Back in October 10th 2007 aTrader.com sat down for a rare interview with NLP Master and Market Wizard Charles Faulkner before he went back to Chicago.The following is a transcript of the entire interview.
atrader.com
Talk us through your involvement with traders now and what are you doing with them now? What kind of work are you doing? What are you bringing in that is new?
Charles Faulkner
I would say what I am endeavoring to do now is to being an appreciation of the malleability of the and biases that have been identified by Turski, and Kingman, Fowler, and others. This work started in the 70's, continued through the 80's and I know it is just becoming popular in the city now. The idea that humans are not the rational decision makers that the models claim they are. What is interesting is that people who have designed the models never said human beings were rational decision makers. They just said the math is easier. A model is not…and again I think about the theory of models, as well as actually…the theory of a model is not that it is an accurate representation of the environment, it is rather that it has enough assailant features. That it becomes a useful guide to behavior or action or whatever within a certain domain space. They were right, I mean, Markowitz, and the idea of portfolio design.
People that understand and follow those principles, do better than people that just guess at what would be a good investment strategy. What would be a good distribution of assets and so forth? This is the nature of science that as a science progresses it progresses not by new ideas, as people think. It progresses by successive levels of measurement. That is as the measuring instruments become more exact, the flaws, or we could say the parts like the bridge example. The parts that people are not aware of come into awareness.
Einstein was not someone that, out of the blue, thought of this incredible new idea about how time and space was actually the same thing in some way. Rather, that the Morrison Mitchelson experiments had demonstrated that the amount of light…the refinement of the idea of light and the way that the universe worked, do not conform to Newtonian mechanics in very large spaces. In other words, the measurements got good enough that the assumptions that they thought were operating; they found were not operating in very large areas.
Charles Faulkner
The same way is, you think about the development of finance and how people like Carnegie and other ones had the mind set to encompass how the system worked intuitively. You can think of somebody like Dago who wrote on the banking system and actually helped found the banking system and The Economist magazine.
These people created these more articulate versions, models, of that system, and they had an advantage for that over somebody who was just guessing at it. We have reached a new area where Turski, Kingman, and others are showing the limits of the rational actor theory. That rational actor theory in certain ways confers an advantage on people. People have traded derivatives earlier today, trading derivatives utilizing Black Scholes and so forth, and making money. They had an advantage over somebody guessing at the price.
We are now, because the measurement has gotten more exact and they can now see there are times that do not apply. Like they noticed, for example what would an expected utility curve look like, versus what does it look like in behavioral finance. We noticed that people…they tend to…it tends to curve off on the gains. As people gain more, they are willing to risk less, and as people begin to loose they are willing to risk a lot more, and then they are willing to risk less. They did not know that before. Now with these new observations a new theory needs to be developed. That theory is beginning to become popular in the city as an “Oh wow, we are becoming decision makers, you know buck up.” My claim which is a little ahead of this, in answer to your question is that these are more malleable than they look. In other words, if you take the representational emotional defaults that people use, then yes. People will tend to conform to these utility curves. On the other hand, I think that you can utilize them in different ways that will give people who understand that, an edge over people who do not have that.
Charles Faulkner
This is not unusual for me, rather than being out there and being a trading Trojan, just like going…I can teach you how to be rich or something like that. I am trying to work out on the…to use the metaphor of the tree here, but the skinny branches.
Charles Faulkner
I am doing that by a rather…what is the word I want to use? Serious study of how it is that people think about decisions. My current work is in the area of decision making, and my current work is in how people represent decisions to themselves. Not in the broad strokes, but actually more in to the details of that, and how I can confer and advantage on my clients who engage me to either upgrade, revise, or take on new ways of making financial decisions.
atrader.com
Now, tell us a little bit about your own trading?
Charles Faulkner
My own trading… I started out doing a demonstration project. A guy put up money in Chicago … gosh that was 92' and I traded eggs, currencies, gold…
Eggs. Agriculturals, wheat, soybeans, in fact, the joke is of course that Jim Rogers said, “If you want to learn something about finances, you can take an MBA or you can short the beans.” In 2 weeks you will learn as much as you learn doing an MBA. Well, I did not take Jim's advice I went long the beans and they immediately tanked. So, I was down on my first trade and I learned a lot.
atrader.com
Just that one trade taught you a lot?
Charles Faulkner
Yes. I learned the emotions, the desire to be right, and the idea of disliking loss. Traded the year to a profit, and the guy that I was…I kept lengthening my timeframe, so like the last trade we were in was orange juice. We were in that trade for months, and did very nicely. We were up over $1800 a contract, and I said, “That is trading!” I turned to him and he looked at me and went, “And I am never going to do that again.” He went on to be a day trader. We parted on good terms. Since then my trading has had, what Rogers , when he was asked about being in the market wizards, he said, “I am not a trader. I am an investor.” I think the same thing could be said of me, that while I do not involve myself in traditional instruments, I do but not really. I actually find futures a much safer thing to trade than companies or bonds or stuff like that. Much to some colleagues chagrin. I have an occasional position on, like being short the dollar. That is like, what? Who did not know the dollar was going down? Is basically the kind of trade I do now.
atrader.com
So, you are trading now?
Charles Faulkner
Yes, but as I said, I would not consider it trading in the sense that a lot of traders would think I am getting up and watching the screens and all that. It is like, no, I have a small position on. My stops are already in place. I am in to look at it. I hit the stop, I am out. If it keeps going, I am not looking at thinking about taking a profit, I will just let it keep going, and I will move the stop.
atrader.com
You are discretionary using some technicals?
Charles Faulkner
No. Well, yes, I am discretionary, because I originally cut my teeth on market profile, which I saw as a time density function. Then my encounters with Ed Seykota and reading George Soros , and then my encounters with Jim Rogers, I would like to think, although I have never tested it against them. I would like to think that I use a much more dynamic approach to trading now.
atrader.com
What year did you start trading?
Charles Faulkner
92' now that is kind of interesting, because one of my challenges was to think of myself as capable of doing that. The guys who trade like that do not think about that, but I did not think of myself as that kind of person. I utilized NLP very explicitly at that point, and I realized that in junior high, I had tracked stocks. I had tracked TRW and IBM and some other ones, and I tried to get my dad to buy them when I was a kid and never got it to happen. I remembered that I had done that, and I remembered that I had been the treasurer of a company. I had a small company that we also had as early as junior high. Then in high school that I had run something else, and the point is, I took all those different incidents of when I had something to do with money and something to do with taking risks, and something to do with understanding something that was not completely understandable, like looking at the prices of technology stocks as they would have been in my earlier years, and created out of that a conviction that I could learn to trade. I built that belief explicitly before I went and studied with Peter Steidlmayer so that I had the belief in places, “Yes I can learn how to …” I did not…
Now important here from a modeling point analogy is I did not convince myself I was a great trader. First of all, I had no evidence of that. That is important for me. Some people say, “Well, if you believe it you can make it happen.” I do not know.... I have not tried that strategy. My strategy is to convince myself I could learn how to do it. By taking a number of highly separated events in my life and pushing them together in time and rerunning them, I created a conviction, this running conviction strategy. I created a conviction, “Yes I can learn to do this.” Then I went in and I learned how to do it.
Charles Faulkner
Interesting, you are right. Although I can say, “Yes, I started trading in 92'” it was previous to that that I had been around traders. I had been around money. I had been around markets, but I had never put the together in a way that I would say. “Yes, now I am going to do this.”
atrader.com
Now… you have mentioned junior high school.
Talk us through your junior high and high school and sort of into college years. How did you go…how did you decide what career you were going to study in college?
Charles Faulkner
There is not much to…I think it goes back to… it goes back to the bridge, if you will. I was looking for something interesting to do. Most of high school I was a math and science major, and yet I left high school and started university as a poli-science major. Part of that was, and I think this is where I am at… this is going to…this again fits England really well is I had gotten a sense at that point that a lot of modern science, especially modern physics, is what is now called big science.
You need big machines, you need government grants, and you need teams. For whatever reason that did not interest me as much. I went over to Poly-Sci and I went through a philosophy department, and an English major, and ended up in linguistics. That journey for me was very much about what is it that is running the show? Understanding the physical world, physicist to be sure, and many of the popularizations of physics even more so, are an attempt to explain life by explaining the physicality of it.
It became clear to me at certain point that that was not really what would determine it. In other words, you can look at the Newtonian physics or Einsteinium physics, and to us… perhaps not to yourself…perhaps you have the math and science to do it. I do not. I was in that direction, but I never finished it. Those are in fact, rigorous fields of knowledge, but for most people they are a story. Relativity is a story for most people.
Newtonian mechanics and the apple, I mean that is what people remember…Apple. It is a story, and I realized more of our understanding comes out of that, and then I added in the linguistics as the underlying basis of that. In other words, how to store your rise out of language. That I am studying language, and I would say that I have had a good nose for direction that way, because I really ended up in a good place.
Cognitive Linguistics is a field that I am very much involved in. They are beginning to show how our relationship to our environment and the way we interact with language in the world, does in fact create these worlds that we live in. I would go further and say that Piaget was more right than we know in the sense that as we grow up, and you have little kids so you will be aware of this. Is that we live in multiple worlds and children live in these very magical kinds of worlds, but also worlds that we still have.
Charles Faulkner
Let me give you an example here, we talk about with a little kid… you pile stuff up, and when you pile it up they will say there is more of it. It is higher. You can take the same stuff and spread it out and there will not be as much stuff to them. It is more stuff because it is piled up higher. Then we have in the language stuff, phrases like things are looking up. Like up is better. Like up is good. Then we also have things we say about somebody's career, well he is on his way up. While on the one hand we can talk about we have these primitive minds, as little kids we pile stuff up, and then when they reach the age of, like 11, they get to where it is formal properties. It is called conservation of matter.
What happens is you take a pitcher of water and you pour it into a tray, and you pour it into the pitcher and you go, “Which has more?” When kids are at that age where they have conservation of matter, they will say, “Well they are the same amount.” Before that they will say the pitcher has more water because it is higher.
he thing is our primitive mind still comes through in the markets. When guys say, “Well, I want to be up on the day.” When their language says I want a bigger piece of the pie. They are still utilizing that very young conceptualization. In that sense, I think I am right where I am supposed to be, as I am able to put together how worlds are made, linguistically and so forth, and how real they are, as well, to the people at live them. It is not that this is just made up. This is not some French postmodernism that says you can just make up anything. If I say things like, “How would you like to be more and more average?” You will go, “Well that does not make any sense, because more means up.”
Charles Faulkner
Right, and average means down. So your brain goes… because we have these basic orientations there.
I think on the face of it I have completely missed the point of school in America . You are supposed to be training for a career. You are supposed to be on your way to becoming a doctor or a lawyer or something, but it was interesting for me.
atrader.com
Take me through a time line. Junior high, high school, you did some college, but you changed degrees until you ended up in linguistics.
Charles Faulkner
Several times. Yes. I have a… my undergraduate degrees are in English and Experimental Psychology, both majors. Minors in intellectual history and linguistics.
Then from there I was in graduate school in linguistics at Northwestern University . Then I left Northwestern to study NLP.
I graduated and then I did graduate studies at Northwestern in linguistics under John Robert Ross who was on loan from MIT. That is why I was there. Because Ross what on loan from MIT, so I got myself in there. Then I talked to Ross for a while and he talked about how NLP was 10 years ahead of anything in university.
atrader.com
What year was this?
Charles Faulkner
What year was that? Gosh, when was that? 79' or 80' yes that was a while back. We are in the way back machine.
atrader.com
Just to get a perspective, because you mentioned that Ross said that NLP was way ahead of school by 10 years.
Charles Faulkner
He said at that time, he said what Grinder and Bandler… he knew Grinder. He said what NLP was doing was 10 years ahead of anything being done in…That was 79' and at that time the dominant model in linguistics was Chomsky, and Chomsky, not to go into transformational grammar, but that is also what Grinder claims is the basis of NLP. The uses to which Grinder was put in NLP were, in fact, not transmissional grammar, but in fact, were generative semantics.
It is a small point for you, but it is a big point in terms of NLP, is that Chomsky's work claims that changes of syntactic structure will not mean changes of meaning. In fact, what George Lakoff and Paul Postal and some others have figured out was, in fact changes of syntactic structure did make changes of meaning, and that was one of the big points in NLP, was that how you talk about things and the different kind of grammatical structures you use would imply or infer certain different kinds of thinking processes. That is fundamental to NLP. Where as in fact, Chomsky's work did not support that.
At the time, I did not know what Ross was talking about, but I can look back on it now because Ross worked with Chomsky and he could see that… because Chomsky was not buying it. He did not buy this shift of meaning business. Ross was actually telling me something, it convinced me to leave and go study NLP. Well, I should not say convinced me. It affirmed for me that that would be a good choice. I did not understand it until years later, when I knew more about what are now called the linguistic wars.
atrader.com
How did you meet Ross?
Charles Faulkner
It was in the course. He was the instructor.
atrader.com
You mentioned that you picked this course because he was on loan from MIT and …
Charles Faulkner
Right. It was pragmatics. Pragmatics has to do with the relationship between language and behavior. What interested me, because of my previous work as a group leader and therapists, and so forth.
atrader.com
Okay. Prior to this you had done some work as a therapist?
Charles Faulkner
Yes. When I was in college I got involved with a crisis center. I do not know why, but I guess people were in crisis a lot in the 70's. At that time it was the way, if kids would only talk to each other, kind of thing, then we could head off the drug problem. This was the Nixon kind of thinking at the time, if you will, post Nixon. This guy got to be head of it and he was an engineer by training, and I was linguistics major. We began to look at how do people talk to people, such that it makes a difference?
We hired a bunch of psychologist to come through and do what they did, which is curious, because it is exactly what Grinder and Bandler did, but I did not know about this until later on. We would bring people in and they would teach a few days and I would make linguistic notes. Mike would make diagrams, engineering kind of thing, like this operation and that operation. Out of that we developed what we called an intake form. A series of questions that if you asked them… A person could get to the end of the questions, and then there was a…Swenson did the math on it, but there was a high percentage, over 80% chance the person's problem would be resolved simply by going through the questions. We thought this was quite clever, and that was that, and I went on to other parts of my life.
What happened was, is years later as happens, I am in a relationship and I am in Chicago now. The woman that I am living with comes home and she has got a book that her boss, who had just quit the job and gone off to Thailand and had left his office, and she was cleaning out his office. There was a book called The Structure of Magic book one a book about language and behavior. Well we tell our spouses, our girlfriends, whatever, things right? She knew, well, my boyfriend is interested in therapy. He used to do Gestalt TA groups, he was involved in this thing where they did the questioning stuff and language, and he was majored in linguistics. He might find this interesting. She brought home the book. The Structure of Magic book one by Bandler and Grinder, and I am looking through it, and I am going, “This is transformational grammar!” This is what… they had done what I thought was possible.
What convinced me so I did not need more convincing was that a number of the questions they asked were a number of the questions that we had also worked out to ask. Not all of them. They had obviously done a more fine mesh than we had, but that made it possible for me to realize the voracity of the work right away. I did not need to… some psychologists are still waiting for enough evidence from NLP to know if it works or not. I already know I already know this works because I did something similar to this and look; those are the questions we used to ask. When I went into Northwestern and I asked Ross about this right away. I said, “Blah, blah, blah, transmissional grammar, Grinder, and he says, “Oh yes. I know John Grinder” That is why that connection was fairly quick there in terms of getting that information. It was not that tough for me to decide for me to go directly to the NLP, I mean, why wait? Especially if they are 10 years ahead already, why wait?
Charles Faulkner
Now there is a situation where NLP has kind of folded in on itself and I think certain areas of cognitive linguistics are probably ahead in terms of rigor, at least. That is what happens.
atrader.com
You have studied something else, afterwards. Do you have any other degrees? Any other involvements in university?
Charles Faulkner
I have involvements, but no other degrees. I attend conferences on cognitive linguistics, and biannual conference, they do a conference every two years in a different place. I have been to those. A member of Cog Sci in the UK . Cognitive Linguistic Science group, now out of Brighton . I am self-taught in systems dynamics that was at the encouragement of Ed Seykota as an adult I taught myself that stuff, but no, this is it at the moment.
atrader.com
You do not teach anything at university levels right now?
Charles Faulkner
Well, I am… yes I do, I am a visiting senior fellow to the department of management for the University of Surrey, UK
That is where I am helping out with research program and research protocol for them. There are some people there that want to demonstrate the voracity of NLP and they brought me in both for my knowledge of cognitive linguistics and behavior finance, and how those research protocols and results could bear on providing demonstrations in for instance, or research protocols for NLP.
Last month I did a program on the role of language in decision making for the Society for Organizational Learning of the UK , which of course, is associated with the Society for Organizational Learning, which is Dr. Peter Senge out of MIT, and I did that at the London School of Economics. I do have these things that I do. Yes. That is most recent. I mean I have presented any number of conferences in the trading area, market timers, and the futures industry association. I was on the futures magazine circuit years ago.
atrader.com
Need a fresh comment about this NLP credibility debate. What is going on out there? There seems to be this debate about…
Charles Faulkner
I do not think it deserves credibility. How is that? Is that a fresh comment?
atrader.com
Yes. That is a very good comment.
Charles Faulkner
Let me frame that comment by saying that when you have the schools and teachers, or as they prefer to call themselves, trainers, and students almost all, and I do mean, almost all in the commercial area. When these teachers and practitioners can not bring themselves to create a colloquium conference, a field conference, not a commercial conference. There is... in fact the finest commercial conference in the world is here in the UK , which is the NLP conference in November, which is run Joe Hog. Which brings in, well I should not say brings in, but we are invited to speak and it is not all that many slots on that conference if international trainers, leading UK trainers, authors, it is a very fine way to find out what is out there. Who some of the major teachers are, and some of the major schools? Get an idea of what is available. What are the different kinds of applications? A very fine thing, and it is no a colloquial conference, it is not a conference for the development of the field. It is not where we get together and say, is it time, for example that we ditched transformational grammar, at least in our brochures, because Chomsky ditched transformational grammar in 1980. Maybe we want to update the epistemological basis of what we do. Maybe we want to support, by donation or effort, some serious jury research into the voracity, the viability of certain claims, either of distinction, like the eye movements of language, or actual interventions in protocols. Like the phobia process or the switch pattern or something. Without that kind of an effort, why would it be credible? They are not doing what they need to do.
That is why I say my association with the University of Surrey is very much about… that is brand new. That is just in the last couple of years. An organization in the US and then the one at the University of Surrey has begun to say, “Well, what would it take to create a research base to begin this process.” There is not even a gathering of the literature at this point, and that is what Surrey is trying to do. Surrey and the group in the US are just trying to get a list of everything published, I mean, they do not even have that. People have gone into it as a commercial enterprise, and that is alright, there are many things that are commercial enterprises that never are shown to be a kind of science if you will.
The most famous example is probably Steven Covey's, The Seven Habits of Effective People. Who knows if there are seven or not? Maybe there are nine, maybe there is only four. People get use out of that, people find value in it, and it has been combined with the Franklin people, so you can get a day timer or Franklin timer, to use the correct phrase. There is no doubt about its usefulness; just like there are other management techniques that no one doubts the usefulness of. If you want academic credibility, if you want respect from the established entities, whether they are psychological or medical or whatever, well, you have to play their game. If game sounds too flippant, then you have to meet their values. Have to meet their standards of evidence.
Charles Faulkner
Which is really what I mean to say…play their game.
atrader.com
Right. Back to this work that you are doing in Surrey , now. This seems to be bringing it up to the level where it needs to be.
Charles Faulkner
That is our intention. Yes.
atrader.com
Who is us, and who started this? Are you a big part of it?
Charles Faulkner
It was started by, there is Dr Paul Tosey and Dr Jane Matheson..they began it. There is a web site which is NLPresearch.org, check it out. They are beginning to gather literature and we are looking to do a conference next year (July 5 2008), which would be a research conference. Which would take a large umbrella or large tent view initially, that is that the research could be an educational technique. It could be in sports psychology. It could be in theory of philosophical or research precedents, antecedents is the word I am looking for there, that is more what I am doing. What are antecedents to NLP where there is parallel research, where they are basically utilizing the same principles and distinctions, but maybe calling them by a different name?
In other words, what are the different ways that one can demonstrate that there might be something here worth seriously researching, and we are hoping for a journal to come out of that as well?
atrader.com
You have mentioned someone who inspired you back in 1979. Who else has inspired you in your different…?
Charles Faulkner
I would say a major inspiration on me is Chris T. Borg. If you look up Chris T. Borg you will find biographies of automakers, some early people in the industrial age, and he was, he and his wife, Vange, they rented a cottage farmhouse to my parents when I was, you would say knee high to the corn. He was a writer. He was George Romney's speech writer for a while. He was a gourmet. He was an editor of Gourmet magazine. An association developed between my parents and him and Vange such that we referred to him as Uncle Chris and Auntie Vange, even though they were not actually family members. His house was book lined, literally he had book…he used to review books for different magazines, so his house was lined with books. His dog, that they claimed that I always used to go and listen to the animals underneath the house, because if you know anything about Michigan farmhouses, you know that they are a little bit up off the ground. Animals can go underneath, and his dog and I, his name was Hemingway, used to go and listen to the squirrels and other animals crawling around under the house. I got from him, a love of knowledge. I got from him that there were other paths in life besides being middle class American, grow up and move to the suburbs and get an SUV…I did not know about getting the SUV, but getting a station wagon. He himself, he had a place out back, which was above the garage really, where he used to write. A studio, if he needed to finish something, he would go out there. As you walk up the stairs there was a map of Paris , and he would go, “Charles, someday you must visit my city,” and he would tap the map. He names among his honors, unverifiable mind you, that he helped Hemingway liberate the wine cellar during World War II. I do not know if it is true, but it is a wonderful idea. He made me aware that there was a life of the mind, and also a life of the spirit. This guy in Michigan was trying to grow grapes to make his own wine.
He had his own vineyard. Of all of my family, I am the one who has traveled overseas. I went to Asia in the 80's and lived in Japan for a while, and then came back and then in the 90's started to come over to Paris . I finally made it to the city; I worked for an American in Paris , who had a company there, an NLP company. Then in the late 90's started to come here, because I thought that England would be the place to be. I actually at that time was beginning to forecast the downturn of the dollar, and the decline of the US economy and stuff. I thought the European economy and the advent of the Euro, this was before the Euro.
The advent of the Euro would really make Europe the place to be. As I am in English speaker, I thought this would be the place to come. This is actually, on one of these journeys is where I met my wife and began to date. She began to come to America , then we dated over here over here. So yes, it is a pretty big influence. Being a reader, a writer, somebody who appreciates good food, and the life of the big city.
atrader.com
So, not so much in a professional sense, but I guess in sort of a general life sort of mentor.
Charles Faulkner
Oh, very much in a life direction sense. I mean you wanted a big influence that is one of them.
atrader.com
What about right now? Who would you like to meet now? What kind of people do you look up to now?
Charles Faulkner
I would not say look up to, but I certainly like to look across to them.
atrader.com
Yes.
Charles Faulkner
Naseem Taleb, now there is a guy… He is another one, the love of literature. The love of a well turned sentence. The love of a well crafted idea, a well crafted thought that is what I meant to say. Yes, there is a fan of good food, good wine, I mean, this is like… not one over the other. My wife is, she would say that she is not intellectual like, and I will not ever believe that, because first of all, she reads Umberto Eco, and you have got to be pretty intellectual to read Umberto Eco. She is a sensual creature who experiences life and sees things in a… she is also an amateur photographer and will pick out a little bit of some… you see the photograph and it like brings this moment out. Almost like one of them in Japan , people had these miniature gardens in front of their houses, and there would be a forest in this little tiny space. So, yes, I want both of those, the life of the body and the life of the mind.
People who are living that, I think, as opposed to somebody who is very narrow. I mean there are a lot of brilliant people that I would enjoy being able to share sometime with.
atrader.com
You have not met Naseem Taleb, but you would like to meet him? You would like to have a chat with him?
atrader.com
Anyone else? Even less accessible than him? He is pretty accessible I would think.
Charles Faulkner
Apparently, he writes…he writes people…if he thinks people are…sometimes he writes back to people in Arabic, you know, if he does not like the way they wrote to him, he will write back to them in some other language.
atrader.com
Naseem Taleb spends a lot of time in Lebanon . A small house he has, He spent some summers there. That is pretty reachable. You have to fly to Lebanon , but I am sure you can have a chat with him there. No someone that is…somebody else?
Charles Faulkner
It is not that there are not a lot of people. I am trying to pick something that would be expressive of…it is like the other night I was rereading some Chris Argyris. Chris Argyris is, you may never have heard of him. He is very significant in management theory; because he is the idea…he came up with the idea of the un-discussible. The theory one and theory two, which again sounds very academic and is, but the idea is that there is what you do, and then there is the ability to reflect and act upon what you do, and about building that reflective capacity. Which is now a very big thing in business, and in fact, that is the whole point of coaching.
A coach by being in the third perceptual position actually takes the executive or the decision maker out of themselves and actually begins to build up. This is Donald Schon , reflective practice, and again, it is the idea, he is so artful and it is such a sensitive touch about the nature of humans and what we think and what we are concerned with that… He is also very old. Probably the opportunities to speak with him are going to be few. He would be somebody I would like to meet. It is somebody who like, instead of grabbing a hold of life, he was able to just be with it and notice subtleties about it, and notice remarkable qualities about it that others had not noticed. Then articulate that. Yes. I mean I have a lot of feeling for that kind of thing. I think that is what some really good traders do, is that they have a sensitivity about, you know; we have the image of the trader of these, bursting at the seam, the suspenders, Gordon Gekko kind of image, but some of these people, they literally, it is like Ed Seykota says in his book Through the Traders Window . They actually get in touch with the mood, the stream of ideas, and images that are this time and have a sense of where things are going. Like George Soros , and his back hurts kind of thing, and then he changes up his trades. Chris Argyris has that kind of quality and knows he has it. It would be interesting to be around him. It is one thing to get a report. It is another thing to be in a source which you know is creating that and cares about it. It is really clear from his work, he is a quiet intellectual. That is another thing. There is not a lot of bravado. He has created a body of work.
atrader.com
You have reached to top in your field, in NLP especially. What do you think sets you apart, and the second part to the question is, you can be someone like some other NLP practitioners, some of them are really popular now. They are on TV. They have various books. They do TV infomercials and seminars, and charging thousands of dollars per person, but you are not. How did you reach the top? How did you separate yourself from everybody else? How come you are not this similar figure to these other people, you are more?
Charles Faulkner
First of all, I would not presume I am at the top. Again, that metaphor up, you know that little metaphor there. Yes, I would say I am a significant participant among this practice, which is what I think of it as. I am using the word as a... The idea of a kind of way in which you take hold of the world, that the tools we use shape our thinking. In that sense, yes, I am a significant practitioner of the work. I think the answer is simple enough that my interest in the work has and is around what it teaches me and allows me to come into contact with about how the world works, and the richness of the experience that it provides. I did not go into it for the money. People, who went into it for the money, know to charge for what they do. I went into it because it is really interesting. I think it might be as simple as that.
Charles Faulkner
If I had gone into it with the idea that I was going to make a lot of money at it, I think that would have made that outcome much more likely.
atrader.com
Who do you read? What are you currently reading?
Charles Faulkner
What am I currently reading? I am usually reading a stack of books about like that. (makes a gesture to reach knee high) I am picking through them. I scan some of them. I am re-reading others. I am starting something new in another. What am I currently reading? Thomas C. Shelling. 2005 Nobel Prize Laureate in Economics
Distinguished University Professor… out of Harvard.
I am looking at my stack, going what is… and then what is under that?
atrader.com
Okay. What books have made a difference in your life since you started reading?
Charles Faulkner
Since I started reading? (Laughs) Oh, this is where I am going to loose everybody.
Charles Faulkner
Anatomy of criticism, by Northrop Frey , big influence. The Body in the Mind by Mark Johnson. I think the title is Toward a Psychology of Art by Rudolf Arnheim , which is the other guy I would like to meet, the old guys. Rudolf Arnheim was so far ahead of his time in understanding how perception is the basis of other kinds of thinking. Only recently have students of George Lakoff been able to build the computer programs that actually demonstrate that connection. Milton Erickson, yes, perennially. I am enjoying the scene to leave. I have read it, but I liked the crafting of it.
Charles Faulkner
Yes. Yes. The Black Swan.
Charles Faulkner
A German fellow. The Logic of Failure by Dietrich Dorner. Some Milos Kowski's book on synesthesia. As my wife jokes to me she says, “Yes, you read light books.”
atrader.com
What about hobbies? Do you have any hobbies?
Charles Faulkner
I have no hobbies. No, I do not have time for a hobby.
atrader.com
I am sure there is something there. You were just at the TATE modern museum looking at some art books.
Charles Faulkner
Yes, I would not say that art is a hobby. I think that the principles of art and the principles of thought and therefore the principles of building a world, whether it is architectural or financial are deeply related to each other.
I use them to inform each other, as I used to joke to my students about this, but it upset them too much so I stopped. Is that I learned about philosophy of science from studying literature, and I learned about literature from studying it wasn't philosophy of science… but it was, you know, I have had these kinds of … where what one field had to say about another was much more interesting to me than what the field had to say about itself. What literature had to do about…to say about stories was much more informative, to me, about the stories of science, than science was able to be reflective about its own work.
atrader.com
Did you have any challenges when you were growing up that you can think of, and that you sort of conquered, and raised above those challenges?
Charles Faulkner
No. I would say if it had not been for my Uncle I would have had a very white boy, suburban upbringing, and would not have headed off in these other directions that I have. It was not so much a challenge as it was opportunity, serendipity.
atrader.com
What did your father do for a living?
Charles Faulkner
Many things. My father, in that way, is a role model. My father was an advertising executive when I was young. The jobs rebellion wants you, he was a…nobody remembers this, but this was one of his campaigns. My father was the ad. Executive on the very first advertisement for bank cards, which became credit cards. If you need somebody to blame about the credit card crisis, and so many people that spend... I was in the commercial, by the way. I was in that very first commercial. I got a bicycle. Not really, but they…they filmed it in our house which was bizarre. They used our suburban home and they pushed all the furniture into a corner. It looked terrible in person, it looked great on screen. That was my first education to what things look like on screen has nothing to do with what they look like in real life.
Then I was a teenager, I think I was 14 or 15 and he and my mother sat my brother and me down at the dinner table one night, and he tells me he is quitting advertising. I was very upset, because I knew he was about to become a senior guy, and I was planning on getting a…at that time a mustang was the car to get. I was planning on getting a mustang and I was planning on being very popular. He explained to me that he had decided to quit advertising because his boss had been carried out, had had a heart attack at work. I remember thinking his boss was really old, because I had been to work a couple times. I stopped by or whatever reason and I remembered this old grey haired guy with a grey mustache. My dad said he was 54, and I went…Then I began to appreciate more what my dad was saying. He went back to college and he got an education degree, and he taught in high school and he taught in university. Then he retired from that and he was a radio DJ for a while. Then he retired from that, and he and my mother do their portfolio, which they are quite good at. Unknown skills, you know.
In that sense, the thing that I took away at the time, I said at 14 or 15 when it happened I was upset. As an adult, when I decided to leave graduate school and go into NLP, it was my dad that was the inspiration. I think I was 28 or 29 at the time I did that. You are supposed to know what you are doing with your life at that point. I realize that it was because he could change careers, I had seen that, that it made me realize. In fact, I am in a sense doing it again, if you will, by deciding not to go the road of the big seminars and so forth. In stead to make a contribution to the behavioral finance area. At least that is my intention. To make a contribution to that area in terms of how people represent the knowledge and decisions and provide insight and value to my clients. Which again is taking on another, if you will another career. My dad was an inspiration in my life.
atrader.com
Okay. Alright. How do you…you mentioned you do not have any hobbies. How do you…Do you take holidays? Do you have recreations? Do you have any leisure time?
Charles Faulkner
My wife would say no. That is American. Yes. Most of Americans who are at a professional level do not even take their two week vacations. It is cultural.
atrader.com
Okay, but you are in Europe now.
Charles Faulkner
Yes, so.
atrader.com
None of it has rubbed off on you?
Charles Faulkner
My wife and I have taken trips to Barcelona , and to Tuscany , and just the other evening she is looking forward to when we might go to Bucharest . We have been to Berlin . I can not get her to…I did get her to go north. We have spent a Christmas or New Years we spent in Copenhagen . I really enjoyed that. I think one of the things I enjoy most about being over here is the rich diversity of culture so near. In the US you get on a plane and you get off 2 hours or 3 hours later and you are in the same place. There is the Wal-mart and there is the… I have just; I am totally supportive of the French. They want to keep their agriculture. There are literally books published by the French, whatever, tourist or whatever, where you can do tours through France where you get the different cheeses and the wines and the foods, because their local and the locality, has difference of taste and difference of quality and so forth. It is just… How marvelous is that? I hope that Europe keeps this distinctiveness and it is not about…it is about genuine expressions of the different cultures and their values and the people there. I know as we get communicating more and these devices we carry around connect us more that will probably disappear to some extent and yet I think it is something to be treasured. If there is a hobby, if you will, I do not think of it as a hobby, but if you want to press me into service. I would say that that is probably what it is for me.
atrader.com
We have a list of your published work. Are you working on anything right now, anything new?
Charles Faulkner
I am working on a number of things now, yes.
atrader.com
Are you? Tell us about that?
Charles Faulkner
Where to begin? Where to begin?
atrader.com
What is coming out first?
Charles Faulkner
I do not know. Publishers and publishing are quite different activities. I did an analysis a few years back of…it hardly describes what I did, a deep study of Milton Erickson's work, and found that he had a richer grammar for what he did than other grammars like transmissional grammar or whatever. What has happened historically is that people have tended to trim off the patterns that did not fit their preconceptions, so I literally have a complete accounting of all of Erickson's language patterns and I am looking to put that out in some form. Possibly cards, possibly a course, rather than the usual things people have a whole phrase…what I have done is, I have done what are the atoms molecules to take an analogy. How can you build those up into the patterns?
I have a study of representation that I am working on that accounts for every…a big claim here…but every bias. I found a way to model out how all the different biases work via representation. Which means that I now know by shifts of verb tense, by shifts of language in terms of abstractness or concreteness, and so forth, that I can literally either minimize or maximize how much one of the behavioral heuristics biases we talked about will effect somebody or not. That is another thing.
atrader.com
Is this is a book?
Charles Faulkner
I do not know what this will be yet, but this is definitely some that… Then there is the project. The project is an account of all the transforms and such of how language… it sounds too big to say… it is an attempt to actually ground NLP academically and philosophically, scientifically and philosophically. As I have been talking here about the children and things being higher and looking up and stuff like that. We are looking forward to things. We look back on things, and so forth; these orientational metaphors form the basis of certain kinds of experiences. These blend with other kinds of experiences, like being on top of something. Not falling into something, and this account which I am terming, meta-patterns, can describe any therapeutic intervention in terms of at this point there is 16 meta-patterns, and either a transform inside a pattern or between patterns. I can account for any kind of therapeutic or consulting business intervention.
Again, this is outrageous claims to make, but we have reached a place I think where the knowledge we have about how human beings generate their worlds is such that we can begin to make these leaps. They are not the huge leaps that they used to be.
Grinder and Bandler made a huge leap years ago, where they did not…because what they did is they just asserted that the superior war hypothesis was much stronger than anybody thought. The common understanding of the superior word hypothesis is that the Eskimos have 70 words for snow, I do not know how many you have, but I do not have 70. Therefore, they have a richer language than we do and therefore their experience of the world is different. What you can name, you can see what you see, you can name. That is hardly nothing compared to syntactic differences. That is that, Japanese language, by having the verb at the end, creates a substantially different experience than having the verb in the middle. There have been arguments back and forth, about whether the superior word hypothesis is viable. What it does really mean? Cognitive linguistics asserts a moderately strong version of the war of hypothesis and NLP asserts an absolutely radically strong version. That is that, how you talk to yourself, not only affects how you thing, but if you are talking changes than we can infer your thinking has changed and your experience of the world has changed. That is…see this is my hobby. It is my job. It is my hobby.
atrader.com
Okay. What advise could you give to traders before starting out? A lot of people are now getting involved…
Charles Faulkner
(laughs) There is still time to turn back.
atrader.com
Okay. That is the advice?
Charles Faulkner
That is the first advice, I would say, “There is still time to turn back.” I have said this before, it has shown up other places, but the idea of succeeding in trading is similar to…it is similar in percentage to succeeding in movies, being a movie actor. I mean, there are a lot of people in the business, and there are a lot of roles in the business that you can take. There are only a few roles though, where you are an actor. There are a lot of other roles in the business. There are a lot of people that want to be actors. There are a lot of levels you can act at, as we are well familiar being in London with live theater and all. There are so few actual really successful roles available, relative to that universe, that if there is anything else you want to do with your life, go do it now. The chances of success are so small. On the other hand, if this is what you really have to do, if this is what you really want to do. This is what you are inspired to do. Come to the right place.
I think the second piece of advice I would give to aspiring traders is there is a much bigger universe out there than what they realize. I think a lot of people sell themselves short by, the old New York , New York song, if I can make it there I can make it anywhere. It is like, yes, but why start there? Trading is one of the few businesses you can go into and your very first day you are competing against the very best people. They do let this happen in other endeavors. You do not get to drive formula one car just because you know where the stick shift and the steering wheel are. You end up competing against people, or algorithms at this point, computer programs, that you may not be prepared for, but there are all sorts of other markets, littler markets, and niche markets.
Niche markets like Singapore , niche markets like Eastern Europe , or even I am saying niche markets, because we are really talking about the future of trading. Sports betting is going to be a traded area, it already is. Political betting, there are lots of other areas in which the future of trading has many opportunities where the players are less experienced. Where it is seen as more marginal by Merrill Lynch or somebody big, because they can not trade in New York . We are trading sports betting, you know, they would get into trouble for that.
On the other hand, you can apply the same principles of trading to these other markets, where you can become a bigger fish in a smaller market and learn the craft, and get good at it, before you go out on the formula one track. They used to say this about musicians, and Bruce Springsteen said that one of the best things that happened to him is that, after he was discovered, he was not discovered. He was discovered with Asbury Park , his very first album, but it bombed. He said, I got, like, an extra three years to work on my music before I was in front of people again. I would make the same analogy for a trader, is that you want to have some time to do the research, to learn to business, to cut your teeth, and to get the craft of it. It is not a limitation to do that. I think it is like kids who grow up in a small town where you can be on the sports team and you can be in the school play and stuff. You get to try out stuff, that these kids, when they move to the big city or the big college later on, they are much more comfortable. They have not learned to be anonymous. They have not competed against 1500 or 15,000 people the rest of their life. They have built up an ego sense. They have got a sense of confidence that then can carry them forward. Does that make sense?
atrader.com
When were you born and where were you born?
Charles Faulkner
January 12, 1952 , I was born St. Clair Shores , Michigan . St. Clair Shores is a tiny suburb outside of Detroit , and a nicer hospital than my parents could afford at that time. It was a gift from an uncle to my mother that I be born at a nice hospital. The next gift he gave me was a dictionary on graduation from high school. It was a good dictionary, I still have it.
atrader.com
Tell me more about these metaphors and linguistics
Charles Faulkner
The point being is that there are things, and the key here turns out to be conceptualizations and representations…that is, that against the concepts, an example I gave when we were talking before. The concept of up and down is very biological. Little kids get it. It is deep in us and it tends to regress our mind when we use it.
Charles Faulkner
So somebody going, “Well I'm not on top.” That metaphor actually ties into very deep structures of consciousness as well. What do you do? You think conceptualizing differently, my term to re-language it…then you create a different mind. So that is where you said, you know, you are at the top of your field, and I said, “Well I prefer to think of it as being a participant.”
Charles Faulkner
…A leading participant in my field or an active participant. Now it sounds all gibberish but that is not the point. It is like when Joe Ritchie was saying in a speech, “It's very important that you be honest in your business dealings and you be honest with yourself.” And I was sitting in the audience watching…If you do not know about the Richey brothers. They are fundamentalist Christians.
And a bunch of the guys were kicking up their feet and go, "I did not come here to hear about Christian preachings. Richey heard that and he said, “Now wait a minute. This has nothing to do with my religion.” He says, “This has to do with keeping your head clear enough to be able to do this business. If you have to keep double books, if you have to remember what you said to people. You will not have a brain space left to do this business.”
That is my point, as well, is I am not saying I am a participant instead of on top, because I am trying to be home loan and community oriented. I am actually utilizing language, which for me sets me freer mentally, then for me to activate those deeper earlier programs in life about ahead and behind and up and down and all the other things.
Charles Faulkner
The cross disciplinarians of this is that I know from the cognitive linguistics what the different forms are. And I know from the behavior-financing research how it is they are operating and I know from the NLP that I can change them. That I know I do not have to….I know I can utilize a different form and it will have a different cap. To me there is something very strong here in terms of putting this together.
Charles Faulkner
That goes beyond the NLP stuff
atrader.com
Have you put them together in practice already? You have given it a name already?
The whole thing? Tell me what name have you thought of ?
Charles Faulkner
Well, yes. That is the thing. The kind of stuck on that is that what do you call this? Names that get spoken about are neuro-economics, but that is actually incorrect. Because neuro-economics is actually the study of…it is the utilizing economics to understand neuro behavior.
But people are…just like people think psycholinguistics is something you do with NLP. Psycholinguistics is about language learning. Academically psycholinguistics is not about psychology. Psycholinguistics is about what are the adaptive phases of language acquisitions and helping you get in and demonstrate those in terms of the research. There was another I saw recently. Yeah. I hate this one. This is another one. It is psycho finance.
Charles Faulkner
We can talk more about that. As I say, there is the public case of this, which is what I just offered and there is the intellectual property that I am trying to figure out what to do with and how to protect and so forth.
atrader.com
Give me the public face…when was the discovery made? Is it still evolving? Is it ready to work?
Charles Faulkner
Yeah. Both. There are the basics so that I work out the basics of it. The thing is, that it utilizes NLP on a level most NLP'ers do not use. It utilizes cognitive linguistics in a way that no cognitive linguist I know would use that they would recognize. The guys of behavioral finance… I do not know what they are going to make of it. Because I am actually claiming, I understand how the biases work. I know in their field that is a PHD thesis, so I am sure to get kick back from them. They are going to go, “Wait a minute.” “Who are you?” “Which university are you associated with?”
But the concept stuff comes from the meta patterns And representation….to me that is just line easy. Everyone knows, everyone knows, even those people that…People are more afraid of sharks then they are heart disease. Why is that?
atrader.com
Everyone knows.
Charles Faulkner
Well, I mean I played this game in front of group and I just the other day was saying that the traders I was talking to were like, "For free drinks…I try to give them something that would motivate them…For free drinks, who can tell me how many people died of shark attacks in 2006? How many people died of heart related difficulties in the world, whole world in the same year?"
atrader.com
25 million?
Charles Faulkner
Four people died of shark attacks. You were actually close. The guys all went from 20, 8, 42, 9. I said no, you are guessing. You do not know. And heart disease 40 million. The thing is heart disease is an abstraction. Heart attack…then people…that gets more vivid. Here is the difference of language. Shark brings a vivid image to mind and the behavioral finance stuff….
Charles Faulkner
Heart disease. It is clogging your veins; no it technically does not come up.
Charles Faulkner
Yeah, you can say, how many died of clogged veins and they respond. So that the basic NLP of it. The vividness, the clarity and richness and somatic You say shark, and you say shark in a certain way like “shark attack.” You know, they respond and they make a vivid picture or movie. You say heart related difficulties and they go yeah, yeah, yeah. It is abstract. It is like the NLP train of thought in evasive training, but nobody notices. Grimmer and Bandler would do this thing where they would go, "glass, bottle, cup, picture and then ? In other words, what are those all, and it would be containers. Then you go "glass…wine glass", down to detail. This is basic NLP training. They will do this, or they will do motorcycle, car, bus, transportation.
Charles Faulkner
Then you go car down and you box up or whatever. Mercedes. Basic NLP. They use though, people…..if you think about it for a while, which I did, you can say transportation they started to visualize. It is like say furniture. It is like saying heart related difficulties. This is the work that I have been doing. Thinking about this kind of stuff. Whereas, if you say, Mercedes or if you talk clogged arteries or bypass surgery. It is more vivid. You say shark. Quite simply enough, is the language that people use in the market. I was at a firm this morning and they showed me some internal documents. It was great. They had risk. It was like high, low, medium.
I am looking at this thinking, there is gold in them there hills. I am thinking about…Now wait, if you said that to NLP'ers, they never understood it, but the work I have been doing with Steve Andres on scope and category… I am giving it all away now. Scope and category. Watch this. Scope. Right?
Charles Faulkner
And then category. So how do you relate categories and how does scope work in the situation. Those are one of the four operators. I am just looking at how do these operators apply and I went all right, wait a minute, look at the representation, and what becomes vivid for the trader in certain situation is taking a loss. Loss is more vivid for them in terms of the numbers than somebody with a metamorphous like following your senses. If you do not talk about them being on different logical levels, think about it…Losing x number of pounds verses following a system, transportation, sharks.
atrader.com
Charles Faulkner Thank you for the interview…