Bilal Hafeez - Founder and CEO at Macro Hive

0:07Hello listeners, my name is Anushka and welcome to another episode of the LSE Focal Point podcast. Today we are delighted to be joined by Bilal Hafeez, CEO and Head of Strategy at MacroHive. Bilal holds a Master of Arts in Economics from the University of Cambridge. He began his career as an FX strategist at JPMorgan in London. In 2002, he joined Deutsche Bank, spending over 13 years taking on key leadership roles, including Global Head of FX Research and Head of Multi-Asset Research. In 2016, Bilal joined Nomura, where he spent over three years and took on leadership roles, such as Global Head of G10 FX Strategy, Head of EMEA Fixed Income Research, and Global Head of FX and Rate Strategy.

0:53In 2019, Bilal joined MacroHive, a platform providing macroeconomic and financial market analysis. Welcome to the podcast, Bilal. It's great to have you on. And how are you doing today?

1:04Bilal Hafeez: I'm doing very well. Thanks. It's great to meet you, Anushka. And I'm very happy to be on this podcast. Amazing. So I guess to start off with, can you tell us a bit more about your career journey and what initially drew you to finance? At high school, for whatever reason, I was quite drawn to economics because one, I had a great economics teacher, a chap called Mr. Drake, as I called him back then. And he was very inspirational. So that helped me a lot. But I liked economics because it had a mathematical side to it. And I was quite mathsy. But at the same time, it was quite applied and talked about the real world.

1:38Bilal Hafeez: So high school, I was drawn to economics and I took economics A level. And I knew at that point, I wanted to do an economics degree. And then when I got to university, the typical path, if you do economics at the time, this was in the 90s, was that you either go into finance, join, go to the city, you go into management consulting, or you might go into audit or accounting. These are the typical paths. And to be honest, I didn't really have at that point when I started uni, I didn't have a strong view on which one of those paths I wanted to take. All I knew was I wanted to get a job because I come from an immigrant background.

2:12Bilal Hafeez: My parents basically told me the purpose of education is to get a job. make sure it's a good job. And that was the mentality. And when it got to applying for summer internships, I did apply to accounting, internships, consulting, and they all rejected me. The only ones that accepted me were the bank ones. And there was one JP Morgan that accepted me. So I ended up inadvertently ending up doing an internship at JP Morgan. And then after the internship, I got a graduate offer, ended up going to join JP Morgan and loved it. I realized that was my home to do kind of research in a financial markets context.

2:49Amazing. That's really given an insight into what led you to pursue financial services in the first place. It's been really great to hear about your journey. And related to that, can you give us a bit of a deeper insight into what your role involves and what convinced you that macroeconomic research and FX strategy specifically was for you rather than other areas such as trading or advisory?

3:13Bilal Hafeez: Yeah, that's a good question. One thing I would say is, and this is a recurring theme in my career, my life, is that what did help was that I had an incredibly good first boss when I was in FX research. There was a person called Alfonso Pratt-Guy, who was the head of FX research at JP Morgan. And he was a very inspirational person because not only was he smart and he was good with the clients. He was a great researcher. But also as a person, he was great. He had a great sort of character, which is very different to a lot of other people in finance who are more like on TV, arrogant and brash and those sorts of things.

3:50Bilal Hafeez: And he was the opposite end of that. So one, it definitely helped to have someone like that to look up to. And he was very nurturing of me as well. So I think that that really was a big sort of factor. But in terms of the role itself, what I really liked about research was that one, it was quite intellectual. and I like intellectual pursuits. So what you're in essence trying to do is you're trying to predict which way will the dollar go in the case of FX research. And that's quite a hard task. There's a million different things that could cause it. So then it requires you to use your analytical skills, your insights to come up with a framework and a model to understand what drives the dollar.

4:26Bilal Hafeez: And then because you're on financial markets, your theory of why the dollar should go in one direction or another gets evaluated very quickly because the markets are live. And so one week, you think, okay, the dollar is going to go up and you do all of this research and you can get to see the result very quickly. Does the dollar go up or not? And that's very different from, say, the banking side, M &A, where the deal flow is very long and protracted. You spend six months on a deal. It takes ages for you to see whether the deal works or not. And so what I did like about markets was that you get the validation or not very quickly.

5:03Bilal Hafeez: And the research side is very analytical. Now, why research rather than sales and trading was sales, I felt was more of a relationship thing. And while I did interacting with clients, the way I like to interact with clients was more in terms of like a presentational perspective. I like to have a debate with clients to solve this problem of which way the market would go. Now, sales job isn't necessarily to do that. Sales job is to manage the client relationship, try to do transactions with a client that will make money for the desk. And that's a different side of things. I don't particularly like to go out to socialize with clients, for example, or to worry about dealing with transactional issues around clients.

5:47Bilal Hafeez: So sales just wasn't my thing. And then trading, I did have some exposure to trading in my career. The problem I found with trading was that it's quite a solitary exercise because when you trade, it's you and the screen. You take input from the researcher. And so you don't necessarily do primary research of your own. And there's a lot of psychology involved as well. A lot of it is about managing your position, dealing with the psychology of making losses, which I didn't find that attractive. So research was the natural home for me. Brilliant. Thank you so much for that. And what would you say is the most challenging hurdle you faced early on in your career?

6:22What were the lessons you learned from that? And are there any that you still apply today?

6:28Bilal Hafeez: I think there's the usual sorts of things like making bad market calls. There were things like making mistakes in different areas. But the larger challenge I found, and this is a human problem, was how to manage my own psychology. Because when you're young and actually all ages, there's a level of insecurity one has. So you're insecure in your role. And how do you deal with your insecurity? So, for example, in my case, it would be, am I smart enough? There are lots of other researchers who are super smart, you know, rocket scientists. And so you have this inferiority complex at that level. Then another insecurity one has is the way it works in financial markets is that there's almost like a hierarchy where trading is at the top because they're the closest to the money and they earn probably the most.

7:15Bilal Hafeez: And then it's sales and then it's research. So research is almost viewed as like lower down the pecking order. So you also have this kind of insecurity around, should I have gone into trading or not? Or should I, on the client side, should I join a hedge fund? So there's all of these psychological aspects that one has to deal with. And for me, that has really been the biggest challenge early on in my career. And so the challenge always was, how do you manage your psychology, your insecurities in an environment that isn't very nurturing or supportive of that, that no one really cares about your insecurities?

7:50Bilal Hafeez: Now, it did help. I had a good boss, so he helped me at one level. The other thing that helped was family, relationship. I was married to my wife, and so that anchors one. And then to reframe your work in the sense that the purpose of your work isn't necessarily to just get promoted and make money, get all of those sorts of things, but rather it's there to train you to become somehow a better person in some capacity. be. Thank you. And I feel like this is a really common thing I see as well, dealing with imposter syndrome. So it's really reassuring to hear that it's been being faced by everyone really, and really important to learn how to manage that because I guess in the long run, it's more important to do what you enjoy rather than what might be deemed as the best thing to do by society.

8:41Definitely support is something that's really important for us all. Following that, if you had to pick the most influential decision that you made or project you worked on that shaped your career trajectory, what would it be in life?

8:55Bilal Hafeez: If it's okay to pick two, one would be, I started in finance around 1997, 98. And then my career was a steady markets were doing very well, finance was doing very well at that stage, late 90s, the 2000s, markets were growing quite well. Then the problem, of course, was 2008, we had the great global financial crisis, which emanated from the financial sector itself. And at that point, the whole finance sector blew up. And at that point, career-wise, I was doing very well. But at some level, I was reaching kind of the peak of my career. And at that very moment, the whole industry almost got blown up.

9:34Bilal Hafeez: And so that was a real existential shock to me and many others in the industry at the time. And at that point, I thought, OK, what happens if the whole sector disappears or we all lose our jobs? What else can I do? And so that was a real wake up call for me in terms of having put all my psychological eggs in one basket of my whole identity. Everything is linked to banking. And at that time, it allowed me to be more open to other possibilities. the other one was in 2019 I left Nomura to set up MacroHive to found MacroHive and that was a huge step for me because up until that point I was working for big banks where you get like a regular salary and you're attached to the mothership so to speak but by setting up your own company you're on your own you start with zero a blank piece of paper and you have to create you have to go from zero to one to borrow the Peter Thiel term and that's very hard and it's hard but creative at the same time, can you create something out of nothing?

10:32Bilal Hafeez: And so that's probably one of the biggest things I've done. That's super interesting to hear. And out of curiosity, what drove the decision for you to make that jump from banking to funding your company? Yeah, the biggest factor was really, I've always had this inner drive to be innovative and creative. And I found that within banks early on in my career, I was able to be very creative. So in the 2000s at Deutsche Bank, I helped pioneer the creation of what's called smart beta indices in currency markets. Later on, I spent time in Asia working with the Chinese authorities on deregulating their capital accounts.

11:11Bilal Hafeez: So I was able to do really interesting, creative stuff. But as the years went on from the financial crisis, banks became much more regulated. And as a result, banks became more risk averse. So there's much less tolerance for people doing interesting things. It was much more about just keep your head down, don't do anything too new, and just don't take any risks. And so at that point, by the end of 2018, 19, I was thinking, look, there's this whole AI revolution that's starting to pick up. There's so much interesting stuff going on the tech side. And I felt constrained being inside of a bank. So then I thought, look, why not just do a startup then?

11:48Bilal Hafeez: And because I'd already had a career of 20, 25 years in finance, I had a reputation in the market. I thought, look, I can take that risk because I can essentially use my contacts and my reputation to help power the new startup. And at the same time, by being a startup, I could be very creative as well. Amazing. And I guess shifting gears a bit to the commercial side of things, as a strategist, what would you say are the key forces shaping the macroeconomic landscape right now? So right now, I would say two overarching themes that are really dominating macro markets at the moment. One is the whole AI revolution and how that will impact the world.

12:31Bilal Hafeez: So part of it is very much in the short term that if you look at US growth, which has been quite strong this year, most of it is being driven by capex, capital expenditure. So the C plus I plus G in the aggregate demand function that you learn at school at uni, driven by the I part of it all. and it's historically record paces the capex this is all these data centers that are being built and so there's a question mark around how sustainable is that is it a bubble is it not a bubble are we in some kind of tech revolution or not so there's this whole bundle of debates around that sort of topic so that's one big force that's driving everything in the world right now the second one is fiscal issues that since covid government debt levels have shot up governments are borrowing at levels that are incredibly high, especially the US.

13:17Bilal Hafeez: And people are worried about the level of debt, how will it be repaid? And the market seems to be jumping and targeting different countries any given week. At the moment, there's a big focus on France, its bond yields have gone up relative to say Germany's, because the market believes that France can't manage its fiscal deficits, that it's creating some instability with the French government. People have ongoing in questions around the US debt levels, UK as well. So there's this kind of big fear around debt levels. And so that's probably the two, the other ones. So AI on the one side, which is optimistic, you could say this kind of revolution, then there's a fiscal issues, which is the more pessimistic.

13:59Bilal Hafeez: And between the two, you're the market is trying to work out which way I think all the key markets will go. It's very interesting to hear. And a very good roadmap about what's affecting the UK as well as on a global scale. And it's fascinating because so much of how we analyse those forces is changing. And so I guess linked to what you were saying earlier, looking at your own experiences, how has AI transformed the way that you work day to day? And what skills would you say are the most important for university students looking to enter this industry? Yeah, for me, I think AI is revolutionary as a tool.

14:36Bilal Hafeez: Leaving aside what you think is the right evaluation for tech stocks as a tool itself, it's revolutionary. Just like the internet was revolutionary, just like spreadsheets were revolutionary, AI is revolutionary. I'd also make the distinction that there's classical machine learning, which is decision tree models, neural networks, which is pre-generative AI, which were useful in many cases. But generative AI, as we now call AI large language models, is what we now think about AI. Like that specifically, I think is huge. And I use it a lot. And conceptually, the way I like to think about the real power of AI, which I think a lot of people don't quite appreciate, is that if you think about coding, before LLMs, large language models, the reason people had to learn coding, whether it was in the early days, Fortran, Pascal, and then later C, C +, and then Python, was because humans, people, had to learn how to speak like a machine for the machine to know what to do.

15:36Bilal Hafeez: And so that was what coders were there for. And you had this special class of people who could code, and that was an advantage. And the advice of students always was learn Python for the last 10 years. But what AI has done, in my view, is it's disrupted that completely. Now, because of large language models, machines now know how to understand humans. so you can use plain language and the machine will then understand what you want it to do and so suddenly you don't need to code anymore so suddenly large language models allow everybody to code and you'll see this when you type into a large language model you put a question in it could be data analysis question like transform this data series or whatever if you look at the reasoning it very quickly goes to python code if you look at the reasoning off it and that's been one of the big changes with large language models where at the beginning when they got launched four or five years ago, they were really just a stochastic parrot.

16:34Bilal Hafeez: They were just trying to predict the next word that should come in the sentence. But two, three years ago, what happened was all the AI companies added coding harness around that. So what would then happen would be that you ask it a question, then immediately the AI starts to reason around, okay, what is this question leading to? And then once it understands what the question is, then it quickly moves to code. And then the code does all the problem solving. So the first wave of AI couldn't really solve maths problems because it was just guessing from text how to solve a maths problem. Since, say, the last two, three years, it can solve maths problems now because it goes very quickly to Python, which is deterministic, and then goes to Python libraries, pulls the libraries then uses code to solve a maths problem.

17:24Bilal Hafeez: So for me, that's the big revolution. So now in my case, what I can now do is that when I'm on the move, like if I'm on the tube or something, I go to my AI and I say, look, we're coming to the end of the month. I want you to pull up this data. I want you to look at seasonal patterns. I then want you to do a trading back test on it. And I want it done before the end of my tube journey and it can get it done. Another thing I do often with AI now is I have some charts I want to get done using Excel is really fiddly with charts. And I basically use my own skill, my impromptu that I developed that formats the charts almost perfectly.

18:02Bilal Hafeez: So in essence, it's like having this super smart bunch of agents or interns working for you that you can get to do stuff 20 hours a day, any point of time, and they can do huge amounts of tasks that would have taken you or your analysts a long time to do. Definitely important to learn how to leverage AI, especially in this era. Thank you. That was very insightful. And as we close out today's episode, what is the one key message or piece of advice you'd like to leave with our listeners? Again, if I can do two. One in relation to AI, This is the big, sort of the tricky one with AI is that AI is a very powerful tool, but the risk for young people in particular is that it can stop you thinking.

18:53Bilal Hafeez: You essentially outsource your thinking to AI, and that's a huge problem. So my advice there would be that when you have a problem to solve, like some school exercise or some dissertation, whatever you're doing, first use your own brain to try to work out what the answer is. Force your brain to do the work. only then for the second edit then go to ai i think the mistake a lot of people do is they when they get some essay question they first go to ai to say look what should i look at that's a huge mistake you have to use your own brain to do the first part the hard work and then use ai for refining and editing and a linked part of that all is you have to read you have to read books whatever the books are if you're not able to complete a book from cover to cover that's a problem.

19:39Bilal Hafeez: And I think most people can't anymore. If you are able to, that's a superpower. So I think you will need to nurture one's own thinking as much as possible. And reading is the barometer of that, your ability to think. So that's the first piece of advice. The second one is even more important than that, which is that you have to develop your character as a person, you know, spiritually, mentally, in all those dimensions, you have to think about what is the purpose of your life on earth. And that always has to be your guiding light. And whatever that may mean if you come from a certain faith tradition interpret it in a way that fits your values if you're not from a faith tradition then use psychology and other sort of means to do that because we're in a world at the moment that is polarizing in different ways and we need to and youngsters to some extent are the future and are the the generation that will that will be dealing with the problems and will be the savior so to speak for all the problems my generation and my former generations of course so you always have to be thinking what is the purpose of your life and you can get bogged down into i need to get first i need to get this job or that job but you always have to think what is the purpose of getting that job is it just for the sake of getting that job because if you don't have that larger purpose in your mind what will end up happening is you'll always be chasing the next high or be okay i want to get that big job at goldman's or citadel or whatever then once you're there it'll be okay i just want to get this bonus or then once you've got it, you'll go to the next one.

21:08Bilal Hafeez: So that urge to always get the next thing will stay with you for the rest of your life, and you'll end up becoming a deeply unhappy person. But if you have a larger purpose, which could, for example, be to help others or something, to be there as support for others, then that sort of reframes everything. So that essentially tells you that the purpose of your job is not some kind of ego trip, rather, it's a means for you to do good in some way. I think that's really good advice to end on. And I just want to say thank you so much for all of your insights that you've shared with us today. And thank you to our listeners as well for joining us on this episode.