From the September 01, 2011 issue of Futures Magazine • Subscribe!

True cost of learning: Model implementation

Learning from mistakes

We knew that we would have student errors in running the money. Thus, Peter A. West, co-managing director of the fund, wrote a procedural draft document, spending more than 300 hours on this project, with more than 120 pages covering everything from training to execution. The document not only provides continuity of knowledge, but also establishes the culture of the fund.

It is the policy of FFF for team members who commit an error to write an error report. One report worth noting covers an error that occurred on Jan. 12, 2011, at 9 a.m.

That month, McNew took 10 members of the FFF team to Houston on a networking and informational trip. This trip left only seven students managing the position for more than a week in Dayton. There, it seemed most other students shirked their responsibilities, leaving one to cover for the entire fund.

To quote from his error report: "After trading for the third time, at 5 a.m. on Jan. 12, 2011, to cover for the other trading team, I became frustrated and sent out an email and a text message to remind them of their duties to the Flyer Forex Fund. Afterward, in a fit of rage, I threw my phone (which is also my alarm clock) and went to bed."

Unfortunately, the phone broke and the student missed the 9 a.m. trading slot, executing the trade 27 minutes late. While any manager would expect greater dedication from an employee than a student, this highlights the importance of making sure you have proper staffing and back-up.

Generation Y, being educated now, will have specific ramifications in the workforce, as has become evident in the running of FFF. Also known as Millennials, these kids are part of the "trophy generation," a term that reflects the trend in competitive sports, as well as many other aspects of life, where mere participation is frequently enough for a reward. It seems that many of the students that join FFF feel that this — the joining — is enough. No extra work is needed.

While the student with the error held the team together and worked through the problem, the remaining students simply didn’t feel that they were accountable.

The purpose here is not simply to critique society’s shaping of tomorrow’s workforce. It is relevant to traders in the sense that there are no entitlements in trading. Indeed, many students believe that everything is owed them — that the long hours and the out-of-pocket costs borne by the professional mentors and advisory board are a right and not a privilege. They argue that an error of $27 is not much. But in this case it represents about 1% of money under management and it is extremely significant.

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