Read The New Market Wizards: Conversations with America's Top Traders Online
Authors: Jack D. Schwager
C
harles Faulkner abandoned graduate school (he was studying psycholinguistics at Northwestern University) after becoming enamored with two early books written by Richard Bandler and John Grinder, the cofounders of Neuro-Linguistic Programming (more on NLP in the interview). Starting in 1981, Faulkner studied extensively with Grinder and then with Bandler and other key NLP codevelopers, becoming a certified NLP trainer in 1987. Faulkner’s focus has been on modeling human excellence, with projects that have included accelerated learning, physician decision making, and futures trading. Faulkner is also a consultant, NLP seminar leader, and program designer and author of several audio tape programs applying the techniques of NLP.
I met Charles Faulkner when he approached me after a talk I had given at a futures industry symposium. During my speech, I had made several references to this volume, which at the time was about half-completed. Faulkner explained that he had been doing research and consulting directed at helping traders overcome mental impediments to success. I told him that I was quite interested in his work because it might fit as a feature in the new hook but that my scheduling on that trip did not leave enough time for an interview. He gave me a boxed tape set, asking me to see what I thought about it.
The tape series dealt with applying NLP to various aspects of achievement. Although there are a number of NLP elements that I have trouble relating to, certain segments of the series made great sense to me and seemed helpful in increasing motivation and focusing goals. Overall, I was sufficiently impressed with Faulkner’s tape series to schedule another trip to Chicago to interview him.
A portion of NLP is concerned with studying the cues people provide through their gestures, eye movements, language, and voice into-nations. Faulkner has obviously had a great deal of experience honing these interpretative skills, and he struck me as being extremely perceptive. He had thoughtfully arranged for the use of a private conference room in a hotel near the airport in order to maximize our time together.
You’re a Neuro-Linguistic Programming trainer. That’s not going to mean very much to most readers of this hook. Let’s start with a layperson’s definition of NLP.
Actually, Natural Learning Processes might have been a better name. NLP’s principal cofounders, Richard Bandler, an information scientist, and John Grinder, a professor of linguistics, define NLP as the study of human excellence. NLP studies great achievers to pinpoint their mental programs—that is, to learn how great achievers use their brains to produce results. They began their study with extraordinarily talented therapists—individuals who consistently produced positive changes in the lives of others. Succeeding there, they went on to study talented people in other fields—managers, negotiators, athletes, and artists—to find what those individuals did to get their outstanding results. The models of the natural learning processes these people used to become extraordinary in their fields can be used by anyone wishing to excel.
To understand how NLP works, let me make an analogy to the beginning of modern skiing. Until the 1950s, most people thought skiing was a matter of natural talent. You either had the talent to do it, or you didn’t. Then something happened that changed the sport forever. Films were made of some of Europe’s great skiers to identify all the movements that characterized them. It was found that they all had certain techniques in common. Beyond that, it was discovered that the techniques of these exceptional skiers could be taught to anyone. All kinds of people could learn to he very good skiers. The key was to identify the movements that made a great skier—the essence of their skills—so it could be taught to others. In NLP we call that essence a model. The same basic principles can be applied to any other endeavor or to various aspects of human interrelationships. I like to describe NLP as software for the brain. It provides mental programs that allow you to develop new abilities and have more of the kinds of experiences you want.
As evident by NLP’s middle name, linguistics plays a pivotal role. I’m not at all clear how linguistics can dramatically affect behavior. Can you give me an example?
How do our brains process language? The answer is very, very literally. People often say things like, “Don’t worry” or “Don’t think about it.” What happens if I tell you not to think about a problem? Well, despite what I said, you’ll think about that problem. That’s because our brains cannot understand putting something in negative language. In order to know what not to think about, our brains have to first think of it.
Consider the example of experienced traders telling new traders, “Don’t think about the money. Remember, don’t think about the money.” Although that may sound like good advice, what’s going to happen? The new traders will repeat that phrase to themselves until they are literally obsessing about the money.
Because of the way our brains process language, which is literally, NLP recommends taking negative thoughts and stating them in positive terms. Instead of saying what you don’t want, state what you do want. Instead of advising a trader, “Don’t think about the money,” it would be far more effective to say, “Focus your attention on following your method.”
What are the basic principles of NLP?
NLP is based on principles different from those in psychology. Five essential principles or presuppositions guide NLP. The first is: The map is not the territory. The map is our thoughts and feelings; the territory is reality. We respond to our thoughts and feelings about reality; we don’t respond to reality. This is good news because it means that it is possible to get a better map—a better way to think and feel.
The second fundamental principle of NLP is: Experience has a structure. In other words, the way in which memories are arranged in our minds determines what they will mean and how they will affect us. If we can change the structure of our memories, we will experience those events in our lives differently. Change the structure of our thoughts and our experiences will change automatically.
The third major principle of NLP is: If one person can do it, anyone else can learn to do it. This is the great promise of NLP. Excellence and achievement have a structure that can be copied. By modeling successful people, we can learn from the experience of those who have already succeeded. If we can learn to use our brains in the same way as the exceptionally talented person, we can possess the essence of that talent.
The fourth basic principle is: The mind and body are part of the same system. If you change your mind about something, your abilities will change. If you change your posture, breathing, or other parts of your physiology, your thoughts will change. The great psychiatrist R. D. Laing used to say, “Change your mind, change your body. Change your body, change your mind.”
The fifth principle is: People have all the resources they need. In NLP, an image, a sound, or a feeling is a resource. Our brain has the ability to see inner pictures. Whether these pictures begin as fuzzy or clear, they can be built up into great motivating visions. Inner voices can criticize us or they can encourage and guide us. Any feeling we’ve had in our lives—confidence, challenge, indomitable will, whatever it is—even if we’ve only had it once, can be transferred to any situation in our lives where we want or need it.
When you say, “The map is not the territory,” do you mean that people have distorted views of reality that lead them astray?
NLP believes that all maps (mental and physical) are a distorted, or selected, view of reality. A topographical map, a street map, and a weather map all provide different views of the same territory and all are true representations. Usefulness, rather than truthfulness, will guide you to want a different map at different times. The different forms of market analysis can he seen as different maps of the same territory. Outstanding traders seek to have maps that most closely match the market territory in a way that is useful for them.
Of course, not all maps are true or useful. Let me offer one example that is particularly significant for traders. It relates to the statistical concept of regression to the mean. This mathematical phenomenon implies that if you do extremely well, you’re likely to do more poorly the next time, while if you do very poorly, you’re likely to do better the next time. This pattern is an inevitable consequence of the law of averages and tends to skew traders’ perceptions and evaluations of their own performance.
For example, if a trader does very well in one period and only average in the next, he might feel like he failed. On the other hand, if the trader does very poorly in one period, but average in the next, he’ll probably feel like he’s doing dramatically better. In either case, the trader is very likely to attribute the change of results to his system or his feelings rather than to a natural statistical tendency. The failure to appreciate this concept will lead the trader to create an inaccurate mental map of his trading ability. For example, if the trader switches from one system to another when he’s doing particularly poorly, the odds are that he’ll do better at that point in time even if the new system is only of equal merit, or possibly even if it is inferior. Yet the trader will attribute his improvement to his new system. In contrast, supertraders understand the concept of regression to the mean and use it to their advantage instead of being misled by it.
Incidentally, the same phenomenon also explains why so many people say they do better after they have gone to a motivational seminar. When are they going to go to a motivational seminar? When they’re feeling particularly low and inactive. In a sense, it doesn’t matter what the presenter does, because statistically, on average, these people will do better in the period afterwards anyway—whether or not they attended the seminar. But since they did, they’ll attribute the change to the seminar.
In the seminar example you just cited, isn’t it also possible that people will feel and perform better because of the placebo effect? For that matter, isn’t it possible that the results attributed to NLP may also be a placebo effect?
In part, this contention may be valid, and it fascinates me that this is supposed to be a criticism. Medical science researchers take the view that the placebo effect is something had. You can hear it in their language: “We have to rule out the placebo effect.” However, Bandler and Grinder looked at it differently. They saw the placebo effect as a natural human ability—the ability of the brain to heal the rest of the body. This actually presents exciting possibilities. What if this ability can be called forth when we want it or need it’? What if our brains can literally make us feel better’? NLP is concerned with results. If the favorable results are partially due to the placebo effect—that is, the natural ability of the brain to affect how we feel, heal, and function, mentally and physically—let’s use it deliberately.
NLP makes claims of being able to change behaviors and feelings very quickly through simple mental exercises. Can you give me an example of such an exercise in order to give readers who are completely unfamiliar with NLP some flavor of the approach?
Let me offer an example that will probably be of use to most of your readers. We’ve all been in trading situations where the market moved dramatically against our position. The question is: How unsettling or disconcerting was it? What happens when you’re in a similar situation a couple of weeks or even a couple of months later? If you begin to experience some of the same unsettling feelings just thinking about it, you’ve conditioned yourself just like Pavlov’s dogs. This is what NLP calls “anchoring.” If these feelings are disturbing your trading decision concentration, use the following NLP technique to neutralize them.
Quickly go through your movie of that disturbing situation and pick out one frame, like a still photograph, that symbolizes for you the whole disappointment. When you’ve found it, notice whether you see yourself in that still snapshot of that time. That is, do you see that earlier you, dressed as you were back then, in that photo? You probably won’t, and this is usually the case. So in your mind’s eye, begin to pull back so that more and more of the scene becomes visible, until you can see your earlier self in the scene.
Imagine that scene rendered in the style of a famous painter, as if it were a Renoir, a van Gogh, or even a Lichtenstein. Now consider what kind of frame might be most appropriate around this picture. Perhaps a big old-fashioned gold frame might seem right, or maybe you’ll choose a modern steel frame. You might even want to add a museum light. Take a moment to appreciate this picture as one of the framed memories in your mind. Now notice your feelings about that time. Most people will find that their disturbed or anxious feelings have been greatly reduced, or even completely eliminated. This NLP process detaches our emotions from the memory. It’s like an emotional reset button and provides a real-world example of the NLP principle: Experience has a structure. By changing the structure, we change the experience. Taking just the few minutes to do this exercise will allow a trader to regain his emotional objectivity.
Another way to change disturbing memories is to do the following: Think of that incident of disappointment and run it back to the beginning, like it’s a movie. Now put on circus music, or the
William Tell
Overture, better known as the theme to the “Lone Ranger” TV series. Any rich, compelling music will do, especially if it mismatches the emotions of your memory. Pick a tune, and start it playing nice and loud as you rewatch that incident in a new way. Once the memory has played through to its end with the music, then rewind it to the beginning. Now play that scene again without the music. Notice your response to it this time. For some people, the incident has become humorous, even ludicrous. For many, the previous feelings of disappointment have been neutralized, or at least greatly mitigated.