Near the end of 1973’s movie Magnum Force, Clint Eastwood’s character ‘Dirty’ Harry Callahan exacts sweet revenge on his arch nemesis, and then delivers the classic line “A man’s got to know his limitations.”

This is the story of how I learned some of my own very personal limitations.

In 1990, I was a college student in London, and I was working on the exchange trading floor. I was the lowliest of traders……pond scum, basically a broker, on the exchange. My job was to execute client orders, but not make any of my own buy or sell decisions. Being a broker meant I was yelled at all day by senior traders, and they threw telephones at my head when the screaming was too loud to get my attention. Anybody remember when telephones were actually attached to the wall by a cord? Back then they put 30-foot cords on the phones just so they could get extra distance when they threw the phones at junior traders like me.

In the trading pits, we saw at least one fist fight every month, and most of the spectators would rush to lay bets on the outcome of the fight. If the fire alarm went off while the markets were open, nobody would exit the building…….there was too much $ at stake each second. The physicality in the pits was legendary…..watching someone get tackled in a pit made the sneaky sharp elbows to my head seem mundane. Outsiders assume floor traders must be ivy leaguers…..but the bulk of the traders in the pits never graduated from high school, some were ex-convicts, and many were street bookies (sports betting, horse racing, etc). Also, the elaborate pranks on the rookie traders never seemed to end, except when the closing bell rang and every soul rushed out of the pits to go drink beer.

I fell in love with it instantly. The chaos, the incessant profanity, the paper flying through the air, the ear-splitting volume, the smell (usually a combination of stress and hangover-driven body odor & whatever was ordered for lunch), the brutal savage competition…… and the fact that our work involved playing a high stakes crazy game all day. That opening bell would fire off in the morning, and it was one of the most exciting sounds I ever heard. The adrenaline rush of the opening bell felt just like that moment when you take off on a big wave on a surfboard. I never really thought about making much money doing it. I just knew I wanted to be there. If I could work in the markets, I knew I would never really “work” a day in my life because it was so much fun.

I finished my time in the trading pits in London, and I graduated from college in Boston in 1991. And almost immediately, I received a job offer from General Electric to work in their Financial Management Program. This was actually a great opportunity to work in finance at one of the world’s most dominant companies. I was shocked I got that offer. My heart was on the exchange trading floor, but logic won out and I accepted the GE corporate job. “Report to work in 4 weeks. Read the books we are sending you first.” A box of books from GE arrives at my doorstep in Huntingdon Valley PA, and every single one is a granular dissection of corporate accounting (not what I expected). I had done well in my corporate accounting classwork, but I despised it. Torture. So I hit the EJECT button. I called GE just 3 days later and let them know I wasn’t coming. I am certain a few of my family members thought I was a complete idiot for bailing out on GE. But I just knew I didn’t want to spend the rest of my life climbing the corporate ladder, compiling spreadsheets, and doing long division.

So I took a big (stupid?) calculated risk and went to work on the New York Commodities Exchange as a trader. My dream!……..”Nothing is gonna stop me.” I was trading options on things like orange juice and cotton, in the pits with some very experienced and dangerous traders. Almost immediately, my losses started to pile up. Like the rookie I was, I was selling when afraid, I was buying when I felt greedy, and I was just losing lots of money. The traders around me smelled blood, and they took advantage of my own weaknesses every chance they got. One man’s misery is another man’s profit. I lost A LOT of money.

After about 6 brutal months of learning what not to do (the hard way), my mentor from my days in London suggested I read a paper from The University of Chicago’s Dr. Richard Thaler called “Gambling with the House Money and Trying to Break Even”. It changed my life. It taught me how, if trying to use my gut, I was hard-wired to fail at investing. How the three-pound human brain, an anatomical marvel, evolved to keep us alive on the savannah. How it is designed for physical survival…..for fight or flight. But also how all that wilderness conditioning makes it very difficult to survive risk-reward decisions in the financial markets. Thaler’s insights showed me how, inside the brutal chaos of the trading floor, I had to proactively override my natural fear and greed instincts.

I read that paper on a Sunday night………and by Monday morning I stopped the bleeding. The consistent losses ceased. I started earning a living as a trader, simply by no longer making dumb compulsive decisions in the trading pits.

I ravenously devoured every single piece of behavioral finance literature I could find, and that continues today. Works by Robert Schiller, Barry Ritholtz, Daniel Kahneman, and others. These writings constantly remind me of my financial market Achilles heels, and free me up to spend more time talking and meeting with clients, managing portfolios, and constructing written financial plans. Second only to my father, and a couple of great friends & fellow traders named Bill and Dan, I credit writers like Richard Thaler with helping me build and sustain a successful practice in this industry. And for me, success is defined in the moments when we help clients do things which include retire with confidence, navigate scary and frustrating cycles in the markets, or put their child or grandchild through college without student loans.

Embrace your limitations. It’s how we grow and become better versions of ourselves.

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