a ten minute event that changed your life?
I started at CMHC in Ottawa 1984, and when I started on Bay Street in Toronto in 1987, and then thirteen of fouteen years later when I was assistant chief economist at the Bank of Montreal, a big bank, a great position, this fellow Bill Down, who is now the Bill Down who is now the (excellent) CEO of the bank came back from the States around 1997 to oversee all the treasury operations.
He sees me at an event at a bar, and we are meeting for the first time. He tells me “I like your morning meetings but you talk really fast, I know you have crazy mornings doing all these meetings, why don’t you get your morning meetings on paper, in print, and as a matter of fact, call it something snazzy and we’ll market the hell out of it.
I remember thinking to myself, what a great opportunity to start my own newsletter. Take all my discombobulated thoughts on paper, send it out to the media, clients. As a result, I began to actually meet clients for the first time. I was passionate about the morning notes, and the passion and results feed each other. Without the daily notes I doubt whether I would have ever gotten my job with Merrill Lynch. The morning notes were an inflection point in my career, giving me a launching pad to blast out my views to a wide audience.
Our students tend to think that success is just about getting lucky. So to paraphrase the song “What does luck have to do with it?
Luck has a lot to do with it. In general, there’s good luck and bad luck. You look the wrong way and a bus just went over your foot. I think it’s a matter of how you maximize your chances of being successful.
We were lower middle class, but not poverty, or wealthy class. There no guarantee, it’s what to you do as an individual to maximize your opportunities – Taking on initiatives for example. I consider myself lucky to have landed the job at the Bank of Nova Scotia in 1987. But I started on the day of the crash October 1987 – a 23% plunge in the markets.
We are not born equal. By deifintion, I didn’t go to Harvard nor the best schools in Ottawa. And you don’t pick your parents or your upbringing
What do you do to maximize. Unless you’re self-employed, you’re always working for somebody, people you have to impress. Being passionate, diligent, responsible, trustworthy a team player. As students, all of you will graduate, the employer has your CV, he knows you’re smart, but your getting the job depends on other characteristics beyond your scholastics. Your scholastics get you the interview.
What you do next – that takes skill, at least initially to show you’re a team player, able to change, juggle balls, a good work ethic.
Luck will open up the door for you. To push the door wide open, that takes a lot of sweat, you have to punch your way through your job description, and help other people. At Merrill Lynch one of the important surveys determining your compensation was how your peers rate and vote for you – that incentivizes you to help other people, not to be in silos, rather to encourage networking and mingling, the sum of the being greater than the whole.
You have to listen to what everybody is saying in your team, in the firm, then you have to make your own judgement, the team comes up with the best forecast it can, the team leader has to bear the responsibility. Let your team help you determine your views.Pay attention to people even if you don’t want to listen to their advice. You have to be a decision maker, take a lot of people’s view, which way are the risks going to be balanced. To exercise judgement. You never want to humiliate, to make someing feel disenfranchised.
David emphasizes the responsibility to clients and subscribers. What is success at the end of the day? How you are as a person, how you want to be remembered. You should never get so arrogant as to think you kinow it all. “That’s what I love about my profession – you’re wrong just enough to keep you humble. “
In Summary – Success as a Roast Stew
“Work ethic is one of the building blocks. When you’re thinking about success, think about the pyramids. It’s about building one block on the other The work ethic is important, but you don’t have the work ethic without the passion.
And if you’re not a team player, you’re never going to succeed, unless you want to be your own boss and run your own company. Most people actually work in an organization –where you’ll only be successful if you have team building. Team playing skills. So like in a stew you have carrots, and peas and potatoes and meat. It’s a whole collection. Our mother made a great stew. It’s hard to know what will override what. Work ethic is critical, but there are lots of other ingredients. If you want to be a leader, you need to have exceptional communication skills as well.”
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Charles and Winston: the DNA of Success
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