“You just have to control your emotions and you’ll be a much better investor” is actually really bad advice.
Emotions contain information, and if you try to override that information by controlling it or ignoring it, you miss out on interpreting your lifetime’s worth of accumulated wisdom.
Aided by recent technology that allows researchers to peer deeper and deeper into the brain, science has discovered that “Emotions are your brain’s best guesses of what your bodily sensations mean, guided by your past experience. Your brain constructs these guesses in the blink of an eye – so rapidly, in fact, that emotions feel like uncontrollable reactions that happen to you, when emotions are actually made by you,” says Lisa Feldman-Barrett, professor of psychology at Northeastern University and Chief Science Officer for the Center for Law, Brain & Behavior at Massachusetts General Hospital.
In other words, the brain is not reacting to what is happening, it’s actually constantly predicting what will happen next, based on the sense data it is receiving, and then adjusts how you respond based on whether its predictions were accurate. It’s like an airplane autopilot that is continuously autocorrecting based on new data.
Now, brain science is complicated and we don’t—and probably never will—have a complete picture of how it works. But based on the best knowledge today, here are three things you can do—and help your clients do—to better deal with your emotions so you can function at a higher level.
1. Ask yourself, “What am I feeling and why am I feeling it?”
This question comes from hedge fund performance coach Denise Shull in my new Barron’s Advisor podcast with her. Rather than just suppressing the feeling or trying to rationalize or intellectualize away the feeling, (e.g., fear of the market going down) it’s best to “feel the feeling,” put the feelings into words, and then try to sort out whether the feeling is coming from unresolved psychology, relevant intuition, or just incidental noise.
As Victoria Song said to me in an earlier podcast, “If you don’t feel your emotions, then the energy patterns get stuck and metastasize, creating dis-ease in the body, which becomes disease.” In a similar vein, Denise said, “If you suppress and don’t want to feel it, sooner or later you’re going to act it out. Period.”
From a practical standpoint, when markets drop significantly, advisors often resort to trying to calm clients by showing historical data about how markets have responded/rebounded from past bouts of volatility.
That’s taking an intellectual approach that avoids allowing your client to feel the emotions they’re feeling. The reality is, they didn’t get into that emotion through a rational understanding so they’re not going to exit that feeling by seeing past performance charts.
If you don’t help them process those emotions and sort out what’s relevant and what’s just noise, they are bound to repeat or “act out” those emotions again.
How do you help a client process those emotions? In my podcast, Denise describes how she coaches hedge fund managers to deal with their negative emotions so they don’t cause avoidable trading mistakes.
2. Get granular on defining the emotion you are feeling.
The clearer you can be on the exact nature of the feeling you are feeling, the more effective you’ll be in delivering a response or action plan to deal with that specific emotion.
For example, saying, “I’m feeling angry right now” is a rather broad statement. As Lisa Feldman-Barrett said on Jim O’Shaughnessy’s Infinite Loops podcast, “For some people, irritation, frustration, and rage are all synonyms of anger. For other people though, those are really distinct experiences with very distinct behavior action plans that go with them, meaning, that you do different things when you’re angry versus when you’re enraged versus when you’re irritated. And the more precise you can be in giving meaning, guessing at the causes of the sense data, the more precisely your brain will tailor its action plan to the situation.”
Negative emotions, in particular, can be helpful when you really explore them. As Denise said in my podcast, “What the research also shows is when you override an uncomfortable negative emotion that has fundamental meaning to you, when your unconscious is trying to get a message to you through an uncomfortable feeling and you ignore it, or just try to turn it positive, the volume goes up inside your head. It gets louder, not softer because there’s something in there trying to help you.”
So don’t ignore the negative emotions. Get granular in defining them and determine what’s the most effective course of action to deal with them.
3. Learn to distinguish between intuition and impulse.
We’ve all had that feeling where we can just sense the right answer, or we can anticipate what’s going to happen even though we can’t quite put our finger on why. That’s intuition.
As Denise said, “Intuition is calm. It’s an actual expectation about how things will unfold based on one’s experience and how many times they’ve seen those set of factors come together.” It’s essentially unconscious pattern recognition.
By contrast, impulse is like road rage. Somebody cuts us off in traffic and we get pissed, flip ‘em the bird, and cuss at ‘em. There’s often a tangled-up energy and urgency to impulse that causes us to react before thoughtful deliberation. And in emergency situations, that’s necessary. But in road rage, not so much.
Through interoception, the brain is able to sense the internal state of the body, both at a conscious and unconscious level. When you get better at sensing your body’s internal state, you can get better at discerning what’s intuition and what’s just impulsive noise.
You can actually train yourself to become more interoceptive through practices such as mindfulness and exercises like sensing your heartbeat count for 60 seconds and comparing it to your actual heartbeat count.
And as David Robson wrote in a recent article in The Guardian, “If you are more adept at accurately detecting your bodily signals, you will be able to form more nuanced interpretations of your feelings about a situation, and this in turn should help you to make wiser choices about the best ways to respond.”
Digging into the realm of emotions is uncomfortable for many of us. But a key to unlocking high performance and more effective decision making is to feel your feelings, discern, define, and process them, and then move forward based on the meaningful information those emotions are signaling to you.
I believe that advisors who are trained in this type of work will add an order of magnitude level of value to their client relationships. Not every client will want this, but for those that do, it can be transformational.