"How the Hell Am I Going to Get Out of This?"

What the Nick Leeson story reveals about success, fear and trader psychology.

How the Hell Am I Going to Get Out of This?

Have you ever uttered this question?  I certainly have.  I’m not the first and I’m sure I won’t be the last.    

For it’s a relatable question that one encounters in those situations where perhaps things are harder than initially anticipated for any variety of reasons.  Very likely where we’ve pushed things just a little too far. 

This question came up recently in an interview between Anthony Cheung from AmplifyMe and Nick Leeson. Nick is of course infamously known as the ‘Rogue Trader', a trader for Barings Bank who in 1995 concealed mounting derivatives losses that ultimately reached £863 million and caused the collapse of the 233-year-old institution once considered one of the pillars of British finance.  You can watch the full conversation here: https://youtu.be/bmzLB8Hh2y0?si=oFDCabQrscQMYYtf

As salacious a moniker as that may be, it’s not the focus of this month's article.  

We like to think, “we’re better than that”. 
That these things happen to ‘other people’.  
We normalise our own shortcomings and vilify those of others.  
And it’s very likely we do this to feel better about ourselves.

But, the fact of the matter is, as traders and investors, there are times that we may indeed experience our own moment of ‘doing the wrong thing’, something we know we shouldn't do. It could be as simple as holding a loss beyond the pre-planned exit.

The experience (and negative consequences) are often very private and we keep it that way as it’s not fashionable to discuss these things openly, especially in professional circles.  

And so we present our successful image and hide the less savoury parts.

I might even go so far as to say, there are some of us who would not even care to admit these things to ourselves, let alone do the difficult work of self-examination in our own private moments. 

It’s rare therefore to get a glimpse into the mind of those that have taken the harder path.  Let alone been exposed to the magnifying effect of the opinions of others, the media and of course the jail time that followed. 

A hefty price to pay.

It takes extreme examples like what Leeson experienced to provide us the gift of example and wake us from our reverie - that we may have more similarity with him than we’d like to admit. 

For this reason, I dedicate this month's newsletter to an exploration of some of the themes that emerged from the conversation through the lens of trader psychology and emotional intelligence. 

I hope you get some value from this piece and take the time to reflect upon your own situation.

Chicken or egg? 

For those of you that follow my newsletter, you’ll be familiar with my interest in the power of the subconscious mind and its impact on how we perform and how we show up both in our professional and personal lives.  It’s an area that holds the ‘secrets’ to our own personal operating system - driving our values, beliefs and modus operandi.  A system conditioned into us from an early age (through family, schooling, society and experience) and which continues to govern us into adulthood.  

That conditioning effect runs on automatic.  It may well be outdated and can on occasion ‘mis-fire’ causing us to behave in counterproductive ways and undergo emotions of stress, anxiety, anger and so on. 

In the case of Leeson, it’s clear that he didn’t set out to deceive.  In fact, what he wanted more than anything was… to succeed.

“Stress - came with what I wanted to do, which was to succeed. 
It's not that the pressure came from external forces. 
It was all inside.”

So how does a person go from a pure intention of success to behaving in a way far removed from the original design?  

To understand this a bit further, we look at Leeson's origins.  

He came from humble beginnings with a working class background, grew up on a council estate in Watford (just north of London) and had a natural aptitude for education.  He found himself excelling with ease.  

With each success he developed a penchant for more success. 
He received praise, accolades and responsibility.  
The upward spiral continued as he moved into banking - starting at Coutts, moving to Morgan Stanley and then into Barings where he was based in Singapore managing a team at the young age of 25.  

Up until that point, he had not met with resistance.  

Each task he was given was easily accomplished.   With each accomplishment his reputation grew as did his responsibilities.  With each success his identity fused with being successful.  And unbeknownst to him with that the ‘ogre of failure’ was born... something to be avoided at all costs. 

“I was used to success.
I wanted success.
Everything was motivated by success, instilled in me at a young age’. 

But with all things in life, the challenger of resistance will present itself and to Leeson that happened in Singapore. 

In his own words, “everyone reaches their own level of incompetence”. Put another way - their own test in life.  

To set the scene.  At 25, his identity was set: 

• Head of a team, with people looking to him as a mentor

• Reporting to a board who knew little about the futures and options markets

• On the trading floor he was the man swinging size - a big fish in a small pond 

• To visiting executives from London - he was a maestro

• To his wife and family back home - a successful professional

He had clearly built a formidable reputation.  
Yet hiding in the shadows, his opponent… the ogre: Fear of Failure.

Let me pause here for a moment and ask you.  

What are your feelings of success?
How do you define it?
Is your identity related in any way to all that you’ve accomplished? 
What if you were to have to admit to not being all that?

Coping mechanisms

What is a man to do?

Here he was at 25.  
The expert in the room.  
Pressure to perform.

Leeson spoke of the Jekyll and Hyde experience. 
Upholding the image of a successful trader on the floor.
With the existential pain of positions blowing up at his desk. 
As he reflects back, he sees himself as having been immature saying: 

“When an immature person has status, they will do anything, absolutely anything to protect it’.

As a practitioner, I’d suggest it was more to do with his inner wiring.  He (as many of us) was unaware that his desire for success had morphed into an avoidance of failure.

To protect himself he relied on coping mechanisms that were harming him rather than protecting.

He rejected the idea of seeking help: 

“I was never going to ask for help.  Fear of failure was too big for me”

With that conditioning…
Damned if he did.
Damned if he did not. 

“The stress was off the chart”

One can only imagine the level of stress he went through

How did he cope?  Leeson resorted to the following: 

• Upholding an image that was clearly incongruent with his actual experience

• Hiding

• Alcohol

• Breaking trading rules

These were coping mechanisms that were hiding, numbing and harming himself.    

With an identity so wrapped up in performance and success, his inner wiring did not allow for failure.  

And yet… failure is what he had to eventually face and experience.

So what are the insights and lessons learned…

These were numerous.  

A critical one being: Self work.

Leeson was forced to face his demons whilst serving time in prison.  

He looked inwards and as is often the case for many of us, it took an existential threat to wake up and really do the work of self-examination.

What he found impactful and effective was communication.  Not necessarily with others, but with himself.

He began journaling.  

Prison gave him both time and space to reflect, review, develop awareness and reframe. 

The question is - do you need to wait for a forced event like prison to think and course correct?  Does it need to be that extreme?

Self Reflection

If you have read this far, dear reader, thank you. 

I invite you to consider Leeson's experience and this most recent conversation to be a wake up call. 

• Look in the mirror.  

• What is driving you?  

• Is it helping or hindering?  

• If things don’t change - where will you be in the next 3 years, 5 years, 10 years?

• Seek help if you find yourself in a difficult situation.  Whether it be health, finance or something else.  Sooner rather than later or you run the risk of things becoming insurmountable.

As a broader comment for the industry, the lesson is clear for those in leadership positions: be more approachable.  Encourage honesty, transparency and vulnerability in a safe environment.  Nurture your talent and it will yield returns.  

And Finally, a Few Thoughts on Resilience

A question was asked at the end of the interview: how does one build resilience?

Leeson’s answer was interesting.

Some of it, he said, comes from life experience.  The kind that humbles you and forces you to grow.

But a large part of it lives in the inner domain.

Resilience is not built through bravado or pushing harder.
It develops through self-awareness.

Understanding the beliefs that drive you.
Recognising the fears that shape your decisions.
Seeing the internal narratives that quietly influence behaviour.

Because when you understand your inner wiring, you gain the ability to respond differently.

And that is ultimately what resilience is.

Not avoiding difficulty.
Having the emotional awareness and psychological flexibility to navigate it without losing yourself in the process.

Which is why understanding your own conditioning may be one of the most important forms of risk management available.

If you need any help or pointers on how to do this, feel free to drop me a line.