The Locus of Control

In my favorite finance book, What I Learned Losing a Million Dollars, the author, a quintessential boomer narrates his experience getting his first out-of-school job:

I walked into this office on just the right day in 1968. One of the biggest brokers in the office was primarily a commodities broker, and I happened to walk in the day after his assistant had quit. This broker was producing $300,000 to $500,000 a year in gross commissions—in commodities—in 1968! He was a big hitter. The office manager’s secretary said, “You’ll have to talk to the office manager, Mr. Fitzgerald.” I went in to talk to Larry Fitzgerald and he said, “What do you know about commodities?” I didn’t know anything, but I remembered a few of the buzz words from the meeting I had with Jack Salmon and Dr. Christian in college. I walked into this office on just the right day in 1968. One of the biggest brokers in the office was primarily a commodities broker, and I happened to walk in the day after his assistant had quit. This broker was producing $300,000 to $500,000 a year in gross commissions—in commodities—in 1968! He was a big hitter. The office manager’s secretary said, “You’ll have to talk to the office manager, Mr. Fitzgerald.” I went in to talk to Larry Fitzgerald and he said, “What do you know about commodities?” I didn’t know anything, but I remembered a few of the buzz words from the meeting I had with Jack Salmon and Dr. Christian in college.

If you attempted that today, they would tell you to apply online. There would be 1000 applicants for that job. And the firm would have a full-time receptionist whose job it was to answer the phone calls of millennials whose parents forced them to call to “follow up” and “check the status of their application” and “show initiative.”

The author, who epitomized his boomer generation in youth but does not by any means live up to their reputation now, admits as much later. But not before saying something on behalf of an internal locus of control:

I was the first lieutenant at Aberdeen to become a master instructor. It was just another game to me. You had to do a bunch of B.S., and I did it. It wasn’t hard. Every other master instructor had been at least a captain, and most were majors or lieutenant colonels. I was only a second lieutenant, the lowest ranking officer there is. The master instructor title, OCS training, and the MOS honor graduate were the same deal: “It’s a game. They wrote these rules; I understand these rules. I can follow these rules and win the game. It’s no big deal. It isn’t hard.” Some of it was aggravating, but I didn’t take it personally. There was nothing personal about it. They didn’t know I existed when they wrote the rules so it was totally impersonal. You can either play the system or you can let the system play you. Pick one. I like playing the system because it’s more fun and you win more. If you let the system play you, you can get very frustrated and very beat up.

Words to the wise. 

It is commonplace to hear men of Generation X tell the large volume of hopelessly single men that the problem is them, not their environment. Such a man might have married twenty-five years ago and his experience is irrelevant to them given the revolution in the relations between the sexes on account of dating apps and millennials being the first generation to take the sexual revolution seriously, as opposed to dabbling in it to shock their elders before settling down. The same Gen X man is clueless that just a few years prior to his birth, relations between the sexes was totally revolutionized, the second such revolution in a half-century. What he knows about this was only valid for a brief window of time. Yet it does not shake his confidence, at least until he has a teenage son. The fact that a given guy might be having a tough time with women could be his fault. An entire generation+ of failed pair bonding is a systemic issue. 

On to the midas touch:

So not only did I think I was neat, but a lot of other people did, too. I thought I was different and somehow better than other people; like I had some sort of Midas touch. I might have thought it was true, but it wasn’t. Little did I know that all the times I thought I was good, I had only been lucky. For example, when I was sent to Korea and became an S-3 as a second lieutenant, was it because I was good or lucky? Lucky. Everyone else was sent to Vietnam, so there was a personnel shortage in Korea. When I happened into that brokerage the day after Cohan’s assistant quit, was it because I was good or lucky? Lucky. When I became a board governor and Executive Committee member after only six months in Chicago, was it because I was good or lucky? Lucky. The successes in my life had given me a false sense of omniscience and infallibility. The vast majority of the successes in my life were because I got lucky, not because I was particularly smart or better or different. I didn’t know it at this point in the story, but I sure as hell was about to find out.

Locus of Control

According to Chat GPT:

The locus of control refers to an individual’s belief system regarding the causes of their successes or failures. It reflects how much control people feel they have over the events that affect their lives. The concept was developed by psychologist Julian Rotter in the 1950s as part of his social learning theory.

Types of Locus of Control:

1. Internal Locus of Control:

   • Individuals with an internal locus of control believe that their own actions, efforts, decisions, and abilities are primarily responsible for the outcomes in their life.

   • Characteristics:

     • They feel more in control of their environment.

     • They are likely to take responsibility for their actions.

     • They tend to be more motivated to achieve success and are proactive in changing their circumstances.

     • Example: A student with an internal locus of control might think, "I did well on the test because I studied hard."

2. External Locus of Control:

   • Individuals with an external locus of control believe that external forces, such as fate, luck, chance, or other people’s actions, primarily determine the outcomes in their life.

   • Characteristics:

     • They feel less control over their environment.

     • They may attribute success or failure to luck, fate, or other external factors.

     • They might feel powerless in the face of challenges and be more passive in attempting to change their situation.

     • Example: A student with an external locus of control might think, "I did poorly on the test because the questions were unfair."

It is often stated that one ought to have an internal locus of control. The strong case for this is the claim that everything is under your control, if you allow that some adaptation may be required. The weak case is that having an internal locus of control helps maximize what is possible. Both of these positions are wrong. 

Of course, more commonly people attribute their success and that of their friends to internal locus of control, and their failures to external locus of control, while attributing vice versa to the affairs of their enemies. 

In fact, the internal locus of control positions are wrong because one ought to have a true locus of control. There is an objective reality and you can and should discern it. The boomer who lost a million dollars had a strong internal locus of control and it nearly destroyed him. There are as many costs to having a false internal locus of control as with an external one.  

One might suggest adopting an internal locus of control for failures and an external one for successes, however, this would be better adopted as a bias for discernment, which will inevitably be imperfect, rather than a replacement for it. 

The simplest way to discern true locus of control is to draw a boundary condition with relevant parameters around your cohort and compare yourself to the average and peak of that cohort. Had the boomer million dollar loser done so, he would have seen that he lived in a rapidly growing time where everyone was amazing. With a lot of effort, he could achieve an above average outcome, but he had no midas touch. His equivalent midwestern white guy in today’s cohort at best manages a Verizon store. 

It is necessary to add a bias for fewer parameters. We’ve all heard demographic excuses ad nauseum in the past ten years. 

Nonetheless, the average millennial is broke, obese, and alone. That’s true even in Utah, Minnesota, and New England. It makes no sense to denigrate someone for being average. “Be a huge outlier” is unlikely to be the solution to your problems, by definition. Certitude that you’re going to be a huge outlier is arrogance. Humility, not arrogance, is more helpful. Furthermore, the effort of an outlier gets you a slightly above-average outcome for previous generational cohorts if you succeed, with way more baggage. Is that really the game you want to play? Or do you want to do something else?