BarroMetrics Views: Nature of Risk
A friend sent me an article from the New Yorker (http://www.newyorker.com/news/news-desk/failure-and-rescue). It’s about surgery and why some surgeons are more successful than others. If we traders substitute the word ‘failure’ in the article for ‘loss’, then all the author says about successful surgeons applies to successful traders.
I have excerpted below the passages that most appealed to me (the bold emphasis is mine). While teamwork probably does not apply to individual traders, the other two qualities, ‘developed judgement’ and ‘acceptance of responsibility’ certainly does.
The whole article is well worth a read.
“When I was nearing the end of medical school, I decided to go into surgery. I had become enthralled by surgeons, especially by their competence. The source of their success, I believed, was their physical skill—their hand-eye coördination and fine-motor control. But it wasn’t, I learned in residency training. Getting the physical skills is important, and they take some time to practice and master, but they turn out to be no more difficult to learn than those that Mrs. C. mastered as a seamstress. Instead, the critical skills of the best surgeons I saw involved the ability to handle complexity and uncertainty. They had developed judgment, mastery of teamwork, and willingness to accept responsibility for the consequences of their choices. In this respect, I realized, surgery turns out to be no different than a life in teaching, public service, business, or almost anything you may decide to pursue. We all face complexity and uncertainty no matter where our path takes us. That means we all face the risk of failure. So along the way, we all are forced to develop these critical capacities—of judgment, teamwork, and acceptance of responsibility.
(why some surgeons are better than others)
Researchers at the University of Michigan discovered the answer recently, and it has a twist I didn’t expect. I thought that the best places simply did a better job at controlling and minimizing risks—that they did a better job of preventing things from going wrong. But, to my surprise, they didn’t. Their complication rates after surgery were almost the same as others. Instead, what they proved to be really great at was rescuing people when they had a complication, preventing failures from becoming a catastrophe.
….. in the end, risk is necessary. Things can and will go wrong. Yet some have a better capacity to prepare for the possibility, to limit the damage, and to sometimes even retrieve success from failure.
…..When things go wrong, there seem to be three main pitfalls to avoid, three ways to fail to rescue. You could choose a wrong plan, an inadequate plan, or no plan at all.
when you refuse to even acknowledge that things aren’t going as expected, failure can become a….disaster. The sooner you’re able to see clearly that your best hopes and intentions have gone awry, the better. You have more room to pivot and adjust. You have more of a chance to rescue”.