The Advantage of Falling Short

June 30, 2011

“Everything relates to failure. We grow up experiencing failure as children and then we go through it as adults. The key is understanding that failure is how we improve. You do this not by ignoring the failure, but by recognizing it, examining it thoroughly and not making any changes until you truly understand it.”

“The truth is, fear of failure can lead you to your best achievements. This is especially true of performers — athletes, actors, musicians and so on — whose livelihoods depend solely on their talents.”

The above quotes are from an excellent LA Times piece titled “The Advantage of Falling Short.”

The piece looks at how instances of failure, and specific reactions to failure, often determine the path of future success.

Examples range from high visibility failure at the Jet Propulsion Laboratory (JPL), to the Tacoma Narrows Bridge collapse, to the Challenger disaster and the aftermath of high-tech layoffs in the bursting of the dotcom bubble. (The article was published in 2002.)

This excerpt in particular felt relevant to trading — especially given how successful traders tend to endure vivid periods of failure early in their careers:

This phenomenon, of the failure who resurrects himself in spectacular fashion, was formally documented in 1938. German psychologist Sara Jucknat reported that people who fail at something they deem vital to their identity will often set an even higher goal the next time. Their hope is that they can erase the failure with an impressive success. Along the way they prove to themselves, and perhaps the outside world, that they are, in fact, competent.

Though Jucknat’s seminal study made the dynamics of success and failure a hot topic for a decade or so, interest cooled. It was revived in the 1970s and ’80s by researchers who preferred to study human strengths rather than pathologies. Martin Seligman is a psychologist at the University of Pennsylvania and a pioneer in studying how people cope successfully with adversity. His writings on “learned optimism” became classics in this field and inspired dozens of academics to begin looking at the positive qualities that help certain people rise above hard times. They found that those who turn failure into advantage share a handful of characteristics:

They possess the analytical skills to take apart a fiasco and understand it well enough to make changes, says George Vaillant, director of the Study of Adult Development at Harvard Medical School. Vaillant has seen people develop this trait and use it to create successes, even late in life.

They have “the capacity to form meaningful relationships,” Vaillant says. “These people can metabolize others — taking in what they have to teach — rather than being oblivious. These are the ones who find mentors throughout their lives. They have the ability to find meaning in what happens to them.”

They also have the ability to be realistic, rather than undyingly optimistic, in the face of crises. Business management guru James Collins, author of the recent best-selling book “Good to Great,” says this point was brought home vividly during an interview he conducted with a Vietnam War prisoner, a retired naval officer. Realists succeed under the worst conditions, the officer said, while optimists “died of broken hearts.”

That sounds like a checklist for learning from a tough trading period:

  • Keep evolving. Failure, evolution and adaptation are so thoroughly intertwined, it’s hard to know where one starts and the others stop. Successful traders court failure at the edges (through experimentation and small-scale tinkering) even when things are going well. As Samuel Beckett advised, “Try again. Fail again. Fail better.”
  • Analyze the fiasco. Don’t sweep a negative experience under the rug. Break it apart like lego blocks, take an objective assessment of each piece, and extract as much knowledge and ‘tuition’ as possible, changing what needs changing while leaving the rest alone. (This is in line with improving your decision making skills.)
  • Learn from others. Look to mentors, near or far, and try to gain from their insights. Metabolize the knowledge of others — and the mistakes of others when possible — while creating a ‘learning narrative’ as such that failures and setbacks have meaning. (They are there to teach and strengthen, not just make your life miserable.)
  • Be realistic, not undyingly optimistic. Don’t die of a broken heart when the sunny forecast evaporates. Stay committed to the path when rough weather hits — as you should fully expect it to. (This goes back to Mental Conditioning and SEAL Team Six.)

The whole piece is worth reading.


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