7 secrets to top level investment performance

 

Topic: Tips for mentoring a trader (or weight lifter)

Executive summary: Focus on the big picture in investing, weight lifting and life: The 7 most important things to consider as an investor

Length: Fairly short


Big mistake, huge

My biggest mistakes in life are typically associated with suboptimization.

Sometimes I’ve focused on the wrong thing, climbed the nearest hill instead of the right one. Sometimes I’ve tried too hard, sometimes too little.

aconcagua summit underwear

Aconcagua summit

What I should have done is mapped out the entire landscape, identified the desired area and put in an adequate intense work effort there and sustained the effort for a long time.

Sure, I did pretty well anyway, albeit in my signature ad hoc, haphazard fashion. The hedge fund industry between 2000-2014 turned out to be a good ant hill to climb. And the way I happened to play it was with enough intensity (well, the right colleagues at least) and long-term enough to win The European Hedge Fund Of The Decade award.

But, I could have done better… and faster in the world of finance. I could have provided more value for clients, contributed more to my colleagues; and learnt more and advanced faster, got out earlier (or enjoyed staying).

Not least, I could have done way, way better in the gym by, e.g., sleeping better, eating better, and focused on the big picture (programming, recovery and long term progress), rather than maximum ‘effort’ in every set and workout. ‘Failure’ is just one of the options for a set ;) 

My worst trait is being stubborn

Grit is probably my best

– It’s kind of the same thing

My natural independence has been of great value to me

Whereas my contrarian streak often gets me into trouble

– You get the point


Big picture thinking

I listen to podcasts every day during my dog walks and weight lifting workouts. My main interests are science, health and economics/finance (as you can tell from this list).

The last few days I’ve been listening to several episodes of Sigma Nutrition Radio (an evidence based exercise and nutrition podcast).

Some of the more important points from episodes 148-153 have concerned big picture thinking, as opposed to being myopic or esoteric.

One thing that struck me – among the information about gluten sensitivity (possibly caused by a poor diet and suboptimal microbiome), the importance or not of drinking water and how to gauge your hydration status, how food composition and timing affects your body composition or health, whether you’re likely to be a hard gainer (no, you’re not), and how dangerous or healthy red meat and coconut oil* really is for you – was the weight to put on applying an 80/20 mindset to what to do and how to do it.

* note: forcing down water seldom is a good idea, and hydration mainly takes care of itself if you drink when thirsty (unless you’re an extreme athlete), food composition and timing hardly matters unless you compete at the national level, red meat usually isn’t the culprit and coconut oil is bad in large and concentrated doses.


80% machine, 20 % human

What really hit home with me were the following two points 1) Greg Nuckols’ statement about envisioning the entire lift, rather than paying too much attention to parts of it and 2) Giving clients mostly what they need long term, and then a little of what they want to keep them happy short term

Those weight lifting and coaching mindsets can be applied equally well to life in general and investing or trading – whether a mentor/master or apprentice:

  1. Health: Eat whole and right 80-90% of the time and more or less whatever you want the rest of the time; as long as your energy intake is what you want and your macros satisfy a minimum required level. Sleep enough. Do compound exercises for an hour or two about every second day. That’s the 20% giving you the 80%.
  2. Trading: Be Analytical, Unemotional, Strategic and Patient most of the time (A USP for you and SUPA for Swedes), but do experiment, gamble and have fun some of the time (sometimes a lesson learned, sometimes free money) if that’s what keep you ticking.

An effective choice of endeavor is more important than efficient task execution

The general idea is to avoid wasting time and energy on unnecessary nitty gritty details, and put quality effort into doing the right things adequately well (instead of aiming for 100% comprehensive scope or detail).

matterhorn

Cutting to the chase, here are 7 things I would have improved, if I had a do-over as an investor. They are all about being systematic, unemotional, mindful and focusing on true value drivers (statistics, learning & people):

  1. Start a commonplace book for investment decisions
    1. List of best practices
    2. List of mistakes
      1. why, what “happened”
      2. what you could have done (before and during)
      3. Be quick to realize and remedy mistakes
        1. That doesn’t necessarily mean “tight stop-loss levels”, but regarding fundamental mistakes in logic or turn of real world events
      4. See if the lesson can be formulated as a best practice
    3. List of wins
      1. why
      2. was it luck or skill – be brutally honest
      3. what you could have done even better (before, during and exiting)
      4. Best practice?
    4. Read the notes regularly
      1. always check your best practices before an investment
      2. keep updating best practices with new insights
  2. Read more books and articles, less sell-side research reports
    1. Take and keep notes of actionable investment wisdom
      1. distill best practices check lists for research, for investing, for interviewing, for discerning causal relationships
    2. Read book notes regularly
      1. repetition
      2. new insights
    3. Read research reports (only) for very specific purposes
      1. to poke holes in your own thesis and conclusion
      2. to find new ideas (but then you need to research them yourself as if from scratch)
      3. searching for data series for certain (proprietary) variables
      4. enable further questioning of analysts or company management
      5. gain new perspective (read reports with different conclusions from yours)
  3. Think more about thinking, think ahead, be proactive
    1. Prepare what you want to get out of a model, meeting or conference before going
      1. all too often I would go to meetings and just react
      2. sometimes I started on a model with no plan and continued and finished it purely driven by homeostasis
    2. Spend at least 1-2% of the time (1h/week?) on strategic planning, structuring and streamlining your work in a systematic fashion (commonplacing)
  4. Be more systematic and evidence based (statistics) when inferring causal correlations
    1. Document exactly why I think a certain correlation is meaningful
      1. fundamentally (causal), or short-term market-wise 
      2. is the covariation large and stable enough to matter
      3. regularly re-check if the correlation still holds
    2. Define a maximum of maybe 5 variables for forecasting, e.g., sales, and move on to more important things
      1. Don’t get bogged down updating detailed information that hardly matters
    3. Forecast only what you can reasonably have an idea about
      1. be clear about what you don’t know
      2. forecast very wide ranges for unknowable factors, if need to forecast at all
      3. make sure your forecasts are expressed as ranges reflecting the actual underlying uncertainty
    4. Use your intuition by all means, but only as a starting point. You still should do the research from scratch, using your best practices list
  5. Less “face time” and showing off
    1. Focus only on what matters (very different whether you’re a PM or a sell side analyst)
      1. PM: investment decisions
        1. understanding value drivers
          1. “fundamentals”, including allocation flows, ownership structures etc.
          2. technicals (widely defined)
        2. not time at the office
        3. not memorizing facts to appear knowledgeable
      2. Sell side analyst: getting more commissions
        1. appearing clever
        2. keeping PMs happy (take blame, give praise, let them win arguments and in golf)
        3. keeping clients
        4. being a good host at trips and conferences
    2. Deep work: Work when work. Relax when relax
      1. Clearly define which is which, and what the purpose is.
      2. There is still room for mingling, partying, gossipping, team building – just know when you do what and why
      3. Be systematic; assign time slots using Deep Work and Pomodoro techniques
    3. Do nothing
      1. Block off your calendar for meditation, walks and serious mobility exercises
      2. Regularly take several days and weeks off from the financial markets
  6. Meet more people
    1. The right people, not wasting times on lunches and cocktails unless for pure unadulterated fun, team-building or similar
    2. Discuss matters IRL instead of over e-mail or just reading reports
    3. Move during meetings, preferably walk outside in natural surroundings
  7. Ask more ‘stupid’ questions
    1. Disregard everybody else, e.g., during a telephone conference.
    2. Ask “why” 3-5 times in a row to get to the root cause
    3. Make sure you understand, instead of trying to appear clever
      1. Ask again; if they can’t explain it clearly there is probably something fishy going on
      2. If needed, go back and research the topic, look up the definitions, then ask again

KISS

ONE thing I actually did do really well was using increasingly simple models for forecasting sales, profits and cash flow. Since you can’t know the variables and outcomes in any detail anyway, that’s just not where you should spend most of your time, unless you’re an analyst trying to impress your boss or client.

Keep

It

Simple

Stupid

If you’re a PM or private investor you need a minimum of modelling for a ball park estimate of the development, in order to gauge if things are going as planned or not. Depending on your position you might need a little more nuance if the SEC or a higher level director demands it.

If you’re a buy side analyst you might need a lot of details to be able to ask any kinds of questions from bosses, authorities and clients.

Finally, if you’re a sell-side analyst there is no end to how big and detailed models you can build to impress everyone in your ecosystem – the only snag is it won’t help you make better investments. Make sure you remember to change your style to something more practical should you advance to a PM position.

Summary – start commonplacing
Lifters and investors alike should focus foremost on the big picture.
A lifter should focus on compound lifts, overall programming, sleep, calories and threshold level macro nutrients, before anything else.
An investor should be strategic, analytical, patient and unemotional, before experimenting or going by his intuition.
Mindset: you’ll get very far – far enough at least – by just avoiding stupid mistakes. Trying to optimize every little detail could on the contrary lead to really stupid mistakes and misallocations of your resources.
7 important tools for every investor:
  • Start a commonplace book
  • Read more books
  • Think more about thinking
  • Be more systematic
  • Less face time
  • Meet more people
  • Ask more stupid questions

Continue reading about my views on systematic and patient investing in this article (posted October 31, 2016)


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Keystone habits: How to live like Benjamin Button

Executive summary: How a few strategic keystone habits almost effortlessly can change your life for the better

Case in point, n=1: How I am the best version of me, approaching 50 years (kind of), thanks to regular dog walks and gym sessions

What you should do? Establish just one (low threshold) keystone habit that has the potential to shape and improve your days or weeks with regards to, e.g., investing, research or exercise


How is father time treating you?

Hi,

How are you?

Investments are lagging?

Tired, a little sore, hungover perhaps?

Got a few pounds and inches extra round the waist?

Getting winded walking up stairs? Back’s aching every now and then?

Got a cold? Again? And you had one last year as well?!

It’s just part of turning 25/30/35/40/45“, you say?


Age is no excuse

I’ll turn 45 in a few months (January 2017)

Today (Monday, September 12) I executed my best bench pressing session ever*. In my previous workout session, three days ago (Friday) I had my best deadlifting session ever*.

*the absolute weights don’t matter, but if you just have to know; I benched 4 sets of 4 reps, with a short stop at the chest, at 120kg (265 lbs), and the 4*4 deadlifts were performed at 165kg (364 lbs).

In between I did some light partying on Friday and Saturday. The weekend before that, however, I set some kind of a new weekend party record.

In a recent interview (Börspodden, to be released Wednesday September 14, 2016, I think) I was reminded of how I in Tokyo this spring memorized a 14-character random WiFi password from a single reading (without even trying… However, I can’t claim to be able repeat the feat reliably).

On top of all this, I am more mindful, focused, kinder, more flexible, healthier*, and exhibit better aerobic capabilities than ever. And, I look like this (September 10, 2016 – NB that my focus is on being healthy not looking healthy)

*I haven’t caught a cold in a decade

Sprezzaturian

I am the least humble I have ever been too. Progress on all fronts…


Faster Harder Scooter

The key to a 300+ lbs bench press at 45, when my PB in my 20s and 30s was 20% lower is keystone habits. The same habits explain my improved posture, general health, psychological resiliency, my party recovery rate, my improved cognitive abilities, mental strength, and on and on.

In short, a few keystone habits introduced in my 40s have caused me to experience a Benjamin Button style backwards life trajectory.

Let’s take a look at those habits.


Keystone habits

Dog walks

I have a dog, a German Shepherd-Doberman mix that I take for at least 3 walks a day; morning (8 am), afternoon (3 pm) and night (9 pm). No matter how I feel, what the weather is like, or what plans I have, I get to go out 3 times a day, walk a few miles, interact with nature, my dog, other dogs, other people.

The dog walks create a framework for my days, a weekly matrix that’s very suitable for other bolt-on habits. For example, I usually listen to educational and informative podcasts during my walks. In addition, I limit my drinking, or at least have a reason to, in order to fit the dog walks into my schedule.

Note: the keystone habit of dog walks also means I get a lot of brain exercise (science podcasts), as well as drink less alcohol.

Weight lifting

I lift weights at a gym every second day. In between dog walks and eating there really isn’t much time. That means walks and gym sessions combine to push me to be more effective, or I wouldn’t get anything done (blogging, podcasting, writing, etc.).

Partying

It’s no fun at all squatting hungover, which means my weight lifting routine sets a limit to the amount of partying and drinking alcohol I can do. That in turn makes it easier to keep a steady sleeping schedule.

I typically initiate my pre-sleep routine around 11 pm, including turning off my phone, washing my face and reading, and then turn off the lights at or slightly before midnight.

Reading and sleeping

-Add reading every day, and keeping a regular sleep schedule to my keystone routines (or possibly second order add-on habits)

Cognition

Some of the research on blogs I read and podcasts I listen to (including The Brain Science Podcast with Dr Ginger Campbell) has inspired me to practice a kind of micro meditation/mindfulness (mmm) during my walks. That has further improved my general feeling of well-being. The mmm habit is a bolt-on that might never have happened without the dog walks. Recently I have started trying longer meditation sessions as yet an extension stemming from the keystone habit of dog walks.

Mobility

Since I’ve started doing mobility exercises during my walks, I’ve come to spend more time on them than my typical 2 minutes during the Game Of Thrones Intro once a week.

HIIT

The heavier I lift at the gym, the more crucial the warm-up becomes. Before doing exercise specific warm up sets at spend 10-15 minutes performing High Intensity Interval Training, which has pushed me to my best aerobic shape ever – without even trying.

Superfoods

Do you hate that concept too?

I know! Me too.

Anyway, every day I have a spoonful of natural fish oil* mixed with a specific antioxidant-rich olive oil.

I would say that habit is just as important as walking, sleeping and working out. However, it is a secondary habit I picked up in my mid-30s, in order to accommodate my taxing work and workout regimes. No matter, it demonstrates the synergistic potential of keystone habits.

Food

I used to live on junk food (McDonald’s 2-3 times a day in 1994-1995).

With time, however, all the working out, working long hours, walking etc. slowly made me eat better and better; more beans, more fibers, more leafy greens and cruciferous vegetables (picture), less meat, more fish and fish oil*, whole fruits and berries, no juice, more spices like ginger, cinnamon, black pepper, turmeric…

Vegetables, close-up

The keystone habits made it a necessity as well as a delight – in between gym and a dog walk what I want and need is a quick power drink with more or less all the above included.

*ArcticMed, if you are interested. Filtered from Phtalates, mixed with a rare anti-oxidant rich (in particular oleocanthal) olive oil, and Friends Of The Sea certified. Btw, a very recent study (summer 2016) on mice is showing exactly how w-3 is reducing inflammation in a cell.


Reinforce or establish your own keystone habits

Which are your current or potential keystone habits? A day job could work, but it’s not necessarily healthy and it could also wear you out and prevent you from adding truly good habits.

You could try subscribing to a food delivery service to eat better which should make exercising easier and possibly lead to better sleep and more energy in a virtuous cycle.

You could try adding an exercise routine, e.g., walking a few extra blocks every day before going home and then “reward” yourself with a healthy power drink.

Signing up for a group sports activity 3 times a week is probably one of the best things you could do to create a framework nudging you toward eating better, sleeping better, drinking less, reading more. If you can stick to it. However, going from zero to three right away probably just won’t work.

My preferred way of introducing a keystone habit, or any habit for that matter, is to set the bar extremely low:

If you want to start exercising, running, studying, programming or whatever it might be, set aside just one minute per session. Gradually increase the number and length of sessions, slowly and in very small increments but steadily, until you’ve reached the desired volume.

Investments

Think about what keystone habits could improve your investment routines. What could make you more informed, more disciplined, sticking to your best practice lists? What could make you focus less on empty tips, on social media chatter, on laid back reading instead of actual research?

Implement those. Just one is enough.


The power of keystone habits redux

– how Ronja and weight lifting turned me into Benjamin Button

Pumping iron and walking Ronja created a framework as well as a need for better nutrition, better sleep, and being more effective.

One thing have led to another, and nudge by nudge I have come to spend my dog walks listening to science news and doing mobility exercises, and my days reading and writing, interspersed by power drinks with whey protein, spinach, kale, cinnamon, turmeric, black pepper, berries, or other healthy meals.

Smarter and more productive by blogging

The framework and constraints (albeit artificial) have made me disciplined and effective, despite my natural inclination toward laziness. That includes not the least my creative endeavors of this blog and my podcast (in Swedish: 25 minuter), which force me to stay up to date and productive during my retirement.

Another way of putting it is that my workouts are better now, since I know and understand more; that my partying doesn’t hurt as much, since I am in better shape, eat better, sleep better and I am more mentally resilient. No matter, it all boils down to the healthy regularity introduced by my dog walking and gym going routines.


Summary

  • Establish a keystone habit – just one, or reinforce an existing one.
    • It could be daily pod walks, a “stop sitting” alarm, walking meetings, reading certain newsletters at set days and times every week, exercising every second day, every day, go outside for 10 minutes of mobility work before dinner every day, or something similar.
    • Remember to make it easy (wu wei); the lower the threshold the better. Once the habit is set you can increase its intensity. 
  • With time, let other healthy, useful, productive habits bolt on to your main habit.
  • Perhaps add another keystone habit
  • Enjoy a carefree and healthy lifestyle without even making an effort

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Lifting weights 101 – Retard’s Guide To The Gym

Summary: the only weight lifting schedule you need; the simplest and most straight forward workout routine you’ll ever come across

Length: 1 200 words


  • Day 1: Deadlift 5×5, Bench press 5×5, Pull-up 5 sets
  • rest
  • Day 2: Bench press 5×5, Squat 5×5, Pendlay row 5×5
  • rest
  • Day 3: Squat 5×5, Deadlift 5×5, Press 5×5

And remember to mobilize your hips, back and shoulders every now and then to stay healthy and young.

-That’s it. Move on. But first share this article with a friend who can’t bench press, squat or deadlift his own bodyweight.

What about nutrition?

Food? My advice is to eat food, real food. Eat a lot but not too much. If you focus on fish, beans, eggs, leafy greens, whole fruits and stuff like broccoli and cabbage first you can probably eat just as much as you like. And after that you’ll be too full to eat too much french fries, bread, cereals and pasta.


Working out 101

It’s supposed to be fun. It’s supposed to be easy. If it’s complicated, you’re doing it wrong. If you absolutely crave complexity, you can add that after mastering the basics (and performing them consistently).

Make no mistake, sometimes you won’t feel like going to the gym, but the choice of exercises should still be simple. The simpler and fewer they are, the less daunting it will feel actually getting to the gym.


Level 1 – Go to the gym

If it’s gym day, just go. Go even if you don’t feel like it. Don’t procrastinate and hope for some motivation, just make sure you get there. Convince yourself you’ll only change and walk slowly on the treadmill for a few minutes. If you’re lucky, walking slowly soon turns into a faster pace, then a light jog, and so on…


Level 2 – Lift weight bars until you feel tired

Lift reasonably heavy weights a few times (that’s a “set”). Do a few sets in one exercise then change to another exercise. Do a few exercises until you feel tired. Do it again a few times a week.

It actually is that simple: a few reps, a few sets, a few exercises, a few times a week until you feel tired. Keep doing that week after week and you’ll become reasonably fit. There’s no need for esoteric exercises or any other equipment than a standard bar and some weights.


Level 3 – 5x5x5; Focus on these five-ish exercises, doing five sets of five reps each at least once every week

  • Deadlift
  • Squat
  • Pull-up/Chin-up
  • Pendlay row
  • Press/Bench press

Simply make sure you do them all at least once a week, using weights you can manage with good and safe form for about 5 reps per set, 5 sets per exercise. “5×5” refers to your work sets, i.e., the day’s heaviest weight (warm-up sets don’t count).

NO, you don’t need to train your forearms, wrists, abs, shoulders, pecs, calves, ass, triceps, biceps etc. with specific exercises; especially not any involving machines. You can, of course, if you’ve got the time and energy after focusing on the real lifts.


Level 4 – an actual weekly workout schedule

  • Day 1: Deadlift 5×5, Bench press 5×5, Pull-up 5sets
  • rest
  • Day 2: Bench press 5×5, Squat 5×5, Pendlay row 5×5
  • rest
  • Day 3: Squat 5×5, Deadlift 5×5, Press 5×5

Add in some aerobic warm-up, biceps curls, prone bridges and crunches (abs) as you see fit. Quite naturally, you’ll be able to focus more and lift heavier weights on the day’s first exercise than the second and third. Plan for that, since that’s the reality anyway.


Level 5 – getting jiggy with it

There is nothing magical about 5x5x5, or working out 3 times a week. I don’t use the 5×5 principle, at least not all the time. This summer, e.g., I’m getting a little crazy, doing 4×4 in most heavy exercises. And I’m working out every second day, meaning I go to the gym 7 times in two weeks, instead of 3 times a week.

I think 3-4 times a week is optimal, for anybody just looking to get reasonably strong and fit, but 2 could probably do the trick as well, and 5 wouldn’t be a complete waste of time.

In addition to lifting weights, I’m doing HIIT (intervals) or fast running on a treadmill for 12 minutes right before every workout, thus accumulating at least 10-12 km of quick running every week. I also add some kind of specific biceps work (seated or standing biceps curls on 2/3 of my sessions, in sets of 5-10 reps each), as well as 25-50 crunches of some kind after every session.

Every now and then I do a heavy pyramid in the bench press or deadlift, instead of a lighter 4×4. And sometimes I do a high rep set, like this 110kg x11 bench press (243 lbs incl. safety springs) or this 140kg x20 deadlift (touch and go).

Most of my work, however, is done in the 4×4 or 5×5, sets x reps, range. That’s where I seem to gain strength most effectively. The variation is mostly for fun and motivation, but I also think it stimulates the muscles in a way that might help build volume or strength long term. No, I’m not going to refer a ton of research on the matter. Google it!


Level 6 – mobility (for health, not Van Damme style showing off; though I’m looking forward to “Kickboxer 2016“)

Don’t overdo it. Don’t waste time on doing the splits (unless your sport or profession calls for it). Make sure you actually do the ones you’re supposed to do instead.

Focus on a few exercises for improved posture and long term health. I’ve written about mobility here before, but as a quick recap:

  • Hips – squat, couch, pigeon
  • Upper back – cobras (seals), tube roller
  • Shoulders – morpheus
  • Lower back – hernia prevention 3D jiggling

Novice level: Spend a few minutes a week on each, e.g., in the TV couch, bundled with your favorite show

Pro level: Spend a few minutes at every weight lifting session


Food? My advice is to eat food, real food. Eat a lot but not too much.

:D

If you focus on fish, beans, eggs, leafy greens, whole fruits, and stuff like broccoli and cabbage first, you can probably eat just as much as you like. And after that you’ll be too full to eat too much french fries, bread, cereals and pasta. Avoid all heavily processed food and food rich in sugar, like ketchup, mustard, candy, cereals, juice, soda etc.


Summary – KISS

Keep It Simple Stupid

Just make sure you get to the gym at all.

Once there, forget about fancy equipment, esoteric exercises and so on. If you just manage to consistently do some squatting, deadlifting, pressing and pulling for a few hours each week, you’ll soon be fitter than most.

Add in some limited high speed running, mobility exercises, biceps curls and ab crunches, and you’ll be a picture of health and fitness.

Eat real food, not processed garbage or fast food. Fast food burgers aren’t really burgers. Make your own instead.


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Om du kan svenska kan du kolla in avsnitt 37 och 38 av “25 minuter” som handlar om träning och rörlighet