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Ep. 483: Paul Tough Interview with Michael Covel on Trend Following Radio

Paul Tough
Paul Tough

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“What is it about growing up in poverty that leads to so many troubling outcomes? Or to put the question another way, what is it that growing up in influence provides to children that growing up in poverty does not?” This is the question that today’s guest, author Paul Tough, poses in his newest book, “Helping Children Succeed: What Works and Why.” It is a data driven book about how young kids are growing and developing in today’s world.

51% of children in the public school system are below the low income bar set by the government. Paul goes through the psychological issues of children from low income homes starting from birth all the way through high school. Science is very clear that children develop the most during the first three years of their life. He says there are two main things to think about when children are developing: stress, and day-to-day interaction with parents or caregivers. Paul gives examples of the types of stress and interaction that is good and bad during early childhood.

Paul talks about the education system next. He says that development should be looked at as on a continuum rather than separated into segments such as preschool, kindergarten, and so forth. Michael and Paul also speak to the behavioral issues that may come from different socioeconomic backgrounds and what schools can do to improve the outcome of a child. “Grit” and curiosity needs to be taught and encouraged along with standard learning, in and out of the classroom. Intervening more intensely in the first few years is a huge way of creating this motivation and curiosity.

Michael brings up the higher income children who also are having trouble finding “grit and perseverance”. Paul says we aren’t giving children the opportunity to struggle with adversity. The difference between not having grit in a higher income family as opposed to low income is that you can usually get by in life. You can usually find an average job and have food on the table. However, not having drive coming from a low income family, you may not be able to put food on the table and have a roof over your head.

In this episode of Trend Following Radio:

  • Early childhood development
  • Creating the right environment for children
  • Childhood poverty
  • Serve and return parenting
  • Teaching grit and curiosity
  • The accountability movement
  • What motivates us?
  • Education as a national problem

Mentions & Resources:

Listen to this episode:

The Importance of Curiosity for Trend Followers: Wanting to Know

A top CEO recently spoke before a Harvard MBA class. A student asked, “What do I do?” The CEO replied, “Take the rest of the money you have not spent on tuition and do something else.” If you do not understand his wisdom, fine. If you are curious, though, you will figure it out. That is the difference. It is a big time aha! moment–if you are awake.

However, curiosity has been lobotomized from many. Freud once lamented: “What a distressing contrast between the radiant intelligence of a child and the feeble mentality of the average adult.” Today, many seem to be waiting for an order or peeking over their shoulder to see what others are doing just to fit in.

Simple childlike curiosity with no agenda except to know–that’s it. That is the precious commodity, the secret weapon. Kids have that wide-eyed wonderment when they take apart their first toy to figure out how it works–and so should you. As simplistic as it sounds, maintaining childlike wonder and enthusiasm keeps your mental doors open.

Curiosity is the only reason I wake up to go digging in the sometimes secretive world of trend following trading. Taking very little at face value and always questioning the system is my modus operandi. With the way I am talking do you really think teachers liked it when I raised my hand? Bloodhounds find things–sometimes things people want hidden.

One of the more unlikely people to have asked me, “How do you go about unearthing details?” was former U.S.S.R. President Mikhail Gorbachev. He had been told in Russian via a translator that my career involved traders who make big money. When an introduction was made he asked me in Russian through his translator, “What is it like to write about these traders?” My response was brief: “Very interesting.” He waited for the translation, “It must be difficult to get behind the scenes; how do you do it?” With a smile I replied, “Oh, I am very good at digging.” He laughed. No translation needed. He understood my English perfectly.

My education comes directly from some of the great trend traders of the last five decades. No hyperbole. However, it did not start that way. It started while finishing grad school in London (school was a mistake, but London and travel was not). A book by motivational speaker Anthony Robbins convinced me that getting close to great traders was the solution. That sounded easy, but how to do it? One part of Robbins’s book struck me square in the solar plexus.

Unlimited Power featured a story about director Steven Spielberg. His life changed when he took a tour of Universal Studios at the age of seventeen. The tour didn’t make it to where all the action was, so Spielberg took his own action. He sneaked off to watch the filming of a real movie. Later, he ended up meeting the head of Universal’s editorial department, who expressed an interest in one of his early films. For most people, that is where the story would have ended, but Spielberg wasn’t like most. He kept pushing by meeting directors, writers, and editors–learning, observing, and developing more and more sensory acuity about what actually worked in moviemaking (excerpt: Unlimited Power).

That Spielberg story was the motivation needed. I once flew to Berlin, Germany spending thousands of dollars not in my bank account just for the chance to possibly meet and learn from a few traders at a conference–a conference where no one knew my name. My credentials were a nametag and moxie, but that calculated gamble, that intuitive belief that I would find the unexpected, worked out enough to spend quality time with a former chairman of the CME.

Those early efforts continually allowed face-to-face access to legendary traders–enough personal contact to see that they put their pants on like everyone else and that what they were doing could be learned. Attendance at those secluded conferences triggered my confidence and passion.

Unfortunately, we have a culture where that go figure it out attitude is not the norm. Children grow up with soccer leagues and spelling bees where everyone gets a prize. On the playgrounds dodge ball has been deemed too traumatic. Some parents consider musical chairs dangerously exclusionary.

Those kids will never be curious. They will end up addicted to Xanax-Ritalin sprinkled cupcakes so they can cope. Am I being a pessimistic grouch? Far from it–just describing the playing field we all know as the status quo.

What are some ways that I have learned about the right direction?

  • Bring joyful, imaginative and impassioned energy every day. Don’t fake it.
  • You don’t need to be big to be good, you need to be smart.
  • When there is no one there, insert yourself. Take over.
  • Engage the world as if your life depends on it.
  • Nothing is more important than transforming someone.
  • Have a vision grounded in your uniqueness.
  • The race winner is often curious and slightly mad.
  • Dry obligation in life will figuratively kill you.
  • No one will give you permission. Seize the mantle.
  • If you can’t solve a problem you are playing by the collective’s rules.
  • Hard work, sustained concentration, and drive are the so-called secrets.
  • Winners understand sunk costs and opportunity costs.
  • Plan to win, prepare to win and have every right to expect to win.
  • It’s in your power to change your belief systems. No one is stuck. Be unstuck.
  • Winning is never about your limited resources, but rather always about your unlimited resourcefulness.
  • By not questioning the world you always lose.

These are not necessarily intuitive. Society doesn’t encourage and celebrate the unproven striver. It is much safer to beat up new thought or heap scorn. Too many are encouraged to take the safe path. This is awful and shortsighted advice. And for those who complain they were born without a silver spoon, who think they need more money to start, who say that they were not blessed to have trend following rules in their early twenties (like the famous TurtleTraders), money cannot compensate for a lack of talent, sloth, flawed vision or a pedestrian frame of mind.

Nothing can keep you from winning if winning is what you want. To think otherwise suggests a lack of imagination and a failure of the optimism needed for attracting good things. No optimism? Stop now. I will not be able to convince everyone to escape the grip of pandering politicians, manipulative media and a mostly decadent Wall Street, but for those looking for an alternative and honest way to view the world, an alternative way to make money, you can find it.

Never forget these wise words: “The phrases gifted musician, natural athlete, and innate intelligence are genetic prisons. Abilities are not set in genetic stone. They are soft and sculptable far into adulthood. With humility, hope and extraordinary determination, greatness is something everyone can aspire to.”

And remember, “Serendipity rules!”

Recommended Podcasts and Articles

Belief is Required to Win Big

Face up to the Facts

Playing the Game

Truth and Fantasy

Doug Casey and Charles Hugh Podcast

Insights of Trend Following

Why Do I Have to Go to School?

Feedback in:

Michael, I have never contacted you before but have listened to all your podcasts. Great stuff! My wife forwarded this to me and I immediately thought of you, in addition to a number of other free thinkers …and just knew I had to forward it. Enjoy,
Tim

Give a big thanks to your wife for the find:

Advice on Breaking into Trend Following Firms

An email in today:

My name is [name] and I am currently a senior at Washington and Lee University in Lexington, VA. I became interested in trend following about a year and a half ago and have studied it and put it into practice over the past year. I am very interested in pursuing a career in trend following. I went through investment banking analyst interviews earlier this year and became very disenchanted with that entire industry. After that experience I absolutely know that I want to be in the trading industry. I was wondering if you could possibly pass along contact information for any of the trend following fund managers that you have interviewed/know. I believe in the system and have been trading my own capital for a few months now but I believe the experience that would come with working with a experienced trader would be invaluable. Attached is my resume, any help or advice would be greatly appreciated. Regards, [name]

Thanks for writing. If you want contact information alone, that is freely available with a few mouse clicks. However, if you want to know legitimate ways in the door, or ways to connect to truly get something out of the experience, I do provide consulting (this is capitalism after all). It’s funny, I did not exactly set out many years ago to become connected, but there is no doubt a method to my madness. If you are in school or just out of school, and are serious about finding ways to connect, I can help. Consultation is available.

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