Inside the Psychology of Investment Banking, Private Equity and Hedge Fund Professionals

How do you measure up?

Here’s what I’ve seen in spending 1000+ hours listening to my clients talk about the behavior of their colleagues:

 I. FOUR PERSONALITIES

 Think of four types of personalities and behaviors:

  1. Dominant: decisive, authoritative

  2. Improv: outgoing, “we will just figure it out”

  3. Steady: wants to help others, accommodates clients wishes

  4. Conscientious: fact-driven, anal retentive

Which one sounds like you?

  • Mostly one

  • Mostly one and a lot of another

  • All of them?

  • Are you authentically one, and you act another?

II. CASE STUDIES OF BANKERS, PRIVATE EQUITY & HEDGE FUND PROFESSIONALS

Investment Bankers

  • The D decisive banker sells clients with their confidence. They can sell alpha CEOs on their mutually respected presence, provide a voice for C-type clients or drive direction for I-type clients. When their D goes too far, they are perceived as not listening, and at times as ego maniacs

  • The I “improv” / outgoing banker loves any new idea, meeting or client. A meeting is a potential opportunity to evolve a relationship or win business. It’s a ‘hands on’, ‘figure it out in the moment’ kind of approach. Once the sale has been made / client engaged, this type of person loses interest and moves to the next exciting challenge. I bankers are often criticized for moving too quickly or being ADD

  • The S banker patiently services clients and builds trusting relationships. They create a feeling of loyalty and service with the client. I worked with an incredible Partner at Goldman who patiently covered clients, rarely opening a pitchbook and instead engaged in a dialog to help the client get clear on what they needed. It’s a different style relative to the Ds or Is bankers who look for a quicker kill. Many clients desire a recommendation, so the S type banker must be prepared to provide direction when prompted

  • The C anal retentive banker is all about the details: getting it “right,” being thorough, methodically following the pages of the book, following checklists. Order is the key. This banker is a dream for processes with lots of moving parts and other complexities. When lawyers switch into banking, they often take this approach. A too C banker can lose sight of the commercial opportunity at hand

  • Note: If I and C can partner, they are a great team to deliver the full package for the client

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Hedge Fund PMs and Analysts

  • “I’m Right and I’m all over the details”… D & C personalities dominate hedge funds

  • Is are wonderful idea generators, but often get shaken out over the life of an investment as the market moves

    S types tend to get runover in the hedge fund world. Your investment opinions are wishy washy, we will take whatever you choose to give, and we will take credit for your work

  • C obsession with detail, process and proof and D stubbornness and confidence provide the foundation to do the fundamental work and hold an opinion through the vagaries of the market’s movements

  • While good PMs move out of the C into the D (and to I for fundraising), many senior PMs never get out of the weeds, as their focus and magic is in understanding the details. While this may lead to consistent performance and rising AUM, it’s the number 1 source of burnout

  • Overly C individuals who actually make it to PMs often have difficulty scaling GMV and adequately sizing positions, for fear of uncertainty and downside risk. Similarly, I types without enough C lack conviction to scale great ideas and tend to track an index

  • While a lot of D can be a blessing for many PMs, it can also be their undoing when they become quixotically attached to their conviction despite overwhelming market evidence to the contrary. Bill Ackman is a leading example of this: he will to go on stage with his view, and then ride the position into a world of pain – he’d be so well-served by learning to say “I was wrong.” Other PMs like Dan Loeb are a bit more D and I – when the market tells him he’s wrong, he’s happy to change direction and swim to another wave

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Private Equity Professionals

  • Most PE professionals are D to the core – they are sure of their view, and willing to conduct a campaign to build a consensus around their thesis internally and then drive value at portfolio companies

  • The best PE professionals have an ability to modulate between C and I – from anal on the details of the numbers and contract/covenants, to politic enough and friendly to build consensus and rapport with management teams. There’s not much need for S – PE is about selling expensive capital, deploying AUM and monetizing results

  • Emotional volatility and vulnerability are especially unwelcome here – other personalities may experience these professionals as a bit cold or calculating

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III. DEEPER DIVE ON EACH PERSONALITY, PITFALLS, AND COACHING OBSERVATIONS

Psychologists described the “DISC” of personalities 100 years ago – our wiring hasn’t changed, and this remains an elegant way to observe the psychological macro themes of human behavior

 As you become Aware of your own behavioral patterns and those of your peers, you can stop annoying your peers and manage those who irritate you. The results of speak for themselves: promotions, more clients, more money, more time, and less exhaustion and conflict

The “D” Personality: From Decisive to Dick

  • With a healthy ego, D personalities are confident of their thinking

  • Naturally provide a plan

  • Take the lead

  • Speak first

 What to watch out for with “D”s Narcissistic behavior, Sociopathic behavior

  • Dominating others to compensate for feelings of insecurity

  • Low/no empathy for others; disregard for others

  • Sadistic pleasure from exploitation of others

  • Believing laws / gravity do not apply to them

  • Judgmental / obsessed with what others think about them

  • Examples of “D” gone dark: Donald Trump, Billy McFarland of Fyre Fest, Elizabeth Holmes of Theranos, Elon Musk

Strategies for interacting with “D” types

  • Stay focused on the result

  • They could care less about your feelings, creativity or need for perfection. They want it done

  • Focus on deliverables; don’t get too much into how you’re going to do it  

Coaching the “D” personality

  • D’s have little problem speaking, moving forward, managing and welcome it as their natural style

  • When D’s get feedback / areas for improvement, it often sounds like: they don’t listen, are inattentive to the feelings of others, or move too quickly without considering the facts. They might miss the romance of a deal and go straight for the mandate

  • As a coach, what’s key is the “intent” behind their actions. While some are simply unaware of the complaints of their peers, others live in their own world and don’t care / have a hard time seeing why they should care about their peer’s feedback. Adding a little more heart is often what separates a successful principal / partner from someone in a much bigger role. Because the D-types often see success, it can be hard to get them to buy into changing - this rigidity prevents them from reaching the higher levels of management and success of which they are capable

The “I” Personality: From Improv & Adventurous to Chaotic & Disorganized

  • Full of ideas and optimism, this person radiates energy and excitement

  • “No idea is a bad idea” as intellectual curiosity abounds

  • Inspiring charisma; persuasive with a group

  • (Note: the Cs dislike Is lack of details, inspiring concepts and poke holes from the peanut gallery)

What to watch out for with “I”s — Lack of Focus, ADD

  • One idea after the next with little followup

  • Shiny object syndrome: everything other than the present sparkles

  • Rarely malicious intent towards others, but sometimes out of touch with others worries and anxieties – poor leadership as the troops don’t feel “heard”

Strategies for interacting with “I” types

  • Give them room to run though many ideas at once

  • Help them tie it all together or extract a theme to create a next step. These types are prolific idea generators, but need to be bridled for maximum impact

Coaching the “I” personality

  • Prioritization!

  • Define macro business goals, then create a process of tying each new branch of discovery to the larger goals

  • Where the details matter, slow down, ask for help, appreciate what others can do for them

  • While some Is can focus, others have a really hard time understanding why others worry or have anxiety – if they can just figure it out, they see no need to worry. While this is a very empowering way to live, it can be delusional relative to reality and alienate the emotions of others. A good leader must make it clear they connect and empathize

The “S” Personality: From Accommodating Host to Angry/Bitter Giver

  • In the service of others

  • How can I help you?  

  • Steady, predictable, patient

  • Won’t impose their view on others

 What to watch out for with “S”s — Exhaustion, Burn Out, Imposter Syndrome

  • Person who takes everything on for fear of saying no / upsetting others

  • May feel victimized, stewing with anger and resentment

  • Can be blind to toxic D’s who exploit their giving nature

  • Guilted giver who feels never enough

  • Borderline fear of abandonment

Strategies for interacting with “S” types

  • Tell them how they can help

  • Thank them for all of their work, and pause to give them room to express their opinions

  • These are the most valuable, loyal workers, so take the time to water the garden and sustain the relationship over time  

Coaching the “S” personality:

  • Help them ask for what they need

  • Learn to say No, and then dump and delegate work to others

  • Get to root of guilt or why they worry about what others think of them

The “C” Personality: From Detail King to Analysis Paralysis

  • Rules should be followed

  • “Right” and “wrong” — lawyers live here

  • Will re-do things that aren’t done right

  • Judges those who don’t operate at their level of detail and precision

  • Can come across to others as always miserable / never satisfied

What to watch out for with “C”s — Perfectionism, Analysis Paralysis, OCD, BPD

  • Rigidity of process due to need for order

  • Need for control due to anxiety (rather than ego with the Ds)

  • Inability to decide 

  • Judgmental of others / other approaches

Strategies for interacting with “C” types

  • Use data and don’t hope for too much fun or excitement

  • To help them move towards a decision, ask them what they would need to know to move forward – this will guide the conversation and limit the analysis paralysis

Coaching the “C” Personality:

  • Use probability weighted decision trees to evaluate possible paths

  • Prove the fear of the unknown is outweighed by statistically likelihood of upside

  • Help them choose their spots and let go of the rest

  • Focus on the commercial opportunity at hand

  • It’s not all black and white — if this doesn’t work, there will be more opportunities

IV: SO HOW DID WE GET THIS WAY?

Analyze your family – what were your parents like? What were your siblings like? In a household, our parents and siblings serve as templates for how we learn to behave: we either imitate behavior we see, or we adapt our behavior to accommodate, combat or deflect the personalities in our family.

 Even if your default behavior is one way today, your original nature might be different. For example, if you grew up with a narcissistic parent or sibling, while you may be D-oriented on a soul level, perhaps you adopted S and C to survive in your family – this gets pretty deep!

V: THE TAKEAWAY

It’s important to remember you’re not a “type” – you’re whatever you choose to be and set your intention on being. Through awareness and practice, you can evolve your default / conditioned behaviors to ones that get you the results you want and connect you to a style that helps you express your brilliance and experience happiness.