Episode 28 – Why We Need To Abandon The Average and Embrace Our Edges

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“All of us want to be normal, yet none of us want to be average. “

Several months back I finished reading the End of Average by Harvard’s Todd Rose, which now sits at #7 of my Top Recommended Books list.

Let me just say, if you are a student of studying talent, as I am, then this is a must-read.

It has greatly influenced my thinking and his work could be the launchpad  to a massive change in how we understand education, personal development, hiring, and the evaluation of individual performance and of employees and personnel.

Todd Rose and his colleagues are at the leading edge of a new science – The Science of the Individual, which is a multi-disciplinary field drawing upon recent scientific and mathematical findings to demonstrate that it is simply not possible to draw meaningful conclusions about human beings using statistical averages.

In the End of Average, Todd Rose provokes us to see how for the past century we’ve all been part of a large scale series of ongoing experiments conducted by a handful of social scientists who thought they could correctly identify how groups of people behave and performed based on averages.

Turns out, they were wrong and you, me, and everyone else that’s been through our “factorized” educational system, or who has worked in corporate America, has been touched by this massive error and cultural bias.

How we became average

“For more than a century, this average-size-fits-all model has ignored our individuality and failed to recognize talent,” – Todd Rose.

Our culture is built around averageness, an idea that was first introduced in the early nineteenth century by Adolphe Quetelet, a Belgian astronomer and statistician.

Quetelet was trying to measure planetary speed. He came up with the then novel idea to find the average of variable astronomical observations in the belief that the result would be accurate.

Astronomers thought the average of all the data points was the correct speed: and the deviation was error. This idea of average being perfect took hold. Average became sought-after perfection and everything else well it became deviation.

Now averages may be all well to good for the natural laws of physics but here’s where the problem started –

Quetelet then took it a step further and began to apply the concept of averagism to human beings and invented the then novel idea of the ‘average man’ in 1835.

That is he took a number of attributes like physical and intellectual measures then proceeded to use the mean of these values to create a “average man”.

Again everyone outside of the average or that normal distribution was considered to be deviation. 

The obsession with average

And so began the obsession with the average.

Then and now we live in a world filled of averages and are constantly rated against these averages.

From IQ, GPA, average income, BMI, average weight, average % of bodyfat, average lifespan, average # of years in school, etc. etc.

Fast forward – to the 1940s, and researchers at the air force were gathering data on 1,000’s of would be pilots and measuring them across ten anatomical dimensions in the hope of finding the best cockpit design and then recruiting pilots who measured up to fit in them.

At the same time the search was on to find female perfection.  

Dr. Robert Dickinson, Chief of Obstetrics and Gynecology, and his collaborators at the Brooklyn Hospital were taking physical measurements of 15,000 young adult women and created a sculpture called Norma that can be seen today in the Cleveland Health Museum.

The trouble was that there were almost no pilots or young women who actually matched the (average) ideal. There was too much individual variation.

Here’s the thing –

“We need to realise that there is no such thing as an average human, and we need to stop measuring ourselves according to arbitrary yardsticks with no real basis in human nature.”

At this point you may be asking what’s the big deal about using averages?

Averages are very useful however there’s a common drawback when you appeal to or design to the lowest common denominator. 

Turns out when you design for everybody you design for nobody.

“By designing the cockpit for the average man, they were designing jets for nobody,” says Rose of the Air Force’s experiment.

The Air Force responded by abandoning the idea of “designing-to-average” physical stature, demanding that manufacturers instead design “to the edges” – i.e. adjustable for extremes of size, fitting both the tallest or the shortest, and those with wide or narrow chests.

This led to innovations we now take for granted, such as adjustable seats.  

Again design to the average may not be a big deal if we are talking about mass market goods like  socks or apparel.

Most of us are after all are willing to trade off on fit and comfort for reduced price and the convenience of being able to buy them anywhere.

But what if we’re talking about something like education?

And in Rose’s mind, averages have failed us spectacularly – especially in our educational institutions.

“We may not all need to fit into a fighter cockpit, but we all have had to fit into a classroom,” he says.

And we have yet to see the equivalent of adjustable seating within education or equivalent endeavours.  

The educational system we have nowadays is still in large part the same system we’ve had since the industrial revolution.  A system designed to churn out average workers would who fit like cogs into assembly line companies.

So i think we can all agree that broad conclusions say almost nothing about individual experience and capacities.

Intuitively we know this isn’t true. Yet the appeal of the average has become a widespread cultural blind spot.

The 3 Principles of The Individual

So I’ve given you a broad swath of some of Rose’s big ideas, so let me now relate some of this to trading. 

Rose shares three principles to help us end our obsession with average.

Let me share with you these 3 principles and how we can apply them to trading.

The three principles are :

  1. Jaggedness,
  2. Context,
  3. and Pathway.

Jaggedness

The key idea here is that Over-simplifying leaves out necessary complexity.

Average is one smooth number derived from varying (jagged) data points.

By emphasizing and valuing Jaggedness this restores accuracy as an individual signature.

One graphic in the book shows a tall thin man and a short stout man. Both might weigh the same, but that’s about all you can say.  Average weight is hence an oversimplification.   

Simplicity in turn is the enemy of accuracy.

Think about how this relates to trading. 

Each individual is better adapted to some things and not to others and Each of us brings different data points to trading. 

Think of your own pertinent attributes that relate to trading – some are cognitive, and some are skill and knowledge based.

There’s:  

  • Working Memory
  • Processing speed
  • Attentional Control
  • Technical / fundamental Knowledge / Chart reading
  • Curiosity
  • Intuition
  • Emotional Resilience
  • Innate interest
  • Preferences

All of these in composite form our individual jagged signature.

So here’s the takeaway if your goal is become a great trader, there is no such thing as an average great trader.

Each trader has a jagged sized profile  that is each trader varies on dimensions of learning, skill, and understanding,  even geniuses have strengths and weaknesses.

Hence the way you develop as a trader is through cultivating strong awareness and having a strong self assessment of your unique skills, strengths, and weaknesses.

Through this awareness you can cut through the average and instead embrace your jaggedness and be willing to confront your true self.   

Warts and all.

You cannot be Paul Tudor Jones or Warren Buffett, I’m sure they have are hard enough time being themselves, you can only be you.

So let me leave you with a question, what it is that makes you uniquely you? 

Choose to make that your orientation.

Context

The 2nd principle is the Context Principle.

Trait theorists and those who are believers of personality typing tend to believe we’re either for instance introverts or extroverts.

But humans aren’t fixed entities. Nor are we simple average abstractions.

Personality typing such as Myers-Briggs Type Indicator and Enneagram don’t take situation variability into account.

Trait theory has come under a lot of criticism nowadays for many reasons including it’s poor track record of predicting individual behaviours and for it’s inability to account for why people act the way they do.

For instance let’s take the issue of trader discipline. 

We all have heard the often quoted importance of being a disciplined trader. 

However what does this even mean?  How does that even begin to address the behavior of being disciplined?  It doesn’t. 

That’s like telling an alcoholic not to drink so much.   

What is important in understanding and actually changing behavior is to understand under what context this behaviour expresses itself.

The same trader who fails to take their stops in a disciplined manner may be the same trader who wakes up early at 5am each morning to go for a 10km run in sun, rain, or snow 5 days a week.

So who’s to say that this trader isn’t disciplined?

What is more accurate to say is that personalities aren’t consistent.

We’re influenced by situations we find ourselves in: context.  

That is each person has a unique set of behavioural “if-then signatures”, which are more meaningful than any overarching characterization.

So the takeaway is to stop falling in the trap of labelling yourself as this or that.

The reality is you have a certain set of traits that show up based upon the context. 

Again apply awareness to your traits.

For instance you may generally be a disciplined trader however you may find yourself acting out of character based upon a certain trigger.

Perhaps this occurs when you have had a set of losses, or get low ticked, that you let your mounting frustration get the best of you and under this context you move or remove your well planned stop.

The practice is to begin to build a list of if then signatures so that you can better understand how you behave and want to behave in these specific circumstances.

Pathway

 

“There is no single road to success.”

The final principle is the Pathway principle.

While some occupations demand a rigid pathway, not all do. Especially not trading.

Given the low barrier to entry, one only needs to fund a brokerage account to become a “trader”.   You don’t even need to pass an examination.

And so we see a wide range of backgrounds and personalities that show up to trading and it always irks me when i see One-dimensional and dogmatic thinkers who see only one right path to trading success.  

The truth is that there are multiple pathways one can take to becoming successful. 

For some this may involve reading books, taking courses, hiring coaches, finding mentors, trying different strategies, instruments, etc.

Unlike traditional schooling where success means clocking seat time and not failing “required” courses, trading success requires that one successfully embody a set of skills and mindsets.

The length of time it may take to embody these sets of skills and mindsets can take anywhere between 2 years to 10 years, and some would argue that it never ends. 

Given the uniqueness that each one of us brings to the table this is why I always call learning to trade a journey. 

Each person has to find their own path towards consistently extracting capital out of the markets.

IF there is one shortcut or one time tested pathway I can leave you with it is to seek guidance from people who have been in your shoes.  Their journey will most resemble your journey and will in turn most resonate with you.

Final Words

I hope you can now appreciate how average thinking destroys talent.

To be a successful trader and investor one of the greatest assets you can develop is your individuality.

It is however our need to conform that keeps us trading and investing like the herd.

So what can you do to begin to embrace your edges so you not just trading and investing like the herd?

Episode 28 – Why We Need To Abandon The Average and Embrace Our Edges

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