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00:00:00
00:00:01
Scott Thompson
35 Plays2 months ago
We talk about going from haute finance, to farm work to sustainable asset management.
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Transcript
Scott Thompson's Career Journey
00:00:01
Joe Waltman
All right, today we've got Scott Thompson. Scott, thanks so much for making the time.
00:00:04
Scott Thompson
Hey, pleasure, Joe. Nice to see you again.
00:00:07
Joe Waltman
Likewise, ah first question, same as always. What were you doing before in Seattle and what have you been up to for the last 21 years?
00:00:16
Scott Thompson
Well, I guess that the sad part of the story is I was in finance before INSEAD and I'm still in finance after INSEAD 21 years later, but there's been a sort of a journey that's gone on there. So before INSEAD I was investment banking, UBS um went to INSEAD as a sort of chance to broaden the horizons and think about alternatives, but inevitably the the job market was such that UBS were offering me a role back there. So I took
Transition through Roles at UBS
00:00:45
Scott Thompson
that.
00:00:47
Scott Thompson
I then, I guess the interesting,
00:00:48
Joe Waltman
and were Were you in one of those exchange programs where they paid for you to go there and sort of have have have a year off kind of a thing and as long as you went back?
00:00:56
Scott Thompson
yeah, so i so I joined them straight out of university on their grad program, which was a three year program. And then there was a sort of fast track associate, associate director program, which had tuition included in it. So I, I kind of got creative and said, look, an INSEAD MBA is, it should really be part of that fast track program, which they they bought into. So.
00:01:16
Scott Thompson
Look, I was, I was lucky because, you know, I was going to INSEAD and the fees were what the fees were then, but, uh, UBS were picking up the bill. So that w that was great. Um, a bit like the consulting firms. So sort of quid pro quo was you went back, otherwise you paid it back.
00:01:31
Scott Thompson
um But as I said, given the job market was fairly muted back then, that was that was a good option. um So i went yes, I went back to UBS,
Evolution of Equity Trading
00:01:40
Scott Thompson
but I did change roles. So I decided i I'd give equity trading ago.
00:01:45
Scott Thompson
I had had some contacts there back back in those days.
00:01:48
Joe Waltman
Well, okay, hold on, hold on. so So you were doing investment banking fresh out and presumably you had one of those grinder jobs where you were there in the office you know all day, every day, kind of a thing.
00:01:57
Scott Thompson
Well, it was a, so when I started, they, actually what they did very well back then is they didn't pigeonhole you as a graduate. You went around a series of different departments for like six months plus and you went, you went around and that was two and a half years.
00:02:06
Joe Waltman
Oh lovely.
00:02:10
Scott Thompson
And and then you you landed. So before I left in Seattle, I was, I was, um, running a team in the, in actually over in the futures and options business. Um, they're supporting the trading desks that were out there.
00:02:24
Joe Waltman
I see.
00:02:25
Scott Thompson
Then when I came back, I actually went onto the equity trading floor. One of my graduate um trainees was one of these sort of superstars who was already, you know, almost at the top of the equity trading game.
00:02:37
Scott Thompson
And he had ah he had a vacancy on his desk. So he he offered me a role there, which was a bit of a baptism by fire because it it's ah it really is a different pace world, or it was back back then.
00:02:48
Scott Thompson
We were still you know it's still sort of at the open outcry to a large extent um on a massive trading floor. So I did that. Then I got
00:02:58
Joe Waltman
but What do you mean by by at the, what was that term? Open outcry?
00:03:03
Scott Thompson
Yeah, sorry. Um, so open out price. So we were still the orders there. I mean, admittedly, a lot of them came electronically, but there was, we were, we were all sitting there on a, on the big trading floor and orders would get shouted across the floor.
00:03:14
Joe Waltman
guys yelling at each other.
00:03:16
Scott Thompson
Yeah.
00:03:16
Joe Waltman
Oh, cool.
00:03:17
Scott Thompson
And so, you know, you were, you were scribbling down tickets and look, we all made mistakes. We all made mistakes, including me, you know, you you you write the ticket the wrong way around. It was a buy, it was a sell order and whatever. Um, it was, um,
00:03:28
Scott Thompson
a far cry from the sort of automation that they now have on there, but it was just at that point where the ah trading was moving to being increasingly electronic and and you know we were...
00:03:39
Joe Waltman
So you get to be one of these like Neanderthals who tell the kids, you you guys have no idea.
00:03:41
Scott Thompson
Yeah.
00:03:43
Joe Waltman
That's right.
00:03:44
Scott Thompson
Well, you see it now more from the tech side because you see all the developers and and I still sort of keep in contact with some of my friends from the trading floor. They've only ever seen ah Effectively, computers trading.
00:03:57
Scott Thompson
How does a computer trade? You know, you want to buy Microsoft, whatever. The computers are now the ones that do all the trading for you. They have no idea how you'd actually do that manually yourself. So, yeah, there there are a few of us Neanderthals still around um
Client Servicing and Trading Decisions
00:04:10
Scott Thompson
who who remember those days.
00:04:11
Scott Thompson
So, that was that was fascinating. Then, Jay, sorry. tell you
00:04:16
Joe Waltman
i'm um I'm really curious about this because because we've we've only had one or two traders on ah and and I've always wondered like what what the hell is it that you do all day? So you weren't necessarily determining whether to buy or sell on behalf of someone's fund. You were more servicing the people who were making that decision. Is is is that fair? or is
00:04:34
Scott Thompson
Yeah, so I had i had some ah had some rope to hang myself, so to speak. So i I primarily was servicing our client business. Sometimes the clients would just give us an order just to execute as best we we felt. And we weren't ah therefore we weren't on the hook ah hook on it. you know If the market went down, you know that's where the order got done. Other times clients could come in and actually they just wanted the bank to buy the position off them.
00:05:04
Scott Thompson
And then it was up to the bank to then decide how to sell that position as they wanted to, in which case that
Experiences during the Financial Crisis
00:05:10
Scott Thompson
was on my P&L. So I'd make them a price. So hopefully I charged them enough for what it was going to cost me to get out of the position. And then there was a third element back then before the regulators really scrutinized and tightened up on the bank balance sheet whereby you could also run your own principal or proprietary position. so
00:05:32
Joe Waltman
Hmm.
00:05:32
Scott Thompson
We might have a view on two sectors or stocks in certain sectors and and we would run positions which would look you know a lot like hedge funds and indeed a lot of the a lot of the best traders from the ah equity trading floors all went across to the to the hedge funds to run their own books of business and in later years.
00:05:52
Joe Waltman
Just blink twice and move on. If you can't answer this question, but, uh, w w there must've been some temptation to do some front running of, of the, the, the orders you saw
Move to Asset Management and Commodity ETFs
00:06:00
Joe Waltman
coming in, right?
00:06:02
Scott Thompson
Yeah, I mean, they the whole of the finance, the trading market. I mean, I'm going now back into the like the 80s into the 90s where you hear the story. It's a small market.
00:06:13
Scott Thompson
People used to know yeah what position was was Joe's hedge fund in. And so they knew if you rung up and you wanted a price, they knew what you wanted were going to trade. And they may or may not trade it ahead of you as a result of that.
00:06:25
Joe Waltman
yeah
00:06:26
Scott Thompson
but I mean, that's the reality of it.
00:06:26
Joe Waltman
Yeah.
00:06:29
Scott Thompson
Now, these days that's That's really hard to do. Like the scrutiny, the scrutiny and compliance makes that a lot harder, but certainly in the eighties and into the nineties that there were elements of that in the market.
00:06:39
Joe Waltman
Cool. Sorry for getting getting sensitive there. so theres a Carry on. You're you're you're now posted to the ad on the trading desk.
00:06:49
Scott Thompson
Yeah. So that, well, then the equity markets continue to heat up. JP Morgan approached me about running their European, um, program trading business. So I moved there in.
00:07:03
Scott Thompson
2005, um, went out to the US as well, just for a few business trips where you really see the size of JP Morgan, which, you know, for those of us in Europe, we don't really understand the size and scale of that, that us business. But so that was, that was fascinating. it It was a, I mean, that was a crazy time. 2005 running into the financial crisis. I mean, it was a classic bubble.
00:07:28
Scott Thompson
you know, colleague the irony was we had colleagues at JP Morgan who were getting poached to go and work at Bear Stearns, which of course then JP Morgan a year later were buying and those colleagues were back sitting next to you. But, um you know, though that was that was that was a surreal experience. And I can't really effectively describe the financial crisis and what we were seeing on that.
00:07:53
Scott Thompson
it jo I mean, there are some films out there which do a reasonably good job at sort of capturing.
00:07:57
Joe Waltman
Which one? which Which one's the best?
00:07:59
Scott Thompson
a
00:08:02
Scott Thompson
Probably Margin Call, I think was the, yeah.
00:08:03
Joe Waltman
I was hoping you'd say that. That's that that's that's that's my favorite from a dramatical perspective.
00:08:07
Scott Thompson
Yeah, Margin Call was fairly accurate. I mean, you know, you were just walking onto the floor and the markets were moving all over the place and it was fairly apocalyptic. um and And also to draw the sort of Margin Call parallel, it also became
Sabbatical and Sustainable Farming
00:08:20
Scott Thompson
very clear ah within a few weeks that I was effectively shutting down my desk and equally walking out the door ah once I'd done that.
00:08:28
Joe Waltman
Oh wow, so you you were the ah the Kevin Spacey character in that.
00:08:28
Scott Thompson
So we all of us, we were all getting our boxes and we were we were we were sent packing. So um yeah, that was it.
00:08:37
Joe Waltman
Did you also negotiate a a big ah big fat ah package? and
00:08:41
Scott Thompson
and would say But you know that was the irony of it, at least from a sort of employment law perspective, because it was mass redundancy as far as the UK market works.
00:08:48
Joe Waltman
oh
00:08:49
Scott Thompson
We were all on a sort of a formulaic, this is what you're getting, and you could go to whichever lawyer you wanted in town, um but they were all going to go, look, we can try and fight them, but you're probably not going to get much better.
00:09:01
Joe Waltman
Yeah.
00:09:01
Scott Thompson
i so then And then I sort of did the INSEAD thing, which was think about what wasn't a startup, to be fair, but ah a small ah asset management firm, which was ah doing commodity ETFs. So ETF Securities was founded, fascinating guy, founded by a guy called Graham Tuckwell, Australian.
00:09:23
Scott Thompson
um He was the man who actually came up with the structure for the first gold ETF in the world. So he he did that. He founded ETF Securities. They went through a bit of a blip with the financial crisis too, um because they had their positions were backed by AIG, which was obviously also under crisis. In fact, it was even more interesting than that because i without going into the details, ETF says ah there's a cashflow every day between you and the counterparty. So the whole market was looking at these ETFs as being the first point which you'd see
Private Equity and Agricultural Data
00:10:00
Scott Thompson
AIG fail to meet one of their obligations because it was a daily cashflow. So anyway,
00:10:07
Scott Thompson
We lived through that experience, which was fairly brutal, um but came out the other side. and And then, you know, what was a storm turned into a tailwind and the demand for commodity exposure just ramped and went through the roof.
00:10:19
Joe Waltman
So what what year did you leave JP Morgan and move to this ah this this company?
00:10:23
Scott Thompson
Oh, eight.
00:10:26
Joe Waltman
Okay.
00:10:26
Scott Thompson
Oh, eight.
00:10:26
Joe Waltman
Oh, wow. you right right Right as it was all, you know, or or had crumbled.
00:10:28
Scott Thompson
Yeah, oh, eight, early oh, nine. I'm struggling to remember exactly the year, whether it was the end of or the beginning of oh, nine. so So that was a small firm. We were London based. We were probably 20, 30 people odd, um about 3 billion in in assets. And the commodity markets went to the races for for the next few years there. um It was also privately owned by Graham, but he did offer um shares to a lot of their senior staff. So so we had a share scheme there.
00:11:03
Scott Thompson
But we also had private equity um who bought in to the business, which was my first real experience of what dealing with private equity ah is like. And that, yeah, they they're tough negotiators and they have a time horizon that doesn't necessarily suit employees. Let's just put it that way. um But I stayed there, we did fabulously well. So we went from about 3 billion to 30 billion ah in assets. Some of that was down to the gold price,
00:11:31
Scott Thompson
was at all-time highs as it was but back then. The oil price shot up as well. And Graham offered to buy me out. So that was
Urban Farming Charity Initiatives
00:11:40
Scott Thompson
a scenario where like I was pretty burnt out by that stage. That was you know that was a classic sort of small business growing incredibly fast. I was running the European sales ah team there. um So I thank Graham very much for that. I took a break. I paid off the mortgage on the house. And I took a sabbatical.
00:12:01
Joe Waltman
what What year was this?
00:12:02
Scott Thompson
ah So this would have been 2013.
00:12:07
Joe Waltman
Okay. Okay. And this is all from London.
00:12:09
Scott Thompson
All from London. yeah Geographically, this story is all all in London.
00:12:10
Joe Waltman
Okay.
00:12:13
Scott Thompson
um or Or the home counties, so aboutat as far as I tend to go. and But i I'd always had a passion around um sustainable food growing and farming.
00:12:26
Scott Thompson
I've read some of Jeremy Grantham's pieces around the sort of the limited resources we've got around food growing, and he's obviously built an investment firm that focuses on that and other aspects of it. So I took that time out to literally go and work on farms in the UK that were practicing what I regarded as some form of regenerative agriculture.
00:12:48
Scott Thompson
Um, there I was literally a farmhand. So, you know, you turn up at seven o'clock in the morning and you go out there and by four o'clock, you know, you're, you're, you're, uh, you're exhausted.
00:12:52
Joe Waltman
Wow.
00:13:00
Scott Thompson
And I did some fascinating courses, learned a huge amount, um, really hard physical work. I have to say all of that romance around farming, uh, the time you've done it for a season, you really realize, uh, what it's like.
00:13:15
Scott Thompson
But I came across while I was doing that in one of the courses, the wife of a ah ah CEO of one of the big New Zealand farming firms. So it's a farming firm that was ah formed by two families married ah marrying um and forming a farming business that spans North and South Island in New Zealand. And they were looking to do a private equity fundraise. So I joined Craig Moore there for about a year to to to help them with that. um And they were also doing some really interesting research because ah there's there's not ah like a Bloomberg equivalent in agriculture. You know, if you want to compare Californian almonds production versus Mediterranean, you like
00:14:05
Scott Thompson
Where do you get that information? Well, the ministries of agriculture have all of that information, um but no one's aggregated it. So part of what we were doing there was also running a alongside the private equity fundraisers, also building up a a bit of a
Joining Impax and Sustainable Investments
00:14:20
Scott Thompson
database of comparable statistics around that with a view that at some stage that would be valuable. And the and the to put that in context, the reason why we were doing that is is and the founder of Craigmore had actually made his money over in Chicago ah in the bond market.
00:14:42
Scott Thompson
And he'd made his money by aggregating um the bond prices.
00:14:42
Joe Waltman
Uh.
00:14:46
Scott Thompson
So you could actually see where a particular bond was trading. And he just pulled all the prices together and he published it basically as a sort of a ticker tape. And he'd sold that data business on and and and made his first fortune there.
00:14:59
Scott Thompson
So he was trying to look to do the same in agriculture. Not sure who he was going to sell it to, but he he felt there was a huge opportunity there to actually provide transparency around agriculture and and and food production.
00:15:11
Scott Thompson
So there were those two aspects. And um while i was while I was there, one of my old clients put me in contact with my current firm, Impax, who are a sustainability manager.
00:15:23
Scott Thompson
And they just, sure.
00:15:24
Joe Waltman
buts let let's let's let's back i want to you know let's let's Let's back up. So how long did you actually spend you know sweating it out in the fields doing this farming work?
00:15:32
Scott Thompson
ah It was a couple of years.
00:15:34
Joe Waltman
Wow.
00:15:34
Scott Thompson
it was like It was a couple of years.
00:15:35
Joe Waltman
Wow.
00:15:36
Scott Thompson
Yeah.
00:15:37
Joe Waltman
From London or had had you relocated something?
00:15:38
Scott Thompson
Yeah, no, I got up very early from London and went out outside of London to to the farms around around and and worked on those.
00:15:39
Joe Waltman
so
00:15:46
Scott Thompson
so I mean, fascinating, but, you know.
00:15:49
Joe Waltman
Yeah. Well, I'm sure met like many people I've recently watched or stumbled into the the Clarkson farm show. I imagine that that you you were a few years ahead of that.
00:15:54
Scott Thompson
Yes.
00:15:56
Joe Waltman
and
00:15:58
Scott Thompson
Um, we were, but, um, I think he's done a great job, um, for what, for what he's been able to show around the reality of what food production is all about.
00:16:04
Joe Waltman
Yeah.
00:16:11
Scott Thompson
Um, and it continues to be a passion of mine. So one of the things I did while I was on sabbatical is I actually set up a, I thought I was going to buy a farm, uh, you know, the classic classic one by a small holding set it up.
00:16:24
Scott Thompson
Um, But UK farmland is incredibly expensive. The returns are awful, as Jeremy Clarkson's sort of program shows you.
00:16:32
Joe Waltman
I was about to say, you you probably probably your wisest decision not buying that farm.
00:16:36
Scott Thompson
Yeah, I mean, the capital appreciation's there, but that there's just no yield. um There's no yield on it, and it's hard work. and But what I did do is I set up ah an urban food growing charity where I live.
00:16:47
Scott Thompson
So we managed to get some land here in southwest London, which was all derelict and full of garbage and a group of families sort of started to clear the land.
00:16:59
Scott Thompson
And, and you know, 10 years later, we're now there with a full blown charity and two and a half thousand school kids that go through the site and learn about food growing and what it all means.
00:17:05
Joe Waltman
Cool.
00:17:11
Joe Waltman
um Very cool. Very cool. All right. So I started, I interrupted you when you were about to say, I should move on to, to your current ah role.
00:17:19
Scott Thompson
Yeah, so so um impacts is ah is an asset manager. All it does is invest in what it describes as a sustainable transition in whatever form that takes. um They just launched a food fund at that time. So investing in listed food companies.
00:17:35
Scott Thompson
ah They needed some expertise, particularly on the sales side, which is broadly where most of my finance career has been, um at least in the last decade. And so one of my former clients said, well, hey, look, Scott's out there farming at the moment. he's He's got a load of finance experience. He's got firsthand experience of farming. You should be talking to him. So I started started talking to Ian, our chief exec, in a fairly sort of casual way. and then And then there was a role that opened up at impacts.
00:18:05
Scott Thompson
um And as i you might have guessed, I decided that farming wasn't going to necessarily be my long-term career ah there. So I moved back into finance, into impacts, but it's been, um
Career Reflections on Sustainability
00:18:21
Scott Thompson
I guess it's taken me this long to really find a role where I can use finance, but I can also do it in a way around sustainability that really sort of speaks to to what I want to spend my time doing and focusing on. So, you know, we just got a great bunch of people in the office. We all have passions in some aspect of sustainability. um And we go out there and we we we try and sort of explain what we do and what and what it all looks like.
00:18:48
Joe Waltman
I assume your primary goal is to make money, but you've got some probably some secondary tertiary goal as well. how do you How do you reconcile those things and how how do you use that to think about you know what what you invest in?
00:19:00
Scott Thompson
ah Well, so there are two things that we consider. We consider the, what does the company do and and how does it go about its business? So I'm not going to use any terminology here because particularly in the US, you know, it's been but being politicized.
00:19:12
Joe Waltman
ah load it
00:19:12
Scott Thompson
Yeah, it's it's a politicized weapon there. ah So it's the what and the how of what a company does gets you into our potential universe for for investment. And then after then it's a, it's a standard investment process, you know, the portfolio managers are building portfolios for financial returns. But as you touched on there, once we've actually built those portfolios, we're often able to quantify the type of impact that those portfolios are having, whether it's from a lower carbon perspective, less water usage.
00:19:45
Scott Thompson
renewable energy generation, recycling, whatever it might be. say It depends on on the strategy. So we report all of that out to to clients who are you know generally, for us, equally the vanguards of ah responsible investing. um So that's been a you know that's been another sort of success story. I started at Impacts. It was 40 people.
00:20:11
Scott Thompson
We're now over 300 people globally. um And that's in 10 years later. um So so we we run the money.
00:20:18
Joe Waltman
Wait, sorry, maybe I misunderstood. it so Are you actually allocating funds or are you more providing information on on sustainable companies for other people to allocate funds?
00:20:29
Scott Thompson
And then my role in that is to manage the client group associated with that in in the yeah UK and with our consultant ah client base.
00:20:30
Joe Waltman
Okay.
00:20:39
Scott Thompson
So again,
00:20:40
Joe Waltman
Clients being like your LPs who who give you money to, to okay.
00:20:42
Scott Thompson
Correct. So we have both listed, we invest in both listed equities and private and private ah businesses. um And then we have a small fledgling fixed income business.
00:20:54
Joe Waltman
Cool, cool. And this feels like you're ah kind of your your the the last job you will have, hopefully.
00:21:03
Scott Thompson
Well, I don't know. I was quite taken actually when we went back for the 20 year reunion by that talk around, you know, but if you get made redundant or you leave your job by the time you're 55, you've got some challenges ahead of you.
00:21:15
Joe Waltman
You're done.
00:21:18
Scott Thompson
So I guess, and that thought has continued to percolate in my head because you either I think the the if memory serves, the the outcome was you either set yourself up as your own consultant or your own i and business, or or you make sure you're doing a job that you want to do for as long as you're allowed to do it. um So lock impacts is a great place to work, but at some stage, finance you know takes its pound of flesh and it's it's ah it's a hard pressurized job. So we'll we'll see where that that goes next. I haven't completely given up on
00:21:51
Scott Thompson
farming but I think it'll be a smaller scale or or it might be actually facilitating others ah to farm you know whether you own the land you don't necessarily have to farm it you can play it a variety of ways.
00:22:04
Joe Waltman
ah Very cool. very cool that's it's ah It's a great story. I'm very happy that you found this you know fulfilling little this that was a little belittle it but but this fulfilling niche to to to occupy.
00:22:17
Scott Thompson
Yeah. Um, I mean, it's all sort of seems to have aligned. There's, so I continue to chair the charity I set up, which is again, around sustainable food growing impacts as that element in everything that we do. Um, so that, that's quite, yeah, that for me is quite key now at this sort of slightly later stage in, in the career is about what am I really giving back rather than, than taking. Um, and you know, the world's a different place from where we were all like 20 years ago.
00:22:47
Scott Thompson
um that that's absolutely sure i'm I'm not sure it's going to get um I don't think it gets easier for our kids than when we were growing up I think that's one of my sort of probable concerns
00:22:57
Joe Waltman
Yeah, that's an interesting point. Yeah.
00:23:00
Scott Thompson
um
00:23:00
Joe Waltman
Well, I i ask everybody a kind of ah a parting question and I'm not sure it's a good one or not, ah but I'll let you take a crack at it. and and and if And if you've got nothing to say, just say and nothing to offer, but is there anything that you know either we can do as as the NC community to help you or or, and vice versa, are there any things that you might be able to do it too or might be able to offer us?
00:23:24
Scott Thompson
Well, I think we we had that conversation when we were all on campus so and there was an element of, you know, when we got the classes back together and there was an element of, you know, is the, and I think it's effectively is the MBA fit for purpose? And an element of that is what can we do about raising sustainability or ESG to use a ah term that I think is about to evaporate from most people's lexicon.
00:23:46
Scott Thompson
um And we've we kind of had a lot of enthusiasm but it that it fell flat um a bit afterwards, which is you know no not necessarily unsurprising. But I still think that that's that's a challenge that we we we're facing. we don't have We don't have economic models out there, or there are very, very few economic models that actually are sustainable, like long-term sustainable. So yeah why what can we do as ah as a group of people who've lived through ah a period of huge change
00:24:18
Scott Thompson
to try and help educate those going forward who are gonna have their own great ideas and launch their own companies about about addressing some of the challenges that are out there. Look, we all put our heads in the sand over some of this stuff. It's just too big and and too difficult to to consider at points in time.
00:24:36
Scott Thompson
Um, so I look, ah my door's always open to discussing and brainstorming ideas around that and love to hear from people who are facing similar challenges or or thinking through similar problems. I don't think any one of us has got the solution, but, um, one thing I am sure of it's, it's a community in a group that fixes this. It's not individuals.
00:24:56
Joe Waltman
Well, and also my tomatoes are supposed to be blooming pretty soon in my backyard. So if I if i have have some problems there, can I call you up and and and get some tips on how to, yeah, thank you.
00:25:02
Scott Thompson
You can call me up. Yeah. Yeah, tomatoes are, ah yeah, I'm pretty good on those.
00:25:09
Joe Waltman
Scott, thanks so much for your time. Really good talking.
00:25:11
Scott Thompson
Thanks, Joe. Take care.