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The Turtle program as a business model
Posted: Mon Feb 02, 2004 9:46 pm
According to published accounts, the Turtles made a lot of money for Richard Dennis during the time they worked for him. It seems to me that the Turtle program could have the makings of a great business model. When somebody does something that makes a lot of money, it usually spawns imitators. In one interview I read, Dennis declined to detail his selection criteria for picking Turtle candidates, saying that he might want to do it again some day. But so far as I know, there has never been any attempt to reproduce the Turtle experiment by Dennis or anyone else. I would think it would be much easier to recruit, train, and supervise a batch of Turtles than to personally manage a fund. Any thoughts?
Posted: Tue Feb 03, 2004 1:04 am
This business model in a different way was and is still alive in the futures markets. In the futures openoutcry markets big indipendent traders or 'local' used to back-up newcomers on a profit-sharing base. These kind of deals are still alive outside the open outcry floors in London and Chicago, where former traders opened trading rooms or companies for electronic trading. The training is different, sometimes you just needed to spend some time as a 'runner' on the floor to be given some money to trade; the time-frame is different, mostly intra-day, and trading system is different, usually no trading system or just discretionary trading.
best regards, as ever
Posted: Tue Feb 03, 2004 4:30 am
RWK - If you had $10M, why wouldn't you just trade it yourself, rather than handing $1M each to 10 people to oversee?
Wouldn't you smooth your risk by simply trading the $10M, with your complete control, across a few systems?
Posted: Tue Feb 03, 2004 6:12 am
rwk wrote:I would think it would be much easier to recruit, train, and supervise a batch of Turtles than to personally manage a fund.
Are you sure? What's going to happen when the market goes against all your positions at once, leaving your trainees in the dark? How are you
going to give them the confidence to stick with the rules?
The unique thing in Mr Dennis & Eckard experiment is that they performed system research that lead them to formulate the rules
and this is what gave them the confidence they could, in turn, push on to the trainees.
If you haven't done yours, then the rules just appear as "black magic" and you won't have a single clue as to why
they work. I certainly wouldn't want to be in such a church-like position where I would have to utter my devotees: "believe, believe, that's all it takes to become successful" ...
Now, if you have done your own research and have come up with some rules (possibly similar, possibly different to that of the Turtles), then, in addition to performing ongoing system research anyway
you'll have to manage a bunch of newbies most of whom will probably only see the "Get Rich Quick" aspect. And thus you'll have triple duty, every day, as a researcher, morale booster, and myth debunker ... All that because you feel that pressing the trigger yourself is beyond your own capabilities?
I would rather revisit immediately the belief that issuing the trades myself is such an ordeal ...
Posted: Tue Feb 03, 2004 7:02 am
Nurturing Turtles or backin-up traders seems another way to follow the trend to me and diversify.
As in trend-following about 6 or 7 trades out of 10 will be losers, but in the other 3 or 4 trades you will make back what you lost plus interest. In the case above you don't enter trades you enter traders.
It's also the same priciple, or at least it used to be (before the New Economy
) in venture capital; you invest in 10 companies knowing that 8 will be losers and two will be very big winners.
Nassim Taleb would say that is investing in 10 white swans hoping to find the black swan, I guess.
And latest but not the least, your manager usually gets a share of the commission fees from the traders, so the boss becomes even your broker and the loser is not very loser; and that's a very nice way to diversify.
Posted: Tue Feb 03, 2004 9:45 am
While I agree that there would be some cheerleading, sounds to me the model that Rich and William put to work was rather darwinistic. You had one guy follow the rules off the bat (c.f.) so he set the example - that could be you. The rest either played along and got more money, sort of played along and got a little money or didnt play along and got canned and started teaching people black jack betting secrets.
In the absence of cheerleading, the traders would be forced to sink or swim on their own merit.
In the end i woud rather design 10 different systems and dedicate say 1 million as a way to diversify...Than give 10 people, a million dollars, trade the same system and hope they can follow the rules to the letter. Lastly and most importantly with Robo brokers it seems to make this far less necessary.
Posted: Tue Feb 03, 2004 11:09 am
I don't think Rich would do the same thing again.
First, he ended up paying us way too much. I got 30% of the profits my last year. The going rate is more like 10%, if you don't have your own fund.
Second, he would have done just as well, perhaps better with just three or four of us.
But perhaps the biggest problem with the whole idea is that you end up creating competition for yourself. If you teach others your methods in great detail, they end up competing with you in the open market. Rich watched several turtles end up making more money than he did off his work. I don't think that absent Rich's Turtle program, any of them would have had the same level of success.
If you have computers doing the work, they work for you without wanting to create their own fund.
If all you want is diversification, you can get that by investing in other funds run by experienced managers. These didn't exist so much when the Turtle program was launched, but they certainly do now.
Posted: Tue Feb 03, 2004 11:20 am
I am pleased and gratified to see so much response to my first post. Richard Dennis said in a published interview that he thought the Turtle program was the best thing he ever did. I fully agree. The Turtle story has had a big effect on me, and I still get a lot of benefit contemplating the lesson after all these years. My post was an attempt to further my understanding, not to engender controversy.
I think maybe some of the responders read more into my post than I intended. I am not suggesting that copying the Turtle program would be an ideal business model or a model that I would implement. I was merely observing that although it made a lot of money, it was never replicated. I think the Turtle experiment was unique in several ways. While there are organizations and individuals who will mentor and fund new traders, all appear to have significant differences from the Turtle program.
It seems to me that one of the most unique aspects of the Turtle program was that the Turtles were only required to follow the system, not to make money. They were given non-recourse advances against future profits as needed to cover expenses. Thatâ€™s very big edge, and I suspect, the most important factor in the success of the program. I know in my own trading, when I am able to focus on the process of trading and become detached from the outcome, I feel less anxiety and make better decisions. I have met several very successful traders who use trading assistants to implement their systems.
The Turtle program by all accounts was a huge success. What are some other factors that could have contributed to that success? The Turtles were carefully screened and not at all representative of the entire population nor even of the population of aspiring traders. The Turtles were supplied with capital, office space, and training. One obvious edge was having a sound trend-following system and good money management rules, but channel breakout was already a well known technique. I think that the fact that they were being trained by a legendary trader was a big factor in the Turtlesâ€™ success. They expected to succeed.
I believe that the difference between winning and losing over time in trading lies in the psychology of the trader. I have been told that the biggest secret of all is that there are no secrets. The biggest secret seems to be that trading can be learned. I am still not sure whether it can be taught.