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A renaissance approach to quantitative investing.

Liqian Ren, Director of Modern Alpha at Wisdom Tree sits down with MIJ to discuss her journey from growing up in a small village in China to becoming a recognized thought leader in quantitative investing. This episode touches on luck and timing, platform company indices, stacking the investment odds in your favour and the benefits of a classical education for investment professionals.

Podcast highlights.

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00:5:36 Milton Freeman's influence on Liqian's journey from a small village in China to the University of Chicago.

00:8:36 How computer science, economics and immigrant friendly policies landed a job at the Federal Reserve Bank of Chicago.

00:10:00 Luck & performance.

00:12:20 Stacking the investment odds in your favour.

00:17:20 Is ten years an eternity or a blink of the eye.

00:19:41 Innovation is key as an asset management company.

00:21:29 Platform company index.

00:24:05 Performance chasing and election bias.

00:27:20 How to fit ETFs into a portfolio.

00:30:08 Closet indexing.

00:33:31 Luck and your investment journey.

00:36:33 Liberal arts education and financial training.

00:39:10 The renaissance man and Chinese classics.

About Liqian.

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Liqian’s background in quantitative investing and experience managing active funds has been incredibly valuable to WisdomTree’s research team. As Director of Modern Alpha, Liqian helps WisdomTree implement strategies that combine the outperformance potential of active management with the benefits of the ETF structure.

Before working at WisdomTree, Liqian was at Vanguard, where she worked for twelve years, as Portfolio Manager in the Quantitative Equity Group managing Vanguard’s factor funds and conducting research on factor strategies. Prior to joining Vanguard, she was an Associate Economist at the Federal Reserve Bank of Chicago. Liqian received her Bachelor’s degree in Computer Science from Peking University in Beijing, her Masters in Economics from Indiana University-Purdue University Indianapolis, and her MBA and Ph.D. in Economics from the University of Chicago Booth School of Business.

About our hosts.

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Rod Heard, Co-founder & CEO of SmartBe Wealth. Art Johnson, Co-founder, CIM & Portfolio Manager, SmartBe Wealth. Rod and Art investigate the journey from traditional investing to the evolution of the modern investor, exploring the bumps, bruises and victories with each of our guests.

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Transcript

SmartBe Wealth Podcast – Liqian Ren

Rod: Hello and welcome to this edition of the Modern Investor Journey. My name's Rod Heard. I'm co-host and co-founder of SmartBe Wealth Inc and I'm here with my partner, Art Johnson. We're delighted today to have with us Liqian Ren. Liqian is a director of Modern Alpha at WisdomTree Asset Management.

She got her PhD at the famous University of Chicago. And she's been a friend for a number of years since we did a March For the Fallen in Pennsylvania a few years back. Welcome to the show, Liqian!

Liqian: Thank you.

Art: Yeah, it's lovely to have you here Liqian and it's wonderful to have someone who talks about the business of factors, talks about quant, but also understands the human side as well. And that you came out of Chicago with some beautiful skills in quant, but also in just general conversations with you, you understand how the human being works with this stuff too. So that's what we're hopefully going to explore today.

Not so much on the technical side of the factors. We'll get a little bit into that. You know, you've filled out your philosophy on investments and how you think people should be using these things, and the emotions behind these things, and how do people stick to these strategies. So I think that's a really timely topic with things that are going on today.

Rod: Why don't you tell us how you first got initiated into quantitative finance and in quantitative investing?

Liqian: When I graduated, I was more on economics than in finance, but they are connected. What got me interested in economics was really looking at the behaviour, of the human behaviour, and why people act like the way they do. And economic factor was considered, you know, one of the most important factor. The more I researched it, I realized that there are so much so-called biases in people's behaviour.

So for example, like, let's use the presidential election as an example right now. When you ask people a question the way the question is framed, or the way the environment that makes you feel uncomfortable to answer, the people who could have very different results based on the behaviour of the person.

So I think my original motivation was much simpler. Really two things. One is I want to, you know, understand how people make decisions. And the second thing is I need a job to, you know, still support take a risk responsibility to support myself. And I think that these two roads converge from my point of view of studying economics and studying quantitative economics.

I've always been very interested in numbers and how people interpret the numbers, how they use the numbers to make a decision. So, in the end, I think, you know, it kind of all converged together.

Rod: And did this journey for you start back in your first university days in China, or was it part of your journey to the United States?

Liqian: When I was very little I lived in a village in China, in Zhejiang province. It's probably more well known now because Alibaba, you know the company, was founded in Zhejiang province and it's a very small province. Doesn't have many state-owned businesses, was very lacking in natural resources.

So it seems the only thing that kind of works for that province was the human capital part. Like, you know, people study hard hopefully to make a living. So when I was very little my father was actually a manager for the Chinese herb shop. Plus the Western medicine shop. You kind of rotate.

The operation is called Supply and Demand Bureau. Essentially, that name gives you understanding of how China was in those days, that all the business is controlled by the government. And then as I grow up it started to loosen up. The state owned part of the business is now such a small portion in the province I grew up. And then my own family started a little shop.

Just keep in mind, you know, for a long time in China, even if you bring your eggs to the market it's considered illegal activity. So you're not allowed to do a business transaction. So I grew up in a little bit of business oriented environment and also in a village environment. In a sense that people are much more close-knit, rely on credit, you know, helping people. If you want to borrow money you really don't have any access to finance, the so-called credit. There's no credit card, no local banks you can go and borrow. So I think in this environment, it forces you to rely on yourself a little bit more, not relying on the government, per se, even though the government is always in there, but for your day-to-day living as I was growing up, the non-state owned business was expanding.

So when I grew up I felt that it really instilled on me, like, if you want to do something do something you're interested in. And I like looking at numbers, I like reading about economics. So I think the earliest element was there. And when I was in high school, I think, I remember very well Milton Freeman visited China. Even in the small town, actually, his visit was in the news. You can see how open channel at that period. So I was able to, you know, know a little bit about Chicago, but really very little. There was no internet, you know, nobody in my family went to college, but I knew a little bit and just kind of, you know, a little seed says, you know, the business side, the personal side, the human behaviour side. And then when I went to college, actually my college was in computer science. In China there is this, like, you have to pick a science direction and then the liberal arts direction. And for my own background and my parents a little bit preferred me to go for the science one, because it's easier to get into college.

I mean, I like some part of the liberal arts, but I picked the route, the science background. And computer science it was really new, you know, in 1993. My family doesn't own a computer. We barely had a TV but then I was going to college it to be a computer science major. Now, when you look back it sounds daring, but it just shows that I think if you like something and you put in the learning, it's not true.

You have to have a computer growing up to understand the computer.

Rod: Nice. And then, so how did you make the journey to the States?

Liqian: College really opened doors for me as someone who didn't have a background or connections to college. I think if even in, you know, in the US if your parents already went to college, you know, all the connections. For me, you know, it was really being able to go to college and then able to study English and able to even have access to the library itself was something which I took in, you know, taken advantage a lot. And then while I was there I have the freedom to study economics as a minor. So that was also something new. In China before my years, you really just have to study one major and you're not allowed to, you know, easily take classes from other majors.

So you can see the freedom, you know, growing at that time. And so I was able to take a computer science classes as a major, but now also took all the micro economics, macro economic metrics. And my interest really grew there. And when I applied to graduate school, I just applied to economics directly.

It was a little bit a risk. Fortunately, I got a fellowship and was able to support myself through both the fellowship and the teaching assistant or research assistant during the graduate school. I think computer science has become so much widely used and economics was ahead of other areas in using quantitative and programming tools. And I was kind of lucky in that I was having interest in both and having training in both. So when I went to after my master degree, when I went to federal reserve bank of Chicago, amazingly I got a job there because when I came to the US I don't really have, I knew a few really good friends, but don't really have any connections.

And you can see how US is really friendly to immigrant culture. That someone like me can get the job at Federal Reserve Bank of Chicago as an associate economist and work on economic and forecasting. At that time I don't, I just kind of go small steps, small goals. Now looking back, you can see how I feel really lucky in the sense that I was able to work there and really understand the Federal Reserve system. Which, as everybody knows, it's so central to the US economy and the financial system, even though I only worked for one year there. And then went back to the PhD study, but it really added some perspective for me to understand how, you know, the macroeconomic side actually kind of works from there.

Art: What an amazing story first and foremost. But I also think, as an economist, I think you said there is luck to it. One of the things when you study economics is you realize how much luck plays into these decisions. Like how much do you think luck plays into it in your own life?

Liqian: Yes. I think a huge portion is luck for person, for performance of a person, or performance of a company.

I think that needs to be acknowledged, but the way you acknowledge is that that doesn't mean then you just succumb to that everything's luck. It just means that sometimes if you are down, you can still work hard and then try to learn and then do better. And sometimes even if you do that, it didn't quite work out.

And that's okay. I think if you bring the element of luck, it actually reduces your anxiety. That's how I treat luck.

Art: I think it's a really good point because, in essence, what you're saying is processes are processes. And when people see them in hindsight they tend not to attribute luck to a lot of processes.

And that's, I think, for most quants the appeal is that the process is the outcome as opposed to the outcome, because there is an element of luck in everything we do. And is that a fair way to look at it?

Liqian: Absolutely. I think luck from the regression point of view it's an error, right? And we all know, you know, this so much. For example, you know, when you use education to proxy a person's income, and we all know that the explanation power is about 0.3, 0.4, 0.5.

It's not 100%, you know, so 60% is luck. And I think between ignore that is at your own peril that, you know, you make a too big of deal of the personal part. But the way I see it is that that really reduces my stress of, you know, when I'm down I know some part of my be luck and I still continue to believe in the things I believe in and work on it.

And if I'm up, I don't take myself too seriously knowing that a huge part is luck.

Rod: The thing about quantitative method and rules-based and scientific method for me that's super interesting is it seems like it's all about stacking the odds in your favor. So it's getting more on the luck side of things.

And then it's just really about patience and timing, because time is your friend. The longer that you can stick with something the better the probabilities are going to be that you're going to have the outcome that you want.

Liqian: The one thing I wish I learned younger is to be a little bit more patient.

I think that that's just the testament of time. Like when I was young, I have to say, when I first came here I was a little bit anxious. You know, am I able to graduate? Am I able to get a job? I really knew very few people when I first came here in the US. I knew my very good friends, the Bruces, they were very nice to me.

But, really, I have no family connection here. So I was full of anxious, but I think now I look back I think if it was one lesson, I would tell the younger myself, you know, stick to the things you can do. And then let time work its magic.

Art: How do we get normal people to recognize what time means in the stock market?

And I'll give you a real specific example. Canadian small cap stocks have produced, I think, zero to a negative return over the last 10 years. When you put on your statistician hat, that's not a big deal. I presume. Now what I can tell you as a Canadian in that there's bunch of context in there. 10 years ago our economy was ruled by oil and gas taking off.

It was expensive. It had a lot of small companies and a lot of those companies have gone bankrupt over the last 10 years. So maybe a zero rate of return is actually quite a positive rate of return when you think of the constituent universe,. But it sure is thin gruel to an investor that owns small cap Canadian.

So can you just talk a bit of how we should think about that statistically?

Liqian: First, actually, you know, US small cap also suffered and actually there are academic papers which are trying to study what is this size premium? Is this size premium still going to continue or not? We also have a lot of our portfolios have a little bit smaller size bias in it.

So I am personally very interested in this factor. I think it really goes back to why in the earlier years, small cap is favoured? I think in the early years, if you believe smaller companies usually get the kind of coverage it usually gets, you know, when the domestic economy does well usually it out performs. I think these things still has not changed in the sense that, you know, because the larger cap company have get the glamour of it. But if you believe in the longer term, these factors will even it out. I think the valid points of a size premium, but on the other hand size as a factor is always a proxy. It's almost like, you know, gender, right? Like, because you couldn't explain it, then you kind of take the lazy road and says size is what's causing it, right? Because everything else you couldn't find a good explanation. The truth is most of the mid companies in the last, you know, 20, 30 years before the large cap run has done the best.

So mid cap, it seems, to take the sweet spot. But midcap has not done well recently as well. In a sense you still do believe. But now if I think about the original reason of size premium is still valid, then I will still believe that this premium still exists. Now people can argue that fundamentally the economy is going to change. That in the world, in the future world, the platform idea will dominate.

Will that make small cap, you know, smaller companies at a significant disadvantage? I think that is still not necessarily true. So I can explain. You know, another point of view is that sometimes when you look at the smaller cap not doing well, it's really a sector bet. That, you know, some of the smaller companies turns up to be energy companies, then energy as a sector has not done well. Large cap growth, of course, has done very well, but mid cap growth they have done very well too.

So sometimes it is also partly a sector.

Art: If I take you back to Chicago, because I sat in many meetings where Fama would be talking and he would just like say 10 years, nothing. Like you guys are crazy to even try to get some signal out of a period that length! But to a retail investor that just seems like an eternity.

So, like, how do you think about that? Because, like, the statistician who looks at the data says 10 years is nothing in data.

Liqian: I think two things. One is he's a professor. So generally if you're academic you can dismiss things much easier. And as a practitioner I cannot easily dismiss ten year numbers. The second thing is in the last 10 years, you know, value has not done well.

On the other hand, you know, within several categories of value, some value has done better. That is attributed to some people who believe that, you know, we are moving away from manufacturing into companies that less manufacture, then the book value is a less accurate measure of a company.

Art: Yeah. The intangibles matter more in the new world.

Liqian: I think I want people to understand is that, actually, if you think 10 year is long, then you need to lengthen your investment horizon. A typical person, if you start saving at 25, you know, the earlier the better. And then we probably won't retire until, you know, 60. 60s now is early. And that is, you know, significantly more than 30 years of investment. And people are living so much longer.

Even if you reach 60, you have another, you know, 20, 30 years to go. You know, on average. So I think the 10 year horizon is usually, it's a good number to look at, but if you're thinking about, you know, your own portfolio you still need to think even longer term for that. And if you think your money usually is a bequest to your children, then your horizon is even, you know, even longer than your lifetime. There's data that shows that for most of the upper middle class families, the money they invested generally don't get spent.

It goes to the next generation. So if you're thinking that way, your investment horizon is really much closer to a hundred years than 10 years.

Rod: You've got a great portfolio at WisdomTree on the asset side of things. How is your job experience shaping your belief system right now? And how do you ensure that, you know, all of the lessons of bias and all the lessons of human behaviour that you're normalizing that in the decisions that you're making every day to try and help WisdomTree?

Liqian: At WisdomTree, I think, one thing we've found is you have to really innovate as an asset management company. The asset management industry has been under a lot of competition and the only way to stay ahead is to innovate.

Be open to ideas and it's true, you know, when WisdomTree was started it was much more value than now. But you can see that, you know, six, seven years ago we already introduced quality. At that time I was not here, but you know Jeremy, our Global Head of Research, they have realized that quality is a very important factor.

So they introduced the actor, you know, a policy as a selection for value. Which has paid off in the last six or seven years. And we introduced, when we're looking at emerging market, introduced ex-State-Owned, you know, the vibrancy of an emerging market, which my own life story is a mirror of. In the sense that you see the decline of state-owned and then the rise of the non-state owned in China.

And it's not just in China. In India when I went to graduate school I have lots of Indian classmates, and they all say the same thing. That in emerging markets, you know, the most vibrant sector is the non-state owned. I think in thinking about the growth, but slightly different way of thinking about growth.

For example, the platform idea.

Rod: Sorry, just just for our listeners, Liqian, I think what you're saying when you mean the platform idea is companies like a Google or a Facebook that are big into the social media have such breadth of a raise of commerce that they become a platform company.

Liqian: In social media it is very clear. But also in some not as clear areas as well. You know, like Netflix. When you become a platform everybody, you know, subscribes to it.

They're able to have the skill economy. Which is one of the fundamental things in economics. And actually, for people who are thinking more regulation will be coming, it's also, if you study economics, that's like Economics 101. Economy that has a huge scale is usually, you know, considered needs to be regulated.

Art: Standard Oil was 60% of oil and some of these platform companies are 85, 90%.

Rod: I think of gaming as well. Gaming is a huge platform piece. There's many interesting evolutions that computational companies are taken advantage of right now.

Liqian: And more regulation will be coming. When you have a skill economy, there is an economic argument that, you know, you don't become too dominant to foster competition for the next innovation.

And also for my own, you know, multi-factor, some of our funds has not done as well because, you know, we didn't bet enough on the large cap momentum. And it is a challenge for myself. And I try to think value, momentum, quality has been, you know, the factors everybody talks about. But they've got to be something that can help us and we have to think a little bit beyond. Thinking toward the innovation or the things coming like, you know, digital assets, right? Like all the talk about every country, you know. In US digitalization of a currency is definitely coming. And then it's going to challenge financial industry as well. So for example, payment system. Like, right now in the US if you wire money it still takes, you know, a couple of days. While technologically it could be pretty instant. So all these things, innovation really makes, you know, to also pushing myself more in thinking outside the box a little bit.

Rod: How do you reconcile the performance chasing, predicting the future, everything that scientific method and academia trains you against?

And this tension with innovation. How do you reconcile those two vectors in your mind?

Liqian: I went back into the early economic training and that's why another thing I wish is I read a little bit more history. So that I have a longer perspective. Since everybody's mind is on the election in the next week, I think also learning. And if you're asking people, you know, how much did President Reagan win in 1980 everybody remember it's a landslide. But actually the popular vote is less than 51%. So, the memory of it, and then the choose of it can be different. So it's very important to have a grounded, economical, common sense.

I think the things behind it, when I'm trying to think about these questions, this idea of intangible assets, right? This is definitely something people have been talking a lot because you know is a traditional earnings still a good earnings? Is it, you know, companies like Amazon is spending so much on those R&D. Should that be considered a part of, you know, future earnings as well? So all this research is going on, but I have to really think back not to be carried away by a quick argument. People are looking at, like, early voting numbers and say, wow, you know, there's so much early voting.

It must be for one party, but actually if you look at really deep down, I've been reading a blog on Nevada, if you're really deep down the lead is not clear and not overwhelming. So all of these, I think, to know a little bit more history and also to be able to really stick to what's your original thinking is behind that that really helped me to try to not being carried by the newest thing.

Art: Yeah, cause we're such narrative creators. We want to, like, it's equally probable that the earlier voters are Republicans. Liqian, in Canada, we're in the early stages of, I guess, people using ETFs. They're about 9% of the market. It's growing rapidly. One of the biggest issues that comes up, there was some recent research done on Canadian advisers and Canadian investors, is they feel comfortable in their knowledge of where mutual funds go in a portfolio. And they also feel comfortable in their knowledge of kind of how they work. But they're not comfortable on where ETFs go. I think this is, I think people are getting, you know, who knows if you talk to an average person, even how a mutual fund would work. I don't know if they could tell you. But the comfort that they have with them and where they go in a portfolio seems to be one of the biggest barriers to people using ETFs. We like the fact that beta is cheap and then we like using highly concentrated kind of stuff like yours, and you can build great portfolios. Can you start to try to maybe talk to Canadians about where ETFs go and where they fit in a portfolio and how you should think about them?

Liqian: So I think the two things, really one thing in the US ETF, naturally, has a good standing in people's portfolio is partly due to the tax advantage. In the US, indeed, it's easier to make an argument, but I think the other argument of ETF is that for advisors, in the beginning, they usually are, you know, a little bit resistant to new things, right?

They usually are a little bit more conservative to use a new thing, because if things didn't crash, if it didn't work out, if they fail, they could get blamed. So in the beginning, I think, some of the resistance is understandable. And actually in the US you can see that, you know, ETF got a lot of resistance.

You know, for example, can ETFs withstand the creation and the redemption in the market? A very volatile market? Even this question was not, you know, convincing in the beginning. Even though all the people who do ETF, you know, say that no, it was completely able to work in a very volatile market.

But I think it takes a little bit of time, like, you know, the market crash this year. The December 2018. Like through one or two cycles, you show that the ETF is, you know, as nimble as mutual funds as an investment vehicle. I think advisors will start to get around it. A lot of it is really because it's a new thing and then advisors feel that, you know, do we want to add?

And the third thing to talk into advisors is really the idea that ETF expense ratio is just so much cheaper compared to same strategy but in the mutual fund structure. So if you're replacing it with almost the same thing, but at lower price for your clients, it is, you know, fiduciary duty in some way that, you know, you look out for your clients.

I think right now, probably in Canada, advisors still see ETF differently from the mutual fund thinking the strategy is different, but some of it is really ETF has been able to do what mutual funds has been doing, whether it's a highly concentrated portfolio or closer to beta portfolio. So in that sense, the argument becomes much easier to make.

Art: So we have two issues in Canada.

One is that in Canada we have the highest percentage, I think it's around 36%, of the money managers in our country run what's called a closet index portfolio. So we have the highest percentage in the whole world. It would be like 8% or 9% in the States. And how is that detrimental to investors? In essence, you're just buying the marketplace and charging say 1% to do it. In the original days of ETF, it was around 20, 30 basis points to buy the market.

We're now down at six to eight basis points to get exposure to the market. So you're looking at a 70% to 80% savings in costs to get you to the same neighbourhood. You would think that a rational person looking at that would easily make this choice. Advisors are reluctant to actually save their clients, say 70% or 80% in cost,

because A. they would be potentially blamed for the change of this new vehicle. And then the other thing is they also give up the ability to blame the manager who is closet indexing. And so we get forced into irrational choices to even buy the market. So long answer to your question on the market, but really what's what the revolution of ETFs has done is increased the transparency tremendously for the customer around the costs of actually, you know, true investing.

And we've seen those costs fall dramatically. So even without the tax advantage, it is a healthier system when we have the level of transparency. So can you speak to that a bit, Liqian?

Liqian: Yeah, absolutely. So in the US ETF holdings, at least most of the ETF for now, has to be disclosed every day. You know, you can check out the manager's investment, how close they are tracking the index.

But mutual funds generally, monthly disclosure, you don't know what's holding in the mutual fund. The second thing is that ETF strategy is much more transparent than the mutual funds. So I think that that is why in the US you can visibly see in that if you look at the US cashflow for equities, little bit active equity, like not non cap weighted, not cheap beta equity.

You can see that regardless of the market, ETF flows has been generally positive even for the month that active mutual funds is losing money. So in a sense, I think people are getting the message you just mentioned. That really you can switch to ETF structure, find something similar to what you, you know, you are holding for your clients at the cheaper price.

I think now advisors are starting to, you know, realize that, you know, they have to change. But in the beginning they didn't want to be the first person who eats the crab. Right. So they didn't want to put so much ETFs in their portfolio.

Rod: How did you transition in from the education world? You said you were at the Federal Reserve Bank of Chicago.

You got out into the marketplace again, how did your journey get you to an asset management firm in the quantitative space doing meteoric things?

Liqian: You know, that's back to our original conversation about luck. Sometimes it's you don't really know your life where it's going. That's why I feel that I'm much less stressed because I know some of it is really luck. After I graduated, because usually you go to a PhD program, you want to be in the academic kind of setting. You know, I actually got a job to go back to China to teach, but at that time I felt not that enthusiastic. I mean, I love teaching. I still hope one day, you know, I can get back actually to interacting with students.

But I didn't feel that enthusiastic to be a hundred percent going into academic. Like, my husband is here, so I want to be with him. So I took a job at a credit card company, but doing risk modelling. And that was in 2006 and 2007. And what really surprised me was that all these credit card portfolio monitoring don't take into account of any economics, macro economics. And at that time you can kind of see, you know, the economy is a little bit heated, you know, default rate, you know, it's very hard. But you wonder, you know, your risk manager, you got to take into some macro economics into account, right?

And actually they were not. And this is another thing about working makes you see perspective better. When I was very little, I worked in our own shop. I worked in my dad's shop, you know. I see a lot of things. You can see that if you're not working there, you will be like, well, how can this be happening?

But you know, businesses generally is, you know, you don't fix until you have to fix it. So I was really shocked, but not very happy in the sense that I felt strongly, that you need to put in some macro risk control into the credit card portfolio. So I got a job at Vanguard Economic Group to go back to studying asset allocation and economics like kind of macro economics.

And while there I decided to go in a little bit more focused role. So I felt that I much prefer if I study, you know, deeper, like into factors in equity. After after that I decided to go down a little bit more deeper. And then that's how I kind of started researching much more like factors, not just in equities, but also in currencies, in commodities, even in fixed income.

And then two years ago I was very happy to move to WisdomTree because in some way it's I truly believe that ETF structure is the future. So WisdomTree is a pure ETF player and was also a little bit more entrepreneur in terms of thinking about new ideas that get things moving quickly.

So I like that aspect of it.

Art: You've really referred to how the liberal arts have actually probably ... Like, do finance people need more liberal arts, I guess is a question? Do they need more history? Like there seems to be a disconnect here that seems to have helped you. And as you've gone along to answer, not only questions, you've had to go and go back into the liberal arts and the history.

And are we missing something in education? Just going down the purely quantum computational side?

Liqian: I do. Actually, one thing I wish I had done more is to learn more history, financial history. Recently I finished a book, The Splendid and the Vile. It was about Churchill and, you know, how London was under the bombing. Those years. How life was in general there.

And you can see that, you know, young people, even though there's a threat of bombs, young people still go out and dance. So to having that kind of perspective on human behaviour is very, you know, is going to help me understand how people, you know, is going to react to the virus situation or how people are going to react to, you know, the investment part of it.

So I think that's very important. The second part is my own kids' education. One thing I want to find out more is that I feel there's a lack of classics education here. I don't know much, you know, so I'm going to learn it and try to find out. Because I do feel that's very important, like for them to read classics and human behavior, poetry, you know, there's so much lessons in it.

So I think that part of education is very important. I have a feeling in the US it's not as emphasized as I want it. I'll come back and, you know, discuss what I found out.

Art: Probably one of the best ways to think about behavioural finance. Like, it's all about conflicting thoughts and decision-making, so that's like, it's one area that I think should be kind of emphasized even in business schools.

Just the way to think about how normative thinking changes people's beliefs. It's really about how we form beliefs in decision-making. I agree.

Rod: You're both touching on something that I've always been interested in the concept of the Renaissance Man and Liqian is there something in China that is equivalent to that? Is it a Confucius era? Is there some sort of norm that you grew up with?

Liqian: So we don't have the Renaissance Man idea, but there's also a classics education. Which are, in the older days, you know, every Chinese is supposed to, you know, kind of get it. Like the tone poems. There's some of the essays.

This was actually a big conflict in China as well. Like how do we teach these classics to Chinese kids? When I grew up, I was lucky in the sense that I still, you know, I still got a part of a classics education from the school, but the school was becoming much more like in the US. When my grandfather was a calligrapher, he practiced Chinese calligraphy and was pretty learned in it.

So I kind of got that kind of education through home. Right now I am trying to get my kids to be able to know some of the older classics, Chinese poems as well. And US poems. I feel like some of the Shakespeare, or earlier, which I myself don't have that knowledge, but I'm learning.

So that, like I said, I haven't found out the whole picture yet, but that is one of the areas aside from my work, I do it. And I think it helps me to see things a little bit more clear.

Art: Yeah. You build a critical mind, which is you learn how to think, which I think is really important.

Rod: This has just been such a delight for me.

You espouse the Renaissance Woman kind of attitude. But hey, isn't that part of life? Is just the quest to be curious and be knowledgeable. I would have taken away three main themes that you gave for me. One was a theme around patience, that as you've grown older and wiser patience has become a stronger value system that you embrace.

I really got a sense, we never talked about the word, but meritocracy really comes to mind in your humble village upbringing to being hardworking and smart and diligent and all of these doors opening for you. Just because of your merit and your tenacity and stick-with-it-ness. I really get the sense that a meritocracy approach is important in your life.

And then the third takeaway was really this whole liberal arts history, quantitative investing doesn't need to be just about numbers because there's so much interaction with human behavior and the lessons that we can learn from ourselves and our past become pretty important. So, thank you so much for sharing with us.

Any final words for you?

Art: It's just lovely to be around you again, Liqian, you're just set such a light and the story's amazing. And it should give us all hope for how, you know, people from humble places can describe the wonderful things and keep the values that you have. I think that's.your super power.

I think it's wonderful.

Liqian: Thank you so much for having me and I really enjoy our time together and I look so much forward to talking again.

Rod: My name's Rod Heard and you've been listening to the Modern Investor Journey. We've been talking with Liqian Ren. Who works at WisdomTree in the asset group.

Thanks so much for having a great show Liqian.

Liqian: Thank you.

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