I am a history buff – the thing that fascinates me about history is that you can see the same patterns of behaviour repeated on a macro and micro scale over and over again. As an example I ran into a past member of our mentor program sometime ago at the opera and we had the usual chit chat and I asked him how his trading was going and he said he was yet to place a trade. I should note he completed the program almost a decade earlier. Further questioning revealed why – his background as a mathematician forced him to look for the perfect system. One that would never have a losing trade.
So what has this got to do with history? The answer comes from a statement I have always used in business that I have taken from history. You win the war with the weapons you have not the weapons you wish you had. When Germany stormed into Russia in 1941 in the largest invasion in history they seemed assured of an easy victory. This was the same army that had swept all before it in Western Europe and had driven the British Expeditionary Force into the sea at Dunkirk. It was battle hardened and well equipped whilst Russia was in chaos. It was still reeling from the combined effects of Stalins purges which gutted the armed forces and the latest five year plan that had been designed to drag the economy into the 20th century.
At first everyones expectations seemed to be fulfilled – entire Russian armies simply ceased to exist under the German onslaught. However, the German advance began to meet pockets of resistance that were built around Russian armour. This resistance was built around two weapons that took the Germans completely by surprise, the T34 and KV1 tanks. It could be argued that the T34 was the progenitor of the modern battle tank. Equipped with sloping armour, it was well armed, reliable , highly mobile and it was a terrible shock to the Germans who considered the Russians to be inferior in all aspects.
Faced with a tank that was largely impervious to their weapons the Germans set about building something to counter the impressive Russian vehicles. The result was the infamous Panther – a 44 tonnes behemoth that was capable of destroying any Allied tank at battlefield ranges. However, the Germans in their search for perfection had built a somewhat over engineered, complex monster that suffered from chronic unreliability. It also that took a skilled workforce an inordinate amount of time to build whereas, its Russian counterpart could be built cheaply by an unskilled workforce in a third of the time for a third of the cost
The end result was that Germany only ever built 6,557 Panthers, Russia built 57,3339 T34’s. If that were not bad enough, the Americans built 48,2449 Sherman tanks. So, whilst both the Russians and the Western Allies knew that German armour was impressive and it would often take five of their tanks to kill one Panther – it didn’t matter because they had plenty to spare. And they could also build more, something the Germans were incapable of doing.
The lesson for traders is obvious – you win the war with the weapons you have not the weapons you wish you had. The endless pursuit of super or mythical weapons by the German hierarchy is often cited by historians as one of the major differences between the Allies and Germany. The Germans were obsessed with super weapons and they made some spectacular breakthroughs in weapons design whereas the Allies simply said, this works and we can make tens of thousands of them so lets do that.
We would all like a trading system that never produced a losing trade or which magically picked only massive winners but that is not the nature of trading. And to seek it is a fools errand, trading is a job that you grind away at. You make mistakes, get a little better and move on. However, neither you nor your system is ever perfect – it is simply workmanlike. Get used to it.