Know Thyself
The market isn't your biggest obstacle; it's yourself.
In today’s issue, we take a look at ourselves.
Delphic Maxims
Three maxims attributed to the Seven Sages were known to be inscribed at the entrance to the Temple of Apollo since at least the 5th century BC. Their English translations are as follows:
Know thyself
Nothing too much
Give a pledge and trouble is at hand
Our focus is on the first of these maxims. Previously, we discussed cognitive biases and sources of disinformation relating to the markets. In this article, we turn our attention to how understanding ourselves is crucial to being successful in markets.
The Market is a Mirror
It may sound strange, but the market tells you who you are.
When I began actively trading the market, I was surprised to discover that most of the difficulty came not from the mechanics of trading (analysis, execution, and review) but from the difficulties I have with myself (emotions, habits, and insecurities).
There were times when I was tired, hungry, or impatient. There were times when I watched good setups pass, didn’t set a stop-loss, or failed to review my trades. There were even times when I felt worthless, that I was a failure, or that something was irreversibly wrong with me. As you might expect, none of these things helped my performance, and every one was something that I could control.
It starts with honesty. Do I get enough sleep? Am I eating well? Could I improve my diet? Am I exercising enough? Do I have a drug problem? Am I addicted to something else? Can I manage my stress? Am I living in a fantasy or the real world? Do I socialize enough? Is there an outlet for my hobbies?
It should be no shock to hear that striving to be a well-rounded individual benefits the quality and performance of your investments.
Assessment
If we would like to know where we “fit in,” we have plenty of tools at our disposal. Here are a few that I have used to investigate myself.
An intelligence quotient (IQ) is a score that attempts to assess human intelligence. Much has been written for and against such a measure, but the fact remains that “general intelligence” is one of the most robust psychometrics that exists. It should be thought of as potential, not predestination. For example, there are many intelligent people that get bad grades in school. A bad grade in the market is the loss of money, so we should care to do our homework. You can take a free IQ test here.
The Personality Assessment System (PAS) was developed by John W. Gittinger after he noticed personality type similarities within subtest results of the Wechsler Adult Intelligence Scale (WAIS) assessment. Gittinger believed that personality was the product of both genetics (intellectual preferences) and environment (compensation for instincts). I will note that you should be careful when interpreting the results of these tests; many of the technical terms are considered outdated. You can take the PAS Primitive and Basic tests here.
Finally, Ray Dalio's experience leading his investment management firm Bridgewater Associates led him to develop a test for his workers. This assessment attempts to describe how you prefer to think, engage with others, and apply yourself. If you feel friction with your role in an organization, try this test out! You can take the PrinciplesYou test here.
What you do with these tests is up to you. I suggest you try not to identify too deeply with their results, but rather seek to understand yourself as if from a third-person perspective. Imagine you were going to hire someone with these results. What are their strengths and weaknesses? Are they a good team player? Is there anything concerning about their personality?
When we understand ourselves, we understand our limits. This is the beginning, not the end, of personal development.
Limitation
Understanding your limits can be a freeing experience.
One of the most pressing issues of our time is overload. An overload of information, choice, and comparison. At no other point in human history have we had such deep interconnections between our knowledge and each other. In a world where it seems that you can learn anything, work towards any career, move to any country, what do you do? This buffet of choices ironically leaves many people stressed out, anxious, and with decision fatigue.
The trick, of course, is that you cannot do all these things. You only have so much time, so much brainpower, and so much potential. To get good at anything, you must spend time on it, focus your mind, and realize your potential. Directing your energy is called discipline, and through discipline, you may achieve mastery.
The better you understand ourselves, the better you understand how you are motivated, your special talents, and where you fall short. Once you do this, you may realize that the market isn’t your biggest obstacle; it’s yourself.