30 Years of Ten Surprises
Every January for the past 30 years, Byron Wien has published his “Ten Surprises” for the coming year – ten events that the average investor would only assign a one out of three chance of taking place, but which Byron believes is “probable,” having a better than 50% likelihood of happening.
The process starts in August, when he hosts a series of four lunches bringing together leading figures in finance to discuss issues of the day, including George Soros, Carl Icahn, Wilbur Ross, and even Blackstone CEO Steve Schwarzman. “It is not a social lunch,” he says. Once he feels he understands the consensus view of the financial and geopolitical issues of the day, Byron considers how the world could go in a different direction than everyone expects it to. “Maybe everyone thinks the market is going to the moon – maybe it isn’t.”
In October, he writes 25 possible surprises on shirt cardboard, and begins to conduct interviews with what he describes as focus groups; by November, he has a rough idea of what the surprises will be. In December, Byron is typically in good shape with a finalized set, though his wife claims he doesn’t “even know that Christmas and New Years are coming up.” Finally, before the market opens on the first business day of the New Year, Byron releases his “Ten Surprises” to his many readers who agree, disagree, and voice their opinions on his predictions.
“I’ve had good years and bad years,” he says. In 1993, 1994, and 1995, seven out of ten surprises were correct each year, which led to a Barron’s cover story featuring Byron as a Wall Street prognosticator who really could predict the future. As it happened, the following year was the worst year he ever had, which leads Byron to claim that some version of the Sports Illustrated curse works on his surprises, too.
He’s had other “seven” years, he says, and even one “nine” year in 2009 – the year he joined Blackstone.
Can you tell us about your work at Blackstone, and how you decided to join the firm?
I view this as the best job I’ve ever had. I’m doing work that I really want to do at this stage in my life, with terrific people who I’m always learning from. I’m interacting with our limited partners who are stimulating and informative. Since my responsibility is to understand what’s going on around the world, I have the opportunity to constantly travel in order to be in locations where that is possible.
[Blackstone President and COO] Tony James, who was shepherding the interview process, asked me to write a job description for the position, which I did. He read it and said, “Where do I sign? This is what we want. What you want to do is exactly what we want you to do.” I’ve been at Blackstone now 5 ½ years and nobody has ever come into my office and said, “Don’t do it that way. Do it this way.”
I’m the oldest person at Blackstone by a large margin, and yet I have no trouble getting up in the morning and going to work. I don’t think people look at me as some old guy, like “Why are we hiring this fossil?” or “He is not in touch.” I work hard to be in touch and stay current.
Over your long career, how did that approach to work evolve?
In my first job, which was with an advertising agency, I was spending about 75% of my time doing things I didn’t want to do, and 25% doing things I liked to do. At that time, and that was a long time ago, I said, “I’m going to get this to 75-25 – the other way.”
One of the reasons I went to work at Blackstone was I thought it could be 90-10. By that time, I had learned what is productive and what is not. I try to spend my time on useful things. I’m very careful about what meetings I go to, and I would say it is 90-10 now.
You have had exposure to a number of different firms over the years. Is there anything that stands out to you about Blackstone in particular?
First of all, we are more seriously diversified in a constructive way, so that is one difference.
Second, we hire terrific people, but everyone does that. Something that we do that is different is that we give individuals a lot of room to do their own thing. That way, if you hire a winner, you find out early that he or she is a winner. I think that happens at other firms, but I don’t think their programs of giving people intellectual freedom are as vigorous as ours.
At the end of the day, how do you think people respond to your work?
It’s very satisfying to be recognized both for what I do intellectually and for what I represent as a person. To be thought of as a good person who is accessible, who is smart and does creative work is very satisfying, and that’s what I’m trying to be.
Of all the surprises you’ve correctly predicted over the past three decades, which do you consider most impressive?
When I wrote the surprises of 2008, Hillary Clinton was 14 points ahead of Barack Obama in the polls. One of my surprises that year was, “Barack Obama becomes the 44th President in a landslide victory.”
How do you stay so informed on so many topics?
I read the Financial Times, the Wall Street Journal, and the New York Times. I read them pretty thoroughly, and they are very helpful. Occasionally, I’ll read the Washington Post or something in it. I read Foreign Affairs, the publication of the Council on Foreign Relations. I pretty religiously read the New York Review of Books, Bob Silver’s biweekly, which I think is really terrific, and I’ve gotten a lot of ideas from there.
I don’t read fiction much anymore, but I do read nonfiction books. I usually dart around them. I don’t read them cover-to-cover; I usually read what I’m interested in. Sort of like when I go to a meal where I don’t order the food myself, like a dinner: I’ll eat what I like and won’t eat what I don’t like. I generally do that with books.
These days, there is a heavy emphasis on drawing conclusions from data and analytics. You seem to emphasize feeling out ideas through conversation with experts and other contacts. Are the two approaches compatible?
Most people look at all the data and then draw their conclusions. I operate differently. I draw my conclusions and then try to find the data to prove it – that means I go down a lot of blind alleys. I usually have a concept of what’s happening – and then I try to prove it.
I spend a lot of time with data, but I don’t start with data. I start with, as I said, the impression – the intuitive view of what is happening and then I try to prove it. I would say nine out of ten times I can’t prove it, but I learn something in each blind alley. By the time I come up with a conclusion, very often it is a good one and often it’s more imaginative than what the people who are data-driven come up with, because the people who are data-driven are prisoners of the data. They don’t understand that the truth may be beyond the data.
I try to connect the dots. When the dots lead in a certain direction, I’m willing to jump ahead over 30 dots to get to the end, whereas a totally analytical approach wouldn’t do that. They would wait until the 29th dot before they would do it and that is normally too late.
Congratulations again on 30 years of Ten Surprises. Thirty years from now, in 2045, what do you think will be the biggest surprise?
If you did it by the dots, you would say the world is becoming a much more hostile place. We have problems in Israel and Gaza, the European Union might break up, and you’ve got ISIS in Iraq and Syria. We’re going to have big water problems in China and India, we’ve got problems in the South China Sea, so the easy answer is to say that the world would be a very hostile place. You would have cyber-attacks everywhere and things like Charlie Hebdo, and people would be afraid for their lives. You think of all of the situations where people have been killed this year, from Michael Brown to Eric Garner, the trajectory of where we are going is not good. But I would like to think that there will be some accommodation, as some believe, that the world will be a more harmonious place – which would be a real surprise. I have implied that by saying there is no profit from evil.
Let’s look at Putin. Let’s look at where this started. Everyone thought he wouldn’t be ready for the Sochi Olympics, but the Sochi Olympics were a big hit. He was viewed as the world leader who could get something done. So he decided he is going to press his bet: he’s going to go into Ukraine, and then he’ll be able to finance it because the price of oil is $100. Then the price of oil and everything goes against him. The world turns against him, the price of oil collapses and so forth.
The same is true in Iran. They are going after a nuclear weapon. They aren’t going to use a nuclear weapon. Nobody has ever used a nuclear weapon after the first time, so they are putting this country through the sanctions for something that no other country wants or believes in, and people will turn against the leadership.
Maybe those things will start to reverse and people will start doing sensible things instead of thing that they think just enhance their viciousness. So if you ask me to loop ahead 30 years, where the conventional wisdom is that the world will be a more hostile place, I would say that the world becomes a more peaceful place.