Thursday, July 17, 2014

Maximizing Performance by Optimizing the Performance Environment

The recent post on improving your cognitive environment suggested that performance is not only a function of talent, skill, and effort, but also one's surroundings.  Those surroundings include at least three elements:

1)  Our physical environment - How our space is laid out; the resources available in that space; the degree to which the environment is comfortable, quiet, stimulating, distracting, etc.

2)  Our social environment - Who we are surrounded by and who we choose to surround ourselves with; the interactions we have with others, virtual and actual; the degree to which we benefit or are hindered by our interactions.

3)  Our cognitive environment - The information we process; the degree to which we filter vs. seek information; the ways in which information we format and process our information; the sources we seek for our information.

Rarely are our environments optimized for the work we undertake.  Partly this is because we tend attribute performance outcomes to internal factors:  our decisions, our psychological states, our research, etc.  Because we don't systematically vary our environments or focus on the impacts of naturally occurring environmental changes, we generally don't appreciate the ways in which the world around us impacts our decision-making and performance.

A simple example is the quality and quantity of sleep we get each night.  We know from research that getting the right kind of sleep, as well as the right amount of sleep, is important to mood regulation, concentration, learning, and performance.  We also know that sleep is affected by what and when we eat and drink, our exercise level, and our nighttime routines.  Keeping a phone at the bedside to check on nighttime quotes is a common environmental choice for many money managers--and it's one that can rob us of the deep restorative sleep that aids next day performance.

One challenge traders have in structuring the environment optimally is that trading consists of multiple activities, each of which typically requires a different environment.  For many traders, quiet periods of deep analysis--whether by reviewing charts, reading research articles, or analyzing data--are an important part of their understanding of markets.  Such work is best undertaken in distraction-free environments that promote sustained focus--not on the desk with multiple distracting screens and phones.

Conversely, most traders need to stay on top of breaking developments during the trading day and so stay closely connected to news, chats, and interactions with colleagues.  The quiet, distraction-free environment, so helpful to deep thinking, is not so useful for the fast thinking of keeping up with and understanding the implications of news releases and the dynamics of real-time market movement. 

And how about those activities in which traders piece together the elements of market puzzles, integrating the results of both deep analysis and fast market pattern recognition?  Such synthesis--quite different from the deep dives of market analysis--benefits from processing information in multiple ways.  We can write journals, carry on conversations with valued colleagues, or simply remove ourselves from the work environment and ponder the world while on a hike.  The creative process of synthesis benefits from fresh interactions, fresh settings, and fresh ways of piecing together our observations--and those of others.

What is unlikely is that sitting at a desk, in front of a trading screen, will optimize all our efforts at analysis, observation, and synthesis.  Each is a different process, and each of us engages in those processes in different ways.  If you find yourself distracted, inefficient, a step behind in understanding markets, frustrated with performance, and/or undisciplined in your work routines, consider the possibility that there might be a suboptimal fit between you and your work environment.  Tracking shifts in your environment and their impact upon your performance is a worthwhile first step in discovering what works best for you.

It's amazing how much we can pick up when we process the right information the right ways in the right settings.

Further Reading:  Where to Find a Trading Career