How To Improve Your Mindset For Trading & Investing

By Taylor Pearson, with an introduction by Simon Kerr of Enhance Consulting



This essay has been published on HFI (with permission) not because it mentions two familiar names/brands from the hedge fund industry (Ray Dalio and Bridgewater, and Peter Thiel of Clarium Capital). Rather, a number of constructions that are key to successful hedge fund businesses and investment processes are raised. The first is the (investment) culture of a business. Regular readers will know that it is the viewpoint of Enhance Consulting that efforts have to be made by the Principals of a hedge fund management business to develop and nurture and share the investment culture. The second is that an appropriate mindset is a key attribute of a successful portfolio manager or trader.

Mood-setting and emotional detachment have long been recognised as essential for people who trade for a living. These are amongst the elements that trader trainers (coaches for trading, if you like) try to convey to their clients. Mindset is also important for those that invest for a living  – that is those that take on markets on an investment timeframe, with a bias to fundamentals rather than giving heavy weighting to technicals/sentiment assessment. Mental preparation is important for both traders and investors, and in this metaphor can be dangerously involved,

There are issues around engaging with the market – wanting to beat the market, or beat the competition. These phrases suggest ranking order of participants or binary success. But winning in a life in markets can have various forms, and a range of motivations. This essay can help in adopting an appropriate mindset – one which can set aside the ego associated with “wining a battle or war” and allow for an attitude of solving a puzzle, a much more mentally neutral though still positive attitude.         –  Simon Kerr


“New metaphors are capable of creating new understandings and, therefore, new realities.” Lakoff, George; Johnson, Mark. Metaphors We Live By


How many times have you heard some platitude that translates to “improve your mindset?”

I get why people give this advice. I can point to certain mindset shifts that have had a profound impact on my quality of life and would like others to experience a similar shift in perspective. The problem is that simply telling someone to “change your mindset” isn’t pragmatically helpful. How do you change your mindset?

The concepts that are important to us (love, money, health, happiness) are abstract. When asked to define an abstract term like “argument,” we typically do it in other abstract terms.

An argument is “an exchange of diverging or opposite views” or “a reason or set of reasons given with the aim of persuading others.”

These are objective definitions. However, these ways of understanding “argument” don’t actually help us to answer practical questions like: “Is it worth starting an argument with this person? Or should I choose my battles?” Someone “with the right mindset” would be able to choose when it’s worth escalating and when it’s better to walk away.

What does help us make these decisions is understanding the metaphors we use when using the concept “argument.” We need to grasp them by means of other concepts we understand in clearer terms like physical objects or orientations. This is not how we’re trained to think in traditional education.

If you want to cultivate a good mindset around when to argue with someone, it’s helpful to understand the metaphor they use for argument.

In modern society, the default metaphor for argument is war.

Your claims are indefensible. He attacked the weak point in my argument. His criticisms were right on target. I always win an argument.

All the words we use to talk about arguing are also words we use to talk about war. We see the person as an opponent who we want to triumph over. When someone opens an argument with us, we feel like we are being assaulted. We attack his positions and gain or lose ground as the argument goes on. If we find a certain line of argument indefensible, we abandon it and open another.

Imagine, instead, an environment where the metaphor for argument was dancing. A point of contention would be a particularly dramatic moment in the dance. Your partner (not opponent) would step towards you, not to attack, but to work with you to create a movement that was beautiful, elegant, and true. One partner moving backwards wouldn’t be seen as losing, but  letting the other partner lead when they were stronger at this particular dance — a very logical thing to do when you’re dancing, but not when you are at war.

If both people in an argument thought of it as a dance instead of a war, the purpose would be to make something true and beautiful.

This is a much more pragmatic way of approaching an argument. You’ll learn more and arrive at something closer to the truth. Bridgewater Associates, a hedge fund started by Ray Dalio, has created this culture of argument-as-dance at his company. Here’s an email that Jim, an employee, sent to Dalio, his CEO, after a meeting with an important potential client:

Ray — you deserve a “D‑” for your performance today . . . you rambled for 50 minutes. . . It was obvious to all of us that you did not prepare at all because there is no way you could have and been that disorganized at the outset if you had prepared. We told you this prospect has been identified as a “must-win”. . . today was really bad . . . we can’t let this happen again.

Can you imagine sending that email to the CEO of one of the most successful hedge funds in history? One of the most famous living investors worth tens of billions of dollars? It sounds horrifying because our metaphor for understanding the email make us view it as an attack. In fact, 25% of employees at Bridgewater churn out within 18 months. They describe feeling constantly attacked and not feeling comfortable attacking others.

The other person is trying to dance with them and they are trying to establish a defensive perimeter. Improve Your Mindset -

Your Metaphors Are Your Mindset

The most recent and powerful example of “your metaphors are your mindset” is Carol Dweck’s research which differentiates between fixed and growth mindsets.

A fixed mindset assumes that intelligence, creative ability, and character are all given at birth and don’t change. A growth mindset means believing that talents and abilities can be developed through effort, good teaching, and persistence.

The words “fixed” and “growth” conjure two different metaphors.

The former, fixed, is a mechanical metaphor for ourselves. We are built just like a piece of manufacturing equipment, and our progress through life is simply a measurement of the fixed specifications with which we were built.

A growth mindset conjures an organic metaphor of ourselves. We grow and evolve over the course of our lives. Life is then a process of change and challenge taking us towards a more interesting, complex future, like an acorn growing into an oak tree.

Dweck’s simple distinction is powerful because once she introduced the fixed/mechanical versus growth/organic metaphor, we could start to extend it and use it to make a number of changes in our day-to-day behavior.

Indeed, people with growth mindsets tend to lead happier, healthier, and wealthier lives than those with fixed mindsets.

Consider how the two metaphors change reactions to different situations.

Fixed/Mechanical: A challenge is to be avoided because it could break us or show we aren’t up to spec.
Growth/Organic: A challenge is an opportunity for another stage of evolution leading us to a become a higher form of our selves.

Fixed/Mechanical: An obstacle is a “wrench in the machinery” that could break down the functioning and should be avoided. Growth/Organic: An obstacle is feedback from our environment on how we can adapt to be more fit and resilient to future obstacles.

Learning Fixed/Mechanical: Upgrades are difficult and expensive if possible at all.
Growth/Organic: Learning is great because I’m constantly growing, and whatever I learn can be incorporated into the next evolution.

This idea of your metaphors are your mindset applies to every area of our lives.

Solution to My Problems

My favorite example from Metaphors We Live By, the book which inspired this essay, was from an Iranian student who had just moved to the U.S. to attend college. He kept hearing people talking about the “solution of my problems.” He understood this term as a metaphor for problems as liquid chemical solutions, which bubble and smoke with all the complexity of your problems inside. You can heat it up and cool it down. You can add other chemicals to it and this might make the problems stronger or weaker, but the solution would never completely go away. Everyone has problems. Sometimes more, sometimes fewer, and of different intensities, but problems are simply a normal part of life.

Contrast this with the metaphor we’re actually using when we refer to the “solution.” We’re in fact thinking of problems as a puzzle. We solve our problems. Having a problem is like having an uncompleted puzzle. Unlike the chemical solution metaphor, wherein  problems are a normal part of life, the puzzle metaphor suggests that problems are something that can be definitively fixed. Once it’s fixed, the problem is gone and never needs to be re-addressed.

I have problems. Everyone I know has problems. The puzzle metaphor we use for problems suggests that something is wrong and needs to be fixed and therefore we should be stressed about it. If we use a chemical solution metaphor, however, problems simply become the nature of life, and—while we can, and should, do things to address those problems and try and make the solution better—they’ll never completely go away; they will merely change over time.

Social Status and Work

In his 1158 book Policraticus, John of Salisbury compared society to a human body. The ruler was the head, the parliament was the heart the court was the sides, the army the hands and the peasants the feet.

This metaphor reinforced the lack of social mobility in society at the time. In that world, a peasant wishing to become a lord was like a toe wishing to become an eye.

The metaphor we have used for social mobility in recent years is that of a career ladder.

Certainly an improvement over the human body; anyone can climb up a ladder. However, it also implies you must climb the ladder and there is something inferior about you if someone is higher up the ladder than you.

In Lean In, Sheryl Sandberg used the term “career jungle gym” instead of career ladder. Using a jungle gym as the metaphor for your career opens up all new possibilities that a ladder doesn’t allow for.

For one, a career ladder implies a linear path. The logical thing to do after you step on the first rung is to step on the second rung. There is a very different end when you get on a jungle gym than when you get on a ladder. What do you do on a ladder? Climb to the top, obviously. What do you do on a jungle gym? Well, you can still climb to the top. But you could also hang from it and feel your shoulders stretch. You could drop to the ground and rest for a few minutes when you get tired. The purpose of a jungle gym is to have fun.

No one looks down on someone for not climbing to the top of a jungle gym the way they would look down on someone not climbing to the top of a ladder. We look down at people who climb the career ladder slowly (or not at all) because why would you not get to the top of a ladder as fast as possible? That’s the whole point of a ladder.

You can also extend the metaphor in interesting ways. A jungle gym is on a playground and if there’s some asshole camping out at the top, you can simply go play on something else. Perhaps there is another jungle gym. Or some monkey bars. Or a fort. There isn’t a better or worse way to play on a jungle gym or playground. You just do what gets you excited.

Because we labor as a kind of activity, that means labor is something that can be clearly distinguished from other kinds of activity like, say, play.  Once labor is a fixed resource, it’s gone and never needs to be re-addressed. Because labor is a resource, if you are having fun, you can’t be working, that’s playing.

Because leisure and labor are separate, we treat leisure as a resource, too. We save upvacation days so that we can spend them later. Leisure becomes something we start to apply productivity measures to in order increase its efficiency. Did I have the most possible fun last weekend?

These metaphors hide all sorts of conceptions of labor and leisure which exist in other cultures (and some subcultures of our society). Work can be play. Inactivity can be productive. Most of what we call work serves no real, helpful purpose at all except to make us feel productive, and that we’ve “spent it wisely.” Improve Your Mindset -

Culture is Shared Metaphor

If you change your metaphors, you can change your life in profound ways. Dweck’s research has shown this conclusively. The power of metaphor extends beyond mindset though.

Venture Capitalist Peter Thiel invested $150 million in AirBnB in 2012. When the founders asked him for his biggest piece of advice and why he had chosen to make a huge investment, his reply was essentially: “I invested for the culture. Don’t fuck it up.”

What Thiel recognized was that the power of metaphors is just as potent for subcultures (including company cultures). Indeed a “great company culture” is merely a collection of shared metaphors which benefit the company.

Genius’s publicly shared culture document, Genius ISMs gives a perfect example:

Take the Roast out of the Oven

An “almost done” project is just as valuable to the company as a project you haven’t started. So always be asking yourself “how has the world changed due to my work here?” If the world isn’t any different, then you haven’t accomplished anything, no matter how hard you’ve worked! Effect change on the world by taking the roast out of the oven and finishing the job.

This also means that the worst thing you can do is get a project to “almost done” and quit.

Partially done projects don’t help anyone, just like a roast that never comes out of the oven doesn’t help anyone.

Having better metaphors doesn’t just lead to higher quality of life, it’s also a sustainable competitive advantage. A company that treats projects as roasts and arguments as dances will get more projects done and get at the truth more effectively.

Metaphors are often imposed on us. If you see an argument as a dance but your boss sees it as a war, you can’t do much about it. You can recognize it, though, and move into a situation where someone shares your metaphors.

Change Your Metaphor, Change Your Life

Once you orient around a metaphor, you will naturally extend it. This is why Dweck’s seemingly simple fixed versus growth mindset distinction has proved so profound.

It doesn’t seem hyperbolic to say that the quality of our lives is determined by our metaphors.

If we’re aware of our preferred metaphors, we can begin to be careful about which subcultures we associate with. A company culture which sees argument as war will find it difficult to compete with a company who sees argument as dance and will be a much less enjoyable place to work. A group of people who see their career as a ladder won’t be very supportive of you seeing yours as a jungle gym.

If you’d like to change your mindset, start with your metaphors.



Taylor Pearson writes about entrepreneurial strategies and mindsets that yield 10x resultsGet access to his free weekly newsletter. 


Simon Kerr’s consultancy business Enhance Consulting helps traders and investors get better outcomes by improving their investment processes as well as their ways of thinking. For further information read other articles in the “Risk Management & Consultancy” section of this website or call him on 07977 445496.


related articles:

The Limits to Fundamental Conviction – Clarium Capital (Nov 2009)

The Culture at Bridgewater Associates (Dec 2010)

Bridgewater’s Leadership In Building Firm Culture & Commitment To Training (Sep 2014)

Organising Research & Staff Development in Equity Hedge – A Podcast with Stuart Mitchell (Oct 2015)