Blog

Mind food for thought:

• Amazon 2004 Annual Report from Jeff Bezos
• The Other Side of Uncorrelated
• The power law, 80/20 rule, and concentration of returns – What it means for money managers
• If You Say Something Is “Likely,” How Likely Do People Think It Is?
• THE STATISTICAL CONSEQUENCES OF FAT TAILS
• Wearing neckties reduces blood flow to the brain
• How To Make A Pie: Reproducible Research for Empirical Economics & Econometrics
• Fizzled Out: Why Coca-Cola Purposely Designed a Soft Drink to Fail
• Why You Need a Retirement Policy Statement
• 20 Reasons Why 90% of New Traders Don’t Make It
• Main Line’s ‘godfather of payday lending’ sentenced to 14 years, stripped of $64M, for preying on financially vulnerable
• Predictable Elements for an Unpredictable World
• The 5 Holy Grails of Trading
• Learning from the Masters

Enjoy!

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Jerry Muller is a professor of history at The Catholic University of America, where he has taught since 1984. His latest book is “The Tyranny of Metrics.” Quantifying metrics can be a good thing, however, it can easily go too far and have great consequences.

Jerry sees pitfalls of focusing too much on metrics everywhere – schools, hospitals, even venture capital. Children gear their learning toward beating a test rather than intellectually developing their mind. Doctors fixate on standardized performance measures, rewards and punishment, and publicized accountability. The system encourages and sometimes requires doctors to game the system. Venture capitalism, the very field where creativity should prosper, tends to foster an anti-creative atmosphere. Investors want to see data to back up a new product so they can see proof of a future profit. The problem? New innovations don’t have data because they have never been seen before in the marketplace.

Using metrics in schools, hospitals, and business can be extremely useful depending on what context it is used, but alone they are not enough. Human development as well as human experience should be weaved into the equation. Michael and Jerry finish the podcast up talking metrics in China, how it has lead to gaming the system and taken a toll on developing research.

In this episode of Trend Following Radio:

• Intrinsic motivation
• Tyranny of metrics
• Metric fixation
• Metrics in law enforcement
• Metrics in health industry
• Managerial ideology
• Powerpoint presentations
• Metrics in China

Mentions & Resources:

• Jerry Muller
• The Tyranny of Metrics

Feedback in:

Hi Michael,

I’ve been listening to your podcast for about a year now. I first heard about you from the Bloomberg Odd Lots Podcast, where you spoke about Turtle Traders. I then started listening to your own podcast and I find your work fascinating!

You conduct brilliant interviews with interesting people from all kinds of backgrounds, but your interviews reveal a lot about their work, without giving it all away, which I appreciate a lot. One definitely needs to follow up and do some more research on your guests after an episode; which I try to do in most cases. I highly enjoy your podcast.

I have 2 requests: First, would it at be possible to have any of the fathers of Behavioral Economics on your show, i.e Kahneman or Thaler (I don’t think you’ve had either of them on your show yet? I may be mistaken.) Second, on your show, you mention that if one wanted to get started with Trend Following, to reach out to you. So, my question is, do you have any suggestions of where to start? Which resources should I be reading, what kind of programs would I need to start trading, and how much money would I need? I recently started my first job, so in some months, I’ll have a bit more disposable income than others. Knowing where to start would be invaluable.

Thanks for your show, I am a big fan.

Kind regards
[Name]

Email with more details on the way! The fathers of the behavioral school? Go here.

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Michael plays three epic interviews with Ed Seykota, Martin Lueck and Jean-Philippe Bouchaud profiled in chapter’s 12, 13 and 14 of his newest edition of Trend Following: How to Make a Fortune in Bull, Bear and Black Swan Markets.

Ed Seykota was originally profiled in the classic book “The Market Wizards.” Seykota has played a pivotal role in the growth of trend following trading for 40 years.

Martin Lueck holds an M.A. in Physics from Oxford University and currently is the Research Director and President of Aspect Capital. Lueck was originally with Adam, Harding and Lueck Limited (AHL), which he co-founded with Michael Adam and David Harding.

Jean-Philippe Bouchaud is founder and Chairman of Capital Fund Management (CFM) and professor of physics at École polytechnique.

In this episode of Trend Following Radio:

• Govopoly
• Systems trading
• Diversification
• Behavioral economics
• Death of trend following
• Exploiting vs. exploring
• Behavioral biases
• Risk

Mentions & Resources:

• Ed Seykota
• Ed Seykota trading strategy
• Martin Lueck
• Jean-Philippe Bouchaud

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Christopher Ryan is best known for co-authoring “Sex at Dawn.” The book deals with the evolution of monogamy in humans and human mating systems. In opposition to what the authors see as the “standard narrative” of human sexual evolution, they contend that having multiple sexual partners was common and accepted in the environment of evolutionary adaptedness.

What was the start of Christopher going doing his path? One of the more pivotal moments was when he was an undergraduate in college. He was able to skip his junior year of college and subsequently hitchhiked to Alaska. Before that journey to Alaska, he thought the world was a dangerous place. Once he got outside his bubble and met strangers, he learned how kind and generous people were. It shifted the way he thought about life and the world.

After graduating he spent his 20’s and 30’s backpacking through Asia and South America. His a-ha moment was realizing that most of what he was told about the world was bullshit. Governments have an agenda and prop up their society to make other places seem less superior. Christopher quickly saw that the cultural message telling us that it’s a “dog eat dog world” was not true.

There are different attributes that everyone shares. What is universal? What do we all share? Consciousness, sexuality, comedy, etc. these are all things that translate across cultures and continents. Learning about these things is what excites Christopher and why he continues to learn, study and teach.

In this episode of Trend Following Radio:

• Monogamy
• Hunter and gatherer society
• Agricultural revolution
• Culture of women sexuality
• Sexual transmitted disease
• War on masturbation
• Social groups

Mentions & Resources:

• Christopher Ryan
• Sex at Dawn

Feedback in:

Hi Michael,

Regarding your latest lesson on diversification, I understand the necessity to spread across different markets and accept small losses in the hope that other trends continue to absorb this with profits. But, you then give an example where all capital would be invested in one trend, with the obvious stop loss, giving a possible loss of 5% on a 10,000 stake.

Trend following involves diversification (yes), but if a big trend unfolds not only do you need rules to get you on it, but heavily on it. Trend following does not force a mandatory “this amount of money” equally across both trending and non-trending markets. This is not traditional diversification whereby you typically tie up capital in markets that are flat.

More.

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Michael shares the Preface and Chapter One of his book, “The Complete TurtleTrader.” “The Complete TurtleTrader” is a classic nature vs. nurture story starring famed traders Richard Dennis and Bill Eckhardt. Are people born with the innate ability to trade? Or can it be taught? Dennis believed that anyone could be taught to trade successful with the right set of rules, Eckhardt disagreed – and from there this epic experiment was born. These men took 23 novice traders, gave them millions and taught them how to be successful on Wall Street.

In this episode of Trend Following Radio:

• Nature vs. Nurture
• Efficient markets
• Beating the market
• Systems trading
• Behavioral finance

Mentions & Resources:

• The Complete TurtleTrader
• Bill Eckhardt
• Turtle Trader pdf