Meet “Wrongologist” Kathryn Schulz.
Do you remember that Loony Tunes cartoon where there’s this pathetic coyote who’s always chasing and never catching a roadrunner? In pretty much every episode of this cartoon, there’s a moment where the coyote is chasing the roadrunner and the roadrunner runs off a cliff, which is fine — he’s a bird, he can fly. But the thing is, the coyote runs off the cliff right after him. And what’s funny — at least if you’re six years old — is that the coyote’s totally fine too. He just keeps running — right up until the moment that he looks down and realizes that he’s in mid-air. That’s when he falls. When we’re wrong about something — not when we realize it, but before that — we’re like that coyote after he’s gone off the cliff and before he looks down. You know, we’re already wrong, we’re already in trouble, but we feel like we’re on solid ground.
‘Being wrong’ is a major challenge for traders and we’re
conditioned early on that being wrong is bad.
Think back for a moment to elementary school. You’re sitting there in class, and your teacher is handing back quiz papers, and one of them looks like this:
So there you are in grade school, and you know exactly what to think about the kid who got this paper. It’s the dumb kid, the troublemaker, the one who never does his homework. So by the time you are nine years old, you’ve already learned, first of all, that people who get stuff wrong are lazy, irresponsible dimwits — and second of all, that the way to succeed in life is to never make any mistakes.
Except the way to succeed in trading is to make mistakes.
Here is Kathryn’s excellent TED Talk – well worth 17 minutes out of your day tackling the topic of “being wrong”.