‘We’re blind to our blindness’ is a quote by Daniel Kahneman from an interview back in 2011. This quote reveals much about the human condition which reveals itself in the realities of a person’s work as a trader or investor.
Trading Problems as Symptom not Cause
When I meet new trading and investing clients who are keen to develop and improve their performance, I ask them ‘what aspects of their work is holding them back?’.
Their answers typically involve a list of behaviours such as fears, being too emotional, stubbornness, irrationality, lack of discipline, impatience and a host of other behaviours.
“If only I could get past my ‘Fear of Missing Out’ ”, is a common type of response I hear.
The difficulty with ‘identifiable behaviours’ is that often they are not the cause of people’s problems but instead the symptoms of challenges which lay far deeper. Typically, the cause of problems resides well beneath the level of consciousness. ‘Out of sight and out of mind’. – These are the blindness that people are blind to.
As an analogy consider a tree: What you see are the visible aspects of the tree.
This is not however the full tree. The tree's root system is out of sight. This root system has a huge impact on the growth of the tree, but is not visible.
Even then that is not the full picture. The tree doesn't exist on its own in a vacuum: Stand back further and the complexity grows.
The trees health and wellbeing is impacted by environment, its interaction with other trees and their root symptoms, climactic condition, weather events, quality of soil, nature; plants and animals which live off and interact with the tree.
Behaviours as symptoms are merely presenting factors of far deeper causes and factors both inherent and relational.
Behaviour as Symptom: Consequences of trying to fix symptoms.
There are so many unseen and unknown factors which are subtly pulling the strings on our decision-making when trading and investing. This is what makes the job of trading so difficult.
The ‘behaviour as symptom’ issue is however more damaging than merely mislabelling. Once the problem is incorrectly labelled, it is then compounded by trying to self-fix symptoms.
In medicine, problems are resolved not by fixing symptoms, but by attacking causes. The symptoms may disappear for a while, but the cause of future problems remain deeply entrenched.
In trading, failure to correctly attend to the causes of issues eventually impacts confidence. A person's self-belief starts to erode and self-doubt slowly increases.
Self-Awareness, Reflection, Standing back.
Trading does not occur in a vacuum. Traders sit within a complex web of relationships, both work and personal.
The job itself involves encountering uncertain and extremely complex situations whilst trying to find a path through the complexity of financial markets.
At the core of this is the individual themselves trying to fight their own ego. Their ego seeks to preserve feelings of self-worth and personal identity which have been forged throughout their life. The ego has been further re-enforced by its own efforts to preserve itself.
Preservation of self, through the distorting lens of ego, is one of the greatest inhibiters to trading success. Faced with this, people are limited in their ability to perceive a true and realistic picture.
Everyone who trades or invests faces behavioural challenges. Those best equipped to deal with the behavioural challenges are the ones most likely to ultimately succeed.
It is said often of people such as Warren Buffett, Ray Dalio, Paul Tudor-Jones, that their ‘Intellectually Honesty’ is their greatest gift.
I see the same in many exceptional traders I have worked with. These people recognise their flaws, fully own their mistakes and errors, and see the emerging pictures that bit more clearly.
These traders are always curious, never accepting that they have the answers. They constantly ask questions and challenge their own, as well as others, ideas and perceptions.
With some outstanding traders I have recognised a trait called ‘Egolessness’. This is managing the ego in a way which captures its best aspects and downplays its worst.
We must learn ‘how to be’, to be better than we currently are.
'Behavioural Trading' is something I talk about and write about often. When I coach individuals I am often working on helping them develop their 'behavioural trading' aspects. 'Behavioural Trading' is about coming to terms with how one really is and helping to shape an approach to trading around that reality.
Returnign to the Daniel Kahneman quote, the full quote is even more revealing than the short excerpt: “We're blind to our blindness. We have verylittle idea of how little we know. We're not designed to”.
Your job as a trader, investment professional, or a manager, will be greatly helped by becoming a little less blind, and working to counteract some of our 'metaphorical' design flaws as humans. It is not just the market you have to overcome, it is also yourself.
We run coaching and development programmes for individual and teams engaged in Financial Market activities. In addition we help Financial Market businesses develop 'Organisational Effectivessness.
If you are curious about how we could help you or your business, please email us at email@example.com. or call +44 (0)7753 446097.