Grind and Renew
That post was about trying to reframe a career in a sustainable way. In a way that aligns with how our idiosyncratic energies work. Aligned with the types of people we want to be around.
The largest payoff to this isn’t immediately obvious. It relieves the pressure to build a nest egg with an overengineered margin of error. Instead of relying on assumptions of things that are out of your control like returns and inflation you choose to rely on your human capital.
The key is that you will still be excited to employ your ability and the returns that come from being a willing perma-learner. You won’t have a strong desire to stop working since you chose a stroll that forgives you for meandering instead of a sprint. A sprint taxes you not just physically, but mentally, by making you think there’s only one way to win. Racing is insidiously expensive because it directs your gaze to a finish line. A bizarre approach to life, since tomorrow is never guaranteed.
The post led to many responses (it’s the most reactions I’ve gotten from a post, especially as a percentage of total views). Many of you are thinking deeply about the same topic. I’ve had a few young people respond. I am impressed at how deliberate they are about their long-term strategy. I was never that mature. Unsurprisingly, most of the responses came from finance/trading folks of similar age as me. Many are successful or downright rich. Some of them have been sick of their profession for years but in the absence of a roadmap can’t pry themselves away from stacking more chips.
In the below Money Angle section, I am re-printing one of the emails I received. In response to sentiments that many of you share, here are 2 useful posts:
The Road To Self-Renewal (speech transcript)
“The barnacle is confronted with an existential decision about where it’s going to live. Once it decides.. . it spends the rest of its life with its head cemented to a rock..” End of quote. For a good many of us, it comes to that...We’ve all seen men and women, even ones in fortunate circumstances with responsible positions who seem to run out of steam in midcareer.
A famous French writer said “There are people whose clocks stop at a certain point in their lives.” I could without any trouble name a half of a dozen national figures resident in Washington, D.C., whom you would recognize, and could tell you roughly the year their clock stopped. I won’t do it because I still have to deal with them periodically.
You’re young and moving up. The drama of your own rise is enough. But when you reach middle age, when your energies aren’t what they used to be, then you’ll begin to wonder what it all added up to; you’ll begin to look for the figure in the carpet of your life. I have some simple advice for you when you begin that process. Don’t be too hard on yourself. Look ahead. Someone said that “Life is the art of drawing without an eraser.” And above all don’t imagine that the story is over. Life has a lot of chapters.
The individual intent on self-renewal will have to deal with ghosts of the past — the memory of earlier failures, the remnants of childhood dramas and rebellions, accumulated grievances and resentments that have long outlived their cause. Sometimes people cling to the ghosts with something almost approaching pleasure — but the hampering effect on growth is inescapable. As Jim Whitaker, who climbed Mount Everest, said “You never conquer the mountain, You only conquer yourself.”
By midlife, most of us are accomplished fugitives from ourselves.
How To Quiet The Chatter In Your Head (4 min read)
If I tell you to “not think about a white bear”, you know that’s going to backfire:
We can’t simply prevent unwanted thoughts. In fact, trying too hard can result in what psychologists call “ironic processes.” That is, you get exactly what you didn’t want.
You cannot battle unwanted thoughts head-on. Even ones you know are wrong. This short post offers oblique strategies that work. I re-printed my favorite. I think these strategies will even work for unlearning ideas that cling to you even though on an intellectual level you have debunked them, but haven’t yet internalized the debunking.
When you can’t stop thinking about something, write it down. “Write your deepest thoughts and feelings about what happened to you,” Kross advised. Don’t worry about being eloquent, just keep your pen moving. Kross pointed out that when you do this for 15-20 minutes a day for a few straight days, you’ll inevitably start giving the story a structure, including a conclusion. “When we have a story to make sense of our experiences, we start thinking about them a lot less,” he said. “But if we don’t have a really good story…our mind keeps on trying to get us to that place and it will, as a result, often bring those experiences to mind.”
Give yourself a break from analyzing your chatter. Kross said your thoughts are like a bus: passengers get on and off, some are well-behaved, others are rude. You can’t control who gets on and off, but you can control how much effort you expend scrutinizing the rude passengers.
Venting has a place, and often feels good, but it can backfire. Beware of “co-rumination.” In other words, a friend who effusively affirms your feelings is obviously trying to help, but while they’re satisfying your emotional needs (your need to be heard and validated), they’re not helping with your cognitive needs (the need for closure and reframing). That can actually leave you dwelling on your inner chatter even more. So you may not want to approach your most solicitous friend. Instead, go for the one who tends to help your reframe things, or who asks if you might consider other perspectives. Kross said that once when he was really upset about something, a friend he vented to asked if he could just ride it out until he felt better. Kross realized he could, and did. It was simple, but helped shift his focus.
If you just can’t stop asking yourself “What if?”, try to replace it with “So what?” and see what happens. As in: “So what if I keep thinking about a white bear? Happens to the best of us.” As Kross put it, “The beauty of ‘So what?’ is it flips the whole internal narrative on its head. It’s neutralizing it.”
This is an email I received from a long-time friend and successful founder of an options trading business (he is bankrolled by a prop shop). He’s chopped a lot of wood, so I changed some details to keep insiders from figuring out who he is. He was very forthcoming and approved this of course.
My understanding is that loss aversion is the idea/phenomenon of different reactions to “losing” versus “winning” despite the same (or even a worse) net actual outcome. I believe there are several studies of this in a controlled/lab setting, but I didn’t go back to review, as I just needed to get this sent!
The loss aversion reference from our call, referred to annual p/l, as I recall. Below, are a few examples (with more or less real world inputs from my past few years).
-In scenario #1, we are having a rough year, losing after-expenses around mid-year. Then, we catch one big winner and a strong q4, including 3mm in the last week of the year during the xmas crash. We finish the year +4mm net. Overall, that's a mediocre year to historical avg. But, given the alternative-- an ugly losing year with no bonus, and possible clawbacks going forward, I'm thrilled to realize 750k or so from that slice of my comp (my specific team performance). That was basically 2018...
-In scenario #2 we are having a home run year, +20mm in the account in March. Then the Cboe closes for 6 weeks while we have our biggest position in 10 years of XXX trading. The position bleeds, we have no outs, no volume... then the XXX makes several gaps from [low number to high number], and right back to [low number], on no liquidity. We negatively scalp (10mm). XXX p/l is now gone, and the product is dead, and Cboe remains closed. Meanwhile, Softbank happens in tech, and we are short a lot of tech vega in YYYY, etc. We lose another 5mm there. So we go from +20mm to +2mm in 3 months (expenses never slow down). We spend the 2nd half of the year grinding back some $$, and finish around +7mm. I get paid a lot more than in scenario #1, but I have horrible PTSD, I don't sleep for months, I lament (daily..) what could have been if I had booked a 30mm p/l year, and it's misery all around. (My XXX trader even had a nervous breakdown and had to take a leave from work.) This is obviously 2020. Despite the much better outcome, it’s a much “worse” year in terms of performance/comp. but it’s all in my head. Overall, I was paid more, which in trader land, should always be better. Right? Right?!
I think these longer term (annual comp) examples illustrate the concept of loss aversion quite well. But there are of course countless others. Just Friday, as I typed this, another arose. We had a winner to the morning news/gap in ZZZZ. Long gamma was good for about +50k. Market opened, we start trading, stock keeps going. 25%, 30%… almost 50%. We were hedging deltas, and then sold some gamma that was quickly awful. We now have an Opening p/l +130k, day p/l (60k.): net +70k. The outcome is better than before, but I’m a hot mess, cursing my decisions and the stock. Better outcome, worse head space. There are so many examples of loss aversion, many of which I’m sure you have considered during your career. But annual comp and intraday hedging of a winner are 2…
I’m not sure if this is at all interesting as a potential future post, but the topic fascinates me. The human brain is just not wired to properly handle these things very well. Or, at least mine is not.
That story is the embodiment of Lawrence Yeo’s terrific Speculation: A Game You Can’t Win.
I realize the numbers my buddy is throwing around make this sound like a high-class problem. But I’ll point you to a post that will prompt you to think deeper before concluding you can't learn from it.
Are You Playing to Play, or Playing to Win? (26 min read)
This post is fantastic on its own. You might even realize you’re a…“scrub”. But it’s a giant doorway to self-examination. It makes you wonder if you are playing to win. But, and I think this is actually unintentional, the post shows the major limitation of analogizing games to life. Check my short tweet thread before or after reading the post to see what I mean. The expression “play stupid games, win stupid prizes” comes to mind. Only you can decide what’s stupid. We are seeing this happen in real-time, with people calling this period of massive turnover and quitting the “Great Resignation”. Then again, just as we mix up bull markets with brains, there’s a good chance asset markets have pulled many people closer to “their number” and accelerated the types of questions many would usually wait another decade to wrestle with. [The nihilistic whisper in my ear, is the quickened trajectory accelerates the feeling that as we peel back one delusion we just find another. If the onion of delusions was a grand secret, its nature was typically revealed to the aged under the stacking pressure of successive self-crises. But today, that reality is creeping broadly into younger cohorts who, when they threaten to not play traditional games, seem to be serious.]
I just learned the term “friendcatcher”. It made its way online 12 years ago in a Hacker News comment. If you look closely it was first uttered by none other than @patio11’s mom.
I have been working on a small repertoire of cocktails which always makes gatherings more fun and very much in the spirit of the word “friendcatcher”. (You know you were just punned right?)
One of these cocktails was an accident. It tastes like a blend of Coke and Diet Coke….I know, I know, don’t ask me to bartend all at once. A genius needs space people.
Mix in a shaker with ice:
2 parts gin
1 part Creme de Cassis
1 part lemon juice/syrup
Strain and top off with Topo Chico sparkling mineral water.
Cheers and happy Sunday!