Trading Psychology : The Difference Between Open-Minded and Close-Minded People

Trading is often about how to take the appropriate risk without exposing yourself to very human flaws.
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Euler
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Thu Sep 21, 2017 3:14 pm

Why is it that some people seem to make constant progress in their professional and personal lives, while others appear to be doomed to repeat the same mistakes over and over?

While the answer isn’t cut and dry, I’ve noticed an interesting mindset difference between these two groups: they approach obstacles and challenges very differently.

The first group approaches life with an open mind—an eagerness to learn and a willingness to be wrong. The second group digs their heels in at the first sign of disagreement and would rather die than be wrong. The way each group approaches obstacles, it turns out, defines much of what separates them.

So which group are you in?

Before you smugly slap an open-minded sticker on your chest, consider this: closed-minded people would never consider that they could actually be closed-minded. In fact, their perceived open-mindedness is what’s so dangerous.

It’s a version of the Batesian Mimic Problem — are you the real thing or a copycat? Are you the real deal, or have you simply learned to talk the talk, to look the part?

These are tough questions to answer. Nobody wants to admit to themselves that they’re closed-minded. But the advantages of having that courage are massive. The ability to change your mind is a superpower.

The ability to change your mind is a superpower.

The rate at which you learn and progress in the world depends on how willing you are to weigh the merit of new ideas, even if you don’t instinctively like them. Perhaps especially if you don’t like them.

What’s more, placing your trust and effort in the right mentor can propel you forward, just as placing it in the wrong person can send you back to the starting point.

So how can you tell what camp you're in? How do you make sure you're being influenced by the right group of people?

In his book Principles, Ray Dalio, self-made billionaire and founder of the largest hedge fund in the world, lays out seven powerful ways you can tell the difference.

1. Challenging Ideas

Closed-minded people don’t want their ideas challenged. They are typically frustrated that they can’t get the other person to agree with them instead of curious as to why the other person disagrees.

Closed-minded people are more interested in proving themselves right than in getting the best outcome. They don’t ask questions. They want to show you where you're wrong without understanding where you’re coming from. They get angry when you ask them to explain something. They think people who ask questions are slowing them down. And they think you’re an idiot if you don’t agree.

In short, they’re on the wrong side of right.

Open-minded people are more curious about why there is disagreement. … They understand that there is always the possibility that they might be wrong and that it’s worth the little bit of time it takes to consider the other person’s views….

Open-minded people see disagreement as a thoughtful means to expand their knowledge. They don’t get angry or upset at questions; rather, they want to identify where the disagreement lies so they can correct their misperceptions. They realize that being right means changing their minds when someone else knows something they don’t.

2. Statements vs. Questions

Closed-minded people are more likely to make statements than ask questions.

These are the people who sit in meetings and are more than willing to offer their opinions, but never ask other people to expand on or explain their ideas. Closed-minded people are thinking of how they would refute the other person’s thoughts, rather than trying to understand what they might be missing.

Open-minded people genuinely believe they could be wrong; the questions that they ask are genuine.

Open-minded people know that while they may have an opinion on a subject, it could count for less than someone else’s. Maybe they’re outside their circle of competence or maybe they’re experts. Regardless, they’re always curious as to how people see things differently and they weigh their opinions accordingly.

(At Syrus Partners, for example, Jeff’s financial analysis trumps mine when we disagree. Why? He’s simply better at it than I am. He finds things that business owners don’t even know about. Do I care that his analyses take precedence? No. Why? Because I want the best outcome.)

3. Understanding

Closed-minded people focus much more on being understood than on understanding others.

People’s default behaviours offer a quick tell. When you disagree with someone, what’s their reaction? If they’re quick to rephrase what they just said or, even worse, repeat it, then they are assuming that you don’t understand them, rather than that you are disagreeing with them.

Open-minded people feel compelled to see things through others’ eyes.

When you disagree with an open-minded person, they are quick to assume that they might not understand something and to ask you to tell them where their understanding is incomplete.

4. I Might Be Wrong, But…

Dalio nails this one. I have nothing to add.

Closed-minded people say things like “I could be wrong … but here’s my opinion.” This is a classic cue I hear all the time. It’s often a perfunctory gesture that allows people to hold their own opinion while convincing themselves that they are being open-minded. If your statement starts with “I could be wrong”…, you should probably follow it with a question and not an assertion.

Open-minded people know when to make statements and when to ask questions.

5. Just Shut Up

“Closed-minded people block others from speaking.”

They don’t have time to rehash something already talked about. They don’t want to hear anyone’s voices but their own. (Dalio offers a “two-minute rule” to get around this: Everyone has the right to speak for two minutes without being interrupted.)

Open-minded people are always more interested in listening than in speaking.

More than that, they say things like, “Sam, I notice you’ve been quiet. Would you like to offer your thoughts to the group?”

“The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.”

— F. Scott Fitzgerald

6. Only One Sperm Gets In

Closed-minded people have trouble holding two thoughts simultaneously in their minds.

This reminds me of the memorable quote by Charlie Munger: “The human mind is a lot like the human egg, and the human egg has a shut-off device. When one sperm gets in, it shuts down so the next one can’t get in.” It’s our nature to close our minds around our favourite ideas, but this is not the ideal way to think and learn.

Open-minded people can take in the thoughts of others without losing their ability to think well—they can hold two or more conflicting concepts in their mind and go back and forth between them to assess their relative merits.

7. Humble Pie

Closed-minded people lack a deep sense of humility.

Where does one get humility? Usually from failure—a crash so terrible they don’t want to repeat it. I remember when a hedge fund I was on the board of made a terrible investment decision. We spent a lot of time rubbing our noses in it afterwards in an attempt to make sure we wouldn’t repeat the same mistake. In the process, we learned a lot about what we didn’t know.

Open-minded people approach everything with a deep-seated fear that they may be wrong.

***

If you recognize closed-minded behaviour patterns in yourself, you’re not alone.

We’re all somewhere on the continuum between open- and closed-minded by default. Further complicating things, it varies by day and subject.

Staying open-minded won’t happen by accident.

When you find yourself exhibiting these behaviours in the moment, acknowledge what’s happening and correct it. Don’t blame yourself. As soon as you can, find a quiet place and reflect on what’s going on at a deeper level. Try to do better next time. Remember that this stuff takes work.

Maybe you have your self-worth wrapped up in being right, or maybe you’re not the right person to make a given decision. Or maybe it’s something else. Either way, this is something worth exploring.

I have one more thing to add: Being open-minded does not mean that you spend an inordinate amount of time considering patently bad ideas just for the sake of open-mindedness.

You must have what Garrett Hardin calls a “default status” on various issues in your head. If someone offers you the proverbial free lunch, it’s OK to default to scepticism. If someone offers to build you a perpetual motion machine, I suggest you ignore them, as they’re violating the laws of thermodynamics. If someone offers to help you defraud the government and suggests that “no one will know,” I suggest you walk away immediately. There is wisdom in closed-mindedness on certain issues.

But consider this: Do you know anyone who doesn’t have any blind spots? I strongly doubt it. Then why would you be any different? As Dalio makes clear, you must be active in the process of open-mindedness: It won’t happen by accident.

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LeTiss
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Thu Sep 21, 2017 3:24 pm

The person who wrote this is a closed-minded person himself, as he refuses to accept the merits of being bullish and bloody minded at times.

It's all about balance and being closed-minded can be advantageous, as it's that mindset that wants us to prove to everyone we can make this work

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ruthlessimon
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Thu Sep 21, 2017 5:45 pm

LeTiss wrote:
Thu Sep 21, 2017 3:24 pm
being closed-minded can be advantageous, as it's that mindset that wants us to prove to everyone we can make this work
100% agree on that. I recently left the BA forum open, & my folks happened to stumble in & seeing the words "Bet Angel", I was forced to have a long discussion defending myself. Because betting is hard to defend, I have to be bloody-minded. The moment I see their point of view - I'm finished. Wins are luck & to sucker me into betting more, ponzi, no one wins by betting etc. In fact, I am taboo in my family, no-one (i.e. friends & neighbours) is allowed to know what I truly do. They cannot & never will see the opportunity betting exchanges provide (very traditional working class, risk-averse, savers etc) - but I know they're wrong. I don't have to argue, I know they're wrong.

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LeTiss
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Thu Sep 21, 2017 5:49 pm

Yes, I suspect every single successful person would have amounted to nothing had they taken everybody's advice early doors.

PW has had to prove himself to doubters time and again. If Peter wasn't so close-minded, they would have dragged him down and beaten him

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Crazyskier
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Thu Sep 21, 2017 6:07 pm

ruthlessimon wrote:
Thu Sep 21, 2017 5:45 pm
LeTiss wrote:
Thu Sep 21, 2017 3:24 pm
being closed-minded can be advantageous, as it's that mindset that wants us to prove to everyone we can make this work
100% agree on that. I recently left the BA forum open, & my folks happened to stumble in & seeing the words "Bet Angel",
I renamed my bookmark to BA Forum for precisely this reason. My family would (I hope) assume it's British Airways as I am a frequent flyer.

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ShaunWhite
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Thu Sep 21, 2017 6:19 pm

LeTiss wrote:
Thu Sep 21, 2017 3:24 pm
being closed-minded can be advantageous, as it's that mindset that wants us to prove to everyone we can make this work
That's just determination isn't it? If you're dogmatic about a bad idea then all the "prove to everyone" you can muster won't turn it into a good one.

:) who'd have thought it, us disagreeing on having open or closed mental boarders.

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LeTiss
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Thu Sep 21, 2017 6:25 pm

I'm just making the point that the article Peter posted is horseshit, as every single person has had to be close-minded at times in order to be successful

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ruthlessimon
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Thu Sep 21, 2017 7:50 pm

I would love to see more vicious debates on the forum. For example, the benefit of practicing on historical data. Imagine, having 10yrs of Cheltenham markets to replay & practice on - as though they were live. That would be amazing IMHO. Peter disagreed with this, but never expanded as to why - & whether there was a better way (i.e. modelling). Is that closed-minded? In fact, reading that thread, Jimibt actually appeared to ask for a compromise & wanted to continue the discussion.

(viewtopic.php?f=5&t=12662)

I wish people challenged those in power more often. We just accept what we're told from those more successful - afraid of being ridiculed & wasting their time. But in a battle of two close-minded people, true knowledge prevails. In a battle of two open-minded people, nothing gets done & they both agree with each other #librals :D

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ShaunWhite
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Thu Sep 21, 2017 8:33 pm

ruthlessimon wrote:
Thu Sep 21, 2017 7:50 pm
In a battle of two open-minded people, nothing gets done & they both agree with each other #librals :D
What ? Being open minded doesn't mean you're gullible or agree with just anything.

It means you want to be armed with all the options before making a decision and you want to explore their merits regardless of your initial instincts. Open or closed minded, surely the only thing you need is humility, the ability to say "I was wrong" when the the environment changes or you accept new information as fact.
ruthlessimon wrote:
Thu Sep 21, 2017 7:50 pm
But in a battle of two close-minded people, true knowledge prevails.
Even if they're both wrong, or both have equally correct but opposing views?

It's the battle of two open-minded people that has more chance of finding answers, because it's only that battle that can produce a third way that neither brought to the fight.

-------
Hey oh, that's enough trying to convince you that I'm right...which I always am anyway, and I'm not budging from that view. ;)

I suppose I'm closed-minded about the benefit of being open-minded, which therefore makes being closed-minded the right way to be. I think I'm trapped in a logic loop. "...does...not...compute".

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ruthlessimon
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Thu Sep 21, 2017 9:56 pm

ShaunWhite wrote:
Thu Sep 21, 2017 8:33 pm
Being open minded doesn't mean you're gullible or agree with just anything.
Unfortunately, the open-minded people I know think David Icke is god, CERN caused hurricane irma & the world is ending in a couple of days!

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