Dedication, Passion and Purpose

September 25, 2012
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The small things are what make a man the master of his craft. That was a clear underlying theme in last week’s piece, What Sushi and Trading Have in Common.

We are grateful for your responses, many with the flavor of this one, from Mark M.

 I had to write and express my gratitude to you for this moving account of Jiro Ono.

 Thank you for re-igniting the need for dedication, passion and purpose.

 Thank you so much.

Most welcome! We’re happy to share the stuff we get excited about…

For another prime example of dedication, passion and purpose, see our recent Trading Wisdom entry, How Jerry Rice Achieved Greatness.

The Rice example is both inspiring and a little intimidating, in that it simultaneously illuminates two things:

  1. An exceptional level of outperformance is possible, from all of us, if we truly seek to attain it.
  2. An incredible intensity of commitment is required.

The good news is, you don’t have to be born a genius, a prodigy, or a superman. Your goals and dreams can be achieved “the hard way,” just as superstars like Rice achieved theirs.

But that is also the bad news, because now there is much less of an excuse for not doing what you first set out to do…

Another book on our reading roster:The Genius in All of Us: New Insight into Talent, Genetics and IQ” by David Shenk.

The central theme of Shenk’s work is that “gifts” are more or less a myth — that genes do not determine traits on their own, and “intelligence is a process, not a thing.”

Another theme is how hard all truly great practitioners — even the prodigies — had to work.

Mozart is a prime example. Called a prodigy of prodigies by everyone, including his own family, little Mozart actually had the tremendous environmental advantage of being immersed in an extraordinary teaching and training environment from the time he was in diapers.

In addition to an aggressively devoted teacher / father – who saw his young son as the family’s meal ticket – the young Mozart learned from watching his older sister, Nannerl, and picked up in all the areas she left off.

What’s more, Mozart’s first dozen or so concertos and symphonies, while penned at an impressively young age, were not that exceptional at all. It took him ten to twenty years of constant practice and effort, with a prodigious amount of output, to reach the levels of supposedly effortless genius he would later come to be known for.

Mozart himself was no stranger to this reality. “People make a great mistake who think that my art has come easily to me,” he once wrote his father. “Nobody has devoted so much time and thought to composition as I.”

We inhale stuff like this (Shenk’s book, the Jiro documentary and other works) because it is our own goal, or life path if you will, to become virtuosos of trading… see the KC piece “Think Only of Cutting” for more on this… and in advancing along the path toward this goal, it is our aim to teach and share as much as possible along the way.

This is one reason among many we are excited about 2013. We have some powerful new ideas in the works, including a sort of trader training initiative that will share all the nitty-gritty details of how we trade… our day-to-day processes, down to the excel sheets and formulas and step-by-step reasoning we use… not so much a holy grail or even a how-to so much as a deep dive into the specific mechanics of the craft.

It makes us stronger to share this material, via the clarity and articulation requirements of doing so… and hopefully it will make you stronger too…

A worthwhile read in relation to “small things” (and not so small things): An excellent Fortune piece titled “Leadership Lessons from Nick Saban.” In case you are unfamiliar with Saban, he is one of the winningest (is that a word?) coaches in college football history.

Here is an excerpt:

What really separates Saban from the crowd is his organizational modus operandi. In Tuscaloosa they call it the Process. It’s an approach he implemented first in turnarounds at Michigan State and LSU and seems to have perfected at Alabama. He has a plan for everything. He has a detailed program for his players to follow, and he’s highly regimented. Above all, Saban keeps his players and coaches focused on execution — yes, another word for process — rather than results.

Sound like your typical chief executive? “I think it’s identical,” Saban says, digging into his salad. “First of all, you’ve got to have a vision of ‘What kind of program do I want to have?’ Then you’ve got to have a plan to implement it. Then you’ve got to set the example that you want, develop the principles and values that are important, and get people to buy into it.”

Sounds simple. But it’s taken Saban 40 years to perfect the Process…

We Mercenaries have a “Process” too… and it gets stronger as we build it and grow it (and share it)… when our capital management operations have expanded to ten-figure AUM one day, and Bloomberg Magazine asks “to what do you attribute your success,” we will likely give a nod to the Process.

Not Saban’s, but our own…

Switching topics, in reference to our “Fed is Terrified” analysis, Skip R. writes,

Hey Jack,

I really enjoy reading your stuff. I try to stay nimble personally. On all levels.

Having been surprised consider an alternative scenario. Me too…

Ben is just a very smart guy. He’s doing the right thing. Ray Dalio agrees. And he’s pretty smart.

The times they are a changing.

Stay nimble.

Skip

Skip then cites an Atlantic piece, “The Next Panic,” which primarily focuses on Japan. You can read it here.

We are big fans of Simon Johnson, one of the co-authors of the Atlantic piece. In fact Simon Johnson wrote one of the best articles of the entire financial crisis in our view — also for the Atlantic, ironically enough. It was called “The Quiet Coup.” You can read that one here.

Re, Dalio and Bernanke, I am not so sure Dalio — the founder of Bridgewater, the largest hedge fund in the world — would giave blanket sign-off to Bernanke’s policies.

It is true that Dalio has called America’s situation a “beautiful deleveraging,” in the sense of attaining a near optimal mix of “a certain amount of austerity… a certain amount of debt restructuring… and a certain amount of printing money.” (For more on Dalio’s beautiful deleveraging idea, see this Barron’s interview.)

Dalio is also a big proponent of owning gold, though — which is essentially a form of credit default swap and a hedge against central bank screwups — and as a macro hedge fund guy Dalio is in position to benefit mightily from volatility and economic chaos. Of just the sort the Fed could be stirring up…

We thus doubt it is accurate to call Bernanke “a very smart guy,” at least in the way you seemed to mean it.

To clarify, there is no question Bernanke is highly intelligent. You don’t get to join the Federal Reserve, let alone become Chairman, if you are short on IQ points.

But that doesn’t mean what Bernanke is doing is “smart” in the sense of being wise (which we suspect is the term you were really looking for).

The real measure of whether the Fed’s policies are “smart” or not are the long-run outcomes those policies will create. By that standard, it is pretty clear the Fed’s hail mary follies will wind up in disaster, or have a very high probability of such.

Don’t take our word for it though. If you want to know all the things that can go wrong because of Bernanke’s moves, read this awesome paper from Bill White at the Dallas Fed: Ultra Easy Monetary Policy and the Law of Unintended Consequences.

Seriously, give it a read, if you are into that sort of thing. It is the most clear and comprehensively written “white paper” yours truly has ever come across, written more or less in plain English. And it is an Austrian economist’s dream, in the sense that it matter-of-factly expresses virtually all the concerns Austrians have as to why the Fed’s “grand monetary experiment” actions are likely to end in disaster.

As for being nimble… without a doubt sir, we are traders!

We are more than happy to buy what goes up and sell (or go short) what goes down… and a Soros-style “false trend” can be just as profitable as a legitimate trend, provided said trend has verifiable legs. “Nimble” would be our middle name, were “risk control” not already taking the spot.

The times may indeed be a changing, as old Bob D. once sang, but certain fundamental laws of macroeconomics are as immutable as ever… as is human nature… some stuff changes constantly but other stuff says very much the same.

On a (close to) final note, Vegas fast approaches! For those of you who can make it, we hope to see you at the Alternative Asset Summit October 17th through 19th… in addition to plenty of excellent speakers — and we will have a presentation ourselves — we look forward to some high stakes cash game action at the Wynn, the Venetian, and the Aria in City Center. We’ll be staying at Aria, having never been there before… should be a blast…

Do you have any questions you’d like answered / topics you’d like addressed? Trading and investing… macroeconomics… life…  how to play pocket deuces under the gun… what you would like to see more of, less of, etc… or just to give a shout out… whatever tickles your  fancy, let us know: jack@ or mike@ mercenarytrader dot com.

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