As I finished my morning jog on Friday, I ran into an interesting sight in Central Park. A large group of children were participating in a tug-of-war competition. Amidst the juvenile yelling and screaming, two teams of 10 gripped a thick rope and did their best to pull a red flag, tied to the middle of the rope, across their respective finish lines. As I watched, I couldn’t help but notice just how much effort it took each team to move the flag just a few inches in either direction. Eventually though, the flag gained momentum towards the stronger team and crossed over their finish line.
Fast forward to yesterday, my wife and I took advantage of the cold, wet NYC weather to stay in and watch an afternoon movie — something I have not been able to do for months. We chose a 2015 film called My All American. It told the life story of Freddie Steinmark, the Texas Longhorn football player who more than compensated for his physical disadvantages by establishing himself as the hardest worker on the team. His success on the field helped transform the Longhorns from mediocre to the best team in the nation. This is as far as I’ll go as I don’t want to spoil the movie for anyone (it’s worth watching, especially if you enjoyed Hoosiers and Rudy)
After watching the movie, I felt a bit motivated by Freddie Steinmark’s story. I went straight into finishing up a couple tasks I had been putting off. Working away, one particular scene began haunting my mind. It involved legendary Coach Darrell Royal addressing the Longhorns team at the beginning of spring training. Royal gave a stern warning that 100 of the players (50%) would be eliminated from the team within the coming weeks because …”they’ll quit, get hurt or we’ll kick your ass out of here for not being good enough or not working hard enough”. This was part of the “weed-out process”, as he put it.
As described in my last post, this scene woke up the negative worms in my head. I couldn’t stop from paralleling the movie scene to my getting fired last month. I felt like one of the players that got cut “because I was not good enough or for not working hard enough”. My inner voice kept nagging me… I wondered whether I was good enough. I thought a lot about whether I worked hard enough. I pondered the true effort I put in towards the end … the couple extra days off I took that I didn’t need to, the nights I left a bit earlier than I should have, the meetings I didn’t feel 100% prepared for. It really bothering me. Why didn’t I just put in the extra effort?
Towards the end of the night, I couldn’t stop thinking about why I was let go. My mind needed more of an answer. It just wasn’t so simple as … “just work harder and it would have been fine”. In my mind’s eye, “working hard” was just one component of it. This did not explain everything though. I began to reflect back on that tug-of-war game from a couple days prior. There seemed to be an even more powerful force tugging against my “hard work” that eventually won.
If there is one thing that I have done well in life, its work hard. Not to pat myself on the back or anything, but anyone who has known me either professionally or academically could probably attest to my strong work ethic. This is not necessarily a good thing. I wish I was born with a 500 horse power engine (photographic memories, reading speed, comprehension, etc.) so that I didn’t need to work so hard. However, I simply was not. I’ve always been a solid ‘B’, maybe ‘B+’ in terms of intelligence. I was born with a 400 horse power engine. However, I learned early on that in order to keep up with the 500 horse power engines, I had to push to 125% of my horsepower. I did this through out-working the other guy.
My definition of a “success formula” is a lot like the return on equity (ROE) formula used by investors. Breaking down the ROE’s components equals profit margin (net income / revenue) x asset turnover (revenue / assets) x leverage (assets / equity). Expanding this general concept this to a personal career level, I think of intelligence (both IQ and EQ) = profit margin, hard work = asset turnover, and talents & interests = leverage.
Based on the 10,000-hours of studying investing that may command expert status (at least according to Malcome Gladwell in his book Outliers: The Story of Success), I’ve found that ROE is a key driver of investment alpha over time. Equally, a person’s career alpha has a lot to do with their own personal ROE, i.e., how smart they are, how hard they work, and how aligned their career is with their talents & interests. If all three of the variables are sustained at a relatively high level, the person will probably become a leader in whatever field they involve themself. The more competitive the field, the more the need for all three variables to be continuously hitting on all cylinders.
Within the ROE profile, all three variables can be changed to certain degrees. One can study to improve general knowledge. With enough work, this may work to increase apparent intelligence. However, overall IQ and EQ are pretty sticky, especially as you age. Hard work is a bit more more controllable. Besides getting tired easily, for the most part, you can control the hours put in and the quality of those hours worked. Lastly, you can make larger life changes to better align career with talents & interests. Not easy, but this is certainly able to be changed.
In assessing my own personal ROE score over the past few months, my ‘intelligence’ to do the work seemed fine. My ‘talents’ should have been fine as well. This leaves the final two variables, ‘hard work’ and ‘interest’. Due to the scene in the movie described above, my inner voice initially focused on ‘hard work’ as the broken variable. For it was true, I eased up a bit and wasn’t putting in my typical 7 days / 80 hours a week that I was doing for most of my Wall Street career. There was more to this, however, than “just not working hard enough”. I wasn’t lazy. I was still dedicated and pushing hard. But why was I easing my efforts vs. the past? What was the powerful force of resistance that was tugging at my ability to put in my all, both mentally and physically?
After much self-reflection, I finally figured out what the strong opposing force was that prevented me from giving 125%. I had been losing interest in trading. As my performance deteriorated and I could not work hard enough to overcome it, my cognitive dissonance towards my job grew. Put simply, I lost the willingness to put 125% effort into something that I truly did not believe in.
I had not changed my approach. I was working hard to find good trades. However, I kept losing money. In my mind, this confirmed my long-held suspicions about my ability to sustain good returns as a short-term trader. Deep down, I’ve never believed trading stocks was a good use of capital. My mind was telling me, trading stocks was not a good use of my own personal capital (time, skills, health, etc.) as well. Effectively, my body wanted to keep working 125% but my mind was quitting. Depression was setting in and I was having a hard time focusing. My mind had lost ‘interest’ in trying to convince myself that this was indeed a good career for me.
As a trader, when your returns are good, everything else in life seems good. When down, life sucks. Looking back, I suffered from a trading floor version of Dissociative Identity Disorder (DID) — a condition in which two distinct identities, or personality states, are present in and take control over a single individual. When I was making money, I was confident and ready to “take-the-world-by-storm”. When the pendulum swayed the other direction (and it always does), the confidence melted away into insecurity, stress and panic. Sometimes this was within the same month, week, day or even hour.
In 2017, I finished the year with seven straight up months. I hardly had any down weeks. This fed upon my ignorance. It over-inflated my ego causing me to mistake luck for apparent skill. I thought I figured out the game, how never to roll a seven in craps. The long tenure of out-performance tricked me into believing a a false reality. All that old fashion long-hold value investing literature that had once resonated with me, now seemed obsolete. Look at me, I was proving them wrong! The cognitive dissonance was there but it was buried so deep in hubris that it would take a few glasses of Glenlivet just to begin pulling it out.
After my January draw-down however, the ol’ cognitive dissonance made a grand re-appearance. It was rested and ready to rumble. My confidence slid alongside my returns. I began questioning my career choices, something I had not had to do in a long time. I scanned the trading floor and I wondered about “where are all the people over 50 years old?”, hell, “45 years old?”… Reality set in. I began thinking about all the Portfolio Managers I’d seen disappear in the past. The lower and longer my returns slid, the more I was forced to think about whether I’d last. I wondered why I chose this career. Whenever I would run across a Buffett or a Munger quote, I would cringe. It definitely felt like I was the protagonist of their cautionary tale. A Harvard Case Study about the dangers of short-termism.
I realized my career was not sustainable. Additionally, it did violate all the lessons in longer-term thinking. When it was good, I was drunk with ignorance. But now that the party was over, my head was pounding with the harsh truths of reality. Through the months, the power of this cognitive dissonance triggered stress, fear, frustration and the inability to focus. As these issues compounded, the track record I had worked so hard to build, slowly bleed away. The harder I tried to save it, the worse it got. Eventually, a series of negative months finally led to a final date of death… 8/13/18. Just like that, it was done.
This is a lesson in what happens when the ROE equation does not balance. In my case, career and interest became misaligned. This eventually dislocated my willingness to put in the hard work necessary to survive.
If you are simply choosing a career just for money, for prestige, for brand name cache, or for the “external scoreboard” — unless you happen to find tremendous interest in said job, sooner or later, cognitive dissonance could begin to weigh on performance. Without the leverage of finding interest in your career, your grip will eventually loosen and you’ll see the competition come away with the flag. Even worse, you may find yourself face down wondering how it happened. This is the reality everywhere in commerce, not just on Wall Street.
Why am I unemployed? I simply did not want to win the game of trading hard enough. I didn’t believe in it enough. Ya, I fucked up. But, it was not for lack of ability or for not putting in enough effort. I fucked up from the onset by chasing something I did not believe in. I focused too much on the upside and disregarded the downside risk. Now I’m paying the penalty. Stuck on the sidelines.
So, what now?
Sunk costs are sunk costs. Lessons have been learned and its time to move on. As Andy Dufresne in the Shawshank Redemption said to Red, “I guess guess it comes down to a simple choice, really. Get busy living or get busy dying.” I gotta pull myself up, brush myself off and figure out how to get back into the right game. I need to find a career where I maximize my return on my capital for a sustained period of time, without needing to pull around the anchor of cognitive dissonance. I need a position where my intelligence gets appreciated, where my hard work is recognized, where my talents, interests, and beliefs align with my long-term beliefs. A team of champions that I am proud to contribute my best efforts to day in and day out.
One of the most motivating speeches I ever heard is from Tony D’Amato, played by Al Pacino in Any Given Sunday In fact, it is so good that I included both the scene and the actual text below. Read this speech. Everything I talk about above is embedded in the words of this speech.
I look forward to getting back in the “right” game and get back to fighting for the inches. Tony D’Amato is right … when you get older in life, things get taken from you. But, you only learn that when you start losing stuff, like I just did. You find out that life is a game of inches. You have to want to fight for those inches. Win those inches. Because, those inches make the fucking difference between WINNING and LOSING, between LIVING and DYING. If there’s one thing I’ve learned from this whole experience so far, its that there is no cruise control to success. In the tug-of-war of life, the one who wants it most, wins. Just like Freddie Steinmark.
I look forward to getting back in the fight to reclaim my inches.
Al Pacino’s Inch By Inch speech from Any Given Sunday:
I don’t know what to say really.
to the biggest battle of our professional lives
all comes down to today.
as a team
or we are going to crumble.
Inch by inch
play by play
till we’re finished.
We are in hell right now, gentlemen
we can stay here
and get the shit kicked out of us
we can fight our way
back into the light.
We can climb out of hell.
One inch, at a time.
Now I can’t do it for you.
I’m too old.
I look around and I see these young faces
and I think
I made every wrong choice a middle age man could make.
I pissed away all my money
believe it or not.
I chased off
anyone who has ever loved me.
I can’t even stand the face I see in the mirror.
You know when you get old in life
things get taken from you.
That’s, that’s part of life.
you only learn that when you start losing stuff.
You find out that life is just a game of inches.
So is football.
Because in either game
life or football
the margin for error is so small.
one half step too late or to early
you don’t quite make it.
One half second too slow or too fast
and you don’t quite catch it.
The inches we need are everywhere around us.
They are in ever break of the game
every minute, every second.
On this team, we fight for that inch
On this team, we tear ourselves, and everyone around us
to pieces for that inch.
We CLAW with our finger nails for that inch.
Cause we know
when we add up all those inches
that’s going to make the fucking difference
between WINNING and LOSING
between LIVING and DYING.
I’ll tell you this
in any fight
it is the guy who is willing to die
who is going to win that inch.
And I know
if I am going to have any life anymore
it is because, I am still willing to fight, and die for that inch
because that is what LIVING is.
The six inches in front of your face.
Now I can’t make you do it.
You gotta look at the guy next to you.
Look into his eyes.
Now I think you are going to see a guy who will go that inch with you.
You are going to see a guy
who will sacrifice himself for this team
because he knows when it comes down to it,
you are gonna do the same thing for him.
That’s a team, gentlemen
and either we heal now, as a team,
or we will die as individuals.
That’s football guys.
That’s all it is.
Now, whattaya gonna do?