In This Episode
- Why you might not want to have death metal bands at your coffee shop
- The trading course that both Walter and Hugh took in Los Angeles
- The biggest lessons we learned from our failures
We Share Our Past Failures Before Becoming Traders
This is something that we don't hear a lot of traders talk about. But thought that it was important to discuss our previous failures and how they shaped our mindset and ultimately helped use with our trading.
Walter talks about his previous experience as a kid magician, which he was successful at, as well as his failure as a coffee shop owner. He also talks about his “dream” job as a jury consultant and why he ultimately quit.
Hugh shares his experience with real estate investing and how he bought a house for $10 and make over $30,000 in profit. He also shares his previous work experience at a hedge fund and in IT.
Watch the video to find out how these experiences all helped us become successful traders.
Read the Transcript:
Hugh: Hi, Walter. I think it might be useful from my psychology standpoint and from an experience standpoint to maybe talk about what we have been into before. Like business-wise, if we have any success or if we have failed. How we’ve learned from that and how we came to trading after that.
Walter: Sure, just real quick. When I was a kid I learned how to do magic tricks. So I was basically a magician from about age six until I was in my twenties. In college, I did magic so that was kind of my business. I had side jobs you now mowing lawn and stuff like that.
When I got to college, I was surrounded by Psychologists because my mom was a Psychiatric Nurse. I would go to her work. There will be like you would see the rubber room where they put the crazy people like the really violent crazy people in the rubber room.
I always remember being fascinated by that. Walking through there and seeing the patients, there was kind of this feeling as a kid. Almost like you are going to a jail or something. I felt like they were dangerous or they were weird people but they just seemed normal. The people that were there just seemed normal to me.
We were always around Psychologists and Psychiatrists and people like that. So when I went to college I just decided to take Psychology. As I got through it, I knew I wanted to go to Graduate School. So I made some friends. There was a Master’s Program at the University I went to and I was talking to someone. I actually ended up taking some Masteral course right before I graduated my Bachelor’s.
One of the guys there, he was working for a jury consultant and I thought that’s interesting. I thought that’s really a cool job. I was thinking what can I do, what kind of a job can I have where I still have time for surfing, that was my whole thing. So I thought of when I was my own boss and I did this jury consulting thing, I could kind of work my own hours and stuff.
I would have the mornings for surfing or whatever. He was telling me about it. So I was really fascinated by the fact that this graduate student was doing ground work basically for a couple of jury consultants.
I applied for Psychology in Law Programs in the U.S and Canada. I saved up my money and applied for twenty-six graduate schools. I think I got into three you know, I did that. After I graduated, I went into jury consulting and I hated it because you’re always working for the bad guys. You were always working for the defendant’s, it really should be a suit. That was tough. Also, you’re traveling a lot and you’re living in hotels. It was not very fun.
So I got out of that and my friend that I’ve grown up with that I went to junior high school and college with, who also went off to graduate school. Although, he only went for one year of Psychology School and then he opted out and worked for an investment bank.
He and I were trading all throughout the nineties when we were in University. In the early nineties, we’re in University and we were trading Dotcom stocks. This is the real, the first big ramp up in like NASDAQ stocks. He convinced me to quit my jury consulting job and moved down with him in Beverly Hills and learn how to trade currencies.
So that is what we did. We went down there and we even had investors lined up and stuff because he had a pretty good trading background. He had worked with lots of different brokers and stuff. So he told me to go and take this class. I took the class. I think you’ve taken the same class. We’ve talked about the guy.
Hugh: Yeah.
Walter: It was just funny. It was like a little ad in the LA Times.
Hugh: We’d go on the weekend or something, right?
Walter: Yeah, mine was five days. It was a week but whatever it is the same dude. So I took that class and we were trading our own money and stuff. I didn’t really have much to do with it but he tripled it for two nights and then by the end of the week the money was gone.
We had these investors lined up like the Swedish Bill Gates was a friend of my friend. He was dating a Swedish girl and somehow made us an introduction with this Swedish Bill Gates. That was the deal. We were going to trade the Swedish Bill Gates’ money. We were going to have this big office in Malibu and all this stuff and then September Eleventh happened.
The guy lost a bunch of businesses and there is no way he’s going to have any play money for currency trading or anything like that. Which is good because we would have lost his money. We dodged the bullet there, that was really a good thing that happened. We weren’t ready for that.
Then I started a coffee shop which was a coffee smoothie shop which is pretty much a disaster. It did not go very well and then I sold everything and moved to Australia. Sold all my possessions, packed it up and went down to Australia.
I thought of it like a sabbatical. In Academia, all my friends in graduate school are all going to Academia. They are all teaching, professors and stuff. I am like the black sheep of the group. I am like the one that nobody talks about.
I moved to Australia and I had this sabbatical of learning as much as I could. Getting as many books as I could about trading. All about technical analysis and they are all stocks-related and futures-related because there was one book on currencies at the time and then there was another one. So there’s two books on currencies at the time.
I spent a good year and a half just learning it there and then I had to get a job because of my Australian visa and stuff. So I had to get a job for that. It was not anything more than just a job. When finally I could get out of that and still maintain my residency in Australia, that was when I got that job as soon as I could because my trading was going really well at that stage.
So I think it does take the pressure off when you have another source of income for your trading. I’ve talked to a lot of traders about that. So to put the long story short, I was an absolute failure at business. I guess my first business where I do not have an employee as a magician, I was doing alright. As a smoothie coffee shop owner, that was a disaster and I made a lot of mistakes there.
The path was an interesting way because I really never wanted to become a trader. It was only my friend who got me into it. I thought it was actually cooler to be a jury consultant than to be a trader. When you think about it and you are at a party, people talk about what you do. Jury consultant is a cool thing to say because they’re like, “Oh, What is that about?”
If you say “trader”, people kind of already have the idea in their head of what that is or do you know what I mean? It could be negative or positive depending on the person. So where do you come from? How did you build up to trader status or how did you end up there?
Hugh: In school I studied Biology.
Walter: Biology, really? Wow!
Hugh: Yeah, did absolutely nothing with that. So right after college, I got a job at a hedge fund. I was working at a trading desk as a trading assistant.
Walter: That’s right. I remember that. You said that on your website. You talked about that on your website. I read that, I remember.
Hugh: So it was a good introduction. I mean, it was a fixed income arbitrage hedge fund. It was not so interesting to me because it is all Math and they were just playing aggression to the mean basically but I got a couple of years there. It was a cool experience and then I went into IT Consulting.
So that was a little bit more stable and I understood it a little better. It was not like an assistant job. I did that for a few years then tried to do real estate and that failed miserably. I found out that I do not like doing real estate because you have to talk to many people and everybody was out to get their own little piece of the pie. We did a few deals but after that I was like, “Okay, I’ve got to go back to the job and figure this out.”
Walter: Wait, wait. Can you talk more about real estate? I am just curious. So were you selling or you’re putting deals together? What was your role?
Hugh: Buying and selling. So like you know late nights, no money down type of stuff.
Walter: Got it.
Hugh: So you know we did a few deals. Bought a house for ten dollars and then sold it. Made like thirty thousand dollars of profit or whatever. That was kind of cool in itself but the whole process of it, I just did not like. People are luring you up and they want to sue you for stuff and that is not just kind of fun.
So I’ve got enough of that. The whole time I was kind of trading on the back earner then I started the website. The website started generating some money so that took a little bit of the pressure off. Once I was able to take the pressure off, the trading came around. That is what I am doing right now.
I am just trading and doing the website. I am going to start another website soon. So it is a good passive income generator not passive but more passive income generator than trading.
Walter: What is the new website? When is that going to be?
Hugh: It is more about self-sufficiency. Trying to learn the skill that maybe your great grandfather has had. Preserving food, building houses and stuff like that.
Walter: I want to learn how to pickle garlic. Are you going to talk about pickling stuff? I am serious. That is kind of the stuff, right? You are talking about stuff like that, like being self-sufficient and storing up your own food.
Hugh: Yeah, that is what my wife wants to do. She wants to pickle some food and I am going to do some tutorials on that.
Walter: I am in. I’m totally in. I had a friend, actually the friend that got me into trading. His dad, they’re from out of the country and his dad would have these amazing jars of pickled garlic. They made it. They had it in like the garage or whatever. I was like, “Oh, that is amazing.”
I remember when I was a kid, my grandmother came out from the East Coast to California. Where we live in California, there’s a lot of strawberries where we grew up. So my mom and my grandma, they just went to town. They went and bought strawberries. My grandma showed my mom how to make strawberry preserve like jam you know.
I am not kidding you. We had it for breakfast on our pancakes. We had it for lunch on our peanut butter sandwiches which I don’t know if you know now, you can’t take peanuts to school. So my kids do not have peanut butter sandwiches.
Hugh: Really?
Walter: Yeah, now you cannot drake nuts to school. It is illegal. That was crazy stuff. I had a peanut butter and strawberry jam sandwich for literally eight years going to school and then we put it on our ice cream for dessert. We would give it to people for Christmas like, “Hey, Merry Christmas! Here’s a jar of preserves”. We literally had that stuff for ten years with just one spring that my grandma came out and just made all that stuff. But, that is cool. I like stuff like that. That sounds like a good idea.
Hugh: We’ll see how it goes. It should be fun. What did you learn when you failed? I mean, a lot of people would try a lot of different stuff like stock trading, swift trading, real estate and all that stuff. So like after you fail at your smoothie shop and after I fail at the real estate thing, how did you feel and how did you know where to go next?
Hugh: Hey there! I hope you find this episode useful. I just want to let you know that Walter and I give away something valuable every month that helps traders improve their skills. You can enter to win by simply leaving an iTunes review and leaving a comment on our YouTube videos.
At the end of each month, we'll look at the comments and reviews from the month and we'll pick a winner at random. Each comment and each review counts for one entry during the month that it's pitted.
So, if you're interested in that, be sure to enter after this podcast is over. Alright, back to the episode.
Walter: I always had like you said trading in the background. When I was at the smoothie shop, there was a lot of down time. In other words, we didn’t have a lot of customers. So I would literally, I am not kidding you, I would literally get up and this is seven days a week. I had people that could work there but I just couldn’t really afford it. You know I’ve given my shift here and there. So I would get up when it was dark and I would listen to the coast to coast AM radio show that would be on replay.
Getting up would be like night. I get up and I drive about half an hour or thirty-five minutes to the smoothie shop. It was really more of a smoothie shop than a coffee shop because nobody drinks our coffee and very few people drink our smoothies as well. But at least four people did.
So I would get up and I would listen to coast to coast AM rerun like they rerun the one that was on earlier. Like you know they have six hours of coast to coast or whatever. I get to this smoothie shop, I fire up the coffee machines and all that. Get everything ready and people would come a little bit before school.
Maybe a few people would come for a cup of coffee or whatever and then after school, it is more of a hanging out for kids that were like eleven or twelve years old because we had ice hockey and foosball and billiard tables. Couches that they can relax on. It was like their parents were just dropping them off there when they didn't have a babysitter. That is basically what it was.
I should have charged something like a door fee, you know. We actually had music too at nights sometimes like crazy music. Bands that couldn’t play anywhere else because they were like death metal or whatever. They were so thankful. Probably the only smoothie shop that had death metal bands at night.
I cannot see what could possibly go wrong. Why didn’t this business take off? What I learned though is I was always looking at the charts during the day because basically from about nine AM to one or two PM, there was nobody coming in.
We have a few people coming in at lunch time. There was a company there that made guitar preamps in that area. They make guitar preamps. I do not know much about guitars or anything but apparently that was really like a well-known company.
The founder of the company, like the CEO or the President dude that the company has named after, he came in once. And then, the whole like all the secretaries started coming in, stopping to have smoothies. They would come in at lunch and then that was it.
So I had all this time to look at the charts. I was following a signal service in South Africa. Whenever they gave their signals I would take the trades and stuff. So that’s basically it. I was looking at charts and still trying to learn as much as I could about trading.
There was a trader guy that actually came in there like a broker dude and we would talk about stuff. I would kind of learn things from him and bounce ideas off of him but other than that you know that was it. All I really learned from it was persistence and perseverance.
When I came to Australia and I convinced my one and only friend in Australia to come and live with me, he was like, “Dude, do not get down on yourself that you had a failed business”. I wasn’t. I really didn’t care about it. I was like, “Yeah, I tried it and whatever” but he was like trying to pump me up even though I didn’t need to be pumped up.
He was like, “I’ll always been on the guy with the failed business. He learned lessons and stuff like that.” I am like, “Okay, cool. I am not looking for any backing or anything but thank you. Thanks for the road to confidence”. It is so interesting that he asks me questions. Just today I was listening to a talk by Malcolm Gladwell. Do you know who that guy is?
Hugh: Yeah.
Walter: He wrote Blink, Tipping Point and Outliers. He was talking more about Outliers and how they did this study where they got the zero-point-one percent top IQ people. I think it was in California. This guy in Stanford, followed him around like for fifty years. What he thought he was doing was identifying the movers and shakers of the generation by getting the genius level zero-point-one percent over a hundred and forty IQ people.
He thought that that was what he was identifying. He was going to follow this cohort every ten years. Do you know what he found?
Hugh: What?
Walter: IQ did not predict anything. I think this is really relatable to trading. I do not think that you can say that if you are smart, you are going to outdo trading. If you understand Math you are going to outdo trading or anything like that.
I think it really comes down to you wanting to make it work. What he found was that those kids that had the higher IQ’s, there was a small percentage of them, about fifteen percent of them that actually did go on to do great things. But, eighty-five percent of them had a very average to below average lives in terms of achievement or whatever.
He said that was because of where they grew up. So if they grew up in a household that is loving and encouraged learning, and had books and stuff like that around, they did quite well. Basically a higher class of opportunities. The kids that didn’t have that, they didn’t. They just had normal lives and stuff.
I thought that was kind of fascinating because a lot of people will assume it’s ability. I think for trading, it is not really ability. There are very incredibly simple trading systems that make money. There are very few traders that will trade those systems through draw downs, through the hard times and learn enough about themselves. So that they can kind of put things in place around them. So that they continue to trade even when things get rough.
I think that is the same with business. Today, if I wanted to go out and make a chain of smoothie shops I could probably do a pretty good job about it because I learned a lot of things from you know having before. Do not have death metal bands at your smoothie shop. Do not have a space of like I don’t know what it was, but it would've been like you know five hundred square feet when you could do with forty square feet.
You don’t need a lot of space for those kinds of places where they kind of like take away places you know. I didn’t need to have a lot of space. That is why I put the air hockey and the billiards tables in there and some stuff because it was all room. It was just weird to have this big room with nothing in it.
I wish I could say I had some really big insights but I think what I’ve really learned from talking to traders, from surveying traders and from thinking about the traders who I know do well, they just know it is going to work. They know it is going to work.
You can probably relate to this idea of like you are not just going to stop. You are not going to let anything hold you back and stop you from getting to the point where you are going to start making money. One of the things that Gladwell was talking about was the difference between Asian cultures and normal Western cultures.
A lot of Asian cultures do much better on the Math tests. So they have these tests that go around the world every four years and they give them to all countries. Basically all countries, they test the kids every four years on the TIM’s Test.
They also had a questionnaire in it that is not Math-related. It talks about how many hours you spend studying in a day. All the stuff about your life and what they found was, not every, in fact it is a hundred and twenty questions and not all the kids would go through all those other questions that were not Math-related. They didn’t get to the end of it.
One researcher decided to look at the countries that tend to complete those hundred and twenty questions about their life versus the Math scores. The kids who did the questionnaire about their life, who went through the end of it, they also did higher on the Math.
In Asian cultures they teach you that every Math problem has a solution. I do not know about you but in America what I learned growing up was that some people would just say, or some kids would just say, “I’m not just good at Math. I cannot do it. I am not good enough at Math”. But the Asian way of looking at it is very different.
The Asian way looks at it as every Math problem has a solution. It is up to you to find the solution. There’s no out. Like there’s no genetic elk, “Oh, I am not good in Math. I cannot do it.” That does not exist.
If you take that idea to trading like people can tell you why I’ve never found a trading system that makes money but there are traders that make money. If traders make money, is it possible to make money trading? Yes. So can you find out what you can do to do more of what the traders who make money do versus following the traders who do not make money.
What can you do to duplicate it? If one person can do it, many can do it and you can do it as well. What I’ve learned from trading is that and I wish I could say more. It really comes down to persistence I think. Persistence and the belief that you can do it.
Hugh: It sounds like I mean, in my case — and sounds like in your case also that — it is also a matter of interest. If you are really interested in it and you really want to figure out this puzzle. I think you will figure out how to do it but if you are not interested then you just kind of have to ask for it and just try to get by and then make a quick buck or whatever.
Walter: Absolutely right. What is interesting about what you just said is that the Turtles when they did their screening, they were looking for people who were interested in games like that was a thing. Actually in the show notes, I will give you guys a link, there’s this really cool guy. I do not know if you’ve heard about this guy named Naval. Do you know Naval?
Hugh: I’ve heard of him.
Walter: He’s an Angel investor and he had this thread that went viral on Twitter about wealth. He was talking about when he grew — I love listening to his interviews too — when he grew up he was always doing role playing games. He was doing games and kind of like looks at life and business as games in kind of figuring out what are the rules. How do you win this game?
I am really big with that with my kids. There are three things I think are really important to teach kids from me as a father. They are the art of storytelling. So we make up stories every night, two stories every night before we go to bed we make up stories.
The other one is probability. So my kids know probabilities and they are five and seven. They know probabilities. So probabilities, the art of storytelling and then strategies. Strategy games. We play a lot of strategy games like Naval was talking about because I think that can kind of apply that to life.
Back to the time when I was in Academia as a graduate student, there were certain academics that got a lot of attention and they kind of dominated their field. Even a tiny little field of child abuse and neglect which I did some sort of ancillary research in at the time.
My mentor had a foot hold in this area called child abuse and neglect. A very little sliver of Psychology but there were these people that had these like larger than life presences at these conferences and they dominated it. When you look at it they only did a couple of things. I think you can do the same thing in any field like real estate or Instagram, influencers or whatever.
There was this guy, he would just wear this outlandish garish like these flowing sleeves. Like he was from the seventeenth century you know. He looked like a seventeenth century magician and his name is Dante. He would wear this big, kind of like the stuff that I used to wear as a magician to be honest. Like a really weird costume, ruffled and all that.
He would give these talks at the conferences and no one is ever going to forget Dante. Do you know what I mean? Because he has created this persona. It’s like he has gamefied the whole academic thing and all these things get published. He goes against the norm. He just rails against the major theory at the time and it’s just like a game.
Everything in life to me is like a game. Trading is a game. Absolutely it is a game and that is why the Turtles were screened. They were looking for people who were interested in the games of strategy when they got the Turtles in there. They say they can take anyone and teach them how to trade but really they wanted people that understood games of strategy because they knew that’s what trading was. It is about learning the rules and learning how to make it work and have a win.
Hugh: That is a good point. I think also that brings up the idea that if you are doing something that you really enjoy then you are going to do it your own way. You are going to make it yours. You are going to figure out how to have fun with it like this guy dressing up for whatever. So I think this is the same thing in trading. Some guys like the big R trades. Some people like consistent returns and you will just figure out how to do it yourself.
Walter: What you have just said there’s a neurochemical basis for that too. If you are happy, you are going to neurochemically create an atmosphere in your brain that is going to lead to more testosterone which is going to lead to more effort. So if you are happy with what you are doing, you will do a better job at it. Why? Because you will want to do a better job. You will want to put more effort into it. It is going to come out naturally.
Whereas, if you are just flagging around at some job that you really hate, you are not going to be a winner. You will just not. You’ve got to do what makes you happy. I know it sounds all new agey and all that you know, do what makes you happy but it is true. Neurochemically it is absolutely true, that will make you try harder. In your brain, if you are happy with what you are doing, you will try harder and you will get better at it and then now it's going to snowball.
Hugh: Secret to life on that note. Alright. Thanks, Walter.
Walter: Thanks.
Hugh: All the information in this podcast is for educational and informational purposes only and is not trading or investment advice.
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