Monday, October 15, 2018

On Being Wrong... and Profiting Anyway (Quotes and Wisdom)

While revisiting the 1996 documentary Triumph of the Nerds this week, I came upon this fantastic segment on Apple co-founder, Steve Jobs.

Finding it eminently quotable (and useful), I just had to share some of Jobs' thoughts from this special clip.

"I don't really care about being right. I just care about success." - Steve Jobs



While Jobs was an entrepreneur in the emerging computer industry, and not an outright share investor or speculator, his quote about the relative unimportance of being right hit me right in the trader's gut.

Here is a game changing company founder saying, "you know what... I don't need to have the best forecasts or even the most original insights and innovations (hence the looting of Xerox's PARC). I don't need to always be right. I just want to ship the best products and win. That is what will ultimately make Apple the most successful company in our industry."

Now anyone who has studied modern business and the art of the "pivot" will understand that success may not come through your original idea or business plan. It may be the second or third business model you pivot to that leads you to find your true purpose and success.
Traders and investors in the capital markets must also realize that the need to be "right" while proving the markets wrong can lead to significant losses of capital or financial disaster. I'm sure we can all think of some high profile cases (ruined hedge funds and bailed out banks), or our own experiences in the market, where such a scenario has unfolded.

We can doggedly insist that we are "right" while we continue to lose money (as investors) or market share (as businesses), or we can learn from what real world conditions are telling us and align ourselves correctly to learn and profit from a new course of action.

So with that in mind, let's soak in some wisdom and see if we can change our attitudes and long held beliefs about being wrong. After all, no one is right all the time. How can we shift our focus from a need to be right to embracing ambiguity or being wrong, while learning from the situation?

Quotes: On Being Wrong and Learning or Profiting Anyway

"It is better to be roughly right than precisely wrong." - John Maynard Keynes

“There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” - John Kenneth Galbraith

"It's not about whether you're wrong or right in this business, it's about how much you make when you're right and how much you lose when you're wrong." - Stan Druckenmiller, citing lessons from George Soros

"Really good traders are capable of changing their minds in an instant. They can be dogmatic in their opinion and then immediately change it." - Steve Clark, via Hedge Fund Market Wizards. 
 
"The only thing to do when a person is wrong is to be right by ceasing to be wrong. Cut your losses quickly, without hesitation." - Jesse Livermore

"I became a winning trader when I was able to separate my ego needs from making money. When I was able to accept being wrong. Before, admitting I was wrong was more upsetting than losing money." - Marty Schwartz

"My stop loss method had two effects. It got me out of the wrong stock and into the right one." - Nicolas Darvas

"Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum drawdown." - Paul Tudor Jones

"I think there's a certain amount of humility with top traders. You have to make enough mistakes and learn to overcome them." - William O'Neil

"It is very important to know the edge of your own competency. You're a disaster if you don't know it." - Charlie Munger

"Being wrong isn't a bad thing like they teach you in school. It is an opportunity to learn something." - Richard Feynman
 
"The type of thinking that is necessary to succeed in the markets is entirely different from the type of thinking required to succeed in school... Mistakes are a good thing. They provide an opportunity for learning." - Ray Dalio, via Hedge Fund Market Wizards

"A prudent speculator never argues with the tape. Markets are never wrong, opinions often are." - Jesse Livermore

"Speculation requires and teaches you to accept reality as it is, rather than reality as you would like to have it." - Rakesh Jhunjhunwala

"The best thing you can do as a trader or investor is learn to recognize and cut your losses. Due to our schooling system, we equate being wrong with losing points and esteem... In the markets, losing or making money is not about being right or wrong. We need to manage risk and stick with our process." - Brendan Moynihan, What I Learned Losing a Million Dollars

"You can't use analysis to overcome fear of being wrong. More analysis will not produce better trading results." - Mark Douglas

"No problem can be solved from the same level of consciousness that created it." - Albert Einstein

"The best training ever for rigor & critical reasoning is trading. You can only survive long term by going against the wrong consensus by "experts"." - Nassim Taleb

"If you act in sync with the market, trading can make you rich. If you argue with the market it will surely make you poor." - Mark Minervini

"If you want to improve, be content to be thought foolish and stupid with regard to external things." - Epictetus

Can you think of an instance where you realized you were wrong, or changed your mind and then benefited or learned from the situation? Tell us about it!

Keep these quotes handy, or print them out, and share them with your friends and family.

Maybe you will help someone change their outlook (or your own) and profit by doing so!

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Saturday, October 13, 2018

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Bernard Baruch Trader Speculator Writing B&W

Thursday, August 16, 2018

Mark Cuban on Elon Musk and Tesla: "You're Investing in an Entrepreneur"

Well the long knives were certainly out for Tesla (TSLA) and its CEO, Elon Musk this week.

Wall Street, legal firms, the SEC, and media talking heads were all roused to action (or comment) over Musk's recent proposal to take the company private at $420 per share.

After floating the idea (via Twitter) of a private buyout of Tesla on August 7, Musk wrote to Tesla employees and shareholders about his vision for running Tesla as a private firm in a blog post entitled, "Taking Tesla Private".

Among the advantages of operating Tesla as a private firm (as well as the disadvantages of being a publicly traded company), Musk lists the following: 

"...First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best. As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. 

Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. 

Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company."

In Elon's view, Tesla and its shareholders are currently weighed down by unfair attacks from short sellers and unscrupulous journalists. Going private would eliminate the distractions faced by fighting short sellers and may also reduce the high media glare.

Additionally, Wall Street's notorious short-termism and quarter-to-quarter view of a public company's prospects often clash with the longer-term vision of entrepreneurial company founders such as Musk.

Speaking to that point of entrepreneurial leadership, Mark Cuban recently shared his thoughts on Tesla and Elon Musk's vision in an interview with CNBC.


 
Leading off with his main point, Cuban reminds all of us that "when you invest in an entrepreneur, you get the entrepreneur!". An entrepreneurial founder is going to have a long-term vision for the company that a professional outside manager or CEO won't have.

When you think of the best, most disruptive companies of the last 25 years or more, you are invariably thinking of an Apple, a Netflix, or an Amazon. These are the company founders, people like Steve Jobs, Reed Hastings, and Jeff Bezos, who confounded the public and the Wall Street analysts early on with their unorthodox thinking and approach to running innovative, publicly-traded companies.

As Mark Cuban points out in his interview, "At one point everybody complained about Steve Jobs (who was fired in the '80s)... everybody complained about Jeff Bezos [no profits, no quarterly guidance]. Reed Hastings, same thing...

...Everybody complained about 'the fundamentals' of all these companies... these guys [founders], they don't cash out like me. They stay there because they're committed and dedicated. You've got to take the uniqueness of each person as part of what you're invested in."
 
On the subject of short sellers, Cuban added, "I would tell Elon that the shorts are your friend. The beauty of shorts is, if you have a great quarter and you do your job, they have to buy back their position [at higher prices]. Rather than getting upset about shorts, know that the more shorts you have, the more buyers you have in waiting."

Note: this point about Tesla shorts adding fuel to the fire was made here last year. 

Great entrepreneurs want to stick around for the long haul and tackle the issues their companies face. As Mark Cuban reminds us, founders like Musk, who "sleeps in the factory", are uniquely driven and have their own unique way of communicating with the public. That's part of what makes these entrepreneurial tech companies so exciting, so competitive, and ultimately, so successful. 

Disclosure: I currently own a very small amount of Tesla (TSLA) shares via the ARKW etf.

Related posts:

Tesla is Exciting... But Its Stock is Stagnant

Elon Musk: The Future We're Building at TED

Reed Hastings, Netflix CEO Interview w/ Charlie Rose

Tuesday, June 19, 2018

Interview with Relentless author Tim Grover: Michael Jordan's Personal Trainer on Mindset and Performing Under Pressure

"The one thing that Michael [Jordan] has, that really stands out, is that he doesn't compete with anyone else. He competes with himself." - Tim Grover.


Michael Jordan Air Jordan slam dunk contest free throw line
Air Jordan free throw line slam dunk

How appropriate that this interview with Michael Jordan's personal trainer and Relentless author, Tim Grover should appear in issue #23 of the Finance Trends Newsletter.

Although I had planned to highlight Tim Grover's excellent discussion on mindset and champion-level performance in our very next newsletter, I did not anticipate this fortuitous numbering sequence. Actually, I hadn't noticed it until I typed up today's email subject heading while counting back through our prior issues.

I'm excited by the coincidence, but it's only because I'm even more excited to share Tim's message with you. You might say that his interview struck a chord with me.

But first, let me briefly tell you why I find this interview to be so crucial. Our mindset and our beliefs around what is possible dictate what we can achieve in life. If the winning mindset is not there, the desired results will not materialize for us.

In trading, business, and sports, we are entering a global playing field of high-level competition. We're not only competing with the people (or organizations) in our immediate orbit, we're increasingly competing against those half a world away.

We're also competing with ourselves. As many great traders and investors have remarked, the greatest obstacle to success is not other traders but ourselves - our own psychology.


This is also the theme of Tim Grover's quote (see above) about Michael Jordan, the consummate competitor.

Tim Grover trains with Michael Jordan, with Kobe (right) via Sports Illustrated.

Now, if I can spend an hour or two with the guy who helped turn Michael Jordan "NBA Phenom" into Michael Jordan "6x NBA Champion" (he has helped Kobe and other NBA stars get there too)... well, you can bet I'm going to listen well and then do my best to apply what I've learned.

 
Interview with Tim Grover: Relentless author, trainer to Michael Jordan and Kobe Bryant.

Some highlights from the interview...

Tim grew up in Chicago and played college ball at UIC, but realized that he would not realistically make it to the pro level. That realization was brought into sharp focus as a college sophomore when he squared up on the court against a high school junior named Tim Hardaway.

"I still wanted to be involved in sports, ideally basketball. Let me figure out a way to help other athletes reach the top of their game. I studied kinesthiology... and worked with anyone I could to learn to apply it."

Grover asks, "You know how I choose a client or [collaborator] someone to listen to? They have to be as fucked up and as crazy as I am!"

He is not one for the philosophy of balancing yourself with a partner of differing personality. He wants someone as intense and driven as he is. In his view, you don't want a partner who is pulling you away from the person you really are.

Tim shares a great story (which I won't replay here) of how he finally connected with Michael Jordan and why "the best of the best" was motivated to work with him.

"A lot of individuals, especially in this generation, are jumping around too much these days. They're using this trainer one week and another next week... or this mentor one week and this person on YouTube over here... they're getting all this conflicting information."

Michael and Kobe mastered one aspect of the game. Then they moved on to a new aspect of the game. Master one thing at a time.

Grover divides performers into 3 levels of effectiveness: Coolers, Closers, and Cleaners. The "Cleaners" are top level, clutch performers who always reach down inside themselves to nail the winning shot. They are instinctual in their approach, deeply focused on the task at hand, and they set the standard for excellence.

"Your obligation to yourself to be the best has to be greater than any outside pressure on you." Tim cites Tom Brady and MJ as athletes who exemplify this trait.

"We're not born with greatness. That's bullshit! You earn greatness. You have to fight like hell to get to paradise. People don't know how to fight anymore. People quit [too often these days]... It's the icons who fight like hell to succeed."

Top level individuals stand alone. The inner circle of the "greatest" individuals is so small. Distance becomes their best friend. Most people want to join the group, the in crowd, the fraternity. "Who do you idolize the most? The ones that stand alone."

As Tim points out, the conventional wisdom of "surround yourself with positive people" is bound to backfire if all those people just smile and tell you what you want to hear. You need to surround yourself with people who will straight up tell you the truth (on this point I agree 100%).

We're all going to fail at something. It's only failure if you don't bounce back.

On dealing with pressure: "Everybody can handle pressure. Most people decide not to. We run from it. Stress is just pressure you won't deal with." 


The Importance of Mindset: "Before you have an exceptional skill set, you need to have a great mindset. Michael and Kobe weren't the greatest athletes I have ever worked with. They were great athletes, but their mindset is what separates those individuals.Tom Brady was drafted 199th (6th round)... he wasn't the best athlete. But from a mindset standpoint, he is a killer!"

Related posts:

More from Tim Grover, author of Relentless: From Good to Great to Unstoppable

Interview: Tim Grover, trainer to NBA stars, talks Jordan, Kobe, Lebron and Durant 

Developing Your Mental Trading Edge: Webinar with Dr. Andrew Menaker

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Friday, April 06, 2018

Unlocking Valuable Info: Moe Berg, Espionage, and Investing

Welcome, readers. This article on the life of ballplayer/CIA operative, Moe Berg and the role of information gathering in espionage and investing first appeared last month in the Finance Trends Newsletter.

Spring, when a young man's thoughts turn to baseball, young ladies, and... espionage?

Well, that last part may seem unusual, but allow me to explain.

I've been a baseball fan all my life. Even in recent years, when I have rarely felt the urge to watch professional sports, I often find myself reading about the great ballplayers of my youth or watching highlights of games from the past.

One of my great pleasures as a boy was reading about baseball's earlier eras and its great heroes (or tragic figures) and colorful characters.

Yes, in the pre-internet world we read tangible books. One of my early favorites was a book entitled, Baseball Anecdotes. If you have a baseball fan in your family I highly recommend it. Paperback copies are inexpensive and the book can be easily read 1 or 2 chapters at a time.

Here was my early introduction to a journeyman ballplayer of the 1920s and 1930s named Moe Berg.


Moe Berg Baseball Card 1933 Goudy


Berg was a journeyman in more ways than one. In addition to playing for six major league teams (including two separate runs with the Cleveland Indians) in his 15-year career, Moe was an avid traveler who spoke seven (or more) languages with great skill. He was also a spy.

Moe parlayed a 1934 trip to Japan into a clandestine sightseeing tour of Tokyo. With a newsreel film camera hidden in his kimono, Berg managed to sneak up to the roof of a tall hospital building and film the Tokyo skyline and its harbors! For years it was believed that his film footage, loaned to the U.S. government, was helpful in aiding WWII bombers in their air raids on Tokyo.



Moe Berg Japan Tokyo 1934 Film Camera Spy


What is certain is that Moe Berg was recruited into the war's new intelligence program, the OSS, an early forerunner to today's CIA.

In fact, while watching SportsCentury's episode on Moe Berg, I noticed that several of the interviewees were not old teammates and sportswriters, but OSS spies and CIA historians!


 

This aspect of Berg's life and work was expanded on in an episode of the Baseball Phd podcast.



The following is taken from CIA historian Linda McCarthy's portion of that podcast, as she describes Berg's value to the war's intelligence program: 

"Moe Berg had this tremendous intellect...like a chess master who can envision what his opponent's next move and next 20 moves will be..."

"The problem we have in today's intel field is we have so much information coming at us. The real skill comes in being able to sift it down into something that is a) accurate, b) readable, and c) has value."

"I've been told that his CIA field reports had some of the best writing that they [fellow officers] had ever seen. I tell new hires, if you want to know how to write a decent cable from the field, you need to study Moe Berg." - Linda McCarthy.

This ability to take in a great deal of information and hone in on the truly important items is crucial not only in espionage, but in the field of investing.

Not only was Moe Berg able to obtain crucial wartime intelligence data, he was uniquely skilled at conveying that valuable information in a highly readable way.

As traders and investors, we need to parse out the signal from the vast fields of noise. Whether we are taking in company fundamentals, technical price data, or industry news and opinions, it is imperative to focus on only the core data that is most useful to our particular strategy and needs.

When we go beyond that, and begin taking in less useful information and opinions, we subject ourselves to the problem of information overload.

As the "noise" increases, we lose the valuable signals within a sea of data, subjecting ourselves to the fear and emotions of outside "news" and opinion. We may also find ourselves subjected to "analysis paralysis", or the inability to take decisive action when we are bogged down with too many options.

Here is what legendary investor and American statesman, Bernard Baruch had to say about the problem of information overload back in the 1950s: 


"If anything, too much information may be available today. The problem has become less one of digging out information than to separate the irrelevant detail from the essential facts and to determine what those facts mean. More than ever before, what is needed is sound judgement." - Bernard Baruch, 1957

I hope you enjoyed this week's letter and will find time over the weekend to delve into the related podcast and video on a fascinating figure in American life, Moe Berg. You can read more about Moe Berg's life in baseball at the Baseball Hall of Fame website.

Moe Berg Baseball Chicago Photo Spy Espionage

Perhaps you'll also draw some useful parallels on good intelligence gathering and active investing! I hope they will serve you well in the future.

Related posts:

1. Maximize Your Trading Gains, Not Wins: William Eckhartd Interview.

2. William O'Neil Interview: How to Buy Winning Stocks.

3. Babe Ruth on Persistence: Keep Swinging Your Bat.