Your Brain on the Market

Can we think our way to better performance?

“The Thinker,” Rodin Museum, Philadelphia. Photo: Andrew Horne. Source: Wikipedia

There’s an enduring misconception that we only use about 10% of our brains, that if we could tap into our unrealized potential we could learn new languages, solve complex math problems, and bend spoons with our minds. In fact, this notion is the basis for a popular recent movie, “Lucy,” in which the lead character unlocks her hidden mental reserves and does incredible things.

In fact, our best mental performance doesn’t come from doing more with our brains, but from doing less. Most of us have experienced being “in the zone” –whether during an athletic contest or some other period of intense concentration. Time seems to dilate. Five seconds can seem like five hours, and vice-versa. Television and movies depict this state by showing action scenes in super-slow motion. I first saw this on television in the ‘70s. In the series Kung-Fu, David Carradine would seem to hang suspended in mid-air during one of his martial-arts moves.

Brain scientists have studied this state and call it “transient hypo-frontality.” The brain isn’t doing more, it’s doing less. The prefrontal cortex—the part of the brain that houses our sense of will, our sense of self—slows down. Our inner critic is silenced. We enjoy a boosted sense of self-confidence and creativity. This flow-state allows us to focus keenly on the task at hand. Everything else seems to disappear. We’re in what some call “the deep now.” There’s no sense of past or future, and we feel a sense of connection with the everything. But the state is transient—temporary. Eventually, we need to come back to reality, if only to manage everyday life.

Illustration from Gray’s Anatomy (1918). Source: Wikipedia

The market is a lot like our brains: complex, inter-connected, and self-correcting. At any moment, it seems like it’s only tapping into a small portion of its potential. In fact, one or two sectors usually dominate on any given day. That’s the nature of price discovery; the market is always adapting to new information. If you have a disciplined approach to investing, you have to let it work. Silence your inner critic and let the portfolio flow. Otherwise, you’ll end up just chasing the latest trend.

Because following the latest fad means you buy what’s hot and sell what’s not. And that’s a sure way to give your money to the house—again and again and again.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2017-07-17T12:22:20+00:00 November 19th, 2015|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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