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Clare Flynn Levy - CEO Of Essentia Analytics

If your job is to make investment decisions that involve billions of dollars, then you need the power of data to help you. Just like in Moneyball, you need to do more of what you're good at and less of what you're not good at, i.e., identify the behaviors that are adding or destroying your value. Essentia Analytics can help you with that with a little bit of technology and machine learning.

Join J.R. Lowry as he talks to the Founder and CEO of Essentia AnalyticsClare Flynn Levy, about how fund managers can improve their investment performance. Essentia Analytics uses technology to help investment professionals identify their decision-making biases to adapt accordingly. Learn more about behavioral analytics and how it affects decisions. Discover Clare's Moneyball techniques so that you can make the best decisions every time. Start changing today!

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Clare Flynn Levy - CEO Of Essentia Analytics

On Bringing Money Ball Techniques To The World Of Investment Management

I’m JR Lowry and this is “Career Sessions, Career Lessons”, brought to you by PathWise.io. PathWise is dedicated to helping you live the career you deserve. The basic membership is free. Visit PathWise.io online and join now.

We are delving into the world of artificial intelligence and big data. My guest is Clare Flynn Levy, who I met when we were both working in FinTech in London 6-7 years ago. She is the Founder and Chief Executive Officer of Essentia Analytics, a FinTech firm that uses artificial intelligence and machine learning to help investment professionals identify their decision-making biases and adapt accordingly with the objective of improving their investment performance. Think about it as Moneyball for the financial services industry.

Clare has spent the vast majority of her career in investment management and related technology spaces, working for established firms and as an entrepreneur. She started her career as a portfolio manager for a division of Deutsche Asset Management, and then founded her own hedge fund, Avocet Capital Management, while still in her twenties. Following several years there, she made the jump over to the technology side of the industry, joining a software provider called Linedata, where she ran a division that provided hedge fund software. She returned to the investment management space, leading business development for the hedge fund Tisbury Capital Management before moving on to an investment advisory firm, Ellsworth & Associates, where she was a Managing Director. She founded Essentia Analytics in 2013.

Along the way, Clare also spearheaded The Equilibrant Network, which focused on bringing flexibility into the workplace and offering consulting opportunities to members. She's also been active in the Young President's Organization, and she has served as a non-executive director for several firms spanning executive search and enterprise social networking. She's earned a number of awards and honors, including being named Technology Innovator of the Year in 2021, and being recognized as one of the 30 most inspirational women in the city of London in 2018.

Clare earned her Bachelor's Degree in Economics from Barnard College and spent time abroad during her undergraduate years studying at the London School of Economics. She lives in Connecticut with her husband and two pre-teen sons.

Clare, welcome. It’s great to have you on the show. Thanks for being here.

It’s great to be here.

Let's start with your current role. Tell our audience a little bit about Essentia Analytics.

Essentia effectively does sports analytics for equity fund managers. We take their historical trading data and then we identify patterns in their behavior that are consistently adding or destroying value. We help them play to their strengths and minimize their weaknesses on a go-forward basis using a combination of technology and coaching.

CSCL 25 | Money Ball Techniques

Clare Flynn Levy: Essentia Analytics helps people do more of what they're good at and less of what they're not good at. You need that if your job is to make investment decisions that involve billions of dollars.

 

Some of the underlying technology is machine learning and artificial intelligence-based.

That's a very wide term. It can mean a lot of things. The part of it that we use is the least sexy part, and yet, machine learning is being brought into everything these days. It's advancing so quickly.

To your point, it's a big and very broad topic. The words get thrown around very loosely. If you want to get more than a little bit deep, you have to understand methodology and technology. Most people don't necessarily want to get that deep in it. For the average person who you would consider a portfolio manager or somebody of that nature who would be using your software, how do you pitch it to them? How is the explanation work in layman's terms for somebody in that space, maybe who isn't super deep on artificial intelligence technology?

It depends on what their pain is. Active fund managers are, in general, in a lot of pain, having been disrupted as an industry with passive index funds and other much cheaper alternatives. It's been a very slow process, but assets have been flowing out of active and into passive. That is what it is. Yet, active fund management continues to exist. There are still large investors who prefer to invest with active managers rather than passive for a number of reasons to do with their needs and their investors’ needs.

That means if you are an active fund manager, you've got the macro threat of outflows hanging over you the whole time. If your performance is excellent, then that's less threatening. If it's less than excellent and you're not in the top quartile, that gets a little scary. In some cases, our clients are coming to us from that perspective. They want to improve their performance because they want to preserve their AUM. In some cases, they're coming to us having performed very well, and they are the continuous improver type of person. In their lives, they might use Fitbit. Now, it's probably an Aura Ring. Or they're a triathlete or somebody who is constantly trying to improve, and not surprisingly, that person tends to perform very well [at work also].

What they use us for is visibility into how to improve and the means to do it, but also to differentiate themselves in the market. As a manager of something other than an ESG fund, which has been attracting assets, if you're in a more standard type of strategy, you've got to find a way to differentiate yourself and being able to tell stories of continuous improvement, show proof, actual quantified absence of skill and acknowledgment of that ends up playing very well with investors.

Your comparison to the sports world is apropos. Moneyball here is like Money Money. It's directly relevant. It's interesting when you think about the fact that professional athletes have embraced all of this data and analytics that's pervaded the sports world. In the investment world, and I know you know this better than anybody else, it's not always an easy pitch. You've still got people who believe in doing their stock picking in a very traditional fashion.

An active fund manager has the macro threat of outflows hanging over them the whole time. Click To Tweet

To be fair, in sports, it took a long time too. I'm sure you saw Moneyball, with the scout in the stands who says, “I judge them by the whites of their eyes.” These people continue to believe that their old way of doing things is the right way of doing it, and don't necessarily notice that the world is changing around them quite dramatically. That somebody who has actual data as a support for their decision-making has a massive advantage. The outcome of the story is everybody then ends up converting across all sports. It's not just baseball. It's taken decades. It's not been fast. The fund management industry we know is extremely slow to change in general, and yet, it is happening.

There is a new generation of fund management talent that is finally ascending to senior levels where they have some influence, and that's a big driver, but the balance of power has shifted in the industry in favor of the investor in a way that it hasn't in the past. The post-financial crisis was the big pivot point. The investor has access to data too. If they have a separately managed account, they absolutely can do this analysis themselves on [your investment decisions] if you're not willing to do it for them.

You may as well just do it and deal with the reality of what it has to say. It's not all bad. People clench up and go, “I don't want to know.” It's not all bad. You are a professional fund manager. You got here for a reason. It's not that you are a total fraud. However, you're probably spending some of your energy on things that are not helping because you're a human, and that's what humans do. We're biased and noisy. If you knew you were doing it and you could see exactly what it was, you could stop doing that. It's possible. It's not that hard. You have to want to do it in the first place.

You started this back in 2013. What was it that led you to this particular idea back then?

Essentia is solving a problem that I had myself. That's where this is coming from. I was an equity fund manager in the late ‘90s at Morgan Grenfell Asset Management in London, which was part of Deutsche Asset Management. After that, I ran my own long-short European tech hedge fund in the early 2000s. I was a tech specialist. I was in the first generation of kids to grow up with a computer in their dorm room in the US. When I went to London, pre-internet, effectively, there was a five-year lag going on. I knew all about this thing called the internet and about email. I ended up being very much in the right place at the right time, as far as my comparative advantage and in terms of my expertise.

It's a bit like being a crypto expert or the blockchain kid today. It's like, “We've got one of those. He knows all about it. We don't understand it, but he does. That's good.” That was me. I became a tech specialist as an investor and ended up picking lots of stocks that went up a lot. Everyone was very happy. I won all the awards. It was all good. That's because my performance was good. This is an industry that looks at recent performance and rewards that. Was I skilled? Who knows. On some level, I would like to believe I was skilled. It wasn't just a coincidence, but without analyzing the data, you don't actually know. That's the truth of the matter.

When I launched my hedge fund, I launched in March of the dot-com bust. It was not dissimilar to the market we're in now, where you have a big dislocation, and what had been working for a long time was no longer working, especially if you were a tech investor. I said, “That's fine. This will pass. I'll keep at it.” I ended up running very hard to stay in one place for four years. I didn't lose lots of money, but I didn't make lots of money either. I couldn't figure out what it is that I should be doing differently to get a better result.

CSCL 25 | Money Ball Techniques

Clare Flynn Levy: ESG funds are now hitting a tipping point where there's an incredible amount of focus on it. In younger generations, people actually care. Back in the day, there was Socially Responsible Investing (SRI), but that was largely lip service.

 

I was young for all of this, and I had a big birthday. I was turning 30 and was already four years into this. I asked myself in the mirror, “What are you doing? Your return on energy expended is negative and going lower. If that was a stock, you would be a seller.” This is way more valuable than a stock. It's your life. Life is short. Another decade has now passed. Shouldn't you be doing something where you can see your way to success and you can prove that you have a competitive advantage? To me, it had very black-and-white logic to it. I looked for it. I said, “Somebody can analyze all my trades. I'm capturing them.” Even back then, you were capturing all your trades in a system.

“Somebody tell me what I'm good at, and I'll do more of it. Tell me what I'm bad at, and I'll do less of that,” but nobody could do that because in the industry at the time, tech was very focused on electronic trading. That was the first port of call. It was too early, and the processing power to do the math that you have to do for the machine learning and all of that was not in place. I couldn't do it.

In the end, I decided to cut bait [with the hedge fund]. It wasn't worth it. I wasn't going to keep investing my life in this if I couldn't see how to improve. Long story short, I went into an existing software company that made software for hedge funds on the basis that the customer who ran a company should have a competitive advantage [in selling software to other companies like it]. I knew more about what hedge fund managers wanted from software than somebody who had not been a hedge fund manager using software, and that did play out to be true. That was a successful stint in my career.

We sold that company and then I went back to a hedge fund, but on the business side. I spent the financial crisis there. It was interesting, not lots of laps, but it was a big learning experience. By the end, when I left, I was pregnant with my first child and I had some time to think about what I liked and didn't like about each of my roles. One thing I liked about that hedge fund job was that I was effectively assuming the role of a coach. I was doing a lot of data analysis because it was "all hands on deck" to try and stop the investors from leaving and prove to them, “Our skill is intact. Don't leave.” That probably wouldn't have worked anyway because everyone needed liquidity. There was a credit crunch.

I could see how hard it was to prove the presence of skill quantitatively. I thought that problem was still there. It is the exact same problem I'd had, whether that fund manager felt that he needed to prove it to himself in a way that I did or not, but either way, investors wanted that proof. Not only does the fund manager need to know this stuff, but the investors want to know. That led me to start Essentia, to solve this problem that affects every single fund manager out there, whether they realize it or not.

What's that entrepreneurial journey been like for you over the last nine years?

These things take decades to be adopted. We're doing something not based solely on what's the quickest way to make a buck. If you were doing that, this would not be it. However, it started with an idea that made total sense, i.e., to help people do more of what they're good at and less of what they're not good at. If their job is to make investment decisions, and those investment decisions involve millions and billions of dollars, then that's a valuable service to be providing. It made sense to do that. We raised money on day one. I had some money from the sale of the previous software company that I put into it, and I had a handful of friends, not even family, who believed in this and in me, and they invested.

The fund management industry is extremely slow to change in general. Click To Tweet

Funnily enough, I was just on holiday with those same people, which was amazing. These are people who have very much been the wind beneath my wings as I've built this company, and have stayed with me and have continued to invest in future rounds and have been amazing supporters. It started with that. We lived off angel money. Every six months, we would raise more angel money. I knew so little about raising money for a private venture. I'd raised lots of money for the funds that I was running, but that's a very different thing. I was naive when I look back on it. I didn't understand the metrics that you needed to achieve in order to be eligible to raise larger amounts of money.

I would end up back in front of angels over and over, and then found that angel investors who were not from the fund management industry were super positive about my pitch, but they would say like, “It's not my area. It's all a bit complicated,” with the next pitch after me selling some consumer product that they [understood and] bought - it was way more obvious to them as a thing to invest in. That said, over the years, I have gathered a great investor base of angels, including the former CEO of Man Group, Peter Clarke, Charles Ellis, names that are very well entrenched in the industry, who have been very wise and helpful along the way. That's been good.

By 2019, we had got the magical number of £100,000 of monthly recurring revenue. That's what the series A, B and C investors wanted to see in order for you to be eligible for investment. It took me that long to figure that out, but eventually I did. We did a little accelerator program with PWC for scale-ups. In that year, we did that. They spent all this time helping you get your pitch right for this audience, and then you pitched. We ended up meeting a firm called Calculus Capital out of London at that event. They then ended up investing in our company in series A, which made it possible for us to finally hire some more people. We were living very much hand-to-mouth [up until then]. We had a great 2019.

In 2020 Q1, all systems were go. We were killing it, and then COVID hit. It's not like we were a restaurant or a hair salon. It wasn't devastating at all, but it meant that people were extremely distracted for two quarters. By people, I mean our target market like fund managers, heads of equity and CIOs. Everybody was moving remotely. They weren't necessarily set up for that. The market was volatile. It was all crazy. Nobody was interested in thinking about software that's going to help them make better investment decisions in the future at that moment.

That's part of what makes it tough on my entrepreneurial journey. It would be an upward graph, but that's a fairly volatile graph because there's never a good time for this. When you're a fund manager, the market is always demanding your immediate attention. Unless you are very good at tuning that out and you're worried about the long-term, there's never a good time to think about this stuff. It's ironic, because what could be more urgent than telling you that I could help you make a slightly better decision every single time you make a decision, starting right now? The compound effect of that is insane.

It's like, “I'm going to start my diet tomorrow. I'll join the gym next month.” It's the same thing. You've got to make time for it.

Everything screeched to a halt for a couple of quarters, and then it came back well at the end of that year. Since then, it's been about growing.

CSCL 25 | Money Ball Techniques

Clare Flynn Levy: So many people are actively using behavioral science for sales and marketing. But what if you had this for yourself? How would you use it?

 

Where are you now?

We're about 50 people now. At the end of 2021, we signed a strategic partnership with Northern Trust. They invested a little bit of money in the company, and that afforded us the ability to add people to our team, on the R&D side in particular, because we have grand plans. We have many years of experience in analyzing fund managers' data and nudging them to make better decisions and then measuring whether that works. There's so much you can do with that. Yet, that does require investing in advance of revenue.

Earlier in 2022, we added a lot of people to our team. We're now 50 people, and about 40 of them are in London. I'm in the US along with the others. Our client base is 30-odd firms around the world, very large asset managers in a lot of cases, but also some hedge funds you've [likely] never heard of before. Probably, 2/3 traditional and 1/3 hedge, all equity-focused. It's about 150 portfolio managers that are live [on the platform and] working with us.

It's taken a long time to get here, and yet, that’s not nothing. That's an installed base. A handful of them have worked what we do into their marketing pitches and are using it as a way of differentiating [themselves] in the market. The more that goes on, the more investors will start asking about it, “Where's your behavioral analytics?” The fund manager who doesn't know what that is [will be] feeling pretty stupid.

Going back to the Moneyball analogy, it took twenty years for that to take off or maybe longer if you go back to the Sabermetrics that form the origin of the Moneyball story. To your point, everybody uses it, pretty much in every sport, and if you don't, you're missing out on something. It has to hit that tipping point. It's probably still out there in terms of when that tipping point will happen. ESG is another example in the fund management industry. It's been around forever. It's now hitting that tipping point where there's just an incredible amount of focus on it. For the people who've been doing it for decades, they're like, “It's about time, but it was painful getting to this point.”

We have a client that falls into that category. They've been at this for at least ten years. Finally, ESG is coming to them. It's great to see that, with all credit to the Millennial generation for driving this and caring about that stuff. Back in my day, people would laugh. We had SRI, Socially Responsible Investing.

We had Gordon Gekko...

As a fund manager, the market will always demand your immediate attention. Click To Tweet

People thought it was Gordon Gekko and the rest was lip service. No one took it seriously. Now, it's a total change, but it's taken a generation of humans to move through the pipeline and force the demand in that direction. It's going to keep going that way for a while.

I want to go back to your hedge fund days because you were running a hedge fund starting in your late twenties as a woman, which is rare on a number of dimensions. What was that like?

It's funny, isn't it? In retrospect, I didn't know any other female hedge fund managers. There might have been some, but I don't even know. I had grown up, at least to that point, surrounded by men in this industry. I didn't think much of it. I thought, “I can do this.” [There was one person] in particular, Mike Lynch from Autonomy. He is very much in the news with lots of press out there about him. He backed me.

I got to know him because he was running Autonomy and we owned a huge stake in Autonomy at Morgan Grenfell. He identified me as a talent and said, “First of all, I want you to run my money.” I said, “I don't want to run money for one person.” He said, “Let's start a fund. I think you can do this.” I wouldn't have done it without that vote of confidence from somebody who I respected a lot. I still respect him.

He convinced me that I could do this, then we went out and raised money. We did it. He sat back and I ran the show. [Well], he didn't sit back. He had a company of his own to run that was far more valuable than my hedge fund. It was a very different time in a lot of different ways. It was weird to be the only woman who was a fund manager at hedge fund events. People would ask me to get them coffee and stuff like that all the time. That was part of the experience of a woman in finance of my generation. You just got on with it.

In the end, I realized, “I wasn't sure I had a competitive advantage after all.” I believed I did when we started because I knew the European tech CEOs pretty well because of my position at Morgan Grenfell. They were a large asset manager at the time. I had good contacts, but the performance wasn't there. I was scratching my head about it. Between that and also realizing that the longer I worked in the hedge fund industry, the more I realized how it worked. There was a competitive advantage. I don't know to what extent it's been diluted now.

The biggest players got the call first from the brokers, and lo and behold, would have all the best trades going and would get in early. They'd get the best allocations of things. I was not the biggest player. I was at $85 million, which at the time was a big fund, funnily enough. It certainly wasn't as big as the big players. Also, there was a lot of nasty behavior.

CSCL 25 | Money Ball Techniques

Clare Flynn Levy: It is great to see so many women taking CIO, CEO, and very senior leadership positions at asset managers in comparison to the past.

 

More and more, I realized that if you want to succeed at this, you need to be much meaner than you are. Do I want to be that person? I don't want to be that person. It all came to a head around the same time with me having these conversations with myself and asking myself this question. My dream was to be a fund manager. I achieved it very young. I got there. I looked around and was like, “Now what? This isn't that great.” It was hard and stressful.

When I needed to be a version of myself that I didn't want to be - “Maybe I shouldn't be a fund manager after all,” - it was a bit of a crisis to hit in one's career when particularly at the ripe age of 30. It was a difficult time. It took a long time for me to think my way through it. I read Jim Collins’ Good To Great around that time. I learned about the concept of identifying the intersection of what you're good at, what you're passionate about, and what the market wants. I would add to that, “Who do you know?” I learned something that mattered a lot.

After the financial crisis, when I left the hedge fund, that came into play as I was thinking about what I wanted to do next. Ultimately, it led to me starting Essentia. It's been a wild ride so far. I can't imagine it's going to get much calmer. It's fine. I've learned a lot. I do so much study of human behavior, whether it's data studies of our clients or just reading about it. I've learned so much about myself this whole time. I'm a different person in a lot of ways as a result of that.

Before we started, you talked about the greats of behavioral science. For many people, that whole field has been an epiphany. It finally explains why rational behavior doesn't always occur. Like everything that becomes part of popular culture, it’s been overplayed in some spaces, but there's ample evidence through all of this research that's been going on over the years about what a powerful force it is. Applying it to this space or frankly to any other, you can change behavior and influence outcomes. All of your reading came together in this venture that you started back in 2013.

The part that intrigues me always is, “How can I use this information to change my own behavior?” Advertising execs have known this the whole time. They've been manipulating us since day one of advertising because they observed that, “You do this, and the people do that.” We continue to be manipulated by people who have this knowledge. At least as it relates to video game makers, social media and whatever else, they can AB test every little thing and they fully are manipulating us. So be it. We can choose to do that or not do that.

I was talking to somebody who said he has a second phone at the weekend that's called the dumb phone. He has a smartphone for the week and a dumb phone for the weekend as a means to not being able to get his dopamine hit from his smartphone. His question was, “I wonder what will happen if I do that? Will I seek that satisfaction through other things?” The answer was yes, he found that he had a to-do list that had been the same to-do list around the house for a zillion years. After one weekend with the dumb phone, that to-do list went right down because he got his fix from those small moments of achievement when he finally cleaned out the closet or changed the light bulb in the chandelier or whatever it was.

You are giving a lot of spouses and partners an idea...

To succeed as a hedge fund manager, you need to be much meaner than I wanted to be. Click To Tweet

I wasn't brave enough to do it myself. I can totally see how that would work because you do need to get your dopamine hit some way. The easiest way is by looking at your phone. The point is that so many people are out there using science already to quietly sell us stuff and keep our attention. What if we knew this about ourselves? How could we use it like somebody wearing an Aura Ring or a Fitbit? What can I do knowing this data about myself? I know I could read in a book that I shouldn't look at an LED screen before I go to sleep, but I read on my iPad every night. I know that I'm not supposed to do that because it's going to jeopardize my deep sleep.

Until I see the actual data that proves to me that this is going on and my deep sleep is sacrificed, I won't change my behavior. The second I do see it, I'll have a choice. I can either say, “I don't care and I don't need deep sleep. Maybe I get the science that says we need deep sleep, but maybe I don't.” I can [alternatively] say, “I believe it. I'm going to do something about it.”

Once you start capturing this data about your sleep, you can be capturing data about how you feel during the day. If you can start to connect the dots and say, “I do have a crappy day every time I don't get deep sleep, because I'm reading with the backlight,” it's like hard evidence that makes people act. The question is whether they're brave enough to go there.

I know you've talked about women mentors helping you along the way. Talk a little bit about that. Where did you find them and how did they help you?

In retrospect, so much of my career path has come from that. It wasn't that I was specifically looking for female role models. It was more that when I identified one in the space where I wanted to be, I thought, "I'm going to hitch my flag to that woman and follow her." When I started my fund management career in the mail room at Gabelli Funds in Rye, New York back then, we would send these prospectuses in the post to people who filled in little things in a magazine.

I worked my way up to the 1-800-GABELLI phone line. I was answering phones. I was a college student at the time. I found out that Mario Gabelli had a business partner called Liz Bramwell. She was Gabelli’s growth fund manager. She was a woman. She was based in New York City and doing her own strategy. They had been at business school together. She was a proper pioneer of women on Wall Street. She must have been in her late 50s at the time. She has sadly passed away since then.

I went to work for her. Being somewhere where there was a woman in charge meant that it was a possibility in general, and that maybe one day I could end up being in charge. I liked the idea of working at a place where that was already the case. When I graduated from college, I was doing the whole Wall Street thing. I went to Barnard College at Columbia University in New York, and very much on purpose, so that I could work on Wall Street through college, which sounds very strange, but I was into it. I wanted to be a fund manager. Working for Gabelli and Liz definitely added fuel to that fire.

CSCL 25 | Money Ball Techniques

When school finished, I was doing interviews at various firms. I wrote a letter to the alumni department of my prep school. I was going to London. I had done my junior year abroad at the London School of Economics. I was going back to visit, and I wanted to see if I could maybe get a job there. I loved London. I wanted to be there. It was worth a shot. I wrote to the school and said, “Give me a list of all of the alumni in finance that are based in London.”

I wrote to them on a typewriter. One of them was to a woman called Nicola Horlick, who at the time was running Morgan Grenfell Asset Management's UK business. That was unprecedented. She was young too. She was in her 30s at the time. She had worked her way to this role where she was in charge. She said, “Sure. I'll see you when you come over. We can have a chat.” I ended up getting a job from her. I did zero research work on Grenfell. I thought, “Morgan sounds good. There's a female boss. These people respect her. That seems like a good call." I was lucky, as that could have backfired massively, but it didn't. It was a fantastic place to be. It was a great group of people. They did respect her.

I had breakfast [periodically] with one of my bosses at Morgan Grenfell for a long time, Adrian Frost, who still runs the Artemis Equity Income Fund. We're still friends now. All of us had such a great time during those years. Nicola took a chance on me. She looked out for me on some level throughout. She was at my wedding. My father made a speech where he talked at least as much about Nicola as he did about me, saying, “Thank you for what you did to guide her.”

The presence of these women alone was a big piece of it. The fact that they existed, and then they reached down, grabbed my hand, and pulled me up. It has been going on for men since time began. For women, that wasn't happening, not on the golf course or at the racket club. We weren't there. Having that made a huge difference in my life. As I was saying to you, people ask me to speak to their daughters. I get young women who will get in touch and want to chat and understand what wisdom I might have to share. I'm very happy to do it because it was done for me. As long as women keep doing that for each other, it's going to work itself out.

There's a lot of work still to do.

This is happening when the proverbial is hitting the fan. There's science that shows that women get appointed CEO when the company is in total disarray. When it's a mess is when they bring the woman in. It's great to see more women now taking CIO, CEO, or very senior leadership positions in these asset managers at a disproportionate rate, certainly compared with the past. It is my generation of women that are doing that. That makes me happy to see.

At this point, do you feel like Essentia is your home for the foreseeable future? Would you ever see yourself going back into the fund management space itself?

Hard evidence is what makes people act. Click To Tweet

I don't see myself going back into the fund management space, certainly not as a fund manager. On a business management basis, it's not impossible. I know so much at this point, and I have a certain amount of expertise that's quite unique and a network of front office people that's insane. That would be valuable to somebody in the fund management business.

What excites me is the software side of it. There are aspects of what we're doing at Essentia that are applicable well outside of investment management. That’s where I'll probably end up going one day, but we still have so much work to do at Essentia. I want to live to see this become a must-have industry standard. It will be just like Moneyball. You’ve got to still be there when it happens. That's my quest.

You've been at it for many years and it's your baby. It's only natural to want to see it become fully entrenched in the industry.

Don't get me wrong. I've had my ups and downs over the years, but I remember reading a book called The Dip. My big takeaway from that was that most people give up. If you don't give up, you automatically have a competitive advantage. Annie Duke is writing a book about quitting and knowing when to fold them, as it were. That's not easy. You do need to know when to cut bait and what questions to ask yourself to be able to make that decision. If the answers to these questions are, “This still holds,” it's like an investment of capital, as you're investing your energy.

I still believe my thesis holds in all through the ups and downs of Essentia. I've known that what we're doing is common sense. One day, it’s going to come true, but you've got to convince people to be brave and to ask for criticism. That's a big ask. People don't naturally want that scrutiny. It's like a magnifying mirror that shows all of your flaws like, “You don't want that.” You need to trust the person who's holding that mirror to not use it against you in any way. We've worked very hard at making sure people understand that we are definitely a force for good, and we are empathetic and trying to help because we know it's hard.

These are smart people who are capable of outperforming net of fees, but they've got to mitigate these little things that they're doing that are leaking away that money. Our average client has improved by 150 basis points a year since starting to work with us. That's the difference between top quartile and everything else. If you can do that, it does make a difference, not only to your own bonus and peace of mind, but to the organization and to your investors, for whom ultimately you are working in service.

Any final thoughts to share? I want to make sure I give you one last chance to share any wisdom that you have for our audience.

I'm definitely a case study in perseverance, there's no question about that. Thinking back over the victories that we've had, which I don't tend to celebrate enough, that's something that I'm always trying to work on in myself and continuously improve. It's one area that I want to improve. When I do stop and think about it, we’ve won lots of awards, competitions and all of that, and every one of those is exciting and gratifying. The fact that I am now at a point where I had one hour-long Zoom call with [behavioral scientist] Daniel Kahneman not that long ago. That to me is the pinnacle.

You’ve got 2 of your big 3 behavioral science greats. [Clare also recently spoke with Michael Mauboussin Richard Thaler makes up the 3rd of her big 3.]

[Thaler will be] the last one to fall.

On that note, this has been great. You were a trailblazer back in the early part of the millennium when you started a hedge fund in your twenties, and you're a trailblazer now. I wish you and Essentia the best of luck.

I appreciate it. Thank you.

Thanks for doing the show. Have a good rest of your day.

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It was great having Clare on the show. If you're ready to take control of your career, visit PathWise.io. If you'd like more regular career insights and become a PathWise member, it's free. You can also sign up on the website for our newsletter and follow PathWise on LinkedIn, Twitter and Facebook. Thanks, and have a great day.

 

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About Clare Flynn Levy

CSCL 25 | Money Ball TechniquesClare Flynn Levy is the Founder and Chief Executive Officer of Essentia Analytics, a FinTech firm that uses artificial intelligence and machine learning to help investment professionals identify their decision-making biases and adapt accordingly, with the objective of improving their investment performance.

Clare has spent the vast majority of her career in the investment management and related technology spaces, working for established firms and as an entrepreneur. She started her career as a portfolio manager for Deutsche Asset Management, now DWS. She then founded her own hedge fund, Avocet Capital Management. Following several years there, she made the jump over to the technology side of the industry, joining software provider LineData, where she ran a division that provided hedge fund software. She then returned to investment management, leading business development for the hedge fund Tisbury Capital Management, before moving on to an investment advisory firm Elsworthy Associates, where she was Managing Director.

Along the way, Clare also spearheaded The Equilibrant Network, which focused on bringing flexibility into the workplace and offering consulting opportunities to members. She has also been active in the Young Presidents Organization, and she has served as a non-executive director for several firms, spanning health food, executive search, and enterprise social networking.

Clare has garnered a number of awards and honors, including being named Technology Innovator of the Year last year and being recognized as one of the 30 Most Inspirational Women in the City of London in 2018.

Clare earned her Bachelors’ degree in Economics from Barnard College and spent time abroad during her undergraduate years studying at the London School of Economics. She currently lives in Connecticut with her husband and two pre-teen sons.

 

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