Todd Simkin – Making Better Decisions [The Knowledge Project Ep. #119]

Todd Simkin is Associate Director at Susquehanna International Group, a privately held trading and technology firm. During his 25 years with the company he has held a variety of roles, including responsibility for SIG’s firm-wide education and trader development, where he taught the company’s new traders what questions to ask and what criteria to weigh before making hugely impactful decisions for the firm.

He calls on experiences from his lengthy career in financial services and educating traders to help Shane understand how to make better decisions. On this episode Simkin breaks down all the influences that go into how and why we make decisions, why financial decisions are different than inter-personal ones, the strategies involved with teaching other people to make better decisions, what he looks for when he’s hiring, the value of asking the right questions, and so much more.

Here are a few highlights from the conversation:

There are a few ways that we try to handle it. One is to build out research capabilities internally so that we do have some basis for our initial opinion. But the most important thing from our perspective is to be willing to understand that opinion in a Bayesian way, to use approaches that are going to be inclusive of all the information available to us.

If we’re good at encouraging the communication then we’re going to be really good at getting other people to help improve your decision process.

The answer to just about every trading question is it depends, which is a really hard thing for someone to hear when they’re first learning because they want the answer. They want to know, “When I’m in this exact situation again what is the optimal thing to do?”

In the world that I live in for better or worse we know that we’re going to make mistakes all the time, that we are effectively just running experiments and getting feedback, and then updating our approach and running a new experiment again the next day.

“Okay, that means it’s not going to happen, and then it did so you were wrong.” It’s really hard to say anybody is wrong about a single probability prediction unless they said that something was 0% or 100%.

The other important thing is to actually change your behavior when you get the feedback. If you get feedback and then don’t do anything with it people are going to stop giving you the feedback. It’s not just not helpful to ask for feedback and not change it. It’s actually hurtful.

All those questions that I would ask in trying to reach a decision, instead of just asking it to myself and then handing over the outcome I share the process. Sharing the process leads to more constructive conversations with my children and with our traders.

But instead, he said, “You know I’ve been thinking about it all night and it’s really been bothering me thinking about the fact that you’re quitting. It really bothers me because I haven’t heard why you want to quit other than the fact that you’ve been frustrated with your coach. There’s not enough here. It doesn’t make sense, so you’re going to have to explain to me in a way that it makes sense in order for me to be supportive of this.”

And so much more. 


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