It can take several conversations with John Carswell to understand his ideas. That’s not because he’s not a clear communicator. In fact, he can distill the most complicated financial concepts into simple terms – and will even tie them to a movie you just watched.
It can take a minute to wrap your head around his way of thinking because he’s often 10 steps ahead.
And that ability to see what’s needed, or how to tackle an old problem in a new way, is part of the reason he’s built several successful businesses by doing something that initially made no sense to anyone else.
Carswell, Founder, Chief Executive Officer and Chief Investment Officer at Canso Investment Counsel Ltd., sat down with Financial Pipeline to discuss what helped him when he was starting out – and what anyone considering entrepreneurship may want to keep in mind:
Find a problem that needs fixing
Carswell created Canso because he saw a gap in the market that no one else wanted to fix. An Air Force veteran with an MBA in finance, Carswell’s background was a mix of quantitative analysis and real-life experience. When he began working in private debt markets at an insurance company, he found “there wasn’t anyone adding value to this area of the markets through active management.” He became increasingly interested in all the ways efficient market theory didn’t work, and in the best ways of marketing products the company was selling. After he got his CFA designation, he was hired at a large investment firm and then another – both of which he helped grow and took a stake in. “After five years, I decided I wanted to work in corporate bonds. I was really the first investment analyst on the buy side of the street,” he says. “Most people buy bonds based on credit ratings, but I saw that you could distinguish between bonds and that you could make a lot of money if you understood the value of what you’re buying and the risk you were taking, so I began doing security selection in corporate bonds, from AAA to distressed.”
Stay true to your vision
In the beginning, the idea of taking (or managing) risk in bonds, not just equities, wasn’t something other financial managers were eager to get behind. The conventional wisdom was to take risks in equities and buy “safe” Government of Canada bonds. “I saw you could make an extra one or one-and-a-half per cent (on corporate bonds). That’s more than equity managers make above their indices,” says Carswell. “But we used to phone people up and say we manage corporate bonds from AAA to default, and people would hang up the phone.” Then came the credit crisis in 2008, and the limitations of traditional fixed income strategies became clear – as did the advantages of the type of credit and risk management Canso offered. “The credit crisis showed the value of what we were offering,” he says. “But it was obvious early on that to do what I wanted to do, I had to do it myself.”
Be willing to be uncomfortable – and take the long way there
“Everybody says, I want to be Warren Buffett, I want to do my own thing. I want to have my own company, (and) that’s great if it works out, but it’s hard,” he says. “When you put all your family’s wealth into shares in a company, there’s a lot of pressure to make it work. Getting to where I am has had its ups and downs.” And while people hold successes up as an example for future entrepreneurs, Carswell says, there are different paths to get there. “There’s the front door – an ivy league university in the United States or top business program in Canada like Queen’s or Ivey at Western, for instance,” he says. “What’s the side door? Well, you go to another school, but you get the CFA, and you become a portfolio manager – and you’re good at it. The back door is when you take a degree that has nothing to do with business, like philosophy, and you become a portfolio manager. There are people like that out there, who are very successful.”
Hire and work with good people
The right people are key – ones who get what you’re trying to do, buy into the vision, and who are willing to learn and grow with the company. “I prefer to take people on and train them,” he says. “But character – that’s the most important thing.”
Keep learning – and keep the bigger picture in mind
Being willing to pivot and adjust is key when you’re trying to grow a new company and work in an area that’s new. For Carswell, diversifying his experience and broadening his perspective was crucial. “At one of my first jobs, when I became interested in marketing, they told me it was a bad move for a career,” he says. “I thought, ‘What do you mean? Don’t we sell stuff?’” The hardest part of starting a business is getting revenues, he adds, and to get revenues, you have to be good at sales and marketing. “There has to be a need for what you’re selling – or at least, you have to decide that there’s a need, and figure out how to fill it,” Carswell says. “It takes quite a while to build a base. I often tell my young analysts – the most important courses they’ll take to be a successful investment analyst are not in things like accounting. It’s marketing and how companies create revenues.”
