The video below has lately been doing the round of investment sites and at a little over five minutes long it is a short introduction to the Art of War by Sun Tze.
For many years the Art of War has been a staple of not only business schools but also investment firms. More than one firm I have been associated with considered it to be compulsory reading. However, I have have always had problems with it, not only because much of it reads like a fortune cookie but because it automatically assumes that everything is a conflict and should be treated as such. The inadequacy of this as a philosophy is particularly true in trading. To my way of thinking trading is an internal endeavour – there is no external enemy who you can deceive or overpower since markets only exist in the most ephemeral way inside your head. Markets may appear to be physical constructs but they are largely an illusion, trading occurs inside your head where your own perceptions and distortions of reality influence your decision making. Without drifting off topic too much – all reality is a construct of our history, beliefs and idiosyncratic perceptions. We do not view reality through the laser like focus of a lens but rather through the muddied filter of the prism of our perception.
This internal confusion renders things such as The Art of War an irrelevancy because taken to its extreme it means that you need to view yourself as the enemy and granted we do get in our own way with disturbing regularity but to consider yourself the enemy is to head down a path that will in no way lead to investment or trading success. Trading is a collaborative endeavour between you and the market. The market offers up opportunities on a regular never ending cycle and you decide what you will do with these opportunities. There is no enemy in this transaction it is a symbiotic relationship and a failure to accept this is at the root of many of the problems that traders have. The notion of a symbiotic relationship troubles many because it means that there is a sharing of the responsibility in the outcome of each action and the last thing we want to do is to take responsibility for our own actions or our contribution to a given outcome.