I had a very enjoyable conversation recently with Sean McLaughlin on his podcast “Trading with @chicagosean.” We talked a lot about my formative years and how that prepared me for an unlikely career in the financial industry.
I studied Music and Psychology as an undergraduate at The Ohio State University, and I was fairly certain I would continue graduate studies in music at some point. But from the moment I learned about technical analysis and found people who studied what investors were thinking and feeling, I was completely hooked.
Over the years I’ve met a number of successful money managers, traders, analysts, and individual investors who have done well in the financial markets and also have a passion for music. Some play in rock bands in their free time, some wake up early to strum a guitar before heading into the office, some sing in community choirs in the evenings.
So why are so many successful investors into music? To rephrase… why are so many successful musicians also successful investors?
Musicians are creative.
Learning to play an instrument is all about studying the great masters that have come before you and trying to imitate their techniques. You spend hours and hours trying to get your instrument to sound just like the one in the recording. But performing well isn’t just about imitating sounds and nailing the basics. It’s the creative process of making the instrument your own; developing your own style and improving your musicianship.
In one of my college music theory courses our assignment was to compose a short piece using a 20th century technique called a tone row. I don’t remember finding this exercise to be especially fulfilling from a musical perspective, but I do remember making it an entertaining exercise. I actually remember incorporating the ESPN SportsCenter theme into the piece.
Given a boring assignment, I made it interesting by thinking a little differently.
The financial markets are not static, they are dynamic. Mastery of fluid markets requires a mastery of fluid thinking. You need to be ready to adjust your thinking based on how the world evolves.
Good investors study how successful investors have found success. Great investors develop their own unique approach by thinking creatively about how to adapt to the changing market environment.
Musicians study patterns.
I was fairly certain I was going to be an orchestral conductor, which means you’re standing in front of a full orchestra trying to get them to communicate one emotional message all together. While making eye contact with a stage full of musicians, you glance down at an orchestral score and make a bunch of quick visual assessments.
Who has the melody? What does the harmony look like? What musical patterns can I recognize? Who is leading the musical theme, and what other important musical things are happening?
Most importantly, you have to anticipate what’s coming next based on your understanding of musical theory and history.
When I first looked at a price chart with technical indicators, I realized I had actually been doing this sort of work for years as I was asking very similar questions. And just as with musical score study, I was anticipating what would likely come next based on my understanding of market history and analysis.
Humans are fantastic at detecting patterns. This capability can serve us very well, whether we’re analyzing an orchestral score or a price chart of Amazon.
Musicians are confident.
Don’t get me wrong, not all musicians are confident. My 11-year old daughter is in her first year of learning the clarinet and she is certainly not a confident player just yet. But the best musicians develop a confidence over the years that allows them to elevate their performance to a very high level.
Now remember, there is a fine line between confidence and overconfidence. Overconfidence, or being too impressed with our own infallibility, is what can cause you to overestimate your abilities and underperform your expectations.
Developing a good investment thesis, putting on a speculative trade, making a bold recommendation - these all require confidence. Only by believing in ourselves and our own capabilities can we ever hope to be successful in the financial markets.
Musicians love to learn.
When you commit to learning a musical instrument, you are committing to an educational process that will likely take a great many years. You are agreeing to study and practice and learn from more accomplished musicians.
Even if you’re just playing an instrument informally, teaching yourself how to bang out a couple riffs you’ve heard, there’s still a rush you get when you finally figure it out and it sounds pretty decent. That’s the joy of learning.
One of the things that drew me to the financial markets was the prospect of lifelong learning. No matter how good you are, there is always someone out there who is better. There is always one more thing to try, a new technique to master, a new approach to explore.
One of my early mentors reminded me to “always be a student of the markets.” And this was from someone who already had a full and successful career of market prognostication! It gave the confidence that no matter how much I learned about investing, there would always be one more book to read, one more investment strategy to understand, one more investor with which to compare notes.
A great musician knows that they always have something new to learn. A great investor knows that they will never know enough.
When I first started in financial industry, it surprised me when I met a fellow musician who was captivated by the flickering ticks of the markets. Over time I’ve learned that musicians have a refined set of skills that enables them to find success not just in finance but in other industries as well. And now when I meet a fellow musician, I’m not surprised at all!
RR#6,
Dave
PS- Hey Dad, I hope this article in some small way justifies me taking my sweet time to pursue degrees in Music and Psychology. Totally worth it.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. Please see the Disclaimer page for full details.