Examination - and the merits of the rat race

After a long while, I'm writing an examination. This is basically a certification examination which is a step in registering with the exchange as a dealer, so I didn't expect to really "learn" much in the process of preparation. Most certification examinations just leverage on knowledge you already picked up in the past, but this one is different, and is a function of almost completely new information. So it's brought back memories.

Back in the day, I'd developed something of a specialty when appearing for multiple choice examinations.  I had found that it was far more effective to dive into things like sample questions, end - of - chapter questions, mock exams etc because it forced you to draw out your memory rather than stuff something in. It probably also contributed to success in a more direct and efficient way because there was some finite likelihood that similar questions would actually appear in the paper. The one casualty in the process was actually learning about the subject - but back in the day, who cared :)

What I probably didn't realise, is that  learning was still happening in a passive way.

Over the years, things changed. With higher education, examinations became tougher (and not always multiple choice either). It was now important to actually learn the basics of the subject and figure out solutions as a logical offshoot of those basics. I'd frown upon someone who just looked at the answer and treat it as the endgame, because somehow it collided with the sanctity of learning. I began to look down on, what was in effect, my own method of learning and getting by.

Now I've come almost full circle. This time, the examination is a step in something much bigger. It's one of the pre-requisites for a bigger process, rather than being the only one. I can only afford so much time to prepare, regardless of my subject interest. It's also more important that I get this done efficiently without much ado, so that brings its own clarity.

That makes me wonder about this whole "learning for the sake of learning and interest" thing. We always frown upon blind and rote learning - starry eyed ingenuity always makes for better pop culture. But maybe one goes through phases where there are other, more important things than pure learning. Maybe it's each one's tendency to their own.  In such cases, it's probably far more effective to allow romantic illusions of learning and discovery to play out in the background! 

Diving vs treading

The one year's experience as a trader has taught me many things. Very little of this has been financial or market related insight. A significant part of it has been a tour de force in System 2 thinking. But most of the new things I've learnt have been on the softer side - an aspect that I've woefully failed at, both at college and thereafter. This is about one of those things.

As a person, I've always had a tendency to deep dive.  You could spin this positively as attention to detail, last mile, perfectionist - or negatively as anal, irritating or other oft misused medical terms like ADHD or OCD. My way of looking at it is "depth first" as opposed to "breadth first". A "depth first" approach would grab the biggest problem around and beat the devil out of it, while other problems linger. A "breadth first" approach would try to solve problems in a smarter, more parallel manner, accepting the fact that 50% of 10 challenges is probably better than 5 completely unknown, unsolved problems and 5 beaten-to-death trophies.

Fact is, society notices "depth first" approaches more than "breadth first". For example, we are more likely to go wow! when we hear of Sachin Tendulkar paying attention to the direction of grass blades at Centurion as opposed to, say, MS Dhoni's ability as a captain to deal with a hundred off-field issues like media, selectors, fans in addition to actually worrying about the match at hand.

I also think our childhood conditioning of problem solving (basically math and math-like subjects at school) is "depth first".  Solving a math problem is pretty digital - you're either right or wrong. Few exam graders would award the same grade to the following 2 students :

• Student A who solves 7 out of 10 problems in an exam, but solves all 7 perfectly
• Student B who tries all 10 problems, final answers being wrong everywhere , but more than half the steps in all problems are along the right lines

Also, multi-tasking, an inherent requirement of depth-first approaches, is not very glamorous. It requires one to rein back the most 'expert' of their skills, and pull their punches when punch is all they can do. It pays dividends in the long run, and only when it is done with diligence and consistency. And long-term-ism is boring!

Many people, including me, tend to get around this challenge in a lazy fashion. You're already very good at something, so just get better and better at it. Till the point where you can tackle all your problems serially in a "depth first" approach , and yet there is no problem left unsolved.

That's where trading (and I suspect many other businesses) changes things. You can never get good enough at something, and no problem is ever completely solved. In fact , all problems in trading, by definition, evolve to render their solution insufficient. Any "depth first" approach would keep you locked in for large periods of time on singular issues, and that time spent yields very little dividends as the problem statement changes with time. Not paying attention to other problems meanwhile, is potentially more expensive,  especially if you don't know how many marks those other  problems will score or cost you.

So, what sort of person are you - deep diver or water treader? 

Fallacy

London. 2012.

I first got attracted to the casino near Leicester Square because the slot machine games were easy on the eyes. Good music, easy-on-the-eyes pictures of pharaohs, pyramids, and what not. Most of all, this place was lucky for me. My first time here, I walked in with a 20 and walked out with enough to buy an iPad.

I walked in and received chips for a couple hundred quid. The sound of the ball rolling on the roulette table was attractive enough to ignore all the stink and smoke of old Chinese guys sitting there since morning trying to beat the house.  I saw the screen. The last 5 numbers were odd. Dare I bet on an even number?

Things had changed since that iPad purchase two years earlier. Now I had read up tons of websites about how the house always wins, refused to believe that and fought with Microsoft Excel to try to prove it. I had learnt how games like roulette, and the slot machine were just impossible to beat the house at, and the only hope was either poker or blackjack. And I had read how it was far more optimistic to play in the markets instead of playing in a casino.

And yet here I was. In 2 years, I had blown myself up enough times doubling down again and again on the roulette table. And yet, unbelievably, I had lost more money trading. Which is probably why I kept coming back to the casino.  Sure enough, as always, my two hundred pounds ran out, and I was in dire danger of not being able to afford my cab to the airport. That's when I walked out.

If there was a commercial for gambler's fallacy, I'd be hired as director, cast and scriptwriter all in one. Everything except the producer who gets paid for the commercial. You can imagine scenes in front of a brokerage account, a roulette table, a slot machine - guy with eyes brimming with perennial optimism, blowing up hard earned money (well , not so hard earned). Hoping for some mathematical god to appear out of thin air, and bless him with unimaginable riches. Except, cut to the present, it is not a god that appears. It is the hard, cold, tight slap of the law of averages - which needs no God to preserve it.