Sep 7, 2021 · 1h 11m · knowledge-project
#119 Todd Simkin: Making Better Decisions
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Trader and educator Todd Simkin shares key decision science insights from Susquehanna International Group (SIG), detailing how Bayesian thinking, process-oriented mentorship, and cognitive bias mitigation improve outcomes across markets and personal life.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Shane holds 13.8% of the talking time here. How this is scored →
Shane as informed peer 3.7 Guest teaching 5.4 Guest disagreement 0.6 Shane pushing back 0.6
speaking balance: gold is Shane, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 41:53 Todd reframes Shane's premise on probabilistic thinking
Todd directly challenges Shane's proposition that probabilistic reasoning is the biggest bang for the buck, arguing that collaborative communication and seeking disconfirming evidence rank higher.
Hardest push from Shane ▶ 18:19 Shane challenges the forward utility of cognitive biasesShane refuses the standard praise of cognitive bias frameworks, asserting they excel at post-hoc rationalization but do little to prevent future bad decisions.
Biggest teaching moment ▶ 25:25 Todd educates Shane on Vygotskian learning theoryAfter Shane indicates he is unfamiliar with Lev Vygotsky, Todd delivers a comprehensive breakdown of sociocultural education, contrasting Piaget's stages with Vygotsky's Zone of Proximal Development.
Shane holds their own ▶ 30:30 Shane articulates the four-stage learning loop modelShane demonstrates strong conceptual mastery by synthesizing Todd's trader mentorship explanation into a formal experiential learning loop comprising experience, reflection, abstraction, and action.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shane as informed peer | Guest teaching | Guest disagreement | Shane pushing back | Why |
|---|---|---|---|---|---|---|
| Navigating Information Asymmetry in Financial Markets | 4 | 5 | 1 | 2 | Shane asks a focused question on dealing with information asymmetry in trading. Todd explains Susquehanna's core market-making approach of updating beliefs rather than backing subjective conviction against informed counterparties. | |
| Bayesian Probability and Option Pricing Models | 3 | 6 | 1 | 1 | Shane asks Todd to define Bayesian thinking in practical terms. Todd walks through a dice probability example and demonstrates how option pricing models incorporate forward-looking volatility distributions and disconfirming signals. | |
| Cognitive Biases, Identity, and Political Tribalism | 4 | 5 | 1 | 1 | Shane inquires why people fail to update their priors across domains. Todd connects behavioral biases with tribalism and shares an anecdote about his daughter dismissing a Ronald Reagan quote based purely on political identity. | |
| Rules Versus Principles and Call-Out Culture | 6 | 4 | 1 | 2 | Shane articulates the cognitive efficiency of personal rules compared to constant deliberative principles. Todd expands on the distinction between personal habits and social tribal enforcement using the example of Liz Cheney. | |
| Peer Review and Institutional Truth-Finding Culture | 5 | 5 | 1 | 2 | Shane challenges the forward-looking utility of cognitive bias frameworks. Todd acknowledges that biases are easier to detect in peers than in oneself and explains how collaborative trading desk culture prioritizes truth-finding over action. | |
| Todd Simkin's Path from Anthropology to Trading | 3 | 4 | 0 | 0 | Shane prompts Todd for his career path. Todd describes his background in anthropology, linguistics, and deaf education at UVA before entering equity options market-making at SIG. | |
| Vygotsky's Scaffolding and Growth Mindset in Trading | 2 | 8 | 1 | 0 | Todd contrasts Jean Piaget's rigid developmental stages with Lev Vygotsky's sociocultural learning theory, explaining the Zone of Proximal Development and scaffolding applied to trader training. | |
| Avoiding Outcome Bias and Modeling the Process | 7 | 5 | 1 | 1 | Shane asks how SIG detects the boundary of competence without falling into outcome bias. Shane synthesizes Todd's answer into a four-stage experiential learning loop model. | |
| Probabilistic Reasoning Versus Binary Certainty | 4 | 5 | 1 | 1 | Shane and Todd discuss how conventional education discourages trial-and-error problem solving. Todd explains how the general public mishandles probabilistic forecasts like Nate Silver's 2016 election model. | |
| Calibrating Forecasts and Superforecasting Systems | 4 | 6 | 1 | 1 | Shane asks how forecasters calibrate probability estimates after single non-repeatable events. Todd cites Phil Tetlock's superforecasting methods and compares them to high-frequency weather forecasting calibration. | |
| Poker Origins and Decision Training at SIG | 3 | 5 | 0 | 0 | Todd details how SIG's founders applied poker hand reviews in Las Vegas to develop decision frameworks under imperfect information and how poker remains a cornerstone of SIG trader development. | |
| Constructive Communication and Seeking Disconfirming Evidence | 4 | 6 | 3 | 1 | Shane asks if probabilistic reasoning is the single highest-ROI skill for better decision-making. Todd politely counters that communication and seeking disconfirming feedback rank above probabilistic math. | |
| Applying Reflective Listening and Inquiry in Parenting | 3 | 6 | 0 | 0 | Todd explains how reflective listening from Teacher Effectiveness Training transformed his interpersonal and parenting interactions, allowing children to arrive at their own solutions. | |
| The Principle of Charity and Collaborative Negotiation | 3 | 6 | 0 | 0 | Shane asks whether feeling-based decisions require different processes. Todd discusses the Principle of Charity, explaining how assuming partner competence is essential in both market trading and negotiation. | |
| Assessing Coachability and ZPD in Job Candidates | 4 | 5 | 0 | 0 | Shane asks how SIG assesses whether candidate pushback targets ideas rather than ego. Todd details how interviewers deliberately push candidates into their Zone of Proximal Development to test receptivity to scaffolding. | |
| A Father's Lesson on Quitting and Real Options | 3 | 6 | 0 | 0 | Todd recounts an early morning conversation with his father when he wanted to quit high school lacrosse. He analyzes how his father's non-punitive inquiry taught him to value real options and deliberate commitments. | |
| Overcoming Depression and Practicing Mental Health Hygiene | 3 | 6 | 0 | 0 | Shane asks Todd about his experience overcoming depression during college. Todd shares how redesigning his curriculum helped him recover and advocates for viewing routine therapy check-ins as preventive mental hygiene. | |
| Jeopardy Competition and Expected Value Wagering | 3 | 5 | 0 | 0 | Shane brings up Todd's appearance on Jeopardy. Todd recounts SIG founder Jeff Yass warning him that failing trivia was fine, but improper wagering on Daily Doubles and Final Jeopardy would be unacceptable for a trader. | |
| Parental Influence, Unconditional Love, and Affection | 3 | 5 | 0 | 0 | Shane asks about broader lessons from Todd's parents. Todd reflects on his parents' work ethic and the enduring importance of unreserved affection and unconditional positive regard. |
Statements from this episode (22)
Simkin: Traders should not back limited opinions against informed counterparties
“Our approach is to recognize that we are often on the bad end of informational asymmetry that other people who are looking to trade in the markets frequently know more than we do. And as a result, we don't want to back our own limited opinion against a more in…”
Simkin: Decision-makers must update opinions in a Bayesian way
“The most important thing from our perspective is to be willing to update that opinion in a Bayesian way, to use approaches that are going to be inclusive of all the information available to us, and only when we get to mutually exclusive information or mutually…”
Simkin: Use related instruments to find disconfirming evidence before taking trades
“And again, in isolation, it's really hard for me just to say this person's wrong. But if I have a similar looking option, similar because it's the same expiration, or because it's the same strike and a different expiration, or that there's something about the …”
Simkin: Strict binary rules reduce cognitive load better than flexible principles
“It's so much easier if you have a rule than if you try to have a principle, right? That I don't eat dessert is so much easier than each time that you have the opportunity to have dessert to say, well, I don't eat a lot of dessert. Is this one of the times that…”
Simkin: Call-out culture incentivizes finger-pointing regardless of expertise
“The big problem with call out culture is that we're rewarding people just for the call out. That it doesn't matter what their other behavior it is. It doesn't matter what other positions they have, what knowledge they have, what expertise they have. They just …”
Simkin: Susquehanna requires traders to continuously vocalize their decisions to peers
“A big part of our approach to education is to teach people to talk through their decisions and to talk about why they're doing what they're doing with their peers, the other people on their team.”
Simkin: Joined SIG with no finance knowledge after studying deaf culture
“I joined Susquehanna in 1997 straight out of college. I went to University of Virginia undergrad. Unlike sort of the stereotypical finance background, I studied a combination of anthropology, psychology, linguistics, and education. And I, it was combined into …”
Todd Simkin: SIG operates on the belief that traders are made, not born
“Susquehanna has always had a very growth mindset perspective on, on teaching trading, you know, before Carol Dweck had even shared her views on growth mindset. That is, that has always been the company's position is that traders are made, not born.”
Simkin: Susquehanna shields feedback providers from knowing a trade's financial outcome
“When people talk about trading decisions that they've made to more experienced traders or to peers who can give them feedback on it, we do everything we can to shield The person giving feedback from knowing the results.”
Simkin: Effective mentorship models the decision process rather than prescribing actions
“And a big part of how information is passed from the mentor to the mentee is by modeling the decision process. It is not enough to say you should have raised vol by two points when this trade came in. Instead, it's so much more important to say, okay, when thi…”
Simkin: Trading is running continuous experiments where failure drives success
“In the world that I live in, you know, for better or worse, we know that we're going to make mistakes all the time, that we are effectively just running experiments and getting feedback and then updating our approach and running a new experiment again the next…”
Simkin: Probabilistic forecasts cannot be judged wrong unless 0% or 100%
“It's really hard to say anybody's wrong about a single probability prediction, unless they said that something was zero percent or a hundred percent.”
Simkin: Calibrating forecasts requires frequent, uncorrelated repetitions and feedback
“If the only thing that you predict are very hard to predict outcomes and you predict them very rarely, you're not going to be able to calibrate very well at all. On the other hand, if you predict many different things that particularly if they're uncorrelated,…”
Simkin: Weather forecasters are exceptionally well-calibrated in probability assessments
“Weather forecasters are really good. I mean, just stupid good. And if you were to plot how often it rains when they say there's a 30% chance of rain, it's like 30% of the time. It's not 25 or 35.”
Simkin: The worst probabilistic forecasts come from media-incentivized experts
“The worst forecasts are often from people who are experts who make extreme forecasts. You know, when they're right, they're going to look really right because they said something extreme. And that means that they're going to get on the news program.”
Simkin: Susquehanna's founders tested decision principles in Vegas poker before trading
“The founders of Susquehanna were in college together. And they studied an array of subjects, but what really brought them together was that they played poker together and were able to talk about the decision process in their poker game in, in a really nice way…”
Simkin: Constructive communication beats probabilistic thinking for truth-finding
“Talk more is number one. That beats probabilistic thinking that, you know, that, that beats sort of anything else in truth finding is, is being able to bring in other people in the decision process in a constructive way.”
Simkin: Asking for feedback without acting on it is actively harmful
“If you get feedback and then don't do anything with it, people are going to stop giving you the feedback. It's not just not helpful to ask for feedback and not change it. It's actually hurtful.”
Simkin: Assuming counterparties know what they are doing protects traders
“On the trading side, sort of this principle of charity is really giving somebody credit for knowing what they're doing when they're trading against you. This is what sort of protects you from being run over by somebody who has better information than you do.”
Simkin: Negotiations are collaborative because counterparties can always walk away
“Every single negotiation is a cooperation and a collaboration. But there's not a single time where I'm almost never, and really, you know, probably never, where the other person has to negotiate with you. They have some alternative. They can walk away, which m…”
Simkin: The best job interviews leave candidates wishing for a do-over
“The best outcome for me for an interview is if the candidate walks away and wishes they could have part of the interview back.”
Simkin: Jeff Yass threatened to fire him over bad Jeopardy wagers
“Jeff Yoss, the founder of, you know, one of the founders of Susquehanna, the chief risk manager at Susquehanna came into my office. Before I went and he said, Todd, nobody cares if you know anything about American history, but if you screw up the betting on, o…”