AlphaMind Podcast 55: Dr Tara Swart; On 'Brain Agility' and being 'the Wendy Rhodes of London'.

This week we are delighted to have Dr Tara Swart on the Podcast. Tara is a qualified psychiatrist and neuroscientist. who left the world of medicine to set-up her own Neuroscience based leadership coaching consultancy and became a coach, working with leaders and increasingly with top traders in Hedge Funds. Tara also lectures in Neuroscience at MIT, is an in-demand speaker, and author of ‘The Source: Open Your Mind, Change Your Life', which has been has described very favourably as ‘The Secret' based on Science, and by some as Life-changing. The Source has become a UK best seller, and is now being translated into 36 different languages.

Tara’s work with Hedge Funds has seen her described as the ‘Wendy Rhodes of London’. For those of you unfamiliar with Wendy Rhodes, she was the Psychology Coach in the Primetime hit show ‘Billions’.

In this episode we had a great discussion about Tara's book ‘The Source’, and expanded this out to explore how traders can develop an ‘AlphaMind’ by developing their ‘Brain Agility’. Brain agility facilitates the mastering of your emotions, developing greater resilience, being aware of the brain-body connection, accessing your intuitive abilities, making good logical decisions, staying motivated and thinking creatively.

This conversation is laced with references to neuroscience, psychology, emotions and references to our cognitive abilities allied to how people think about and make decisions in risk, trading and investment situations.

One of the fascinating parts of this interview was a talk about a topic rarely discusses, but that we see often as a factor in people's behaviours as traders, inter-generational trauma. This is part of the field of epigenetics, which is the influence of the environment on the expression of our genes. The point of this is that trauma’s experienced by parents and even grandparents can influence and shape how we are and how we behave when taking and managing risk and plays out subtly in people's work as traders. Tara makes that point that we do have the capability through Neuro-Plasticity to override this and take back control.

We also discuss later in the episode how fear and anxiety play out and how there are behaviours which can allow us to better a get a handle on these elements.

Listen to a soundbite from this episode 

You can find out more about Tara on her website https://www.taraswart.com/.

You can also read the Spear Magazine Article which Tara refers to later in the interview at this link: https://www.spearswms.com/stop-work-killing/

Another great article worth a read mentioned by Tara was Ghosts in the Executive Suite : https://syncreticsgroup.com/wp-content/uploads/Ghosts-in-the-Executive-Suite-2-26-16.pdf

Tara is married to Robin Bieber, one of the world’s leading technical analysts and a guest a few podcasts earlier.

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The AlphaMind Podcast

The AlphaMind podcast is co-hosted by Steven Goldstein and Mark Randall, market veterans with over seven decades between them in the financial markets. The podcast delves into the lives and stories of extraordinary guests whose experiences provide a fresh and powerful lens through which to understand the mental, emotional, psychological and behavioural challenges people face when encountering risk and uncertainty in financial markets. To find out more visit the AlphaMind podcast website. The AlphaMind Podcast is produced in partnership with 'The Society of Technical Analysts'.

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MarketPsych - Social media, Behavioural Finance, Psychology and Neuroscience.

I came across a very interesting piece on a blog called ‘MarketPsych: Applying Behavior Finance’. I was particularly interested in their posting on the 3rd January this year. – The link is here. The title of the piece is ‘Using Reason+Emotion to Forecast 2012’.  The article grabbed my attention making some thought-provoking points and assertions and is well worth a read.

A couple of things jumped out at me, particularly in light of the fact that this article was posted on the 3rd January and how market events have unfolded since that time.

Firstly, their assertion that, ‘uncertainty is predictive - in a counter-intuitive way’. Looking at the way markets have started this year, this would go along way to answering all those people, and there are many, sitting around scratching their heads at the performance of the markets so far this year.

Secondly, and I find this really interesting, they have analysed and aggregated the past 13 years of social media chatter by year for 8,000 publicly traded U.S. companies. They found that December, perhaps not surprisingly, has been the happiest and most optimistic time of the year for investors. Perhaps this is one theory why markets tend to experience the ‘January effect’: The January effect has been known for many years and was first described some 70 years ago. Since 1991, not including this year, January has on average returned 6.7% on the SP500.

Following on from this analysis, they have conducted, in their own words -‘basic analysis’ - from which they have created forecasts for stock out- and under- performance using both emotion and reason as the inputs. As a result they identified five companies that they think may outperform and five who may underperform the market for 2012.

Given that this was published on their blog on the first Monday of January, I thought it would be interesting to see how these have fared so far this year. The following table shows % performance ‘Year to Date (YTD)’ as at the close of business on Friday (3 Feb 2012) for the suggested outperformers and underperformers. At the bottom of each group I have calculated the average performance for each group; I have also included the median performance, which I think gives a better reflection, due to the distorting effect of one outlier in a small group. It certainly looks very impressive thus far: 

Finally they talk about some interesting insights from neuroscience, which can have far reaching consequences for our own performance when trading and investing. Whilst it should be no surprise that people get excited when they do (and possibly believe they will) make money, it is however what is happening inside our brains that is fascinating. When we make money this triggers activation in the brain's reward system; however at the same time that excitement leads to a de-activation in the "loss avoidance" areas of the brain.  Let me just re-phrase that slightly: ‘When we become excited about making, or the prospect of making money, we become less able to detect risk, thus perhaps when we need it most, we let our guard down’. – Who as a trader or investor can not resonate with that? 

 

They also talk about how we become ‘emotionally primed’ when watching financial news, (and I would suggest when watching market price action, data releases, and other aspects of trading and investing). They assert that it is common for - our unconscious emotional state to shift from news story to news story - across a spectrum from joy to anger to fear - depending on the message of each story.  As these shifts occur, the brain shifts its decision-making from primarily neo-cortex (analytical) to primarily limbic (emotional).  And most importantly, this shift to emotional decision making is unconscious.

After such a shift, our rational brain (neo-cortex) believes that it is responding to financial circumstances and information as before, but in actuality it has been "emotionally primed" and is reacting to events from within an emotional frame.  

We see this in our own behaviours, when we hear frightening news; we react with more caution, whereas after favourable news, we are inclined to take on more risk. This ties in an aspect of my own ‘Trader Performance’ coaching, where  I suggest to clients that their major market analysis and indeed their thinking should where possible be done, in what I consider a ‘cold-state’, preferably not in front of screens, or away from market activity, or during quiet times. This way decisions and analysis are far more likely to be based in reason, whereas decisions taken in the heat of trading, ‘hot-state’ are far more likely to be poor decisions, based on emotional responses. (Please note; I like emotion as an input into decision making, so I do not suggest ignoring it, but the decisions themselves should be made in a rationale state of mind - where possible).