The risk of being real
When my son is 17, there is a chance he comes in and says he doesn’t want to go to that great university he got into. There is nothing there they can teach him that he already doesn’t know. He wants to start some cool start-up researching whale songs and trying to translate sonar into human language using AI (or fill in something else that seems cool but hard to monetize). The kid is very excited.
The traditional reaction would be one of grave concern, telling him it’s vital to get a recognised degree and a stable job so he can be financially independent and have a good life… Child will either comply or rebel. Initial reaction of parents in this or similar situations can determine his attitude towards experimentation for a long time ahead.
Before reviewing how this chat might be approached from a trader’s perspective, I would like to step back and look at the approximate interaction at the subconscious level, the place from where beliefs and future action are directed. It would go something like this (some might have that as a real conversation, but unlikely):
Parent (P): ‘Do you not realize how hard it is to get a job and be recognized without a degree? That you won’t get paid in life if this fails and that means you will have to work at Starbucks for pennies’
Child (C): ‘At least I am going to take a risk to do what I love and what interests me. When was the last time you got excited about something and took a risk to go get it? Why would I listen to you about what I should do in life? Your life seemed affluent, but you were always anxious, I never saw why you love your job except for the financial freedom it gives you.’
P: ‘I have worked a hard job to ensure you and your siblings had a great life and education. If I went out on a limb like this, there would be no nice house and no nice holidays.’
C: ‘Yeah, but I had the holidays, how many more resorts can I visit? This doesn’t interest me. I have seen it all. The nice restaurants, the ski season, it's all lovely, but it doesn’t do anything for me. I have not grown up with a fear of being poor (like you). My life experience is different. I don’t need as much money to live and the concept of needed wealth for security is just not a main driver for me.’P: ‘You just don’t know the value of money and freedom. You don’t know what it's like to toil in Starbucks. You don’t know that well-paying jobs can be fun and exciting at times, when you know you never have to think about what something costs - oh the freedom of it! ‘
C: ‘We are on a different planet you and I on the subject of what makes a great life. Did we even have that conversation before - what makes a great life? Did you have that conversation with your parents when you were young? What are we aiming for here? When we look around our circle, who can we say has a great fulfilling life? What was so great about your profession(s) and life choices? Can I find common ground and agree that this is valuable and different for people? ‘
P: ‘Well, I got this and that out of it. I probably wished I took more risk at that time, but then you know, I could have failed and would have become a loser if I failed, and all my peers would have made more money than me and you would not have been able to grow up in a nice area and go to a nice school and have nice holidays.’
C: ‘For f*cks sake. When you were a young man/woman - what excited you? what did you want to pursue besides security and getting financially free when choosing your profession? How much money and things does one need to feel secure? How does this differ between people? This is common ground. I am not at a point where I care about mortgage, child schooling and more resort breaks from the life of ‘work’. It does not make me want to jump out of bed in the morning. I want my work to be my life if I am going to spend so much time doing it.
And if you first pursued financial freedom, like you said, and then you got it - did you then go out and do something that you want to do? Or did you stay tethered to the hamster wheel and forget about even exploring, because now you have a lifestyle to maintain and responsibilities? And this is what you are trying to sell to me now??’
P:...............…………………………………………………………………………………………………..
You think your kid is not going to ask you all these questions?
You are right - most children will not.
But there are adults that a child will naturally listen to more, there are those that he won’t listen to and those he will comply with and resent it later.
Figuring out one’s unique path and authenticity is a trial-and-error process that is scary – you risk ridicule at first mention, loneliness, failure, and more ridicule after failure.
The result relates to that first response when he goes on a limb and announces his excitement. The child who is coming up with new ideas he wants to try and got really excited about, can be put off risk taking and experimentation with the traditional fear based unexamined response.
It also depends on the depth of self-exploration of the parent. The authenticity of one's own life. You can f*ck up and be lost yourself for years. The only important thing is - do you own it and talk frankly about it? Authenticity can be scary, but taking risks also commands respect.
Back to the child in the conversation above. He will either:
1. Not listen to parents’ advice.
2. Listen and base his/her decisions on an unexamined life, half-truths and potentially false information that might not fit the context of a fast-changing world.
The outcome can turn out OK by sheer luck, but the process is not ideal here if the goal is for the child to flourish. I am concerned with the process being right. This increases the likelihood of getting the right outcome.
One might conclude – “I shouldn't overthink parenting and just get out of the way then and the kid will figure it all out.”
Which will not be that bad of an idea and is a good enough option.
But then for your child to truly achieve his/her unique potential, there are still pitfalls: the potential can be destroyed by a rattling herd of unexamined teachers, institutions, friends, and celebrities.
So ideally you want your child to be able to think for themselves, exhibit intellectual honesty and self-awareness, know who to listen to or not to listen to, and how to ask good questions, right?
At this stage we can glimpse a bit of information from the world of trading, a non-personal, neutral ground that can be invoked to make decisions under uncertainty. Here it goes:
A good decision typically has good expectancy, which is:
(Likely probability of being right x pay-off of being right) - (likely probability of being wrong x Cost off of being wrong).
If the number of this equation is positive - go for it! It’s worth the risk. If it's negative, probably not a good idea.
Filling it in, using the case above, would include not easily monetizable things, but by breaking it down further honestly and seeing the factors involved, the child can then know himself what each would entail.
Probability of failure of startups is 90% in the first year. One can debate this number and stack it for year 2/3, but we will use 90% here as an example. We will define failure (for lack of a better word), as endeavour/business finished, on to something else.
The cost of failure can be time wasted, opportunity cost wasted doing other things, any expenditures needed to get it going. This can be reduced if one manages to obtain external funding, a fellowship programme of sorts (someone else who funds highly uncertain novel ideas says with no clear payoff). Or the child has saved up enough of own funds and thinks it's a good way to spend them as opposed to anything else they can possibly do with it.
The probability of success is 100% -90% = 10%.
The payoff in case of success can be huge - hitting it off in a novice area can have a large personal payoff intellectually, life quality wise and financially. When you multiply it by 10% success rate, it can still be much bigger than 90% times cost of failure.
The other factors to consider are:
The cost of failure when you are young is much less forgiving than when you are old. You still have time to do other stuff, the energy to learn something new and time to use your experience of your ‘failure’. You might have also just had a great time just doing the thing, even if it didn’t lead to a lifelong engagement or big payout - you got a payoff in the form of: part of life spent doing what you love.
The endeavour might give a lot of transferable skills and experience, which in hindsight might not make it a failure, but a steppingstone. It could signal to future potential funders/employers: thinking outside of the box, self-confidence to try new things, passion that can redirect to other things and give birth to new ideas.
The success in the endeavour can come from industry demand that you haven't spent deep diving enough in to see demand for. My 25-year-old brother is a “space farmer”. Figuring out how to grow food in space. Whilst I might not be able to fathom how that will be a mass market and it could be a fad, he is having the time of his life and I realize the limit of my own knowledge. I can be excited about the potential of exploring things I don’t necessarily understand yet. In this case, the less “worldly” the parent, the better it might be for the child trying new stuff - the intellectualisation of everything will not be as rampant.
Then, when we have figured out what a life well lived means for the child, we can ask him/her if it would be a good idea to make a list of things that would:
Increase the probability of success
Increase the probability of failure
Increase the payoff of success
Increase the cost of failure
Who can be counselled for specifics? Anyone inside or outside circle? If there is someone he is obtaining advice from on a topic or looking up to , how have they fared themselves in the matter? After all, you are not going to take nutrition advice from someone sick and overweight, you shouldn’t take portfolio advice from someone who hasn't run own meaningful portfolio for a while. Same goes for all other more esoteric things like a life well lived.
Based on this framework, what would my response be to my son announcing he is too cool for school and wants to decode whale conversation?
‘That’s exciting! Let’s get a big drawing board and chart out the possible paths this can develop.’ Let the thinking unfold in a truly positive encouraging environment. At some point I would suggest examining if spending 1 year at uni might go in the “increase the probability of success” bucket. That he might see if education evolved to be more tailored to his interests and perhaps, he could benefit from having access to a broader network or, perhaps, he could find professors who can point him in specific areas he hasn’t thought about yet. And then if he doesn’t find it interesting, than he can still quit.
There are many nuances and layers of deeper real to unpack that are different for all. This is just one framework.
Thank you for reading.
Anna