Dr. Indre Viskontas:
Hello and welcome to Inside the Mind of a Trader, the show where we explore how brilliant traders are wired for success. I'm Dr. Indre Visconti, neuroscientist and professor of psychology at the University of San Francisco.
On this episode, I'll be talking to Stinson Dean. Stinson, a former standout college quarterback, lives, breathes, and physically trades lumber. As CEO of Deacon Lumber, he routinely shares his strong opinions on commodity trading on social media platforms and financial news shows. Hi, Stinson.
Stinson Dean:
Hi, Indre. Thanks for having me.
Dr. Indre Viskontas:
Oh, so great to have you. I want to start out by talking about your career as a college quarterback. How did you gain those skills? How did you learn to take your team to victory?
Stinson Dean:
I grew up playing sports and I played football since the third grade. And it wasn't until school football that I started playing quarterback. You grow up watching players on TV and the quarterback is the one we all gravitate to, so I was able to... I laugh because my son is in little league flag football now and he doesn't play quarterback. He doesn't care to, but I remembered in little league I would learn the quarterback plays even though I played fullback. It was a completely different position.
I always just was drawn to that position because of how much impact you have on the game, but really it wasn't until college football where the stakes are so much higher and the depth of the game is so much deeper. You kind of go to school, but really, as a college quarterback, you're getting a PhD in quarterbacking. Those skills, kind of the grit and the callousness of failure, those things were developed through intermediate football. But, really, in college is where I've developed into a quarterback that can read defenses and lead a team and we take tests during the week and film breakdown and all those skills that kind of come together to create both the physical skillset and then the mental skillset.
Dr. Indre Viskontas:
Yeah. So tell me a little bit about that training period when you're developing those skills. I don't play football, but I imagine that part of it is you're looking out on the field, you're watching all of these players move positions, you have a plan in mind, but you have to also be able to adjust. There seems to be both this spatial awareness that you have to have, but also this sense of what is going to follow what and...
Stinson Dean:
There's rhyme and reason for every movement on a football field and you don't really appreciate this until you are in a dark room in a conference room with a projector up in film and you're pausing it and you could play one second. We have a pre-snap analysis and then we hit play and then we go for one step. Everyone just takes one step and then you pause it again. You got to reevaluate your post-snap decision making. You have a series of outcomes that are possible based off of the alignment of the defense and the defense knows this. They may show you something to imply an outcome, but once the ball's snapped, you can't lie, you can't cheat, you can't be out of position from a defense perspective, then you got to start making your movement.
As a quarterback, you have your post-snap read. So everything you did pre-snap, you now have to either execute on or throw it out the window and, within a step or two, have a new decision and a new series of outcomes. That's just on paper. That doesn't take into account the flow of the game, the score, where you are on the field, your intent for that drive, your intent for that play, if you're in a position to take risks or do you need to be a little bit more conservative to move the ball down the field in a more conservative manner.
All those things are playing into your head and ultimately playing quarterback is about putting one defender in a place where they can't cover two people and you got to figure out which defender is going to be the most vulnerable and then throw it to the guy he's not covering. But there's a lot of steps and repetition and practice and study before you get to the game and then try to execute on that.
Dr. Indre Viskontas:
Yeah. I mean, I can already see the parallels of how this might impact your job as a trader, as you have to not only know the landscape and be able to predict people's behaviors or the market's behavior, but you also have to be able to pivot on demand. How do you approach now those elements of trading? Do you ever find yourself actually thinking about football when you're...
Stinson Dean:
I do a lot. One of the most common phrases in a quarterback meeting room is you can't go broke taking a profit. That's typically in the red zone where you just have 20 yards and the field has shrunk. A four-yard play on a percentage basis is significant on a 20-yard field. On a 100-yard field, four yards isn't that big a deal.
Generally in trading, if there's profit there, we say, "If there's an order, you take it." You don't get greedy and you don't hold out for a higher price. When there's profit there, you take it. That's always going through my head, "You can't go broke taking a profit." My quarterback coach taught me that at the University of Wyoming, and now it applies to, "Hey, we got into a good trade. There's profit there. We're going to take some chips off the table." The other parallels that I apply to... It's funny. I mean, I'm trying to dodge 300-pound men tackling me. Now, I'm just clicking buttons.
When I'm clicking the buttons, it's not quite as intense of trying to get in and out of trades, but the risk management is constantly going through my head. If I make this decision, then this, then this, then this, and it opens up this branch of outcomes. As a quarterback, you had to constantly process, "Okay, do we need to get a first down or do we need to go for a touchdown? Do we need to audible to something safer?" It's completely situational. The context and the situational dependent on the situation. So the ability to kind of have some general guidelines...
People ask me like, "What's your trading process?" I don't really feel like I have one. I've never written anything down. We have some risk management guidelines, but every day, every piece of information as a trading cycle is happening similar to the flow of a game, things are changing and you're giving more waiting to this priority, less waiting to this variable. For a certain outcome to happen, you need this guy to go there. And if he goes there, this guy has to go there. They can't leave it open. And God forbid if they did, we're going to throw it there.
In trading, if I trade lumber for a living, and I know that if... For an easy example, if rail car speeds are half of what they normally are this time of year, then downstream from the rail line, they're going to get product in a less prompt manner, so they're going to need to be calling me. So I'm tracking the speeds. And if they're not calling me, it either means they already have a bunch of lumber and they're going to have even more when that lumber shows up and that's bearish. Or if I know rail speeds are low and my phone's starting to ring, they're in trouble, they need these rail cars, I need to sell everything I have that I already have positioned downstream of the rail line before their rail cars show up.
It's like this cause and effect and putting yourself where you're trying to eliminate this defender, this defender, this defender, so I can just zero in on this defender or this rail car variable. Nothing else matters. You've eliminated it and its effect on the broader picture, and then you're just... What are you going to do? Are you going to call me and say you need lumber or are you not going to call me and not going to answer my call to indicate you have a whole bunch of lumber and I'm in trouble if I'm sitting on a bunch?
Dr. Indre Viskontas:
Watching your hands move like this, it looks like you're actually literally seeing this in physical space. One of the things that has come up recently in neuroscience is that we all have very, very different inner mental worlds. For example, some of us actually have an inner monologue, a voice that's literally talking to us. Some of us can visualize things really, really clearly. There's this one animator at Disney who literally never has to see a film twice because he can recreate every single frame. At first when I heard about this, I was like, "Oh, that's total bullshit." But then you watch him do it and you're like, "Oh, my God, this is actually how his mind works." And then there's someone like Ed Catmull, who is the founder of Pixar, who has zero ability to visualize something in his mind's eye. When I see you work like this, are you actually seeing physical railway lines and lumber?
Stinson Dean:
Well, no one's ever asked me that, but I feel like I... It reminds me of studying film. This guy has to go here and this has to go here. And I learned through film study way better than I did doing a walkthrough in person. I don't know if that makes me a visual learner, but that kind of mental picture, I think, helps my mind organize all of these variables. One of the most fascinating things I've ever seen and I feel like I'm probably not as good at this, but there's a clip of the head coach of the Rams and they interviewed him on the practice field and they gave him the down and distance, the time of the game, how much times left, and the score. And they go, "What play did you run?"
And it was from the season prior, months and months prior, and he just... like little nothing plays like, "Oh, an end-around and we threw it to the tight end. Oh, we did a reverse. We did a dive." He just nailed them, pop, pop, pop, pop, kind of that visual memory where those things are really ingrained in you. As a coach and as a quarterback, those snapshots... I feel like this was something I was thinking about earlier.
There's a book called The Sports Gene and one of the elements in there was about some of the best hitters. It wasn't necessarily their vision that was great, because fastballs come in at the fractions of a second.
Dr. Indre Viskontas:
You can't see it. Yeah.
Stinson Dean:
They have these mental snapshots of all the reps of just a couple little frames and then they can figure out where this pitch is going to go and their body kind of naturally puts the pad on the ball. In football, you got that pre-snap read and then you have a fraction of a second to get the post-snap read to see where the players are going to move, and then you have to extrapolate where everyone else is going to move. You can't look at all 11 guys. And in trading, you kind of get these snapshots like, "I've seen this before. I've seen this setup before."
For this setup to complete, I need the futures market to go from backwardation and start trending towards contango where the time spreads are compressing. If that happens and the rail lines are happening, I've seen this movie play out before, and this is how we're going to position it and this is how we're going to manage the risk. But those kind of snapshots in time help me and athletes in general process information extremely quickly because you're just kind of storing these mental setups and you can kind of pull from those and tweak them and go execute.
Dr. Indre Viskontas:
Let's take a quick break and we'll be right back with Stinson Dean after this.
James Kostulias:
A lot of what we do and a lot of what we talk about at Charles Schwab and with our whole offering of Schwab Trading powered by Ameritrade, it is the educational component.
Lorraine Gavican-Kerr:
We really like to teach our clients about risk management, about using a platform. I think that we really want to set people up for success for whatever they want to do. Traders have different aims, different goals, they trade different types of products.
Chesley Spencer:
Enabling them to see what they are able to do, particularly with things like derivatives or options where it's not nearly so much a binary of, "Hey, you think this is good? Buy it and it'll go up. You think this is bad? Sell it and go down." All of those have very particular actions one can take based on them that's a lot more nuanced than just a simple buy or a simple sell.
Lorraine Gavican-Kerr:
The people who work behind the product and experience are traders. They're super engaged. They love what we do.
Chesley Spencer:
The advice is very much a part of the overall Schwab business, but in the trading space, it's much more about empowerment.
James Kostulias:
Whether you're somebody who's more fundamentally based or more technically based, there's so much to learn across how to trade different instruments, across how to trade different markets. And so I think from my perspective, what I would say is continue to learn and continue to educate yourself. There's no sort of one playbook to trading.
Dr. Indre Viskontas:
One of the things that I wanted to ask you about that, I think, actually relates to... Just bear with me. This is going to be a really random seeming tangent. Some neuroscience research showing that you can actually literally physically enlarge certain parts of your brain with training comes from London cab drivers. In London, black cab drivers who had to get this particular medallion to have that label had to go through this huge training called The Knowledge, where, for two years, they get on these mopeds and they drive around the city and they have to memorize this map of London.
It turns out that the hippocampus, which is the part of your brain that takes information and turns it into a long-term memory, is also really important for spatial navigation. The volumes, literally the number, the size of this region in these successful cab drivers who ultimately passed the test grew over the course of their training. The way that you've been describing what a quarterback needs to do made me think that, in some ways, this is kind of similar, where you're going through all of this training and you're building up probably this one region of... We haven't scanned you yet. That's going to come. I'm going to send you a quick note about that, because I want to measure the size of your hippocampus.
Because then when I think about what you're able to do now, remember in detail all of these kind of previous scenarios, that's exactly what the hippocampus does. It's like an index of bringing things together, but the interesting thing about this particular part of this memory network is that what it does... Our memories are not very accurate for the past, even though we think they are, even though it gives us a lot of confidence they are, and that's actually not what it's for. Because knowing exactly what happened in the past is not as useful as being able to take the current situation, which is probably slightly different, and projecting what's going to happen in the future.
Instead, the hippocampus in these brain regions are involved in simulating possible futures. See where I'm going here?
Stinson Dean:
Mm-hmm.
Dr. Indre Viskontas:
which I think is exactly one of the tasks that you do as you're making these trading decisions. You're simulating possible futures on the basis of what you've experienced in the past and the knowledge you've had and then predicting and making a decision on that basis.
Stinson Dean:
Yes, what I call the dispersion of outcomes. It's like that's, I think, the future looking possibilities and then second order effects and kind of like having this rabbit trail or decision tree kind of played out. One trigger then tips you this direction and then another trigger can tip you back the other direction, but as a trader, what I worry about is getting stuck and saying, "Oh, I've seen this before and this is how it plays out," and it does this every time. Because we all know during COVID lumber did something nothing has ever done, let alone lumber as far as the price, the speed at which the price went, how high it went, how fast it rolled over, and then it did it again, and then it did it again. That was not something anyone had in their hippocampus-
Dr. Indre Viskontas:
Nope.
Stinson Dean:
... at all. I take a lot of pride in how, ultimately, I navigated the COVID commodity market because being a quarterback is you have to have mental depth and probabilistic thinking, but you still have to manage your risk. Navigating COVID meant, "I think this is how this is going to go," but black swan event, COVID, whatever, we need to have hedges on, we need to have an exit plan, and we need to have something that triggers that exit plan.
When you're playing quarterback, you could practice a play all week to take advantage of a certain tendency that the defense has. You get it called into the game, get it called in the huddle, everyone's super excited because this is the touchdown shot that you called, and then the defense lines up in something completely different that you've never seen.
What worries me about having relying too much on that prior experience and trying to extrapolate is what happens when there's something you've never seen and there is no precedent. That's why, as a trader, you got to have risk management on, because it just takes one of those to blow you up. Risk management is what keeps you alive to continue to trade all these markets and, to me, it's that part that I'm now learning is the hippocampus, kind of keeping that in check and not getting too confident on your prior experience.
Dr. Indre Viskontas:
I want to say don't worry, because the one thing that, really, we know has a direct impact on the size of the hippocampus is stress. Cortisol, it's a hormone. Mothers resist monkeys who are stressed, their children are born with smaller hippocampi. So stress is a big problem, long-term chronic stress. It sounds to me like a lot of the things that you learn as a quarterback is actually how to manage that stress and not to get stressed when things are going awry. Talk about that, your relationship with stress management.
Stinson Dean:
Yeah. Yeah, that's very interesting. I didn't know that. Stress, you're saying, shrinks and depletes the capabilities of your hippocampus?
Dr. Indre Viskontas:
Long-term. Acute stress in the moment is actually boosting and it's not just hippocampus that's involved, but long-term chronic stress, feeling like you are working for someone who doesn't appreciate you, all that is really bad. You know that from baboons, Robert Sapolsky work. But, yes, it's really bad for these brain regions.
Stinson Dean:
So the most stressful thing in trading is when you think you're right, you have a lot of conviction, and then every day you're wrong a little bit more, a little bit more, a little bit more, and you start to panic. Do you cut your losses? Do you double down? What did you miss? And you start second-guessing. Being able to control those emotions and really having a plan before you get to that bad scenario. One of the things we try to do is make decisions well before we're in the midst of executing a decision, so the rules and guidelines and our risk policies. This decision that was made in a boardroom months ago, we put this trade on, we all agreed if it hits this level, we're getting out, and there is no decision to be made. So that helps.
But the unforeseen, the market's moving for COVID and lumber, we were locked limit up every day. Within seconds, the first trade was the highest possible trade of the day and that was it. It was stuck and no one would sell it, which meant no one could buy it. Having to navigate that market and manage your cash and manage your margin calls and manage your customers' expectations, being able to navigate calmly volatile markets just gives you a huge edge. Some of that comes from I was born that way. Some of that comes from football culture. Some of that comes from perspective like, "It's not that big a deal. It's money. My wife's still going to love me and no one's going to die." What's the downside? We lose all our money. That's terrible, but I'm still going to have a loving wife and four healthy kids. To me, that's a huge piece of the calmness and the contentment with we could lose it all and I'll be okay.
Dr. Indre Viskontas:
Yeah, and it's protective. I'm glad to hear that. We sent you a bunch of tasks to do-
Stinson Dean:
Oh, buddy.
Dr. Indre Viskontas:
... and you did them.
Stinson Dean:
Oh, man. Yeah.
Dr. Indre Viskontas:
And then we compared your results to a bunch of college students.
Stinson Dean:
All right.
Dr. Indre Viskontas:
Okay. Just to put things into context. To me, I want to tell you about one, because that was the most interesting to me and probably the one that I feel like, "Oh..." It set off a light bulb in my head. We asked you to generate a bunch of questions to a prompt like socks.
Stinson Dean:
Yeah, it was terrible.
Dr. Indre Viskontas:
Really stupid
Stinson Dean:
I forgot I took this.
Dr. Indre Viskontas:
Yeah. Yeah, ridiculous.
Stinson Dean:
I didn't realize we're going to go over this right now. Great. I haven't seen the results.
Dr. Indre Viskontas:
We took your answers and then we categorized them using something called Bloom's taxonomy, which is where you get one point if you're just telling us what it is like, "Socks are socks. I remember that I was asked about socks." Two, where you explain something about socks are something you put on your feet. Three is where you apply that knowledge. And then four is where you analyze or go a little bit deeply and use those questions to get at the heart of the matter. For one thing, what you'll see here is that the black line is what the average college student... How they would respond to these questions. They're mainly staying in the very low one to two area and then we see you. This is the order of the questions. Right away, you go straight to analysis, straight to the really interesting questions, and then you stop caring, which-
Stinson Dean:
I mean, it's socks.
Dr. Indre Viskontas:
It's socks. You're right. There's only so much. You know when to get out of the market, when you get...
Stinson Dean:
I'll take that. I'll take that.
Dr. Indre Viskontas:
But to me, your initial response coming out of the gate is to go straight to the, really, unanalytical questions made me think, "Huh, I guess this is how you approach this problem. Instead of sitting in the... Let me think about this or explain it." It's like, "No, what is the important analytical question here?"
Stinson Dean:
Yeah, that doesn't surprise me. I'm kind of thinking back to that test, because it felt like competition. It was like, "List as many as you can, pop, pop, pop, pop, pop, pop." But then it's like, "But make sure they're creative," and I'm not creative. So I was very stressed out about thinking of creative stuff. I think my instinct was to analyze the sock and then I'm like, "Well, these are not creative questions and I don't have any creativity."
Dr. Indre Viskontas:
Oh, that's not true.
Stinson Dean:
Okay, we'll deal. I'll take that, but it is fascinating. Also in my professional life, I analyze a lot and I used to be in a sales position where I'm doing a business-to-business sale and it's like chum it up and how are your kids and stuff. I'm like, "I don't really care about your kids. I think you have a problem and this is a great solution to solve it." I'm not very good at sales, it turns out. I'm very good at trading where it doesn't matter how your kids are doing or how your golf game is or what vacation you went to. It's price. My customers don't care about anything than me having the cheapest price. That's how I prefer it. That result ultimately makes sense.
Dr. Indre Viskontas:
Makes sense. Well, Stinson, thanks so much for sharing your experiences. I have a good idea now of how quarterbacking prepared you for commodity trading and I really appreciate you.
Stinson Dean:
Yeah, thanks for having me.
Dr. Indre Viskontas:
Join us next time as we look inside the minds of brilliant traders.
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