Mentorship, Coaching, and Why Traders Fail

How do people develop in high-performance fields?

If you look at training programs, you'll generally find two components:  mentorship and coaching.

Mentorship is teaching and role-modeling the right attitudes, behaviors, and skills.  Coaching is helping trainees practice and internalize those skills.

Many times in training programs, upper level trainees serve as coaches, while senior professionals offer broader mentorship.  For example, in medical school, an attending physician might explain and demonstrate a surgical skill, but it will be a resident who will actually supervise the student's practice of that skill and deliver needed feedback and guidance.

"Each one teach one" is a motto of medical education.  The experienced physicians mentor; the advanced trainees coach--everyone is both teacher and learner.

Each one teach one also occurs in the military.  Officers offer leadership and mentoring to trainees, but it's the seasoned veteran soldiers and drill sergeants who coach the skills and oversee performance.  Similarly, senior players on a team (and assistant coaches) will help rookies build skills, while the head coach serves as mentor.

Of course, mentors can coach and coaches can mentor.  The iconic basketball coaches in college, for example, lead and teach.  Rarely, however, can training programs get away with having a single person as coach and mentor.  The demands of deliberate practice are sufficiently intensive that assistant coaches and support from senior players become necessary.

With that division of labor, it is crucial to mentorship and coaching in performance fields that both are daily and both are integrated.  Combined, the two result in professionalization.  A trainee becomes a professional by internalizing the lessons of mentors through guided practice and coaching.  When I trained to become a psychologist, I had classroom teachers and advisers (mentors) and I had clinical supervisors who reviewed recordings of my therapy sessions with me (coaches).  The learning was far more than absorbing facts and figures:  it was cultivating a set of attitudes, ethics, behaviors, and skills.

I could take a class at a local college, but no one would pretend that I am undergoing training in a performance field.  Indeed, I could take a series of classes at school and learn plenty of facts and figures and never develop as a performance professional.  It is the integration of mentorship and coaching in the service of skill development that separates performance training from simple education.

In the trading arena, mentorship and coaching have notably existed within investment banks.  Indeed, several banks, have been well-known for their efforts in training and mentoring.  It has not been unusual to see graduates of the good bank training programs go on to become successful mentors themselves within banks and hedge funds.  With Volker Rule/Dodd Frank restrictions on the trading activities of banks, however, it's difficult to imagine that banks will be in forefront of future training efforts for traders.

Coaching and mentorship does occur between hedge fund portfolio managers and their assistants, but rarely is this organized and programmatic.  It is quite unusual to find a dedicated Tiger cubs-style effort at funds, especially when it's been relatively easy up to now to recruit the promising professionals fleeing reduced opportunity sets at the banks.

At the proprietary trading and retail level, too often mentorship and coaching are subsumed under the umbrella of "trading education".  But courses in technical analysis and the like are no more training than those courses at the local college.  Without intensive, integrated mentorship and coaching, no amount of education can provide performance training.  Few trading firms possess the resources to develop ongoing, programmatic efforts at mentorship and even fewer can integrate hands-on, daily coaching with the learning from mentors.

Consider the sobering issue of the high failure rate among individual traders and investors.  Might that failure rate simply be a function of trying to succeed in a performance field without the requisite performance training?  After all, would we expect someone to perform at the Olympics if they have not been systematically mentored and coached?  Would we expect positive outcomes from a surgeon who did not undergo a rigorous program of mentorship and skill-based coaching?

With banks and their training efforts less at the trading forefront, there is a tremendous opportunity for the right financial organizations to develop the next generation of trading talent.  Such an effort, I suspect, would have to begin with the recognition that mentorship and coaching are themselves performance domains that can be cultivated within trading firms.  Many times they are occurring on their own, informally at various desks.  Learning from the successful efforts and leveraging those lessons is a first step toward building a self-renewing performance culture that grows profits by growing talent.

Further Reading:  Self-Coaching
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