Friday, June 22, 2007

The Spouse of a Trader: What Makes Marriage Work

In past posts, I've written about daughter Devon (above, front left) and her principle, and I've shared the story of son Macrae (above, front right) and our multicultural experience. This one is about the mom, Margie (right rear) and what it takes to succeed as the spouse of a trader. (Mad props to photographer Rob Grego for the Vermont stream shot).

Much has been written about trader personality and what it takes to succeed in markets. I can't say I've encountered any serious discussion of the psychology of the trader's spouse. And yet, my work with professional traders suggests that trading can take a meaningful toll on spouses and marriages.

The fundamental challenge, I believe, is that traders are rewarded for sound decision making under conditions of risk and uncertainty. These very conditions ensure that traders do not have regular, predictable earnings streams. When I was teaching full time in Syracuse, I had a fixed salary and a tenured position with the medical school. While Margie and I certainly dealt with other challenges, money was not one of them. We had fine employee benefits, two secure incomes (she was a tenured teacher at the time), and very reasonable living expenses.

The trader at a professional firm (investment bank, hedge fund) will typically have a base salary, but most of potential earnings will come from performance. Because these firms are often located in such high living cost locales as Manhattan and suburban Connecticut, the base salary is not perceived as adequate total compensation. Many proprietary trading firms have no such salary structure at all. At best, they offer a "draw" against future profits that must be repaid eventually. Too, the proprietary firm may very well not offer full benefits to its traders, as they are customers of the firm (the prop shop acts as their broker), not employees.

It's when the trader is self-employed and independent that we find little financial security whatsoever. There are no benefits and no income guarantees. The risk and uncertainty in markets create risk and uncertainty for family income. Very, very often it is the spouse--concerned about children and home--who suffers from this uncertainty. The trader may thrive in such an ambiguous environment; the spouse/significant other often does not.

Research tells us that the absence of perceived control over outcomes is one of the most crucial mediating conditions of psychological stress. The spouse of a trader has no control over markets, trading results, or monthly income. I've generally found--even with traders who have had careers spanning decades--that their income levels are cyclical: there are lean years along with good ones. All too often, couples make financial decisions during the flush times, only to experience pressure when market trends and volatility shift.

Yet another challenge faced by the trader spouse is that one of the qualities that makes for trading success--the ability to absorb oneself in markets--is also a quality that can pull the trader away from family involvement. The trader may come home to relax, zone out, and then prepare for the next day; the spouse may be looking for interaction, help at home, and involvement with the children. Many traders describe trading in terms of pursuing a dream. Too often, while one partner is pursuing the dream, the other is getting by from day to day keeping up a home, making ends meet, and providing a stable income. Rarely does the trader realize that the spouse may desire a different dream: one based more on the factors that initially produced the marriage vows.

One of the most common problems I hear from married traders is that bringing trading stresses home creates problems with the spouse. It creates problems precisely because the absorption in those problems prevents the trader from fully participating as a partner and parent. Over time, that can only lead to conflict and resentment. It is in such a situation that spouses then find it difficult to be supportive of their partner's challenges. Many times I've heard that traders dread coming home after a losing day, fearing recriminations from a stressed-out and undergratified partner.

I asked Margie for her view on the most important quality of a trader spouse and she immediately responded: "resilience". By that, she meant the ability to ride bad times with good and maintain some emotional distance--and even a sense of humor--through the challenging times.

And yet, I believe there is much traders can do to promote the resilience of their partners. Two principles that make marriage work in general are especially crucial to the well-being of the trader spouse:

1) Take Responsibility For Your Partner's Well-Being - Where I've seen the marriages of traders work out very well, it's been because the trader has gone the extra yard to ensure that the spouse has a career or other outlets for involvement and expression. The trader has picked up the slack at home, enabling the spouse to also participate in fulfilling activities. The trader has also made particular efforts to not bring trading pressures home and to ensure that there is enough "rainy day" capital at home to weather lean market conditions. In turn, the spouse has sustained the self-sufficiency to allow the trader to have time at home to engage in research or just unwind from a tough day. When the marriages have worked out, the trading career has been a partnership, not just the trader's job.

2) Find The Best In Your Partner - Psychologist John Gottman has found that four patterns of communication predict divorce with 91% accuracy: criticism, defensiveness, contempt, and stonewalling. Successful couples view their past positively and view each other's character with admiration. Unsuccessful couples attribute problems to flaws in the spouse's personality and character. They see the worst in each other. To a successful couple, a flaw may be a lovable quirk; for the couple headed toward divorce, it is an insurmountable gap. Among the keys to marital success mentioned by Gottman is the ability to create shared meaning. The spouse is not going to be a trader in most cases; nor will the spouse necessarily have an interest in markets. It is crucial to have a shared sphere of interest and activity that continually yields fresh experiences of intimacy. These shared interests will also enable each member of the couple to direct perceive the best in each other.

I did not learn these things from my graduate training as a psychologist. No, I learned them by observing Margie, who is easily as good as being a mother and spouse as I am at being a trading psychologist. This post is for her and all she's done to sustain close to a quarter century of happiness through many personal and joint ups and downs. When we had our wedding rings engraved, we chose the phrase "Perpetual Passion".

It's a formula for success in love as at work.


A Dozen Reflections on Life and Markets

What Trading Teaches Us About Life