Coming to America

Elite in an uncertain world..

In the summer of 2000 I was 15 and had just finished my high school entrance exam. I had made considerable improvements from where I started in first grade, when I had the second-worst grades in the class and had to sit at a desk perpendicular to the blackboard so that the teacher could keep a close eye on me. I had managed to become an average student in an average school.

My parents, by then, had concluded that I was not going anywhere promising in China and were ready to send me abroad for high school. Contrary to all expectations, however, I got the best mark in my class and my school, ranking me among the top ten of more than 100,000 students in the whole city. Though my teacher and I both assumed the score was wrong when we first heard it, I got into the best class in the best school in my city and thus began the most painful year of my life.

My newfound confidence was quickly crushed when I saw how talented my new classmates were. In the first class, our math teacher announced that she would start from chapter four of the textbook as she assumed, correctly, that most of us were familiar with the first three chapters and would find it boring to repeat. Most of the class had been participating in various competitions in middle school and had become familiar with a large part of the high school syllabus already and had grown to know each other from those years of competitions together. And here I was, someone who didn’t know anything or anyone, surrounded by people who knew more to begin with, who were much smarter, and who worked just as hard as I did. What chance did I have?

During that year, I tried very hard to catch up: I gave up everything else and even moved close to the school to save time on the commute, but to no avail. Over time, going to school and competing while knowing I was sure to lose became torture. Yet I had to do it every day. At the end-of-year exam, I scored second from the Bottom of the class—the same place I began in first grade. But this time, it was much harder to accept, after the glory I had enjoyed just one year earlier and the enormous amount of effort I had put into studying this year. Finally, I threw in the towel and asked my parents to send me abroad. Anywhere on this earth would surely be better.

Anywhere on earth

So I came to the UK in 2001, when I was 16 years old. Much to my surprise, I found the UK’s exam-focused educational system very similar to China’s. What is more, in both countries, going to the ‘right schools' and getting the ‘right job’ are seen as very important by a large group of eager parents. As a result, scoring well on exams and doing well in school interviews—or even the play session for the nursery or pre-prep school—becomes the most important thing in the World. Even at university, the undergraduate degree from the University of Cambridge depends solely on an exam at the end of the final year.

On the other hand, although the UK’s university system was considered superior to China’s, with a population that is only one-twentieth the size of my native country, competition, while tough, is less intimidating. For example, about one in ten applicants gets into Oxbridge in the UK, and Stanford and Harvard accept about one in twenty-five applicants. But in Hebei, my Province in China, only one in fifteen hundred applicants gets into Peking or Tsinghua University.

Still, I found it hard to believe how much easier everything became. I scored first nationwide in the GCSE (high school) math exam, and my photo was printed in a national newspaper. I was admitted into Trinity College, University of Cambridge, once the home of Sir Isaac Newton, Francis Bacon, and Prince Charles, where I studied economics, a field that has become increasingly mathematical since the 1970s. My British classmates' behavior demonstrated an even greater herd mentality than what is often mocked in American MBAs. For example, out of the thirteen economists in my year at Trinity, twelve would join investment banks, and five of us went to work for Goldman Sachs.

Goldman Sachs

Three years later, I graduated with first class honors and got a job offer from Goldman’s Fixed Income, Currency and Commodity division, the division founded by my hero, Rubin. It seemed like whatever I wished would simply come true. But inside, I feared that one day these glories would pass. After all, not long ago, I was at the bottom of my class in China. And if I could not even catch up with my classmates in a city few people have even heard of, how am I now qualified to go to Cambridge University or Goldman? Have I gotten smarter? Or is it just that British people are stupider than the Chinese?

My job at Goldman was a mixture of making markets to facilitate client trades and finding trades for the bank’s own book. In early 2009, I believed going long UK inflation was an excellent trade. In fact, I thought it was such a good trade that my biggest worry was that there wouldn’t be anyone who would want to be on the other side of it. Yet we managed to put this trade on versus a British bank. In the following year, the trade worked wonders, with UK inflation steadily rising, making the bank tens of millions in profits. I thought I was an amazing trader.

But there was a slight problem: I wanted to do the trade because I thought the market was pricing UK interest rates to go up. And when interest rates go up, UK inflation would rise mechanically due to the way it is defined and calculated. But in that year, the Bank of England didn’t raise interest rates at all. Rather, the increase in inflation was due to things like tax increases, exchange rate fluctuations, oil price moves, etc.—things I didn’t anticipate at all. It was pure luck that I made money, and I made it for the wrong reason.

When I was an intern, in one of the training presentations, a senior banker told us to distinguish between the process and the results. He said that we should focus on the process, which we can control, rather than the result, which is subject to luck. And here at Goldman, he said, we don’t punish people for losing money for the right reason. I have always loved asking questions, so I asked him, was anyone ever punished for making money for the wrong reason? After giving it some thought, he said that he had not heard of any such thing. And he was right. In fact, no one seemed to remember the reason I did the inflation trade at all. They only remembered that I did this trade and that it worked well.

Performance review

When I met with my manager for a performance review, I was expecting to be berated for my poor judgment. Instead, I got promoted! I told my manager that it was a mistake, but he merely said, “Puzhong, tell no one.” He, too, was promoted on the basis of managing my brilliant trade. In fact, my manager was so proud of my work he recommended me to Stanford’s prestigious Graduate School of Business (GSB), and I soon set off for America.

Coming to America

One thing that I learned at Goldman was that, to rise through the ranks, it was not enough to just be a good trader. It was also essential to be able to manage one’s boss, other colleagues, and those who report to them. I never paid any attention to those things. I hoped to learn about them in business school.

Stanford was for me a distant second to Costco in terms of the American capitalist experience. Overall, I enjoyed the curriculum at the GSB. Inevitably I found some classes less interesting, but the professors all seemed to be quite understanding, even when they saw me reading my kindle during class.

One class was about strategy. It focused on how corporate mottos and logos could inspire employees. Many of the students had worked for nonprofits or health care or tech companies, all of which had mottos about changing the world, saving lives, saving the planet, etc. The professor seemed to like these mottos. I told him that at Goldman our motto was “be long-term greedy.” The professor couldn’t understand this motto or why it was inspiring. I explained to him that everyone else in the market was short-term greedy and, as a result, we took all their money. Since traders like money, this was inspiring. He asked if perhaps there was another motto or logo that my other classmates might connect with. I told him about the black swan I kept on my desk as a reminder that low probability events happen with high frequency. He didn’t like that motto either and decided to call on another student, who had worked at Pfizer. Their motto was “all people deserve to live healthy lives.” The professor thought this was much better. I didn’t understand how it would motivate employees, but this was exactly why I had come to Stanford: to learn the key lessons of interpersonal communication and leadership.

On the communication and leadership front, I came to the GSB knowing I was not good and hoped to get better. My favorite class was called “Interpersonal Dynamics” or, as students referred to it, “Touchy Feely.” In “Touchy Feely,” students get very candid feedback on how their words and actions affect others in a small group that meets several hours per week for a whole quarter.

We talked about microaggressions and feelings and empathy and listening. Sometimes in class the professor would say things to me like “Puzhong, when Mary said that, I could see you were really feeling something,” or “Puzhong, I could see in your eyes that Peter’s story affected you.” And I would tell them I didn’t feel anything. I was quite confused.

One of the papers we studied mentioned that subjects are often not conscious of their own feelings when fully immersed in a situation. But body indicators such as heart rate would show whether the person is experiencing strong emotions. I thought that I generally didn’t have a lot of emotions and decided that this might be a good way for me to discover my hidden emotions that the professor kept asking about.

So I bought a heart rate monitor and checked my resting heart rate. Right around 78. And when the professor said to me in class “Puzhong, I can see that story brought up some emotions in you,” I rolled up my sleeve and checked my heart rate. It was about 77.  And so I said, “nope, no emotion.” The experiment seemed to confirm my prior belief: my heart rate hardly moved, even when I was criticized, though it did jump when I became excited or laughed.

This didn’t land well on some of my classmates. They felt I was not treating these matters with the seriousness that they deserved. The professor was very angry. My takeaway was that my interpersonal skills were so bad that I could easily offend people unintentionally, so I concluded that after graduation I should do something that involved as little human interaction as possible.

My calling

Therefore, I decided I needed to return to work in financial markets rather than attempting something else. I went to the career service office and told them that my primary goal after the MBA was to make money. I told them that $500,000 sounded like a good number. They were very confused, though, as they said their goal was to help me find my passion and my calling. I told them that my calling was to make money for my family. They were trying to be helpful, but in my case, their advice didn’t turn out to be very helpful.

Eventually I was able to meet the chief financial officer of my favorite company, Costco. He told me that they don’t hire any MBAs. Everyone starts by pushing trolleys. (I have seriously thought about doing just that. But my wife is strongly against it.) Maybe, I thought, that is why the company is so successful—no MBAs!

An Uncertain World

Warren Buffett has said that the moment one was born in the United States or another Western country, that person has essentially won a lottery. If someone is born a U.S. citizen, he or she enjoys a huge advantage in almost every aspect of life, including expected wealth, education, health care, environment, safety, etc., when compared to someone born in developing countries. For someone foreign to “purchase” these privileges, the price tag at the moment is $1 million dollars (the rough value of the EB-5 investment visa). Even at this price level, the demand from certain countries routinely exceeds the annual allocated quota, resulting in long waiting times. In that sense, American citizens were born millionaires!

Yet one wonders how long such luck will last. This brings me back to the title of Rubin’s Uncertain World. In such a world, the vast majority things are outside our control, determined by God or luck. After we have given our best and once the final card is drawn, we should neither become too excited by what we have achieved nor too depressed by what we failed to achieve. We should simply acknowledge the result and move on. Maybe this is the key to a happy life. It seems odd that this should be the principal lesson of a Western education.

In Communist China, I was taught that hard work would bring success. In the land of the American dream, I learned that success comes through good luck, the right slogans, and monitoring your own—and others’—emotions.

Excerpted from: The Western Elite from a Chinese Perspective,’ by Puzhong Yao. American Affairs. Winter 2017 / Vol I, No 4