Why a self-employed person is different from a businessman

The Self-Employed Person: The self-employed person is basically motivated by control and doing it right. Notice that I often talk about how these motivations constitute some of the biases that most traders have—the need to be right and the need to control the markets. The self-employed person is the entire system. They are basically running on a treadmill only they don’t know it. And the more they work, the more tired they get.

 

Like the employee, the self-employed are working for money. However, they like it a little better, because they are in charge. They think working harder will make them more money, and to a certain extent, it does. But mostly, working harder gets them tired. Nevertheless, they continue to plow forward, thinking that they are the only ones who can do it right.

 

As I said earlier, the self-employed person basically is the system. And quite often they cannot see the system because they are so much a part of it. They are stuck in all the details. In addition, they have a strong tendency to want to “complexify” things. They are always looking for perfectionism and they believe that the perfect system must be complex. They are always asking, “What will make my system perfect?”

 

A lot of people come into trading from the self-employed mentality—doctors, dentists, and other professionals who had their own small business in which they were basically all of the systems in one. This is all they tend to know and they approach trading the same way. They keep adding complexity “until it works,” even though this strategy seldom works. The self-employed person would be likely to have a discretionary system that is constantly being changed.

 

The Business Owner: A good business owner should be able to walk away from the business for a year and come back to find it running better than before. While this is an ideal type of statement, it has some theoretical truth to it. This should occur because the job of the business owner is to design a group of systems to run the business so well that his employees can do the job by themselves (or at least with a manager in place). In other words, the business owner is someone who designs systems and these are usually simple systems.

 

The business owner usually does very well in the trading arena if they approach the process the same way that they’ve run a business before. And, of course, the business owner would usually hire someone to run their trading system, at a much lower wage.

 

When Tom Basso,1 who is interviewed in The New Market Wizards, did workshops with me, he always described himself as a businessman first and a trader second. Part of Tom’s perspective was to look for repetitive tasks that a human being in his organization has to repeat over and over again. When he found such tasks, his job was to develop a program to take that task out of human hands. Routine computer programs are great examples of simple systems.

 

By Dr. Van Tharp

 

 

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