On Change

Now that the Bogan 1000 has been run at Bathurst for another year I note that there was much weeping and wailing at the imminent demise of Ford which is soon to be followed by the end of locally produced Holden’s. This gnashing of teeth was echoed by the car magazines I subscribe to which devoted their entire contents to reminiscing about the good old days when Australians wore stubbies and thongs and drove local cars. Before, I belt the local car industry which is a little bit like kicking someone when they are down let me state my credentials. I am a car nut – I tend to turn over cars like other people change shirts. I have owned cars from all around the world of all sorts of different shapes and sizes. From a Valiant Station wagon which was the only car I have ever owned that you could actually stand in the engine bay to work on to temperamental European pieces of high tech craftsmanship. I have even been silly enough to own an English car but only once….

I have been a keen observer of the car industry since before I could drive and in a bold pronouncement I will state that the demise of the local car industry was completely and totally foreseeable. It was obvious from the moment I sat in one of the first Golf GTi’s and an old girlfriend turned up in a Mazda 3. The collapse of the car industry is a keen example of a complete and utter failure to adapt to a changing world – evolution is not only a biological function, it is also an economic one. Change or disappear, the outcome is wonderfully binary in nature so it leaves no room for doubt. Much has been written about the ending of production of locally made cars and most if it is wrong since it fails to address the simple notion of adaption as a function of survival. Blame is sheeted home to all sorts of places and for some reason various governments get the blame for not propping up an industry that turned out a poor quality product that was always a generation behind what was being produced in Europe. When foreign manufacturers were installing airbags as standard features local manufacturers insisted they were luxury items.

It is intriguing to me that the peanuts who ran the local car industry would look out of their office windows and over the decades and see a change in the ecology of their workers car park. The days when all workers drove the local product to work began to change in the 1980’s and for some reason they were completely blind to this occurrence. Delusion is a powerful force in shaping how we see the world.

At the heart of this is a fundamental need for honesty in assessing our own performance of seeing what we do well and more importantly what we do poorly. You would imagine in a profession such as trading that there is little room for delusional behaviour; surely the cold hard nature of our profession would keep us honest. The correctness of our decisions is obvious, we either make money or we don’t. However, this is underestimating our power to craft a reality that seeks to protect our ego at all costs. Losing trades suddenly become winners in our mind and we plough on regardless of the financial consequences of our actions. The protection of our egos is paramount and is central to the way we behave. We will seek to preserve its integrity at every turn.

The preservation of ego is a function of an emotional investment in the outcome of the decision. Whenever we undertake a trade we are actually setting in place two trades. The first is a financial one, the second an emotional one as we stake our identity on the outcome of the trade. This second investment often precludes change if we are fragile in our self image. If all you have in terms of an emotional reservoir is the outcome of either a single or a series of trades then you will not have the ability to adapt to changing circumstances.

To me the crux of trading is represented by a series of paradoxes which in some way goes to explaining why it is so difficult. You need to be smart enough to write a trading plan but stupid enough to follow it. At the same time you are robotically following your plan ignoring all outside influence and your own emotions you also have to be attuned to whether it is working and whether you need to change. But you cannot change simply because you were bored, there has to be an actual need for change. Yet this observation can only come about being carefully tuned to the emotions you are at times seeking to ignore. It is no small wonder that we find this a challenging endeavour.

Despite its challenges trading does represent a chance for the keen self observer to mould their behaviour and their trading to whatever circumstances arise. This fluidity is not something that is offered by most other professions. Trading is infinitely malleable but it can only change in response to a reasoned observation of a change in your environment or performance. Change for the sake of change which is really just another way of expressing a low threshold for boredom and sticking to a task sounds the death knell of the trader. So we have another paradox, we need to not change on a whim but be every ready to change.