Interview with Trend Follower John W. Henry

The July issue has a great interview with John W. Henry. Some excerpts:

RW, Sr.: Let’s change gears here. I saw in an article that you were on the right side of the Barings Bank blow-up in 1995. Most people focus on all of the losses and, obviously, that the Queen’s bank was taken down by Nick Leeson. But there is another side. After all, in a zero-sum game, someone does have to be on the other side of a loss. Can you go through that a little bit with me?

John W. Henry: Sure. We were on the right side of the market. But we did forego some profits because we weren’t able to get much information out of what was going on at the Singapore exchanges early on, and we were afraid we weren’t going to be able to repatriate our profits. We ended up getting out of that move after the Barings Bank collapse, unluckily only a few days or a week after the news hit. It looks like we may have made a lot of money, which maybe we did, but it was only half of what we should have made. Leeson didn’t have the ability to take a loss. If you look at the great disasters in markets on an individual basis, they are mostly individuals who refused to take a loss. They waited for the market to reflect their belief about the market. Long-Term Capital Management (LTCM), Leeson – Jesse Livermore – you can be the best and the brightest, but without the knowledge of your own limitations and the discipline such knowledge brings, you court disaster.

RW, Sr.: John, you’ve had a tremendously successful career thus far. I always like to ask successful people who their mentor was because sometimes it throws light on what may have influenced that success. Do you have someone who mentored you?

John W. Henry: Actually, there was a fellow named Jiddu Krishnamurti who was a mentor in this regard. He was an iconoclast who really believed that what is was all that was important – at least with regard to making decisions. If you can put aside what should be, what could be, what ought to be, what would have, could have, should have occurred and just pay attention to what is actually happening, the act of paying attention transforms what is. The greatest action, the wisest, the best action that you can take in almost any situation is to stay with what is, instead of jumping to conclusions or trying to come up with conclusions. Just pay attention. And that has had more of an impact on my trading and my life than any other thing. I only knew him briefly – and “knew” him is probably too strong of a word. I met him and was around him briefly, but he had a major impact on my life.

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