Turtle Talk : Episode 014

Episode 014 is live, and it is unlike anything the show has done before. This month Rich Brennan, Jerry Parker, Adam Havryliv and Mike Melissinos break the usual format on purpose and bring two worlds into a single room. On one side, the trend followers. On the other, two Marines who have spent their careers studying how you act under fire when nothing is certain. It began when Rich, Jerry and Mike were invited onto the No Way Out podcast and discovered, to their surprise, that they were almost speaking the same language as the war camp. So the turtles returned the favour and brought Mark “Moose” McGrath, of AGLX and the No Way Out podcast, and Ben Ford, a Royal Marines commando turned software builder, onto Turtle Talk to keep the conversation going. What follows is a two-part special that walks eight of the old military strategists side by side with classic trend following, asking one question at every turn: do the same answers hold on both sides of the door, for modern warfare and for markets alike?

Running underneath the whole conversation is a single idea, and it is worth holding onto. In war, the Marine has to predict, because nothing out there tells him where the enemy will be. The trend follower never has to predict, because the price already gives him the crowd’s answer in one live number, and all he has to do is follow it. Prediction on one side, following on the other. Every topic in the episode turns out to be a variation on that one difference, and the pleasure of the episode is watching two very different lives keep circling the same truth.

The first idea is friction, the way every plan breaks the moment it meets the real world. Jerry opens with a story from 1992, only a few years into his trading life, when the British general election went against expectations and the Tories under John Major were unexpectedly returned. He drove into the office at three in the morning to liquidate his positions in gilts, short sterling, the FTSE and the pound, and had a quiet word with himself in the dark about what the job really asks of you. Moose reaches for the seminal Marine Corps text, Warfighting, freely available online, and makes the striking point that you could retitle it as a trend following manual and barely change a word. Ben brings the view from inside military planning, the part the orders process calls “actions on,” where after you have built the perfect plan and laid out your assault in the sandpit, the final and most important step is to rehearse what happens when it all goes wrong. Adam ties it back to the mind, and to the mental friction every trader knows, the energy breakout earlier this year that looked flawless, drew everyone in, and then reversed, and the discipline of reorienting when expectation and reality come apart. The two camps agree that the plan never survives first contact, so you build for the mess rather than the whiteboard. Where they split is instructive: a Marine’s friction is partly a thinking enemy who has chosen to resist him, while the trader’s friction is a market that does not even know he is there.

From friction the conversation moves to the fog, the fact that you can never see the whole picture. Rich reads the old verse, For Want of a Nail, and then unpacks why it captures uncertainty so well. The problem was never a lack of information. Everyone could see the nail was missing. The trouble is that no one standing at the blacksmith’s could have traced the line from that one missing nail all the way to a fallen kingdom. Each step only makes sense looking backward. Forward, from where you actually stand, the chain is invisible. That, as Rich puts it, is the fog. Not darkness, not missing facts, but a future that refuses to assemble into a picture no matter how long you stare at it. Moose connects it to the interconnectedness and complexity that defines an atmosphere of uncertainty, the reason a Marine must live in a constant state of reorientation, and notes that the fog is exactly why so many trend following books belong on a Marine’s reading list. Ben offers one of the images of the episode. Think of taking an action as casting a pebble into a pond. The only way to read the result is to watch the ripples, but everyone is throwing pebbles, at different speeds and distances, and all any of us ever receives is the overlapping pattern where those ripples meet. A whole crowd can come to agreement without ever exchanging a word, simply because they are all sitting on the same pond reading the same surface. In markets, that shared surface is the price. Rich makes it concrete with a hurricane: the only way to know exactly where it will be in six weeks is to wait six weeks and watch it arrive, because the future is not hidden as if someone is keeping it secret, it is simply not reachable yet. And Moose closes the segment with history, recounting how Boyd first reached the Marine Corps in the soul searching after Vietnam, a war the United States should have won on every measurable metric and lost anyway, because the things that mattered most could not be measured.

The third idea is the loop, and here the room takes apart the popular cartoon of Boyd’s OODA loop, the four boxes and the stopwatch, and goes inside it. Rich asks Jerry to take us back to the moment cocoa exploded upward, and not to say what he thought, but what he physically did. Jerry’s answer is perfect. Essentially nothing. Cocoa had not made money in fifteen years, it was just another breakout, another small position, and the system did what it was built to do. The discipline lay in feeling nothing about it at all. Moose then gives the room a genuine education on orientation, the part of Boyd most people skip. We are complex adaptive systems interacting with other complex adaptive systems, and each of us carries an orientation, the cultural inheritance, the genetics, the experience, that makes us who we are. Crucially, orientation is fractal. An individual has one, six people have a collective one that lets them make a podcast, the Marine Corps has one, the trend following community has one, and it is the thing that houses our biases and shapes what we notice, how we decide, how we act and how we learn. Keep it static while reality keeps moving and you guarantee a painful mismatch. Ben grounds it in something physical, the first time he took a motorbike onto a track, obsessed like every rider with getting his knee down. He read a book on bike dynamics first, and that was the knowledge, but the moment it clicked there was no bike and no deliberation, just him and the action he wanted, the trained hand moving below conscious thought. He layers Boyd’s nested loops over the top, the fast fluent loop where you simply act, the slower one where you pause for more information, and the rare deep one where you realise your whole orientation is wrong and has to be rebuilt. Rich brings it home to the trader with the image of a shadow: following a trend is the trained move run against price, lagging it like a shadow lags a body, never out in front guessing. And the segment lands the knot at the heart of the whole show. We are all, underneath, prediction machines, so how can a trend follower be told never to forecast? Because there are two different things hiding in that one word. Forecasting where the market will go is one. Staying matched to where it already is, is another. As the room puts it, trend followers ride only a third or so of their trades, so to claim they predict would be absurd. They buy every breakout, have no idea which one will run, and simply let the winners go until the exit is hit. Anticipatory, perhaps, but never prescriptive.

The fourth and final idea of Part One is tempo, and the room makes short work of the “speed kills” reading of Boyd. Mike, now settled in after a battle with New York traffic on a Pride March weekend, tells the story of a bond short that was three years too early, rolling the futures quarter after quarter while doing nothing at all. His investors are rarely chatty, because they know they will get the same answer, but he remembers that one well, still short, fellas, gotta go, talk to you later. Doing nothing was the entire trade, and in the end a very easy way to make money. Moose makes the point that speed means nothing if your direction is wrong, that you can be fast and efficient and still be racing in precisely the wrong direction, and he reaches for Blockbuster and Kodak, two companies that were fast and efficient right off a cliff. Tempo is rhythm and timing, not raw pace. Adam brings the psychology, the fight or flight pull that has traders taking breakouts too early in a kind of fight response, or freezing up in a flight response, the bad kind of stillness rather than the disciplined Mike Melissinos kind. Position sizing, the room agrees, is where tempo is really won or lost.

What makes this episode is how little translation the two worlds actually needed. A Marine reorienting in the fog of war and a trend follower riding a breakout he cannot explain turn out to be doing the same thing in different clothes, refusing to predict a future that cannot be seen, and building instead to respond to whatever arrives. The verse said it before any of us did. For want of a nail the kingdom was lost, and nobody could have seen the chain coming. You cannot fast forward the world. You can only stay oriented, stay patient, and be there with your positions on when the trend finally shows itself. That is the condition both camps share, and it is the whole of Part One. Next month, in Part Two, we get to the craft: the orthodox and the unorthodox, the culminating point, defence in depth, and the strategist’s mind.

Stay systematic. Stay patient. And may the trend be with you.