Denise Shull - The Game Within The Game
This episode is brought to you by Stream by Mosaic, a product that is integral to any fundamental research process. Stream has developed an extensive library of expert interviews that cover a variety of industries. https://streamrg.co/BB features over 300 expert interviews per week. 70% of Stream's experts are found exclusively on https://streamrg.co/BB. Visit https://streamrg.co/BB today for a 14 day trial.
Album art photo taken by Mike Ando.
Thank you to Mathew Passy for the podcast production. You can find Mathew at @MathewPassy on Twitter or at thepodcastconsultant.com
Please leave us a rating in your favorite app store!
+ Transcript
Bill: This episode features Denise Shull. Denise has a very cool background. She is the Founder and CEO of The ReThink Group. She has developed the Shull method, which relies on the latest brain research on how humans perceive, judge, and decide. Our conversation is around emotions and how they impact investing and trading behavior. At times, I feel as though I am my own worst enemy. I hope that what we discussed in this episode is broadly applicable. Obviously, some is just applicable to me because I'm the one having the conversation. But I had it and wanted to have Denise on because I heard her on Jim O'Shaughnessy's podcast. I heard her on Caitlyn Cook's podcast, and I think that she has some really interesting things that if people take seriously and apply to their life, the impact could be larger than any investment framework that one may have because execution of the plan is as important as the plan itself.
…So, Denise, how you doing today?
Denise: Hi, I'm good. Early morning and December. [crosstalk]
Bill: It's nice to chat with you again.
Denise: Likewise.
Bill: It's been what, 24 hours?
Denise: Yeah.
Bill: So, for those that don't know, Denise is a performance coach and we first met when I was going through my battle with Robinhood, and Denise was the person that kept popping into my feed saying, "Use your anger to power you." I appreciated that a lot. I said to myself, "Who is this woman that keeps encouraging me to use my anger?"
Denise: [laughs]
Bill: [laughs] I thought it was great because a lot of people were, I don't know, I guess more concerned and I thought that you saw the power in the anger. I guess I said to you yesterday, but I want to say publicly just thank you very much for your encouragement during that week. It was not an easy week.
Denise: Oh, you're more than welcome. Honestly.
Bill: Something that we talked about yesterday a little bit and as I've been thinking about what we talked about for background to the conversation and you popping in to my feed, do you want to talk a little bit, I mean, I know this is like really jumping into what you do, but just the power of anger and how people really struggle with that emotion generally?
Denise: Yeah, sure. It is jumping right in but that's not a problem. I think that's get in the way. So, I learned from a group of people called modern psychoanalysts, and obviously that means they're psychoanalysts, but they're different than Freudian, that unconscious rage to be blunt can be worked with in a way to help severe mental disorders. Meaning, the modern psychoanalysis started with a guy named Hyman Spotnitz said, actually somebody is "cured," but cured schizophrenia through helping people diagnosed with schizophrenia, understand that they were covering up for rage they couldn't handle. I actually met a guy. I was in a class that they taught and I met this guy who was a cartoonist for The New Yorker who was like, "Yeah, I used to be diagnosed paranoid schizophrenic and she cared me." I was like, "What?" I love it was like-- But to be glib about the very serious thing I just said, I thought, "Oh, my God, well, if we could do that, it can help these crazy traders I work with."
[laughter]
Denise: That is the seed of me sitting here, literally, because I thought that is so powerful. What does that really mean? Most people have behaviors they wish they didn't execute like, Pat, most people.
Bill: Yeah.
Denise: So, I was like, "Huh, what's the connection?" But you know, here in 2021 in the late days of positive thinking, because there is a whole toxic positivity movement, mostly you're not supposed to be angry, and people denigrate you if you're angry because they can't handle it.
Bill: Yeah.
Denise: There's also a real phenomenon where people are afraid that if they admit to their anger, they will automatically act on it and do something destructive. That's not actually true but that fear is very widespread. So, people suppress it, tend to turn it on themselves, and that leads to self-destructive behavior. But it's because they're afraid that if they acknowledge it, they will act it out in a dangerous way. So, in its core, in its pure form it's meant to help you. Like, if you get angry about something, it means that most likely there's something wrong. You're being mistreated in some way.
Bill: Yeah.
Denise: Yeah. People don't process anger, and then they overreact, and it's exaggerated and distorted. But at its core, it's giving you a message that's meant to help you.
Bill: Well, what I think is interesting about what you just said is, a lot of people don't want to acknowledge the anger. Therefore, it's somewhat repressed that feels to me like, there's almost some element of guilty for being angry or something like that. And then, manifests itself in some sort of self-deprecation, or self-loathing, or I don't know exactly. Maybe I'm taking it too far but it's almost like not wanting to acknowledge the truth in how you feel creates an outcome that you're trying to avoid.
Denise: That is absolutely how it works. That's absolutely how it works. Let's say, you're a little irritated. Now, think of it on a spectrum. You're annoyed, you're irritated, you're mad, you're angry, you're in rage, but whatever. You're a little annoyed that whatever, someone didn't treat you fairly. But you don't really do anything about it except you act it out kind of passive aggressively.
Bill: Yeah.
Denise: Then that person gets annoyed with you and then they treat you less fairly.
Bill: [laughs] This is human interaction right here. [crosstalk]
Denise: Yeah. They treat you less fairly, then they were going to when we were at step one, and it becomes a self-fulfilling prophecy absolutely. Basically, we're always acting out emotions, like, that's a fact, and we're particularly acting out the ones we won't admit to.
Bill: Huh. That's interesting. So, it's almost like the emotions that we're probably the most ashamed of for some reason, which is why we want to admit to them are the ones that we end up acting out.
Denise: There's so much pressure, I've a professional athlete client, when you watch this person in their games, they've had reasons to be angry. It's fine, it's fine, it's fine. No, you really got screwed there and just they can't. Generally, people are afraid of what they will do and they're afraid of their own reaction. So, they just shut it down. Now, it's exacerbated by the fact that it's not acceptable to most people. We use this core principle in our one-on-one work all the time, which it's really trying to get a person centered and like who they are in their own validity and the fact that their thoughts and feelings should first be accepted and understood. When you do that, then you can choose which actions are likely to get you the outcome you want.
But some clients, like I have a client, he's not a hedge fund manager. He is kind of more BC who has not been recognized by his team. He's basically hired me to help him, show leadership, and ultimately. Because he was recognized by his team.
Bill: Yeah, we all do, right?
Denise: Yeah. But he has a background of never been recognized by his family. I know he has this expectation because that's his lifelong experience. I know that if I could get him to understand his personal history, and if I could get him to be mad about not being recognized by his family, who by the way, he's basically a strange [unintelligible [00:10:30], it's all fine and wonderful, but not a chance. I've been working with him almost two years and just categorically refuses to go there.
Bill: Huh. So, when you're working with him, will you say this like flat out to him and then it's just no or how does that work?
Denise: Well, often offer up, like, gosh if that happened to me, I'd be really frustrated and see if the person can say, "Yeah--" [crosstalk]
Bill: Yeah, like, need a little bit.
Denise: Yeah. I know. It's fine. Yeah, but they all took that other title and they didn't give you a title, you're still just a partner. There's like a disconnect there. Another thing we learned from the modern psychoanalysts, though is, it doesn't help an individual to just try to break through that resistance. That's what certain other coaches and other modalities might do. My guess is Tony Robbins would do that for example, because we've seen him do that in [unintelligible [00:11:25]. We've seen him talk it all. He'll get somebody and he’ll be like "[unintelligible [00:11:31] Blah, blah, blah." We don't work like that. Because we actually also know the defense is there for a reason like, can it help protect the person?
Bill: Tony's interesting, because he gets people to hammer, I don't know. He's got an interesting way. I come from a line of people who have probably drank, well, they have drunk too much. I wonder sometimes how much of the pain or whatever that people are running from in that scenario is like not like-- I think there was some neglect in the higher like my grandparents up generation, and I just don't know how many people have been really honest about that.
Denise: Probably, not many.
Bill: Yeah, and I think it's like really created self-destructive behavior and it's really sad.
Denise: Yeah.
Bill: I think some of that has been because growing up, I don't know if it's a generational thing, but it was like, "Oh, everything's fine." I don't think everything was fine objectively. I think it really hurt the kids in the house to have that framework.
Denise: It's natural for kids to blame themselves for things that are either bad, unhappy, or they can't make sense up. Because if you think about it, the five-year-old or the eight-year-old, if their parents' behavior is their fault, it gives them a sense of control over the situation. So, the five-year-old thinks, "Oh, well, if I just did like a better kid, mom won't have to drink because she won't be so frustrated with me." It's called a narcissistic defense and its effective and good for the kid. Because the five-year-old has no control. So, if they feel like they have a sense of control, it actually makes them look more optimistic.
Bill: Really, that's bizarre. It makes sense, but it's bizarre to hear it.
Denise: Yeah. A lot of people then grow out of that. You get to be a teenager, a college student, a young person, maybe you see a counselor somewhere along the way and you grow out of and you realize, "Wait a minute, their behavior was not my fault." And you lose that narcissistic defense. Some people never lose it. It's often that like psychological phenomenon is the power behind self-destructive acts, whether they are like character logical, like the person who can never get out of their own way or the person who just gets in their way at the critical moment, like, snatches defeat from the jaws of victory. Because some people are like that. They go along fine till the critical moment and they can't quite capture the victory. They never know. They spend lifetimes wondering why and then they'll just decide that it's like their own lack of skill, or their own inadequacy, or their own fate. Again, what's they're doing? They're blaming themselves.
Bill: Yeah, and it's that stuff that's repressed somewhere. I mean, not for everybody but on average, that's probably what's going on here.
Denise: Yeah. I would say, most of my clients show up with some amount, some aspect where they're suppressing or repressing a frustration let's say with their family almost. It might show up to start with the boss or whatever, but then you trace it back. Most of my clients now I think they're also a self-selecting population. Most of them are willing to look at it. [unintelligible [00:15:08] what they hire me to do for them.
Bill: Yeah, that's right and presumably a lot of these people are high functioning because they-
Denise: Well, they are.
Bill: -can afford to hire you. So, it's not as if this is something that is-- Here's maybe a different question. Do you think some of these issues have actually propelled them to where they are in life?
Denise: Well, there is that double-edged sword and I have to say, yes, although I'm not going to come up with a great example right off the top of my head. But here's one. Someone who's always afraid of being criticized, say, their grandfather always criticized them because-- I'm thinking of a very specific person. It also made them work extra hard in school, and college, and graduate school, and go to a good school so that they wouldn't be criticized.
Bill: Yeah.
Denise: Then that set them up to find or get employment, and then if they're investing, they're double checking everything, and their process is really thorough. But then you play that out, what ends up happening is they don't really believe themselves and it's hard for them to come by conviction, and then they second guess themselves. So, they get into a position, they get out early, and then it works, and then they're mad at themselves, and then they really did do something wrong, and we're back to the cycle of self-criticism.
Bill: Yeah. Isn't that crazy how it works? That's a very good example. Something that you have said, I want to frame it the right way and please correct me if I'm wrong, but it's like, we make decisions based on the emotions. It's not the data, it's the emotions about the data, and really, it's the emotion about the emotion that we think we're going to feel?
Denise: Mm-hmm. Yeah, that was pretty good.
Bill: Yeah?
Denise: Yeah.
Bill: All right. Cool.
Denise: [laughs]
Bill: I was thinking about it last night, because I'm like there're certain parts of my portfolio that are taking pain right now and I was reflecting on like, "What about it?" First of all, everything is fine objectively. But there's something in me that feels this more acutely than I ever have before. I think that part of the issue is now that I'm like a quasi-public figure, I guess. I don't know. The idea of failing in public is really scary to me and there's this part within me that has never felt worthy of what I have to begin with, and I can hear people saying, "I knew he would fail," and it's this weird thing that for the first time, I have never really questioned whether or not talking publicly has been a good or a bad thing for me until very, very recently. It's the response to the drawdown and also having people-- Well, let's put it this way. It's a lot easier to tell somebody that you knew that they were wrong all along when things aren't working. I'm hearing it now coupled with that fear has been an interesting thing to process. I was listening to you last night thinking about this.
Denise: Yeah. So, it's true. After the modern psychoanalysts, the second thing that got me into this was Antonio Damasio showing in the late 1990s that we have to have emotion to make a decision. And then so, you were right when you said like, we do the analysis but we make the decision on our confidence in the analysis or maybe our fear, and then we feel compelled to do something. But the action happens out of the feeling. There's this prediction of like how it's going to feel.
Actually, if you start looking forward, it's oftentimes not that hard to find. So, in the past, you had positions go against you, and you didn't like it, but no one was necessarily going to know. There wasn't going to be someone out there criticizing you necessarily.
Bill: Yes. By the way, criticizing me for the fear that I actually internalize for whatever reason that I probably haven't dealt with yet.
Denise: In other words, if you admit to a fear, you'll be criticized for it? I just want to make sure [crosstalk]
Bill: No, no. Okay. So, fundamentally, what I think I run from the most is that, I feel unworthy of having what I have in large part because it's a function of birth. Therefore, I think that there's a voice in me that says, you're not good enough to do it and then publicly now that other people can say, "Are you sure you're right or question me on certain things?" It's almost like it preys on the insecurity that I have even if they're trying to be nice. And that has created for me an emotion in this drawdown that is different than ever before.
Denise: So, when they question you, their questioning basically agrees with or supports that feeling that you don't deserve what you have because-- [crosstalk]
Bill: Even though, that's not what they're saying in my head, that's some of what's going on, which is really weird and tortured.
Denise: Were you ever criticized growing up for being wealthy, I presume?
Bill: I don't know about that. I think that perhaps a realistic accounting of what happened and this is all revisionist history and perception. I didn't have the safest emotional household I don't think. I always got support from my grandma and friends' moms, but I don't think it's a stretch to say that my stepmom and I had some issues and my mom and I did, too. Then, I think, among my friend group, one of the things that was able to chip at me that would hurt me in a way that I do think like kids will do that to each other was sort of that, yeah, it was like, "Oh, well, you're not that smart or whatever." I don't know that stuff stuck with me for real.
Denise: Yeah. It sticks with everyone. Some people they have experiences that ameliorate it. But if they don't, one of the clients I'm thinking of got a job at 13, and the employer was super supportive and like, "Oh, my God, you're amazing. Will you work for us until you go to college." And another client who became a runner, even a great school like, run a 50-yard dash, and the coach adopted him, and so, they had this in both those cases, another adult figure that treated them with the respect that they deserved, and then that counterbalance, that criticism that they got at home. But everybody remembers stuff from their kid. Like, that's normal. So, if you got the feeling from your mothers that something was wrong with you, then that would just lead to thinking somehow you didn't deserve success.
Bill: Yeah, I think something that could have happened and we'll see mom, if you're listening, we can talk about this. I think we have talked about it. But yeah, I do think I got some things imputed on me from divorce.
Denise: Oh.
Bill: And I think that my mom told me some things about who I would be because I was my dad's son that I don't think were totally fair. Yeah, she's a very loving soul but I think that sometimes divorce really fucks with kids.
Denise: Oh, totally. Oh, my gosh, I have lots of stories of that. But the thread is like, "Okay, how did I feel when that was happening and how did I feel at eight years old or 12 years old versus how do I feel now?" Then, when people do those two exercises like, "Okay, how do I really feel now?" No judgment. How did I feel then as best as I can remember, which that usually is a process and you'd be surprised. They usually match like puzzle pieces. Then-- [crosstalk]
Bill: Yeah, that's what I'm saying is last night, I was like, "Holy shit. I'm the eight-year-old kid." That's what this really is fundamentally.
Denise: Yeah, which logically then leads to what you feel now isn't necessarily true.
Bill: It's not even close to true, but it feels super true.
Denise: Yeah. Of course, it does. That's literally the brain is predicting future, what's going to happen based on our past experience like period. So, what has to happen is or what works is to reveal that and then in the process of revealing it and seeing it little by little be able to create new emotional experiences that you can draw that you can be predicting from. So, an easy way for people to understand this is a professional athlete who will spend a morning working on one little tiny piece of their craft.
Bill: Yeah.
Denise: What are they doing? Athletics will say, "Oh, it's emotion." They're creating muscle memory. Well, they're creating a different feeling. Yes, it's muscle memory, whatever that is. But they're creating a different feeling that they can do this new thing in a certain way. The same idea applies to psychological growth. So, I'm teaching a workshop, an online workshop right now, and we mean on Wednesdays. Yesterday, I gave him the homework, like, "Spend a half a day doing nothing, not trying to actually take trades, get in or out of position, but trying to see if you can hear your valid intuition like make it an exercise." Be watching the market, walk away from it, come back 5, 10 minutes later and ask yourself before you look at the screen where the prices are and see how good you are at it. Because actually, oftentimes, people can know without looking.
But the point is, put this exercise in place to create a different feeling and access to that feeling that then you can put in your repertoire. Now granted. It takes a lot of new experiences to turn the teeter totter from the old experiences. But it's doable. And more doable, if you get conscious of I'm predicting that this thing is going to happen and I'm going to feel like that it's going to be the same as always. But wait a minute, that prediction is actually just a repetition. This is a place I emphasize emotion so much that sometimes people think I don't have anything to say about cognition. No, this is like using your intellect to work with the human system the way it actually works.
Bill: Yeah. Well, I think that how I understand your framework is, humans are incapable of acting without emotion. So, even if they think it's pure intellect, the emotion is driving at least a portion of the decision making and potentially a significant portion. However, that same emotion can preclude people from seeing reality when things that go wrong that they were right about, but were outside of their control. They then internalize it as, "I was wrong or I didn't do something." But it's like, "No, no, no. You did do something." Objectively, you're correct but your emotions are precluding you from seeing it.
Denise: Yeah, and that's oftentimes an expectation. My client so heavily criticized that can't really stick with his own conviction. Well, he's better now this year. But he'll automatically go to, I must have missed something. He spent so much time avoiding criticism that he rarely misses anything. But stuff happens out there. That's the nature of the market. We wake up and new things have happened, things change.
Bill: I have a buddy who trades, I guess, they call it TAS in the oil market. It's like Trade At Settlement, and I was asking him, how he trades and whether or not he uses charts, and it's all intuition. That didn't make any sense to me until I was listening to something you said and I was like, "All right, I guess, this guy just has it."
Denise: Well, actual intuition and there's all kinds of academic research on the validity of the-- They will call it visceral intelligence. It's a real thing. I always tell people look, think about when you first learned to do anything and I don't care what, the sports are obviously the easy one. But when you first learn to do it, you did step one, step two, step three, step four. And then as you gain experience, you don't do step, you just do the thing. But what happens? It goes from this linear cognitive conscious and it gets down into your body where you just have a feel of how to do it and you can do something at 22 that took use 10 steps, at 42 just can do like that because why do we value experience? Because people can see the factors and react to the factors in a more effective way without having to think about it. That's what experience is, which is knowledge pushed from your intellect into your body, it existed. There're all kinds of research. There's one quote I use that, "The validity of intuition in high paced probability tasks under time pressure." So, often, a market decision, but the behavioral finance people gave it a really bad name and people don't know how to separate their intuitive feelings from their impulsive feelings.
Bill: Ah, interesting.
Denise: That's the skill that people can think. Intuition is a sense of knowing and it's called. You don't feel compelled to do something once in a while.
Bill: Yeah, that makes sense.
Denise: But impulse is energized. Your urge to do, you feel like, "Oh, my God, I have to do this right now."
Bill: Yeah, interesting.
Denise: There's a woman at Harvard, Jennifer Lerner, who has done a lot of work on risk decision making and market decision making. She calls it either integral, the feelings are integral. They're giving you information about the thing or incidental, meaning they are not, you have emotions, but they're not about the decision at hand. I like to change that to the feelings are informational or they're irrelevant to the decision at hand, or intuitive, or impulsive generally. There's a skill that people can acquire of knowing the difference.
Bill: How would somebody go about acquiring that skill?
Denise: I always think in a venue like this, step one is just believing that you can.
Bill: Yeah.
Denise: And then deciding that you're going to, and then learning to admit to yourself, your different feelings. It can even start with just the physical. So, there's something called Interoception. Interoception means you just are perceptive of your internals. So, there was research done in London that showed that traders who could feel their own heartbeat made more money.
Bill: Huh, that's interesting.
Denise: So, like, practice. Practice just the physical. Can I feel my pulse? Can I feel my stomach growling? No. Does my knee hurt? And then start to think of like just physical, then that sense of something. Sense that there's danger, sense that something's going on in price movement let's just say. Then there might be a feeling about it which is a little more intense, a little more information, then there might be an emotion about it, which is a little more intense with more information. Deciding and being willing to grapple with this other dimension of being human gets people a long way. There's so much chaining to not have your feelings and emotions, particularly, for men. It can be hard and then even if you decide too, then you might feel guilty about it, or ashamed of it, or so, there's these levels of defenses.
Bill: Yeah. I think that's super interesting. It's this company, I talk about a lot, QVC. It's an idea and a business. Forget about an idea. But it's a business that is so unloved. But I happen to love it. I love that business. But it's funny, I said not too long ago that I wouldn't be surprised if it trades down to six or five and it was at eight. It's a business I owned, I want to own it, I'm fine owning it. But as I watch it drift down to what I think like what I said that it could, I have no idea how to assess the probability. It could go higher, it could go lower, whatever, which is why I'm holding it. If I knew, I would sell it.
Denise: Right.
Bill: But it's interesting to watch it happen and to feel these emotions of like, "Why am I so stupid to hold something that I thought could go down?" Then they'll also say, "Well, the reason is, my true north is that it's a business that I'm comfortable owning and I own the business." But to still struggle with feeling dumb that it's going down when I thought it could, I think the answer for me is probably to just look less and to not care as much when people say like, "I knew that this was not going to work or whatever." But it's just interesting.
Denise: There is a tactic that sometimes works and that is, "I'm worried about this," whatever worry it might be. But I'm going to worry about it in a week, or a month, or three months. Say in that you're not really suppressing your emotion, you're just changing the timeframe of it, sometimes that helps people with these kinds of things.
Bill: Yeah. It's interesting to be in touch with, I think. Just to even acknowledge that it's going on, I think is--
Denise: Yeah.
Bill: I mean, it's part of life. But a lot of people, well, I shouldn't say a lot of people. There was a period of my life that I just wouldn't even acknowledge that this was going on.
Denise: Yeah. There's actual research that shows literally, this is almost, "The more an investor can differentiate amongst their negative emotions in favorable high-risk situations, the higher their returns are." There's this skill called emotion differentiation and it is like, I teach my classes just trying to get the categories fear, frustration, disappointment, and get the words for that. There's actual research that says, if you say, I'm afraid because of x, and you're basically right as to your reason, oftentimes, you're literally less afraid.
Another thing, you consciously-- Because it is core like that fear is giving you a warning, "Hey, Bill, pay attention to this. Maybe there's a danger here. Turn your attention to it, evaluate it." If you do that and acknowledge it, oftentimes, that part of your brain quiets down a little bit. But people are afraid to do it. Again, it just like the anger, they think, if I admit to the feeling, I'll feel more of it and it will overwhelm me. The research says, and I have literally at this point, hundreds of clients, it's almost exactly the opposite.
Bill: I also think as a man, it's hard to say, I'm afraid of this happening.
Denise: Yeah.
Bill: Because and especially, I don't even run outside capital. Imagine if I was like a hedge fund manager, and all these people are relying on me to have all this conviction, and I've got a no, and then all of a sudden, I say, I'm afraid that this might happen. I don't know. I, sometimes wonder, do people have an identity that is so big about themselves that they're incapable of saying I'm afraid? I think I have in the past. I don't know.
Denise: Oh, certainly, some people do. Usually, though, there're really extreme versions of that people can see through it, right?
Bill: Yes. That's straight.
Denise: You are talking about a more of-- [crosstalk]
Bill: Although somebody [unintelligible [00:34:27] [crosstalk]. That's neither here nor there.
Denise: That's a whole other podcast.
Bill: [laughs]
Denise: By the way, terrified child every moment of every day like.
Bill: Yeah, that's right. It's pretty easy to see when you see it.
Denise: Yeah. Everybody can see that. Like, terrified of being rejected, so vindictive over being rejected. Emotion differentiation and granularity like being able to know it's fear versus frustration, and then being able to know degrees of, or you concerned, or degrees lower like panic. But literally, no one has to know you can say it to yourself, 'What am I feeling and why?" Try to get them both right, and see what information is in there, and then also say, "How much of this is just my personal expectation of myself given my history of being unfairly blamed?"
Bill: Can I circle back to something that you said earlier? Because I'm thinking about it as we're having this conversation. You said, there's a toxic part of the positivity movement or something. I forget exactly how you said it.
Denise: Yeah.
Bill: But what did you mean by that?
Denise: So, other people have now recognized that the movement of positivity, which is still pervasive. You have to be grateful and you have to be optimistic. Ten years ago, I don't know that hardly anyone recognize that there's a downside to that. But now, there are groups of psychologists and I think there was an article in The Atlantic, there've been articles in various places, that it can be toxic. The pressure to be positive hurts people. One way it hurts people is, if someone's feeling bad whatever that is and they have no one to talk to. That's not optimal. It's good to have someone to talk to who will understand you feel a certain way, and respected, and accepted, and just be a good listener, and try to let you work through it, right? That's a really helpful thing to feel understood and not judged.
Well, when everybody's got to be positive, if you don't have anyone that can listen to you feel fear, frustration, it can actually get bigger and you lose an avenue out of it. But there are groups of people now who have written articles and recognize that this positive thinking movement isn't all it is cracked up to be. It isn't a panacea. It has a dangerous downside.
Bill: Well, it seems to me, the reason my mind got triggered when we were talking about what we're talking about, and then I thought of this is, it seems to me that like that positivity movement is at odds a little bit with saying, I'm afraid of something, and causes a repression of an emotion that could come out and bite somebody in a big way down the road.
Denise: Totally. Sooner or later, the feelings come out.
Bill: Yeah, you can't suppress them forever.
Denise: Yeah. And they come out in a behavior. Usually, it's a behavior that someone then regrets and says, "Why did I do that again?" Why did I hold this position, hold this position, hold this position through the pain, maintained my conviction, and then couldn’t stand it one more second, and sold it right before it moved.
Bill: Yeah.
Denise: Because you suppress their worries about it, and then finally, they grew to a degree that was overwhelming, and you act on them. Not you, I mean, the proverbial you.
Bill: No. You could say you. I can own this. I've done this in the past.
Denise: Well, you and everybody else.
Bill: This is how capitulation happens, right?
Denise: Yeah.
Bill: This is how it markets. And then, it's like, "Boy, well, I've been afraid of this. Now, the markets telling me that I'm wrong and it didn't matter before. But now, it's hit this pain point where maybe I did miss something or whatever it turns into."
Denise: The short version is verbalizing our pain in an effort to understand what it's really about. So, the future embarrassment is a huge factor in trading and investing, particularly, anyone who's managing money publicly. I can't tell you the number of conversations. I will do this like, "What's the worst that can happen? It will play out. What's the worst going to happen? And then what, and then what?" Inevitably, it's like embarrassed first in front of one's investors if they're managing money. and then in front of their family, and they're really reacting or trying to avoid the future embarrassment, and that's having a huge impact prediction of a future feeling is coloring their judgment in the moment. I don't know it.
Bill: Yeah, that makes a ton of sense to me. And especially, if you're trying to do something that's different from what most people are doing, that's even harder.
Denise: Yeah. But the trick then is-- okay, I, I'm worried that if x, y, and z happen, I'm going to be really embarrassed in the future in front of whomever. You know like, "Okay, how embarrassed am I really going to be and how bad is it going to be?" Oftentimes, people, when they actually can tack it that way, they'll go like, "Wow, I got to be that bad or I don't care that much." But until they do that, sort of play out the worst that can happen and look it in the eye, that future prediction is stronger than their kind of current intellectual understanding of the moment.
Bill: Hmm. This makes sense to me. This is interesting.
Denise: [giggles] I'm just the messenger.
Bill: No, well, I really like it. Do you want to talk about how you got into this? Actually, first before we talk about that. I've heard you talk about the superpower and the torque. Do you mind talking a little bit about like what the superpower of getting in touch with emotions is and then you're referred to something as torque? I can't pull it out of my head, but I loved when you said it. If I can jog your memory, that'd be awesome.
Denise: Well, I do think superpower is being able to understand what one is actually angry about and be accurate. So, then, oftentimes, a big chunk of that is about things that happened growing up. I know, there's like a bunch of people probably groaning right now. It can really solidify someone's self-image. When you realize that it's reasonable, I mean, I'll take myself. It's reasonable that I'm angry about the fact that I was given up at birth and put in a foster home for four months. I spent my entire adult life until I learned differently from the modern psychoanalysts that, "No, my parents who adopted me were better off financially, and they sent me to private schools, and who knows what life would have been like if I was raised by my natural mother?" Yeah. But when I was an infant, and my mother wasn't there, and you need that infant mother bonding like, I was traumatized by that. It's not unreasonable. Now, that's an extreme example but if you were blamed unfairly in some way, you felt somehow responsible for your parents' divorce, I mean, that's ridiculous [crosstalk] responsible, right?
Bill: Yeah, I think my scenario was, later on in life, I was maybe imputed some-- Look, so, first of all, I'm not even sure that I can talk to either parent about what either parent did because all I hear from both of them is their perception, and now, we're years and years away from what actually happened. So, that's point one. Point two is that perception was then imputed on me. But when you're talking about being abandoned, I mean, I can still see my mom packing up the car when I was a kid playing basketball and I remember her leaving the house and I remember that day, like, it happened yesterday.
Denise: Yeah.
Bill: Like, it's okay that I'm angry at the husband that came after and the situations that I saw in the house. I don't think kids should have to see that. It's okay that I'm angry that my parents broke up.
Denise: Yeah, yeah.
Bill: But that stuff took a long time for me to come to grips with, I think.
Denise: Yeah. Well, so, what happens then, in adulthood there are certain things that will make us angry. Oftentimes, underneath anger is hurt. As adults, it's just being realistic. It's not like people will criticize people for getting lost in a blame game of their parents. It's just about being accurate. About like, what happened to you, why they would understandably make you feel like, and then given it the brains predicting future experience, the future based on past experience like, "Okay, how's it going to play itself out? Okay, let's just get that out on the table so that we can be actually objective and bring--" The purpose was it actually allows you to be more in the here now.
Bill: Yeah, that makes sense.
Denise: It's psychological magic to being able to admit that you're unhappy about crap that happened to you. It really lowers the likelihood that you re-enact it in your adult relationships or work when you just recognize it is what it is. Because what happens is, if you don't, you do reenact it. Freud called it the compulsion to repeat. Your psyche is trying to work it out and so you recreate it, because your unconscious is trying to get your conscious to deal with the emotions you're not dealing with. So, you keep recreating opportunity, you think it's just a lot in life, or you're cursed, or these people always mistreat you, or you can never be seen for the talents you have, or whatever.
Really, it's like an evolutionary thing, where for any one human being like, we're just trying to evolve and it does know that whatever God or evolution doesn't really care about exactly what happens to us. It just that we grow until it might, so, we keep getting in these painful situations, but this opportunity to work through it, but then you get all this pressure to be positive and nobody understanding you, you just get stuck.
Bill: Yeah. You know what? I did once upon a time I went to a men's group and it was like a group of guys stood in front of me and you get really enraged, they make you really enraged, and there's like two people that are supposed to represent people in your life and they're saying something to you that gets you more and more angry. It's amazing how I found myself having a conversation. In my own mind, the emotions whereas if I was talking to the person that I wanted to actually talk to, but it was a complete stranger.
Denise: Yeah.
Bill: But after that, I actually associated that I had had closure in the conversation. I don't know how the hell that happened. It was like the most bizarre thing. Because I knew mentally, clearly, I didn't talk to this person. It was a random guy that was at this retreat with me. But I emotionally felt I had closed off that issue. It's wild how the brain can work like that.
Denise: So, you had a different emotional experience. This person--
Bill: Following?
Denise: No.
Bill: You are saying.
Denise: During it was as if which created a different emotional experience, which you were somewhat able to drawn afterwards.
Bill: Correct. Permanently changed the way that I looked at a situation.
Denise: Yeah.
Bill: Even though, logically, when I was looking at the person, I knew it was not the person that I was talking to. Emotionally, I felt it was.
Denise: Yeah. That's because they were not judgmental. They were empathetic. So, they gave you the experience you needed, and in getting experience even not from the original person, it has a healing effect.
Bill: That is bizarre stuff.
Denise: That's literally how the modern psychoanalysts cure the schizophrenics by giving them a different experience in response to their rage. We tried it enact to the degree it's necessary. We try to enact that in our coaching at ReThink, give people a different emotional experience. I had a client who was looking for a job at a different fund and then turned the job down. I have a client from both funds. So, the client from the fund where the person was maybe going to go work was like, "We really need them. This is a perfect job for them." So, I go back to client B, or A. whichever that is and say, "You should talk to them again." That client ended up getting infuriated at me, because I didn't really listen that they didn't want to work at this other fund. So, that was a moment in which I was able to use what I learned from the modern psychoanalysts. I've just listened and took it and said, "Okay, so, I didn't really hear you about how much you don't want to go to the other place and I'm sorry for that."
Then they calmed down, where if I hadn't been chained by the modern psychoanalyst to be able to take that rage that was not direct, and I knew it had nothing to do with me because I'd really listen to the person I just thought it. I had said the words, it seems like maybe that you don't understand the job or they said, maybe you don't fully understand the job description and that set that person off. I thought that I would think that they didn't actually understand that. But only because I was trained, could I take the amount of vitriol that was coming at me for something I totally wasn't doing? [laughs]
Bill: [laughs]
Denise: I was just trying to help both parties. I was just the go-between person trying to help both parties.
Bill: Well, that's a tough spot for you because you're a trusted adviser to both, so to your point they can put you in a situation where somebody is mad at you over something that is not really your intent.
Denise: Yeah. Someone once totally, I want to say effed up. July options expiration and I was like, "Oh, well, it's July--" I can't remember. This is so long ago exactly. But I basically built their ego up. I said, "It wasn't that bad. It's understandable that you did what you did." They never spoke to me again.
Bill: Wow.
Denise: He's the only client in all these years of doing this. He spoke to me again to tell me how mad he was. I made him feel dismiss. I was thinking and it was a mistake, but it wasn't the end of the world. I was trying to help him not feel that bad about it. Somehow, I made him feel dismissed and not understanding his self-criticism that day, and that was it. I was a bad person. It was like unbelievable.
Bill: I can understand that. I don't know that it's fair, but I can understand it.
Denise: Well, I didn't fully empathize. Sometimes, you're going to get it wrong.
Bill: I go through this with my wife a fair amount, where I don't fully empathize. So, that's where I'm saying that I understand it.
Denise: There is a superpower in making another person feel understood and really understanding. I mean, my husband tries to do that to me sometimes, too, where he tries to make me feel understood where I know he doesn't understand.
Bill: [laughs] It's a man trait. I'm sorry. Apologize on behalf of all of us.
Denise: I'm pretty good at telling the difference.
Bill: [laughs]
Denise: And then, sometimes, he really doesn't understand. Sometimes, he's well intentioned. He doesn't want me to feel bad. He wants to go away like but--
Bill: Yeah. Well, my understanding is that as a species we like to solve rather than listen and something that we could probably learn a little bit from.
Denise: Generally, "Sweety, do you want me to solve this or do you just want me to understand?" oftentimes, I was going to say, "I'll solve it, just understand." [laughs]
Bill: Yeah. That's good advice. That's probably the best advice that anyone listening to this is going to get. [laughs]
Denise: Yeah, practically.
Bill: So, do you want to talk a little bit about now that we're almost an hour into the conversation, your background and how you got into this?
Denise: Sure. So, the adult piece of the story is, and I had this career at IBM, and I was going to Stanford Business School and selling computer, mainframe computers to progressive insurance and I thought, "Oh, my God, if I have to do that, when I'm 40, I'll die." Because who cares? So, I finagled my way into a graduate program at University of Chicago that is a design your own and I did, it was called biopsychology then. But now, it's neuro-psychoanalysis, which is really just how does the human brain have an unconscious and had his unconscious emotion? I was trying to figure out I was going to get a PhD, and I was dating this guy who traded at the SIBO, and he thought I've been good trader, and we were walking down the street and someone came up to me said, "We're opening an upstairs trading firm. You can trade from upstairs. You don't have to stand in the pit and you should come." Somehow, I got swept up in that. Ditch the PhD, became a trader, a few years later, I went to New York to manage a trading desk, and then to start long-term equity.
Bill: What did you trade in Chicago?
Denise: I was at a place called the electronic trading group because I thought that was a good name for it, and then I went to Schonfeld, which is a little bit more famous partly because a guy named, Dimitri Balyasny started Balyasny Asset Management out of Schonfeld. Schonfeld's well known long, short momentum in the 90s. And then it seemed like I was never going to use that master's degree in neuro-psychoanalysis until someone wanted to publish my paper, my master's thesis, and that's when Damasio said, "You had to have emotion to make a decision." I was like, "Oh my gosh, that changes all the trading psychology." I just started talking about it and someone asked me to write an article, I was like, "Oh, my gosh, no one's going to publish an article by me," and then they did, and then the Board of Trade asked me to give a talk, and then it turned out a life of its own.
Bill: That's cool.
Denise: It now seems literally meant to be my whole entire life. My parents nobody had any time for my emotions. What I have been as interested in how emotion really works if I hadn't had the life experience, I don't think so.
Bill: Yeah, probably not.
Denise: So, now, it just seems like, "Oh, no." I don't know. I'm kind of agnostic. Maybe, there's God, maybe there's not. There's some sort of fate. I don't know. It seems like it's meant to be.
Bill: I had a lot of stuff in my life lately that has had me say the exact same type of thought, where it's like, it just all needed to happen this way for this to break this way if that makes any sense.
Denise: Yeah, totally. Totally, totally, totally. I don't claim to know but-- [laughs]
Bill: Yeah, nor do I. Those questions are above the pay grade.
Denise: There's more than we can see.
Bill: Yeah.
Denise: That I'm sure of. I just don't know what more power for me.
Bill: Yeah. I agree with that. I don't think that we've touched on this yet but the idea of conviction as an emotion as opposed to a logical conclusion. I thought that that was an interesting thing that we had talked about or I've heard you talk about that. Conviction is really the emotion behind the data analysis. It's not necessarily objectively the analysis if that makes sense.
Denise: Yeah. Well, the thing I'd say is, if people are honest with themselves, they know they're convicted because they feel it in their body. It's a belief. You feel a belief in your body. Now, yes, some people are so cut off that they can't access that. But generally speaking, people can recognize that if they really believe something which is close to synonymous with conviction. It's a physical experience. That's an emotion. Literally, as simple as that. Damasio back when he was saying, he has a whole thesis. I think he's updated this called somatic markers. Somatic being soma is the body. The markers in the body with meaning that's all like an academic way of saying what we think of as emotion. It's a physical sensation. So, I teach people to articulate those different physical sensations. Like just start to do gradation, degrees of.
I did with one hedge fund right before the pandemic and we did degrees of and I did a seven-point scale. I always say seven is like overconfident. They came up with the word 'bulletproof.' When they feel bulletproof, that's a risk when you feel like you [crosstalk] that's a risk. Once I was speaking for Credit Suisse in Hong Kong with a total of 250 people and I said, "How many people think you should invest about emotion?" 90% people raised their hand. I said, "How many people talk to your investors about using conviction?" Then 100% of people raised their hand. I'm like, "Where do you feel that conviction?" Then they start answering, chest, body, stomach, gut feel? I'll be like, "Okay, you can't have it both ways. You can."
Damasio's original research showed that people whose brains were damaged in ways that they didn't experience emotion couldn't decide what shirt to wear, couldn't decide what day to make an appointment, couldn't decide what candy bar to buy because they have no sense of what's correct.
Bill: Interesting.
Denise: I don't think there's a neuroscientist on the planet at this point who thinks we make decisions without emotion. There may be neuroscientists and there are. A lot of them who are focused on the cognition, attention, learning, memory. But even those people will somewhere in there talk about your competence in something. Watson playing chess, it did its thing and then it decided its competence factor on its answer. That's emulating a human being. We do our thing but we make the choice based on our competence in whatever the thing told us, whatever the method of analysis told us, just like Watson did. Without that competence, we won't act.
Bill: Yeah.
Denise: Unless we're driven by fear and avoiding something else.
Bill: Yeah, I was just thinking of FOMO as we were talking.
Denise: Yeah.
Bill: I'm like, "What that is?" So, when people say, FOMO, how do you articulate what FOMO actually is?
Denise: Well, back to that embarrassment thing. If I miss out, first of all, I won't have made the money, but I won't have made the money, and I'll feel bad, and I'll be embarrassed, and maybe someone will criticize me, or I'll just be mad at myself because I saw that the money was there to be made and I didn't. So, it's that either probably mad at myself or other people will criticize me. So, therefore, I have to do it. It seems like it's about the money. It's about the implications of the money or not the money, emotional implication.
Bill: It seems like a good exercise to do when I feel FOMO next time is to say and then what?
Denise: Yes. Yes, yes, yes, yes, yes, yes, yes. Always.
Bill: What's the real downside here of missing out? What does it really mean?
Denise: Oftentimes, we can do that-- This just goes back to the whole, "What am I feeling and why?" If we get the 'why' right and the 'why' is that end of and then what, and then what, and then what, and you get your real 'why' you often go, "Okay." Well, maybe that real 'why' is even true. But it's three months from now, or a year from now, or five years from now, and okay, so, therefore, I don't have to worry about that today. There's this process that happens when you make that real lie conscious that brings you back into what we would think of as a more, here now a more objective viewpoint. You're not stuck reacting to that unconscious prediction of future emotion.
Bill: Yeah. You know what I have observed, perhaps in myself and perhaps in others, I don't know, and maybe it's not even a true observation, but it seems to me that in bull markets, especially, or and maybe it's true in directional markets, I don't know. But the fear of missing out drives some people to be hyper dogmatic in proving that they're right. The market is irrational but they are right because they can't accept that they've missed out. And then others, it manifests itself in doing really silly things because they don't want to miss out. I find it intriguing if my perception is accurate, how the markets can cause different behavior out of similar emotions in people.
Denise: Well, they are Rorschach blots.
Bill: Yeah.
Denise: You know the inkblots that you project onto?
Bill: Yeah, that's right.
Denise: So, they are immutable authority figure. Like, no one could make the price change for the most part. Maybe some big algo with enormous amounts of money behind it can change the price. But for the most part, everyone's sitting interacting with the market can't change the price on their own. So, you play out your authority figure expectations with it.
Bill: What do you mean by that? Just so, I pick up what you're saying.
Denise: People had parents or fathers who are like, "You had to be smart, and you had to get As, and you had to be right." There's a real terror if you're not right. So, people get stuck in having to be right because of the consequences. The perceived future consequences, I guess, a lot consequences in future. But the perceived coming criticism, this is what drives confirmation bias by the way. Confirmation bias is a fear of being proven wrong. Like, if you get comfortable with the possibility of being wrong, you have less need to put blinders on and only see confirming data, get comfortable with, "Okay, maybe I'm wrong," then you're able to look at more. But if you can't tolerate what will happen, if you're wrong, you will avoid, avert, and delay seeing it by what, getting dogmatic about your analysis and dogmatic about the fact that you're right with these certain factors.
Bill: That's a really interesting way to frame confirmation bias and I think it's almost certainly correct. I've just never heard it said that way.
Denise: Because behavior finance people think in terms of thinking and behavior. They don't think in terms of to use the academic term 'anticipated effect.' Anticipatory effect is the academic term for this phenomenon. Well, from my advantage point, if you look at the anticipated effect that the expected future emotion is, you can explain just about everything. Because she's so humble.
Bill: [laughs] Well, I think it's real. I think people can quibble about how much you can explain or whatever. But I don't know if it's people chasing careers that they don't want to be in, or people chasing markets that they would rather not chase, or not being confident in decisions, or whatever. I really do fundamentally, the older I get, I believe two things. One, all children end up on a couch eventually mad about something, and two, those things tend to create outcomes later on in life that if left undealt with can have real negative outcomes.
Denise: Yeah. That's Freud's compulsion to repeat. I wish I could articulate it in his original language but it was literally like the man, all of whose relationships end up in the same state no matter how well they started or what aspect of their life, but the man thinks they're determined in the moment. They're not. They are people expecting certain things based on their past experience. And then in the expecting of it, behaving a certain way that recreates it, that induces other people to treat them in a certain way.
Bill: Yes, yes. Because you see that sometimes and it's like, I can see the pattern develop in certain people and it's like, "I know where this is going. It's gone there before, it's going to go there again." Then that person is almost frames themselves as a victim to the issue. and it's like, "You caused it, you're not the victim."
Denise: Yeah. So, this is the good thing about trading or investing. You cannot induce the market to treat you any particular way.
Bill: Yeah.
Denise: It's not going to participate in you're trying to recruit. Now, you can interpret what happens. But if you decide to be conscious about it and start to unwind this for yourself, you can get different emotional experiences out of this animal of the market because it's not going to cooperate. It's going to do what it's going to do no matter what. You can't influence it. So, it actually in a certain sort of way is a great venue to work out some of this stuff, believe it or not but totally ironic. Because it is a totally different ball.
Bill: Yeah, a tough place to learn, but a good place to learn.
Denise: Yeah. You can't make it mad at you despite the fact that seems like you can't. You can’t make it go your way or not go your way.
Bill: Yeah. I found at times when I have felt like, I can make it go that way. It's probably the time to de-risk a little bit and step back.
Denise: That's the thing about this work too. The more you know yourself, the more you know when I feel like this, it means that.
Bill: Yeah, I've gotten to the point that I've been feeling that lately. The one regret that I have and it's not really a regret, because I think I did the right thing, but I don't know. I felt it in my bones that my portfolio was extended a little while ago and I was like every time I've ever felt this way I should sell. But I'm trying to be less emotion driven. So, I held. But now I have all this stuff that I talked to you earlier about that I'm blaming myself for. So, I've just been writing more that's--
Denise: Writing is good. Writing out how you feel like-- The truth is, if you get the thoughts and feelings into words with no judgment, it's a real competitive advantage. People can do that on a piece of paper, or one note. Because the paper can be empathetic if you allow it to and then you can sort through what are you really feeling and why, and then you can get the information out of it, and know which part's impulsive and which part's trying to avoid being embarrassed, and you can-- It's this whole dataset that people can learn to work with. The more you learn to work with it, the more of an advantage it is.
Bill: I like how you said that, the paper can be empathetic.
Denise: I don’t know. We allow it to-- [crosstalk]
Bill: Yeah.
Denise: People are afraid if they write the word. "Oh, my God, it'll actually happen or I can't actually say that out loud or whatever." Type it out in a word document and erase it, delete it.
Bill: Yeah. I've heard somebody say come into the office15 minutes every day and then throw it away.
Denise: Yeah.
Bill: Which is an interesting exercise.
Denise: In the TV writing world, it's called Morning Pages. Not that I know anything about TV writing.
Bill: [laughs] Yeah, well, we don't have to go there.
Denise: Yeah, no problem.
Bill: Well, I don't know where to take this. Unless you've got somewhere else, I will tell you that I've just had a fantastic time talking to you, and if you want to talk about more stuff, I'm here to hang out.
Denise: [laughs] Well, it's fun to talk to you, too. I feel like, we really dove right in the psychology of all of it in a way that maybe I haven't done before. I usually get into it, but that's pretty much all we've talked about for 90 minutes. So, kind of cool.
Bill: Yeah.
Denise: I felt terrified to-- [crosstalk]
Bill: Well, I really appreciate it. I really, truly appreciate you. I can't tell you, that week that I was going through what I was going through, there are a couple people that to this day I can remember, and it's no disrespect to those that I don't, but you were one of them. I just really appreciated your support, and that was one fucked up week, and my mind was on all kinds of adrenaline, and anger, and everything in between, and you were one of the people that held me together. So, thank you.
Denise: You're welcome. I, honestly, back to what I said like, I feel like I was meant to be here. When it's all said and done, that's actually all I really want to do like, yeah, I coach investment managers who manage lots of money and I make a little bit of money doing it. But it's really helping people not feel bad about when they feel bad, and giving them an avenue through that whatever the service. That's really like that is my mission. So, I'm glad. Sometimes, I've tried to do it on Twitter.
Bill: Well, thank you. Where can people find you if they are inclined to want to dig deeper into your mission, and reach out for coaching, and whatever?
Denise: Yeah. So, my company is The ReThink Group and The ReThink Group, meaning, rethink your thinking. It's therethinkgroup.net. There's contact us on there or send us an email, at think@therethinkgroup,net and obviously, I'm on Twitter's @denisekshull. That's my initial. Thanks so much for having me.
Bill: All right, cool. Yeah, well, anytime if you want to come back and do this again, we can. But we'll put the contact info in the show notes and thanks for stopping by.
Denise: I appreciate having me.
[music]