Sunday, November 09, 2014

The Missing Ingredient in the Development of Traders

To become part of elite military units, soldiers need to pass rigorous training programs.  There is a great deal we can learn from these programs, as they have a solid record of producing soldiers operating at high performance levels.

I took a look at the Fort Benning site for the Army's Airborne and Ranger Training Brigade and was surprised to learn that 60% of all training failures occur within the first four days of the program.  (About half of all those who begin training ultimately complete the sequence successfully).  The reason I was surprised was that soldiers who undertake the training are typically those interested in furthering their performance and their careers.  Why would they drop within a few days?

The answer lies in the structure of the training program, which is laid out in detail on the Ranger School Preparation site.  The first week of training (Ranger Assessment Phase, or RAP week) consists of a physical assessment; combat water survival assessment; day and night land navigation tests; and a 12 mile foot march.  As the site emphasizes, "RAP Week Attrition is the direct result of students that are physically unprepared to achieve the minimum standards."  

However, there is more to dropout than just lack of physical conditioning and preparation.  The site makes clear that "The physical RAP Week events, when taken individually, are not very difficult.  However, RAP Week's cumulative effect will make each task a serious challenge for any Ranger.  You must train to the maximum standard on all events to mitigate the cumulative effect produced by these events over a one week period.  Lack of sleep, food deprivation, heat and/or cold weather, and the overall stress induced in Ranger School will add to this cumulative effect."

In other words, it's not just that you have to pass several tests to move on in your training.  The tests are intensive; they are crammed into a single week, and that week is filled with mental and emotional stresses, including lost sleep, little food, and very uncomfortable conditions.  After several days of such rigor, many seemingly motivated recruits drop out.  They are not just physically unprepared:  they are not mentally prepared for the rigors of warfare.

There is an important performance principle at work here:  Effective training programs demand a higher level of skill enactment and incorporate a higher level of stress than trainees are likely to see in the field.  This is the idea of boot camp; it is also why team athletic practices push players harder than they will be pushed during actual competition.  Take a look at medical residents:  they typically function with longer hours and more responsibilities than they are likely to encounter in normal clinical practice.  By drilling at high levels of demand, training programs prepare recruits to mobilize their skills and coping resources under the most challenging conditions.

Very few training offerings for traders recognize and incorporate this performance principle.  Much trader education takes place in the form of conference presentations, webinars, courses, videos, podcasts, and/or websites.  Even when trading simulations are employed to actually apply the information derived from these sources, it is almost never the case that the simulations systematically push students to apply skills under progressively demanding conditions.  The missing ingredient in the training of traders is grit:  the development of cognitive and emotional fortitude in the face of high demand and high stress.

Can you imagine a soldier, physician, or athlete training primarily via videos, seminars, and courses?  Why would we think that the challenges and rigors of trading can be adequately addressed in the comfort of an auditorium seat or in front of a computer screen?  Education is necessary but not sufficient for elite performance.  Developing traders need training, not mere information.

Further Reading:  Making the Right Decisions in Emotional Conditions