Trading Psychology: Masters and Slaves
[B]Thanks[/B]
There are many insightful, interesting, and compelling articles on this site and elsewhere this weekend. Hat's off to Mike Scott, Gapcap1, Jerry, et al.
[B]Preamble[/B]
I'd like to write a short piece on the psychology and ethics of our business. I hope some find it of interest.
As part of this preamble, let me make a fair disclosure: I am, or perhaps was, a standard-issue academic lefty. Since I left academics, I have made it a personal policy to talk [I]not[/I] about politics, culture, or economics in any polemical fashion. So, please know that my intention in this article is to [I]not stir debate [/I]on these topics. Rather, it is to explore a question that has vexed me since I became a trader. The problem is simple: I have found many very intelligent people who are strongly libertarian. Indeed, every time I open IBD I am reminded of this orientation of many investors and traders. I will address some problems with this position at the end of this piece, not as an attempt to refute the ideology but as a kind of warning about ideology and practical life in general.
[B]Masters and Slaves[/B]
To introduce how this question affects me, I will compare two people in my life, who are both good friends of mine. One is a practicing psychiatrist; the other is a self-made millionaire. Both are chess players and have contributed enormously to its development in Seattle, and both are pushing 70 years of age with vitality and confidence. The psychiatrist asked me to see "Margin Call"; I did last night. We have considered the question in our discussions of "How conservatives can be so mean spirited in their social and geopolitical policies?" With my other friend, I find another entirely different orientation. Regular people are not on his radar of concerns, except insofar as he packs a handgun to protect himself, his family and his property. Foreign policy, such as invasions of Iraq, serves to assert American power and guarantee our way of life. When I left academics, I asked the wealthy friend to serve as a mentor of sorts as I move into business.
As I watched the film "Floored" on Friday, I was struck by the winners and losers in the trading game. I'm sure Gapcap1 knows all of this first hand. What struck me was that the winners all had the attitude of my wealthy friend. They seemed to have the attitude that it was their right, duty, destiny, etc. to be rich, to do what they want when they want and to call it good. One winner gunned down big game animals in Africa and had their preserved heads mounted in his house. He keeps an amazing display of weapons. A loser in the game, by contrast, plays golf in the cold, lives in a cheap apartment, wear the gold coat of a clerk and appears ready to train his son in the same. He sports a cigar and golf clubs but he appears extremely absurd in his mimicry of the winners. It is almost painful to watch until we see him enter the floor as a clerk. Suddenly his quasi-indentured status makes his relative poverty and self-deception more clear and understandable.
After watching the movie, I recalled the psychology/ethics of Nietzsche. Nietzsche has been given a bad rap for being appropriated by the Nazis and for making powerful arguments about Christianity as a slavish ethical system. There many other people, especially "respectable" "liberal" philosophers, who find his work unpalatable. One professor of mine said in seminar "The philosophical edifice was burned to the ground with Nietzsche." But if I can sidestep these controversies, I want to recap his point on the ethics and psychologies of masters and slaves.
The master has won or obtained power through intense struggle. For the master all that he or she does is determined to be good simply because he or she does it. Collecting gold, maintaining a giant household, sexual liaisons of all sorts, the best in everything, etc. All means to obtain these ends are good if they succeed. The people who succeed would succeed under any economic or political system because they have proven their superiority, will power, self-control, etc. The slavish ethics on the other hand is built on resentment of the master. For the slave, humility, self-sacrifice, simplicity are valued. The master sees poverty has bad simply because the poor are obviously inferior insofar as they are not like him or her.
To sum up, after watching the film and rethinking the problem discussed by my psychiatrist friend and I in terms of Nietzsche, the politics of superiority that finds expression in my millionaire friend become utterly clear to me.
[B]Enter the Trader[/B]
I would like to suggest here that for someone to be a good trader, he or she must adopt[I] to some degree [/I]the attitudes of the master. Indeed, I have done this. For example, after I watched "Margin Call", which shows how a fictional "firm", probably GS, dumped its toxic assets to its trusting customers in order to save itself from the collapse, I was not moved to moral outrage. All of the actions of the people in it seemed realistic and rational given their positions and ambitions. Some won and some lost, and as the CEO argued: money is just a symbol that allows us to obtain our meals without killing one and other. Seattle being Seattle-- an enclave of privileged liberalism-- I could hear people around me discuss the shameless behavior of those depicted.
So what has happened to me? Have I become a full-fledged libertarian master? No. However, I think that the attitudes of the master are crucial if one is to trade well. One must think of profits as deserved. One must think of opportunities as magnificent and that one is worthy and welcome to them. One must believe that the rise of personal fortune to be justified. Of course, such an attitude without proper preparation is foolish. But study itself is probably insufficient for market success over the long run.
[B]Limitations of Zealotry[/B]
I want to end with a simple political truism: the people who are of greatest danger to the system and, thus, to themselves are the people who take their own ideology too seriously. Libertarians praise to high heaven the merits of freedom; the free market can decide all problems caused by government meddling. But to take any ideology so seriously as to neglect reality is a serious mistake. All the great multi-nationals require government support (socialism, if you will) to succeed. The ideology of libertarianism works pretty well to secure the allegiance of millions of wanna-be-rich people. But should the libertarians obtain power, their worst enemies will be their most true believers. As my wealthy friend reminds me, the same people who succeed in the system today would succeed under any regime. Indeed one of the most entertaining aspects of contemporary political debate is to watch conservatives attempt to out, for example, Michael Moore, as a closet libertarian because, from the libertarian/conservative point of view, his success demonstrates his own mastery of the minions he proclaims to represent. Similarly, liberals/socialists point at, for example, the Koch brother as hypocritical libertarians insofar as their founder made a fortune in business with Stalin and the brothers’ industries all depend on access to the public trough. The psychology and ethics of master consciousness are independent of any particular political philosophy.
