#119 Todd Simkin: Making Better Decisions

Todd Simkin calls on experiences from his lengthy career in financial services and educating traders to help Shane understand how to make better decisions. Simkin breaks down all the influences that go into how and why we make decisions, why financial decisions are different than inter-personal ones, the strategies involved with teaching other people to make better decisions, what he looks for when he’s hiring, the value of asking the right questions, and so much more. Simkin is Associate Director at Susquehanna International Group, a privately held trading and technology firm. During his 25 years with the company he has held a variety of roles, including responsibility for SIG’s firm-wide education and trader development, where he taught the company’s new traders what questions to ask and what criteria to weigh before making hugely impactful decisions for the firm. -- Go Premium: Members get early access, ad-free episodes, hand-edited transcripts, searchable transcripts, member-only episodes, and more. Sign up at: https://fs.blog/membership/ Every Sunday our newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/ Follow Shane on Twitter at: https://twitter.com/ShaneAParrish Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  There are definitely places where we know that we enjoy the search for answers. Nobody ever goes out and buys a printed book of Sudoku puzzles that are already printed and completed. But there are other contexts where you're absolutely right, where people say, "I'm afraid that if I don't know the answer here, I'm going to make mistakes." In the world that I live in, we know that we're going to make mistakes all the time, that we are effectively just running experiments and getting feedback and then updating our approach and running a new experiment again the next day. And experiments fail. Like, that's one of the ways that they eventually succeed, is because you found enough ways that they fail.

• 0:55Shane Parrish?

  Welcome to the Knowledge Project Podcast. I'm your host, Shane Parrish. This podcast sharpens your mind by helping you master the best what other people have already figured out. If you're listening to this, you're not currently a supporting member. If you'd like special member-only episodes, access before anyone else, transcripts, and other member-only content, or you just want to get rid of this annoying message, you can join at fs.blog/podcast. Check out the show notes for a link. Todd Simkin is here today. Todd is a trader at Susquehanna Group, having also worked as a general operating officer handling personal hires, compensation, and most importantly for this podcast, he was the co-head of SIG's educational department, where he taught people how to make better decisions.

• 1:40Shane Parrish?

  As you can imagine, this podcast is a deep dive on decision-making, how we make them, how we calibrate them, how we make different types of decisions from trading to interpersonal ones, teaching other people to make better decisions individually and at scale, what the biggest bang for the buck is when it comes to making better decisions, identity, an early encounter with his father that still shapes how he thinks about quitting something, being a contestant, and winning on Jeopardy! And so much more. It's time to listen and learn.

• 2:20Shane Parrish?

  I'm really excited to talk with you about a lot of things, especially being on Jeopardy and working through depression. But I want to start with why we're here, decision making. As a trader at Susquehanna, did I even say that right? How do you say that?

• 2:34Speaker 00

  SIG is the way to say it to get away with it. Susquehanna, I think, is the accepted pronunciation, but we've got people around the globe who have all tried their own way of pronouncing it, and SIG seems to be the safest way to go.

• 2:49Shane Parrish?

  All right. So that's one of the more secretive and successful investment outfits. You make a living, though, effectively making decisions. So I want to dive into that. What's your process for making decisions?

• 3:00Speaker 00

  The products that we're trading are pretty much any financial product that you can think of being traded. So equities, fixed income products, currencies, commodities. And we really got our start in derivatives, so equity options and then index products. And our approach is to recognize that we are often on the bad end of informational asymmetry, that other people who are looking to trade in the markets frequently know more than we do. And as a result, we don't want to back our own limited opinion against a more informed counterparty. Instead, what we want to do is take the information that we have coming from outside sources, and there are multiple outside sources, different

• 3:44Speaker 00

  types of products that are being traded, different option series if we're trading derivatives, and use that information to improve our own information set to then be able to allocate our capital in a way that we think will lead to a return.

• 3:58Shane Parrish?

  So how do you deal with information asymmetry? I mean, that's a common thing for everybody in making decisions where one party knows a lot more than another party.

• 4:07Speaker 00

  Yeah, there are a few ways that we've tried to handle it. One is to build out research capabilities internally so that we do have some basis for our initial opinion.

• 4:20Speaker 00

  But the most important thing from our perspective is to be willing to update that opinion in a Bayesian way, to use approaches that are going to be inclusive of all the information available to us. And only when we get to mutually exclusive information, or mutually exclusive signals, can we say, something here doesn't jive, right? It's totally fine if somebody says they think that the stock price is greater than 100. Knowing nothing else, I think the stock price is going to be greater than 100. Somebody else says they think the stock price is going to be lower than 105. I say, okay, now I've got a market. Now I've got two sides. And then someone else says they think the stock price is going to be lower than 97. Now we don't have information that can coexist in the same universe.

• 5:04Speaker 00

  I don't need to know who's right, but I do know that it can't both be above 100 and be below 97.

• 5:10Shane Parrish?

  What does that mean, Bayesian thinking? I mean, we all have this idea of it. What does it mean to you?

• 5:15Speaker 00

  So I guess I'll take a step back and just make sure that we're on the same page with Bayes' theorem. Bayes' theorem is a probabilistic approach to updating probabilities based on new information. So in a simple example, if I said, what's the probability that I rolled a four on a six-sided die? It would be 1/6. But if I said, what's the probability that I rolled a four, given that I rolled an even number? Well, now I can eliminate half of the possible outcomes. So if I know that I rolled an even number, now the only numbers I could have rolled were 2, 4, and a 6. So the probability I rolled a four is now 1/3. So I can update my original probabilities, my priors, with this new information.

• 5:58Speaker 00

  The new information here being that I rolled an even number. In the same way, when we're looking at option pricing, one of the big determinants of the fair value of an option is options derive their value because the future stock price is not going to be the same as what it is today. And there's some probability that it's going to be higher or lower. And knowing what that forward-looking probability distribution function looks like leads to the ability to price the options, to come up with the fair value based on their expectancy. And one of the determinants of sort of how much a stock can move is what we call its volatility. The volatility is just the annualized percentage return on the stock in any given year,

• 6:41Speaker 00

  or really for a time slice, because it can change, can change over time. So if I think that the fair value of an option is, say, $3 because of all of the assumptions that I have built into that, and then someone comes and wants to buy 10,000 options from me for a price of $3.10, there are two things I could do. One, I could say, well, I know that all of my assumptions are grounded in truth. I know the future better than anybody else. So I know that over the long run, if I sell these options at $3.10, I'm going to make 10 cents in an expected return over and over and over again. That is not the approach that we take at Susquehanna. Instead, I would say, this option can be worth more than $3,

• 7:25Speaker 00

  given some, some possible sets of, of information about the future. Maybe this person knows something about the fair value of the underlying of the stock that's different than what I know looking at the stock market. And I can test that by going out and trying to trade stock. Maybe they know something about the forward-looking volatility, the, the forward-looking probability density function. And I can say, well, if that's the case, how wrong would I need to be to now be losing if I, if I entered this trade? And this is where, where Bayes' theorem comes in, because I can say, I have my prior assumption set, my, my prior probability distribution. Now, how much do I want to weigh this new information to come up with a new, a new distribution that will allow me to come up with a fair value?

• 8:09Speaker 00

  And again, in isolation, it's really hard for me just to say, this person's wrong. But if I have a similar-looking option, similar because it's the same expiration, or because it's the same strike and a different expiration, or that there's something about the option that looks close enough to this, I can say, I can find disconfirming information. And only when I find disconfirming information can I feel more comfortable about taking the other side of this trade.

• 8:36Shane Parrish?

  Walk me through a little bit about why we struggle, though, because this happens in all different types of decisions, right? It's not just sort of buying stocks or, or trading. We, we get new information, but we don't appropriately weight it or update our priors. What contributes to that and what can we do about it?

• 8:52Speaker 00

  The, the what contributes to that is covered by a whole host of literature. And you've had some of the luminaries in this field as guests on your show before. So I certainly can't speak more particularly about this than Danny Kahneman could. But the types of things that Kahneman Tversky uncovered 45 years ago about the failings of our ability to look at and process and update information is exactly what's happening here. So things like confirmation bias and hindsight bias and attribution error and you've got all of the decision biases that have been covered in behavioral economics come into play here.

• 9:33Speaker 00

  So if I for some reason have some stake in believing that the fair value of this option is $3, then I'm going to discount this new information that someone wants to buy it for $3.10 and say, you know, high fives all around, I just made an extra 10 cents that the rest of the world missed out on. If on the other hand, I am able to have better second order knowledge, so knowledge about what I know and knowledge about what I don't know, then I can appropriately weigh this information and act accordingly. And the price of an option doesn't feel like something that anyone's going to have a very strong personal tie to, but certainly there are lots of other things in your life where you've got ego tied up.

• 10:16Speaker 00

  You've got some part of your personality benefits from sort of the truth value of whatever position it is that you're taking. So when you get disconfirming information, you're going to discount it.

• 10:27Speaker 02

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• 10:57Speaker 03

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• 11:22Speaker 00

  I've been thinking so much about tribalism lately. Like, this is just something that's been showing up in conversations I've been having all around. The thing that's very clear is that when people hear information that comports with whatever their tribe believes or whatever their tribe supports, they're willing to accept it without doing a lot of digging into the quality of the source, the quality of the information, the sort of the implications of the rest of the information that goes with it. And anything that challenges what their tribe believes, they are going to be more dismissive of whether or not it comes from a quality source. I've got children that feel very strongly aligned with political parties.

• 12:04Speaker 00

  And I also had a quote on the wall in my office that I think is just a good, important quote to help remind me about the importance of habits leading to behaviors. I shared the quote with one of my daughters, my 16-year-old. And she said, "That sounds kind of interesting. Like, I sort of like that." And then I shared with her who the quote was from, and she's like, "Ah, all right, I don't need it." And it was because it was from somebody in the other camp. It was from the wrong political party.

• 12:39Shane Parrish?

  What is the quote? Now we have to know. Sorry.

• 12:41Speaker 00

  "The character that takes command in moments of crucial choices has already been determined. It has been determined by a thousand other choices made earlier in seemingly unimportant moments. It has been determined by all the little choices of years past, by all those times when the voice of conscience, it was at war with the voice of temptation, whispering the lie that it doesn't really matter. It has been determined by all the day-to-day decisions made when life seemed easy and crises seemed far away, the decisions that piece by piece, bit by bit, developed habits of discipline or of laziness, habits of self-sacrifice or of self-indulgence, habits of duty and honor and integrity or dishonor and shame."

• 13:20Shane Parrish?

  And who said that?

• 13:21Speaker 00

  In order for this to be acceptable to your entire listening audience, I'll tell you that that was either Ronald Reagan or Jimmy Carter.

• 13:29Shane Parrish?

  I like it that way. You can you can ascribe it to who you want.

• 13:32Speaker 00

  But it was Ronald Reagan. There's a lot that Ronald Reagan did and over the course of his life, not only in his presidency, that I I don't particularly respect or honor. There's other stuff that he did that I think was great and full of honor and and and stuff to support. But either way, I think that the quote holds water, that that the quote is still, you know, a pretty good lesson to live by.

• 13:57Shane Parrish?

  Now, talk to me a little bit about why that happens. Is that because we see our identity as the tribe or and then anything that goes against that is now challenging our sense of self?

• 14:08Speaker 00

  The the short answer is I don't know. And and and I'm afraid that I might say that phrase more than a lot of your previous guests, because because that is a part of what I value. I I mentioned Condon, and I've got heuristics and choices within with our within arms reach of me where I'm sitting here. And I think that this is a heuristic. And heuristics are the, you know, the shortcuts that we take that are mentally freeing, right? It would be really hard to always to always work from first principles. So it's so much easier if you can have a heuristic that you can fall back on that just sort of tells you what to do next without having to stop and think through the think through the process. And when that heuristic is, I'm going to find people who are like me. And if I do what

• 14:52Speaker 00

  they do, then I'm going to sort of maintain my integrity. I'm still going to be like me, because this is what people like me do. Then it's very easy to fall into the trap of of never contemplating, or not sufficiently contemplating each of those, each of those actions, each of those different behaviors.

• 15:10Shane Parrish?

  So the same thing can work for us, right? Like, if you make a personal rule in a way that's like, I'm not the person that eats dessert, so I'm not going to eat dessert. Well, no, I don't have to think about it. I just don't eat dessert. So it can serve you, but it also it can prevent you from accurately weighing new information or contemplating. In this case, we're just, it sounds like we're inherently lazy. And we just want, if we're part of a tribe, I don't have to digest every little new piece of information. I can sort of just go with the flow and fit in. And plus, we want to fit in. We want to be a social member of something larger than ourselves, I would imagine.

• 15:44Speaker 00

  So there are a couple distinctions I want to make. One thing that you just said that I like a lot is that it's so much easier if you have a rule than if you try to have a principle, right? That I don't eat dessert is so much easier than each time that you have the opportunity to have dessert to say, well, I don't eat a lot of dessert. Is this one of the times that I'm better making a change there? And I'll tell you that I get up and do some type of exercise every morning, and I find it easy to exercise seven days a week. I found it really hard to exercise five days a week. And the reason was because every morning, it's, you know, the alarm goes off at 5:00 a.m. It's really easy to not have your feet hit the ground and get going. It's really easy to say, well, I need to take two days off anyway. This can be one of the days that I take off. So on the

• 16:29Speaker 00

  I don't eat dessert rule, I think that's a great way to pre-decide. And lazy has a lot of value laid in it, but to lighten your cognitive load, right? I don't have to stop and think about everything if I've already spent the time thinking about it. And it's led to this conclusion that I've reached, which is this rule that I can follow. So I love being able to do that. But you're not part of a group of non-dessert eaters, right? That this isn't part of a broader identity that you're now wrapped up in where if you decide to change that rule and you have dessert, you don't have other people calling you a dessert denier in name only, right? You're a D-Dino. Who cares, right?

• 17:12Speaker 00

  Okay, so Shane used to eat dessert or used to deny dessert, and now he's having an ice cream sundae. Good for him. Maybe it's his birthday, whatever it is, this is a decision that's totally fine with him. And you don't have to worry that you have now also contradicted all of the other tenets held by the people in the non-dessert eating group. If it's something that is more tribal, where we are the type of people that do this and don't do that, then a violation of one part of that. Removes you from this group that you're, you know, we just saw Liz Cheney, who voted the party line, something like 95% of the time, be drummed out of her seat because of one thing that she said that,

• 17:56Speaker 00

  that most Americans think is, is right. And in fact, it doesn't even matter what most Americans think that, you know, that's sort of what the experts in the field say is right, which is that the elections were by and large fairly executed. So we don't think that Trump is in an office because of a lie, but because Biden got more votes.

• 18:15Shane Parrish?

  Yeah, that's really difficult, right? Because if you go against the tribe, especially in a world where we have a call out culture almost too, not only are you going against the tribe, but you sort of like can't go against the tribe quietly. I guess in a lot of ways you're going against the tribe in a very visible signaling way, which adds another layer of complexity to it, I would imagine.

• 18:37Speaker 00

  Yeah, and this is, this is, you know, again, I'm a fan of the show. So I've listened to, to many of your guests. John Height talked about this when, when he was on. He said that the big problem with call out culture is that we're rewarding people just for the call out, that it doesn't matter what their other behavior it is. It doesn't matter what other positions they have, what knowledge they have, what expertise they have, they just get the reward of, of pointing the finger. And that's exactly the difficulty with going against the tribe is that someone is standing there, ready to get the gold star for saying, you did it wrong.

• 19:13Shane Parrish?

  What I, I don't like about cognitive biases is that they seem to be poor at preventing us from making poor decisions in the future. What I do like about them is they seem to offer a language and a framework for thinking about why we've made poor decisions in the past. How do you use that information to make better decisions in the future?

• 19:34Speaker 00

  This is a place where maybe not so much call out culture, but being able to see other people's behavior really comes out as a, as a strong positive. It is definitely true that it is sort of descriptive of the past, that, that, that a lot of these, a lot of these heuristics and biases are things that we, that we can see when we, after we've already identified that a mistake has been made. And we say, okay, well, why was the mistake made? Say, oh, because I was anchored or, oh, because of the way the question was framed or, or whatever it might be. We have a really hard time seeing it in ourselves, but a really easy time seeing when someone else is, is making that, that type of stupid mistake. A big part of our approach to education is to teach people to talk through their decisions

• 20:15Speaker 00

  and, and to talk about why they're doing what they're doing with their peers, the other people on their team. If we can do that real time, that's great. Often in trading, you don't have that opportunity because things are just too immediate. But certainly anytime things have changed, if you're doing things differently, it's a really good time to turn to the traders around you and the, and the quantitative researchers around you and the assistant traders and your team and say, huh, it looks like all of the sudden GameStop is a whole lot more volatile than it was a week ago. Here's how I'm positioning for, for this trading. What do you guys think? And have someone say, oh, it seems like you're really anchored to last week's volatility.

• 20:57Speaker 00

  If things have changed that much, you need to move much more quickly than you're moving right now. So you don't realize that you're anchored. That's the whole nature of being anchored is that you don't recognize the outsized importance that the anchor has on your decision, but somebody else who's a little bit more distant from it can. So if we're good at, at encouraging the communication, then we're going to be really good at getting other people to, to help improve your decision process. Yeah, I know that you were fond of pointing out that, that, that you were the sum of the five people that you spend the most time with. So if the people that you're spending the most time with are your coworkers who are thinking about trading the same way you are, then maybe you're going to make. You know, combine the same types of errors. It's certainly better than than trying to act on your own.

• 21:39Speaker 00

  And even better if you have a culture that rewards truth finding as opposed to rewarding action. If nobody feels personally attacked because of somebody else pointing out their error, but instead feels like we together have now done more to to get closer to to some truth, to the better way to act, or the, you know, the more accurate, fair value of this asset that we're trading, then everybody feels like it's a win and they will therefore encourage the the involvement of the people around them.

• 22:13Shane Parrish?

  I like that a lot. Truth finding over action. I want to get into the training at SIG, but before we do that, maybe you can give us just this two minute vignette of how we got here.

• 22:25Speaker 00

  Yeah, and I think that this will be good for my parents, who will certainly be listening to this podcast when it airs, to figure out what it is that I do for a living. A question that they've been asking me for for a couple of decades now. I joined Susquehanna in 1997, straight out of college. I went to University of Virginia undergrad. Unlike sort of the stereotypical finance background, I studied a combination of anthropology, psychology, linguistics, and education. And it was combined into a major that focused on deaf culture and language, so American Sign Language and and deaf communities. So I came into the firm not knowing the difference between a call and a put, which turns out to be pretty significant when you're trading options, but knowing a good amount

• 23:08Speaker 00

  about about how people act and about mistakes that people make and about how to encourage this truth finding. Started off working on the floor of the Philadelphia Stock Exchange, trading equity options. And then after going through our training program and returning to the floor for a little while, I then moved on to trade American depositary receipts, which are an international equity arbitrage. So foreign companies listed in the US, denominated in dollars in the US, but also traded in their native currency in their home country. Over time, I moved to Europe when we were setting up our operations in Dublin, Ireland. I moved back to the US after a little while in Dublin to work on the business side for

• 23:50Speaker 00

  a while, to work on on some new business development and some of the business administration part of the business. Then moved back to trading in 2007 to trade fixed income. Few years after that, I moved back over to the education side of the business. So I moved from trading, where I'd been for over a decade, to bringing in our junior traders, teaching them what we know about decision-making under uncertainty, the fundamentals of option pricing and finance, and how we apply that to the markets.

• 24:23Shane Parrish?

  Talk to me a little bit about that experience. How do you teach somebody to find the truth? Like, how much can people improve as they come in the door to what they're capable of?

• 24:33Speaker 00

  Susquehanna has always had a very growth mindset perspective on teaching trading. Before Carol Dweck had even shared her views on growth mindset, that has always been the company's position, is that traders are made, not born. We're now over 2,000 people worldwide, and we still have a small company mindset of, we've got to make the best of what we have, and we're competing with the world. Let's figure out how to improve our employees the best way we can. And the way that we're training people today has certainly changed from what it was originally, but there are a lot of things that have stayed the same.

• 25:13Speaker 00

  And among that is this idea that if we have smart people that are educable and vocal about their thought process so that we can improve it, and willing to be wrong, then we can teach them about trading. Part of my background is studying education. And as I moved through my time at SIG as an educator, I was finding that I was applying things that I had learned in the classroom over a decade earlier in a way that I hadn't anticipated. When I was originally studying education, I was thinking that I might be teaching sixth grade deaf kids how to do math. Instead, I've got MIT graduates who certainly understand math but don't know trading, and I'm teaching them how to make these asset allocation decisions with imperfect information.

• 25:58Speaker 00

  But the approach is still the same. The approach is still this one of modeling the process, finding out where somebody is, and finding out what they can grow to, and providing the appropriate support so that they can grow to be a better decision maker. The philosophy that always comes to mind when I think about it is, I'm not sure if you're familiar with Lev Vygotsky. No. So Lev Vygotsky was a Russian psychologist. He was born in the 1890s, grew in prominence in Russia pretty quickly through the mid 1930s. He died young. He ended up dying when he was 37 years old, so in 1934.

• 26:36Speaker 00

  And the ideas that Vygotsky had around education were contrasted with another prominent psychologist of the day, Jean Piaget. So Piaget had this perspective about stages of receptivity to different types of education, that you cannot teach somebody anything until they reach the appropriate developmental stage to be able to learn it, and then they can learn whatever's presented to them before moving on to the next stage. And Piaget had a pretty rigid framework for the stages that you move through, how you move through them, and that education effectively ended at adolescence. And Vygotsky said, no, that's kind of bunk. That's not how any of this works. All of education is sociocultural.

• 27:21Speaker 00

  All of education comes from interaction with others. And those others, in order for them to be educators, have to be more knowledgeable than you are. And that when you have interaction with more knowledgeable others, what those people are able to do is recognize your zone of proximal development. You have a zone of things that you know, and then you've got a zone that is just too far out of your reach, that no matter what, if I were to sit down my six-year-old nephew and try to explain linear algebra to him, he's not going to get it yet. He just doesn't have the fundamental tools to do that. But somewhere outside of your zone of mastery is this zone of proximal development, the zone that you can move into with appropriate support.

• 28:06Speaker 00

  And that support in the Vygotskyan literature is referred to as scaffolding. You want it to be the... The minimal amount of support necessary to appropriately move somebody to be able to handle the next level of mastery. Over time, you can dismantle that support, dismantle that scaffolding, and that zone becomes part of their zone of mastery. And you've just pushed out where their zone of proximal development is so that over time you can you can move them into an area where they're learning more and more and they've got greater mastery and competence in whatever area it is that that you've been teaching them. And eventually they become more knowledgeable than other people around them.

• 28:47Speaker 00

  And they can provide the scaffolding as the more knowledgeable other for for their peers as well.

• 28:53Shane Parrish?

  How do you identify that tipping point between competence and okay, now we're into educated incompetence in a way because you're just outside of your competence, especially in a field where you have imperfect information and uncertainty?

• 29:08Speaker 00

  One, one important thing that we don't do is look at the results of the trading that they've had and say, well, if they're winning, then they've got it and we can leave them alone and and and assume that they've figured things out. And if they're losing, then we need to step in and intervene. Annie Duke, another one of your former guests, talks about that as resulting. Kahneman refers to that as hindsight bias. It is something that we we look to avoid as frequently as we can. When people talk about trading decisions that they've made to more experienced traders or to to to peers who can give them feedback on it, we do everything we can to shield the person giving feedback from knowing the results. I'm not going to tell you whether or not this trade worked out. I will tell you the information that was available to me at the time that I made the

• 29:53Speaker 00

  trade and then what I did and you can give me feedback on that process. So the identification from in sort of this less formal setting comes from from knowledge about about how how trading works or how this particular risk taking works or whatever it might be. In our education setting, It's something that we control a whole lot more cleanly, right? We don't have to present a very complex trade and see who can figure out sort of the pieces of it until everybody's ready to, everybody who's in the trading class is ready to get there. We can build from smaller pieces up to the larger concept and see who along the way isn't processing that smaller piece appropriately.

• 30:37Speaker 00

  And a big part of how information is passed from the mentor to the mentee is by modeling the decision process. It is not enough to say, you should have raised the vol by two points when this trade came in. Instead, it's so much more important to say, okay, when this trade came in, I remembered that earlier in the week, somebody had traded this other structure. And when they did, I updated my possible outcome space to look different. This trade confirmed what that other trade did. So now I was, I just more heavily weighted this other outcome. And the result was that I took volatility up two points. Then someone knows not only what to do, which is really not the important thing to take away,

• 31:21Speaker 00

  but how to do it, which is very much what we're looking to teach.

• 31:24Shane Parrish?

  It sounds like what you're really doing is knowledge transfer through sharing of reflection. So you're opening up people's mind and you're saying like, you have an experience. Tell me how you process that experience, which is the reflection angle, which comes to an abstraction or sort of, which is what you would do in this circumstance, which becomes an action. And I think of this as the learning loop, right? So you start with an experience, you have a reflection, you draw an abstraction and then you do an action. So often we're just drawn to the abstraction. What should I do? What should I do? But I don't see the thinking behind it. I don't see that. Then I can't match the patterns. I can't see the nuances. I can't encode it in my brain about when I should deviate, when I should follow.

• 32:08Speaker 00

  Yeah, we're really discussing how we would behave in a situation and modeling what the conversation really should look like. And we'll disagree with each other. The answer to just about every trading question is it depends, which is a really hard thing for someone to hear when they're first learning because they want the answer. They want to know when I'm in this exact situation again, what is the optimal thing to do? The interesting part of the conversation comes in the what it depends on. All of these questions lead to the some type of answer of what you could do or what should be in your, in the actions that you might take here. And there's some things that are clearly wrong and it's important to talk about that, too. So when we're talking about it in a trading context,

• 32:53Speaker 00

  it's really nice that one teacher can say, I think that I probably would have shown a bid for this price and this amount. And someone else says, well, I don't know that I would because this broker's behaved this way before. So I think that this might be a time where I'd be afraid that I'm opening myself up to selection bias. If I, if I were to price it that way and I would do this. And you have these senior traders who are disagreeing. And so there's this really nice modeling of, of how to think about, how to improve the process so that you can reach an answer that you are tentatively more comfortable with.

• 33:28Shane Parrish?

  There's something you said earlier that stuck with me about answers. And when we're given the answer, we sort of stop thinking, but we're, we go through life and we're told the answer to problems. And the thing that happens is when somebody doesn't know the answer, we're stuck because we forgot how to actually problem solve. We forgot how to reason through things. We've forgot that we can solve these problems on our own and we have our own way of thinking. And these tools are rusty because we've just gone through an education system. That's like, this is the answer. This is how you think about it. This is how you do it. And when the answer doesn't appear, we're just, we were paralyzed almost, right? And we don't know what to do. So we wait for somebody to give us the answer.

• 34:07Speaker 00

  And there, there are definitely places where we know that we enjoy the search for answers, but they're, they tend to be separate and self-contained. Nobody ever goes out and buys a printed book of Sudoku puzzles that are already printed and completed. But there are other contexts where you're absolutely right, where people say, I'm afraid that if I don't know the answer here and I don't know who to ask for the answer, that I'm going to look foolish by trying to figure it out on my own. I'm going to make mistakes as I try to go through this.

• 34:39Speaker 00

  In the world that I live in, for better or worse, we know that we're going to make mistakes all the time, that we are effectively just running experiments and getting feedback and then updating our approach and running a new experiment again the next day. And experiments fail. Like, that's one of the ways that they eventually succeed is because you found enough ways that they failed. The other thing that happens when people want answers is they want certainty. Five years ago, Nate Silver was everybody's favorite punching bag because this moron thought that Trump wasn't going to win the election, and then he did, which is, of course, never what Nate Silver said. Nate Silver said there's a 20% chance he's going to win the election, and 20% chances happen.

• 35:22Speaker 00

  And we don't think through things probabilistically, right? The world is just not set up for probabilistic thinking. I think it was Phil Tetlock, who I heard say that "We talk about things with probability numbers, but what we really have are three probability states. It certainly won't happen, it certainly will happen, or it might happen." And those are the only three things that we can process. So when people hear that 538 had Trump at 20% to win, they say, "Okay, that means it's not going to happen." And then it did, so you were wrong. It's really hard to say anybody's wrong about a single probability prediction, unless they said that something was 0% or 100%.

• 36:04Speaker 02

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• 36:07Speaker 02

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• 36:19Speaker 02

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• 36:25Speaker 02

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• 36:33Speaker 03

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• 36:56Shane Parrish?

  Two things about that strike me as interesting. One, is that why you use poker to teach decision making is because you're dealing with probabilities and uncertainty? The second is, how do you calibrate? Like if you're Nate Silver and you live in this world where you put this out there and you say, you know, 80% of the time it's going to be Hillary Clinton, 20% of the time it's going to be Trump. How do I look at that in the face of Trump winning and say, was I right? Or was I wrong? Given that information, how do I update?

• 37:32Speaker 00

  Yeah, so two really good questions. I think I'm going to take them in the opposite, in the opposite order of what you gave them to me and start with the, how do you calibrate one? If the only thing that you predict are very hard to predict outcomes and you predict them very rarely, you're not going to be able to calibrate very well at all. On the other hand, if you predict many different things, particularly if they're uncorrelated, so you have a lot of repetitions where you're going to get feedback, then you're going to have learning. And it'd be great if you could look back at all of the times that you said something had a 20% chance of happening and see how many times it happened. And if it only happened 10% of the time, you're also making a mistake.

• 38:14Speaker 00

  It's certainly a mistake if it happened 70% of the time and you said it was 20%. But importantly, you might be making a mistake of being too conservative in your estimate, not discriminating enough in your, in using the probability distribution available to you. Phil Tetlock has built an entire solution around this, which is to look for super forecasters. And the way he measures the performance of the super forecasters is by giving them lots of things to predict and to come up with probability assessments on it and to be able to change their probability assessment as the information set changes, which is a really important thing in decision making and really avoids the binary it will or it won't and

• 38:55Speaker 00

  leads to a much better nuance in the middle and really understanding the probabilities. And when you have lots of measurements, then you have feedback that you can use to improve the quality of your predictions. Weather forecasters are really good. I mean, just stupid good. And if you, if you were to plot how often it rains when they say there's a 30% chance of rain, it's like 30% of the time. It's not 25 or 35. That would be a pretty bad weather forecaster. But that's because they get daily feedback, right? They are making predictions all the time and they always know whether or not the prediction came true. And sometimes they say there's a 30% chance of rain and it rains and that doesn't mean they were wrong.

• 39:38Speaker 00

  It does mean that the people who are talking about them the next day are going to say they were wrong. They're going to say, you know, I was listening to Andrew Frieden, my local news weather forecaster, and he said there was 30% chance of rain, so I didn't bring my umbrella. Now here I am all wet. Thanks, Andrew. Right? But I know that if I listen to the local forecast over and over and over again, that that prediction is going to be, is going to be pretty accurate. And the places where, where people are terribly inaccurate are places where they are making predictions about, about things where they either haven't had the opportunity for a lot of feedback or where nobody's going to hold them accountable for, for being wrong. And the, and the worst forecasts are often from people who are experts who make extreme forecasts. You know, when they're right, they're going to look really right because they said something extreme.

• 40:23Speaker 00

  And that means that they're going to get on the news program. That's, you know, they're going to be interviewed on the cable program that night because they were the ones who said there's a hundred percent chance that, you know, Chelsea wins the Premier League. The, and the people who have the more nuanced view and say, well, this is what I think the probability is, but if things shake out this way, then the probability is going to shift. Those people don't get, don't get the spotlight.

• 40:48Shane Parrish?

  And then poker as an aid to teaching decision making.

• 40:51Speaker 00

  So part of this is the phylogeny of, of Susquehanna. The founders of Susquehanna were in college together and they studied, you know, an array of subjects. But what really brought them together was that they played poker together. And were able to talk about the decision process in their poker game in, in a, in a really nice way. And they said, you know, we shouldn't just be, you know, shifting our own money between ourselves. Let's go to Vegas and let's see if we can apply these decision principles at the poker table in Vegas. So they went out to Vegas one summer and did and did very well. And a big part of the reason they did well is exactly the principles I was talking about earlier. That that they were thinking, they were updating their probability space in a Bayesian way.

• 41:36Speaker 00

  And very importantly, you know, they weren't able to talk about hands real time with each other. But they would finish their session and and come back to their hotel room. And they said, you know, so here's the situation I was in. I had, I was on Fifth Street and I had a flush draw on a pair of kings. The other person made an open pair of aces. He bet out on Fifth Street and I thought about it and decided to fold. What do you guys think? And they would, you know, work through the numbers and talk through. So they would work it out quantitatively, which is certainly something that's important for us to do on the trading side. And they would also talk about the decision process and the information set that was available. And they realized that that they were benefiting a lot from the the interaction they were having together. And they said, this same type of of decision process is something that we could apply to the markets.

• 42:21Speaker 00

  And then they went into into business first individually. And then they came back together and in 1987 formed Susquehanna Investment Group at the time was the sort of the the first company that came together in May of eighty seven. You know, I mentioned the phylogeny. So this was sort of the evolutionary development of the company. And and I'm sort of referencing Ernst Takeles recapitulation theory that ontogeny recapitulates phylogeny, that the development of a fetus over time looks a lot like the evolutionary development of that species over time. You know, totally debunked. It's not the way fetus is actually developed. But the idea works really well for the for the passing on of of the thinking around around how to trade,

• 43:05Speaker 00

  which is that if we think through trading and build up our our understanding of risk and asymmetric information and the difference between selection bias and noisy outcomes, you know, that you can make the right decision and still get unlucky. All of these things apply to what we're doing as traders.

• 43:25Shane Parrish?

  Is it fair to say that probabilistic thinking is probably the biggest bang for the buck when it comes to improving your decision-making ability? If you had to isolate that into the top three variables that you could teach somebody to improve their ability to see reality or truth finding, what would they be?

• 43:41Speaker 00

  Talk more is number one. That beats probabilistic thinking. That beats sort of anything else in truth finding is is being able to to bring in other people in the decision process in a constructive way. So finding good ways to communicate to improve the input from others in your decision process, I think, is pretty important. Thinking probabilistically, I think, is definitely a very, very important piece of that. I'm trying to sort of diagnose this, what works by trying to think of where where things fall apart, where people fail. The other place that people fail is really falling falling in love with their decision process and not being open to being wrong. So in openness to to feedback, to finding disconfirming information, to actively seeking out disconfirming information, which is really uncomfortable.

• 44:27Speaker 00

  But that, that I think is the other piece that is is super important for for being a good trader.

• 44:33Shane Parrish?

  There's something you mentioned there that that I thought was really important in the constructive versus non-constructive ways of talking. Dive into that. What does that mean?

• 44:43Speaker 00

  Yeah. Adam Grant recently was talking, talking about how to get feedback from people who are sort of lower on the the corporate echelon. So, you know, your direct reports or their reports or whatever. And one of the things that he talked about was by leading with an honest acknowledgement of your shortcomings. That's really constructive, right? Because that allows for feedback. It invites it in an open way where you're clearly challenging behaviors and not the person. And then has the open-ended, you know, piece of of asking the important what else question. Non-constructive ways are seeking out yes-man answers, right? Like, hey, I just won, you know, $10,000 on that last trade that I did. Seems like that was pretty good. Can you think of any ways I could have improved that?

• 45:29Speaker 00

  It's really hard to follow that up with, yeah, I think you probably should have won a lot more, or you could have done it in a much less risky way, or you won because, you know, you flipped a coin and it came up heads. Stop patting yourself on the back like this was not all that impressive. You haven't really opened up for that if you if you frame it as. Tell me why my trade was good, or tell me why this piece of my decision process was good, where you do the framing of what to focus on. And the other important thing is to actually change your behavior when you get the feedback, right? If you get feedback and then don't do anything with it, people are going to stop giving you the feedback. It's not just not helpful to ask for feedback and not change it, it's actually hurtful.

• 46:08Shane Parrish?

  Are there ways that you teach? I mean, you mentioned sort of what constructive versus non-constructive is, but how do you teach people to communicate in a constructive way when it comes to decision making or when it comes to life?

• 46:21Speaker 00

  Yeah, so part of that, again, comes from modeling it. And modeling it intentionally in the Bogatzkyan sense of the more knowledgeable other conveying information through language is by saying, you're not going to get this unless you hear how I'm approaching this decision. I think about this a lot more with my own children, that this is something that I think about a lot as I'm raising adults into the world. They frequently come to me and my wife and ask for advice. And the important thing for us to show them is not what the answer is, because we're going to be wrong, but how we think about the answer, which is probably going to be much more, I know is going to be much more important for them as they go forward making decisions when I'm not going to be standing next to them, but they can have sort of the proverbial

• 47:06Speaker 00

  dad on their shoulder whispering in their ear, have you thought about this? Did you consider it this way? What is the cost of this? What are the benefits of this? Is this a decision that you can change after the fact because you didn't like the outcome? Or is this one that you're sticking with? All those questions that I would ask in trying to reach a decision, instead of just sort of asking it to myself and then handing over the outcome, I share the process. And sharing the process leads to more constructive conversations with my children and with our traders.

• 47:37Shane Parrish?

  Are there other things that you do to help your kids learn how to make better decisions that other parents can be like, aha, I want to do that too?

• 47:46Speaker 00

  One was something that I learned while I was in college from a book called Teacher Effectiveness Training. When I read it in the book and we talked about it in class, I said, this is the dumbest piece of advice anybody's ever put down on paper. And it was around reflective listening.

• 48:01Speaker 00

  And the idea was that instead of trying to step in and problem solve, instead of trying to reframe, instead of trying to provide context or dig deeper, all you do is tell the person what you heard them say. And that night, a friend of mine was over at my apartment for dinner. And she was talking about a problem that she was having with her roommate. And I was like, just for kicks, I'm going to give this a shot. And she's, you know, sauteing the chicken or whatever it was. And she's like, and then my roommate never puts her dishes away. And it bugs the hell out of me. I said, it sounds like you're really bothered when she doesn't put away your dishes. She's like, yeah, and it's not just that. It's also that she doesn't appreciate it when I do clean up.

• 48:43Speaker 00

  I said, oh, so it sounds like, you know, a part of the problem here is that you're not feeling appreciated. She's got to think I'm the dumbest guy that she's ever known, right? Like, all I'm doing is repeating what she's saying. And I was like, well, this, this certainly feels dumb. And I guess at some point I got to call myself out on it and point out that I'm just doing this stupid thing from this stupid book. And that's, and then she turned to me and said, Todd, this is the most beneficial conversation I've had about my relationship with my roommate ever. I feel like I'm coming away with this, understanding myself better and her better. And, you know, and her experience was totally different from mine. She felt heard, she felt seen, and she felt like she now had the power to make a better decision about her relationship going forward. And I thought, okay, well, maybe this guy's not so stupid. Maybe this book isn't so stupid.

• 49:28Speaker 00

  And maybe these methods work in places that I wouldn't have thought they would work. And it's not always the solution, but it's a much better solution than, than I would, would have thought it would be. And it's something that I find myself doing with my kids all the time. And it no longer feels forced to me. It no longer feels fake to me. It's very clear that what I'm doing is allowing the space for, for them to finish their own thought. That's one of the things that I do with my kids that I think has been, been really beneficial. Another one that's sort of related that was pointed out to me yesterday by, by my 16 year old's friend, who was, who was over in the house, her friend.

• 50:06Speaker 00

  Had said something that was happening with with with her parents. Her parents were were away and she was talking about an argument that she had with her parents and something that her father said to her. And my daughter said, how do you feel about that? And and her friend said, that is the most Simkin thing that I could hear you say at that point. Instead of asking what I want to do next, that you start with, how do I feel about it? Which is, you know, and and it's something that that she is that, you know, the friend and my daughter have heard from me and Shelley, my wife, over and over again. Because, again, it's really hard for us to jump in and start providing advice if we don't even know where the child is coming from. You know, if we start saying, well, it sounds like that, you know, that other kid was being a jerk and they're like, no, that's not what I was saying at all. How do you not get me?

• 50:51Speaker 00

  How do you not understand what this is? So, starting with, how do you feel about that? Which, again, feels like the Freudian psychologist sitting back, you know, while you're lying on the couch, just, you know, mumbling something so you'll keep talking. Turns out to be pretty beneficial. Turns out to be really helpful.

• 51:05Shane Parrish?

  Is there a different process we use when it comes to things that would be more feeling based, like maybe interpersonal relationships when we're making decisions?

• 51:14Speaker 00

  In some, in some ways, I could definitely see that it might feel that way. But I think that a lot of it is is really very similar. A lot of it is still understanding truth, that if you don't have an understanding of what's really happening as a starting point. If we can't sort of agree on the facts, then then we're not going to be able to to reach a good decision, trading or interpersonally. Something else that I haven't talked about yet, but that definitely comes up a lot when I'm modeling for my kids and when I'm modeling decision processes for my classes, is the principle of charity. When somebody says something, assuming that they're not an idiot, assuming that they're coming from from a a place of sincerity and good intentions, and giving them the benefit

• 51:58Speaker 00

  of the doubt in the in the conversation. On the trading side, sort of this principle of charity is really giving somebody credit for knowing what they're doing when they're trading against you. This is what sort of protects you from from being run over by somebody who has better information than you do. On the interpersonal side, this allows for This gift to the other person of an assumption that that they are well intentioned and smart and approaching this for the same purpose that you are. And therefore, you're going to end up being aligned in your process to to reach a resolution to a conflict or to to come to an agreement about whatever it is that you guys are talking about. Every single negotiation is a cooperation and a collaboration. But there's there's not a single time where I'm almost never and really, you know, probably

• 52:43Speaker 00

  never where the other person has to negotiate with you. They have some alternative, they can walk away, which means that the only reason anybody's going to engage you in a negotiation is because by doing so, they're going to get a better outcome than by not doing so. If that's the case, then every every negotiation is collaborative, which means that a lot of these principles of how you treat other people in an interpersonal way so that you'll end up having a favorable outcome for yourself means that you have to have a favorable outcome for them as well. Otherwise, they're not going to be part of this conversation and definitely not future conversations.

• 53:18Shane Parrish?

  We're both believers in looking for people that challenge ideas and not the person. I'm curious as to what that means to you as well as how you identify it in other people and nurture it.

• 53:27Speaker 00

  So we've been talking about what we've been doing with our employees once they're on board and we're we're training them, we're teaching them how to do what we do. In that hiring process, the best outcome for me for an interview is if the candidate walks away and wishes they could have part of the interview back. That means that I did not spend the entirety of the interview in their zone of mastery where they just got to show off and primp and preen in front of me and then I'm left to decide whether or not they would have the skills to to do more. And I did not spend the entire time in the in the zone of frustration where they couldn't do anything. And it's like, okay, like, you know, I didn't expect you to anyway, but you know, if you could, that would have been great to see. And I still make a hiring decision. But instead, on on multiple dimensions.

• 54:14Speaker 00

  I've been able to find the place where with a little bit of support, they could do a little bit more. A big part of the reason that I like that is exactly this thing that we're talking about, which is this openness to feedback. Because when I'm giving them feedback in, because I've successfully mapped out their zone of proximal development. And now I'm providing a little bit of scaffolding to see what they can do with support. You will find that some people embrace it and say, oh, I think I see where you're going. Let me see if I can take it from here. That's a great answer. You will find some people who are just waiting for you to give them more of the answer.

• 54:55Speaker 00

  Who will just say, okay, what else? Like, you know, they'll wait for you to map out the entire solution process and then they'll just fill in the numbers. And then you'll find some people who are totally resistant to it, who will shut you up, who will, you know, put their hand up and say, no, no, no, no. Let me work on it my way. And their way is not working.

• 55:11Shane Parrish?

  Yeah.

• 55:11Speaker 00

  And I know why it's not working and I can help direct them away from it, but they don't take the feedback. I don't want the person who doesn't take the feedback and I don't want the person who's waiting for more feedback. I want the person who is hungry and eager to use the tools that are presented and available to them to then do the work themselves. That's what's going to be successful when they're trading and they get to have a small opportunity of doing that in the interview process.

• 55:37Shane Parrish?

  When you were younger, you had an early morning experience with your dad where you told him you were going to quit playing lacrosse. Tell me about that conversation and how it still helps you to this day when it comes to stopping or quitting something.

• 55:49Speaker 00

  Yeah, I went to high school in Baltimore. I believe that my high school might have been ranked number one in the country in lacrosse at the time that I was in high school. So I was, I was very much at a lacrosse centric high school. So the requirement for all the boys there was that they, they have an activity, an athletic activity for three seasons. I played football pretty well when I was in high school. I wrestled really poorly when I was in high school. And, and I played lacrosse, but I really wasn't great and I really didn't love it. And there were other things that I want to spend my time on. And I decided that I was going to quit. So I, I woke up or I got home after practice after having, you know, had enough of, of my coach one last time.

• 56:33Speaker 00

  And, you know, at dinner that night, I said, I'm quitting lacrosse tomorrow. When I go into school, I'm going to quit lacrosse. And, and my father was clearly irritated by it, but didn't know how to express it. And the next morning, I went and I showered like I always did in the morning and I came out of the shower and I remember that I was just wearing a towel because I remember how vulnerable I felt because I was just wrapped in a towel around my waist and my father said, "Todd, come into the living room, sit down, I want to talk to you." So I sat down in my towel and thought that this was going to be a couple of seconds of, "You can't quit lacrosse," which would have made some sense, sort of a heavy-handed edict. But instead, he said, "I've been thinking about it all night and it's really been bothering

• 57:16Speaker 00

  me, thinking about the fact that you're quitting. It really bothers me because I haven't heard why you want to quit, other than the fact that you've been frustrated with your coach. There's not enough here. It doesn't make sense. So you're going to have to explain to me in a way that it makes sense in order for me to be supportive of this." And in hindsight, I recognized that this was such great parenting happening here, which was not saying, "Here's what you have to do, here's what you can't do," but instead, it said, "If this is a reasonable and rational choice, or even an emotional choice, which isn't necessarily rational, but it's an emotional and consistent choice, I'll back you up on doing this. If it's not, if this is rash, and it's going to have long-term

• 57:59Speaker 00

  implications for you, which is that you can't quit the team and then three days later, go back and say you've decided that you want to rejoin, then there are big implications here. So you need to make sure that you've given this appropriate weight and appropriate thought before following through with the decision that you can't change. Tell me what you're thinking and tell me what your plan is. If you do this, you're going to have an extra two hours every afternoon, you're going to have an extra 10 hours a week. What are you doing with that time? How are you better off having that time not on the lacrosse field than when you were on the lacrosse field?" And the way we left it at the time was with me still dripping wet, holding my towel, feeling a bit frustrated that I was not able to convince my father that this was the right choice. Because I couldn't, I realized that maybe it wasn't the right choice.

• 58:43Speaker 00

  Maybe what I needed to do was wait. And waiting was the low cost option, right? That at the time, I didn't know what options were. But in the way I sort of frame and think about the world now, I recognize that this is what we would refer to as a real option. That there is a cost to it. It does cost me something. It costs something in terms of my frustration level and the fact that I'm tired after running for two hours straight. And I'm not as fast as the other guys on the team. So I've got to play catch up a lot. All this stuff that's gonna, but that's day by day. And in return, I get this upside of maybe there's some benefit to me sticking with this longer term. I ended up reaching the conclusion a couple of weeks later that I wanted that to be my last lacrosse season. But I would finish out the season.

• 59:26Speaker 00

  I would finish out both the commitment to the team and also find the opportunity to fill that time with something else that was going to also be productive and ideally more productive than playing lacrosse, which I couldn't do midseason. I couldn't switch over and start, start playing on the baseball team midseason. But the process of having my father model deliberate decision making for something that was consequential was really, was really pretty beneficial early on.

• 59:54Shane Parrish?

  And how do you use that today?

• 59:56Speaker 00

  I hope with the same care that my father had then, which is that, that he never erupted. His, his reaction was never emotional. It was purely inquisitive, right? It was like, you know, help me understand better. And the, and the question of help me understand better is, is exactly the way I approach decisions that my children are making is to say, look, you know that I love and support you with whatever it is that you're doing. But I can either provide context or at the very least more support if I understand better where you're coming from. So, so help me get this. One of the, one of the other teachers of the class at Susquehanna has such a lovely touch. He just says, tell me more. And tell me more doesn't have any value laid in it. It doesn't have any, any judgment in it.

• 1:00:41Speaker 00

  It's just saying, go ahead and, and add more words to, to what you've already shared. You want to take this action against this type of order flow? Why? Tell me more. And effectively what my father was saying is the same as what, as what Mike, my, my, my co-teacher says when he's talking to our students, which is just, I cannot reach a conclusion about what you're saying until I understand it better. So help me understand it better. Tell me more.

• 1:01:08Shane Parrish?

  I think that's really effective. And one of the things that I like about your father's approach is that it started with, I want to support you, but in order to do that, I need to understand better. So it comes from this sort of like unconditional love and no judgment about your decision, but not being able to connect the dots for yourself, which I assume would help you communicate constructively about your decisions and communicate how you're thinking about things, which is the beginning of sort of getting better at them.

• 1:01:38Speaker 00

  Yeah, I think that's exactly right. And the other thing that it does is that it establishes very early that we are on the same side, that we have, if not all of the same goals, we have alignment with our values and our goals. I want to support you says, all I'm looking for is an excuse to make sure that you and I are facing the same direction and facing the world together. Help me get there. Bring me into alignment with you by telling me more.

• 1:02:06Shane Parrish?

  You've struggled a bit with depression. I'd love to learn more about your struggles and how you overcame that.

• 1:02:13Speaker 00

  I was, when I started college, I started off as a pre-med and I found that I hated it. I hated the classes that I was taking and I hated the idea about medicine as a career. I just felt unmoored and unsure about how to get back where I wanted to be. As a result, did some really unhealthy, self-destructive things, both educationally and in my personal life. So I was, so I ended up sabotaging myself academically and I sabotaged myself interpersonally. I was doing stupid things like drinking too much alcohol in the middle of the week and doing things that were not going to be productive toward any goal because I felt like I didn't have a goal at the time.

• 1:02:59Speaker 00

  I mean, it ended up manifesting in a pretty bad way in college that it got to a point of a pretty dark, deep depression that ended up with me withdrawing from classes, working for a while to find the right therapist to work with in school. And then maybe amazingly, or maybe in a totally expected way, righting the ship. That once I had the appropriate support and conversations with people who loved me and cared about me, around me, who were supportive of me sort of finding my own way. All of a sudden, I didn't feel the pressure that I was putting on myself and I was able to succeed. And I didn't feel like I needed to fulfill anybody else's desires for where I was going to end up.

• 1:03:42Speaker 00

  So I was able to to chart my path and start doing things that I really enjoyed. And instead of being pre-med, I said, I really love these different topics. And that's when I created my own major, which focused on, of all things, death, culture and language, which does not let, is not a pre-vocational path, but instead, you know, education for the sake of education, which allowed me to sort of demonstrate to the world that I was able to learn. And it also provided a lot of tools that I've been talking about and how I deal with my children and how I deal with my students, which is that, you know, I learned a lot better how to handle interpersonal relationships and how to communicate more clearly.

• 1:04:22Shane Parrish?

  How do you reflect in yourself? Like, do you catch yourself prone to depression? Or do you catch yourself sort of falling into that way of thinking? And then move yourself out of it? Or is it something that's sort of not there all the time in the background?

• 1:04:40Speaker 00

  If it's definitely not something that I feel like I live with and struggle with, this definitely feels like a much more of a footnote in my history than it is a, you know, a description of something that I fight. I do know that that there are certain behaviors that I tend to fall into when I'm feeling overwhelmed that are non-productive. That is, I don't feel depressed, but I know that there are better ways for me to approach either the way I'm caring for myself or the way I'm interacting with others. And importantly, it's given me a lot of good tools for handling issues that my loved ones face, that I feel like, you know, when my children are facing issues with depression or unproductive,

• 1:05:23Speaker 00

  I feel like I've got better tools now to be able to help them out of wherever they are. And the other really important thing that I think goes is still stigmatized broadly is is using mental health professionals that just before we started this conversation, I got a phone call from my dentist to set up my annual cleaning. So in two days, I'm having my annual cleaning, which most of your listening audience is going to think, you know, so what? Okay, great. He's getting his teeth cleaned. If I were to tell you that instead it wasn't my dentist that called, but it was my therapist who called and in two days I'm going to sit down with her and just talk through what's going on in my life, not because there's a problem, but because it's part of my mental health hygiene. I think that there might be some people who sort of bristle

• 1:06:08Speaker 00

  at that a little bit and be like, what are you seeing a shrink for? And you know, why are you sitting down with the therapist? Like, what's going on? What's wrong? But I do regularly check in with a therapist, not because there's anything wrong, but but for the same reason that I get my teeth cleaned and for the same reason that I see my doctor every year for a check in, just to make sure that things are staying on track and that that I'm catching anything that might be bubbling up as a problem before it becomes a problem.

• 1:06:30Shane Parrish?

  I think that's really powerful, not only individually, but for performance too, to have somebody to talk to you and talk through things with. And I don't know why I get stigmatized or sort of thought down upon. Yeah, I don't I don't quite understand that. I have to ask, tell me about your Jeopardy experience. And we were talking before you told me you were a contestant on Jeopardy. I want to want to hear about this.

• 1:06:54Speaker 00

  Yeah, this was a while ago now. This is soon after my my oldest was was just born. There was an open audition for Jeopardy and it was a show that I had watched, you know, as a family. And I was always so amazed by the fact that my father would be able to answer like two thirds of the questions, you know, before the contestants got to. And I thought, man, this is, this is pretty cool. And then there was an open audition. So I went to the Baltimore Convention Center and signed up for the audition and did well on the test. And then they have you, you know, play a practice round. And I end up getting invited on to the show. And before I went on the show, I knew that there were some things that I needed to really brush up on. Shakespeare comes up in ways that I knew that I didn't have a deep enough knowledge of. I went to make sure I

• 1:07:37Speaker 00

  knew all the presidents and vice presidents in order, things like that. And Jeff Yass, the founder of, you know, one of the founders of Susquehanna, the chief risk manager at Susquehanna, came into my office before I went and he said, Todd, Nobody cares if you know anything about American history. But if you screw up the betting on the final Jeopardy and Daily Doubles, don't even bother coming back.

• 1:08:03Speaker 00

  Which was a lovely, a lovely reminder that I couldn't embarrass myself by not knowing trivia. And a very good reminder that what I do as a profession is put money at risk. So I should probably make sure that I'm thinking pretty clearly about how I'm gambling in the game. And when I got back, he came in my office, closed the door behind me. He said, I know that you're not supposed to share the results until the show airs, but tell me how much money you had, how much money everybody had at Final Jeopardy, and I'll tell you what you should have wagered.

• 1:08:34Shane Parrish?

  Oh, that's interesting.

• 1:08:36Speaker 00

  And that was all that he wanted to talk about when I got back. I won one night, so I made it to two Final Jeopardies and he approved of my wagers on both.

• 1:08:45Shane Parrish?

  I want to end with some of the lessons that you learned from your parents growing up.

• 1:08:50Speaker 00

  The first thing that I thought of when I thought of what my parents taught me or showed me, something that I misunderstood when I was little. And when I was little, I noticed that they would sleep late on the weekends. When I was in college, I knew not to call my parents on a Saturday before noon because they might still be asleep. And I interpreted that incorrectly when I was little as them being sort of lazy. And what I realize now, as they're septuagenarians and still working, is that this was totally the result of the fact that they worked their tails off for my entire life and still do work incredibly hard. And that the conversation that I had with my father that morning when I wanted to quit the cross was really one of making sure that I wasn't picking the path of laziness,

• 1:09:35Speaker 00

  but that I was picking a path for good, well-thought-out reasons. Because there's value in doing work, value in doing hard work, that there's payment that comes from that in the long run. So my parents did a really good job of showing me that that being dedicated to a purpose and for them, the purpose was so very clearly providing for me and my brother and my sister and providing the life that gave us opportunity was important to them. And I realized that the reason that they were working so hard is because they valued education so highly. So this is sort of the number two that I got from them was was the very clear value of education. My siblings and I had private education. We went to private schools when when we were younger because they saw some failings in in the in the

• 1:10:16Speaker 00

  public education that that we were getting and they saw that there was greater opportunity if they could provide us with with a better education. So they made sure that in spite of the fact that it was more of a financial stretch, certainly than sending us to public school, that they were willing to take on, you know, the additional mortgage to pay for for us to be appropriately educated. And in talking to my kids about sort of how that shows up for them, I sent them a group text and just said, hey, I'm going to be talking to Shane. I know that this is something he's going to ask about. What have you guys learned from me? And the way they responded was that I've done a really good job of modeling

• 1:10:57Speaker 00

  for them acceptance and love. My youngest daughter, my 13 year old Jane, said that she knows that it's important to leave saying I love you, that that the end of every conversation is I love you. And it's not performative. It is, she didn't say performative, I'm using the word, that it's very clearly real and you're and you make sure that that's the the purpose with which you end a conversation. And that was always my interaction with my parents, that I remember so very well them coming to see me sing in college. So I sang in in the Virginia Glee Club, and there were 65 men standing on stage in rehearsal, and my father showed up trying to figure out, you know, where he was supposed to, you

• 1:11:41Speaker 00

  know, leave my tuxedo or whatever it was. So he walks onto the stage in as we're rehearsing before the final performance. And he came on and I went over and greeted him the way I always greet him, which is with a hug and a kiss hello. And then I talked to him and then he gave me another kiss and he and he walked away. And I always knew that with disagreements, with fights, whatever, that my parents always loved me, that that was sort of the baseline understanding of where I stood with them. And, you know, as a grown man, I was able then and still am to hug and kiss my parents hello and goodbye. And only later, when some of the other guys in the glee club said to me, like, you know, it's sort of, it was, that was nice to see you give your father a kiss. I was like, what the hell are you talking about? Of course I would. Like, how

• 1:12:25Speaker 00

  else would I greet him? And realize that that wasn't everybody's norm. And that's something that that I've certainly taken from them and passed on to my kids.

• 1:12:36Shane Parrish?

  Thank you. That's a beautiful way to end this interview, Todd. I really appreciate the time.

• 1:12:42Speaker 00

  Thank you so much for having me. I appreciate it.

• 1:12:46Shane Parrish?

  The Knowledge Project is produced by the team at Farnham Street. I'd love to get your advice on how to make this the most valuable podcast you listen to. Email me at [email protected]. You can learn more about the show and find past episodes at fs.blog/podcast.

• 1:13:04Shane Parrish?

  To get a transcript of this episode, go to fs.blog/tribe or check out the show notes.

• 1:13:10Shane Parrish?

  Can you do me a small favor? Go online right now and share this episode with one friend who you think would love it. Thanks for listening and learning with us. Till next time.