Exactly. If IBM had made even the modestly intelligent decision to develop their own DOS in-house like Apple did, there would have been no IBM clones and almost nobody would've ever heard of Bill Gates or Microsoft. Amazing how a single decision can change an entire industry. That is luck in a nutshell.
Why Do We Trade? For Real.
- Thread starter cornix
- Start date
Very interesting story, StarDust, thanks for that.
Could you please elaborate: you consider risk management and psychology to be primary elements of successful trading? In what sense? Reading psychology of other market participants or controlling yourself?
he's been investing since the 1960s: he's seen more cycles than 95% of investors will.
brk/a returned 286% from 3/2000 to 2/2015 compared to sp500TR which returned 87%. given 3/2000 was a bubble valuation that's a fantastic return.
he didn't start with a huge stake. he earned it through a fund he managed and some savvy activist investing.
the insurance industry edge means he cant buy more insurance companies, but he is ggood at finding other cashflow businesses: bnsf returned 150% of his investment already and is still producing.
I think so. Ego is a driver and the ultimate solution to trading.
Not just successful trading but success in life in general - what we do for personal purpose so well that there is no longer any separation between I and what I do. There is a word for it that escapes me but it has been called FLOW as well. Most of us have experienced it.
Risk management keeps one in the game until one eventually finds success. Mistakes have less impact with proper risk management. It has protected me from my ego for decades. Ego fights risk management because ego wants a crown as part of its achievement. It is not enough to win - "I" have to win over enormous odds like the hero "I" am inside. Why are super-hero movies so popular among youth these days? The movie stops when they get married. There are no movies for cleaning up after the prince as two egos clash.
Ego drew me to trading, ego drove my improvement, when I reached success, ego eventually became hollow because it really is the journey, not the destination. The game lost its attraction. Then we learn to put away ego (extremely tough to do) and we see our trading improve yet again much to our complete surprise since we thought ego made us successful on our journey. Next money is not that important, neither is achievement, fear and envy etc. - all the toys of the ego. We are masters of the trading game but it loses its glory for us. True for many things people do IMO - facing our own mortality out of the dreams we live. When one achieves a goal, does it still drive one?
Its been said that we trade against ourselves in the markets. If that is true then it follows that we win the battle by overcoming ourselves. However, when there is no battle - that is the pinnacle IMO.
BTW, I have occasionally met some egos on these forums. Those with the loudest drumbeats often are the worst traders, although luck can play a role as I have said.
If I recall Bill's dad was an executive with IBM so that decision was interesting indeed. How did a kid with a garage get a serious hearing?
Bills dad was a prominent lawyer. His mom was on the board of a charity with an ibm executive.
Most wealth is created because someone else stumbled. Hpq had first dibs on first apple but didn't take the ip. Microsoft saved apple in 1999 only to watch it destroy them in mobile 10 years later.
I hear you, but is your "flow" trading state possible to code as a logical algorithm or a set of conscious rules or it is mostly unconscious process?
For your own answer consult certainly one of most intelligent people IMO on this board - Nitro - where he said "Because otherwise P=NP." I think I understood what he meant while some did not but my own thought was around this Turing machine subject:
http://en.wikipedia.org/wiki/P_versus_NP_problem
It was a brilliant insight for traders who really think deeply and provided some evidence for my own thoughts about investing/trading theory.
Some simplified thoughts (please keep in mind they are hypotheses and opinions and not proven for me yet.)
An edge is an inefficiency in the market. The strong eat what they kill (mostly the weak).
Technical Analysis started failing many decades ago. Program trading arose to defeat it.
Many years ago program trading was popular when large firms had better quality tools than amateurs and amateurs were fewer in number. Specialists were the hammer.
In the 90s that changed as smaller traders TEMPORARILY gained enormous computing power and could game the pros with better information and faster timing. Amateurs were the hammer.
Prop shops then arose where pros gamed large numbers of amateurs that believed in TA essentially by painting TA indicators since they had better indicators and ties to the heart of the market - specialists who wanted their hammer back.
Amateurs moved to daytrading. TA indicators started completely losing their power as information was disseminated. The Edge of the big shops and prop shops was lessened. (Such is the nature of markets. There is an astounding indicator that shows this clearly since about 2005 which will remain secret until someone else raises it first).
Prop shops died to HFT who gained a market inefficiency by regulation. Curious that that has never been corrected IMO - do the legislators not know what to move to now?
HFT are savaging HFT now. Michael Lewis spilled the beans and the weaker traders fled.
Something even worse is appearing (that will defeat HFT) and traders must adapt yet again. This particular though very preliminary for me and will not be clarified because it could be a future edge for me.
Market change. Markets stay the same. And change always appears from the fringes (as it must): http://en.wikipedia.org/wiki/The_Structure_of_Scientific_Revolutions
So in short, in the very early days hard edges existed as market inefficiencies but already in the early 90s I realized that computers had limited shelf life in trading and it is my opinion that discretionary trumps system ultimately. That is why I have steered that course from early on in my own investing/trading.
Interesting you would ask about this as CERN is being restarted. Will rainbow gravity be found or the Big Bang or will Nitro absolutely be proven correct in his brilliant brilliant insight. BYW consciousness itself doesn't play a role in our models of physics - a rather glaring omission don't you think? Recall even our physics requires an observer - a piece of discretion that makes the system work. So IMO, computers will NEVER be intelligent and CAN never be conscious.
If consciousness is required to trade and win, then all systems have some discretion don't they?
Hopefully that answer it. Sorry for the length of the post.