Ben Horowitz’s brutally honest memoir about building and running startups contains wisdom that extends far beyond Silicon Valley. As a trader navigating volatile markets, unpredictable events, and your own psychology, here are powerful lessons you can extract from this business classic that will make you a more resilient and successful trader.
Embrace “The Struggle”
Horowitz describes “The Struggle” as that period when dreams turn into nightmares, when self-doubt becomes self-hatred, and when you question why you ever started down this path.
“The Struggle is when you wonder why you started the company in the first place. The Struggle is when people ask you why you don’t quit and you don’t know the answer.”
Sound familiar, traders? Those crushing drawdowns, those periods when your strategy stops working, when you question your methods and abilities – that’s your version of The Struggle. What separates great traders from failed ones isn’t avoiding these periods; it’s how you navigate through them.
Trading Takeaway: Acknowledge difficult periods as normal rather than signs of failure. The greatest traders in history have all weathered significant drawdowns and periods of doubt. Your response to these inevitable struggles defines your trading career.
Make Decisions with Incomplete Information
Horowitz notes that CEOs typically have less than 10% of the information they’d like when making crucial decisions. Yet, they must still decide:
“The most difficult CEO skill is managing your own psychology… As a CEO, there will be many times when you’ll have to act with a confidence you don’t feel.”
Traders face this reality daily. You’ll never have complete information before entering a position. Markets are complex systems with countless variables, and waiting for certainty means missing opportunities.
Trading Takeaway: Develop a framework for making high-quality decisions with incomplete information. Focus on process rather than outcomes for any single trade. Build conviction in your edge and system rather than seeking certainty in individual setups.
The Peacetime vs. Wartime Mindset
One of Horowitz’s most insightful frameworks is distinguishing between “peacetime” and “wartime” leadership. During peacetime, companies can focus on expanding opportunities and long-term investments. During wartime, they must focus intensely on survival and immediate threats.
For traders, market regimes require similar adaptations:
Peacetime Trading: When volatility is low, trends are clear, and your strategies are working as expected. This is when you can experiment, build your skill set, and optimize your approach.
Wartime Trading: When markets are in crisis, volatility spikes, correlations break down, and normal patterns fail. This requires heightened discipline, risk management, and sometimes drastic measures like reducing position sizes or moving to cash.
Trading Takeaway: Recognize which market “regime” you’re in and adapt accordingly. Don’t apply peacetime strategies during wartime conditions, and don’t maintain crisis protocols when conditions normalize.
“Don’t Punk Out and Don’t Quit”
When faced with seemingly insurmountable challenges at Loudcloud and Opsware, Horowitz persisted through multiple near-death experiences. When asked what makes a great CEO, he notes:
“The great CEOs tend to be remarkably consistent in their answers. They all say, ‘I didn’t quit.'”
Trading is punishing precisely because it’s so easy to quit. Market losses combined with psychological pressure make abandoning ship an ever-present temptation. But consistency and persistence through difficult periods are what ultimately lead to success.
Trading Takeaway: Commit to your trading approach for a meaningful time period. Evaluate and adapt your methods, but don’t abandon your core principles during temporary setbacks.
Focus on Leading Indicators, Not Just Results
Horowitz describes the importance of looking beyond lagging indicators (like quarterly results) to leading indicators that predict future performance. In the book, he evaluates CEOs on three dimensions:
- Does the CEO know what to do?
- Can the CEO get the company to do what they know?
- Did the CEO achieve the desired results?
For traders, P&L is the ultimate lagging indicator. Your results today reflect decisions made previously.
Trading Takeaway: Develop and track metrics beyond P&L that indicate whether you’re trading well: adherence to your process, quality of entries/exits, appropriate position sizing, and risk management. These leading indicators predict future performance better than recent P&L.
The Accountability vs. Creativity Paradox
Horowitz discusses the challenge of holding people accountable while encouraging creative risk-taking. Too much accountability kills innovation; too little leads to chaos.
Traders face a similar paradox: you must follow your trading rules religiously while remaining adaptable to changing market conditions. Rigid rule-following can miss market evolutions, while constant “creativity” leads to undisciplined gambling.
Trading Takeaway: Establish clear parameters for when you’ll follow strict rules and when you’ll allow adaptation. Create a framework for controlled experimentation that doesn’t risk your trading capital.
Lead Bullets, Not Silver Bullets
When facing competitive threats at Opsware, Horowitz’s team wanted to find “silver bullets” – easy solutions that would solve their problems without hard work. His response:
“There are no silver bullets for this, only lead bullets.”
For traders hoping for the perfect indicator, setup, or strategy that will deliver consistent profits without drawdowns or work – sorry, it doesn’t exist. Successful trading requires the disciplined execution of fundamentally sound practices over time.
Trading Takeaway: Focus on the basics – proper position sizing, risk management, a legitimate edge, and psychological discipline. These “lead bullets” may not be exciting, but they’re what create sustainable trading success.
Nobody Cares
In one of the book’s most powerful sections, Horowitz shares advice he received from Al Davis: “Nobody cares.” When things go wrong, nobody cares about your excuses or explanations:
“All the mental energy you use to elaborate your misery would be far better used trying to find the one seemingly impossible way out of your current mess.”
The market certainly doesn’t care about your reasons for a bad trade. Your broker doesn’t care why you’re down this month. Your family might be sympathetic, but they care more about results than explanations.
Trading Takeaway: Save your energy for solution-finding rather than excuse-making. When trades go against you, focus immediately on managing risk and learning, not on justifying or rationalizing.
Final Thoughts
What makes Horowitz’s book so valuable is his willingness to discuss the raw, unvarnished truth about leadership challenges. Similarly, the most successful traders aren’t those who pretend trading is easy or who never face difficulties – they’re those who acknowledge the brutal realities of markets and develop the psychological fortitude to persist anyway.
As Horowitz concludes: “Hard things are hard because there are no easy answers or recipes. They are hard because your emotions are at odds with your logic. They are hard because you don’t know the answer and you cannot ask for help without showing weakness.”
Sound like trading? I thought so too.
What lessons from “The Hard Thing About Hard Things” have you applied to your trading? Share your thoughts in the comments below.
