Thursday, April 29, 2010

Three Feet from Gold

In Three Feet from Gold: Turn Your Obstacles into Opportunities! (Sterling, 2009) Sharon L. Lechter and Greg S. Reid continue the work of Napoleon Hill, author of Think and Grow Rich. In his self-help classic, published during the Great Depression, Hill wrote about a man who abandoned his dreams of becoming rich by prospecting for gold a mere three feet before someone else, to whom he sold both his mine and his equipment, found a major gold vein. The message: the most common cause of failure is quitting.

Teasing out this message, the authors distinguish between the goal of the quitter and that of the winner. The quitter wanted to become rich, the winner wanted to become a gold miner. The quitter wanted instant success, the winner had studied mining for more than a decade before he made his investment. The winner had stickability, which came from being committed as opposed to being merely interested.

There are, of course, morals in this story for the trader. Good traders love what they do and want to become good traders; they don’t trade simply as a means to becoming rich. Some traders pan for gold (and most likely will come up empty), others exploit a major gold vein. All traders go to work every day hoping that the value of the gold they discover will exceed their costs of exploration and extraction.

Unfortunately a trader’s hopes are often dashed, and he may feel like quitting. At least, assuming that he employs effective risk management tools, he has the choice of whether to quit or not. Sometimes quitting is in fact the correct decision. If he isn’t committed to the life of a trader, perhaps it’s time to move on to something better suited to his personality and talents. If he’s treading water, making no progress in his trading skills, perhaps he would be wise to go back to school. (I use the “go back to school” phrase in its broadest sense.) But if he can’t think of anything he’d rather do for a living and if he knows that he is a more accomplished trader than he used to be, however painful any temporary setback, what choice does he really have? As Napoleon Hill wrote, “Living life to the fullest is a lot like shooting the rapids in a rubber raft. Once you’ve made the commitment, it’s difficult to change your mind, turn around, and paddle upstream to placid waters.” (p. ix)

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