Does anyone remember the call for financial education in the wake of the 2008 crisis? Most notably, Dr. Shiller, the Nobel Laureate economist, was perhaps the most vocal in calling for the investing public to become better educated. The basic premise was that a well-educated public would be more aware of the risks inherent in the marketplace — as well as the risks posed by those in our society who prey upon the unaware.

I wholeheartedly agree that there is a void when it comes to financial education in this country, and I am disheartened by the tepid advances toward that goal since the crisis. More importantly, I think the focus is misdirected. The solution lies in educating our young in the basics of finance and economics — starting with the simplest examples of personal finance, and reaching toward an understanding of how investments and decision-making affect their lives. I am talking about a core understanding of how the financial world functions and interacts with human nature, and of how each of us, in our own way, can make sense of money to enhance our lives rather than detract from them.

Let me take a step back. When I read Dr. Shiller’s book, I could not help but recall the famous line from W. C. Fields: “You can’t cheat an honest man.” Don’t misunderstand — I know the limits of the advice implied in the quote. But in reality, if one understands three primary tenets — which, by the way, are the very foundation of success in trading and, I believe, in life — temperament, risk versus reward, and discipline, then many of the concerns raised by those who call for financial education can be addressed. In fact, I would assert that the breadth and depth of education required, which is the real challenge, becomes greatly diminished.

Part of the problem is age. By the time one reaches a certain age, it is harder and harder to develop financial self-discipline that was not ingrained early in life. A simple sports analogy is muscle memory. Have you ever dragged a friend who used to be a good high-school or college golfer back out to the course after many years? As you stand behind him at the practice range, waiting for him to fail, the smug smile leaves your face as you watch him swing. You don’t even have to follow the ball. With very little effort, his game comes back — because he has the swing that you, and $20,000 in private lessons, still long for.

So what does this have to do with the 2008 crisis, or trading, or financial education in general? Human nature, in many ways, drives markets. Ask any risk manager, broker, or financial advisor who has sat down with clients and asked them to articulate their goals, temperament, and risk profile. People will always say yes when asked if they are willing to accept risk — but are they really? The answer is yes, but only if their investments go up and they make money. It is incredibly hard for a middle-aged, fairly successful person to grow in financial intelligence — and I don’t mean reading a lot and learning about markets. I mean what really matters to success: the three tenets. This is why so many people sell when they should buy and buy when they should sell. Fear and greed.

The solution, I believe, lies in one of the fundamental shortcomings of our education system. We are not preparing our young people for the practical financial realities they will face. How many high-school students, even in supposedly great schools, can’t explain how interest on a loan or mortgage works? How many can’t explain what a corporation is, or how to balance a checkbook? Schools do try to teach self-discipline and risk-reward. Testing is a simple example: if you don’t study, you fail. Sports: if you don’t come to practice, you don’t make the team. All good, fundamental lessons. But in the financial arena, somehow, those lessons don’t transpose.

I do not purport to have all the answers, but I can share that when one looks at investing — and, indeed, at life — there is a clear message: practice and master the three tenets, and you gain substantial advantage and probability of success. I learned this on the trading floor, where reality presents itself every morning in the form of a simple accounting statement that tells you whether you are kidding yourself or not. Although impractical, I think placing every high-school student in a trading pit for a month would be a remarkable educational experience — a first step toward understanding the financial world, and, just as importantly, toward the self-awareness that comes from confronting one’s own temperament. Coupled with the wisdom of W. C. Fields, it might be the start of avoiding the kind of financial and emotional pain the 2008 crisis inflicted on the average person.

Temperament

Why do guards want to be centers, and second basemen want to be center fielders and bat fourth? Know yourself and be happy with it — as the saying goes, everyone else is taken.

Risk & Reward

What happens if I am right or wrong about this decision? If I am right, will it really change my life? And if I am wrong, will it have a great negative impact on it?

Discipline

Easy to talk about, hard to do. Your statements don’t lie; you can’t lie to your scale; and just because your bank gave you checks doesn’t mean there is money in the account. Do I have the discipline to put a plan in place? Once it’s in place, can I follow it? When I make a mistake, can I admit it? Remember — there is no shame in falling, only in not getting up.