Maths, banking and even more misconceptions

Hello everyone. In today's post, I would like to deal with a misconception that I have encountered many times before but it came up again quite recently with one of my readers Ray. He wrote that he couldn't work in banking like me because he wasn't good at maths - I had to point out to me that I constantly struggled with maths at school, it was my weakest subject. I still have horrible nightmares about how my maths teacher in secondary school used to call me stupid because I sucked at maths - yet I now work in banking and I earn in under a month what my maths teacher would have earned in a year. What do you actually think people in banking do when they go into the office? Do you actually think that we sit in our office doing advanced calculus as if we're preparing for a maths exam? So in this post, I am going to use a Q&A format to address the more general issue about how useful maths is in the working world, what happens if you're brilliant at it and more importantly, what you should do if you totally suck at maths like me. Given the amount of misinformation and misconceptions there are out there on the role of maths in banking - I hope this will offer some clarity on the matter. 

Do you need maths in banking? 

The short answer is no for a simple reason: even the best experts at maths can make mistakes, I'm sure you've heard about infamous incident from 1999 when NASA lost a $125 million Mars orbiter due to a simple math error. It is a classic example of how even the world's brightest scientists are capable of human error - that's why whenever possible, we would never ever allow a human to do a calculation even if the maths may seem relatively straight forward. Thus in banking, in order to remove the possibility of this kind of human error, virtually all processes are automated - the computers do the calculations, not the humans. So it's a different kind of skill that's required, you need to know how to use various pieces of software but with these programmes, I do no more than data entry and it is the computer that does the calculation, not me. Of course, human error can still occur during the data entry process but all I need to do is to be meticulous and double check that I've indeed typed the right numbers into the programme, that's not maths at all. It's simply about having the discipline to double check your work. Sure these programmes that we use to store and process all these figures have to be written by computer programmers but these are coding experts, not mathematicians per se. You could argue that coders need some knowledge of maths, but a mathematician who has never had a lesson in coding can't even write one line of code. So whilst most of us in banking have studied maths at school, none of us are using any of it at all at work and in fact, this system is designed to prevent us from using our maths, in order to avoid human error! 

So what do you need to work in banking, if you don't need maths?

The most vital skill you need business acumen and that's not just for banking, that's for any kind of business role whether you're working in financial services or running a shop selling bicycles. The irony is that business acumen is not a subject taught at school, you either have it or you don't. I doubt it is possible to teach someone who has any natural business instinct how to develop business acumen. There is a comprehensive piece on Wikipedia on business acumen, but I refer you to the reality TV show The Apprentice where they are on the hunt for someone with loads of business acumen. This is when we often see candidates who never went to university beat those who are highly educated because this is simply something that they cannot teach you even at the very best universities. Let's look at one of the popular tasks featured in the show: the teams would be shown a range of items on a theme and let's imagine the theme for this episode is cycling. The teams would explore a range of cycling equipment, apparel, bikes, accessories etc and they can only pick two items to sell, if the teams happen to pick the same item, then it is the owners of the item to decide which team gets to represent them in the process. In order to win the challenge, the team will have to "sniff what sells" and pick the item(s) that will most likely to be the biggest seller, then outsell the opposing team within a period of like 24 hours. So it is not just one skill they need but a whole range of skills that need to come together, in order for the team to delivery the winning result. 

Case study: pricing vs maths

So let's look at one aspect of this process that is related to maths: pricing. If you brand yourself as a luxury good and set a very high price, you may not get that many sales but each item sold will bring in a lot of revenue. If you brand yourself as a bargain option and set a much lower price, sure you can sell many more units but your profit margins are very low. In the absence of knowing how the buying public will react, this kind of pricing conundrum requires a lot more than just maths skills to solve. In a maths exam, you will be told exactly what the variables are, then you have actually all the information you need to determine what the optimum price should be to maximize sales revenue. However, in the task on The Apprentice, we don't have that information because that's just how it is in the real business world - we're operating in an environment where business decisions are based on instinct and guesswork rather than perfect information. Sure you need some maths skills to be able to get your pricing strategy right, but you need a lot more than maths if you are to succeed in this process - you need business acumen. That's why some of the highly educated graduates fail miserably in this process because they simply lack that natural business acumen to get their pricing strategy right, even if they are great at maths. This is also explains why it is so hard to teach business acumen in a classroom - those who are blessed with natural business acumen are making millions in the business world, cashing in on their precious talent. They would not be stuck in the classroom - earning a very modest teacher's salary, trying to teach students about business acumen. 

What if I don't wanna work in banking, I just wanna invest my own money. surely I need some maths? 

No you fucking don't! You need many things but maths is not one of them for fuck's sake. Firstly, I must state the obvious: you need money, a lot of it. You will have far more lucrative options if you had $500,000 to invest as opposed to just $5,000. Let's assume that you do have that kind of money to invest, then hire a professional for crying out aloud - pay for a private banker or a financial adviser. They are the experts who will be able to help you manage your investments sensibly. You wanna have good sushi? Don't try to make it at home, just go to a Japanese restaurant and let the chefs there make you awesome sushi. Likewise, if you do have a lot of money to invest, then simply let the professionals who it on your behalf. Even if you are a genius when it comes to mathematics, you're not going to magically turn a $500 investment into $5 million as if that was possible with some clever maths. That's not how it works. Even if you do want to dabble in managing your own wealth, there's a lot you need to understand about the various options available and say you wanna buy stocks in this company: you need to understand their underlying business model, is it sustainable over the medium term, can this company perform well in spite of the pandemic, do we have faith in the current management of this company etc - there are so many questions that you need to ask and none of the answers involve mathematics. Instead, this involves business acumen which I have stated time and time again, has absolutely nothing to do with mathematics at all - maths is no substitute for real business acumen, you ought to know the difference between the two! 

So what is happening in the schools then?

Would you trust a teacher who couldn't speak French to teach you French? Obviously not. Would you take driving lessons from an instructor who couldn't drive? No way! But there are all kinds of university courses dedicated to business studies - so why would you trust a teacher with no business acumen to teach you about business? So we end up with a terrible situation whereby the teachers are not teaching the students what they need for the business world (business acumen) but rather what they're capable of teaching them (mathematics) and then to cover up the lie, they convince the students that maths is more important than business acumen. The saying, "if all you have is a hammer, you will treat every problem like a nail."  These maths teachers don't have that much to offer apart from maths lessons - so imagine if the maths teacher walks into the class and admits, "you'll probably forget everything I taught you within a few days of your final exams and then you'll never use this kind of maths in your life ever again - in fact it is a complete waste of time." No, instead the maths teacher will convince you that not only is this a vital part of your education, but you will need to draw upon these math skills during your working life. My father is a retired Chinese teacher and he used to claim that because of the rise of China, being able to speak Chinese would enable his students to go to China and 做生意,赚大钱 (do business and earn big bucks). I would roll my eyes and think, okay if your Chinese is so good as a Chinese teacher, then why aren't you doing business in China, making your millions? Why are you stuck in the local primary school earning the modest salary of a teacher? I have this deep mistrust of teachers, because my parents were awful teachers. 

So why are we learning mathematics at school then? What is the purpose of it? 

School is where we learn how to learn - we may forget the actual content of the lesson because our brains simply cannot retain that information, but it is the process that we become familiar with. Don't forget, schools have absolutely no idea what careers their students will pursue in the future, so it is impossible for them to know what they ought to teach the students to prepare them for their future careers. The onus is then on the students to seek the right education and training that would be most useful to their plans and ambitions rather than just passively trust the teachers to deliver a good education. So the rationale is that since advanced maths can be very difficult, you can use it as a means to prove to employers that you're a good learner: we can give you something very complex and you can climb that learning curve super quickly - that's a brilliant trait to have. However, you can prove this by tackling any complex academic subject to prove that you're a quick learner. For example, you can make the same point by mastering a difficult foreign language like Welsh or Russian. But you have to be realistic about what employers are looking for: essentially, they want to find someone they can train up very quickly rather than someone to hit the ground running. Most companies will have their own procedures and processes regarding their products and services - this is why they want to hire someone who will be able to learn about all of these and pick up that new knowledge quickly. Thus doing mathematics at school is just one of so many ways to prove to your future employers that you're an intelligent candidate capable of learning new stuff quickly. 

Wouldn't mathematics give you a useful foundation to learn other stuff in banking? 

No because that's like trying to learn to swim without getting into the water - it's a displacement activity. If you wanna learn about banking, then fine, then just get on with learning about banking and waste time studying something like mathematics. This reminds me of this guy at my gymnastics club Ali (not his real name) - he is the king of excuses: every time he starts learning a new skill and run into difficulty, he would say either, "I'm not strong enough" or "I'm not flexible enough". It would be his excuse to stop practicing the new skill and go do some conditioning exercises or stretching - he retreats into something that feels safe and familiar with gentle stretching. Whilst that allows him to avoid the frustration of learning the new skill, Ali is not going to learn anything from gentle stretching. Now he is the kind of person who would argue that stretching and conditioning exercises would give him a foundation to learn more complex skills in gymnastics, but unless he actually gets past the gentle stretching and learn these difficult skills. Whilst basic numeracy skills and language skills are essential for anyone to start learning about banking, but most people already do have that if they have completed primary school education! let's make sure we don't make the same mistake as Ali by sticking to what is simple and familiar. Like gymnastics, some of the most exciting aspects of investment banking are scarily complex and difficult to understand. Some people do fall prey to the same mindset as Ali by sticking to something simpler and more familiar like mathematics rather than actually facing the far more complex processes in the world of investment banking. 

So why is there the myth that you need to be good at maths to work in banking?

I'm tempted to accuse the maths teachers of telling this lie to make themselves feel more important, but I think it goes further than that. The misconception could go way back to my parents' generation - back then, ordinary working class folks only went to the bank for two reasons: firstly, it was when they made some money and wanted to deposit their earnings. Remember, this was a generation ago so everyone handled cash and digital or card payments were extremely rare in those days. Secondly, they went to the bank when they needed to withdraw money - a good example would be during Chinese new year, there is that Chinese traditions of giving out red packets 红包. These are decorative red envelops filled with a small amount of money, given out by married adults to young children to celebrate Chinese new year. So when my parents would get an amount of money from the bank in preparation for this tradition, they would stand at the counter of the bank and count the money to make sure that they were not shortchanged. Ironically, banks and other businesses have been using machines to count their notes and coins to avoid human error - besides, these machines can count far more quickly and accurately than even the most experienced bank clerks. So if my parents wanted to withdraw $880, the bank clerk would take out $880 in cash for them but then put that stack of notes through a counting machine to verify that the amount is correct. My parents thus would come away with the impression that everyone working in a bank is just counting money all day (and thus the need for good math skills) rather than doing anything else, since they associate all their visits to the bank with the act of "counting money" after making a withdrawal. 

Do you actually know how banks make money?

The fact is most people know very little about what the banks actually do - they have such limited contact with their banks even if they do have a bank account. They may use some of the bank's services but they have no idea what actually goes on behind the scenes. Take my mother for example, she has a bank account but if I asked her the question, "how do banks make money?" She would really have no idea how to answer that question but quite frankly, most people have no idea how to answer that question. If your answer does not contain the most important word 'leverage', then you do not understand how banks make money either. But instead of turning to our good friend Google for the answers, my mother would rely on her limited interactions with the bank and formulate an assumption based on those experiences - resulting in the assumption that banks are full of workers who sit there all day counting money, surrounded by stacks of notes and big bags of coins - of course, that's such a ridiculous assumption because it couldn't be further from the truth! But for people like my mother, that's the wrongful impression they have and if many people from my parents' generation jump to the wrong conclusion, then this misconception becomes commonplace. So it is not some kind of conspiracy by maths teachers to lie to students, to mislead or confuse students - rather, it is simply a misconception born out of ignorance by our older generation. The moral of the story? When you're in doubt, always ask Google - do not just make a wild guess!

Why are people so baffled by how banks work then? 

My point is simple: this misconception that "banks are full of people counting money and thus need workers good at maths" is something that originated from my parents' generation because they have absolutely no idea what banks actually do. In the modern world, we use loads of things that we have a very shallow understanding of how they actually work. There's a difference between being a consumer and a producer: for example, I love sushi - I know what to order when I go to a Japanese restaurant and I know the difference between an uramaki and a temaki roll - I even have some Japanese vocabulary to includes sushi related words like gari, shoyu and chutoro. But this is information for me to consume sushi, I am still totally clueless as to how to make sushi and that's something I leave to the chefs. Just because I know how to enjoy sushi doesn't mean I have the skills to work as a sushi chef in a Japanese restaurant and by the same token, just because people know to access all the services their banks provide doesn't mean they have the skills to have a job in a bank in order to help the bank make money. This may sound like basic common sense but if you want to find out what kind of skills you would need to work in banking, who do you ask? Do you approach someone like me who actually works in financial services? Or do you approach someone like a maths teacher in a school who may have some limited experience in being the customer of a bank but really has absolutely no idea how a bank actually makes money?

What about those who are really good at mathematics? 

Well that's good news to begin with - you're good at something. Think about all the sad losers out there who aren't good at anything at all! It can be one of many ways to prove to employers that you're smart and can learn complex processes quickly. But let's be clear about this: there isn't one job out there where you are paid to 'do maths' the way a student does. You're expected to apply your knowledge of mathematics in real life situations and that's where some students struggle: the thing about mathematics is that even for complex questions, there is a 'right answer' that you can arrive at if you know what you're doing. But in the example of the pricing strategy as discussed above - nobody would know what the 'right answer' is because it is but a calculated guess what the customers would do when you price a product a certain way. You will have the information about what the clients did buy at that price, but it is impossible to verify the alternative of "what would have happened if I had made the product more expensive/cheap"? The only way to reliably figure out a pricing strategy is based on knowledge and experience of the market - that kind of knowledge and experience is gained from having spent many years dealing with different situations, knowing what to anticipate and making accurate predictions. There are suitable roles for those strong in maths, such as in accountancy but you need to take many exams in order to qualify as a chartered accountant: simply being good at maths is not enough and whilst you need some maths background to start your accountancy training - the bar really isn't set that high in terms of the basic entry requirements. 

What about those who truly suck at mathematics? 

That's me! I well and truly suck at mathematics! Let's put it this way: all you need to do is to pick a way to prove to your future employer that you're brilliant. By this token, I avoided the subjects like maths that I sucked at and focused on the subjects that I excel at, such as foreign languages. If you suck at any subject at school, then don't let that worry you - in the future, you just have to make sure that you go out of your way to avoid the subject and pick a career that doesn't expose your weaknesses. It is quite rare to find someone who's good at every subject at school from physics to English literature to maths - our brains tend to be biased one way or another and thus beyond our primary and secondary education, most of us will specialize in one area once we get to university. Thus this is why I have chosen to work in the sales and marketing division in my company, where virtually no mathematics is required of me, but I can still earn loads!

Okay so if I wanna get into banking, then what do I need if it isn't maths? 

Allow me to turn this around and ask a different question: what are employers within banking looking for when searching for a new candidate? Are employers looking for someone good at maths? No, they're not - not specifically in any case. Simply being good at maths per se is not a useful enough skill to make you attractive to employers in this industry. They're looking for someone who has demonstrated that they are fast learners who can climb any learning curve really quickly and solve complex problems that do not have simple 'right answers'. So apart from intelligence, we're also looking for people who have loads of natural business acumen and the only way to prove this is to demonstrate that you have plenty of experience working in the real world as this is not something you can learn in school. Furthermore, of course, we're also looking for people with great social skills - once again, despite this being such an important feature we're looking for, this is simply something not taught at school. But then again, is this something you can actually teach? I'll leave that discussion for another day. But yes, in summary, give me the triple threat: intelligence, business acumen and social skills. Or if I could turn this around and say, "don't be stupid, don't be a geek who spent the entire holidays studying instead of getting a part time job to gain some work experience; don't be an autistic moron with no social skills." 

What is the best way to gain or improve one's business acumen? 

This is a hard question to answer: even if we know what business acumen is, can you actually teach it? I'd like to compare this to gymnastics. Let's look at this skill in gymnastics: a Tsukhara vault. It is a skill first performed by Japanese gymnast Mitsuo Tsukhara in 1972 - I can show you a Youtube video if you wish to see the great Tsukhara performing his eponymous skill, I can describe in great detail the training drills I would make gymnasts do if they wish to master the skill and I can even demonstrate the skill for you (please see video below) if you were to come to my gym! But could I actually teach you how to do a Tsukhara vault, even if we have a very clear idea of what the objective is? I would say that this is a relatively advanced skill that requires many years of training, many gymnasts who have done gymnastics for years never ever get to the point where they can perform a Tsukhara vault at a competition. The fact is you require a lot of talent to attain that level of skill in gymnastics, a gymnast without the necessary talent would never be able to perform the Tsukhara vault even after many years of training and even if you give me a very talented gymnast to train, it would still need months of hard work before the gymnast can master the Tsukhara vault given how complex it is. Hence in the case of business acumen, you do need a mix of natural talent and hard work to improve your business acumen, I can't give you that talent: you're either born with it or you're not. Those who are born with it will need very little help in seeking out the right information and experience to improve their business acumen - thus this is clearly a kind of natural talent/ability. 

Okay, what about improving one's social skills then? 

I'm going to give you a very similar answer - the situation is exactly the same as above. You need some talent in the social skills department but even then, you need training to make the most of your talent. I also believe in making the most of whatever talent you have through appropriate training. So allow me to stay with gymnastics as an analogy: if you come to an adult gymnastics class, would I be able to train you up to contend for a gold medal at the 2024 Paris Olympics? No, that's not going to happen. But can we improve your core strength, stamina, fitness, flexibility and ability by giving you a comprehensive training programme? Of course. Would you pick up some basic gymnastics skills that you will enjoy and have fun with? Oh yes. Definitely. Given how important social skills are and how much benefit one can reap from better social skills, I think it is important to make the most of our social skills but the problem is that this is simply not part of the education system. It is left pretty much to the parents to try to deal with this issue and if the parents are clueless when it comes to social skills, then sadly, often the children have no hope in that department. On one level, you should put yourself in environments where you're forced to interact with people for extended periods - that's the equivalent of simply getting into a pool if your aim is become a better swimmer. You need to be amongst people to begin with to practice your social skills. But beyond that, you really need a teacher: someone who's willing to be very blunt when criticizing you whenever you make any kind of social faux pas and telling you what you ought to have done instead.

Do you have a personal vendetta against your former maths teacher? 

Well he's dead - he died in 2015 and I learnt about his death through the Facebook page of my secondary school. What just puzzled me then was the number of tributes the former students paid to him and I was like, what the fuck are you guys on about? He was a terrible teacher, one of the worst I had ever had the misfortune of encountering (and trust me, I've come across loads of awful teachers). He was the one who told me how stupid I was because I couldn't do maths, he told me that I was going to be failure in life because I sucked at maths. The thing is that my brain is not wired for maths, maths never came easily for me - it was something I had to work really hard at. Rather than recognize that and help me with my weakness, he assumed that I sucked at maths because I was lazy and didn't pay attention in his class. Of course, being a teacher who knew nothing about the world beyond the school gates, he was in no position to talk about what my future career prospects would be but he still took the liberty of telling me that I was doomed to failure. Mind you he wasn't the only terrible teacher I had encountered in Singapore, but the fact that I am now earning so much more than he ever did despite still being awful at maths goes to prove one thing: don't listen to your teachers, especially if they tell you that you're stupid and you'll amount to nothing. That teacher pushed the blame onto me, he called me lazy and stupid when really, I could turn around and say, "hey you're my teacher, you're supposed to teach me and if I still suck at maths, then it is entirely your fault - you've totally failed me as a teacher. Why don't you take responsibility for this situation as you are my teacher?" I'm rather philosophical about it today, if my teacher had been any smarter and some real business acumen, would he have settled for the modest salary of a humble school teacher? Well no - of course not. 

That's it from me, what do you think? Why do people make this ridiculous assumption that you really need maths to work in banking? Is this (as I suspected) a misconception that started with our parents' generation or is there something else altogether? Did you study maths when you were at school and do you actually use any real maths in your work today? What about this illusive skill we call business acumen - what does that mean to you and is this something we could teach? If maths isn't all that useful, then what do you think our students should be learning instead? Have I been biased in this piece, just because I had a bad maths teacher in the past? Do leave a comment below - many thanks for reading.