Market Wizards: Behind The Scenes (With Jack Schwager) 

Today we have Jack Schwager on the show!

I believe he needs no introduction but I’ll do it anyway…

He is the author of the Market Wizards book series and has inspired a generation of traders (me included).

Now during my conversation with Jack, we talked about…

1. Behind the scenes: How the interviews were conducted for the Market Wizards book.

2. His approach to writing Market Wizards (what type of content stays in the book and what gets removed)

3. Significant changes in the industry over the years

4. Why he doesn't believe the market are efficient (which gives traders opportunities to profit from it)

5. And much more...

Sounds good?

Then go listen right now...

Rayner (00:00)

Hey, hey, what's up, my friend?

So in today's episode, we have Jack Schrager on the show.

I believe Jack doesn't need an introduction, but I'll do it anyway.

So Jack Schrager is the author of the Market Wizards series, okay?

These are the books that he has written that have inspired a generation of traders, myself included.

So if you want to connect with Jack Schrager, I'll put his social media profile in the description below.

Now during my conversation with Jack, we talked about the behind-the-scenes of Market Wizards, and how he goes about interviewing these different traders from all around the world.

Then he also shared his approach to writing Market Wizards, how he decides what content stays in the book and what content doesn't make the cut for the book.

He also talked about the significant changes that he's seeing in the industry, he shares why he doesn't believe in the efficient market hypothesis which gives traders opportunities to profit from the markets.

So we talk about all this and more in today's episode.

Sounds good?

Then go listen right now.

Rayner (01:13)

So to kick things off, I'd like to hear how would you describe your childhood.

Jack (01:19)

My childhood?

Not particularly eventful.

I grew up, actually, well, I immigrated.

I wasn't born in the States.

I was born in Belgium. I immigrated at the age of four.

Grew up in Brooklyn.

Went to college and Brooklyn College, which most people don't realize, at least back then, was an excellent college and not a particularly eventful childhood.

So I went to parochial schools through high school, so it was particularly not eventful in that respect.

So nothing dramatic in my childhood.

Rayner (02:03)

Okay, so I hear the word eventful, so I'm not sure if this is appropriate to us, but you know, might you want to maybe share why that is the case for you?

Jack (02:11)

Well, no, I mean, so I grew up in an urban environment, not particularly, interesting, attractive environment.

So, you know, later, as an adult, I gravitated a lot to outdoors and everything, sort of, you know, I don't think I saw a tree until I was 13 years old.

So, you know, I think I'm attracted to what was not in my childhood, you know, sort of.

So not that I had a bad childhood, it just was nothing particularly interesting about it.

Rayner (02:22)

Okay.

Jack (02:48)

Pretty much just school and just school and that was it really and friends and typical.

Rayner (02:53)

So what kind of kid were you like in school?

Were you more of the quiet type, right?

You know, just floating around?

Jack (02:58)

I guess, yeah.

I guess I was probably more of quieter than outgoing.

Had my group of friends like any kid would.

I was always kind of serious about getting good grades and studying and that type of thing.

Did not have much involvement in sports as a kid.

Later as an adult, did various athletic things, but not as a kid.

Rayner (03:29)

Is it because there wasn't any interest in that as a kid or is it because of your environment?

Jack (03:39)

I just wasn't exposed to it.

I just wasn't exposed to it.

I went to school, I went to school all day long. Like I said… It was pro-go-school.

Let's say — Yeah, I would get, you know, it was like Jewish studies for the first half of the day and then English studies for the rest of the day.

By the time you got home, it was six, you eat dinner, you know, a few hours of homework, and go to sleep. It was like...

“Tremendously uneventful”

You know.

I didn't come from a wealthy background, so there's nothing particular, no particular things we did.

I guess, yeah, the one thing we did do, one of my best memories from childhood was the summers.

In the summers, my family always rented a mungo at Rockaway Beach, and so I liked the beach, I liked the water.

I like body surfing, that type of thing.

So the summers were good. I guess that's the only thing that sticks out in my memory about childhood being fun.

You know, the rest of it is pretty much just, just route.

Rayner (04:44)

Yeah, I can see that, right?

The smile on your face as you were describing the bungalow during the summer holidays.

Jack (04:50)

Yeah, it's mainly just the beach and you know, in the water and so that part, you know.

So those were like the times when we'd do something fun.

During the school year, not really.

Rayner (05:04)

So from what I heard earlier you know, the school year, like, it's like your school day is pretty long.

It's like, is it from morning to evening?

That's the typical school day?

Jack (05:11)

Cause it was, yeah.

So it was like from nine to six type of thing.

Rayner (05:15)

It's like a full-time job. It's like, yeah.

Jack (05:16)

So, and then like I said — You eat, you do homework and you go to sleep.

There wasn't much, there wasn't much, you know, much free time and no hobbies to speak of really.

Rayner (05:32)

Is it because of the school that you happen to be in that's why the day is so long?

Jack (05:38)

Yeah, because it was like I say — It was like half the day was religious studies and half the day was conventional secular studies.

So it's like a double school day essentially.

Rayner (05:53)

Okay, but back then I think not all schools structured their curriculum in this manner.

I think some could be just wanting to...

Jack (05:59)

No, I mean if you want to go to college, if you want to pop a school, you would have a normal day.

Rayner (06:05

Alright, okay. So do you remember like maybe what are some things that happened in your younger days that kind of like you know shaped who you are today?

Jack (06:14)

Uh Gee, I don't think so. Not that I can... My childhood like really... I just...

I was serious about school.

I liked reading, you know, I remember.

Going to the library, especially as a young kid, was the thing I liked to do.

So I guess I was a bit of a nerdy back then.

Rayner (06:39)

Were you good, like, in your academics?

Jack (06:40)

I was good, but not great.

I hardly noticed.

The school I went to was a small, high school was a very small high school.

Oh, we had just… incredible number of students who scored like crazy, crazy high scores on the SATs.

So I wasn't in that league.

So I was kind of average for the school I went to.

But I did, you know, I did well enough.

I did well enough.

Rayner (07:14)

Okay.

Jack (07:15)

But I wasn't, I wasn't outstanding in any way. I was, I was okay.

But I wasn't outstanding.

Yeah, the one thing I can't

I do have one disappointment I did have is I had to work out.

I liked math and anyway, I wanted to take calculus and I couldn't get it scheduled because it was conflicted with some other work that I had.

So I just couldn't take it.

I remember trying to teach myself calculus in high school and I didn't get it on my own.

Then I went to college and I thought I was going as a math major.

But I quickly discovered by myself all year and realized I just wasn't good enough in math.

It was the right decision because I mean now I know that something like advanced calculus is kindergarten work in terms of mathematics and for me that was like, you know, sort of reaching.

So it's a good thing.

It's something, it was like my favorite subject, but I think to be a mathematician, you have to have an innate talent for it.

I didn't have an innate talent for mathematics.

I liked it.

I could, when I understood it, I was good at explaining it.

For example, I wrote, the first book I wrote was an analytical book called “A Complete Guide to the Future's Market”

I felt it was necessary to use regression analysis as part of it.

I realized I couldn't talk about regression analysis without having an introductory chapter in statistics.

Then when I did the initial regression chapter, I realized — Well, that's only simple regression.

I got to go to multiple regression and then I realized there were all sorts of exceptions that had to be discussed.

I ended up with like six chapters and I don't know how many, well over 100 pages of not so much mathematics, but always math in terms.

What I was good at was because to understand it by having to understand it myself, I think I wrote that I think my section on regression analysis is probably pretty good as an instruction for somebody because for the very reason that I wasn't good at mathematics.

In other words, I had to understand it myself and that made it, I was able, I think, to communicate.

Also, I could write.

That was, that's the one skill I discovered I did have that I could write and so I was able to convey that, but it wasn't the mathematical skill.

I had an interest in mathematics, but not the skill.

But on a preliminary basis, made me maybe more capable, maybe more capable than somebody who's a mathematician to write something that could be grasped and understood by somebody more of a layman or a lower-level mathematics student.

So it did come, I did end up using it, even though I didn't become, I didn't end up majoring in math, I did end up using it.

Rayner (10:39)

So it seems like your strength is kind of…breaking down complex topics into a layman where people can...

Jack (10:44)

Yeah, I think that's... everybody's good at certain things and I think I'm good at taking something and putting it in a framework that it can be understood.

That came up in the Market Wizard books in certain cases had to talk about the, you know, it's a complex thing.

The subprime bonds, which are put together from different, different tranches and that whole thing.

To make that understandable and readable is, is not easy, you know, or it's something that I was satisfied that after I wrote it didn't have to know anything, but you could read it and get it if you wanted.

I didn't know that I had been in markets, but I had no involvement in this whole area of subprime mortgages and all of that.

So I had to kind of educate myself on it as well.

But because by doing that, by educating myself, then I'm able to explain it to an audience.

Rayner (12:07)

It's a skill itself to break down complex topics into something digestible.

So before we move on to the Market Wizard series, I'd like to share a story or something that brings a smile to your face whenever you think back to your younger days.

Jack (12:26)

About the Market Wizard books?

Rayner (12:27)

Well, it can be in your childhood days, maybe we just...

Starting out finding a career, something that happened that brings a smile to you?

Jack (12:37)

Gee, yeah, a smile on my face. So...

Rayner (12:46)

So for example, I can share an example.

So for me, I think one example is that when I was in, we call it polytechnic about 17 years old, right?

So I was playing catching, right?

With my classmates, 17 years old, imagine that.

So they were female classmates, they were running around, and they ran to the female toilet because they were female.

They carried some of my stuff with it, their laptop.

I was feeling a bit cheeky. I figured, you know, why not just go to the female toilet and grab my laptop back?

Not that serious after all, it was just my friends. So I did just that.

Got my laptop out, came off the toilet, and realized the disciplined mistress was just standing outside of the door.

So what happened next?

I had to do some corrective work orders for like two months during my holiday.

So when I look back now, it kind of brings a smile to my face, being naive, silly, but you know, it looked back, you know, that's fun times for me.

Jack (13:30)

Yeah, I don't know, number thing, I mean, I guess one thing I remember coming out of graduate school.

I expected to get a job right away and I was having, I was having, you know, I wasn't getting any empty there.

Went to employment agencies and they were useless and then I put an ad in the Times, position wanted, you know, I just had to know.

MA in economics, minor in mathematics and I only got, I got several calls, many of which were just really hidden.

They were subterfuge for sales positions, but they wouldn't tell you that.

I got suckered into going to one of them, and I could tell you that story, it's an amusing story, but I had one legitimate call out of the whole thing.

So there's my one legitimate interview and I went for it, and it was for a commodity analyst position.

I didn't even know what commodities were and, I was asked about it, and the research director asked me, well, what do you know about commodities education you know, getting an economics degree?

You learn nothing about, you learn nothing about markets in general, but certainly nothing about commodities or futures.

So I said —not much, I mean, something like gold was my inane answer.

But there was something about the interview that the fellow thought I might have some potential and he at the time was writing a column for Barron's, he wrote a weekly column, Commodities, Colorado, English Column.

So he was using these interviews, he would have the interview candidates write an article, which he kind of uses as kind of background research material.

So he's kind of killing two birds with one stone, but also seeing who could fill the analyst's position.

So like, he gave me the assignment of writing an article on copper.

I knew nothing about copper.

So in Brooklyn, where I lived at the time, there's a large library called the Grand Army Plaza which is kind of like the Fifth Avenue Library of Brooklyn.

This is way back, you know, we were decades before the internet, so you had to go to libraries to find stuff.

I just lived in the library for a week, read everything I could on copper, you know, there was like, there was like something called a medical American metal market.

I think, the McGraw-Hill had a weekly, and I would go through years of this stuff, and any books and articles. I am just... kind of educating myself to become an expert in Hopper.

I wrote an article and basically, I ended up getting a job I was later told by one of the brokers who was a friend of mine that the research director had passed around the articles from the top candidates and everybody said…

“Yeah, pick this guy”

So that's a kind of smile on my face because I wrote my way into a career.

You know, I mean, it was my writing that landed my job.

Then a couple of years into the job, I started writing for, what was then called Commodities Magazine.

This then, it's gone through various changes, futures, and then it's changed again.

But back then it was called Commodities and I became a contributing editor.

So that gave me some notoriety.

Some people knew me from that.

That made it possible in a couple of years to go from being an analyst to being a research director.

So then I eventually ended up writing books.

Writing is, but that very first job was the fact that I just kind of, writing that article that everybody sort of thought was the best article that got me my career.

I guess that's something I can look back and smile at.

Rayner (17:31)

Happy to hear that.

So would you say that at that point, you didn't realize that you're good at writing?

So after that… point that maybe you look back, yeah, maybe you know pretty good.

Jack (17:40)

Yeah, I didn't realize I was good at writing as a matter of fact.

Now there were maybe hints during college years. I

 remember, for instance, I took a history course and we had to write and I had to write an essay on the First World War.

It turns out I missed a day of school.

I had to be absent.

The next day I came in and people said — That the teacher had picked my article as to read in class as an example of an excellent article.

I didn't get to appreciate it because I wasn't even there when she read it.

There were a couple of things like that where I wrote something and there was a good reaction to it.

There might have been hints, but I never realized that this was something that I could particularly be good at.

I just discovered it.

Rayner (18:32)

Okay.

That's a good one.

So maybe now we can move on and talk a little bit about the Market Wizard's book, right?

So I'm curious to hear, I think firstly, how do you prepare for a Market Wizard interview?

 Like, you know, what's the process that you follow?

Jack (18:51)

I don't do much preparation at all.

I'd say the preparation is less than a percent.

The actual work, the actual interviews, you know, maybe 5%.

Then the editing of the interviews, 95% of the work.

So that's a pretty good way I see it.

So I don't know, what I did in the very first Market Wizards book, and I kind of did it the same thing in a way.

So I had a list of, back then I had on index cards, I had a list of questions.

And what I ended up doing, which was successful, like I kind of never changed it, was that I didn't use the cards.

So I had a conversation and let the conversation go where it went.

Now, at the end of it, when the interview was over, I would say — Hey, I had some questions.

I want to make sure I hit everything and I'd flip through the index cards.

Most times, I'd covered everything anyway.

Occasionally, there might be a question or two, a few questions that might be relevant to that particular interview that I hadn't asked and I would ask at the end.

So that would be it.

So there was not much preparation.

Once I did the set of index cards, which was pretty much common for most, maybe I added a few for certain people, but that was pretty much it.

I didn't know real preparation.

I knew what they were, I had read if there was anything written on these people, which in many cases there wasn't. In many cases, these people hadn't been interviewed before.

In many cases, they hadn't been interviewed since.

I mean, there are people I interviewed who never wanted to give an interview and kind of made, you know, made an exception for, you know, in my case.

That was the one interview they did.

I mean, I can think famous, perfect example that might be similar to Bruce Kovner, who was, I don't think ever given an interview.

When he agreed to do it, the first thing he said to me — We saw the interview.

I guess you're maybe wondering why I agreed to do this.

I said — Yeah, sure.

So he said…

“Well, you know, there's a lot of stuff appearing about me in the press, and a lot of it's not correct”

I figured I'd want one accurate, one accurate narration on the record.

He kind of trusted me to give an honest, you know, an honest portrayal.

So, um, you know, anyway, uh, it's not, as far as the preparation goes, really minimal, minimal.

Rayner (21:26)

So why do you think?

As you said — People who don't do interviews, give you the chance to let you interview them.

Jack (21:35)

There are different motivations.

I just gave an example of Kovner. Going back to the first book, Marty Schwartz, he said…

“He thinks his parents were very proud to see him in a book”

So that was his motivation.

Michael Marcus, who was a friend, and I knew I took Marcus as a friend.

In that first job I told you about, the position that opened up was Marcus was the analyst.

He was leaving to become a trader.

So when he was cleaning out his desk, I was coming in my first day and we met and then we kept in touch.

While he was in New York, we would get together for lunch periodically.

So I knew him and he was still, he was very, he's also somebody who never gave an interview.

Very shy person, very, very low-key, didn't want much exposure.

He kind of hesitated and didn't want to do it and we had a mutual friend that convinced him to do it.

So he did it, you know.

Once he did it, he was satisfied.

So I spent two days at his home.

At the time he lived in Malibu and interviewed him over two days or something.

The first day was just part of it because I came late.

Then the next day was a whole day.

We talked everywhere.

We were in the house, walking on the beach, everything.

At the end, we had dinner, naturally cooked by him, he had his chef there, you know, cook the meal.

So, after dinner, he comes in and pushes back his chair and he says — You know, this was good.

“This was a cathartic experience

Going through his whole life like that in our interview, sort of lifted a burden from him.

He kind of felt good.

Although initially, he was very reluctant to the interview.

You know, some people, why they did the interview, I just, I never would know. I mean, I didn't necessarily know.

Now you might say in some cases, of course, if they're managing money, there might be also a beneficial motivation.

It gives them greater exposure maybe.

If they're looking to raise more assets, then it makes it potentially helpful in that respect.

But in a lot of cases, people I interviewed weren't managing money or if they were managing money, they weren't open to new investment anyway.

So there was not necessarily always a natural motivation.

I think also after the first book, which became kind of well-known and popular, people knew me because of the book.

One motivation was, as I got to the later books, like as I got to say Hedge Fund Market Wizards, there are several traders, let's say — Might be, who were there, who started their careers because they had picked up the original Market Wizards book.

So my book was the catalyst for them becoming, getting into the whole career.

So you would say that's naturally a natural motivation.

You know, so I remember one trader talking about his, I forget what the circumstances were.

He was like traveling somewhere and he had time and he went to a bookstore and he, he just found like a used copy of Mark Rizzo's support and it was, you know, serendipitously led to his career.

So, yeah, that's also, when you get the later books, that's also a motivation.

Rayner (25:23)

How did you then come up with the title, Market Wizards?

Jack (25:26)

I had the idea for Market Wizards, and I guess I had the title.

I don't remember where I got that, you know, I guess I just thought, I don't know.

I don't remember where the original thought came from, although I think I always believed it was a good title.

Then five years after I'd written the first book, I got approached by a publisher who wanted me to do a series of fundamental books, you know, analytical books, I had no interest, because I did that for more for reputation.

I wanted to write what in my mind was the best textbook on futures at the time and having done that, I had no interest in doing it again.

It was a lot of work and that type of book doesn't sell.

When I say textbook, if you write a textbook in a, like a calculus one textbook, that becomes well used, then you can make a lot of money because it's a big audience.

But if you're writing a textbook on something like future analysis, there are very few courses in that and the audience is much smaller.

So you never do that to get a large audience.

You do it for other reasons.

Like I say…

My motivation was to write that type of book for the sake of writing the book, not to sell several copies.

I knew when that regression analysis section I mentioned

I knew by putting that in, I would decrease sales because I knew seeing that many formulas would scare people.

So I did things that I knew would hurt sales, but I wanted to do, I was trying to write a certain type of book.

So I knew I didn't want to do that.

I knew I wanted to do something more popular and I had an idea of what was market wizards and that was influenced, I think, because I knew some great traders.

I knew Marcus, I knew Schaffner, I knew some other traders for them.

So I thought I had a starting group of traders that I could do and I could find others.

I just didn't do it because I had a full-time job as a research director, which is more than a full-time job and I didn't see how I had the time.

But when I had that lunch and the publisher, I told him this idea, he said…

“Dude, you know, okay, you do that”

I agreed to do it.

I ended up, I knew it would be nights and weekends.

But back then I was, well, one skill I also had, I could be very, very focused.

For example, when I wrote the Complete Guide to the Future's Markets, we're talking pre-PC, maybe PCs were on the advent, but they weren't a common use tool.

We're talking doing graphics by hand, we're talking doing multiple aggressions hand calculator, you know, we're, you know, and besides all the writing, you know, just do the basic analysis work would be what you could do now in minutes in Excel.

You could spend days doing this because you didn't have those tools.

I would literally be up at night and I would work through the night and I could be focused solidly through the night and just get stuff done.

In those days, my younger days, I could do something like that where I could be working a full-time job and then on my nights and weekends being intensely focused and somehow getting it done.

When I look back at it now, I don't know how I could do it.

It wouldn't seem feasible for me to do it now.

Now just writing a book seems to be enough.

Forget a full-time job on top of it.

Not to mention a commute and a family and everything else.

Rayner (29:33)

Yeah, you seem to me like someone who's driven more by purpose than money.

Because whatever you're doing, you know, like books, they don't make much money, but you still choose to do it.

Like, you know, the futures one where it's harder to sell, but you have like a lot more passion for it, or you want to have something out in the market.

Jack (29:49)

Yeah, I never, you know, when I wrote Market Wizards, I didn't.

I didn't know it was going to turn out as popular as it was.

Um, but I, you know, no money was never, I never think in those terms as that's my motivation.

I think if you're motivated by money, your product is not going to be good.

Um, you know, as I think if you're writing a book to make money, I don't know. I guess there are exceptions to it.

I mean, people do that and they're successful, but in my case, that was never, never the way I would look at it.

I think the same in trading. I think people who are good at trading.

They're not doing it for the money.

They're doing it because they like the challenge.

They like the game.

They enjoy it.

They're not doing it because…Hey, I want to get rich.

Now, there are exceptions.

There are exceptions and then they find the passion.

So, yeah, but for the most part, I think, people who get into trading, because they think it's an easy way to get rich, is usually not going to be successful if that's their motivation.

Rayner (30:52)

Alright. Yep.

So I think I read somewhere you have written like 10 or 11 books.

So among the...

How many books is it?

I want to kind of like know the official number.

Jack (31:01)

I think it's 12.

Let me see. It's 12.

There are five Market Wizard books and then there's the notebook of Market Wizard which is a kind of synopsis of the main lessons.

That's six and then there's the complete guide.

The futures market is seven. There's a... and then there was a three-volume version of that.

So that's nine.

I mean, that's seven and it's 10 and then there's a book called Market Sense and Nonsense.

That's 11.

Yeah, it's getting started on technical analysis, which is a short version of one of the three-volume sets, which was technical analysis.

So, in that case, it's 12 separate volumes.

Rayner (31:44)

So 12 books, is there any particular book that you have the most feelings for, that feels special to you?

Jack (31:54)

That I'm most satisfied with or...

Rayner (31:57)

That you're most... that you felt you have the most feelings for that particular book that you've written?

Jack (32:02)

No, you know, I... to be honest, I felt satisfied with every book that I wrote. I think if I wasn't satisfied, I would have kept on working on it until I was satisfied.

Each in a different way. I think the original...

Complete Guide to the Future's Market, which was revised years later and made a little bit shorter.

But back when I did it, particularly with the limited resources, I was proud of that work.

I think it's a good piece of work.

Marker Rizzo's books, I think, were good.

I achieved what I was trying to do. I was trying to do two things.

I was trying to guide traders and understand traders If you look at the successful people, what are they doing and what can we learn from them?

So that was one main motivation.

The other main motivation was, I wanted to write something entertaining.

So being able to do both is I think that is the trick.

So far as I felt at least personally satisfied that I had done that for, in Mark Rizzo's books, I felt good about them.

So I don't know.

Then Market Sense and Nonsense which was not a big seller, but I had personal satisfaction out of that because what I was doing was calling out these misconceptions that I think are common.

I just was using a soapbox, you know, to do that.

Yeah, I think for people who actually bought the book and read it, I probably liked it, but it's not, it's nowhere near.

Same exposure as the other books but I kind of was satisfied with it.

Rayner (33:54)

Okay and maybe going back to the Market Wizards I think I read somewhere or heard on some podcasts where you can write pages, 100, 200 pages of notes, and then only 20 pages maybe make it to the book.

My question is you know how you then decide what goes in the book and what doesn't go in the book?

Jack (34:21)

Yeah okay, good question, that one goes in the book.

So basically a little bit similar to the answer I just gave you for the other question.

What goes in the book is, I listen to the interview.

As I listen to the interview, I take down anything that, I consider instructive, informative, insightful, helpful, um, and on the other hand, on the other side, anything that's interesting is a good story and so forth.

So those are the things I'm pulling out.

Anything that doesn't fill either of those two purposes, I excise.

That's what I'll go through.

As I can go through, I can put this in context.

The interviews I do vary in length. I mean, occasionally they're short for reasons we couldn't discuss, but many times they're many hours long and they have been as long as a dozen hours since, you know, a total recording.

So that's a lot of pages.

If you would transcribe all the hours of conversation, that's long.

I don't know how many hundreds and hundreds of pages that would be.

But the idea therefore is that what you're trying to do is you've got all this massive material you're trying to go through and glean out the essence, you know, less is more.

So I'm not trying to make the chapters as long as possible.

I'm trying to make the chapters as short as possible without leaving out anything that is instructive or amusing and interesting.

So in some cases that can end up still being a long chapter.

But of course, it still means a lot of stuff has been left on the cutting room floor.

That's part of the process.

Another part of the process is, I don't know if you have experience with this, you do interviews, but if you ever see transcriptions of interviews, that is how you do a podcast and we're talking and it may sound fine.

But if you transcribe it word for word, like a court sonographer, here you'll find there's a lot of sentences that don't end, sentences that are run on, subjects that get mixed up, grammatical, things that when you read it on the page are not grammatical.

You may not pick it up when you're talking, but if you see it on the page, it doesn't work.

When you transcribe the actual literal word for word, you do not end up with a readable copy.

Part of that process then is you use verbatim whatever works verbatim, you use verbatim.

But in most cases, you have to fix the sentences, you know, so they read well.

In some cases, you have to complete the sentences because, you knew where the speaker was headed, but he didn't quite finish it.

He picked up on another tangent, right?

Then you have things going in order, which is incoherent.

So you talk about subject A and then subjects B and C, and then somewhere around subject H, you come back to subject A, and it's just a mess.

Another thing I try to do is to get all the things on one subject in one section.

Then where you start may not be where you think the interview should start.

You may want to start it somewhere else.

That's why I say 95% of the process is editing.

I'll give you another interesting example.

So I did an interview and hey…

There was an interview in Hedge Fund Market Wizards where one of the traders referenced a famous psychological experiment.

His point was that we misremember stuff.

That was the point he was trying to make and it's a famous psychological experiment where people were shown slides and there's a stop sign or not a stop sign and there's an accident.

I forget the exact details and all that.

But then they were asked to recall what they saw and the point was that people, when they were set up for it, remembered something that they didn't see.

It's that type of experiment.

He came and he liked statistics and whatever he talked about.

So I went back and I went back.

I researched and found the study and there were things that, like if I was talking about, I wouldn't get things wrong too.

So there were wrong things, but I knew what he was talking about.

I fixed that section.

It was factually correct, right?

It wasn't exactly the way he described it, but I knew exactly what he was trying to say.

By the way, when he read it, I don't think he knew that that wasn't what he said.

That's true in almost all cases.

I think people want a, I always send people the finished interview before I publish it.

To see if there's anything that's, I got wrong or anything that they have a problem with.

I don't think people realize that what I'm sending them is not the actual conversation.

Yes, it's all drawn from the conversation and I am trying to convey what they said as closely as possible.

But it's not word for word, and I don't know if they even realize that.

Because if you do it correctly and you capture the person's voice, you're just getting a clean version of what was being said.

I'm very much cognizant of what it will read, and what it will look like on a printed page and so unlike a journalist who has to be verbatim, I need to be verbatim in terms of being true to what the trader said or wanted to say.

But I don't have to be verbatim to the actual word for word if it doesn't work on the written page.

If that makes sense.

Rayner (40:42)

Just one question.

What is verbatim?

I'm not familiar with that term.

Jack (40:46)

Oh, what is that?

Rayner (40:48)

What is verbatim?

Jack (40:49)

Well, verbatim means word for word.

Rayner (40:52)

Word for word.

Okay.

So some of the interviews can go for like 12 hours.

I think you mentioned you would transcribe them first.

Do you do the transcription yourself? Or is there somebody to help you with it?

Jack (41:03)

I didn't know.

Yeah. In the first...First Marvel Reasons book, I had a secretary to whom I sent the tapes and I think she did the transcriptions.

I did it that way.

Now more, you know, reasons books, I changed the process.

I listened.

I will listen to the recording and I will stop it at any point where I want to capture something.

Then I will redictate that portion into a new document.

I'll go through the whole interview piece by piece, and you often have to go through the interview more than once this way, and you have to go through it slowly.

So in that rare case like the 12 hours, it's not 12 hours, it's much longer.

Although to be fair, there are certain portions of that where you get into a conversation that you remember…

“Hey, this didn't lead anywhere, so you can let that play”

In case you're wrong and there's something all of a sudden that...that captures you, you could stop it.

But in some cases, you might let the tape run for a while and not take down anything.

Because in my opinion, none of it was worth capturing.

Rayner (42:15)

That's a lot of work going through, man.

Jack (42:20) 

Yeah, yeah, yeah.

So that's where the work is.

Like I said— people think that I'm a lot of time, I've had this comment a lot of times, that people say, you're a great interviewer.

I say… I'm not.

But I am a great editor.

So my strength is taking those interviews and melding them into good readable copy.

That's what I'm good at.

As an interviewer, I don't think I'm great as an interviewer.

Probably okay, but I don't think I do some things right.

I think one thing I do right is I listen, which is very important because so many you can tell a bad interviewer when they go into a list of questions, and they hit a question.

They wait for the answer to finish and then hit the next question.

But the point is the answer may itself lead to roles that are much more interesting than your list of questions.

I always listen and if somebody says something, I then go off on that tangent.

So that's, I think that's one thing.

That's an interview skill, well not skill, but I think an interview tip that I think is good, which is something that I do.

But I don't think I'm a great interviewer.

There are people that I listen to, let's say — I'm into a podcast, who I think are great interviewers, but I wouldn't consider myself.

Rayner (43:43)

Who do you consider a great interviewer?

Jack (43:45)

Oh, you know, like this show called Fresh Air, a podcast called Fresh Air, and the main host is Terry Gross, and she interviews all sorts of people, you know, writers, musicians, you know, and business people, everything you can think, every walk of life.

Famous people from all walks of life.

There's another interviewer on that same program, well, Dave Davies.

They are both superb interviewers.

They ask like really good questions.

They're great at follow-up.

They, in most cases, ask the question that you want to be asked.

You know, somebody says something, you think — Hey well, what about that?

They'll get to that.

They'll ask that question. You know,

Most interviews I listen to and I'm listening to interview and I said — Well, what about that?

They don't ask the obvious questions, it drives me nuts.

So, but that's an example of that particular program Fresh Air, Terry Gross, and Dave Davies, I think are great.

If I hold up If I hold up paragons of what I consider great interviewers, I would say they are good examples.

Rayner (44:55)

Right.

Speaking of the interview, I think I heard on another podcast, I think it was with Aaron Fifield, he mentioned that one of the more difficult interviews you had was with, I think, Tom Baldwin, right?

Because he's just trying to escape, right?

So my question is looking back right now, how would you do things differently if you're in that scenario again?

Jack (45:14)

Well, I don't think there's any interview that I ever did that I said…

“Hey, I should have done this, because I always had my limitations which weren't set by me”

So in Baldwin's case…

He didn't want to do the interview.

Okay.

But he had it, but there's another trader that I got to convince him to do it.

So, I agreed to do it.

My luck was it was St. Patrick's stay in Chicago.

So while I'm, and so he didn't want to interview, to begin with.

We interviewed after trading hours, we're in his office and, the messing questions, and every few minutes somebody came up.

Comes in and says…

“We're going down to whatever the bar was”

He said —  I'll be right there.

I knew that I couldn't leave a split-second space between his finishing talking and my hitting him with the next question.

Because it was like, I think I used the analogy.

I might have used the analogy for that interview.

But it's like you're trying, like a photographer trying to get a picture of a bird before it flies away.

That's the way I felt that whole interview.

There was one point where I hesitated for a second, and he said… Gotta go...

So that was like the shortest of the very other days, but it wasn't by choice.

I knew the circumstances at the time. It still worked.

I still have enough material to make it work.

It was not the worst interview.

The worst interview was about which book was it in.

I think that was all, it was in The New Market Wizards.

It was a fellow by the name of Gary Bielefeld.

This is kind of an interesting backstory.

So those days I was a research director and one of the things we had to do in those days was you'd have to put a little wire out at the end of the day on certain markets, you know, the bond market was up because of this or down because of that.

You would say —Well, there's buying by Morgan Stanley and something like, you know, and so forth.

Anyway, there was one firm that kept popping up, and all these big names with BLH.

When I kind of looked at who the hell is BLH, I found that BLH was one guy in Peoria, literally.

This is the guy who's kind of trading thousands of bonds, you know, that's just, that was an interesting story.

So I got in touch with him.

I went out to Peoria, literally Peoria, to interview him.

I don't know if you know the old Westons, like you know Gary Cooper.

Do you know him as an actor?

Okay, so Gary Cooper was one of these Western hero stars.

But he was very, very terse, you know, yup, nope, that type of thing, that type of personality played and very, very kind of rigid wooden man of very few words, but action.

Bielefeld, every question I asked him was like this short, you know, that's reminding me of Gary Cooper.

I just said — Yup, no, I couldn't get anything out of him.

Sort of then at one point in the interview, he mentions how trading is like a poker.

I said — Okay, yeah, well, how's my poker?

He gives me like a semi-interesting paragraph, or two or three about the analogies between trading and poker.

I said… Gee, that's fine.

He said — But you can't use that.

So why, what's wrong?

He says… Why do people think it's like gambling?

I said — No, nothing.

You said it's not, you don't make it sound like gambling.

You're making adequate points, real points the risk side of it, and the probabilities.

It's not a, anyway, so he can let me use it, but that was like the one short section that I thought was marginally interesting.

But the long interview just really wasn't very good.

I mean, I made what I could out of it and the story is very interesting, but that is the only chapter in any Mark and Wiz's book where my narrative is longer than the interview, because the interview itself was so not successful, you know, makes sense.

Rayner (49:51)

Speaking of narrative, what's your approach to writing the narrative?

Jack (49:55)

So I use the format of an introductory section, which talks about the trader and maybe related topics, depending on the situation.

Then I have the interview and then I have a conclusion section.

So for that introductory section, I'm trying to create some interest in this trader.

Now, a lot of the background of the trader comes up in the interview.

So you can't necessarily put, you're not putting all the stuff in the narrative because you have it in the interview.

But what is in the interview, if it's interesting, I try to put that in the, in the beginning, and I'll also talk about my observations.

I may talk about it.

What I had to do to get the interview, it's just, you know, it was difficult.

In Mark, like in some cases, I may talk about the surroundings.

For example, Marcus lived at this mansion in Mineralbo, and I remember driving up and it was just like a huge gate.

So just in that describing that, I said…It's sort of, you kind of enter the gate, which looks...which looks like it got held up under a panzer division.

You know, so you try to, I try to convey what my thoughts and feelings were and be descriptive as much as I can or extra-relevant.

So the beginning narrative could be anything.

It depends on the trait.

It depends on the circumstances.

Rayner (51:32)

So do you write the narrative first before the edited interview or that comes later?

Jack (51:39)

That comes at the end. So... I do the interview first and then I do, and then I don't know if I do the conclusion first or the narrative first, but the conclusion section comes obviously after the interview.

Then the narrative is just a separate piece.

Rayner (52:02) 

You interviewed many many traders.

I'm just curious, how do you remember all the different narratives, the different environments, and the context of all these different interviews?

Jack (52:10)

Well, I know, I mean, I'm writing these after, so I do have to take notes and stuff, you know, while it's fresher than my memory.

So after I do an interview, I may sit down in my hotel room and write down some notes about things that occurred to me.

Rayner (52:34)

Yeah because if not you just quickly forget about it.

Jack (53:36)

Yeah, yeah, yeah.

So you have to, yeah you have to and, and yeah so that's, that's important like we're like sort of like I think about it a lot it comes up all the time in different ways.

So like I remember interviewing Bill Lipschitz who at the time was ex-Solomon brothers.

He traded huge currency positions at Solomon going off to be his trader or manage his own money, not his own money but...

Become a money manager on his own.

I interviewed him, and we spent a couple of hours, and it just really wasn't coming anywhere.

Then we ordered Chinese food, and I had the tape recorder off, and then he started coming up with interesting stories.

That type of situation is something that I would convey, or like I take a break to go to the restroom, and there at height, at standing height is a quote screen.

He has quote screens all over, but the fact that he has a quote screen at standing height in the bathroom, I thought was particularly universe, you know.

I put stuff like that, you know, and of course, I'll make notations of all those things and then that will go obviously into the initial narrative.

Rayner (53:50)

It's the things that stick out like a saw tongue to you, you know, like bring in all this.

Jack (53:53)

That's amusing, you know?

Rayner (54:03)

It seems that when you write this Market Wizard book, there are a lot of costs involved, like you're booking up your hotels, the flights, and stuff like that, and you have no idea how well the book will sell.

Is it like all this cost is born on you?

Jack (54:13)

Yeah, I mean, I absorbed the cost.

At this point, you know, and I'm pretty efficient, so when I do one of these Market Wizard books, I try to group the traders.

So in the last book I had, I'm gonna...

Quite a few London traders.

I think at least four that I can think of right off the bat were London traders.

So I did all of them.

I had more than four.

But in every book, there are interviews I end up not using because I feel they're just not good enough to include in the book.

So I might have had like a dozen traders.

Not a dozen, a half dozen traders.

So, I had them all.

I had the triple range.

So I had like one every day, in some cases two in a day, if I thought that it was the type of thing like every two in a day.

So it's, and I make it pretty efficient in that respect.

Rayner (55:07)

It's because earlier you mentioned something along the lines of, you know, you interviewed the traders, but their interview didn't make it to the book.

I like to hear, you know, what's the reason for that?

Jack (55:16) 

Lots of reasons, but if it bores me, after my best, some cases, in some cases, in many cases when the interview is not in the book.

I don't even try to edit it.

I go through it, I listen to it, and if I find myself rarely really wanting to stop and take stuff out, you know, if it's not interesting to me, I can't expect it to be interesting to anybody else.

So I think you need to be able to cut stuff and not use stuff that's not good.

I think it would be a big mistake to include subpar material.

The reason may be a lot of times it's because the type of trading a trader is doing may just be inherently not very interesting.

It could be some sort of arbitrage or whatever.

It could be something that just doesn't...

Maybe the guy made money and did it right, but there's just no drama to it.

There are no lessons to it.

It's just...

There's nothing to pull out of it, as far as I'm concerned.

So there, if I drop an interview, it's because there's not merely enough anything that I can say would be helpful.

There's very little, if anything, that I consider interesting or entertaining or anything like that that would make a good read.

So those are the reasons.

I just don't want to put any.

I don't want to put anything into a chapter that I wouldn't want to read.

Rayner (56:57)

So before you interview them, I guess you would have to let them know that there's no guarantee you'll be featured in the book, you know, blah blah blah.

Jack (57:03)

Yeah, I don't think anybody, I don't think I ever mentioned that per se.

I don't think anybody ever asked me, well, this goes in the book, I don't think, you know, so I make no guarantees ever about that.

The only I guarantee is...

I guarantee that they'll be able to see the chapter before I publish it.

The reason for that is, I did that from the very first book on, is because I'm trying to get the trust of people and I want them to be honest and open as much as possible.

If somebody's giving an interview with something that's gonna be in a book, they're gonna be particularly cautious and sort of self-editing themselves a lot of times.

I try to minimize that as much as possible.

So by telling them, look, go with you or whatever, if there's anything that ends up in there that either you feel is not correct or for whatever reason you don't want to include it or is problematic, then we won't use it.

We'll either figure out a compromise that we're both comfortable with or I won't use it.

It doesn't happen too many times that in some cases, most cases don't result in any changes.

In some cases, some changes but it is a big deal.

But I think it makes people more comfortable.

Rayner (58:26)

Okay.

By the way, Jack, we are currently around the one-hour mark so I just want to check in with you to see how you're feeling.

Yeah, absolutely.

You can go a little further.

Sure.

Do you want to get some more water for yourself?

Jack (58:37)

Yeah, let me get some more water.

Sure, go ahead.

Rayner (58:41)

Yeah, by the way, I like when you shared earlier, right, that you know...

Interviewing right you don't have a list of questions you just follow it or bullet by bullet because that's what I used to do then when I heard that from you I told myself…

Yeah, that's a good point I should just kind of like you know throw away the questions go through the conversation see where that leads to, and then at the end yeah I kind of like check what I missed right so yeah that was a very good point.

Good tip yeah love that yeah so

So going back to the market wizards right I think I'm going to steal this question from you I think you shared this like what's

What are some of the more painful memories you had while writing the Market Wizard series?

Jack (59:16)

I can't think of any painful memories.

I was doing what I wanted to do and it was largely successful.

There were no, nothing painful.

There was occasionally...

Interview I couldn't use, you know, where I didn't want to use it, but the trader had other reasons for not wanting to grant permission, but that happened rarely.

But other than that, I can't think of anything painful.

Rayner (59:57)

Are there any, like, maybe... things that happened, right, during this entire journey of yours that bring a smile to your face?

Jack (1:00:03)

No, I don't know, it's just that it's been so... so much through my entire adult life, I mean... spans...

Like 1988 through the most recent book?

2020, so there are some updates even more recently last year.

So it's been a good part of my adult life.

It's not like an isolated thing.

It's been part of it's been part of my career, essentially.

Rayner (1:00:40)

Okay, and since you know, I think it's like 30-plus years now and you've interviewed so many since the 80s and 90s.

So do you know how many?

Of these markets, businesses are still trading today, right?

Jack (1:00:53)

No, I don't.

I don't. Of course, you know, in many cases, they're not trading because my original interviews were done, as I said, in 88.

So that's quite a list.

Not all of them are alive anymore, for that matter.

Certainly, many of them are retiring and stuff.

But once I do the interview,

I don't follow up.

There was an exception where this last book on non-market wizards, I did go back, the book came out right before my last, and my last interviews were wrapped up sort of months before COVID.

After the book was finished, we had COVID, you know, the bear market, and we had the big bull market recovery, and then we had another bear market.

Kind of an interesting times and led to the question, well, these people have done so great.

What about this subsequent period with a bear market, a very sudden reversal, and then another bear market eventually?

Just so, how did they fare and what were their experiences?

They were also interesting periods.

I want to know how they navigate all that happened.

In some cases, that led to some pretty interesting stories.

In that particular case, I did go back a few years later and did an update, which coincided with the release of the paperback version.

The paperback version has the updated interviews as well whereas the original hotback didn't.

But that is the only time I went back and followed up.

Although I think the stock market wizards, there was a bear market that began a couple of years later.

When the payback was coming out, I did update at that point.

So I guess I did intend to as well.

Those are the only times, but they were done a couple of years after the original book.

But I haven't gone back and filed it up with traders.

I interviewed 10, 20, 30 years ago.

Rayner (1:03:13)

I think for me, the stock market results were kind of like a special book because like...

stock market wizards, right?

I'm thinking that could open up further opportunities like options trading market wizards, you know, day trading market wizards along those lines.

Jack (1:03:39)

Yeah, but to be fair, I had stock traders in all the other books too.

So one of the dilemmas you have, to look like, is once you've got something like market wizards, it's gotta be a heavy title, right?

Because that's, it's kind of a brand name.

Okay, so the first time, yeah, market wizards, the second time around you can do new market wizards.

But then, you know, you kind of, so each time it's a bit of a challenge.

So that particular point that said… Well, I'll do one of all stock traders.

So I did stock, so I could use the title stock wizards.

But there were stock traders in the other two books as well.

Then with hedge funds, again, I needed an angle.

So I said — okay, this time I'll do only hedge funds and the other books.

You had hedge funds, but you also had individual traders.

Yeah. Then I said…

Well, I did hedge funds.

Let me do exact opposite solo traders, you know, that nobody knows of and that was unknown market wizards.

If I ever did another book, I don't know what the hell I’d call it because I'm running out of preface words for market wizards.

Rayner (1:04:38)

The latest market wizards.

Jack (1:04:41)

Yeah.

I am kind of amused with thinking I ever did another one, maybe I should just call it the last market wizards.

Because I wouldn't do another one after that.

I don't know if I'll even do another one.

Rayner (1:04:53)

I think I heard somewhere you mentioned there was maybe a lady's one, right?

Where you saw female traders, something along those lines.

Jack (1:05:00)

I always try to find women traders.

But very difficult because, look, I'm always looking for people who've done it for a long time and to find women who've traded for a long time.

High success, it's difficult, you know and so it's not that I don't want to include women, and I would like to, but you don't have to just the demographic style of such, and it will probably change.

But if you're looking for people with 10, 15-year track records, you know, particularly when I did the earlier, you know…

In the other MarkerWizard books up until the more recent one, you just didn't have those types of records. I mean, there was an occasional exception I could find.

Like in stock MarkerWizard's Dana Galante, she was a short seller.

So when I could find a woman trader, I would use that, you know, but I just had, I had trouble, every one of the traders I kept on uncovering happened to be male, it wasn't by choice.

I did do...

I did interview an over-woman.

Well, one of them Tuesday that I'm not using in the last book, is a good trader.

Had some interesting stories in a sense, but her methodology was just so esoteric that I just think the thing it could relate to.

It could relate to you know,  that most people most people just couldn't relate to it was just a very esoteric methodology.

There was another woman trader I tried to get who just didn't agree, I didn't want to do it.

But I have trouble finding even just a few, let alone fill a whole book with women traders.

It would be, if I had that, it would be a fair topic for a book.

Rayner (1:07:13)

So after the interview, you know, then you tell the person, maybe the ladies, hey —  you know, your interview didn't cut.

So what's the kind of response you usually get when you tell them, tell them...

Jack (1:07:20)

I don't... Oh yeah, I guess I maybe do. I probably always...

Well, I'm always honest.

I probably, I like, I think in the most recent book, I said —Hey, you know, turns out I'm not going to end up using it.

I just, there wasn't enough material in here that I felt would be, you know, of interest to readers.

But thank you for, you know, participating in that type of thing.

Rayner (1:07:46)

All right.

So, okay, now we're going to move on to the next section, maybe talk about trading and, you know, about the financial markets.

So I like your answer.

I think I heard on a podcast, you gave a very good answer to why you don't believe the markets are efficient, and I would love to hear that from you.

Jack (1:08:01)

Why I don't use what?

Rayner (1:08:02)

Why you don't believe the markets are efficient?

Jack (1:08:07)

Oh, markets are efficient.

Yeah. So, plug here.

I mentioned the book I wrote, Market Sense and Nonsense.

When I told you allowed me to get on a soapbox and complain about things like people are wrong.

There's a whole chapter in there called the Deficient Market Hypothesis, in which I go through like a dozen plus reasons why the theory is wrong.

they range, there are a lot of reasons, but let me just go through some of them.

Therefore, you know, and if new information comes in, everybody gets it.

Therefore, you can't beat the market because of the things that they see discount.

So one thing that’s wrong with that is that even though everybody has the same information, not everybody is equally skilled in using that information.

An example I use when I give talks is, you know, you have a chess tournament.

Everybody knows the chess rules.

Everybody has all the, has read the same chess books.

Everybody knows all the same.

Classical chess openings and everybody has the same information.

But there's going to be a Magnus Carlsen or a Gary Caspar of it, isn't it?

Who will just crush everybody else?

It's not because they know something everybody doesn't know.

It's not that they have some hidden information. It's just that they are more skilled in employing the information that's there.

The markets are the same.

There are thousands of ingredients of potential information in the markets and there are endless ways they can be combined and used and how you can react to that information.

Some people are going to be more skilled than others.

That's the inherently wrong thinking.

One thing I do when I give talks is I sometimes use a slide where I'll show a traffic jam and sort of the efficient market hypothesis of the markets is the markets are like a traffic

You're in one lane and you try to switch over to the other lane and you keep on switching back and forth trying to get ahead.

Half an hour later, you look to your side and it's the same car on your side and you just can't get ahead because everybody's on the same, you know, they got the same impediment.

Then I put up a slide and I show a motorcycle going between the cars.

So everybody's using it.

Everybody's using the same road, but some people have a more efficient way of doing it.

Rayner (0:10:58)

That's good.

Yes, that's a good…

Jack (1:11:02)

Analogy.

Right. Okay.

Another thing that's well, then is the empirical argument.

There are just too many examples of markets that were ridiculous, totally absurdly ridiculous.

The classic one classic is the internet bubble.

So the internet bubble, we have the internet stock index going up sixfold 600% in a year and a half.

Then it goes down 88%.

Enough goes down in that percentage, which brings it back to where it started. Right?

So you have a 600% rise in 18 months and then an equal decline back down in the next 17 months.

If markets were efficient, hey, there must have been some really dramatic, bullish news going on during those first 18 months and some incredibly bearish news.

Going on for the next six, to 17 months.

I mean, I challenge anybody to find fundamentals that explain that.

You had companies that had business plans that never made money, that could never make money.

I mean, the companies where, you know — I joke as I joke about like one of the companies like Pets.com, which just became famous as an example of one of these failed companies, because back then the shipping cost was so expensive.

They were selling a lot of things like dog food, which is heavy.

They were losing money on most of their sales because it was costing them more for the product than the shipping, then they were making, from the sale.

So I kind of joke there…

They think they went broke in nine months, but they couldn't last longer if their sales weren't so good.

So, um, you know, because the more they sell, the quicker they burn money and my point is, do you have companies that have these?

Models that just didn't work at all, never work and they initially, you know, they made a lot of money.

Or not, that's not content, but a lot of, there were a lot of worthless stocks that went from 10-200.

So there's not the fundamentals of change.

What happened was it sort of became this mania where everybody's making all this money into their socks.

My neighbor, hey, my neighbor just bought these internet socks and he just made 100% of them.

He can keep people, more people come in and more people come in.

The people who didn't come in, fine, they can't stand it, seeing everybody else making money and they get it.

But it's like musical chairs where at some point the music stops and somebody's left holding the bag and it's just the stock goes from 10 - 200 then goes to zero.

It was never worth 200. It probably was always a zero.

But it's not that the fundamentals change.

It was the human emotions that were driving it to excess on the up and excess on the down.

It's not that the markets were not efficient.

If they were efficient, you would never have that basic problem of the efficient market hypothesis is, I use the example that it's the efficient market hypothesis is like a recipe for chicken soup without the chicken.

Because what does it leave out?

It leaves out human emotions.

Now, human emotions are very difficult to quantify in any way.

But the fact is markets don't just act on fundamentals.

They also respond sometimes more to human emotion than to fundamentals.

If your model assumes leaves no room for human emotions or human irrationality, as behavioral economics will argue, then your model is lacking a key ingredient.

So that's another wrong thing. the efficient market hypothesis.

The empirical examples go on and on.

I mean, the crash in 87, 29% in futures, the cash market never caught up, the data never caught up.

But I think in the future, it was a 29% decline in one day.

Interestingly enough, in a day where there was no really big news.

But if the markets were efficient and were normally distributed,

The probability of that would be, it wouldn't occur in a number that is mind-bogglingly long in terms of zeros.

We're not talking about trillions or quadrillions.

We're talking about some minute fraction.

So events like that would never happen in the history of the universe, let alone the history of modern mankind.

So you know, there are too many things that happen empirically, which couldn't happen if Mark's number one is just the traders I interviewed.

Ed Thorpe, his first fund 19 years, and he has three losing months, three losing months in 19 years.

All of those losses are less than 1%.

Now, I did a probability distribution, just a simple binomial distribution.

I made the simplifying assumption that were equal to the losses, which is conservative because his gains were larger than his losses, those three losses.

So the probability I came out with was for Thorpe to have made that without skill, you know if it's a Mark’s sufficient, nobody can beat it, right?

So Thorpe shouldn't be able to beat it.

But the probability of his getting that type of record of 19 years of positive months, was equivalent to picking one atom from the mass of the Earth.

Not the surface, from the entire mass of the Earth, and then randomly doing another atom selection and getting the same atom.

That probability is higher than Ed Thorpe's record.

So people could say — Yeah, well, if you have enough traders, somebody's gonna make money.

Well, yeah, somebody's gonna make money.

But to get somebody's track record is probabilistically impossible.

You know, it's like the argument of, well, if you have enough monkeys typing, hitting random keys on a typewriter, some monkeys are gonna type Hamlet.

Yeah, but how many monkeys do you need to do that?

There are probably more monkeys that can fill the visible universe.

So it's the same type of argument.

It sounds right, but it's wrong when you get down to the numbers, they're just much more extreme.

You have that empirical argument that comes up in many, many different ways.

So those are some of the factors.

There are other things, but that should give you a flavor.

Rayner (1:18:18)

Yep. So, I mean, after you've interviewed like many traders, you've seen the different types of strategies that they have employed.

I'm curious to hear, are there any strategies that worked in the past but don't work anymore today?

Jack (1:18:36)

Yeah, there are lots of strategies.

You know, markets change, and things that work stop working.

I mentioned Thorpe.

I mean, he originally...started on the market side of it, trading options, and that was because he had mathematically derived the equivalence of the Black-Scholes model.

But years before the famous Black-Scholes model paper was published, then you get to the point where there are also programs of option pricing, and everything else.

So that engine goes.

Excuse me, that edge goes away.

He goes from being the only person who knows how to price options to everybody having the computer power to calculate up.

So he goes to a different strategy.

Now he goes to statistical arbitrage.

Eventually, that stops working well and he goes to convertible arbitrage.

Eventually, so he kept on changing his methodology as the markets, as things that weren't efficient became efficient.

Something like trend following.

In the first market wizard books, several traders did spectacularly well with trend following.

I mean, you know, you have extraordinary stories of traders successful trend following, essentially trend following, you know.

Trend following by itself no longer works anything like that.

I mean, yes, there's always, there's still trends, there've always been trends, there's a reason why there would be trends.

There is a logical fundamental underlying principle.

But what has changed is because trend following has become popular, and you have so many computer programs being sold

Software sold to do trend following type of things and so many different CTAs using the same type of approaches very highly correlated approaches, that very participation of so many more traders doing the same thing.

Leads to a lot more false breakouts.

So while you still have trends, you'll get a lot more, not only false breakouts but very, I think there's a greater predilection to violent reactions within the trends that make those trends very difficult to follow.

Not in all cases, occasionally you'll get a smooth trend.

I mean, we've got a smooth trend going on now in the stock market.

So they do happen, but they're more the exception than the rule.

Rayner (1:21:11)

Yep, and I think from what I've also gathered is that you believe that exceptional super traders are kind of like, whether you have it or not.

So I guess your genetics do play a part.

What's your take on that?

I think that's what I heard right from the other episodes you shared.

Jack (1:21:29)

Okay, so repeat the question.

I mean, I'm not getting the essence of the question.

Rayner (1:21:37)

Okay, so try this again.

Like running a marathon, not everybody can run a marathon at the Olympic level.

So trading to be a super trader, not everybody can be a super trader, but they can at least still be a profitable trader.

Jack (1:21:50)

Yeah, I agree.

So, I mean, that's true.

I mean, people ask, can anybody be Mark Wizard?

The answer is no.

Can anybody run in your... I've used the same example when I've given talks, everybody who's devoted enough can train to run a marathon.

Even even people with serious handicaps have managed to do it, right?

Yeah, with this amount of commitment training, everything else can be done.

But no matter how dedicated you are no matter how hard you work for the vast majority of the population It will be impossible for them ever to run world-class Marathon times because their bodies just aren't built to do that.

You not only have to have the work and the dedication and everything else, but you do have to have a very specific body type to be able to run a marathon at world-class record speeds.

Right?

So that's not so.

We talked about mathematics.

I mean, sort of, I could love mathematics, but I didn't particularly have the skill to be a mathematician, let alone a good mathematician.

Right?

So and it's true for most people.

If they like math, you have to have a special type of mind to be a mathematician.

Through music, I don't care how many people practice how many years on the violin, you're just not going to be the first soloist for the New York Philharmonic.

In most cases, you do need some, you need that plus some innate talent.

So why should training be any different?

Certain people have some innate skills.

Not a particular skill because people's methodologies are all over the place.

If it's different for everybody, you know, for everybody, it could be an intuitive type of skill of the markets.

It could be a quantitative skill.

It could be anything.

I mean, certain people just have talents in certain niches, in certain areas and some people have that talent in a trading strategy they develop.

So I don't think everybody could be an exceptional trader. I think most people can end up being that profitable, but not if they do everything right, but not exceptional.

I think that the exception by definition means that everybody can't even be average, let alone, you know, above average.

Everybody can't be above average.

By definition, right?

Everybody can speak different languages.

Let alone everybody can be an exception.

Rayner (1:24:45)

Yeah, so I can understand where you're coming from when you say that certain people have certain physical attributes that favor them to perform well in certain sports.

Jack (1:24:52)

So I've been around a long time.

So I've seen a lot of big changes.

For one thing, we've gone from trading pits to fully electronic trading.

Thank you for the top.

So changes, you know, one big change has been going from Pit trading to electronic trading.

Dramatic change there.

Commissions, you've gone from high commissions to, well, zero commissions, but you then have slippage, but you always have.

So dramatically reduced cost.

You've gone from no computers, except for the occasional, you know, large computer back in the, you know, which wasn't accessible to anybody but academics and people in corporations and had very limited power even then.

But you go from a world of really no computers to the general public to one where you have powerful PCs and hand them out to everybody and where you have supercomputers in the hands of some professional traders.

So that's another, the computerization, I think, is a major, major change, which by and we're coming with the computerization, you have all this proliferation of data of all types.

There's, and by data, I mean, not only just fundamental data, but as I say —Price data.

You didn't even have daily price data computerized accessible in my early years in this industry.

Whereas, you know, for many years now you have any time interval you want down to minutes or even fractions of minutes, right?

So you have all that data available, plus all the fundamental data and it's available to lots of people.

Then you have the availability of gold's computing power has been accompanied by a tremendous influx of quants into the markets.

So you go from a situation where you had virtually no quant funds originally to now a world where multiple quant funds have hundreds of people, hundreds of PhDs I should say…

On PhDs working for them.

So that's a very different world.

So the markets in that respect have changed a lot.

The one thing that hasn't changed, obviously is human emotion.

That's the one thing that stays pretty constant.

Rayner (1:27:47)

Even the quants that are operating on their systems, there are still emotions involved right, especially when they go into a drawdown and all, you know, how you know, when they pull the plug and stuff like that.

Jack (1:27:57)

You've had some famous examples, I forget which year it was, but it was well over 10 years ago, but there was an instance where market and real funds were doing well.

There was a situation where all the market and real funds were the same, same, belonged to the same stocks, and were short the same stock, and something triggered

You had these fonts which were kind of nice, having nice smooth performance, all of a sudden print these nervous losses.

You went at it very quickly and you had to have the decisions made.

Do you stay with the system?

Do you look at the data?

So even then, you know, human decision emotions had to come into it.

Rayner (1:28:47)

So what do you think?

Or rather, how do you think discretionary traders would then find their place in this world where technology is advancing quickly, the rise of Kwan, so where do discretionary traders have a place in this world?

Jack (1:29:03)

Yes, I would have thought that it's become much more difficult, and logically it should be.

Yet when I did this last book on non-market wizards, I found these discretionary.

They were all, all except one were discretionary.

The least impressive track record was by the systematic trader.

His track record was fine, but none of the same being the other discretionary trader.

So everybody else was a discretionary trader and some of them are truly just mind-boggling performance records.

So somehow, despite competing against these MAMA firms with hundreds of quants, they were able to have way better performance numbers, although, of course, they're trading much smaller amounts of money.

They couldn't do it a lot.

You couldn't have those types of results with large sums of money.

Nevertheless, they're still getting those returns in liquid markets and somehow it's possible.

It's still possible.

Everybody figures out there, not everybody but those that are successful figure out their particular edge, their particular edge is the best way to put them and they're able to pull it off so it's still possible.

I think empirically it's possible.

Rayner (1:30:39)

Yeah I like to hear from you also like you know I think trading principles are usually pretty timeless like you know cut your losses and all ride the trend blah blah blah

Are there any principles that were largely true back then but it's maybe not low no longer true today?

Jack (1:30:58)

Oh, you mean trading principles that were true once but are not true today?

Rayner (1:31:05)

Yes yes Yeah

Jack (1:31:06)

well actually I mean take a practical example.

I took the original Mark Rissabuck and then it was like 30 years later.

Uh, well, it was 30 years later, but why am I even about maybe 25 years later?

But decades later did an update, uh, where I added a chapter and I, you know, in other words, the chapter I added was looking back, you know, what, what do I think men type of thing, you know, 25 years later or whatever number the years are.

Between that 2012 edition and the original.

There was nothing that I put in that first book that I didn't think was still true.

So kind of basic trading principles do stand the test of time.

Markets may change, but because people don't change, basic market principles continue to hold.

That's why a book like Reminiscence of a Stock Operator, which I read 65 years after it was written, back in my youth, it was written back around the 1920s, rang true to me then...

It still rings true to people now and my original book, you know, it's the original Mark R. Wizz's book, more than 30 years later, I think still rings true to people today.

So, because I think trading principles have some time of mortality to them.

Rayner (1:32:44)

All right.

You have interviewed a lot of successful traders, and I think you also shared one of the commonalities.

Maybe instead of going down that route, I'd like to hear, in your opinion, what are some types of people that shouldn't be a trader, that shouldn't go down this trading route?

Jack (1:33:04)

Sure.

 Very dogmatic people, who insist they believe they're right all the time who aren't open to changing their mind.

That is a very bad personality for trading.

I mean, one common denominator that almost all exceptional traders share is this flexibility, this ability to turn on the dime.

You know, and so that's, that's an example somebody shouldn't go into trading.

People, I think who are well, people who need to win shouldn't go into trading.

If you need to win because you're financially desperate to get money, that's a recipe for disaster.

People who are mainly motivated to make money, in most cases, that's not a good sign.

If that's your motivation, that's probably not a good sign.

If you're highly impatient, by the way, which is a trait that I have.

Which is one of the reasons I don't consider myself a good trader.

But that's a bad trait for trading.

To be a good trader, you need to have a high degree of patience.

Those are some traits that are adverse to trading.

Rayner (1:34:26)

So maybe we can move on to the closing section now, right, Jack?

I think it's almost two hours now and it's pretty late for you.

Jack (1:34:33)

Yeah, I'd like to wrap it up at this point.

Rayner (1:34:34)

Yeah. So I think just a couple of questions.

Maybe just... couple of questions.

So is there anything that you like to add that you know you didn't have a chance to cover?

Jack (1:34:43)

No, I think we covered a lot.

Rayner (1:34:48)

Okay so yeah last one will be where you know traders find and connect with you?

You know I am on Twitter you know so check go at Jack Schwager.

I mean I guess that's that's probably one spot to get me on the front seat or you can communicate through that, I suppose.

I have a website which I don't update which actuator that comes up is there and you know you can get information on the contact me through there as well.

Rayner (1:35:27)

Okay great so thank you so much for your time once again Jack.

I appreciate it it's late for you right, you shared so much and yeah thank you for your time I appreciate you.

Jack (1:35:34)

Okay, have a good one.

Thank you.

Rayner 1:35:37

You too, take care bye bye.