Jack Schwager, co-founder of FundSeeder, a platform designed to find undiscovered trading talent worldwide and connect unknown successful traders with sources of investment capital, is coming out with a new book called Unknown Market Wizards: The best traders you’ve never heard of.
Q1: What inspired you to write this book?
This isn’t Jack’s first rodeo when it comes to writing books of this type. In part, it’s a continuation of a series of books that goes as far back to 1989.
The first book he wrote, Market Wizards, was published in ‘89. Three years later, he wrote his second one called The New Market Wizards. Then came Stock Market Wizards in 2000 and Hedge Fund Market Wizards in 2012.
He just finished his most recent book called Unknown Market Wizards, which profiles some of the greatest unknown traders, some of which have been sourced via FundSeeder.
The premise is that there are people out there who are as good, if not better, than some of the top fund managers and nobody knows them. It focuses on people who are completely unknown, generally one man operations, not managing anyone’s money and who have done remarkably well in the stock or futures markets.
Q2: What is your writing process like?
Jack has used the same process with all of his books.
First, there’s the interview stage. Many people confuse this as the main part but in fact it’s a tiny fraction of the job.
After he records the interviews, he’ll listen to them and extract any information that’s useful – normally a very long process.
Then, it’s a matter of molding that content, funnelling down more and more, and reorganizing peoples thoughts to be more coherent.
Finally, it’s all about moving things around, draft after draft, making corrections, rereading it and getting rid of repetition in order to attain a smooth reading.
Quick tip from Jack: Save the introduction and conclusion for the end. According to Jack, “The introduction is the narrative of who the interviewees are and my interactions with these people. The conclusion is based on the main key lessons that come out of all the interviews.”
Q3: Were there any parts of the book that predicted a black swan like event as we saw during the COVID-19 pandemic?
Jack clarifies that great traders are not predictors. It’s not a matter of predicting, it’s a matter of clearly seeing what is going on, and what that’s likely to imply in the near future so that you can trade advantageously.
The interview process began last spring 2019 and nearly all of them were carried out pre-COVID days. However, two of his interviews towards the end had to be carried out via Zoom, which was a first for him.
His conversations were focused on the pre COVID-19 trading days, when the market was a lot different than what it is today. Jack has been following up with them since and they continue to do remarkably well.
When COVID-19 hit, these unknown traders didn’t encounter the same fate we saw on Wall Street. In fact, they continued doing extraordinarily well (40-50% return per year). None of them had any significant losing months like the market had. One of Jack’s goals is to combine some of these traders to make a fund.
So, how did these traders manage to create incredible returns during such an uncertain time? Jack is considering answering that question in an updated version of the book as soon as a vaccine hits the shelves and the world starts settling down.
Q4: What did you learn when writing the book?
On a risk side, these traders do take exposures, but they’re very quick at getting out when things are not going exactly right. Their records are highly abnormal. If you knew nothing about trading, but decided to compare the distribution of returns among different groups of traders, you will see these traders are like a different species.
Most peoples’ returns ressemble a normal looking curve, whereas their profile is highly skewed with virtually no large losses and many large gains – a completely different distribution than most managers and traders.
Q5: Where does Fundseeder play a role in the creation of this book?
The idea that propelled the Fundseeder concept is the same as in the book. The whole premise behind Fundseeder is that there are traders out there who are talented, but have no access to capital. There are many people who signed up to Fundseeder who fit this description. In fact, of the eleven traders interviewed in the book, three of them came from FundSeeder.
Q6: If I have no background in trading or finance, is Unknown Market Wizards still useful and understandable?
Since Jack’s very first Market Wizard book, he has had the same goal which is to write something meaningful to both professional and regular traders. Another important element was to make the book accessible to people who are also interested in those who made a lot of money in the market.
Q7: What surprised you most when writing this book?
The biggest surprise to Jack was that people could still do as well as a number of the legendary traders he interviewed in the first two Market Wizards books did in the 1970s and 1980s. Even with all the computer power in the financial markets, some of these traders he interviewed were making 300% per year in these markets. That’s something he didn’t think was possible and for which he finds astounding. These are individuals who are able to achieve such high levels of performance without the aid of any computer programs.
A particularly high percentage of these traders also mentioned that they were extremely poor students. This comes up in a number of the interviews, where they say they had trouble even finishing high school. Just because these traders were poor academic students, it certainly didn’t mean they weren’t smart! They had a different type of intellect. In a few cases, some were of the ADHD type, where they could focus on something they were very interested in. These people turned out to be remarkably skilled when they found this particular niche.
Q8: Can you share a key takeaway from the book?
In the epilogue, Jack makes an important point regarding the theory surrounding efficient markets. There are two schools of thought: markets are efficient and you can’t beat them and markets are not efficient and you can do way better than the markets.
In essence, Jack’s very final point in the whole book is that these contradicting views are both right. It’s a matter of context. For the majority of people who have no particular skill set, edge or knowledge about the markets, they are better off putting their money in an index fund. In this case, markets act like they are efficient for most people.
However, on the other hand, the markets are not efficient and it is possible to beat the markets. As these traders demonstrated, they didn’t just beat the market by small amounts. They consistently got high performance over long periods of time by large amounts. This takes both skill and markets that aren’t efficient. Even with all the quant power thrown at the markets, opportunities for skilled individual traders to excel still exist.
Q9: Where can we purchase the book?
The book will be released on November 3rd in all formats. You can pre-order a copy now on Amazon.