Best of TTU – Un-Learning & The Legacy of AHL

It has been said that: 'The biggest room of all, is the room for improvement', and one thing that is clear to see in the amazing careers of today’s guests, is the continued hunger for learning in the quest for an improved investment process. This has led to an unprecedented success for this trio.  Today, I share the last key insights from my conversation with Michael Adam, David Harding and Marty Lueck, also known as the founders of AHL.  In this post, we don’t just discuss the importance of learning... but also how you must un-learn certain things in order to move forward.  Lastly, we discuss what the three of them wish the legacy of AHL will be.
So, sit back and relax and enjoy these truly unique takeaways from my conversation with Michael, David and Marty and if you would like to listen to the full conversation, and I hope you do, just go to Top Traders Round Table Episode 13.
Keeping Systems Optimized & Minds Open
Niels: I think it was once said that, "The biggest room of all is the room for improvement." By this I mean, when I look at your achievements, I see a continuing hunger for learning. What about the flip side, you touched upon it earlier today about unlearning. Are there certain things you've found really important to unlearn in order to continue to improve your strategies? Were there things that you thought were really good only to realize that they were in fact flawed and much riskier than you thought?
Mike: That's probably a different view amongst the three of us. I remember, in the early days, David had an office where what he would do, he was surrounded by data, there literally was this much. His desk used to be a complete chaotic mess full of cuttings from the Wall Street Journal and bits of paper and notes. My desk was always completely clean. I thought that that was because I was more organized and focused than David, and he used to say to me, "Empty desk, empty mind."  I've always believed that one of the biggest challenges in systematic trading is not remembering what you know it's having the discipline to forget what you know because applying what you know to the next thing that you do is a very powerful hidden form of optimization. I think that building into research processes the organized capacity and insistence that people forget. Also, recruiting people who never worked in the field before, always, always, feeding people who aren't polluted by knowing stuff is really, really, important.

On the other hand it's very hard to develop systemic trading if you don't have a real feel for the way that markets work, so there's this constant battle, I think, between what insights you have, what wisdom you have on the one hand, and yet have the abilities to forget the specifics. I don't have an answer to that. I think it is extremely hard to do.
David: Yeah, I think what you said is spot on. Also, with the other people we've recruited, the struggle has been to get them to forget the efficient market theory. You need clever people with good mathematics and computer science. Typically you get them because they've passed degrees and took exams and so on and so forth. They've often been taught the efficient market theory which is a beguiling theory because the mathematics is appealing and difficult so it's something they can master.

'The whole thing is always in need of constant care and attention. We spent an awful lot of time and money on improving the execution of what we do, and I think we got that to a really great place, and there's more that we can do.'

Then having mastered that they believe it to be true, most of them - most people having mastered something difficult.I think education can crush creativity. It's interesting that Steve Jobs didn't actually get a degree, isn't it? He went off and did a smorgasbord of courses including, famously, calligraphy. I think, sadly,