Trend Following Warfare: John Boyd's OODA Loop in Trading

Most investors want comfort. We make the case for discomfort. This conversation dives into trend following as a rule-based way to survive chaotic markets, mapped directly to John Boyd’s OODA Loop and the culture that made the Turtle Traders relentless. Instead of worshiping smooth curves and tidy narratives, we focus on process: cut losses fast, let winners run, and treat volatility as information rather than injury.

With Jerry Parker and Mike Melissinos, we unpack what makes trend following so hard and so effective. Jerry traces the original Turtle training, where doing the right thing while losing in the short term was rewarded—a culture almost no client environment tolerates. Mike explains why “volatility management” often disguises feelings management, and how redefining risk as the chance of permanent loss changes everything from position sizing to patience. Together, we explore orientation—how beliefs shape what you see—and why a 40 percent win rate can still compound if your payoff distribution catches outliers.

Jerry Parker on X: @rjpjr12
Jerry Parker on Linkedin

Mike Melissinos on LinkedIn:
Melissinos Trading
Michael Melissinos's Blog: 
Michael Melissinos on X: @mmelissinos

John R. Boyd's Conceptual Spiral was originally titled No Way Out. In his own words: 

“There is no way out unless we can eliminate the features just cited. Since we don’t know how to do this, we must continue the whirl of reorientation…”

March 25, 2025

Flow Learning Lab

Find us on X. @NoWayOutcast
Substack: The Whirl of ReOrientation

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Recent podcasts where you’ll also find Mark and Ponch:

The No Bell Podcast Episode 24
...

Chapters

• 0:00 From Sales To Boyd And Trends
• 3:52 Trading As Combat And Flow
• 6:50 Why Trend Following Feels So Hard
• 11:34 Turtle Origins And Rule-Based Discipline
• 18:40 Belief, Whipsaws, And Sticking Power
• 25:20 Orientation Shapes What You See
• 30:05 Cutting Losses And Taking Every Trade
• 35:40 Training Culture: Do The Hard Thing
• 42:15 Mentorship And Community Norms
• 47:10 Classic Rules Versus Vol Management
• 53:50 Redefining Risk And Math Bias
• 1:00:00 Behavioral Edges And Process
• 1:05:40 Generalist Systems And Go-Anywhere
• 1:11:20 Culture, Clients, And Integrity

Transcript

Mark McGrath: 0:21

So, Ponch, as you know, I had a long career in asset management wholesaling, and it was a fun, exciting life. The volatility, uncertainty, complexity, ambiguity of markets was a great place to apply the theories of John Boyd daily. And I learned really quick that I can't sell product. I had to sell myself, and how I sold myself was by teaching people Boyd and teaching people orientation and Uta and how you reorient and how you get feedback and how you create snowmobiles. And it was in that process of being delirious of all the product and everything out there that I knew. Something almost felt off to me that a friend of mine said, Have you ever heard of trend following? I go, No, what the hell is what the hell is trend falling? So he gives me this book, who one of our guests today is uh is is widely featured. And he gives me this book, and I start reading it, and it's like literally the polar opposite of everything that they were teaching me and my peers to wholesale funds inside of financial institutions. I'm like, can we get shot having this information? Does this really work? I end up getting this book. As you can see, it's taped and copied, and the marginalia is drenched. Chapter 28 was a cruise missile against the industry that I was in. And here we are today talking to two very well-known trend followers to have a conversation with us about the connection between what we see from where we come from from the theories of Boyd and Flow and other things, to a style of investing that almost nobody talks about, that you're not going to see on the news rarely, that you're not going to see in popular financial media, which I like to call financial porn. Yeah.

Brian "Ponch" Rivera: 1:59

Moose, I want to I want to add something here. Trading is combat. We know that, man. Yes. The market is a flow system. You just brought up flow and the connection to John Boyd Zoodaloop. I cannot think of a better way to you'll never master the market, but you can increase the probability that you're going to have success if you follow John Boyd's real observorient decide act loop. And I think that's where we're going. So Luce, I I know you spent a lot of time on Wall Street. I haven't, but I do a lot of work on my own. And I find that one of the reasons we trade, maybe two reasons. One, it allows you to get into a flow state. And two, nobody's going to handle your money better than you are, right? We we hand off, you don't hand your kids off to somebody else to get, well, some people do to go raise them. We buy insurance for our house and our cars, but we never, ever, ever learn individually how to trade and how to master the market or how to learn how to increase the probability in the market. I think that's what Doodle Loop teaches you. So back to you, Moose.

Mark McGrath: 2:52

Yeah, Jerry and Mike, thanks for Jerry Parker and Mike Melancinos, thanks for joining the conversation with us today. Good.

Michael Melissinos: 2:58

Thanks for having us.

Mark McGrath: 2:59

Thanks for having us. So let's start at the biggest, let's start at the biggest picture. Like I said, I I I learned of this trend following at age, I don't know, 44, 45. I immediately wish I would have read the book when I was 13. I gave it to my children, so hopefully, hopefully they could uh they could have a different course. What is it about trend following that is so radically different to the point where almost nobody talks about it or nobody thinks about it?

Michael Melissinos: 3:29

I'm gonna let Jerry go because he literally has a lifetime of uh experience more than me.

Jerry Parker: 3:34

Well, I think um it comes across as a pretty straightforward and easy to understand concept and idea. And then it starts tapping into sort of things that humans don't really like to do. And you sort of you sort of embrace that, you know, like, oh wow, I see how that could work. It's it's really counterintuitive. It's making me or asking me to do things, take small losses. I don't like losing. I like one-tick winners. Give me a winner of any kind. Profits run, uh it sounds good, but then when you get into it, it's really difficult to do because you could all that profit that you've accumulated could go away. And I think it's uh objective and not subject to discretion, which we all have this experience and uh that we want to tap into. A win percentage of 40%, which is like no fun at all. And so you can either embrace all of these sort of negatives and say, well, this may be the reason it works and because it's hard to do, and it really calls me to another level of um what works in the markets. I shouldn't expect what works in the markets to make me feel good if I can survive and keep take money out of the markets. That might be all I should be expecting. But um, or you can reject it. And I think that's where that comes in. It must be something better. It gets rid of the drawdowns. It certainly makes the losing uh percentage of 60, at least 60% or so, better than that. So, and I think that it's easy to reject uh the the difficult, narrow path. We're always asking people to eat more broccoli, and that's just not what's in fashion usually.

Mark McGrath: 5:11

You see why it would appeal to contrarians like us. How did well you're you're you're featured in this, in the in the the turtle traders. You were one of the original turtle traders. What had you been doing before that to share with our listeners, and then what was it that clicked for you to say, like, wow, I need to be, I'm I'm I'm gonna do this, and then I need to stay doing this because you've you've done this your entire career.

Jerry Parker: 5:34

I was in public accounting in Richmond, Virginia in 1983, and I saw the ad in the Wall Street Journal to um come to work for Richard Dennis, and he would teach you how to trade commodities and futures, and uh didn't give you money to trade. And so um I thought that was a pretty good idea. I thought I knew it was, I thought it was legit because I'd seen an article about Richard Dennis, and I had spent a past year or two studying trend following just randomly it hit my uh radar, and uh I had watched Wall Street Week with, and Marty Zwag was a frequent guest on there, and he was about diversification and trend. And so I had spent a lot of time really studying, and then when I got the response back and the truefalse test and started the processing from trying to get an interview, I was just hoping that those guys were talking about trend following. I didn't know for sure. But uh and so I thought trend following was great. You know, when I was 20 some years old, I thought it was great when I first read about it, and then I fell in love with it every day since then, more and more. It gets better and better every day. And uh it's just I just thought, yeah, it's objective and it's rule-based. And that sort of, I guess, maybe clicked with me as an accountant. And then I looked at the charts and I was like, yeah, I can understand this. If the big winners, the infrequent big winners pay for all the losing trades, then things will work out pretty well. And that's sort of naive, but in the same way, it's really the essence of it, too. Are they going to pay for it? And you need to figure out a way or have someone tell you, like me, how to pursue a strategy and in a way that will hopefully ensure or tilt the probabilities in your in your favor that you will get enough of those big trades to cover the losses.

Mark McGrath: 7:19

Mike, how did you uh how did you come into uh trend following?

Michael Melissinos: 7:23

Well, first, hold on. I want to bring up uh you fall in love with it every day more and more. You know, April was tough to love it then, getting rocked by the the tariff-related whipsaws. That I remember having Jerry uh having coffee with Jerry that week, and we were we were a little, you know, had the thousand-yard stare sort of thing going on because the volatility in the whipsaws were so extreme. But um, I just want to go back for uh another second about what makes you know trend following hard or you know what makes people not maybe attract to it as much. I mean, I think in general, you know, trading, investing, whatever you call it, you know, managing money in general is hard and not comfortable. Like, and I think there's plenty of evidence on this that, you know, for the the everyday investor, even up to the pro level, the the the approach they all know and love, you know, the maybe, maybe when when you were working in the business telling people that, hey, stocks go up, this is the story, just keep investing month after month, hold on no matter what. This is this is what this is what uh we believe and what this is what um we're we're here to capture, this this ever this ever ever going uptrend in stocks. Okay, well, even that's hard. Um, it doesn't mean people do it. Okay, I understand that. That sounds lovely, uh, you know, until you get until you get crushed, and until um, you know, you start taking some pain, and then you're like, well, maybe I don't know if I believe that anymore. And then, you know, maybe well, you know, my situation's changed and my risk tolerance changed. You know, I don't like this. And and then you start medicating your your feelings with what's selling out when you shouldn't be selling out and all those types of things. So I think uh, you know, whatever you choose, whatever approach you go with, even if it has long-term validity, doesn't mean it's gonna be some joy ride. I don't think so. You know, markets are chaotic and dangerous at times and uncomfortable. So uh, you know, whatever you go with, you gotta you just have to make peace with, all right, well, this is what we do here, and this is how it works, and we're always up, you know, aware that something can go wrong. And hey, maybe historically something that has never happened before happens on my watch. Yeah, that's just life. And uh so I think, yeah, but maybe, maybe with, you know, when when it gets tough though, in the tough period, you kind of have that belief. You know, the the equities crowd has that belief of, well, okay, I you know, I believe that the stocks are gonna go back up. So, okay, this is fine. I'll I'll buy into this. It's okay. You know, I can get back in easier or something. I don't know. I don't even know if everyone does that, but but that just could be some of the internal chatter that goes on. And with trend following, it's you have to believe that trends are gonna still continue occurring. And I don't think a lot of people get there. They don't understand why they need to have a story, um, you know, a fundamental driven story on why um, you know, trends are gonna keep occurring, commodities, currencies, and all these other markets that we trade. So yeah, that that it just might not occur to them. So it's just uh, you know, if they try it out, they might they might not stick with it because it doesn't give them that story, that that warm that warm blanket they need when they're when they're taking some pain. I don't know.

Mark McGrath: 10:53

That totally makes sense. I mean, what what we would say when we're advising clients about orientation, you know, we all have one. We all have one individually. It's fractal. We can have one collectively to create a podcast or a fund or anything. At some level, you share orientation with your with your investors. And it's important to note that orientation shapes or implicitly guides and controls how we observe things. So it's very clear to us that in a in a trend following mindset or trend following frame of thinking, a trend following orientation implicitly guides and controls or shapes a view and sense making within markets that is remarkably different than just about every other actor out there.

Speaker 2: 11:37

And thus the differentiated results.

Michael Melissinos: 11:40

Yeah, I think with trend following, we always know you know, we're I guess maybe frequently emotional or you know, we have some emotion going on, but it's you know, maybe for you know guys like me and Jerry, we're we're not confused about what to do. We know what to do. We have our rules staring at us right in the face every day. So that's that's nice that we have that. We know exactly what to do. We believe in it because we've done all the work that that you know, okay, these rules have long-term validity, and um, you know, we've tested them many different ways on, you know, in and out of sample, different time frames, yada yada yada. So okay, we're we feel cozy with that. But um, you know, it doesn't mean our emotions go uh you know stay nice and even no matter what the PL does. No, you know, that can happen, but it's not enough to abandon ship and you know what, that looks nice over there. Let's go try something else. No, because then you're you know just in chaos, giving into your feelings all the time. No.

Mark McGrath: 12:43

So uh But at the same time, you'll you you'll let go of something if you believe it to be wrong. How do you walk us through the discipline of that? Like when something doesn't fan out the way that you want it to or believe it to, you know, talk us through the discipline of being able to cut cut your losers and and move for move on.

Michael Melissinos: 13:02

I think I think for me that's pretty much one of the easiest things for me to do is to cut a loser. I don't I don't feel that this, you know, this is a loser. Uh I don't know what I'm doing because if I knew, I wouldn't have taken taken this trade in the first place because see, if I was smart, I I would have I would have been able to avoid this one. No, you don't like no one knows. That's another belief that we have as trend traders. We just we believe that we cannot know the future at all. So so we take these small calculated low-risk bets and say, okay, let's see. You know, it's like planting a seed in the garden. We don't know if this one's gonna work. We're not putting all of our eggs into this seed to, you know, feed the whole family for generations. Just nah, let's try it out and uh monitor it. And hey, if it doesn't work out, no problem. That that is maybe hard for people to get to. I I I I don't know. I don't want to talk for Jerry, but I suspect it's the same for him. You know? Um it's pretty easy just to cut losses and just say, okay, uh move on. Yeah, because we don't have some hardened belief about you know our ego or something about uh you know, if we knew, if if we were smarter, we would have been able to avoid this or something like that. Or I don't know.

Jerry Parker: 14:23

I was taught um that the most important thing, you know, you is you gotta put the trade on. There's nothing more important because you're gonna miss that big trend if you don't. And the five to ten percent of the trades each year that are gonna turn into all the profits, you can't miss one of those. And so right out of the first week of trading, I was not taking all the trades, right? I mean, that's just I don't know why, but it so I guess in in some respect, I was a step ahead of the game. I was so afraid of taking the loss that I did want to do the trade. But once I was putting the trades on, then I was happy to take the loss. I don't know why that wasn't a struggle, but um the struggle for me was just putting that on. And but the odds are it's just the asymmetry of it is so crazy because you're gonna have this predefined small loss before you put the trade on. You've got your exit and your percentage of your capital that you're going to lose, 50 basis points, 10 basis points, it could be something really small, depending upon how many markets you trade. And then uh you'll miss something like Cocoa or the stock market. We trade the stock, you know, the stocks or stock features as well, or gold and silver. And then you look back on that trade, and let's just say, as a trend follower, for some reason you just didn't take the gold and silver trade, and you look back and you say, I was going to risk 50 basis points for all of this wealth in gold and silver that I and so it's really ridiculous. So over time, you just experience that, and you hopefully you haven't had any good experiences by not following the rules to lean on. And so you you uh build up this history of regrets that informs your behavior in the future.

Mark McGrath: 15:59

What was it? So, you know, with with Ponch's background as a naval aviator and mine as a marine officer, you know, we've gone through very exacting transformational programs that weed out all of the people that that can't hack, you know, or or or shouldn't be there. So I'm wondering if you walk us back to that very initial time where you gathered with Richard Dennis and everybody in Chicago, what do you think was the major difference between yourself and your path and others? Like what were the things that they weren't able to handle or accept that sort of filtered them out or weeded them out, if you will?

Jerry Parker: 16:32

Yeah, that's a great question. I've often used this really bad analogy, which is, you know, you can't really become a Marine just by being given the handbook. You got to go through basic training or whatever.

Speaker 2: 16:43

And you gotta go through hell.

Jerry Parker: 16:45

Yeah, yeah, exactly. And so the the advantage you have too, when it's all said and done, you're like, yeah, I can't imagine just being given a manual or a set of rules. And the same with us, you know, we had a great set of rules from great teachers and genius people, and very nice people, too. I mean, these are the nicest, smartest people you've ever wanna meet. They had broken new ground on using computers at that in the 80s and doing backtesting and understanding math. Bill Eckhart is probably one of the smartest people I've ever listened to that I didn't really understand much of. But just being put in that kind of pretend environment where they would say things like, uh, do the hard thing, do the right thing, and you're gonna be fine if you follow the rules. Now, these are our rules, but if you follow the rules and lose money, you're fine. If you don't follow the rules and you make money, you could be in trouble with us. And so, and then after just a few months of trading, everybody had lost a lot of money by following the rules. Some better than others, but about the same amount. And their response was, you're following the rules, you're doing the right thing. Here's more money. No one does that in real life. No one encourages you like that and says, look, concentrate on one thing, follow these rules and be disciplined, and things will work out in the end. When you get into the real world, you know, with clients, they're the exact opposite. Look, if you have to cheat, use discretion, don't follow the rules especially specifically to make money for me, fine, go ahead and do it. Whatever it takes. I don't, you know, sitting through these losing trades and these bad periods, this is horrible. And I don't like your system. So this was this sort of uh great and way to start your career. And then another thing they would, I don't really remember exactly, but I remember leaving there with a huge skepticism of clients. Clients and other people are gonna steer you in the wrong direction. They're gonna ask you to take these shortcuts, they're gonna criticize you for losing when you're doing the exact right trades that you should be doing. So I couldn't have been a better, and I couldn't imagine not having that experience with those guys. But look, you know what? It's no surprise that the secret of the success of some and the lack of maximizing the possibilities that others experienced was just uh how much did you follow those rules? And did you really believe those rules? And then when you got out on your own after four years with Rich and Bill, were you still dedicated to the at least the philosophy? They taught us an enduring philosophy of how to maximize trading life, not just, and they would just say, look, these specific rules or parameters are not going to last forever. You're gonna have to evolve and adapt over time. But it was deeper than that. It was the philosophical way of looking at markets and looking at life and knowing what to expect and that you should expect pain and suffering when you're doing the right thing. Once again, going down this path of this narrow path of excellence. Quite an experience. And it's really, I think that the one thing that never got written about was how smart they were and how nice they were. I had I learned that lesson too about dealing with seeing people for the first time who were just incredibly nice and didn't treat us the way we deserved to be treated.

Mark McGrath: 19:55

Remind us the size of the original cohort of turtles.

Jerry Parker: 19:59

So 1983, the December of eighty three, they hired twelve, and the next year was eight. So it was around twenty. There were some that were we didn't really know that weren't in our office, and there was one or two in our office that really weren't turtles, but just sort of friends. There was a lot of friends hanging around, especially in the turtle class. Half the room was just brokers of theirs or friends of theirs. Yeah, come on in. Sit in. See what you can learn.

Mark McGrath: 20:30

So this is the other thing that's always blown my mind about trend followers is their willingness to talk, their willingness to mentor, their willingness to teach, their willingness to explain, not only through books, but replying to emails, groups. Jerry, I used to attend your group. I can't remember what it was called. It wasn't on Twitter Live, but it was spaces. Spaces or something like that. Yeah. I mean, like the willingness of people, the accessibility to learn and mentor has always really struck me as a very stark cultural difference in an industry also that's usually guarded by arrogance and secrecy and other things. That the trend followers are almost the opposite of that.

Jerry Parker: 21:11

Yeah, that's good. It's nice to hear I was in it with a group of uh CTAs recently, and someone brought that very idea up that he had had lots of experience dealing with finance, with other types of strategies and funds and hedge funds, and that trend followers were still able to sit around and have a coffee or a beer and talk about and be cordial and wish everybody the best. I do think that uh we disagree a lot in the philosophy on how to handle it and how to do things. But uh give us more about that.

Mark McGrath: 21:39

Tell tell us more about that.

Jerry Parker: 21:40

Well, I think Mike and I come from more of a classic background of taking small losses and having to stop losses.

Michael Melissinos: 21:48

I I think I think the new element that's involved with uh maybe some of the changes that um some of the trend followers have made in recent years, especially I think since I think the business model changed then. And I think the business model and influenced the trading models, and that was to gather more assets, appeal to more people, make trend following more palatable for people to handle. And that I think spurred a lot of the the work around changing the the the historical uh you know techniques.

Mark McGrath: 23:15

Like made it too commercial or too commodified or Jerry gets really charged up about this, so I'm gonna let him fire.

Michael Melissinos: 23:22

Yeah, let's hear it. Light it up.

Jerry Parker: 23:25

Well, I think uh it has evolved. And um I think uh oh just thinking back to the basics, you know, uh are you gonna have a stop loss? This is kind of in question now. We'll exit, we'll try to exit try to keep losses to a minimum or not let them get out of control. But are you gonna have a predetermined stop loss? Maybe, maybe not. Are you gonna let profits run? No, no, no, no. This is not letting profits run, we can't really do that. We need to scale back our winning positions due to increased volatility or correlation. Um I did a calculation the other day, just a simple calculation, based upon the increase in volatility in silver. And I would say that uh it would not be unheard of that uh the that uh sort of the typical managed futures CTA is probably out of 80% of their silver and proud of it, and then selling every time there's a big day up. And so Mike and I are like, no, no, we're gonna like let the profits run. We've done the research, we've done the back test. Risk is this is a big change too. Risk is that potential loss we had, the 50 basis points. And so silver's got a monster profit. We don't have that anymore, and the the industry has sort of changed into no losses, the daily fluctuations, negative or positive. This is this is now redefined as risk. And that sort of takes away the underpinnings of what how we learn trend following.

Michael Melissinos: 25:02

Yeah, I think what uh Jerry is describing, like the vol management, the the daily fluctuations, you know, we don't like that. People don't like that. They don't like giving back gains. Okay, well, let's not give them back then. Let's every time, you know, we we get some gain, you know, to a certain degree, whenever we r rerun our calculation and we see some gain and now it's getting more volatile. Okay, let's take some off. Let's ring that register, as some would say. All right, well, that's inherently counter trend. Because you're the trend is still in favor, right? You're still long the thing, but you want to have you want to hold less now for what reason? Well, yeah. Well that's not the trend reason. So this is inherently counter trend. You're just calling it something else, you know, vol management, you know. And you're really it's really feelings management. I don't care what they say. That's inherently what it is.

Mark McGrath: 26:00

When did the, you know, when you you're both describing risk, you know, I always thought of risk as the permanent, the chance of the permanent loss of capital. And years ago, when I was in the biz, and I would go out to the Berkshire Hathaway meeting, and Buffett and Munger would say essentially that, that the the prevailing theme across uh the financial industry was that risk was volatility, just the mere ups and downs. But I rejected that because I followed what Buffett and Munger were saying, that no, risk is the classic definition of risk is the chance of the permanent loss of capital. But what I found in 15 years of telling people that they thought I was a heretic. They thought I was crazy, but that seems to really align with what Jerry just said and what you just added on to, Mike, is that the very orientational definition of risk that I have, miss if if I believe it just to be volatility, that's completely misshaping how I view and sense make inside of inside. Right.

Jerry Parker: 26:51

I think what happens, what was good for Mike and me is that we came to trend following without having a background or like a heavy statistical and math background. I think a lot of the managed futures CTAs, they're coming from physics or statistics or heavy math backgrounds, and they need to cram that into their trend following. They cannot abandon it. This is a rejection and turning my back on everything that I've learned, all my PhDs, and it's just not going to happen. And I'm going to embrace everything that I learned and make and change the trend following to uh reflect that. And Mike and I did not have that problem. We came in not knowing anything, thank God, and being taught by people who knew a lot and were super smart, just as smart as anybody else I've ever met. And yet took that more straightforward approach of letting the profits run. And it can't, you think it's difficult for people to embrace trend following retail or normal people. It's super difficult for people who are well-versed in math and advanced degrees to simply do less and uh let the market and let the trends take care of it for you. There's lots to do, I think, putting together the portfolio and devising your approach. But um, it is a shame that classic trend following is 1% of managed futures.

Mark McGrath: 28:13

How much so is another way to ask this question is that basically that the less you know about classical finance and and modern finance, maybe the better you would be at trend following.

Jerry Parker: 28:23

I think so. And some people and I've seen evidence of that. They just don't ask all the questions. And I think that, you know, definitely when you when we had success, so much success in the first 10 or 15 years, we were subject to that as well. Like, okay, what's next? We've already kind of conquered trend following and let's make it better. What can we do? And we just got away from the principles and we had to backtrack. We, you know, we would overoptimize and see performance in our real track record that we'd never seen, we'd never seen such poor performance in the backtest. And that our response was, we got to stop this. This is crazy. But it is tempting because every you read about everyone else is doing it. But I've told Mike before, when we do our backtest on these approaches that we have that don't have a lot of moving parts, just one entry, one exit, and a stop loss. The track record is so good. And I've never seen a track record of any CTA as good as that. So they're trying uh to make it better, but it's really difficult.

Mark McGrath: 29:23

You know, another another one of my heresies in my career was learning and teaching mass psychology, particularly around behavioral economics and behavioral finance, and you know uh the my favorite book was The Art of Contrary Thinking by Humphrey B. Neal. And I found that the more that I read those things and studied those things, the clearer I saw it when I looked around how markets were crashing and people were behaving. Some places you were quote unquote allowed to talk about it, but what I've what I've noticed, if anybody has studied mass psychology or behavioral economics, I think that from me, from my vanta point anyway, that trend following actually is a really good discipline for someone that does know something about that, because I think that trend following ends ends up leveraging those things without falling victim to those things, if that makes sense.

Michael Melissinos: 30:10

Yeah, I I agree. Um, you know, I think uh trends occur for all different reasons, you know. Could be changing fundamentals, you know, the the dynamics between the you know ever-changing fundamentals and the ever-present, you know, human condition within the markets. People overreact, underreact. Things go way farther, you know, trends go way farther than you think, they don't go as far as you think, you know, all all the biases that have been well documented over the last 20, 25 years, especially. They get talked about every crisis, you know, they'll get talked about what caused it, what what traps we've fallen into. So yeah, so like when you is you know, when you have a set of rules to do, and you know, it really tests and brings out your character, gives you entry points for, oh, you know, maybe I gotta work on this, uh, you know, in order to do it, to do the thing, to do the trades, as Jerry's mentioned in the free, just doing the trade. That's hard. That's just hard to do. You know, it's you know, I I I've been I I've been grew up in sports my whole life. I've been going and working out and training my whole life. You learn so much about people, the first day it rains. Go to the gym. Ten percent of the people are there. Why is that? When it's cold here in New York, no one wants to go out, no one wants to go do it. They don't want to go and layer up and brace the elements on the walk over to the gym and then have to walk back a little sweaty. It's gonna be cold again. Ah, I'll just stay here, you know. I'll just stay cozy. You know what? I'll I'll make up for it later. You know, I'll I'll do two this weekend, or blah, blah, blah. You know, that those are all great entry points for okay, you see what makes it hard. You see what but that doesn't mean it's a reason to change it. No. This is what works, you know. Hit the gym this time's a week, eat your meals, sleep, blah, the whole system that would make you healthy, hard to do, easy to explain, the premise, everyone gets it, hard to do.

Mark McGrath: 32:15

So Jerry, I've often heard the metaphor a little birdie once told me, but you're you're living proof of that right now that a a little birdie came on your shoulder and told you. Yeah.

Jerry Parker: 32:26

Um I was out of town yesterday, so she missed me, so she's wanting some love this morning.

Mark McGrath: 32:32

Love it. Love that. Hey, Ponch, I have a quote for you. And you're you're uh there's two options. It was either Michael Malicinos that said this quote or John Boyd. The trend following philosophy is based on adapting to evolving conditions in the now. It's about learning from the past in order to make the right decisions today. The goal is not to eliminate losses from investing, but to manage them in a way that doesn't kill us. Uh that could come from either. It could come from either, right? Yeah. I mean, John Boyd could not have said that better.

Brian "Ponch" Rivera: 33:02

Let's break, let's break this down a little bit. So when you think about the Outer Loop, and this is for our listeners, and and implicit guidance control represents those processes, those habits of minds, those things that you need to do. Why do we have those things? Well, it allows us to get in a state of flow, to see the outside world a little bit better, and it helps us overcome our biases, which are part of our orientation, right? It was alright, brought up in this conversation that uh our our heuristics or biases kind of kind of limit our performance in markets. Uh there's there's all kinds of biases out there, resulting, loss aversion, things like that. So what we need to do is you need a process, and this goes for teamwork too. Teams need a process of how to plan, which leads to better risk management, by the way, how to mitigate uh cognitive biases, which overcome those biases, which we call red teaming. And of course, you need to take action on the environment to get feedback from the environment. And what you do, you end up looking at your process. That's an implicit guidance control pathway at the top. You can see how it bypasses the deliberate approach from the middle, that it goes through decision and hypothesis. What we want to do is develop a process that we can follow. And that's what trend following does. It gives you the process to help you bypass um, we'll just call it the uh the system two thinking there, the del, you know, and narrative to you want to avoid the narrative from the external world and just follow that. So I I think what you're bringing up there, Moose, or you what you just shared on the quote, is uh uh again, could come from either John Boyd or anybody in the in the trend following network.

Speaker 2: 34:29

If if John Boyd was talking about trend following, um Wow.

Michael Melissinos: 34:37

That's what I'm saying.

Mark McGrath: 34:38

We know it was you in this in this book. You know, on page 90 of uh Michael Covell's trend following, uh, you're quoted on there, but it's a what what resonates with us, Mike, is that one, you told me when we first met that you were quoted in that book, and of course I had that book and I looked it up and I looked at it and I said, well, Boyd could have said that. So it goes back to what I've long been thinking about trend following is that the the knowledge and understanding of what it was that Boyd was teaching. You know, it only works where humans make make decisions and act. Yet trend following is a really good example because that central part, the orientation, is so uniquely different. You know, we you and I had talked about, you know, the cultural at the cultural level, at the philosophical level. That that distinction alone, that difference alone, implicitly guides and controls. You see there on the top or shapes how we sense and how we and how we act. And I also think the other thing that's remarkable with trend following is that, and it's in, it's in a lot of the literature in either the trader, the Turtle Trader book, uh, The Complete Turtle Trader or in Trend Following is that decisions are hypotheses of what you think will happen. And you test the actions are tests. So I the the the correlation to what Boyd was was was teaching, and that the you know the Marine Corps bought into it and reevaluated its entire warfighting doctrine based off of these concepts. The the example of trend following to depict what it was that John Boyd was was teaching and continues to teach, and this that's our professional work with trend following, it's uncanny. And when you when you go through it and you you read it, and the deeper that you read it, I also think too, Ponch, I don't know that you thought about this, but trend following is the ultimate generalist that looks at all markets and they can go in any direction, not just a very specific piece of the market or not just any any particular direction. They can go long, they can go short, they can go into commodities, equities, bonds, cash, you name it. Like they have a they look at the market as an entire system.

Brian "Ponch" Rivera: 36:46

Yeah, it's a go anywhere approach. It's a go anywhere approach.

Michael Melissinos: 36:49

I mean, to make a metaphor, it might be bad. You know, I don't I don't feel um you know super qualified to be talking about uh your your backgrounds, uh military things, but say, oh well we you know we can only you know we have a we have a military, we can only fight um on this terrain and in this weather using these weapons.

Brian "Ponch" Rivera: 37:12

You so you sound like the French, by the way.

Michael Melissinos: 37:15

Good luck, fellas. Yeah. Good luck, fellas. You know, it ain't gonna work out.

Mark McGrath: 37:21

Yeah. Mike, next time we get together, we'll go through patterns of conflict. What you just said is exactly that's yeah, people actually do think that. And it it's not just war, it's business, it's investing, it's yeah, it's child rearing, it's it's it's everything. They actually completely disregard what it takes to thrive in complex nonlinear environments. And the system of trend following, the systematic approaches to trend following, at least inherently seem to me to be accounting for all those things to take advantage of anything and have the agility to go in any which way, given the complex nature of markets.

Brian "Ponch" Rivera: 37:59

I want to share a quick story about the French, by the way, just for Jerry and Mike. I want to make sure this could I clarify something. So I spent time working with the air component command of the French Air Force. And one of the hardest things I had to do was teach them that, you know, war goes 24 hours a day. It doesn't just work in a 12-hour window, right? So what we had to do is get them prepped up and learn how we fight wars in the U.S., an air war, an air campaign through the air tasking order and getting into weeds at the scheme of maneuver for uh warfare, for air warfare. And what ended up happening a few months after we taught that, they ended up taking the lead in Libya, right? Which was awesome because uh this is what 10 years ago more or more. But I'm just saying they had a propensity to lean towards, well, it's time to eat, and we can't fight a war right now. We gotta go drink wine. Well, it didn't work out so well for them early on in the in World War II, but uh they've really come around, and I think that's uh a kind of a metaphor analogy to think about when uh when people trade, right?

Michael Melissinos: 38:51

Jeez, yeah. That's surprising. I guess not surprising.

Mark McGrath: 38:54

I don't maybe know my history with the French on I know what happened in World War II to them, and then you know We we could also say that trend following is war fighting, and you could take the book war fighting, and Mike, I can again I can give you a copy of this and show you, just cross out war fighting and put trend following trading.

Michael Melissinos: 39:11

Sure. Throw it into Chat GBT and say, write this as a trend following book, and boom. It correlates perfectly.

Mark McGrath: 39:18

So that's the that's the that's the core Marine doctrinal publication is uh Marine Corps doctrinal publication number one. And it's basically creating the cognitive operating system that you have to have as a Marine, whether you're an officer enlisted and you know at every level, it goes back to what you had told me and what you said in that what you said in that quote, that the cognitive operating system of trend following is what differentiates it from all other from all other forms and which which gives it its long run advantage. Yes, I agree. I believe that.

Michael Melissinos: 39:52

And you know, I think it it uh so I I this podcast is great because you know, we're talking to you guys who, you know, you know, um you mark who have you know some market experience, but you know, we're we're talking about something deeper than the markets here. We're not talking about the markets. We're talking about how to think and behave and you know, design and how to approach life, how to think about life, and like the the metaphors, you know, just using uh translating it into a another language that people are more you know comfortable with or used to, you grew up with, and um to help them get the oh yeah, okay, that I know what you're saying now. Like, yeah, that's it. That's it. Because I, you know, I came, you know, same as um uh same as Jerry, not from the market, so to speak, in a in a career, only for a short while, but then you had to tell a bunch of people when I started my fond at twenty six, had to tell a bunch of people about trend following, and they're all older than me and they hadn't heard of it before, so had to had to use metaphors and everyday language and things that would resonate. And they hopefully some of them would say, Oh yeah, okay, that no. I know what you're saying now. Oh, it's like that. Yeah, it's like that. Boom. No, you know. Okay, we got it. Now we're now we're we're connecting the the dots here. So I think when you you know when you're you talk, you know, to some people, they just they don't they don't have the vocabulary, they don't they don't know exactly what you're saying. So to try not to be too stubborn too with hey, you need to get this, you know, this way, you know, you need to understand what I'm saying. Um, well hold on, let me let me let me just you know make a simple metaphor and that's it. You know, it's like a little ABC's book. I got a a three-year-old at home now, you know, and they teach all these lessons through different silly cartoon stories, and it's that's the it's the same stuff, teaching the same lessons, just in different ways, more more fun ways.

Mark McGrath: 41:57

And Jerry, from your sage viewpoint of, you know, having done this since 1983, I mean, it really does come down to one's cognitive operating system, right? It really does come down to the way someone thinks.

Jerry Parker: 42:08

Exactly. One of the things that would frustrate me over the years has been this idea, which I mean it's a bad idea, but it has a grain of truth, I suppose, that you should choose an approach to the markets investing that suits you so you can do it. Able to, it's just acknowledge that, well, I'm not gonna do it if I don't like it. And I thought that was so backwards. I didn't like it from the very beginning. And I don't really like, you know, I'd like to make 1% a month or 2% a month and a really smooth, but I had to acknowledge that what I liked more was actually surviving and being successful. And I think if you're asking the market to reward you for a career with a career of trading and investing, then to do it on your own terms, where at the end of the day you feel really good about it and it really ticked all of your emotional boxes, I think is kind of naive and stupid. So I think that those people should not trade. That's the that's the alternative. You know, if you don't want to do hard things and do the right thing and submit yourself to a set of rules that have worked over the long term, and but you're gonna be overwhelmed by the daily negativity and emotions of losing money or giving back big profits, then don't trade. I think now the one thing that I would say is purely up to each individual person is deciding how much risk that you want. Are you gonna risk if you trade 100 markets, you're gonna risk 1% per trade, 10 basis points per trade. You know, anything in between is is fine, you know, because you have to uh you do have to follow the rules. And sometimes I've been in situations where I was definitely over-trading. Anyone would say that, and my own emotional makeup said that. And so then that led me to not do the trades. I had to scramble and get out of a bunch of positions or override the rules because I was losing too much money. But I don't think that we should expect. I I never really desired that. I uh I wanted to be successful and I wanted to do it the right way. And I took pride in doing things that other people thought was really hard. And I thought it was hard too.

Mark McGrath: 44:10

I mean, I mean, there is a lot of nonconformity that has to, I think to be as a trend follower, I think you'd have to be somewhat of a nonconformist. Am I am I following that right?

Jerry Parker: 44:18

I think to be, I think that's what we were taught. Don't look for positive feedback. Don't look for praise. You're gonna be alone. It's lonely. Don't look for consensus. Be be skeptical of consensus. A lot of the turtle trading that never got, I don't think, written about very much and never really practiced outside of the four years we were all there, was contrary opinion, where Rich would say, you know, if you um read about it in the New York Times, then you should be a little worried. But if it's in like your local hometown newspaper, you know, be very worried. And then if you get into a taxi, there was taxis, no Uber back then. And the and this and the taxi driver says, What about those soybeans? You should just get out of your soybeans right there. And so you kind of combine the trend with uh maybe using some um contrary opinion when people agree with you too much. And most of Wall Street really likes to see unanimity and agreement. We're all in this together. And uh Mike and I have, we left one thing out. We we don't use uh dynamic position sizing and reducing positions or increasing them based upon volatility, and we trade single stocks. This is another heresy amongst managed futures. You can't trade single stocks. So I've been in so many meetings where it's just a no-go. We're not gonna give you money. We're not gonna, you're not gonna work for us because you trade single stocks and you don't reduce your positions when volatility kicks up. And so we're just like, okay, I've often said, you know, I don't know if classic trend following can really be a successful business. You're always feeling the need to make some compromises. It's it's difficult.

Mark McGrath: 45:50

Ponch, I feel we've once again found people that we can have a conversation with that know everything about John Boyd without knowing anything about John Boyd because what excited about this.

Brian "Ponch" Rivera: 46:00

Yeah, Jury made a lot of connections. Yeah, he made a lot of connections there to to be or to do. Choose doing over to be part of the system, that's clear. And then, of course, survive and thrive or survival on a system is uh is the name of the game, right? How do we do that? And that's really what the ODA loop is, is how do agents survive and thrive with an ever-changing environment?

Mark McGrath: 46:18

I mean, it really does come down to that differentiation at how Boyd would look at war, or we could look at business or Sun Tzu the same way at the moral, mental, and physical and physical levels. I know that you all trend following, when done well, I think, understands all of those things. They understand at the highest level that you do have to have a very clear belief system and philosophical approach to how you look at the you know, the volatility, uncertainty, complexity, ambiguity of markets, that you have to have the mental fortitude to be able to stay in the game and follow the rules and not give in to the emotional swings or the psychological swings. And then at the physical level to structure everything in a way that supports the mental and moral approaches to investing. Yeah.

Jerry Parker: 47:04

Back when I first started trading, um we would sit in front of a computer and look at the markets and the charts, and you do the trade or you don't do the trade. And if you didn't do the trade and you or you did it incorrectly and used discretion, everyone knew that you just made a mistake. You know, you're not doing what you should do. Nowadays, it's much more subtle. We can write bad ideas. Jerry used to do these things to make himself feel better. We'll just write that into the rules. So now the rules are no good. And they can claim, we're following the rules, and that's what you said I should do. So you have to make sure the rules are what they should be as well, because humans will try to circumvent doing the hard thing, doing the right thing with I'll just make it a rule. And nobody can criticize because I'm following the rules. So a lot has changed in uh 30-some years.

Mark McGrath: 47:52

Jerry, so just kind of following on that, when when you know you look at the 42 years since 83 and you look at you look at the technological change of everything that's happened, of how we look at markets and how we approach markets. What what effect have the technological changes had on what people right or wrong, what they say their philosophy is? Like in other words, do the philosophies and beliefs get compromised that the the tech has had such an effect on them that they that they steer in favor of the tech, or are they still able, regardless of the technological changes, they're still able to stick to a philosophy that sort of pursues the truth within markets following a rules-based system like you do?

Jerry Parker: 48:33

I think the managed features has evolved into more complexity, smoothing out the trend following, giving the clients what they're asking for. Can you give me the bit of trend following that I like and eliminate the part that I don't like? And they're trying to do that. I think AI is probably just another bad idea for trend following, but we'll see what happens. But I think to some degree, it's been a the uh the addition of the markets and expansion of the number of markets. I traded 20 markets in 1983. Now we're up to hundreds of markets, stocks and many more um commodities and interest rates and currencies are available, and crypto can be another, maybe a fifth new asset class to put in there. So that's been a welcome. And then the commissions and the execution of our trades, all of the expenses of managing money and trading has gone down. So some of it's good, some of it's not so good. But Mike and I are in the in the in the minority here. No one would have really, not too many people would agree with us on all of this. It's uh it's risk-free.

Mark McGrath: 49:38

Tell us more about that. Yeah, tell us more about what you just said. Or Mike, add to that, you know, being in the minority when when everybody else is seemingly against you philosophically.

Michael Melissinos: 49:47

Well, I don't think we have this extra layer. You know, I I I I messaged you, I didn't see if you uh replied, but before we before you got going on the podcast here, talking about Boyd and he one of his points that I saw, you know, at the the moral level of the culture and trust, you know, okay, you have a system, great. You have a diet and fitness, you have a um yeah, you have you have a diet in the fitness machine, okay. You he's got one, he's got one, he's got one. You know, there's a lot of things that work, you know, within within um uh you know, the the markets uh as far as trading goes at times, but but I think what's often you know very overlooked is that we have, I think especially me and uh and Jerry's that we have we have a culture where we're we're not being pulled in many different directions on well, we gotta change. Well, we gotta think about these guys. They're they're our biggest clients. These are our newest clients. And uh we want to get these these new clients uh that we haven't got yet. We we've been working on them for years now. You know, like that kind of language and that kind of day-to-day hum and pull, and you don't you don't even know what you're doing anymore. You know, you have to have a this is what we do. Is it is everyone at peace with this? This is what we do. And we can't make a guarantee about what next quarter, next year, and you know, well, they're trend traders and they're you know, they've been beating us the last couple of years. Well, what does that mean? We're doing something wrong. No, no. And at the time, um, you know, just looking back a few years, 21 and 22 were good years for most you know, uh managed futures trend followers. But some had better twins and some had better twos. So if you took you know, if you checked in every year, every quarter, and you say, Oh, what are you guys doing wrong? We're up 40. You guys are up two. See? You guys aren't with it anymore. And then oh, the next year you check in again and they're ahead of you that year. It's like, okay, hold, you know, there's gonna be there's gonna be variation on a short-term time frame. Okay, no big deal, you know. But again, this is what we do here. This is how we do it, and these are the ups and downs. We don't, we're not we're not telling people, we're not telling ourselves that we need to be, we expect to be ahead of everyone all the time. That's just you're gonna make yourself insane. And and you're just it's not statistically correct, it's not even healthy to expect that. So again, you know, a terrible analogy. I can't I I can't. I don't think so. I see. I shouldn't even bring it up. But like imagine going into battle and saying, man, they shot one of our guys. You see, we're doing something wrong. Like, what? No, of course you're gonna have things that go wrong and people are gonna get hit, and like this is just how it is. There's that's that's it, that's expected. You don't like it, they don't like it. Try to minimize it, but you're not gonna avoid it. And I think what we have today is that people are trying to avoid it.

Mark McGrath: 52:54

I see Ponch smiling, and I I don't know if this came to you, Ponch, but as Mike was talking, I started thinking about energy maneuverability theory, about how Boyd would shape and design aircraft. And one of the points was to be able to gain and lose energy, and sometimes it looks like you're at a disadvantage and you're actually gaining an advantage unforeseen to your opponent.

Brian "Ponch" Rivera: 53:14

Yeah. Yeah, I was also thinking about Kinevan framework where we talk about there are no best practices that are just good practices, good processes, right? So it's the same thing here, and I think that's what uh is going on here. The other thing is, you know, we have to separate uh decisions from outcomes. You can have horrible decisions and have great outcomes, or you can have great decisions and horrible outcomes. It's called complexity, right? So that good process, that that good approach doesn't always guarantee you're gonna have a fantastic outcome, right? Let me let me uh point this out. You and I could drive a car down the street, do everything correctly, not on our phones, paying attention, and still get hit by a car, right? Why is that? Well, the environment gets a vote, right? But we did that, we followed a good process. We don't go back and change and go, well, I drove um and I I didn't text and drive. I didn't do any of that, but so now I'm gonna go text and drive. Well, I know every day kids text and drive and they have good outcomes, right? Horrible decision making, great outcomes. They don't get in car accidents. Yeah, no, no. Moose, what you brought up about EM theory and uh everything else, it all connects. It's just how does it resonate with us? And that's uh that's how it resonated with me on Trend Falling.

Mark McGrath: 54:18

We'll save that for the next convo. We want to also remind our listeners that Jerry and Mike have a podcast. Tell us about that.

Michael Melissinos: 54:25

We have uh talking trends podcast where we just, you know, we get we get hot about certain topics, and then we just get on there and start yelling and ranting and uh, you know, just kind of venting. Um, you know, it's not like it's not an angry podcast or something, but sometimes we're we're a little miffed and sometimes we're uh we're this and we're that. It's just kind of what's hot at the time. Um yeah, so we we get on there, um I I I want to commit to do it weekly, but you know, I I I feel sometimes that we just don't are not always hot about something. Sometimes we're just you know, I don't know, I don't know, what do you want to talk about? It's kind of like well, if we have no not nothing, we're not we're not feeling something, then then we just uh you know kind of wait, wait for it to bubble and then we'll then we'll get on there when we're when we're charged up. But yeah, we I don't know, we got about 30, 40 episodes on there, different, different topics, and they're usually like relevant for the the recent time, like you know, when um the topics of uh around the the the day we we record. So you know, we talk about the tactic.

Jerry Parker: 55:33

We might be using it before um like psych psychology, psychiatry, you know, we're we're counseling each other. We we reach a state where we're so frustrated that we get on and do these podcasts. But do we also sometimes talk about fantasy hockey? We kind of compete against each other in fantasy hockey. An adventure that I have dominated over the recent years, but not this year. I'm not dominating, so my spreadsheets are letting me down this year. But uh do you use a spreadsheet in doing your hockey draft, Mike?

Michael Melissinos: 56:00

No, I'm all intuition. Uh, you just use my inner inner genius at all. Not me, not me. You see, different system, different, different uh you know, Jerry's won, I think, twice. Uh he beat me last year. I came in second last year. So it is also funny too. My dad is also won twice. So we got the two oldest guys. My dad's uh uh 72, Jerry's mid-60s and what it's 67 now, Jerry? 68. 68, and and then we got some guys like around my age, around 40, you know, 30s, 40s, um, that uh that are uh you know trying to get to the top. But it's been me, Jerry, and my dad have been the only people I think that have ever won it. Maybe there's been another winner, but you know, we've been doing it like five, six, seven years now. So it's it's fun. We got a we got a tough league this year. This year's tough for some reason. We'll have to take a look at that. I got I guess hockey's fun.

Mark McGrath: 56:57

Well, I got kicked out of a fantasy football league. Somebody dropped out, I was a replacement, but I only did it quantitatively. Like whatever whoever was the best, whatever, I just auto-drafted or whatever, and I won two years in a row and I got booted out. Wow. And I I didn't know the other guys either. They were older than me and I didn't get involved in the the shit talking and stuff because I, you know, they weren't my frat brothers from college. They were all like close friends.

unknown: 57:20

Right.

Mark McGrath: 57:20

Hey, congratulations on two years, and then get the hell out of here. That's what happened. But that's funny. Well, hey, for your podcast, you know, I'm gonna talk about how to apply the uh how to understand the theories of John Boyd relative to trend falling. We got a guy. So Okay. Happy to happy to keep the conversations going because I I think that really there's uh there's a lot here. And I I know that the the people that we interact with from a from a listener base, from a subscriber base in our Substack, this is gonna resonate with a lot of people. And I think trend following and the story of the turtles and the story of Trend Falling, the disciplined approach, I think that we'll have a uh I think it'll sit well with a lot of people. What do you what do you think, Punch?

Brian "Ponch" Rivera: 57:58

Oh 100%. I mean, it aligns perfectly well with what uh Boyd put out there.

Michael Melissinos: 58:03

I like to uh hit on that. You know, next time we talk, I'm gonna hit on that that culture side because uh you know Jerry talked about it in the turtle program, and he's he's said it many times over the years, even he was in this pretend environment where you do the right thing, you lose money, that's okay. That's great. Good job, fellas. You know, just keep doing that. And you know, here in New York, or here, you know, in the in the big boy investment world, no, no, no, no, no, you need to make money all the time. And like if you're losing, you're doing something wrong. Like it's just a totally different planet. And that is is so is such, I believe, an underrated part of uh you know long-term success, is that okay, we'll just keep doing the right things. I'm not I'm not pleased with the recent results. Uh, I don't like this. I don't like to lose, but we're doing the right things and keep doing this, and uh we'll be on the you know, we'll be on the winning side. And again, like what part, what other part do you not want to do? You want to trade against the trend? You want to cut your losses, you want to let your losers ride, you want to bet it all on a few ideas? Like, that's how you die. That's that's not how it works, not how you're gonna succeed long run.

Mark McGrath: 59:17

One thing, you know, you're sitting here talking with two scholars of uh unconventional guerrilla warfare, insurgent warfare. It seems to me that trend following is still very much in an insurgent state. It's still very much a guerrilla movement within the broader conventional movement of markets. And that goes right back to what you talk about, Mike. It's it's it's the culture and the philosophy, the belief system of the cognitive space. It wins at the moral level, and then everything else will uh will follow, unlike the people that focus on the physical level, like you were saying. Did we make money? Did you know what what was our performance? The people that focus on that are they're disconnected from the mental and the moral realm. And that's that's how gorillas win all the time. That's how insurgents win all the time. Yep.

Michael Melissinos: 59:57

And uh another metaphor is in uh, you know, the spiritual realm, the religious realm of, you know, you got you got your you know, your golden rule, treat others how you want to be treated. Okay. Good rule. Hard to do. You know, it's very simple. Hard to do.

Speaker 2: 1:00:16

Yeah.

Jerry Parker: 1:00:16

Go ahead. Ten commandments, good rules, hard to do. One of the things that I I think I read a book many years ago. Twenty years ago, I read this book. I forgot the name of it, but um I came away from reading that book making a promise that I wasn't gonna follow my performance day to day or minute by minute. And that really helped me quite a bit. And so I have to pretend sometimes when people ask me, well, how is your fund doing? How did it do last month? I have to make something up. And inevitably, people throughout the year will mention something about performance. Oh, yeah, you're making money, good job, or you're up a certain percent for the year. But I think you got to understand your what you need to do to follow this process and be a process driven person. And that was one of the things that I I never I seldom look at performance. You know, wow. Every now and then I look at the markets and I look at the positions and I get a sense whether it's good or bad. But uh a proper systematic approach should um have some rules as it relates to what to do when the market.

Mark McGrath: 1:01:12

Trevor Burrus, Jr.: Boyd would call that finger spitzen gefuel, that which basically was a translation of a German term, the German military reform movement after Napoleon when they were trying to figure out how we never let this happen again. And it uh the apex of it was eventually blitzkrieg over those hundred years of study and reform. But basically, you needed finger spitzen gefuel, which is a fingertip feeling, you know, uh an intuition that's built around Einheit, which was mutual trust. So we we trust each other, our our team managing the funds, or our team managing clients and having you know the uh the relationship with clients. So it was uh Einheit, finger spitzen gefuel, and because of trust, we can develop that intuitive feel. Alftrog, which was contract, which is another way of saying that we're driving on intent, and we understand what the intent is so that we can operate flexibly inside, pursuing that intent. And then the last part was schwerpunkt or the focus and direction. Where are we focused and directed together? And Boyd studied that because he realized that when when facing formidable foes or facing complexity, you had to have those things or else you wouldn't be successful. And you guys are really good examples of of exactly what they're talking about. And Einheit, fingerspits a good fuel off trag and schwerpunkt, which uh we might have to put a pin in that one for another another conversation. But uh but that's just that's really beautifully what you just described in your own way as it relates to trend following.

Jerry Parker: 1:02:36

This is really fascinating. I've never been on a podcast where I'm learning so much, and I have so much to look into. Well, you know, um, I want to hear more about this. Oh, we just touched the surface, man. Yeah. We haven't gone deep at all. No. How have you how have you guys uh how did you get in involved with uh Boyd?

Mark McGrath: 1:02:53

I'll go first. So when uh I actually I just found my original notes from 1995 and he was two years from his death. He died in 1997 from uh an evolution of the art of warfare class, which I took as a sophomore at Marquette University in the Naval ROTC program. I had a I had a naval ROTC scholarship for the Marine option to become a Marine officer. And then when we go through all of the training at officer candidate school and the basic school and then our respective areas, you know, Boyd was always a, because he had such impact on our our sort of cognitive, our our cognitive stance towards war fighting, you were given it from a very much of a how and what, not from a why. And when I when I stepped out of the military originally in medical sales and then, you know, 15 years in asset management, everything that I had been taught kept helping me reframe what it was that I was seeing. And I noticed that I was looking at everything different than anybody else, particularly in like 08. Uh, we were on a podcast recently. I could send you the link, um, where I was out in LA recording and I was interviewed about why I saw things differently in 08. And the reason was was because I had been grounded in this type of training, this kind of thinking. Well, I what I realized was I didn't know the whole story. So I started digging and digging and digging and digging and digging and trying to get to the bottom of really what was behind it. When I realized was that we weren't just taught a system of thinking to approach combat. We were actually taught a frame of thinking to approach anything that we do in life that would involve a decision and an action within within complex nonlinear environments. And I took it on myself to not only pursue that, to learn more and more, but to try to position myself uh to differentiate as a wholesaler. Hey, I'm not here to push product. I'm here to show you a different way of thinking that you could apply to markets, you can apply to your client relationships, you can apply to your marketing, your sales, your advertising, et cetera. That's going to be broadly differentiated, that's gonna help you see what others don't faster. And that's the that's the journey that uh led me to run into Ponch uh back in, I don't know, 2018, 19, and then eventually going into joining Ponch as a as a business partner and working on these things collaboratively because Boyd was insistent that this not be ossified, that this not be set in stone, that you constantly develop and teach, develop and teach and figure out. And as you say, Jerry, learn that we're learning, we're learning new stuff from John Boyd every day. That's how I I wound up through the Marine Corps because the Marine Corps was the one organization that he actually really did have uh an outsized uh influence on.

Brian "Ponch" Rivera: 1:05:28

I'll give you my fluff answer. This is three things, right? It's uh naval aviation plus military, and I'll talk about that briefly. Complexity theory, and ready for this, psychedelic assisted therapies. That's how I came to where we are today with John Boyd. So military or naval aviation does a horrible job teaching you John Boyd. They give you the four-step observer oriented side act. That's never what it was meant to be. It wasn't until I started looking at uh complexity theory 15 years ago, we came across Kanevin, went back, I ended up talking to Chet Richards about complexity theory, saw it in science, strategy, and warfare from uh Francisinga, and really started pulling it apart and go, wait a minute, Boyd was not talking or ever was talking about the military and and warfare with the Oodaloop. He was talking about something else, and that something else is the nature of creativity. It's called it an enacted system, how an agent interacts with its environment. That's what he was trying to figure out. That's what the Oodaloop gave us. So that pursuit took me through complexity theory and then psychedelic assistant therapy, opened my eyes up to this thing called the free energy principle, which is just basically John Boyd's Oodaloop formalized through math, right? That's it's what that is at the moment. And that's led us into ecological dynamics, how we interact within sports, or something known as a constraints-led approach, perceptual control theory. There's all these other connecting tissues, if you will, to John Boyd's work. So John Boyd's work is greater than what you can find on the internet. Uh, and what you'll find on the internet is a bunch of morons or um charlatans pushing you first you observe, then you orient, then you decide, and then you act. Well, if you provide that to your competition, they're gonna get their ass kicked. If you teach the Udaloop like the way you guys are teaching it, and you are, by the way, through trend following, you're gonna dominate. And you guys brought that up today. So appreciate your time. Uh, that's been awesome and happy to have other conversations on this.

Mark McGrath: 1:07:08

Our our stance from a business standpoint is basically that successful organizations or successful trend following traders, successful coaches, et cetera, they're already doing these things inherently. It's the awareness or showing them the awareness around what it is that they're actually doing, then their results actually become geometric. They act they become they become outsized from even where they're at because they gain a perspective that that their competition won't have.

Michael Melissinos: 1:07:34

Yeah, no, I think that's that's great. Um sports too, you know. This is why we do it. You know, this is what we do, this is why we do it this way. You know, that's it's important to know that, especially have that trust internally, especially when um you know things get emotional. You have to have like a foundation to, all right, okay, now I I remember. This is what we do, and just keep at it sort of stuff.

Mark McGrath: 1:07:55

Keep at it, never quit, never uh never give up the ship and have a smile on your face going into combat. You know, and marines have a very sick sense of humor. Things like market fluctuations or whatever, we can we can handle those with a smile on our face. That's that's kind of the teaching. But back to the point. I mean, only successful people actually gr gravitate towards these things because they want to understand why. Now some don't don't, but then the ones that don't, they're actually our our argument would be that they're actually vulnerable to sudden unpredictable changes in their environment or a competitor that does grasp these things, because a competitor that does grasp these things becomes that gorilla fighter that can topple a an umpire. So getting getting there faster first. So anyway, well, for the purposes of the recording, we'll we'll pause here. We'll no doubt continue this conversation. We'll make sure that we link to uh your your various sites, certainly the uh the podcast. We're both really glad to know you and and and and and get to know you better and uh see if we can develop some of these concepts further and uh and show people how they can be successful. Definitely.

Speaker 2: 1:09:02

Great. Sounds great. Yeah, it's great talking. All right, thanks. Thanks for having us.