Tuesday, March 11, 2014

Creativity and Greatness in Trading: Perspectives From Dean Keith Simonton

One of my favorite books is Greatness:  Who Makes History and Why by Professor Dean Keith Simonton.  Readers unfamiliar with Simonton's work can get a taste from this article on creativity as blind variation--a Darwinian explanation of creative genius.

Simonton points out an interesting facet of creative genius:  about 50% of creative ideas come from the 10% of contributors in a field who are most productive.  One would think that creative geniuses bat out one creative masterpiece after another.  That, Simonton's research finds, is not the case.  The hit rate for the greatest geniuses--the ratio of works deemed creative masterpieces versus not masterpieces--is no higher for the geniuses than for their lesser competitors.

Those we come to know as great don't get that way by hitting home runs every time they come to the plate, so to speak.  Rather, they go up to the plate more often:  they produce many more works and a relatively constant proportion of those works end up becoming historical contributions.  In other words, the signature characteristic of creative geniuses is prodigious productivity:  they produce many more works than their peers and so are more likely to produce "mutations" that pass the test of natural selection.  

What makes eminent contributors to their fields so unusually productive?  Simonton observes that they are absorbed in their work and put in unusual numbers of hours doing what fascinates them.  To paraphrase Seykota in the Market Wizards interview, they don't just have talent: the talent has them.  This absorption in their work is a big part of what gives them the deliberate practice hours to achieve expertise.

The traders who I've seen maintain career success are also those who are absorbed by their talent.  Their unusual productivity shows up in the constant flow of new ideas they generate and their continuous efforts at improvement and adaptation.  One of the best tests of a trader is what they do when markets are closed.  The best are absorbed in markets, whether markets are trading or not: theirs is a passion for mastery, not just a need to trade.

Further Reading:  Trading as Performance Activity