Brandon Renfro and Harry Markowitz

Meeting Harry Markowitz

Fair warning, this post is a departure from my normal articles on retirement planning. I had an opportunity to meet one of the founding fathers of modern finance, Harry Markowitz, in June of 2019 and I simply want to share the experience with you here.

Harry Markowitz isn’t a household name, but the work he has done to advance the theory and practice of investment management is incredibly far-reaching. If you invest, chances are your strategy is at least influenced by his work.

Some Background

Finance as a distinct academic discipline is very young, particularly as it relates to the study of investments and financial markets. Louis Bachelier’s dissertation Theorie de la speculation, which he defended in only 1900, is considered the beginning to which we can trace the work on what we call “random walks”, or the idea that the short-run fluctuations in the stock market are unpredictable. He used the same mathematical model used by Einstein to describe random movements of particles, Brownian motion, and Bachelier predates him. This randomness of short-run price movements is a big part of the motivation for index investing.

Other major topics that form the fundamental building blocks of investment theory, and their dates of publication, are:

  1. Modern Portfolio Theory – Developed by Harry Markowitz in 1952. He received the Nobel Memorial Prize in Economic Sciences for this contribution in 1990.
  2. The Capital Asset Pricing Model – Largely credited to William Sharpe in 1964, and is an extension of Markowitz 1952 work on portfolio construction.
  3. The Efficient Markets Hypothesis – Largely credited to Eugene Fama in 1965.

The point here is that it has been less than 100 years since many of these ideas were formalized in the literature.

At some point each semester I always manage to slip this into a discussion with my students. Why? Because it’s important to note how young our field is to recognize that there’s still so much room for it to develop. It’s also fascinating to me that many of our fundamental theories and models were developed so recently by people who are still alive.

Physicists don’t have the option of talking to Isaac Newton. Pilots can’t talk to Orville or Wilbur. Financial economists, however, can still talk to the majority of the pioneers of the study of investment management.

Markowitz is one of the most notable. As long as finance is taught in a classroom students will hear about Harry Markowitz and his mean-variant efficient portfolios. Sure, his ideas have been and will continue to be extended. Possibly to the point of obsolescence… who knows? But his work as a defining moment in the history of financial thought is permanent.

Arranging the Meeting

After having that discussion with a class one day I walked back to my office and asked myself, “Why haven’t you taken the time to meet any of these people?”

I looked up Harry Markowitz to see if his contact information was publicly available. It was.

I shot him an email and asked if he would let me buy him lunch. You know, kinda like how a schoolgirl might send fan-mail to Taylor Swift. Bear in mind I’m quite literally halfway across the country from him.

I plainly explained that I had no agenda. I simply thought it would be cool to meet him, but completely understood if his schedule wouldn’t allow.

(As a side note, Markowitz is the only person I know besides myself who still uses a personal AOL email. Surely one day it’s just going to stop working.)

Once I hit send I chuckled to myself. Obviously Markowitz wasn’t going to meet me, or even respond to the email. I wanted to share a laugh with somebody, so I sent a message to my own undergraduate professor David Ashby. I didn’t know too many people nerdy enough to appreciate the humor. Congrats Dr. Ashby, you made the cut!

That Evening

That evening my then pregnant wife and I went for our usual walk with our daughter. I hadn’t mentioned the email to her because I didn’t figure I’d need to, and sometimes I find it hard it explain the things I find interesting or funny so figured I’d just avoid it this go around.

A little into our walk I heard my phone buzz and picked it up to see an email from none other than Harry Markowitz. To paraphrase, slightly, he said, “Sure, let’s go to lunch.”

Have you have ever told your pregnant wife that you were going to fly halfway across the country to eat lunch, for no particular reason, within a few weeks of her due date? I have. She was super pumped!

By super pumped I mean borderline disturbed. She looked at me with the most perplexed look I’ve ever seen on her face. I could see in her eyes that she could tell I was serious, and this was happening, but didn’t understand.

For the rest of our walk I explained to her the significance of Markowitz work and why this was such a cool opportunity. She really enjoyed that and I think she had a good time. She’s also never asked me about it again so I must have done a good job explaining it.

Like any good Finance professor, I’m able to boil almost any topic down to a fundamental trade-off. I told her that some husbands drink too much, or watch sports too loud, or have obnoxious friends. I don’t drink at all, or watch sports at all, or have any friends at all, so I offset that with random trips to meet other nerds. She really came out ahead by marrying me.

She bought it! I told her that I would be out of the house less than 36 hours. She is such an understanding lady!

Traveling to San Diego

I live in East Texas so I flew out of Dallas the night before and stayed in a hotel outside the airport in San Diego, about 8 miles from his office.

Admittedly, I worried a little on the trip out that he hadn’t believed me when I told him I had no agenda. I thought he might be a little offended or think that I was wasting his time when I showed up with no prepared interview. The simple reality is the man has written almost every thought he’s ever had, and I’ve read almost everything he’s ever written, so there really wouldn’t have been much to talk about along that vein. I decided to just stick with my customary casualness and see how it went.

The next morning the weather was nice and I had several hours before I was supposed to meet him so I decided to walk. I’ve been in the infantry long enough to know that any two points not separated by an ocean are within walking distance from each other as long as you have enough time.

About a half mile from the hotel near Old Town San Diego I walked up on some of those electric scooters that you can rent with an app on your phone. I’ve always lived in very rural areas so have only seen those a few times, but those things are cool. I hopped on and rode the rest of the way over to the downtown area near his office.

Initial Meeting

When I walked into his office at the scheduled time his long-time secretary, Midge McDonald, greeted me.

“Brandon?” she said. “Yes ma’am, that’s me.” We walked a few feet to Harry’s office, who was sitting at his desk drinking coffee.

You have to understand in my book this was ten times as exciting as meeting some television celebrity. I distinctly remember studying the efficient frontier as a young undergrad with fascination. I have taught his ideas to hundreds of students. If I had the chance to meet The President of the United States, any of them, all of them, or Harry Markowitz, I’d choose Harry Markowitz every time. I am completely unembarrassed to tell you that I was starstruck.

And there he was, just sitting at his desk drinking coffee. I chuckled out loud, looked at Midge and said, “That’s Harry Markowitz.”

He smiled and we shook hands. He directed me to a table in the conference room next door and told me he would join me once he finished his coffee, and then offered me some. Before I could get sat down good he walked in and said he’d go ahead and show me around.

We walked around his office looking at old clippings from magazines and newspapers of coverage he had received over the years. He showed me a painting that he had bought right off the wall from a local restaurant because he liked it so much.

Although I had mentioned it in our emails he asked me to tell him again what it was I did and how I knew of his work.

Me: “I’m a finance professor.”

Harry, playfully: “Well, yea, you know me then.”

We sat on the couch in his office and talked a little about finance and about our shared profession of academics while he continued to drink his coffee. We talked about the joys of teaching and research. Our talk was fairly professional for several minutes, but quickly became casual… I think when he realized I really was just there to meet him.

He asked about my accent, and bluntly told me it was quite obvious I was from the South. I get that a lot. Then he asked if I wouldn’t mind putting shoes on.

We sat and chatted like friends who shared common interests and a sense humor.

After about 30 minutes Midge came back in and offered to take our picture. We grabbed his Nobel and Von Neumann medals and posed for a few.

Lunch

We walked to lunch, which I thought was impressive considering he was 93 and uses a walker. He is a pretty big guy, and I’m very small, so even doubled over his walker he is taller than I am. That may be why he wasn’t worried about heading out with a perfect stranger.

I think I could have taken him. We didn’t wrestle though so I guess I’ll never know.

He gave me a rundown of all the restaurants within walking distance and told me to pick. We decided on the Fig Tree Cafe which was just a few streets down.

As we walked we talked more about our careers, teaching and research, and families. He told me about some business ventures he had been a part of and the work he is currently doing, and asked about mine.

When we got to the restaurant and started looking at the menu he made a few suggestions, told me he was getting an omelette, and recommended the same to me. I wasn’t in the mood for an omelette so I got the turkey sandwich.

I’ve spent hours studying his work. I’ve taught his methods to hundreds of students. His ideas have been taught by others to thousands more. It’s not possible to count the number of dollars that have been managed in accordance with his portfolio management techniques. He’s been awarded a Nobel Prize. And yet, I disregarded the only advice he ever personally gave me. I guess that’s something? Sandwich was good though.

Brandon Renfro and Harry Markowitz at lunch
I highly recommend that turkey sandwich.

Talking

So when you have two of the most powerful financial minds in a room together, what do they talk about? No… I’m asking. They always lock the door and then pretend like they can’t hear me knocking. Jerks!

Harry and I, on the other hand, mostly talked about coffee.

He drank most of a cup before we left his office, then several cups as we ate. I pointed out that I like coffee too but if I drank that much I wouldn’t be able to sleep for a week. He said that he had met his quota and wouldn’t be having any more. Then he told me about a local coffee shop to which he goes several days each week to work on a book he’s writing. He bought a card that allows him to get unlimited coffee for a year. He pulled it out and showed it to me. I’m glad he showed me but I actually didn’t need him to verify. I would have believed him anyway.

That prompted him to ask me if I had his current book. It’s a four-volume series. He has finished the first two volumes, and is currently working on the third.

Me: “I have volume 1, but haven’t got around to getting volume 2 yet.”

Harry: ” Oh, I’ll call Midge and see if she can grab a copy for you.”

He called Midge and asked her to set a copy out on the desk for me to grab when I got back, and asked if she would bring his jacket down to him at lunch.

As our discussion meandered he mentioned that he invests pretty aggressively despite his age. He started to explain that it is because he can withstand significant risk in his portfolio given that he has accumulated substantial wealth and still earns a sizable income. We call this risk capacity. He got tongue-tied for a second as he explained that he could take a substantial hit and still be ok, so I interjected. (Ok, yea, I completed his sentence.)

Me, nodding: “The check’s not going to bounce.” (implying that a market downturn wouldn’t hurt him too bad)

Harry, laughing: “YES!, yes, the check’s not going to bounce…haha… Hey! do you know what the three least credible phrases are?”

Me: “No.”

Harry: ” 1. The check’s in the mail. 2. Yes, I’ll still respect you in the morning. 3. I’m from the government and I’m here to help.”

While we talked over lunch he stopped himself on two separate occasions to ask if I had time to hear a story or listen to him explain something. I assured him that I had plenty of time, but I didn’t want to encroach on his time. He just waved me off and continued talking.

He told me about flying out to receive his Nobel on a supersonic jet, and other places he had traveled. I told him about the time I flew over the Sphynx but missed seeing it because I was asleep.

We talked some about San Diego, and I told him that compared to rural East Texas downtown San Diego had a much larger variety of restaurants. He noted that it was due to the diverse makeup of the local population and listed off a few professions that draw people there and create the demand for restaurant diversity.

Me: “And famous economists?”

Harry: “Well, we mostly impact the local coffee market.”

The Walk Back

On the way back we had to walk uphill. He joked that it seems like that hill gets steeper every year. Remember, he’s in his 90’s and has a walker!

He asked where I had parked my car right as we passed by some of those electric scooters. I pointed at the scooters and told him I had ridden one from the airport and that I’d likely just call an Uber for the trip back.

The scooters intrigued him. He asked about how they work so I explained.

Harry: “Yea, I haven’t ridden one of those yet.” – paused for a moment and looked up – “Ha! Yet.”

Me: “We can take those back to the office or ride around for a minute if you want to.”

Harry: “Ok. You’ll need to help me attach this (nods toward his walker) to the front.”

Me: *laughs*

Harry: “You know, maybe I better not.”

Me: “Yea, if I’m ever famous that’s not really what I want it to be for.” (That, of course, being the guy that killed Harry Markowitz.)

Harry: *laughs*

Headed Home

Once we got back to the office he signed the book and I was off. All told I think we talked for about 4 or 5 hours. It was an awesome experience and I’m incredibly grateful that he took the time to do it.

I’m also glad that I decided against coming up with interview questions at the last minute. It makes the experience much cooler to me that all there really is to say about it is I hung out with Harry Markowitz for the afternoon.