“The hedonic treadmill, also known as hedonic adaptation, is the supposed tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events or life changes. According to this theory, as a person makes more money, expectations and desires rise in tandem, which results in no permanent gain in happiness. Brickman and Campbell coined the term in their essay “Hedonic Relativism and Planning the Good Society” (1971). During the late 1990s, the concept was modified by Michael Eysenck, a British psychologist, to become the current “hedonic treadmill theory” which compares the pursuit of happiness to a person on a treadmill, who has to keep working just to stay in the same place.”
You’ve heard the saying, “It’s the journey, not the destination.” The wisdom in this old saw is backed by behavioral science. Attempts to change our lives by achieving a goal or reaching some dream level of success tend to fall short.
It is better to be wealthy than non-wealthy, all things being equal (which they rarely are)… but after a while it starts to feel the same. You adjust, like a thermostat.
Milestone goals — like winning a championship or a coveted title — are also emotionally fleeting. You took home the trophy. You drank the champagne. You wake up the next day. Now what?
Anything can get old, even winning. The point was underscored by an amusing WSJ piece:
Sometime in the middle of last season—which, like the previous season, ended with Alabama winning college football’s national title—the popular sports-radio host Paul Finebaum was filling up his car at a gas station in Alabama.
A listener stopped him to say three things. The first was “Roll Tide.” The second was that Nick Saban becoming the coach of the Crimson Tide was one of the greatest things that had ever happened in his life. The third was something Finebaum wasn’t used to hearing: “To be perfectly honest with you,” the fan said, “it’s really gotten boring.”
…Amid all of this prolonged dominance, there are signs that boredom, if not downright apathy, has started to creep in. The first offenders: Alabama students. The Crimson White, Alabama’s school newspaper, reported in November that 30% of student tickets went unused by students last season.
“You get to the point where there’s a game against Western Carolina at 11 in the morning that’s not really worth waking up for,” said Marc Torrence, the newspaper’s sports editor, referring to a 49-0 rout last season. “You can do a whole lot of other things on a Saturday, like get a head start on your drinking or sleep in, that are a lot more interesting.”
To understand how wild this is, it helps to have familiarity with college football in the South.
In the South, you see, college football fans make regular sports fanatics look like stoned hippies. I went to high school in Atlanta and attended Auburn University my freshman year (before transferring to a tiny liberal arts college and later studying abroad). I was at Auburn the year they went 11-0 with a media blackout (due to a coaching infraction). The Auburn-Alabama game (a premier Southern rivalry) was off-the-charts insane. Screaming, stomping, t-shirt ripping (male and female alike)… smuggled alcoholic beverages poured on people’s heads (mostly accidental, sometimes not)… it was the most emotion-laden sports event I’ve ever attended. You would have thought the rapture was taking place.
College ball is basically a religion in the South. So for ‘Bama fans to be “bored” with their dynasty is really something. It makes sense though. If you have Christmas every day, or even every week, you start to get bored with it. The mind can normalize almost anything.
The hedonic treadmill — the “so what” nature of success, and the fact that the thrill of victory is fleeting — makes enjoyment of day-to-day process all the more important. This is especially true in trading, where loss aversion and the cumulative impact of the grind create a built-in psychic deficit. Humans are wired to experience greater pain from losses than pleasure from comparable gains. Some studies suggest the psychological impact of loss is twice as powerful if not more.
This plus the 90/10 nature of profit distribution means the pain of trading is almost guaranteed to net out at greater cost than the pleasure, even if you are solidly profitable (and especially if you aren’t)… unless you love the game and love playing it for its own sake, in which case love of the game itself, and the daily pleasure and satisfaction derived from that — from the “journey” — keeps your emotional bank account in surplus, even in grueling periods.
The process itself is what keeps you fascinated and engaged and coming back, and the thrill of tuition accumulation (learning experience) is what keeps you smiling in the periods when you get roughed up. If you don’t have access to this joy — the joy of playing the game, the joy of building your skills — you are handicapped in comparison to competitors who do.
This is a huge reason why “I want to make a lot of money” is not a truly legitimate reason to pursue a job or career — especially in a field you don’t like. Investment banking is the quintessential example of this. But trading is up there too. If you don’t like what you’re doing, there are increased odds you will fail (because people who truly love it will outwork you while expending less energy), and even if you succeed you might not be happy, because the perks of success will hedonically adjust, leaving only the day-to-day as your bedrock source of satisfaction.
(And if your day-to-day sucks, as it does for many i-bankers and obscenely paid corporate lawyers, then guess what? That house in the Hamptons doesn’t make the balance. The middle school teacher making 35K a year, feeling a sense of purpose and joy in what she does, may well be enjoying a better life than you.)
So how to get off the hedonic treadmill? Focus on the journey, which means the day-to-day constants of what you love:
- what you love about the process (the engaging aspects of what you do each day)
- what you love about building and honing your skills (the growth path)
- what you love about the competitive aspects (challenge of resiliency, performing under pressure, fun of solving puzzles etc.)
And if there is nothing you truly love about trading — if you’re just in it for the dollars — then good god man, quit! Go find some other pursuit that sings to your soul. Your odds of success will be much higher, and your time on this earth will certainly be happier.
We are often so focused on conventional images of success, or other people’s notions of success, that we forget to ponder what success really means.
Alain de Botton has great thoughts on this:
One of the interesting things about success is that we think we know what it means. A lot of the time our ideas about what it would mean to live successfully are not our own. They’re sucked in from other people. And we also suck in messages from everything from the television to advertising to marketing, etcetera. These are hugely powerful forces that define what we want and how we view ourselves.
What I want to argue for is not that we should give up on our ideas of success, but that we should make sure that they are our own. We should focus in on our ideas and make sure that we own them, that we’re truly the authors of our own ambitions. Because it’s bad enough not getting what you want, but it’s even worse to have an idea of what it is you want and find out at the end of the journey that it isn’t, in fact, what you wanted all along.
Of course, there are plenty of legitimate reasons to fall in love with trading (other than the fact that winners are paid well). It’s the most fascinating game in the world. Every day is different. Every day is a challenge (in the best kind of way). It’s one of the few careers with an athletic profile (in terms of competing aggressively, experiencing the thrill of victory and the agony of defeat) yet not restricted to athletes. It’s one of the few pursuits where you can truly arc for decades, and hit the top of your game at age 82 rather than 32 (poor Roger Federer).
What’s more, pursuing mastery of your craft gives you license to become a polymath. (Yay!) A well-rounded and well-seasoned trader will have roots of understanding in math, psychology, finance, economics, history, game theory, behavioral science, and many other disciplines.
The following will come as no surprise: The best way to ditch the hedonic treadmill, we have found, is to cultivate a love of learning.
In one sense the market always pays out — it’s just a matter of whether you get financial profits or educational profits (i.e. tuition). Sometimes it is better to be paid in tuition, with the result of far larger compound gains in the long run, in exchange for short-run financial setbacks that play the role of tuition investment.
The guys I feel most sorry for are those who came into markets in a great stretch of years… made a ton of money without really trying… and then gave it all back when the going got tough because they never truly learned their craft. Far better to start hard, fight for every inch, pick up tons of knowledge, and then marvel at how easy it all feels when the next milk and honey stretch comes along.
If you love the learning, and are enthusiastic about evolving, the hits fade quickly. This is a real psychological advantage. It makes you like Wolverine — you heal ridiculously fast. I had vivid experience of this in my thousands of hours learning poker, at the usual Livermore rate of “one good whack per each step forward.” Countless times I would take a huge wallop… be furious or frustrated or stunned for a period of half a day or so… and then the next morning, if not later that evening, I would immediately revert to being fascinated, enthusiastically dissecting the error I made and all its fascinating (seriously) theoretical implications, extracting the tuition like gemstones at an archaeological dig.
If you really get joy from that kind of stuff, there IS no hedonic treadmill for you, because you are having as much fun as a kid at Christmas every single session and every single trading day — even when getting beat up! — and your mind and heart and competitive spirit are engaged even in those periods where P&L is flat or in drawdown.
Love of learning, and love of tuition extraction from setbacks and rocky periods, creates an eternal wellspring of fulfillment that counterbalances and even subsumes the standard “emotional deficit” accounting of grind and loss aversion.
Having this kind of internal edge makes you a steady-eddie juggernaut, a relentlessly efficient learning and growing machine, as you evolve toward ever higher levels of trading competence. Whereas other traders are suffering in their setbacks, bitching about hardships and grinding their gears in the flats, you are “winning all the time” as you rack up financial gains on the P&L side and personal / intellectual growth gains on the tuition side.
Advantages like this compound. They don’t just get you through, they help you thrive. They make you faster, better, stronger. They help you smash through barriers (figuratively speaking). They enhance your odds of sticking with the deliberate practice that could eventually make you great.
So ditch the hedonic treadmill by focusing on the joys, getting a real handle on what “success” means (to you, not someone else), and embracing tuition in a spirit of love for what you do.
And if you can’t do that, switch pursuits to something else more fulfilling, or at least less taxing!
Finally I can’t help adding: If you are into this sort of thing — learning, evolving, kicking ass and such — you should really check out the MT Driver’s Manual. We are exploring all facets, all nooks and crannies of the trading process. We will be taking a 360 degree look at the Mercenary methodology, upside down and inside out.
And we will be going deep, deep into the elements of successful trading with a level of granularity and clarity that has never been attempted before. (This project is huge.) We are already sharing stuff that has blown people’s minds — according to testimonials, not my own description — and we’ve barely gotten started.
Again, you can check out the Driver’s Manual (and get free access to the Trading Psychology Field Guide) by signing up here or below.