Monday, September 03, 2007

Trading and the Psychology of Heroism

I have to admit, I found special pleasure reading Dr. Andrew Bernstein's essay on The Philosophical Foundations of Heroism. Andy and I became friendly in New York back in the early 1980s, when I was finishing my graduate education. We were students of Ayn Rand's Objectivism; you'll see that influence in his essay. Reading his article two decades later, I can see that he has lost none of his rhetorical verve; nor has he compromised his views.

What Dr. Bernstein recognizes is that heroism represents a profound psychological need. If you go back to my post on goal-setting research, you'll recall that goals facilitate self-regulation: they direct our efforts, enhance our motivation, and build our sense of mastery and self-efficacy.

But what goals do for us on a day-in/day-out basis, heroism accomplishes over the course of a lifetime. Our heroes provide the horizons by which we direct our life efforts; they supply the emotional fuel that comes from the realization that our deepest values can be attained. Perhaps most of all, our heroes confirm that life is worthwhile; that the struggles to achieve values so aptly described in the Bernstein essay can be won.

It is difficult to find heroes when much of the media is consumed with stories of celebrities in meltdown, lurid crimes, and "reality shows" that portray the less savory aspects of human relationships. I'm convinced that "American Idol" has vaulted to prominence, not just because of the talent of the contestants, but because of the drama it provides of a dream come true. It is a major reason we love sporting contests: each game is life-in-miniature, a tableau of the quest for success.

After reading the Bernstein essay, I made an identification that hadn't struck me previous: So many of the top traders and portfolio managers I work with have undergone a deeply emotional mentorship. They've been taught the business by a valued teacher/friend/mentor. That mentor has become their hero: at times in the marketplace when confusion reigns, they're able to look back on their training and ask, "What would my mentor do?"

Heroes are exemplars: they make concrete the principles by which we hope to live our lives. Perhaps one reason so many traders succumb to fear and greed during volatile market times is that they lack the internal compass--the vision of an exemplary path--provided by heroes. Without such a philosophical and psychological compass, we become as lost in life as in markets.


Blueprint for an Uncompromised Life

A Dozen Reflections on Life and Markets


speedtheplow said...

Finding a mentor early on can be the difference between success and years of struggle and a much greater potential for failure. Acquiring confidence is vital to success, and a mentor is the invaluable safety net in the early stages of learning. I look back on my own life and wish I had been lucky enough to find a mentor in my teen years. It would have saved me twenty-five years of wasted energy and self-destructiveness.

Bryan said...

Hi Doc,

Your observation that in times when confusion reigns in the markets many traders ask themselves what their mentor would have done in those circumstances reminded me of a quote from Warren Buffett about his hero-mentor, Ben Graham. Buffett has said that:

"On a lot of people’s compasses, Ben [Graham] was true north.”

It's interesting that he uses the same internal compass metaphor that you use.

It seems that Buffett was lucky in that he did not have to imagine what his mentor would have said in times of dire need. Certainly in 1968 when the market was going through a shaky patch Buffett
sought Graham out in person in California while he was in semi retirement in order to gain advice on what actions to take.

Bryan Wendon

Warren Buffett cited in Janet Lowe (1996) "Benjamin Graham on Value Investing: Lessons from the Dean of Wall Street", Penguin.

Brett Steenbarger, Ph.D. said...

Hi Speed,

Great, great point. I like your insight into how mentors serve as safety nets. My own career as a psychologist was very much influenced by mentors who supervised my early development.


Brett Steenbarger, Ph.D. said...

That's a great quote from Buffett, Bryan. I hadn't heard that one, but it gets at the heart of mentorship and the psychological role of the hero. Thanks much for the insight, as always--


Brett Steenbarger, Ph.D. said...

Hi Speed,

Great, great point. I like your insight into how mentors serve as safety nets. My own career as a psychologist was very much influenced by mentors who supervised my early development.


Wayne said...

Hi Brett,

Serving others gives people internal strengthes to master their life as well as their trading.

I like your posts, and even more of your willingness to serve others.

Brett Steenbarger, Ph.D. said...

Hi Wayne,

Thanks much for your note. Interestingly, in helping others, I've learned much from them, creating a win-win. Best of luck in your trading--


AnaTrader said...


Thank you for pointing to the The Philosophical Foundations of Heroism by Andrew Bernstein.

Also, I revisited Atlas Shrugged when Bernstein wrote:
"Those who can - do", goes the first part of a famous quote and here , in a different context, we can draw a different conclusion - that those who do on the grand scale stand head and shoulders above those who don't and are, therefore, the greatest heroes of the human race". Unquote

What a hero means to most.