#26. Portfolio Optimization (Monday, April 18, 2011)
What was your best day…of seeing all that hard work finally pay off?
In a way, the challenge I had to face going into my third year of university at Waterloo was one of the hardest of my life. But in another way, it was the easiest. Because I had hit rock-bottom (#48); and so, there was absolutely nothing positive about my life that I could fear losing, if I just completely changed the way I did things.
First was the friends thing. After spending the better part of two years letting my isolation build on itself – until just leaving my room to interact with anyone just didn’t feel like a normal activity anymore – I decided to aggressively expand my social circle. I made friends with my new suitemates; I made friends with guys who played Magic (#105, #31); but most importantly, I became inseparable friends with Masato Takamura (#69, #29) and Tommy Tong (#113).
And that led directly to the second thing, the school thing. With the three of us forming an extremely close-knit study group, with many late nights spent doing matrix algebra in the math building, there was now something real to reinforce the command I had given himself at the start of the year. To get my shit together and actually understand the concepts I was learning for my Financial Math major.
Especially the concepts in…well, math. Where despite the promise I had shown in my childhood (#98, #79, #36), I had struggled mightily in my university career so far. Almost failing calculus and linear algebra in my first year, and not doing much better in my second year.
As it turned out, math was hard.
But that Fall semester, I pushed through, and ended up doing fairly well on all my math courses1. And the Winter semester was shaping up to be even better.
The most difficult math-based class, by far, that I had to deal with was Portfolio Optimization. But, despite that, maybe because of that, everything around that class just gave me a persistent good feeling.
It was a 9:30 a.m. class on Monday/Wednesday/Friday, and I got into a really nice regular routine for that. With a core group of classmate friends – Masato, Tommy, Bill, Liaotong, and Edward; we’d all sit in the front row of the Portfolio Optimization class then all head together to the corporate finance class. It was the best of times in university; having that kind of structure there that I wanted to be part of.
What made it better was the professor for that class: Dr. Michael J. Best (who retired a year later). He was the one who wrote the textbook, he was a well-known professor in this field who had earned the first Bachelor of Mathematics ever in history2, and…he had these “cookie breaks” in the middle of every class where some assigned student would bring in boxes of cookies for everyone to share.
All of that (except for the cookies, which were just awesome) made me feel for the first time that I was actually on the leading edge of some area of study. I wasn’t just some student digesting information to get a degree; I was actively taking part of the promotion and development of the field itself. And that motivated me just so much more than that arbitrary ideal of “getting good grades”, “getting a good job”, and “being successful”.
So I studied hard for that class. The midterm didn’t go so well, because a third of the exam was a “new” question that I couldn’t really figure out. But I kept pushing, fascinated by the intuitive integration of linear algebra with portfolio management, and felt like I was in a good state of mind going into the final exam on this April evening.
It was not an easy exam, I’m sure. But the way the specific concepts and methods being tested just seemed to perfectly fit everything I had studied and developed the intuition for – it made that exam feel like the easiest exam in the world.
When I finished, at the time I was shocked at the stroke of luck that had just befallen me. It was only in time that I realized that it wasn’t necessarily all luck.