Into the Impossible With Brian Keating - Denise Shull: The Psychology of Billions (#153)

Episode Date: May 31, 2021

Denise Shull is the author of MARKET Mind Games, which has been repeatedly called "ahead of its time", "a game-changer" and "the best book on trading psychology" in unsolicited Amazon reviews. Shull is a performance coach who uses neuroeconomics and modern psychoanalysis in her work with hedge funds and professional athletes. She is also the founder of The ReThink Group. Shull focuses on the positive contribution of feelings and emotion in high-pressure decisions.  She has been called the most important inspiration behind the character Wendy Rhodes on the Showtime series Billions. Thanks to our sponsors! https://magbreakthrough.com/impossible http://betterhelp.com/impossible Join this channel to get access to perks:https://www.youtube.com/channel/UCmXH_moPhfkqCk6S3b9RWuw/join Support the podcast: https://www.patreon.com/drbriankeating And please join my mailing list to get resources and enter giveaways to win a FREE copy of my book (and more) http://briankeating.com/mailing_list.php 📝 🎥 🎥 Watch my most popular videos🎥 🎥 Frank Wilczek https://youtu.be/3z8RqKMQHe0?sub_confirmation=1 Weinstein and Wolfram https://www.youtube.com/watch?v=OI0AZ4Y4Ip4?sub_confirmation=1 Sheldon Glashow: https://youtu.be/a0_iaWgxQtA?sub_confirmation=1 Michael Saylor The Physics of Bitcoin https://youtu.be/CaN_CDKqXOg?sub_confirmation=1 Sir Roger Penrose, Nobel Prize winner: https://www.youtube.com/watch?v=AMuqyAvX7Wo?sub_confirmation=1 Jill Tarter https://youtu.be/O9K9OBd3vHk?sub_confirmation=1 Sara Seager Venus LIfe: https://youtu.be/QPsEDoOTU6k?sub_confirmation=1 Noam Chomsky: https://youtu.be/Iaz6JIxDh6Y?sub_confirmation=1 Sabine Hossenfelder: https://youtu.be/V6dMM2-X6nk?sub_confirmation=1 Sarah Scoles: https://youtu.be/apVKobWigMw Stephen Wolfram: https://youtu.be/nSAemRxzmXM 🏄‍♂️ Find me on Twitter at https://twitter.com/DrBrianKeating 🔥 Find me on Instagram at https://instagram.com/DrBrianKeating 📖 Buy my book LOSING THE NOBEL PRIZE: http://amzn.to/2sa5UpA 🔔 Subscribe for more great content https://www.youtube.com/DrBrianKeating?sub_confirmation=1 ✍️Detailed Blog posts here: https://briankeating.com/blog.php 📧Join my mailing list: http://briankeating.com/mailing_list.php 👪Join my Facebook Group: https://facebook.com/losingthenobelprize 🎙️Please subscribe, rate, and review the INTO THE IMPOSSIBLE Podcast on iTunes: https://itunes.apple.com/us/podcast/into-the-impossible/id1169885840?mt=2 🎙️Listen on all other platforms: https://wavve.link/into A production of http://imagination.ucsd.edu/ Support the podcast: https://www.patreon.com/drbriankeating Learn more about your ad choices. Visit megaphone.fm/adchoices

Any sufficiently advanced technology is indistinguishly from magic. Denise Scholl, she's the founder of the Rethink Group, a risk and performance advisory consulting firm, a globally recognized trailblazer. She combines insights from 25 years in the real world of markets, neuroeconomics, dynamic psychology, and a radical new theory that gets rave reviews that she'll talk about in this book. I came to learn about her through the TV show Billions, and I want to get into that towards the end. But first, Denise, how are you doing today during these wild, crazy times that we're living in?

I'm good. I'm good. I got to move out of New York City into the mountains, and so, like, how bad can it be? Are people that have psychology training? Are they better or worse adapting to global pandemics than normal people? It probably depends on what, kind of psychology training. You know, if it's psychoanalytical and based in emotion, they're probably better than if it's cognitive behavioral and based in thinking.

So I want to first start off by asking you a question I normally ask people when they have written wonderful books as you have. This is called Market Mind Games. I love this book. I love reading it, reading passages very, very frequently. I'm trying to morph it and see. if it can be applied to studying scientific leadership and so forth. I want to first ask you, where do you come up with the title, the cover design, what does it mean? And the subtitle is always important. And non-authors really don't know how much time, effort, and energy go into books. Choosing books by their cover is a literal thing that publishers worry most and most about.

So how'd you come up with the title cover and design? That's a good question. I don't think anyone's ever asked. I mean, I have this tendency when I'm trying to think of, like, the concept and how I communicated to just really think, what really is it? Like, not what's the fancy name, but like, what really is it? And sometimes I can be kind of boring because of that. But I'm like, this is this mind game of playing with the markets. And so I submitted market mind games because it literally seemed exactly accurate.

And the publisher said we love it. Now, the truth is they created the Roershack block, because that's what that is. Yeah. So, but that's, it was part, I mean, literally, and then they sent that back to me and said, how about this? And I said, I love it. So there was no author, publisher, back and forth about the title or the cover. I think I got the title right and they got a symbol for the cover right, meaning,

like you impute, you impute meaning that's your own meaning onto these dollars. that you make or lose in the market. That's essentially what the book's about. And what's actually to me is I was just talking recently in the comment section of my YouTube channel where we talked to billionaires and Brainiacs and Nobel Prize winners and athletes, et cetera. So a lot of top performers,

a little bit different than the world that you inhabit, but similar in some categorical class that we'll get into. But one of my commentators was responding to a discussion that we had recently about academia, about so-called theories of everything, string theories, and I'll get your insights into string theory towards the end of the show, Denise. But I'm just kidding. I don't have to say, I don't know too many times.

But in academia, we have our own version of a metric that is gamified, and that's called the H index. Are you familiar with the H index, Denise? So for my first, I don't know. No, I'm not. Okay. Well, it's not super complicated. It's a metric that parameterizes not only the,

amount of citations that an author has. So we don't make products in academia. We lose money. You know, we spend money. We convert it into ink. It's basically pretty inefficient process, and it takes years to convert millions of dollars into a single equation. But that equation might be in a paper, and that paper gets cited perhaps by thousands of other academics in kind of a reverberating echo chamber, so to speak. But let's say an academic has one just really titanic paper, and it's incredible, and it really is cited a thousand, two thousand, ten thousand times. That would be a phenomenal for an academic journal, not for a book. Your book has sold many, many multiples of that figure, for example.

But for academia, that's really good. But it's better if an academic has 10 papers that are each cited 100 times, and that person would have an H index of 10. Now, if they have 100 papers each side at 100 times, they would have an H index of 100. So it starts to get exponentially more different. to add each index to H. And so it was actually created by a colleague of mine here at UC San Diego in the physics

department named Jorge Hirsch. He's got a lot of H sounds in his name. So he created this index. And it's kind of this parametric way of quantifying a researcher's impact. Obviously, in what you do, the metric that matters most is money. And there's no, you know, there's no secret why a dollar sign resonates so, so securely. But what other motives kind of impel people in the communities that you? you advise and that you work with in terms of psychology. Is it more than just money? Is it,

is it some other metric that influences people's mindset? Yeah, I'll tell you, this is hard for people to believe, but underneath the hood, a lot of these guys, it's not about the money. I mean, they can accumulate these crazy sums of money, but it's about winning this crazy game. So, you know, It's kind of like the ultimate poker game, right? It's not even as close to poker because the cards don't have specific meaning, but it's not a terrible analogy or metaphor. And they want to win. You know, it's like the puzzle.

There's this puzzle of what our, you know, bonds going to do and stocks going to do, and the U.S. dollar are going to do, and like, they just want to figure the puzzle out. And, oh, yeah, we get paid a lot of money if we figure the puzzle out, and that's cool. but they're figuring the puzzle out is the real motivator. And then the thing that surprises people since, you know, shows like billions give these portfolio managers such a bad name, is that most of them really care about their investors. So, and their investors tend to be, or the investors they want, are pension funds oftentimes. I mean, there's some other categories, but there's a lot of pension funds of a lot of teachers,

unions and state government and you name it. And, you know, they invest in these hedge funds. And the people really care about making money for the pension funds. They actually really do. They're not just money hungry. Now, I mean, obviously some of them really like a lot of money, but it's the score, right? The money keeps the score. The game. It's the game that motivates them. Yeah. And I think that goes to the title of the book. And that even I didn't you know, finish, really, I didn't wrap up the thought of the people in the chat in my video, but they were saying, yeah, it's funny that even academicians, you know, who will maybe poo-poo those that just want to make money or something like that, that even they are concerned with the

gamification of their profession in social media, likes and shares and thumbs up and so forth. And it seems like our whole world is predicated on these vast networks of social proof. and then beyond that, I was reading recently kind of this Reddit forum, and they were talking about, you know, there's really four different, you know, logarithmic intervals of wealth, you know, that this guy separates, his name is Chung Fan, and he separates, you know, 10 to 30 million, 30 to 100 million, 100 to a billion, and then a billion plus, and that, you know, basically in all those, you're essentially economically insensitive. Like beyond a certain amount of wealth, as far as I understand it, it doesn't matter how much money you have. Like every dollar that you make is incrementally less impactful on your life. Is that not correct? I mean, it's almost like psychologically, it's only valuable psychologically.

I will tell you that they can have between 20 and 100 million and still feel like it matters. Wow. It goes like this. I'm 45 or I'm 50 years old. I have three kids. If I, you know, have $80 million, but I never make another dime. And I live to be 95, like, do I really have enough money?

Now, to the average person, yeah, they probably have enough money. But, you know, they've developed a certain sort of lifestyle based on that 20, 30, 40, 50 million. And in that group, they worry about it. They worry about if I never make another dime. Or if all of a sudden I can't do this anymore because literally the currency market has changed because that's a, I have one client that that's specifically the deal, that they've made so much money in the currency markets, but the currency markets have acted different in the past few years. Now, you know, the billions writers said when they started like, what's the difference once you've got

a hundred million. What's the difference between 100 and 101? And that was part of what they were trying to figure out the show. But that's my world. I get to talk to these guys about like being worried that, you know, maybe they're going to be broke

because they only have $30 million and maybe they'll never make another guy. So I talked with a man by the name of Bill Perkins. You may have heard of. He wrote a book called Die with Zero. And his whole philosophy is that if you die, with a dollar left, you're a loser essentially, because that dollar had much more value to you to serve other people. And if you didn't plan on your kids, like, you know, his point is that

your client with $80 million and has three kids, if he saves up all that money until he dies at age, let's say he dies at age 78, you know, median age for men or, you know, in the Western world or whatever, assuming he gets pretty decent health care. So he dies at that age and his kids, kids when he was 30, you know, his kids are going to be in their 40s, 50s, 60s, you know, what good is that going to do them, you know, versus when they were 20 and 30 and then like, thanks a lot, Dad, you kept all this money so that you could, you know, be buried in a casket with a whole bunch of cash? What good does that do? So how much, but is the psychology of kind of a loss ofversion or, you know, running out of it or

is it more the shame of it? Like going from the, there's this episode of Silicon Valley show, which has a UCSD connection via Mike Judge, who's the author of it. who went here also. And that show, you know, there's a character who goes from being, you know, in the three comma club. And then he's like kind of teetering on the edge of being a billionaire or not. And it's like he has these paintings made up that just have three commas. And it's obviously very important to his identity. And in physics, we talk about things that matter, Denise, and there are things that don't depend on the coordinate system.

In other words, the force of gravity, it doesn't matter if you measure that in feet or feet per second squared or meters per second square. Clearly the universe doesn't give a crap. So why is it that we're so obsessed about this completely arbitrary thing, the dollar? In other words, there must be something intrinsic at the heart of it. And I've had two billionaires, maybe three billionaires on the show. And I'll ask you, what is the purpose of wealth? Not that I'm saying you're a billionaire, but in your estimate, like, what is the value of wealth? What's the purpose of it?

Why accumulate it? Well, I mean, you know, everything is layered, right? So, you know, there's the basic, like, safety and security, right? then it becomes competitive. You know, I am shocked, and I think some of this is being a female. But over the years I've been shocked, like how much it matters to some of my clients

that the other guys down the street or the hedge fund they used to work at or their friend from college that's at a different hedge fund are in some stock that they're not in, that they're making money in. It drives some of them downright crazy. Like, and they can have some sort of

process where they like one really evaluate a stock really thoroughly where the other guy has a technical analysis and he's in and out based on price and volume and they're two totally different things but guy one is really worried about guy too and not all my clients are that way but plenty of them are that way and then honest this is going to sound crazy but it's really true when it's all said and done all this is sort of a proxy for Am I valuable and lovable? In the hedge fund world, the figure that needs to value and love you is that chief investment officer of the pension fund.

But that person can serve as a proxy for however valued and loved you felt growing up, frankly. Now, I'm deviating a little bit from the purpose of money. But basically the accumulation of money is a symbol for that, in my opinion, and in my experience. So theoretically, the more you have, kind of the more valuable and lovable you are in, like, status, you know, in the world's view. Now, part of the problem is people accumulate enormous amounts. And, you know, inside, they don't feel any more valuable or lovable than they felt before they didn't. In fact, sometimes it's the reverse because you have so many people coming after you to borrow money, to invest in your business, like, you know, to help you in some way. And then you start to feel like, well, I'm supposed to have value because I've got a lot of money.

But my only value is that I have a lot of money. So actually, I don't really have any value. It's a score of the game and it's a proxy for like, are you a worthy human being? Or can you win? I mean, you know, it so depends on the person's innate. psychology. Yeah. Like there's wanting to win because, like, it's the human instinct to improve yourself.

And there's the wanting to win because you want to prove you're better than the other guy. And those, you know, it's a matter of degree, right? But somewhere in there, it morphs from healthy to unhealthy or useful to unuseful. They're destructive. So there've only been four women to ever win the Nobel Prize in physics, one of whom was at UCSD when she won it, Maria Geppert-Mayer. Fun fact, when she won it, the local San Diego newspaper said,

San Diego Housewife wins Nobel Prize. Of course, I did. That was in 1963. I point out when people say, oh, that was back then. No, in 2018, one of my friends won the Chemistry Nobel Prize, and Caltech and JPL, where she worked put JPL employee mother wins Nobel Prize. Of course, they did. Anyway, yeah, nothing's changed.

But I've noticed, you know, from the few people that have won the Nobel Prize, there's two living women who have won it. But then going back to Marie Curie and Maria Mayer, you know, they seem to say famously Maria Mayer said, you know, doing the work was more fun than winning the prize. Do you notice a difference in the attitudes of wealth towards wealth from women versus men? You know, I get asked that all the time. And here's my second opportunity to say, I don't know. I only have right now one female professional portfolio manager who works in a hedge fund. But over the course of the, you know, pushing 20 years since I've been doing this, I don't know, I've had maybe four, five. So I don't get to dig into their psyche so much, strangely.

But it's true because, I mean, you know, 3%, I think the numbers 3% of the world's professional portfolio managers are winning. that's not very many. And so I have a select group that's going to contact me to begin with. Interest in self-development. And then of that select group, you know, only 3% of that group is women. So I don't have very many possible female pandates. It's still three times the amount of women that have won in a well-prisoned physics or economics. I think I'm going to need to pass that along to the woman I just spoke of.

You know, you're doing better. Yeah, that's right. You're over-representing. No, please don't say. You've said, and I've read you saying that the ability to identify fear in yourself is a superpower. Why is that? Why is saying what is the worst that can happen? Why is that a superpower? The cutting edge of neuroscience is showing that, number one, our brain is always predicting, based on our past experience, and we're really predicting a future feeling. Brian Newton of Stanford calls it anticipatory affect.

And I, that like fits with my work completely. It also fits with most psychoanalic thinking about like what makes human tick, what makes humans tick. But we've all been taught to ignore that signal. Like, you know,

emotions are old, left over from the Savannah, set them aside, you know, the only thing to be afraid of is fear itself. The truth is, in its pure form, it's a signal meant to help us. And the research also shows that if you suppress that signal, if it's something that's actually important to you,

I actually use the example. Like if it's going to your mother-in-laws for Thanksgiving, maybe it doesn't matter and you can use your cognition to overcome it. But if it's like, are you going to make or lose money, or are you going to get promoted, or are you going to pitch a good game in the Major League Baseball, like it matters. And so the signal's meant to make you press.

prepare. And if you override it, it actually gets louder because it's like your unconscious is trying to say, Brian, you know, do the work. And I always say, look, if most of us, maybe not a few like exceptionally smart people, of which you may be one, but most of us would have never graduated from college if it weren't for fear. Like we were only afraid of the alternative of not doing the work. Otherwise, we would have just done college, right? Right. So it has this great purpose. But literally people are afraid of fear. When if they can understand what they're actually afraid of and what prediction they're making, they're able to sort out what's real and what's present and what's likely from what's not. Like instead of just bringing their old fears, you know, the fear of when they didn't make the football team into,

is the investor going to reject them? Once they get it out on the table and shine light on it, they can go, wait a minute, like that's then, this is now. For the moments that matter, choose Curad Naturals. Infused with aloeuvre and vitamin E, Kyrad Natural's bandages protect your unexpected scrapes, cuts, and burns, while also moisturizing your skin. Find deeper relief with natural ingredients you can trust to start the healing.

When life surprises call for the best, choose Kyrad, a deeper level of care. Shop the full collection on Amazon or visit Kurad. And people just, well, first of all, there's, you know, enormous amounts of advice that's saying, you know, override your fear, you know. So they're only doing what they thought they were supposed to do. When you're working with a client to overcome fear, do you, is your focus one more of rules or tools or, you know, is it strategic? Is it tactical? Because I'll tell you, you know, my family, we keep kosher, despite the last name, we're actually, uh,

practicing Jews and, you know, we'll go to the supermarket with the kids and they'll see all this junk and, and, or, you know, I see junk and I want to eat, but I'm going to diet. And if I have to resist it based on willpower, that's really hard. But if, you know, if one of my kids wants to get some junky food, I just, oh, it's not kosher, you know, and they won't eat it. So that's like a system that's been in place for thousands of eating, whether or not you believe there's some reason for it. But what's more effective? Rules, tactics, strategy, how do you help someone to, you? How do help someone to deal with that fear in the moment? The trade is about to be made, the closing bell, the Bitcoin's down, you know, whatever. Sorting out, sorting out the true answer to

what are they feeling and why are they feeling it. So the first is like really what are, like they don't know the difference between their intuition, their unconscious pattern recognition, which is based on their experience, and their impulse. So they have one set of feelings that's about this is what I think is happening. I can't, this trade will work. And this other, afraid to lose money, afraid to disappoint the investors, whatever. And so we do a lot of talking about what's what. Sort of helping them sort that out. For they're comfortable acting out of their expert, you know, pattern recognition.

I sometimes give them homework, like make a list of what's the worst that could happen or everything you're afraid of. I sometimes give homework. Like I did this happen to me the other day. Hedge fund person that if I said his name, everyone would know. And he has this possible deal working. And he's like telling me all about this deal. And I can tell.

And it's all the reasons why he should do the deal. And the feeling I'm getting, and to me, the underlying tone in his voice was he didn't want to do the deal. But literally, I'd listen to 40 minutes of why this was a great idea and why I had to do this. This was last Friday afternoon. And I said, okay, your homework this weekend is to figure out why you don't want to do this. He's like, what do you mean? I said, I can tell you don't want to do it. He's like, what?

I'm like, the feeling I'm picking up from you because it's within your tone of voices, you don't really want to do this. And he came back on Monday and he figured out the reason. He didn't trust him. He didn't really trust the person. But he didn't know that on Friday afternoon. So the homework I give will be about like, investigate that feeling and what it means to you and where it's coming from.

And then let's, you know, that's not a perfect example. But oftentimes it's, okay, let's put the feelings in the different buckets. You know, which one is just your childhood repetition? And which one's a fear of the other guys doing better? And which one is your market recognition, you know?

Which one's your intuition? But I think that's a skill people can learn. And I think, I mean, most men, particularly, have been taught to, like, just try to set all that stuff aside. So they don't know they should do it, and then they certainly don't have a skill in it. But what also happens is once people tackle it, it oftentimes is easier for them because they're really kind of working with the human psyche more the way it was built,

and there's like less static, less noise. Unless you have a whole series of well-built defense mechanisms, and that's a different case. Indeed, yeah. I was talking with Andy Weir, who is a graduate of UCS, or not a graduate. He's a dropout of UCSD. He wrote The Martian, a wonderful movie, and he has a new book out. And we were talking about how this month is Mental Health Awareness Month, the month of May. Who decides these things?

But it drives me crazy. Every time mental health awareness, but no, I'm just kidding. But we were talking about how he had, and he revealed it on my podcast, so I'm not like saying some patient client's confidentiality. And I thought I commended him for it. He revealed that, you know, when he was after the Martian was such a huge success, NASA invited him to go down from San Jose, where he lives, down to Johnson Space Center, where, you know, the home of NASA where, and NASA runs all these huge missions, has this huge dive tank, you know, that's like 10 Olympic swimming pools deep, whatever.

And he was petrified because he has a fear of flying. And so he started to see a psychologist, and they started to have some deep sessions. And it turned out that the psychologist said, you know, here, we can work on your fear of flying. but when you're done, after you come back, you've got to work on this crippling kind of general anxiety disorder that you have. In other words, it was manifesting itself as another fear. Is that a common sort of response? I mean, I don't want to speak specifically more about him,

but is it common to find that, you know, someone will have this, you know, some fear of a trade or something, but, you know, that might be something, yeah, like they weren't, they're dealing with childhood trauma. And really this, somebody that didn't deal with that trauma would make the trade or an athlete would have no problem win some competition. It's almost never what they think it is when they show up.

Almost never. I could probably say never, but I'm just being careful because I think zero or 100, right? I mean, in short, that's the work I do. Let's figure out what this is really about. Let's, you know, it's easy for me to say, what are you feeling and why? Like, everybody knows what this question means, not a complicated question. answering it accurately is a whole different story. And usually they think it's one thing, like another client in London,

I started working with him six months or so ago. You know, I'm just not disciplined enough. I just don't do the work. If I did more work, if I journaled my day better, I knew right off the bat that anybody that shows up with like those 19 criticisms is it's not going to be what it is, you know. Now, as it turns out, this person was regularly criticized as a young boy growing up, mowing the grass, cutting the wood, because he grew up in a place where he'd cut and stack

the wood. So the self-flagellation, I'm not, I'm not, I'm not, was a repetitive voice. But now he, like, he literally told me this morning, I don't worry about journaling anymore, and he's doing really well. And he, he, he, this year. And I'm like, good. I wasn't really worried that you're not journaling, wasn't your problem.

Always like that. Are there people that are resistant to therapy, like just intrinsically? Oh, totally. I mean, I don't know about it. They weren't born that way. Right. But like I have another client

who hired me basically because he didn't get a promotion. I mean, he wouldn't put it that way, but that's what it boils down to. And he was resentful and, like, wanted me to help him behave in a way and he's in private equity that, you know, I've been working with him for well over a year. And I literally just the other day got him to talk about was he ever denied things growing up. And even then, it was like pulling teeth.

People develop particularly intellectual defenses. Yes. And they have a rationalization. I mean, it's literally what it is for why things are the way they are. and then they operate within that. But the thing they want is over here. It's outside of that rationalization. But that rationalization or explanation has protected them.

So, like, our way of working, which came from modern psychoanalysis, which is different than Freudian, is not to bust through the resistance. Like a Tony Robbins type would just try to bust through the resistance. Right. We don't do that. Like we try to work with it and, you know, maybe make some suggestions that hopefully

they're unconscious will work on. So that's why like a guy like this, I could say I've been working with him for, you know, 16 months or whatever it's been. And I just feel like I made some progress the other day. Because I'm not going to say, you know, you're being resistant or anything like that. Was it one of your biggest challenges, would you say, to kind of overcome the, you know, or to split them, you know, the happy median between the Freudian and the Tony Robbins, you know, kind of poles of extremes. It's always hardest to walk in the, to find a middle road.

How did you, you know, how do you, how did you balance that and strike this unique and innovative new middle, middle way of approaching things? Well, you got to look at how I got there. So, I mean, I was like rising the corporate ladder at IBM and supposed to go to. Yeah, you were a dietitian. You wanted to be a dietitian. I started out as a dietitian. That was my biology background, but I quickly gave that up. I was like telling people how, here's an irony.

Telling people how to eat was going to be horrible. And now all these years later, I'm keto and monitored my glucose. And like it's huge. And I'm constantly- You're tweeting about diets all day. I try not to, but it's been such as like, I wasn't even in that bad of health before, but I'm in so much better health. Like, my knees don't hurt.

My knees killed me skiing 30 years ago. And now I can ski, like, I can kill it and my knees don't hurt. That's diet-related. So, but anyway. That's awesome. Then I actually landed at IBM and I did the corporate ladder thing in Stanford Business School. And then I was like, I don't want to do that. If I'm going to go to graduate school, it's got to be in like psychology.

So, and I had discovered at that point in time in my 20s that both me and all my girlfriends dated the same kind of guys and broke up with them in the same kind of way. And I was like, that can't be a coincidence. Like, it just can't be. And then I discovered that Freud had this thing called the repetition compulsion. and he has this beautiful paragraph about how the man who's all of whose relationships end up in the exact same circumstance. I mean, I'm not quoting it very well, but that's the bottom line. I was like, really? Freud noticed this.

So long story short, I go to graduate school and this design your own and I say, this is what I want to research. If that's true, and I think it's true that we behave in a patterned way, then there has to be a template in there. And what could the template be? So I had this psychoanalytic background when I took a whole, hard right turn and became a traitor and then a few years later it came back together when someone wanted to publish my master's thesis. So that's a long-winded way of saying I didn't really have the Tony Robbins perspective. Now, I know a lot of people who do and I know that the sort of a cognitive, positive thinking, it helps some people in some circumstances.

It also tends to people end up feeling like there's something. wrong with them because it doesn't work for them and they don't want to tell anybody because it's like the cultural psych guys and the way to do things so it just must be them. So when you when you approach the you know kind of starting the rethink rethink group what was that like that was kind of taking a different tack from the conventional wisdom which was you know basically disciplined and and you know just kind of work hard and collect, you know, efficient market hypothesis and information and not really paying attention to the, to the person behind the making the creates. So can you see more about that and how you

came up, you know, what the challenge was there and how you overcome the barriers to that new approach that you innovated? Yeah, so there's a couple things. The guy that got me into trading in Chicago had been a floor trader and he'd had these crazy circumstances, which to me at the time were just really incomprehensible, where in one afternoon, he would lose, like, his net worth, which was sizable. And I just, I mean, I knew him socially, and I was like, and I came from a home that my dad and grandmother saved every penny they ever made. I'm like, literally, it was completely foreign to me.

Well, so then, you know, a few years go by, and I end up trading with him and some friends of his, and I'm told I have that best instincts I've ever seen, and I stay home on Friday nights, even though I'm single to read trading psychology books. And I would still do some stupid stuff. And the books didn't tell me why. Well, then it just so happened that when they went to publish my master's thesis, Antonio DiMasio, who I think now is still at USC, had said, basically, you have to have emotion to make a decision.

He'd shown all these different circumstances where these human beings couldn't decide, you know, what tie to wear, what day to make an appointment, what to eat for dinner. if they're emotional parts of their brain, and now that's a whole debate, but basically weren't working. And I was like, oh, my God, all this trading and investing psychology is taking the emotion out of it. And if you could literally do that, you wouldn't make a decision. Like, we have a problem. So I started, well, really, I was just telling someone about it and telling someone about it over coffee in Hell's Kitchen in New York City.

The next thing I knew, I was writing an article about it. And then the next thing I knew, someone was calling to ask me to speak. So it was that. And the modern psychoanalyst, which is a small group, not very well known, but they'd had success with assisting schizophrenics to become what I like to say, normal New York neurotics. I was like, hmm, you guys have got some powerful techniques. And you have to have emotion to make a decision.

Both of these things apply to these crazy traders I work with, like the guy that lost his net worth multiple. times in the afternoon. And he'd lose it, he'd make it back. Four years later, do the same thing. So I was trying to answer that question. And I thought that basically that the brain research about how

emotion interplays in our decision-making and the fact that we're predicting based our past experience, which is very psychoanalytical, even though a lot of the neuroscienters say that, probably don't know that. Like, I was like, therein lies the answer. And just basically, the more I talked about, the more people came and said, you're right. That makes sense to me. And that just took on a life of its own.

And I remember what you asked me, you know, if I am. That's okay. So I like to get your perspective on the phenomenon of COVID, which is obviously controversial. But I'll just point out in terms of risk mitigation. So I'm, you know, coming into work today. and I see a bunch of my brilliant students on campus. And, you know, these are the only top university in the world, top 20 research university in the whole planet.

And they're wearing masks. They're very good wearing masks. Many of them are vaccinated. I think we're up to at least 50% of the on-campus population, which is only a quarter of the total capacity because most students stayed home this quarter. And they're wearing masks, but they're on their skateboard. One's on a skateboard with a mask, with his phone, without a helmet. And I'm like, this is like a study in risk management, right? I mean,

the odd of dying from COVID when you're vaccinated probably with a mask on. I mean, it's just so infinitized. So what do you make of our obsession with the differential, you know, tradeoffs with risk management that COVID has presented us? Is this a study? Is it fascinating or is it scary and terrifying to you as someone with expertise and fear and risk management? Well, It's all scary to me at this point in terms of, you know, society and risk assessments. And frankly, our inability to do it. You know, I had the opportunity to read an advance copy of Daniel Conneman's noise, which I think is coming out on Saturday, because a journalist asked me to help them.

interpret it so they could ask him questions. And, you know, he has his zillion examples, like, where people who are specifically supposed to be good at risk decision-making are getting it wrong. I mean, I do think it goes back to, like, we literally misunderstand ourselves. So, you know, we're making decisions on the facts or what we've been told. And we're not really thinking through what will happen if. We're not being conscious of the what will happen if. Now, the 20-year-old, you know, supposedly their brains aren't developed enough to do a full risk assessment.

Right. I wish I'd known that when I was 20 because that would have been a good excuse. You know, I don't know, when I was 20, we were supposed to be full adults making good decisions. But, you know, now you can rent the car into your 25. I know. I know a super responsible, fabulous young woman on Twitter who's like a leader and she was complaining about, I can't rent a car? Can anyone help me? Because she's 22. We don't, you know, we don't know how to work with ourselves. Like, we don't. We don't know how to analyze what we're doing and why we're doing it because there's this over emphasis on cognition and rules. Yeah, my opinion. Yeah, the rules kind of just default, and then it allows you to maybe free up some bandwidth for other processes, I suppose.

I want to just take some of the remaining time and talk about applications of rethink, which on your website, which I'll link to, you talk about applications to traders, investors, to learn how to trust your judgment, understand your convictions, recognize valid intuitions, and diversions. impulsive urges, despite what they say, you are not controlled by cognitive bias. So I have... I did say that. Yeah. And so I'm kind of second-guessing now because I would love to get advice on how scientists who are kind of like CEOs of small industries. As I said, we have a budget.

I've got a million dollars a year in payroll. I've got travel expenses, payable, receivables, make products. I have budgets, proposals. I don't make anything for profit, but I have to interact with government and local entities. So we're like the CEOs of small corporations. The whole project is a $100 million project. It's not that small. And yet we are subject.

We learn, as Richard Feynman and others said, to really suspect that we are the biggest fool. And really to say at all times that we are the most likely person to be fooled and to fall into the trap of cognitive bias. My book, you know, kind of prominently featured behind me is all about how I fell into this cognitive bias in anticipation of winning the equivalent of becoming a billionaire in financial world, which is winning the Nobel Prize. Right. And so, you know, trusting intuition doesn't really have as much of a place in science and judgment. Yeah, you might get some wisdom from your accumulated experience in science, for example, but we are supposed to think of ourselves as biased and rely on blind peer review. So can we square that circle? Can we take the fear, you know, techniques and knowledge that apply in investors and CEOs and risk officers?

Can we apply that as scientist or is it fundamentally a different domain? I don't think it's fundamentally different in any. I think it's very similar, actually. So let's just take confirmation bias. You know, we only see what we already think or believe. What's that really about? well time and time and time again when you dig into it with an individual they're afraid of what will happen if they're found out to be wrong and what does that mean afraid to be found out they're wrong well they're afraid they'll be embarrassed maybe a shame maybe lose their career you know maybe be denigrated rejected and What's causing the confirmation bias is this anticipatory effect of worry over rejection criticism just to simplify it.

Right. And so that's like a not-a-fun thing to think about. So you try to avoid it. What you really do is kick the can down the road, right? Like, you don't want to feel the possibility that it could be wrong, you know, today, May 13th, I think it is. Yeah. So you'd like see your data as proving your thesis. Because this possibility that you can be embarrassed is real, but maybe you can avoid it.

But what happens, and I do this with portfolio managers all the time, when we talk about, okay, let's suppose you're wrong and you lose the money and you're embarrassed. Then what? And sometimes they think their investors will pull their money and that'll be the end of their career. But usually when they put that on the table, they go, that's, kind of unlikely. Now, in a science world, now, and I know, I mean, I did go to graduate school at the University of Chicago, and I did once, by the way, go to a hedge fund conference, and I flew from there to an academic conference, and it was like Mars Venus, like, at the hedge fund conference,

everybody wants to talk to you because maybe you could work together, and at the academic conference, there's a hierarchy. Right. Nobody wants to talk to you, right? Do not speak to the full professor, like, unless you are also the full. Anyway, I was a business person. What did I know? I think you can do that kind of thing with most biases, where you can figure out what the person's actually predicting they might feel, and that works backwards to explaining quite a few.

Like, recency is sort of being, you know, it's a kind of easy thing to do, right, to just expect the same thing that just happened. Well, and in fact, your skateboarder is a little bit of that. The recency bias is wear the mask. Now he doesn't need to wear the mask, but he's not engaging in the thinking. Right. But what's the predicted feeling?

It's kind of like, oh, God, it will be a pain to do the thinking, so I'm not going to do it. And I got better things to do with the time for the thinking about that. So, I mean, I haven't tried to do a systematic top. Well, I once tried to do a systematic list of the biases after I did the Harvard Behavioral Finance class and I couldn't do it. I thought you should be able to do it if they were really true. But I do think you could go through them and basically figure out what the expected future feeling is.

And by recognizing that, it allows you to subvert or avert is the word I'm looking for, a behavior. Interesting. Very cool. So the last thing is just about clarifying the biotechnology. That was a new term to me. And I think it's something that maybe I only heard you for the first time coining it. So can you tell us a little bit about biosecology and how that? Yeah.

Back in 1993 and 94, when I said to my graduate school advisors, you know, Freud has this idea that we repeat. And my theory is, if we repeat, there's got to be a template. And we should figure out what the template is. And everybody was like, and I'm like, well, the template doesn't exist out here, you know, at the end of my eye. It's got to be in here somewhere. Otherwise, so it's basically how does our brain, you know, how does the neurochemical, electrical reaction give rise to perception, judgment, subjective experience. So at that time, the only, no, maybe there were other people, but the primary person at University of Chicago,

who was doing that was Martha McClintock, who'd been the one who discovered that women tend to ministrate together if they're in dorm room together, which is kind of an interesting thing. Like, why did their hormones sync up? Anyway, she was chair of the biosecology department. So that's what it was. But by a decade or so later,

it had become, like at least for me, neuro-economics, which is really what is the brain on risk, has the brain deal with risk? I see. Very good. Good. Okay, Denise, this has been very, very fascinating, and you have agreed to indulge me with what we consider to be the thrilling three final questions that are not very risky, but

they will involve discussing topics in the far future, perhaps, and then in the far past as well. Perhaps maybe not that far in the past. But the first one is usually just a simple one. As I said, you know, can you please help us derive your favorite four-dimensional theory of quantum mechanical space time that is also generally covariant? Is that, can you just describe that? Can I get like? First I don't know or third, I don't know. There we go. All right. We got to quote us. We hit the quota. Okay. The first thing has to do with what is known as an ethical will, and this is something that you want to leave to humanity, not to your biological errors, but more

to your ideological errors, and that is a type of inheritance that would encapsulate the wisdom or ethical learnings that you would most want to communicate to those that come after you in the form of what is known as a Zava-a, or ethical will form. Your pure emotions are information meant to help you learn how to understand them? So listen to your pure emotions. Interesting. Are there tools, that people can use to get better in touch with it, besides, you know, rethink group, which we'll put in a connect to,

but your average person can they... First of all, you've got to believe that it's worth it. Mm-hmm. But second of all, it really is be kind to yourself. Mm-hmm. The number of times that, not so much clients, because my clients learn not to do this pretty quickly, but that people just,

their own feelings. Eliminate from your vocabulary, now I'm sounding so cognitive, like whatever you feel is fine. Like, there's nothing wrong with anything you feel. The trick is to understand what it's really about. And I can actually guarantee you that when you do that, there will be some emotional logic to it.

Some of it may be, and is likely to be, a set of feelings you accumulated from your experiences in the world. But by doing this, you will be able to start to separate your accumulated emotions from the presence and be able to make decisions that are more based on the things that are likely to happen as opposed to things you expect to happen. I've heard you speak about the importance of kind of recognizing that, you know, the theory of mind, you know, that other people have, you know, kind of an equal share in the realm of reality. You know, there's an old joke that, how do you know a scientist is outgoing?

Because he looks at your shoes when he talks to you. But, you know, it's a way to improve those kinds of perceptions of someone else's reality. You know, can you, can you, are there any exercises to strengthen the theory, the practice of mind rather than just the theory of mind? Yeah, so there's an old psychology experiment from the 1940s. I can't remember what the experiment itself is called, but it's basically with a series of shapes and people imputing stories to the shapes. It's actually a good theory of mind practice, and not to tip my own horn, but we built a game around it.

Oh, wow. It's called, what's what do it was it called these days? Intuition brain game. Okay. But literally you're watching these shapes move around and predicting what's really going on, and you have to listen to your intuition to do it because your unconscious, subconscious will tell you if you're listening.

So it does two things. It helps you predict other people, which, by the way, reading fiction helps you predict other people too. There's research that shows portfolio managers who read more fiction make better money management decisions. Why? Because they're thinking about how are the other people thinking, which is really the job of a portfolio manager.

Interesting. You say Apple's going to make more money, but what you really mean is Apple's going to make more money so the guys down the street are going to pay more for Apple stock and that's what you want to know and that's the skill.

So reading fiction actually helps their end mind. But playing this crazy little game we have on our website also helps. I put a link to it in the show notes. Very good. Thank you. So that's fun to play an actual game.

I love it. And I love anything with the word brain in it because sometimes people will mistake my name for the word brain. Okay. If you had a time capsule and it was guaranteed to last a billion years, what would you put in such a time capsule? A book or any, what would you like to give to the future of the universe? I mean, I got to believe, though, by then they're going to be able to use their feelings as data.

I'd probably revert right back to be kind to yourself. Don't judge your thoughts and feelings. examine them, analyze them, understand them. But don't judge them. Interesting. Yeah. I don't know if you're familiar with Tim Ferriss. He's kind of a pop personality, but he has this TED talk.

He talks about fear setting, which I found, you know, pretty, pretty interesting. Yeah, it's a series of just like what's the worst that can happen. And it's funny because he like has like 12 things on this huge TEDx TED Talk screen. and I'm just like, wow, you have 12 things that are the worst things that can happen. I guess if you can fill those out. What's that? That's a lot.

Actually, since I ask that question a lot, it usually is, you know, I lose all my money. My kids are, you know, drug dealers and prostitutes and in ditches and, you know, I die homeless. Yeah. That fear is not uncommon. Right. Yeah.

It's as uplifting as that sentiment is. Right. Yeah, it should be, you know, right. it should be relatively limited. And then, well, I always think, you know, that like problems, and I think there is some Buddhist term for this when my wife gets stressed out, you know, so something will either, you know, the worst, not usually the worst, but something bad will either happen or it won't.

And if it happens, it's probably not going to happen the way that you thought it would. And if it doesn't happen, you just wasted all those mental calories thinking about it and stomach acid and ulcers for nothing. And so what was the point in even worrying about it? Well, the thing about it is people don't know they're worrying about it. So that's the, you know, bring the unconscious conscious. And then you can go, what's the point of worrying about that? But we don't really know you're worried about it, then it ends up controlling you

because you have this feature predictive motion of misery. But you think you're trying to solve it by, you know, like a common one is working all the time, right? Yeah, I was just going to ask you, yeah, what about burnout? Like, I mean, people, there's so much stuff to do. We're so, you know, convinced of, you know, we're always got to be doing something, especially now, we're at home, we're not physically moving as much, doing as much. How do you cope with burnout? Well, I mean, people need to realize that, you know, if they get a good night's sleep

and they're clear-minded and energetic, they can do a lot more and a lot less time and they'll make a lot better decisions. So there's an efficiency factor to rest. Mm-hmm. And that can be enhanced. I heard you speak about exercise. and the benefits of exercise and being in nature, hiking, et cetera. Yeah, yeah, yeah.

Great. Okay, the last question on my standard list of questions has to do with the opposite direction on the timeline, going to the past. So I want to ask you, as I ask all my guests, and this is going backwards in time now. I want to ask you in relation to this quote by Sir Arthur C. Clark, who had many laws, one of which is, any sufficiently advanced technology is indistinguishable from magic. And we open the show with that particular phrase read by him from beyond the grave. The other quote that I like from him is for every expert, Denise, there's an equal and opposite expert. I think that's kind of fun to trot out on my faculty colleagues every now and then. But the last one that I'm going to ask you to close out the show

with is he said the only way of discovering the limits of the possible is to venture a little way past them into the impossible. That's the origin of the name of this podcast. I want to ask you, Denise, what part of life was mysterious to you as a 20 year old but makes sense to you now? And what advice would you give to that 20 year old to give you the courage to go into the impossible? Honestly, like what was the real role of emotions? I remember sitting in Akrono, Ohio ready to turn left onto I-77 with my high school best friend. And she said, well, you know, if you smile, you'll feel happier. And I remember looking at her going, that's insane.

Except there's a lot of research that says that. So now it's really clear to me that you feel the way you feel. And if you accept that and understand it and analyze it, you gain these superpowers. I wish I would have known. I don't know if I could have dealt with it then, but. Right. And who knows what would have happened? You did meet yourself in the past and tell yourself that advice.

Denise, I want to thank you. Oh, I forgot to ask you, where did Wendy Rhodes grow up? Did she grow up in Akron, Ohio? I didn't know that. Columbus, Ohio. Columbus, Ohio. Can you say anything more about Wendy Rhodes? What can I say about Wendy Rhodes?

Maggie, the actress, is really nice. and she really she's very bright and she's very intent on being realistic other than that she you know

some of her parts of her life are of a male fantasy I think what else would you like me to say so were you connected it all with the show or they modeled her character

on you. The character is, of course, Wendy Rhodes and Billions, which has a very striking resemblance to some of the characteristics that you have been known for and you pioneered in your career. Yeah, there's parts I know in parts I have put the pieces together. So the parts I know is they called and asked me to help develop her. Like, so that I know. You know, she asked for help, and then the showrunners ask for help and then I told them all about how the portfolio managers like project their childhood unconscious onto markets and then you start to see that

particularly in the first few seasons. You see some of the intuition stuff later. The part I don't know for sure but I piece together is that Sorkin was using my book as he was developing her. He wrote the pilot and like the fact that she's from Ohio and some of the other things.

But she uses a lot of my technique, you know, in show speak, right? But like she'll talk to Taylor about separating out her intuition and recognizing her intuition in really just the way I talk to you. Right. Yeah. I didn't admit that I consulted it first because I wasn't sure what she was going to have to have to be. And then what happens, I couldn't avoid it. Like anywhere I would go in New York City, they would be like, oh, my God, you're on television.

And it took me like, I don't know, a year to finally say, look, yeah, I consult it. Because probably I was afraid I didn't know how much of a dominatrix she was going to be in. I don't know. Right, yeah. Not my gig. So, yeah. Well, I want to thank you so much for coming onto the show and going into The Impossible. And thank you for this wonderful book, which I've dog-eared to death.

And really just devoured it when I, I, I really wasn't sure what to me. Sometimes it's hard to meet your heroes and people that you respect so much. I understand that at least when I first started talking to you via our mutual friends, Steve Goodstein, I think, a year ago, that you were working on a new book. Is there a plan for a new book or another book? There is, but reality keeps getting in the way. My working title is Predict.

A ghostwriter just gave me another working title. Field casting. I think it's field casting. But it's basically this fundamental idea. We're always predicting and we're always predicting future feelings. And if we reimagine ourselves through this lens, a lot of our behavior is going to make a lot more sense.

And we're going to have a lot more latitude to choose the behaviors that get things we want. That's wonderful. Denise, I want to thank you so much for going into The Impossible. Please stay in touch and let me know when you can come on the show again. This has been such a delight. Thank you so much, friend.

Any sufficiently advanced technology is indistinguishable from magic. Thanks for listening to End of the Impossible with Professor Brian Keating. Please support the show by rating, commenting, sharing, and leaving reviews. We appreciate hearing from you, and it really helps keep our universe expanding. Watch our YouTube channel at Dr. Brian Keating. That's DR. Brian Keating and join our premieres Tuesdays at 8 a.m. Pacific Time. Follow Brian on Twitter and Medium and support us on Patreon at Dr. Brian Keating. For exclusive content, visit Brian Keating's website and sign up for his informative newsletter at Brian Keating.com.

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