Pod Insights Michael Covel's Trend Following Ep. 1321: Sharpen Your Analytical Thinking with Michael Covel on Trend Following Radio About this episode Please enjoy my monologue Sharpen Your Analytical Thinking with Michael Covel on Trend Following Radio. This episode may also include great outside guests from my archive. --- I’m MICHAEL COVEL, the host of TREND FOLLOWING RADIO, and I’m proud to have delivered 10+ million podcast listens since 2012. Investments, economics, psychology, politics, decision-making, human behavior, entrepreneurship and trend following are all passionately explored and debated on my show. To start? I’d like to give you a great piece of advice you can use in your life and trading journey… cut your losses! You will find much more about that philosophy here: https://www.trendfollowing.com/trend/ You can watch a free video here: https://www.trendfollowing.com/video/ Can’t get enough of this episode? You can choose from my thousand plus episodes here: https://www.trendfollowing.com/podcast My social media platforms: Twitter: @covel Facebook: @trendfollowing LinkedIn: @covel Instagram: @mikecovel Hope you enjoy my never-ending podcast conversation!
Transcript 0:00 Speaker 00 I was thinking about it this morning.
0:03 Speaker 00 Your goal is not to persuade everyone. Your goal was not to save everyone.
0:11 Speaker 00 They can't be persuaded, they can't be saved.
0:15 Speaker 00 So your goal is not to focus on everyone or everything.
0:20 Speaker 00 The information flow is non-stop. What are you going to do with it? What are you going to do with the non-stop information flow?
0:30 Speaker 00 How will you act on it? You can't act on it. There's not enough time. Even if there was enough time, show me how, if you absorb all of this information,
0:46 Speaker 00 that it will be useful for you, or your family, or your friends. I'm just like everyone else. I look on places like X. I do check out the news.
1:00 Speaker 00 It's been terribly sad to watch what's going on in California. But what can you do?
1:07 Speaker 00 What can you do about that situation? Or any situation that's not in your immediate purview?
1:16 Speaker 00 Something that you can't control? Why focus on it?
1:22 Speaker 00 If you are spending significant time every day focusing on something you can't control, and that you are not working to change? May I ask why? Well, the reason is simple. It's an addiction.
1:41 Speaker 00 It's a psychological issue.
1:44 Speaker 00 We've all been there to some degree, to some extent.
1:48 Speaker 00 But we can't stay there. If we stay there in that place of constant, non-stop information flow,
1:56 Speaker 00 how will you become the great trader? How will you become the great writer? How will you become the great photographer? The great surgeon? The great lawyer? You won't. Because you need focus.
2:14 Speaker 00 If we all live in non-stop distraction, what's the upside? What's the endgame?
2:22 Speaker 00 Let's pretend for a second the average life is 90 years these days if you're healthy and you get there. 90 years of non-stop distraction? Ladies and gentlemen, the last I checked, we're all gonna die at some point in time. So what will we do with our time? What will we leave behind in terms of what we figured out? This requires work.
2:50 Speaker 00 This requires focus, time, discipline, and sharpening your analytical thinking. Is number one. Now let's be frank.
3:02 Speaker 00 If we have been following a lot of these political and social issues over the last many years, a significant portion of the population cannot use an analytical thinking.
3:18 Speaker 00 They are stuck.
3:20 Speaker 00 That's not my problem. That's not your problem.
3:24 Speaker 00 The only thing we can do is to try to avoid these situations and to avoid these people. Because they will bring us down. For those of us that want to do something big, for those of us that want to leave something when we're gone, we cannot become immersed in the proletariat's problems. Now I can already hear some of you out there saying, "Oh, Mike, you're being cocky. You think you're so great. You think you're so this." No, I just don't care what you think. I don't care what you say. I speak the truth. That's it. I leave it at that.
4:04 Speaker 00 So in the spirit of sharpening our analytical thinking, in the spirit of developing ourselves in a more productive way, I want to share some sentences with you. Ones that I caught on some post, I'm not sure where exactly. I guess I could search and figure it out. But these are several sentences, I guess more than several, more than 10, that will guaranteed by me to sharpen your analytical thinking. And again, this only matters if you even know what the hell analytical thinking is. If you have been watching any of the coverage, for example, of the Los Angeles fires,
4:48 Speaker 00 clearly, most of the people involved in that situation at the leadership political level have no analytical thinking. How they got there, why they're there, that's an entirely different subject. Just to point out, what I'm going to share now isn't for those people. They're not capable. They are in government positions for an assortment of reasons, and none of those reasons have to do with merit or the ability to think. So before I go off on too much of a political tangent there, I will say though, I'm quite sad because I know many of those areas
5:29 Speaker 00 in Los Angeles, and it's quite sad to see such devastation. But here you go. The sentences that will absolutely sharpen your analytical thinking. Number one, 80/20 rule. 20% of your time, 20% of your activities are going to lead to 80% of your results. Maybe 90% of your results, maybe 95%. Maybe 5% of your effort will deliver you 99% of your reward. You have to figure that out. You have to figure out what you do every day that's the most valuable effort that you extend.
6:15 Speaker 00 Number two, master learning with the Richard Feynman technique, the famous physicist. Quite simple. Teach others. Figure out what you missed, identify the gaps, and simplify.
6:29 Speaker 00 Isn't that the brilliance of Steve Jobs at Apple? He took complicated issues, hardware, software, and he simplified. And it worked. Number three, you must not fool yourself. You are the easiest person to fool. Another comment from the good Richard Feynman. You see, we like to lie to ourselves. We like to pretend that we have an excuse for why we can't do something. We have a special excuse that no one else has. Oh, that's bullshit.
7:09 Speaker 00 Number four, ask why five times to get to the root cause of any problem. Why? Why, why, why, and why again? You know, I've developed a certain ability to ask questions doing this podcast. I feel like I'm pretty good at it. And when I talk to people on the podcast, they expect questions. But here's the funny thing. In regular life, people don't like questions. Or at least they don't like questions coming from someone like me. Because I've seen a lot and I can see through a lot. Number five, eat the elephant.
7:53 Speaker 00 Break complex problems into smaller, manageable parts. Now, one of the great examples here would be with trading. Reduce all of the information flow to one thing, which is the price. Trade the price. Wham, bam, thank you, ma'am. You've reduced something very complicated, this wild amount of informational flow, and you've reduced it to one variable, the price. Number six, apply second order thinking. Consider future impacts by asking what comes next? You're listening to me right now, so I'm going to assume you are with it, so to speak.
8:34 Speaker 00 The vast majority of humanity does not ask what comes next. Either they don't have the ability, the IQ, to do so, or they don't care to do so, or they've not trained themselves to do so. Number seven, have strong beliefs loosely held. Update your beliefs based on new evidence. Damn straight. I look at something like AI.
9:02 Speaker 00 Yeah, I've been poking around and looking at AI for the last year or two. But in the last couple of weeks, I've had my come to Jesus moment. If you don't figure out AI and you don't figure out how to use AI, you will be burnt toast soon enough. Number eight, study cognitive biases so you can identify and outsmart your biases regularly. Basically, what are your sacred cows? What are you refusing to update on your operating system?
9:36 Speaker 00 Do you see your weaknesses?
9:39 Speaker 00 If you can't see your weaknesses, guess what? I can, or someone else can. Number nine, seek intellectual sparring partners with diverse views to challenge your assumptions. Now, this is definitely tricky in the modern age. There are plenty of diverse views that add nothing to the conversation. The kicker are to find those people with diverse views who actually are somebody, who actually have a mind. Diverse views with no mind equals a big waste of time. Number 10, use Occam's razor. Prefer the simplest explanation that fits the facts.
10:26 Speaker 00 Can you do it? Can you reduce it to the simplest explanation?
10:32 Speaker 00 Or is everything a conspiracy theory?
10:37 Speaker 00 No doubt, we have seen many conspiracy theories come true.
10:43 Speaker 00 But maybe they really weren't conspiracy theories. Maybe they were just smart people using Occam's razor to reduce to the simplest explanation.
10:55 Speaker 00 Number 11, be data-driven, in the words of Peter Drucker. What gets measured gets managed. Bottom line is that you have to count. Why do you have to count? If you don't know why you have to count, don't listen to me. You are already gone. Number 12, factor in nuances. Not everything that counts can be counted. Absolutely.
11:28 Speaker 00 I know several friends, several associates, that don't understand yet where AI can help them and where AI cannot help them.
11:40 Speaker 00 For example, you are not going to turn all of your creativity or ideas over to AI. Otherwise, you're drinking from the same fire hose that the rest of humanity is drinking from.
11:56 Speaker 00 Number 13, invert problems. Growth also comes from avoiding mistakes and bad habits.
12:05 Speaker 00 Now, I can connect this to trend following trading. Growth comes from avoiding mistakes. Well, sometimes a mistake is okay. Small mistakes, that's fine. Make your small mistake and move on.
12:22 Speaker 00 Number 14, practice morning journaling. Use writing as a tool to clarify your thinking. Now, I don't care whether you write in the morning, at night, in the afternoon. It doesn't matter. And anybody out there who tries to say there must be some pattern of when you should do it, just a prick.
12:43 Speaker 00 But I gotta say, there is tremendous value in learning how to take what's inside your noggin, inside your brain, the six inches between your ears. There is tremendous value in learning to write. For every aspect of life.
13:04 Speaker 00 If you can't write, or at least worst-case scenario, as I've watched Trump dictate his tweets, his posts, if you can't write, or at least if you can't dictate with a clear mind, you're gonna have a hard time winning in life. Number 15, build a second brain. I've been doing this for 20 years, but I didn't know I was doing it. Saving every bit of information, from emails, to PDFs, to other files, to images, to videos.
13:45 Speaker 00 If I can just figure out a way to better organize it and deploy it, that'll be something. But having that second brain, that place where you store everything that you find, everything that you come across, everything that you know is instantly important to you, saving it, damn, that's value.
14:10 Speaker 00 Number 16, adopt probabilistic thinking. Weigh decisions based on likelihood and risk. Now, you could actually sit down and really put some math to this, or you can use some robust intuition.
14:28 Speaker 00 But you have to think in terms of risk, you have to think in terms of odds. I've said it on this podcast before, but I remember meeting Ed Secoda for the first time, the famed trader. And we started talking about the turtle experiment, the turtle trader experiment, the topic of my second book. And Ed asked me point-blank, "What did I think Richard Dennis was looking for when he hired his turtle students?" And I said, "I thought he was looking for people who could think in terms of odds." And Ed Secoda looked at me and said, "Who told you to say that?" He didn't say it with that exact tone, but that is what he said to me. "Who told you to say that?"
15:12 Speaker 00 Meaning he liked my answer, but he wasn't sure where I got it from. Where did I get it from? Well, I'd been immersed in that world for a very long time and it was pretty easy to see that that was the most likely way that Dennis decided on his turtle students. Number 17. Understand opportunity costs. Consider the next best alternative you're giving up. Terribly important. I will add in there also sunk costs. As I've said, over the years, the only thing I got from my MBA program was the definition of a sunk cost and an opportunity
15:53 Speaker 00 cost. And a sunk cost is quite simple. If you spent it, it's gone. If you're worrying about spilled milk, if you're worried about spent money that you can't get back, what's wrong with you? Why are you still focused on something you can't get back? Move on. It's over. Game over. Find something new. If the money's gone, it's sunk.
16:22 Speaker 00 Number 19. Master compounding. A 1% daily improvement leads to a 37x growth in one year. I don't know about the 37x necessarily, but compounding advantages, compounding lessons.
16:42 Speaker 00 Taking something that you learned, applying it, and seeing the result. This is big stuff. Now again, plenty of people out there are never going to apply these principles. I'm not one of these people that thinks everyone has it.
17:02 Speaker 00 Plenty of people don't, and they won't.
17:06 Speaker 00 Is that DNA? Is that environment?
17:10 Speaker 00 Those are good arguments, right? That's a deep rabbit hole to go down. The true thing that I think about the turtle experiment is that anybody can do that. But you gotta have some basics. You gotta have some basic IQ. Because the guy on the street, the junkie, the gangbanger, they're never gonna do it. And the last one that I want to share, the greatest enemy of knowledge is the illusion of knowledge. From the now deceased physicist Stephen Hawking. The illusion of knowledge. That really brings you right back into the notion of flow.
17:55 Speaker 00 That if we really don't have good knowledge... What are the first principles? What are the basic principles? Which way is the wind blowing? If we follow that wind, can we protect ourselves? Are we too scared to follow the wind? Do we not trust the wind? If we have a way to escape the wind, if the wind goes the wrong direction, then why not trust the wind? We don't know how much is an illusion or not, but all we can do is act. We can take action. We can refuse to overthink it. We can refuse to procrastinate.
18:40 Speaker 00 We can refuse to be a loser. You know, I said it at the top. What I just shared with you, those 19 points, a significant portion of humanity doesn't care, or can't care, or won't care. Not my problem. I am here to exist, to do what I do, to share with you, to share with like-minded people. That's it. I'm not trying to save the world, because I can't save the world. You can't save the world. The world will go on long after we are gone.
19:23 Speaker 00 So let's take our limited time. Let's make big things happen. Let's stay focused. Let's stay disciplined. And let's share amongst smart people. That's all we can do. I'll see you again next week.
19:44 Speaker 00 I see a time when those awake will understand how to make money in up, down, and surprise markets. Whether new trader or experienced, college student or financial advisor, protecting against a crash or just trying to make a lot of money, trend following offers everyone an answer in uncertain times. To get started immediately, send me an email, [email protected] . I will send you the right trend following steps to take, along with my free video. But if you want to buy and hold, trust the government and trust Wall Street. This is absolutely not for you.
Previous Ep. 1320: Happy New Year with Michael Covel on Trend Following Radio Next Ep. 1322: Kurt Gray Interview with Michael Covel on Trend Following Radio Page updated November 7, 2026 · transcript and summary are machine-generated
