A Lesson In Profitability From Another Industry That Works In Trading

One of the coolest things about having worked in the Quality Assurance industry was seeing how focusing on consistency and the process of what you’re doing can actually be the fastest path to being highly profitable.

Take the Japanese car companies for example.

Back in the ’70s, they had the reputation of making cute, cheap little cars. But they wanted to shed that reputation, plus they knew that they had a lot of waste in their operations – waste that otherwise would end up on the bottom line.

American car makers were focused on production, just make as many as you can. The thought was, “We make money by producing cars. The more we produce the more we make.”

But the Japanese decided to start pursuing Quality, making better cars and also becoming better at making them.

So they hired American W. Edwards Deming to come over and help them.

They learned from his teaching that as they focused on getting themselves organized from the top of the company all the way down to the production floor, their costs went down, their waste went down, their consistency in their product improved dramatically, and they were making a LOT more money.

All the while, the American car makers were losing market share and struggling more and more financially, due to the better competition, but also because they were continuing to waste so much time and resources through their focus on production only and NOT on consistency and quality.

The Japanese were smart to bring in Deming because it didn’t take long and they began to reap tremendous rewards, both financially and in gaining the admiration of both customers and competitors.

The neat thing about this is that the same approach used by the Japanese works in all industries and it works tremendously well in trading too.

Unfortunately for traders, the common notion being purported is that ‘being more disciplined’ is the only way to improve your consistency – which is NOT true and it doesn’t address the root causes of the problem.

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