We Study Billionaires - The Investor’s Podcast Network - RWH069: The Psychology of Investing w/ Emily Haisley

Episode Date: June 28, 2026

In today’s episode, William Green speaks with Emily Haisley, who heads the Behavioral Finance team at BlackRock, the world’s largest asset manager, with $14 trillion under management. Here, she explores the critical intersection of investing & psychology, explaining how she helps elite fund managers identify & counteract their behavioral biases, regulate their emotions, optimize their physiological state, avoid systematic mistakes, & take risks that align with their edge. This conversation offers powerful insights on how to win the inner game of investing. IN THIS EPISODE YOU’LL LEARN: (00:00:00) Intro (00:00:40) How Emily Haisley became head of Behavioral Finance at BlackRock (00:23:52) How her team helps fund managers recognize their behavioral biases (00:28:51) How to counteract a notoriously destructive bias, myopic loss aversion (00:39:56) Why disposition bias leads investors to hold losers & sell winners (00:44:31) Why it’s helpful to experience investment pain, not just learn about it (00:53:46) How investment teams can profit by “beating up” their decision makers (00:56:00) How the best investors benefit by subjugating their own ego (01:00:14) What practical steps Emily recommended to one elite investment team (01:17:48) Why she views “tainted altruism” as “the saddest bias” (01:25:27) What investors can do to manage stress & its impact on their decisions (01:29:35) How BlackRock uses AI to simulate decision making amid extreme volatility (01:35:32) Why she’s learned to embrace uncertainty, false starts, mistakes, & change (01:52:33) How 3 new year’s resolutions nudged Emily toward a happier life Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Inquire about William Green’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠Richer, Wiser, Happier Masterclass⁠⁠⁠⁠⁠⁠⁠⁠⁠. Benjamin Graham’s book The Intelligent Investor. J. Krishnamurthi’s book On Right Livelihood. William Green’s podcast interview with Annie Duke. William’s book, ⁠Richer, Wiser, Happier⁠. Follow William Green on ⁠⁠X⁠⁠. Related ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠books⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ mentioned in the podcast. Ad-free episodes on our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Premium Feed⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. NEW TO THE SHOW? Get smarter about valuing businesses through ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Follow our official social media accounts: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠X⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Finance⁠⁠⁠⁠⁠⁠⁠. Enjoy exclusive perks from our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠favorite Apps and Services⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. SPONSORS Support our free podcast by supporting our ⁠⁠⁠sponsors⁠⁠⁠: ⁠⁠⁠Plus500⁠⁠⁠ ⁠⁠⁠Netsuite⁠⁠⁠ ⁠⁠⁠Vanta⁠⁠⁠ ⁠⁠⁠Shopify References to any third-party products, services, or advertisers do not constitute endorsements, and The Investor’s Podcast Network is not responsible for any claims made by them. Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. You're listening to The Richer, Wiser, Happier Podcast, where your host, William Green, interviews the world's greatest investors and explores how to win in markets and life. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own,

and they may have investments in the securities discussed. Now for your host, William Green. Hi, folks. I'm absolutely thrilled to welcome today's guest, Emily Haisley. Emily has really one of the most fascinating jobs in the world of investing. She leads the behavioral finance team at BlackRock, which is the world's largest asset manager with more than $14 trillion in assets under management. She's a PhD psychologist with a very strong background in academia. But what I think makes her so unusual is that she has this extraordinary depth of experience working in the trenches with fund managers and investment teams within BlackRock, basically helping them overcome their behavioral biases

and deal with their emotions and make better investment decisions. I'm particularly excited to have Emily here today, not least because her expertise is really usually on display behind closed doors. She's a kind of secret weapon within the world's largest asset manager. So this is a very unique opportunity to learn directly from her about the psychology of investing and all sorts of practical ways we can use psychology to become more successful investors. So Emily, welcome. It's really lovely to see you. Thank you so much for having me, Ma'am. I'm most excited just to have a conversation with you because I always enjoy our talk so much. Thanks. It's a real delight. I've been looking forward to this, I think, for two years now since we first met.

And so we're finally actually getting to do this in public. So thank you for coming. You have such a unique and interesting job that I really wanted to stop by simply asking you to describe what it is you do at BlackRock as head of the behavioral finance team. Can you give us a sense of your role and your responsibilities there? Absolutely. So I work within the risk and quantitative analysis group at BlackRock. And this is a group that really prides itself of being an independent and consultative function for investors within Black Rock. So within that space, I really have this amazing kind of position of being able to bring another perspective to investment teams,

help them review their process, understand their biases, understand their team dynamics so that they're really working for them and not against them. And doing this all from a place of kind of, you know, consultative independence, rather than kind of doing it from a place of kind of where they're, like, I'm in their reporting line and they may be worried about, you know, exposing their biases or talking about their pain points or talking about their mistakes with me. because I have this independent function. And within a risk and quantitative analysis,

it's very much a quantitative approach. So our kind of first court of call is where we can, where it's available, is shutting light on what's going on in an investment process using our behavioral analytics. So these are suite of analytics that will quantify biases that you may have heard of, like loss aversion and the disposition bias and a damage effect that are driven by loss aversion, overconfidence, myopia, so they're excess trading.

You know, we basically started from the behavioral finance literature and said, you know, what are the biggest problems identified there? And let's try to calculate them in portfolios. And then from there, we will help investors understand, And systematic mistakes that they're making that are costly, biases consistent with the literature, which then are a drag on returns in their portfolio, will help them understand their edge and try to get them to essentially change their process to help their biases or take less risk where they don't have an edge and take more risk where they do have an edge.

So that's the main kind of area that we work in. With some teams, you know, it's not possible to have analytics. So maybe just one example is but maybe private in private assets where there's not enough of a transaction history, new portfolio managers, not enough of a transaction history to quantify biases. And there will mainly work just around what's going on in the investment process. How aligned do we think that investment process is to behavioral best practice? What are the pain points in that investment process? And with every process, even if it's, you know, a really, really strong process,

There's always something you could do. There's always some work to do to add some discipline or subtract some process that's just bureaucracy and not working. There's always something. And then there's also a team dynamics approach, which is use leveraging the literature from social psychology, for example, on group decision making and the biases that apply there, many of which I found align with like some of the spiritual teachings that have been, passed down over three centuries. And then another thing that we do is very unique, I'd say.

We're interested in keeping portfolio managers in the right state of mind, in the right state of balance, to have the best shot of making rational decisions. And these are things that, you know, are uncontrovertible from like a scientific perspective, but not often applied. things like we don't want them in a sleep-deprived state, things like we want them aware of when they're stressed and taking measures to rest to counter out that stress to stay in balance. We want them in positive stress states where their stress is fueling their performance and not negative stress states where they may be with drying or maybe more shutting down or heading choice burnout.

And to do that, we use a wearable technology. The main one that we use is the aura rank. And on a voluntary and confidential basis, portfolio managers will agree to share their aura data with my team. And then we can link their physiology to what's going on in their portfolios and play that back to them. You know, there's so much there. And we're going to unpack a lot of this in detail as we go through this conversation. But really, in a way, what strikes.

me going back to the very origins of your team is just the curiosity that it's a recognition that investor psychology is a form of risk. And it's fascinating to me. It reminds me, I think in the intelligent investor, there's a sort of seminal quote from Ben Graham, where he said that the investor's chief problem and even his worst enemy is likely to be himself. And so it feels like philosophically, that's like a really fundamental recognition for you guys, is that actually it's not just market risk that we're contending with. We're contending with the risk that we ourselves are sort of capable of self-sabotage and the like. I completely agree. And I think that's true not only in investing, but I think that that's true often in life. For whatever we're trying

to achieve, we're often our own worst enemy. And whether that's underconfidence and questioning one's own intelligence and capabilities and maybe goodness or et cetera, or it's coming from overconfidence of a fragile ego that's trying to protect itself, shutting itself off to other information or information that it doesn't want to hear. I think, you know, it's true for almost anything that we're often our own worst enemy. Yeah, you've always been watching me in the kitchen. So before we get started on the investment-related interventions, the kind of biases you're identifying and the kind of antidotes to them. Let's talk a little bit about your journey that got you here.

You've been a BlackRock for about a decade, just shy of a decade. You had a very strong academic background coming from Brown and then Yale and then Connie Mellon. Can you talk about that sort of early academic training? And in particular, you were mentored by a couple of really kind of foundational figures in the world of behavioral economics. Can you give us a sense of how you came to be in this position of being so fascinated by behavioral economics and the like and what you're drawing on in your work at BlackRock? So I always tend to give the advice to young people to follow their bliss and to follow their interests and to follow their curiosity and to follow their passion.

And sometimes that leads you to kind of like you hit a wall of like you realize like I'm not interested in this. don't like this. And then that tells you, you know, tells you to pivot into something else. And when I look back, I feel like I pivoted all over the show, but I apply everything that I've learned in my role today. So I always just find that that interesting is to just, you know, to just keep exploring passions. And if you don't like where you are, chances are you've learned a lot from that. And you've also learned that that's not where you want to devote your time 100%, but maybe you can work that knowledge into what does become your life's where. And so I started out, you know, being, you know, as a child, being really interested in science,

worked at like a plant molecular biology lab at NYU when I was in high school, worked in neuroscience, neuroscience laboratory at university. My first paper was in neuroscience. Then I hit this wall where I decided I didn't like lab work. I didn't like working with animals and laboratories. And I realized that I had such a strong passion for understanding the brain that also extended to psychology. And so I started to think about exploring clinical psychology and started volunteering and later worked in psychiatric hospitals. It was doing research in psychiatric disorders that were treated in primary care settings.

So did a lot of research where I was diagnosing and doing research on anxiety disorders. I worked in a sleep laboratory for some time and TIA class on sleep, which obviously I apply in my work now. Some of the work I did involve sleep depriving children. So you can see the effects of sleep deprivation, which a lot of that work now, it's very hard to get IRB approval for sleep deprivation because it is so. costly. It is so damaging the body. So, you know, it's part of some of that, that early work to uncover that. And, you know, I kind of think now my penance for that work is encouraging people to sleep as much as possible and to pay attention to it because I just, we know how

critical it is for help and for intellect. So, you know, it's actually, but if I think about, you know, what I had a lot of all of those things that I did. And I took something. from all of them. But what I think, you know, one of like the most interesting lesson I took was working in psychiatric hospitals and really having this fascination of being there for somebody who's in pain and also really helping them look at their pain as an experience where they could learn. And looking at pain as like an intellectual exercise to really. really not be afraid of, but to go right into and to understand. So that was really impactful for me. It's funny, Emily, because most people, I think a lot of people observing the investment world

don't really think of super successful investors as being in a lot of pain. And I think what's interesting for both you as a psychologist and for me as a journalist who's become friends with and just spend a lot of time inside the lives and minds of really successful investors, I think what's striking is to see the amount of pain and the amount of stress and the amount of fear and the amount of shame and pain when things aren't going right. And, you know, when I was writing the epilogue of my book in a way, that was Richard Wise or Happier, that was one of the things I wanted to show people was, you know, this sort of great Buddhist truth that everyone suffers. And, you know, that just because you were, you know, genius like Bill Miller or whatever and you'd been managing $77 billion. and then suddenly, you know, everyone yanked out their assets at the worst moment. It went to 700 or 800 million or whatever it was. You know, just because you were brilliant and had made a

fortune yourself didn't mean it wasn't torture. And I think in some ways that's part of what strikes me about your work is sort of the unexpected humanity of it. Yeah. Even just this morning is having a conversation with investors trying to understand doing a post-mortem on how they were adding risk during the drawdown triggered by the conflict in Iran and talking through that experience of when they were adding risk of how the team, you know, how it was on the team for that experience. And for teams that are cutting risk, you might often ask, is it pain management or is it risk management? And to be really clear about your emotions around, let's say, when you're cutting risk. Are you cutting the risk because you're adding, you know, during a drawdown and it's

just too painful to hold it? And it's not because it's not working. And so are you going to then cut risk because you just can't take the pain anymore? And the emotions are too strong around the position itself and the performance itself. Or are you cutting risk because you're worried about things happening in the future? Right. So is the emotion coming from something really to a forecast, or is the emotion coming from something that you're experiencing right now that's difficult or something that you're scared up, maybe that's happening in the past or something you're scared might happen in the future and not related to a worry around, you know, what might happen around, you know, constraints on like supply and oil, for example. So we really understand

what's driving the emotion. Is it coming from something that's related to the investment decision that you're trying to make in a helpful way where it's potentially providing information, or is it related to the decision that you're trying to make in a way that is not integral to the decision itself because it's based on the past or because it's based on, you know, your worry about yourself rather than the position. So, yeah, something I talk a lot about with investors. Then what I came to, though, especially I think doing research on what I would have kind of came to is that while I really, really loved kind of clinical psychology and that whole area,

I sort of didn't see a place for myself in that system. And I really just kind of, the more I learned about psychology, the more I felt really strongly that there were so many opportunities to apply psychology in policy, in organizations. And I didn't see that really being done. I think it maybe still isn't done that much. But in my mind, I could see such strong links. I just knew that that was what I wanted to do. And so I got a PhD in organizational behavior management in Cardigy Mellon, which was the kind of the closest area I could find to that. Even though a lot of the graduates went on to be professors as opposed to going into organizations, that was the path I decided to follow. And then once I got to Carnegie Mellon, which was an extremely interdisciplinary school,

I could see how much, you know, they encouraged you to work with, you know, the economics department, with economists there who were behavioral economists who were studying the impact of psychology and financial decisions and economic decision making. And I just completely fell in love with that area. One thing that strikes me that's interesting about being at places like Carnegie Mellon at the Tapper Business School where you got your PhD is that there was a kind of internal tension there where a lot of the professors, presumably teaching economics, believed that people are rational agents and that markets are efficient.

And here you were coming in and studying with these great professors, like I think Robin Doors and George Lowenstein, these great behavioral economists, who, were saying, wait, not so fast, can you talk about the realization that you were coming to as you studied with people like that and you saw how irrational really we are? Yeah. So I think my, my actual prior and most people's prior is that humans are not that rational, actually. And we might be surprised by the kind of neoclassical economists who believe, in at least modeling decision making with the assumption of rational agents. And there really was that tension at Carnegie Mellon. So Herb Simon was like a leading figure there who, you know, really, I think,

you know, introduced the idea of satisfacing and bounded rationality, you know, with core of that. And then there were a lot of, you know, neoclassical economists in the business school who would argue that even if individuals aren't themselves rational, markets will become rational or inefficient because in aggregate, the errors will cancel each other out. And there is potentially some, I do believe that to a certain extent, but not completely. Not for any one individual making decisions. We shouldn't be assuming that they are rational or they should not be questioning their own rationality. And then in the liberal arts department, there was a department called social and decision sciences, which had, you know, behavioral economists who were there and was, you know, and they really almost were two separate

groups who sometimes were in conflict and didn't work together that often. And I actually didn't see any conflict between the two. I always thought of it as like the rational agents approach, the efficient market approach might tell us like where we want to go to in an ideal world. it might give us like some clues towards like what the right solution is or what we might want to kind of like aim for in our decision making. Although they did also have a lot of assumptions about people being, you know, self-interested that we maybe don't want to, don't want to model. But at least it gives us, you know, some direction and some benchmark through which we could actually compare how people actually make decisions, how they actually make decisions, how they actually. behave, how often markets are really maybe out of equilibrium and how often prices may look irrational. It gives us a comparison point that we can learn so much. So I never really thought that

there should be any tension from the two and in fact that they could really learn from each other. And actually, on a personal note, for many, many, many years, my boyfriend was a PhD student in the neoclassical economics persuasion. And we would learn from each other. Some of behavioral economists might say, you know, sleeping with the enemy. But from my perspective, I was, you know, this was like an opportunity to kind of like think about how other people see the world and use both perspectives to move forward. And if you think about what you learned from someone like George Lowenstein, this kind of

legendary behavioral economist who is, I think your dissertation advisor and, you know, and still a friend. He's an expert on things like, you know, feeling risk in the body, for example, or the human capacity basically to sabotage ourselves instead of acting rationally. Can you think about sort of any enduring lessons that you've learned from him that you still are drawing on to this day? Yeah. So he wrote a paper with others called Risk It's Feelings, which I use probably every day in my work.

she also talked a lot about differences between hot and cold state decision making. So looking at, you know, and looking at the impact of like visceral forces on your decision making. And obviously that feeds a lot into the work that I do in conversations with investors and in the work I do on stress impacting decision making. So, you know, and again, I can talk more about, you know, how we, how I apply those concepts. but I just also want to really say how much I learned from George in terms of, you know, applying like intellectual curiosity, you know, to your work, to researching things that, you know, were meaningful

for you that might help you understand something about your own life. and how much I learned from George about taking things out of the laboratory and starting to put them in a more applied setting. So, you know, a lot of the early work that was done in the judgment and decision making and behavioral economics and experimental economics, it was all done in laboratory settings. and either with surveys or with experiments normally on university students. And with George's inspiration, we looked outside of the lab to test ideas. So we started working, you know, we were interested in how low-income people make decisions. And so, you know, I was collecting data at the Greyhound bus station. We were interested, you know, and one of my colleagues was actually interested in how people make decisions

when they're under the influence of alcohol. And, you know, George had like a data van set up and she'd go and down at people were coming out of bars and ask them if they wanted to do experiments. You know, with George, we did research. We did field experiments in banks. We did field experiments in low-income populations to encourage them to save. We did experiments related to healthcare. So, you know, he really inspired me to start to move the theory into.

an applied setting. He really taught me that. So let's talk in some depth about the ultimate field experiment that you've been conducting of Black Rock over the last 10 years, because it's kind of a perfect microcosm of this, right? How you take this sort of academic research on biases and the impact of emotions and like, and then you take it into an applied setting. So I want to really unpack it in some detail and go through the various things that you do that. So maybe you could just start by giving a sense of when you sit down with a portfolio manager and you're sort of beginning to build a relationship, how you go about identifying their behavioral biases and the impact that it's having

on their performance and their risk taking. And what you actually do, which I think is very idiosyncratic in terms of quantifying and measuring their biases by looking at everything from their portfolio and their trading data and their trade diaries, their journals. Can you take a through that process? Yeah. So the process is not, so there's many different processes depending on where the portfolio manager is coming from.

So if it's kind of a routine sort of meeting where we have analytics, like maybe they're a new portfolio manager, but now we have enough track record where we have analytics to be able to show them what's working and what's not working in their process. They generally have had some introduction to the team, know that they can come to us if they want help. And when we start to review their analytics, I try to make them understand, and many of them

already do understand, that this is a process where if our analytics don't show anything, that doesn't, that's not necessarily a good thing, right? Because if our analytics don't find any biases, then kind of, we can't help you. You're kind of maybe like as good as you're going to be in your process. And we're not seeing any clear opportunities for you to learn. So I really try to have them understand that they don't need to be afraid of us identifying bias. Because if we can identify a systematic mistake, we can often fairly easily undo that. Whereas if the mistakes that they're making in the portfolio are just random, then there's less we can do to help them. So that's number one is to really have the mindset that these biases are like our opportunities. And very often,

you know, they'll, you know, enjoy the meaning on some level and also find it painful on another level, right? Because isn't it always just, you know, painful to look at our mistakes, but good for us. And the other thing I try to instill is that, you know, this is like a protected learning environment. You know, again, this isn't something where myself or my team are feeding into, you know, whether they are promoted or not or their compensation or not, or the opportunities that they get or denied in their career down the road. This is kind of their time for self-reflection to get to know themselves, to think about how they can improve their process, how they can improve their team dynamics, how they can improve their team dynamics, how they can. do better for clients, not a situation where they have to perform or they have to be on or they have to, you know, defend themselves or rationalize. So you kind of have to be secret.

You have to be sort of confidential and not revealing stuff to their managers and the like about, you know, if you find out that, you know, they get super stressed and they start drinking when the market's going down or whatever it is, you know, you're having to respect confidentiality. Yeah. I mean, I think, you know, where there is, to be clear, where there is formal confidentiality is only around the ORA program. They have agreed to participate in this program under strict confidentiality. When we're looking at their portfolio analytics, you know, to be fair,

like anybody can kind of look at these, look at these analytics and see what's going on in somebody's portfolio. It's based on, you know, their history of holdings and return and risk through time, right? And that data is really, you know, the public, you know, within the Aladdin technology at BlackRock. But what's what the most often is really just my team that is looking at these analytics and sharing, you know, sharing the insights with them. And there is a lot of discretion that we apply around what happens in the meetings. And And there may be discussions with CIOs about, you know, how to take the investment process forward, about maybe resources the team may need, but certainly not about, you know, the mistakes of the

investor or of maladaptive reactions to stress and the like. Let's take a quick break and hear from today's sponsors. Curious about online trading, but haven't taken the first step yet. You're not alone. And plus 500 futures is a great place to start. The futures markets are moving fast, and with plus 500, you can explore popular assets like oil, gold, S&P 500, Bitcoin, and more. From crypto to commodities, there's always something happening.

The platform is super easy to use, so you can trade on the go right from your phone. You can get started with just $100 and jump into the action. See something interesting? Once your account is open, you can trade it in just a couple of clicks. And if you're not quite ready yet, you can practice with a free demo account. No risk, no pressure. With 20 years of experience, Plus 500 makes trading more accessible than ever.

Check it out at Plus500.com. Trading and futures involves risks of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500. It's trading with a plus. Spending my days digging through the financials of the world's best businesses, and one thing becomes obvious fast. The companies that win are the ones that can actually see what's happening inside their own

operation. And these days, they say that every day your business is late to AI, you fall two days behind. The competition is only moving faster, but fortunately, there's NetSuite Next. You've probably already known NetSuite, the AI-powered business management suite that securely connects all your data. It's a unified suite that brings your financials, inventory, commerce, HR, and CRM into a single source of truth, trusted by over 43,000 customers. NetSuite Next is the next huge leap, and how business gets done. Because now, AI is built into everything you do. It's customized for a wide range of industries, so it supports the way your business actually works. Whether your company earns millions or even hundreds of millions, it's time for NetSuite next, where

your business meets AI. And look, if I were running a growing company and needed to get my financials and operations onto one platform, NetSuite is exactly what I'd use. For the first time ever, you can try NetSuite Next for free. If your revenues are at least in the seven-figure go to netseweet.AI slash TIP, built for every industry, ready for every boardroom. That's netsuite. a.ai slash TIP. What's the one thing in business that's spreading as fast as AI? AI risk. Every new tool your team signs up for every vendor that turns on AI features, every new integration. Each one is a chance for something to go wrong. And most security programs just weren't built for AI's pace of growth. InterVanta.

Vanta is the number one agentic trust platform used by over 16,000 fast-moving companies like Ramp Cursor and Harvey to stay audit ready. And now Vantta is helping companies like yours. Watch for the risks that show up between audits across your vendors, your AI tools, and your whole environment. How? The Vanta agent works like a 24-7 GRC engineer in the background, finding issues, drafting fixes for you in cutting vendor assessment time by up to 50%. Whether you're a fast-growing startup or a global enterprise, Vanta is here to help you automate your security and compliance and earn and prove trust. Get started today at vanta.com slash t-I-P. That's V-A-N-T-A.com slash T-I-P. All right, back to the show. So what happens if you look at their portfolio

or their trade journal that explains their rationale for making investments. And you see these very common biases that I think you referred to before, like myopic loss aversion or disposition bias. Can you talk to us about how you'll observe that in a portfolio, like say, you know, the way that investors scales into positions or something because of their fear of loss? Can you talk about what these biases actually are that a lot of people will know because they've studied Kahneman and Tversky and all of these other great behavioral economists? But give us a sense of what the kind of biases are that you're seeing how it shows up in the evidence that you're looking at and then what kind of interventions you can actually come in and help to provide.

Yeah. So in one that you just mentioned in scaling into positions to slowly, which myopic is consistent with myopic loss aversion, we'll look to compare the performance in a particular position that actually occurred as the investor built up the position through time and compare that to the return they would have achieved if they had entered the position at the peak weight initially. You know, and it may be that, you know, going in slowly is the right thing to do because maybe you're building on local sell-offs, right? You know, I mean, you're building on that, you're building your position on weakness. That seems like,

you know, that could be a very, a very smart thing to do. Or it could be that what's most typical in your process is that as you have formed your investment thesis and this thesis is quite sound, is quite credible, maybe it's based on new developments or newly released pieces of information that you want to incorporate into your portfolio through this position, very often, portfolio managers will enter at a small size. And this may be because positions that are new often feel risky, because you're maybe not as familiar with this. This isn't a company that you've owned for years and years and years.

This is a company that maybe you've just decided to invest in or a position that you just finished researching that you want to put into, say, multi-outith portfolio. And so this newness feels. risky. I think also for a lot of investors changing the portfolio can feel risky. Like change feels risky. And in terms of myopic loss aversion, very often that that in particular may come, not just from kind of going into a new risk, but it may be because maybe in particular analyst on the team is recommending, is pitching this investment idea.

and maybe this analyst only has a small number of positions in the overall portfolio. And so for that analyst, right, they have less dress. They're more concentrated. So if any one of their positions doesn't do well, that will kind of like really, you know, that will stand out, right? Whereas for as like a portfolio manager of managing across a diversified portfolio, he or she wants to add risk to any, you know, new position that's consistent with their edge and through diversification and through taking risks consistent with your edge through time,

you'll make money over the long run. The CEO of a company wants everybody kind of, you know, below them, taking risks in line with their edge, taking risks with positive expected value through time. But for that, if you go down the pyramid, for that one individual, taking the risk, they're less diversified, each risk is more of reflection on them. and feels riskier. So that is why it's set kind of several reasons why people may enter into new positions in two small size or perhaps scale up a bit too slowly.

And so how do you make it harder for the portfolio manager to make the mistake? Like what a, what a, I mean, is it sort of setting advanced rules, for example, about a default position size? Like, what can you do to kind of nudge them towards better behavior? Yeah, that's exactly it. I think there's approaches that have to do with addressing the psychology of like the mindset and the emotions. And there's approaches that are just in line with what you've suggested that are taking from the behavioral literature, these nudge strategies that help change behavior. So you set a default position size. So you may say, you know, all new positions, we think about it. We've collectively created the team. that each new position should start at this level. And it's okay to exercise our conviction, right? And say no, this is a higher conviction position

or the catalyst hasn't quite, you know, started to materialize, you know, so it's going to be smaller. There's good reasons to deviate from that default, but you have to be really clear and perhaps document reasons why you would deviate from the default. So you're kind of, the default is nudging them towards the correct. or the more rational approach, and then you're using maybe a bit of process sludge

having to document like deviations from the default to make sure that you're thinking hard about why you're debating and not just reacting driven by emotion. I think also in that what's really important is, again, the emotion and the mindset and the culture around it. So, you know, I was talking about this ads, you know, for a group of investors at an offsite,

once about monopic loss aversion. And one of the investors took me aside after. And he recounted about, you know, the first time he had lost a lot of money. And that his idea that went into the portfolio, like, didn't do well. And how he had like, you know, gone to the bathroom, you know, to hide in shame. And that they came back and his manager explained to, you know, explained to him. that part of the job is taking risk, and those risks don't always work. So you're not here to make money every time.

You're here to take risks consistent with your edge, and you cannot expect them all to work all of the time, that this is like part of the job, and that he hadn't done anything wrong. And so I think that that is a huge part, you know, having the right culture of rational risk taking that can help alleviate some of these biases, as well as the more investment process, structural things like defaults. So I think probably just to clarify for most of our listeners who are pretty sophisticated investors, they know something about prospect theory and Kahneman and Tversky and this whole framework

and this idea that with loss aversion, that loss is something like twice as painful as an equivalent gain is pleasurable. There's something kind of related to that that comes out of the same sort of framework, which you talk about a lot, which is disposition bias. Can you explain what the problem is here and how it kind of leads often to suboptimal behavior where people say, you know, hold on to losers for too long? Yeah. So the way that we measure the disposition bias is we'll look through time of what's the probability. that they realize a gain versus the probability that they realize a losing position. And so we'll take as evidence that the disposition bias could be of interest for this portfolio

if we see that there's a greater probability of them reaping a gain than cutting a loss. And this is, you know, this is, we're generally looking at this relative to a benchmark. And the general idea here, right, is that you don't want to cut the flowers and water, to the weeds, right? As I think Peter Lynch would say, right? You're, so you're trying to overcome that tendency that we have? Yeah. And this is, this is a kind of natural tendency that most retail investors will have, that often investors will have early in their career and they kind of unlearn this bias. They kind of learn to run their winners longer and to admit when they're wrong sooner and cut losses or risk manage their losses so they don't get carried out. But, you know,

it's not always the case. And there could be some investors that are quite good contrarian investors that are just very, you know, they understand when the market has overreacted and, you know, overreacted to negative news or negative news is impacting a position where it's not actually relevant. And, you know, that's where they'll add risk and the position will actually mean revert. So when we look at it, we're looking at like this, the relative probability. of realizing a gain versus a loss, but then we also, that's like if a greater propensity

to reap your gains and cut your losses, that could be consistent with the disposition bias, but we'll only say it's a problem if it then turns out to be costly in the portfolio, if it then turns out that the losing positions don't mean revert and combat, right? And by reaping your gains,

you've taken profit too soon and you've missed out on future opportunities. So in that case, your sell hit rate isn't good as you're cutting positions. they continue to perform. So when we see, you know, if we see the disposition bias, there's a number of different things that we can do to try to like, you know, dig into why it's happening.

So we might go through and look at lots of examples that are consistent with the pattern and have the investor talk through them. We might look at, you know, is the disposition bias being driven by a particular type of trade in the portfolio and there the trade diary might be useful. Is it coming from, you know, trades that started out as tactical trades that are actually becoming, you know, longer term trades as the investor gets caught in this pattern of wanting to continuously hold or add risks to positions that aren't working, even though the original thesis is no longer valid. Maybe they're creating new theses for why they should hold it that don't make sense

necessarily. They're just justifications for their previous decisions. Maybe there's something going on in the team dynamic where the positions that are losing money have become a taboo topic. And they're not being re-underwritten. They're not being updated. It's not okay to challenge those positions. Maybe in the trade diary, we would have seen that they have put down particular risks to a position and those risks have materialized, but they're still folding it. I think the biggest clue also that someone's doing this is if you start talking to them about it and you're met with some emotion, you're met with some soundness or some stress or some anger, that's when, okay, we know that there's some alpha here.

We can unlock by addressing this. And that's what I get excited. I wrestle with this a lot myself as you're talking about this. my mind is sort of wondering because I keep thinking about the fact that I've now owned Alibaba since 2021 in an IRA account and it's down about a third. And I tend to have a rule for myself, the basic rule that I, you know, if I buy something, I'm not allowed to sell it for five years because I'm kind of trying generally basically to force myself just to hold stuff. And I only own two stocks. Like I mostly own funds. And so I'm sort of happy to own Birch Hathaway as a kind of permanent

position. But Alibaba, really, I just bought because I'd had this. amazing conversation with Charlie Munger and Lou Simpson. They were both like super bullish about it. And I was like, it was like almost like this tribal thing where I was like, okay, well, they love my book and I love them. And so I'm going to buy the stock they love. And here we are, like five years later. And I really, A, I have no real reason to own it because I don't really understand anything about China and the political risks and the like. And I sort of have a general sense that probably it'll mean revert in the end because it's probably cheap. And, you know, everyone hates investing in China and the like. But it also, it's such a cognitive burden for me

because it's such a minuscule position. It's totally irrelevant. I don't even think it's like 1% of my portfolio at this point. And yet I look at it and I look at Berkshire and it's like, it's irrelevant compared to the funds I own. And so even though I know that I'm sort of subject to these biases and I know that I'm being illogical and I know that I should probably just get rid of it because it's not aligned with my investment approach and I don't really want to be buying individual stocks myself. It's like, the knowledge of my own irrationality doesn't seem to stop me being irrational. And I talked to Annie Duke about this a few years ago on the podcast. And she was talking about having kill criteria, specifically with regard to Alibaba.

She's like, well, you need kill criteria where you decide like, this is what will make you sell it eventually. Does my own folly and stupidity, and irrationality, raise any thoughts for you, any observations? Sorry to turn this into a therapy session for me. Not at all. First of all, I love that you did buy Alibaba, right? Because it's giving you all these opportunities to reflect on your own

rationality and all these lessons that you can learn. And I think they, I'm like a real believer that in order to learn to undo these biases, you almost always have to limit yourself. And this is with some of my research is also showing, and lots of behavioral researchers, teaching people about the biases often isn't sufficient. You have to, like, build it into, like, the structure of the process. And, like, very often you have to, like, have physical, real experience with it

and, like, and seal the experience, like, in your body as well as go through it cognitively. Okay, a couple of things, like, go to my mind. you bought the security because people that you admire. You said they love your book and you love them, so you buy it, right? Yeah, so there's a sort of authority bias. There's something tribal there that I don't think I quite appreciated. So all of these things. So, okay, taking the advice of experts, that's pretty rational.

But doing things, anytime you're making a decision about markets where the reason why you're doing it has something to do with you, then that. that's when you know that there's a problem, right? So you, you know, you mentioned it because, you know, it was your feelings about them that made you buy the security, right? Not their expertise, but your kind of affiliative feelings towards them. A little bit of both because I also thought, well, here's Munger who makes very occasional investments. And he's literally saying to me, look, if I had more cash, I would be all in.

And so I have one of the greatest investors of all time and Lou Simpson saying, oh, it's unbelievably cheap, another of the greatest investors. And they're two of the great global value investors. So it's sort of my tribe. And so there's a sense of, so there's authority bias. There's the shortcut of saying, well, these guys are kind of brilliant. There's wanting to be part of that tribe. There's the ego and vanity of thinking, oh, wait, I have access to the smart money.

And so it's like doing none of the due diligence. And, you know, yeah, there's too much ego and identity. involved in the decision rather than sort of dispassionate economic or financial analysis. Yeah. And almost nothing you said right at that moment had anything to do with Alibaba. It all had to do with you or with other experts. But you know, but you know, I might stay with the I might stay with the position because of what it's teaching you.

Yeah. Right? Because it's like actually teaching you quite a bit. The other thing that you mentioned was the cognitive burden of this position losing money. And that comes into this pain management versus risk management. And if you're cutting something just because it's putting you in pain, I think you need to look at that and make a decision about whether it's worth the pain if it's that big of a distraction. But I think for you, you said it's 1% of your portfolio and it's causing. and it's causing this pain.

And I think, you know, we talked about for portfolio managers having a job where, you know, there is a constant scorecard where the drawdowns are examined, you know, by clients, by management, by risk managers. You know, there's a lot of a need to defend yourself as a person that I think really you have to do a lot of work to continually subtract, you know, How much of that cognitive burden is about because you're worried about that 1% of your portfolio or how much of that cognitive burden is about what does it say about you that this position is underperforming? And again, I think it's like so important to take the you out of any scenario

and look, you know, purely at the prospects for the company. Another thing that that example brings up for me is let's say today you broke even. I've ever rallied enough for you to break even and your original investment. What would you do then? Yeah, it's a really interesting question. I think historically I've never sold in down periods. Like I was fine in 2000, 2001. I was fine in 2008.

Like I either, most of the, in 2020, 2020, to most of the time when things got hit, I either bought more or I was kind of paralyzed and at least didn't sell anything. And but I realized that so, so I've done okay psychologically in that sense, like not brilliant but okay. But I've noticed that sometimes I would wait for something that was painful to get back to even and then I just wanted to get it out of my site.

So I definitely aware of that being a recurring issue. So part, I mean, part of my work around for this has literally, just been to say, I want to take myself out of the game and I'm just, I'm going to just give money to people I trust who I think have a better temperament for this and are more focused on it. And so, I mean, to me in a way, what's so interesting here, you know, sorry to be overly self-referential, but I think what's interesting is, is the importance of self-awareness. I think that's what a lot of these examples get at is you need to be aware of your own weaknesses

and irrationality. Yeah, yeah. What you can learn about yourself in the process, I think, is really important. And then, you know, I think on that, that temptation to break even, right? When you break even, you're out. I mean, I like this, you know, I, too, like you have, my inclination is to add into weakness and not to crystallize losses at the bottom rate, unless it was clear that my rationale really, really doesn't hold water.

I was really mistaken. There was something that I missed. But then, you know, this break-even of that, I think that's one that you have to be really aware of when you have a kind of temperament like our own. And that's where having the right sparring partner,

you know, on your team, I don't know if you make investment decisions with your wife, but my husband has exactly the opposite is me. You know, he wants to, he wants to aggressively cut losses and he wants to, on winners, right? And he's not scared to go about going into positions that have rallied,

whereas I don't like that. I'd rather reply it to weakness. So I think that, you know, there's no wrong or right way of doing it. It always depends on the situation. And it always, it's, you know, it depends on you making the decisions based on your future expectations, not based on yourself, right? So to counteract the impact of yourself, you would want to try to find somebody to debate to work with that is going to, that has the, like, naturally has the opposite inclinations that you have. I remember Annie Duke when I interviewed her, she was friends with both Danny Kahneman and Richard Thaler and she said, you know, who I guess both them won Nobel Prizes for economics, right? And she said, Conneman had, had appointed Thaler

as his quitting coach, basically to tell him when he was being blindsided by his own bias. is or I and so for me that was really interesting that if someone as brilliant as connemon needed to appoint someone who could tell him what he didn't want to hear that says something really important right about our capacity for self-delusion yeah absolutely I think it's I think it's absolutely essential to have a team or to have people that you work with that that can do that a lot of the decision-making processes that have been at Black Rock are in the structure of the team. And where, and the, the, the decision-making authority kind of structure that I prefer is to have,

you know, to not make decisions by consensus, to have the lead PM or like a couple of lead PMs being the people who are taking the decisions informed by the collective intelligence of the team. And but that means that even though the, the people making the decisions are often the kind of like the most senior people in, typically the most senior people in the group. I really try to impress on all of the other members of the team that it is their job to beat up the decision makers, right?

It is their job to challenge the decision makers. It is their job to really speak their truth to the lead portfolio managers making the decisions. Because that is how the wisdom of crowds, primarily works is through like a principle of error canceling. Diversity and independence have a function of canceling errors, canceling these biases. Yeah, this is such a powerful insight. You said something to me a week or two ago when we spoke. I wrote down the exact quote because it was so striking. You said the responsibility of everyone else in that team is to debias the decision maker, to attack, to challenge the decision maker. So there's a certain type of ethos

that you're trying to instill in a group, there requires a lot in terms of the leaders being self-aware, but also getting their ego under control. Can you talk about the functioning of ego, which I think is a, it's a huge part of what you think about, right? The way that ego kind of screws up a team, for example. Yeah, I think that you heard asking the question actually of, what makes a really good, of what makes a really good investor at one point.

And I think I'd answer that, you know, I see so many different types of investors. And I think there's so many different strengths and weaknesses. And, you know, you just want those strengths and weaknesses to be aligned with the particular game you're playing with like, you know, the asset class that you're in or the time horizon that you're investing under, etc. But I think something that just, you know, when you're reflected on it, something that just really pervades every good investor. think is not being caught up in their own ego. And is someone that is more interested in markets, right, is then being interested in themselves being right. They want to like understand what's going to happen next in markets more than they want what they said yesterday to be true. So it's a fascination with the problem, with solving the problem in a way,

as a, not as necessarily a reflection of your own ego and self-worth, but just because it's an infinitely interesting and complex problem. Yeah. And of course it's, yeah, exactly. And of course, it's impossible to take your ego out of the situation completely. And, you know, I struggle with it myself, even when I'm in conversations with investors or speaking with my own team, I've learned over time, and I've not mastered this, but I've learned over time that the more I am trying to be the one to be helpful or the one I am trying to get to the solution, the more I'm trying to be right, the worst the whole thing. The worst the whole thing is. So what are the habits, I think, of good leaders who can subjugate their own egos? I think they, or move past

them. I think that, one, they have a willingness to talk about their mistakes, to be vulnerable in that way in front of the team. So this is like classic psychological safety. By doing that, you promote psychological safety, this feeling that everybody on the team can speak their own truth, be their authentic selves, that they can take intellectual risks without fear of retribution. And I think also what's really important is that these leaders are all. often quite quiet. So they may be the ones speaking last in the meetings, right? You don't want a leader, the key portfolio manager, the key decision maker speaking first and kind of anchoring everybody on their own point of view. They're genuinely interested on the independent points of

view of other people. And so they'll listen first and try to stay in a state of, delayed judgment. They'll try to really delay their own judgment until they hear other people's perspectives. And then, of course, at some point, you form a judgment, but you're open to reversing that judgment if you're convinced by a better point of view

or if you're convinced, if you're convinced by new information that emerges, that tells you that you're wrong. And this is, you know, consistent with the trade of active, of open-mindedness that Tetlock found was really one of the defining traits of super forecasters. This idea that they have strong convictions, they have strong beliefs, but they are willing to update. Their egos are not so fragile that they don't update in the face of a better

argument during new information. Let's take a quick break and hear from today's sponsors. Spending my days taking through the financials of the world's best businesses and one thing becomes obvious fast. The companies that win are the ones that can actually see what's happening inside their own operation. And these days, they say that every day your business is late to AI, you fall two days behind. The competition is only moving faster, but fortunately, there's NetSuite next. You've probably already known NetSuite, the AI-powered business management suite that securely connects all your data. It's a unified suite that brings your financials, inventory, e-commerce, HR, and CRM into a single source of truth, trusted by over 43,000 customers.

NetSuite Next is the next huge leap in how business gets done. Because now AI is built into everything you do. It's customized for a wide range of industries, so it supports the way your business actually works. Whether your company earns millions or even hundreds of millions, it's time for NetSuite Next, where your business meets AI. And look, if I were running a growing company and needed to get my financial and operations onto one platform, NetSuite is exactly what I'd use.

For the first time ever, you can try NetSuite next for free. If your revenues are at least in the seven figures, go to netsuite. A.I. slash TIP. Built for every industry, ready for every boardroom, that's netsuite. com. Curious about online trading, but haven't taken the first step yet, you're not alone. And plus 500 futures is a great place to start. The futures markets are moving fast and with plus 500, you can explore popular assets like oil, gold, S&P 500, Bitcoin, and more.

From crypto to commodities, there's always something happening. The platform is super easy to use so you can trade on the go right from your phone. You can get started with just $100 and jump into the action. See something interesting? Once your account is open, you can trade it in just a couple of clicks. And if you're not quite ready yet, you can practice with a free demo account. No risk, no pressure. With 20 years of experience, plus 500 makes trading more accessible than ever.

Check it out at plus 500.com. Trading and futures involves risks of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500. It's trading with a plus. Before I joined the Investors podcast, every what if you can imagine was running through my head. What if I'm not the right fit for this audience? What if I freeze up on camera?

What if I can't keep up with the level of analysis people here expect? Well, betting on myself anyways turned out to be one of the best decisions I've ever made. And I'll tell you, those early days would have been a lot less stressful with a partner in my corner the way Shopify is for the businesses that work with them. Shopify is the e-commerce platform behind millions of businesses around the world and 10% of all e-commerce in the U.S. From household names like Allbirds and Jimshark to brands just getting off the ground. You get started with their design studio, hundreds of ready-to-use templates that help you build a beautiful online store that actually matches your brand with no design background required. It's also packed with AI tools that handle the work you didn't realize you'd have to do writing product descriptions, headlines, even enhancing your product photography. And what if you get stuck?

Well, Shopify is around 24-7 with award-winning customer support to walk you through it. It's time to turn those what-ifs into with Shopify today. Sign up for your $1 per month trial at Shopify.com slash TIP. Go to Shopify.com slash TIP. That's Shopify.com slash TIP. All right. Back to the show. We were originally introduced by a mutual friend of ours, Thomas Miller-Borja,

who's co-headed of global real estate at BlackRock and head of the Value-Ireel estate group. And Thomas recently gave a wonderful speech. my invitation in Omaha when we went for the Berkshire Hathaway weekend, where he talked about applying lessons from Charlie Munger on the psychology of misjudgment and talked in some detail about working with you to improve his team's investment process. And one of the things I thought was really interesting, he talked about, you know, the kind of problems that he was trying to address with you. So I think he said that in the seven years before you guys started working

together on this. There was something like a hundred percent approval rate for the deals they were discussing. And he said, you know, look, we were a group of five white men on the investment committee. And if someone was traveling or they were sick, you'd give your proxy vote to another investment committee member so they could vote in your stead. And he said, there were never discussions that felt uncomfortable. And we never approved the sale of an asset at a loss. And so I wonder if you could talk a little bit about how you and he worked on that process of kind of creating more uncomfortable discussion, which kind of goes against our nature, right? And Thomas is such a lovely human being, right, to actually invite uncomfortable conversation and to bring more cognitive diversity to the group, more diversity of all sorts to the group. Can you talk about some of the, that is a kind of microcosm of what really works well in a successful

group? Because it seems like it's had a kind of profound impact as you guys have transformed that investment process. Yeah. So I can talk about how that process has shifted a bit. But again, it goes back to loss aversion. And when you're working in the private asset space, like real estate or private credit or private equity or infrastructure, I think the number one bias that you need to be aware of is the sub-cost bias, which is that as you've had, you know, you've been doing due diligence on a particular deal, on an opportunity, you kind of, you've come kind of pregnant with that deal, you've done lots of work on it, you've spent, you know, due diligence money on it. and then to walk away feels like a loss, right?

So this is, I think, the number one bias that you need to try to overcome in private assets. And so the last kind of stop for doing that, hopefully that's done earlier in the process, but then the last kind of stop for doing that in this world are the investment committees. So in Thomason's process, what we did is before they went into a preliminary IC meeting. So this is not the final IC. This is one where they're deciding whether or not to spend the due diligence money. You want to collect independent points of view. So instead of having everybody receive the memo, receive the IC paper, go into the room and discuss it,

where then again, you can anchor on the position of the first person that speaks. You want to encourage everybody to come to their own perspective on the deal before that meeting. So we introduced voting ahead of the preliminary I see. And instead of it just being actually, it wasn't just kind of a yes, no vote. It was there rating the deal on the distribution, comparing it to a scale with very concrete anchors, looking at the distribution of deals that have previously been approved by this IC, how good or bad, you know, is this particular deal? Then those votes, those ratings, go to Thomas, who's chairing the IC, and then Thomas has, as he's going into that meeting,

understands what everybody else believes about the deal before the discussion even starts. And so if it starts with people talking about the strengths and it seems like it's just moving in that direction. But Thomas knows that there's one IC member that has a less positive view on the deal. He can make sure that perspective is aired in the meeting. So it's avoiding, it's avoiding rush to judgment. It's avoiding the momentum where you start talking about a deal that you've already invested a lot of time in and you move inevitably towards fruition. And it's avoiding kind of deferring to the most senior people in the team. So a sort of authority bias, right? It feels like there's, as Charlie would say, there's a sort of lullapaloozer of biases that

you're having to address. Yeah. And this practice of just collecting independent points of you knocks out a whole lot of them. I mean, another bias that groups have is that they like to talk about shared information and they like to talk about things that they agree on. You and I agree on something, that feels good. That just humans like that. We'll feel closer to each other. We'll trust each other. We just positive emotion.

Us disagreeing is horrible. Who's their hate? People don't like it. It makes them uncomfortable. If a psychologist wants to do an anger manipulation, something they can do is find out what somebody believes and have them watch a video of somebody arguing the other side. Disagreement is just unpleasant.

But the literature suggests that, disagreement leads to much better decisions, objectively better decisions. Even though the brute may feel less confident about it, they're objectively often more correct, the more disagreement there is in the discussion. So that type of structure allows the chair to pull out different points of view and make the full committee aware of them. So part of that, Emily, is like you're creating this culture where independence is valued over agreement, where challenges invite not taken personally. But part of it is actually,

actually structural, right? So you have this kind of blind voting system. But you also, I think, in that group, I think you guys introduced

the role of a challenger, right? Someone, someone, can you explain their role? Because I think this is a really important aspect

of actually structuring disagreement or debate into the process. Yeah. So this actually, it serves a couple of purposes. I think most people would have heard of devil's advocate. So you want to bring

a devil's advocate into the discussion. And in this particular example, what we decided to do was to have an outsider be the devil's advocate. So instead of having one of the IC members do it, to bring in somebody from outside of the IC group, because bringing in the presence of outsiders also helps you think harder about your assumptions. And it was generally somebody who has really the time and the space, the capacity to really dig into the details. And then they're not only digging into the details of the particular deal, but they are licensed.

They are charged with thinking about if this deal were to go wrong, what would go wrong. And that's what we call a premortem. You imagine that it's three years down the road. and we've all agreed that this investment was a colossal mistake. What happened? And so that person then goes through that process. And what you want to happen here is to make it, you know, okay for somebody to challenge the work that the deal team has been, you know, spending long hours exploring and building.

And so you do that by making it structurally part of the process. And then just because, you know, the premortem, if you do a premortem and you're identifying loss of risks and lots of polls on the deal, that could lead you to potentially walk away. But also what that could do is just to say, okay, well, you know, maybe we need to negotiate the terms harder and maybe we need to, you know, to structure differently to be able to guard against some of these risks. Or maybe this just gives us a blueprint for if the deal is going wrong down the road, that will know that we're wrong and we try to dispose of the asset rather than continuing to spend

to throw good money after bad. So that kind of all happens in the preliminary IAC and then in the final IAC, you know, as we mentioned, we introduced blind voting. And so this was, you know, so at this point now, it's, you know, it's hardest to potentially walk away from a deal or to vote against it. So what we do is have the IAC members vote anonymously. So it gets a way. from the kind of pressure of you being the one, you know, who doesn't want to voice your true feelings about the deal because you don't want to be the one who has killed the deal who's kind of ruined it for everybody else. So that an amenity like takes away that kind of pressure. It seems like another really critical shift that you guys made was in terms of the group

composition in the investment committee and these ICs that I think, if I remember rightly Thomas said originally, you know, there were no women at all. That went from zero to three. And, you know, then you guys explored having the group rise to 10 people and that was too many. So now it's come back down to seven or eight or something. Can you talk about the importance of cognitive diversity in a group? Because, I mean, that seems to me a really critical thing, right? is not just, you know, not just understanding these biases, but actually having these kind of systematic ways of structuring things so that you'll get more diverse independent views.

Yeah. You know, and to be fair, I think this is something that Thomas really drove, like changing the composition of the IC and I think just, you know, needed to kind of sense check that idea with me. And it's something where, you know, you want. want to balance diversity to the point where, you know, you, like, if you're choosing, like, this is actually like Conneman's idea that if you, you know, are looking for the first person to be on the IC, you just want to take the person who has, you know, the most expertise in the area, like,

you know, the best track record in that area, like, you trust them the most, like, you know, they have the clear, you know, training in that area. But then the second person that you would want to have in that group is somebody that's not the next best expert in that area. The next person that you'd want to have is someone that brings a different perspective, someone that doesn't share the same assumptions, someone that may make a mistake, but it's not going to be the same mistake as the first expert that you brought on. And this again is because, you know, if you have two people with exactly the same,

background and training and experiences and ways of thinking, then it's very likely that they're going to make the same mistakes. And so they're going to have correlated errors. And so there's kind of almost no, there's just not a lot of benefit of having, you know, a clone, like on the team. And you get much more benefit by introducing somebody that's going to have a different error and going to be able to spot yours. Yeah, I thought it was striking that Thomas and various other people on the investment committee talked about the importance of, you know, not only having more women, but having people who were from Asia or the Asia Pacific region or I think they brought in, you know,

a sustainability expert and the global head of securities. And, you know, so it seems like just this goal of bringing in people with different forms of experience, exposure, different ways of looking at the world. It's not just about gender, right? It's about geography and many other things. Yeah, I think the geography, when I hear some investors from other parts of the world, which is one of like the great advantages of being at Black Rock, I mean, that is just, it's not only fascinating to see, you know, how where somebody is based, changes what they believe and what they forecast. It's just so interesting.

It's always, you know, it's just fascinating to hear another point of view that comes from someone living in a different place. The other thing that I would add to your list is political diversity. People are so polarized by politics these days. It's really, I think, essential to have people in the decision-making environment from a different political persuasion than yourself. I think especially because there's so much kind of, you know, politics lead to so much of like a world view of what you think is right or wrong, which then affects your forecasting so critically because you want, you know, your side to be the right side. Well, it's such an interesting point, Emily, because I remember being at a BlackRock event a couple of years ago because I had come to give a speech. and the real estate team would talk about the importance of sustainability as a kind of an element of judging the risk of an investment they were making. And like, you know, people who are sort of politically myopic would sort of say, ah, you know, ESG nonsense and BlackRock's gone crazy about this stuff.

But actually, if you just set aside your politics, you're like, why wouldn't you want to know whether the property you're investing in for the long term is vulnerable in terms of sustainability, you know? And so, you know, it was kind of such an interesting thing for me to see the debate there because, I mean, I'm pretty independent politically. But like, even when I've done podcasts where you mention ESG, the reactions you get on YouTube are sometimes like, like literally someone will just write fail, you know, ESG nonsense. And you're just like, why would you close your mind to that? And so, I mean, just, you know, I think of Buffett and Munger who are sort of, you know, Democrat and Republican and really. close friends, very consciously, sort of using, you know, very open-mindedly using the other one to kind of stress test their judgments. Absolutely. I mean, what I think about sustainability is, you know, I completely agree that we should be looking at it through the lens of risk and also looking at it through the lens of opportunity. So there is this, a bias called tainted altruism, which is that we often, and to me this is the status bias, and it's this idea that anything that might have positive externalities

that might be doing some good in the world, like shouldn't be making money or won't make money. And if you think about what sustainability is, right, like, you think it's like, it's like new innovations that, you know, don't have a lot of negative externalities and, you know, are likely to sustain us through into the future, that why not think of them as opportunities, even if maybe they have some benefit for the world, despite that. Yeah, I also just love that. Both of those phrases you use, tainted altruism and the saddest bias. The saddest bias sounds like

it should be the title of an article. I wanted to go back a bit and discuss more about investor physiology, which I think is something that is a huge area of expertise for you. And I think, you know, for a lot of our listeners, I mean, there are professional investors here who operate in teams. There are people who can apply what we've discussed about teams just in terms of getting kind of cognitive diversity in their lives in different ways and having quitting coaches and the like to stress test their ideas. But for some people, it doesn't seem that relevant. Whereas the investor physiology stuff that you've studied is unbelievably applicable. to all of us as we deal with the emotions involved in investing.

And so one thing I think so fascinating is that you study physiological data, as you mentioned, you're looking not just for biases related to the brain, but biases related to the functioning of the body. Can you talk a little about what you've found by using, you know, in the past, whoop straps and using uro rings and various types of measurements? just in terms of what you've learned about sleep, about stress levels, about activity levels, and about, you know, how to deal with this kind of physiological challenge of being a kind of balanced, sensible, smart, rational investor amid this sort of storm that goes on, not just

externally in markets, but this storm that goes on internally in our brains and our bodies. Yeah. So I think that the main kind of bias that inspired. this project was that research had shown that when you administer cortisol to people in a laboratory setting and then test their risk preferences, if they have sustained levels of cortisol over the course of about a week or slightly more, this can then change their risk preferences. And they saw this from looking at an experimental group receiving cortisol and a control group receiving placebo, and they found that those receiving the cortisol were biased towards risk aversion.

Now, we need our investors at BlackRock being able to take risks and to have this the basis for those risks they take, you know, what's going on in the markets. We don't want them taking risk depending on their internal cortisol levels, right? Not great. You know, you think they're maybe not so bad, but there could be some. problems if those cortisol levels are being driven by the markets, but like really bad, if those cortisol levels are being driven by something in their personal lives or something that's going on in the work environment that's not related to the risks and opportunities

in markets. So this is something that, this is the kind of the driving kind of factor, the driving like rationale for the project. And we do see, you know, with individual investors, relationships between their stress levels that we can measure from the aura ring and the. risks that they take in their portfolio. And the main thing that we want to do is bring that to their conscious level of awareness and try to break that relationship between stress and the body and risk decisions in the portfolio. So that's kind of the impetus for the project. But then in

addition to that, the data that we get and linking the data to portfolios is so rich for so many reasons. So there's even just this really basic and intuitive finding that, you know, their performance impacts their physiology, that their performance impacts their stress level. And that may be a kind of like no-brainer, but it's useful for people to see. And it's particularly useful for people, for investors to see, like, if they're in a period of sustained drawdowns and their stress has stayed elevated, we really want to bring that to their attention. And often you'll hear something like, oh, I didn't, you know, I've been investing for so many years. I didn't really realize that the portfolio was still impacting me this way. I thought I didn't move behind that. And then

it's just by looking at and acknowledging their stress that then often would like take them out of that, like that chronic stress state and bring them back down to their baseline and help them recover. There's also the information in that of like when you're in volatile markets or you're in a period of drawdown, often investors might think, well, I just need to, you know, to work harder and spend longer hours in the market or, you know, be more and more vigilant about, you know, about what's going on in my portfolio. And what I try to impress on them is that, it's not just their job to work hard. It's also their job to rest hard.

Because if they aren't able to meet that stress with rest and recovery, then it's very likely that that stress is going to be more biasing for their decision making, that may be a cycle that takes them towards burnout. It's not going to be actually an efficient or productive or rational way for them to be making decisions. What do you find in terms of? of habits like changing people's sleep habits, maybe getting them to meditate. I know you're very into yoga and somewhat into meditation and the like.

Or I have friends who are great investors who will just go walk in the woods and do something contemplative. What do you find is actually really helpful as a sort of pressure valve release for investors who are suffering from a lot of stress? Yeah. I mean, for me, I always like to go for a mindset approach, for a mindset shift. And I feel that that does help a lot of investors. But for every investor, there's a different approach.

I could talk through some of those mindset shifts. Yeah, no, that would be great. The mindset shifts, and I know you do a lot in terms of mindfulness techniques, like anything that you've found helpful to us. You know, please, yeah. So in terms of the main mind, mind. mindset shift is around seeing the stress as something that is fueling. Like I've just heard about this study where they told girls doing math exams that the

butterflies in their study in their stomach were fuel, not nerves, right? Or you can think about if you have to do some public speaking and you have all this nervous energy, well, put that energy into your smile, right? Like, or, you know, use that energy to show how much you care about the topic. And a positive stress mindset is one which is, you know, leveraging, you know, the main function of stress, which is to give us energy and focus rather than where stress can go wrong and, you know, when it becomes chronic and we go into burnout or if we're in panic and we can't focus.

So to think about the benefits that come from stress, I also really like this insight that the stress hormones are not only cortisol and adrenaline, but that oxytocin is also a stress hormone that leads us to gravitate towards others when we're feeling uncertain, right? You really want to resist if you're feeling stress with drawing into yourself.

You want to follow that impulse to be drawn towards others. and oxytocin not only draws you towards others under stress, but also has this heart protective effect, has a health benefit under stress. And as we draw towards others, towards others investors in the platform, or to other members of our team when we're under stress, that and we bond with them or we connect with them,

then that actually stimulates oxytocin in them and they stimulate oxytocin and ourselves. and this has this, you know, really positive outcome from a stressful experience of drawing closer to your teen. Another kind of classic positive stress mindset is looking at it as a learning experience. You know, you look at like what's going on in markets today. We're in the midst of this major technological innovation of AI.

And of course that is making investors nervous, right? Like that is reducing brousland market that's making valuations start to feel frothy. That's, you know, getting investors worried as we're moving out of CAPEX funded out of cash flows and more towards being funded through leverage. This is, you know, it's a risky, stress, potentially stressful period of market history, but like, man, is it interesting? And the lessons that investors will gain from, you know, having a front row seat to market,

during this period of history will serve them throughout their entire career. So taking that broader mindset and taking a mindset of learning rather than this mindset of just worry and being in it, I think is quite positive. I was also really struck by some of you said to me when we chatted a couple of weeks ago where you said, and this is an exact quote, you said to me, I think that the best investors of the future are going to be the ones that are best leveraging AI to support a disciplined process. And so in some ways, like, we're going through this period where AI is a, you know, tremendous opportunity, tremendous threat, tremendous source of disruption. But I was really struck by the fact that of BlackRock, you are actually using AI in this kind of simulation program, a sort of war games program, to sort of see how investors will react under certain circumstances. Can you talk about that?

Because it's absolutely fascinating. I haven't heard anyone else doing this. Yeah. So this is something that, you know, again, is inspired by George Lundsen on hot state and cold state decision making and thinking that, you know, and also having experienced, you know, seeing investors go through the experience of volatile markets and how, you know, how stressful those types can be. there's the thinking, can we let investors kind of practice how they would matter to their portfolio? It's a rude, different, stressful, volatile market experiences. And so a woman on my team, Nikki, Lai actually took this idea and used AI to create a game, which we're constantly developing on the full team and making it better.

The way that the game works is that it loads up your existing portfolio. positions and shows the team news headlines and that are economically normally pretty economically relevant or they may just be noise, but that's what it is for the team to decide, right, whether they want to react to this information and if they want to react, how do they want to react to manage their portfolio? And then as they decide whether to trade or not, then the simulation produces another headline in the next period and you kind of keep going, you keep iterating in that process. And from doing this exercise several times, one of the things that I think the teams really

learn is to really be really clear about what their strategy is for trading through volatility. Are they a team that has to really hold risk? through volatility? Are they somebody that wants to provide liquidity during volatility? Are they somebody that maybe wants to manage risk in a more dynamic way? So it really helps them kind of like understrand, given the types of investors we are, our temperaments, our edge, the constraints on the portfolios and the time horizons of the portfolios that we're managing, what actually makes sense and lets them kind of rehearse what makes sense for them? The other thing that teams get from this is that they get to see how their decision-making process changes under

volatility where they may have to make decisions more rapidly if they have gone with a strategy of being more dynamic in volatility. So that same group dynamic that I explained earlier, where the head of the team may sit back and really listen to everybody's point of view in an independent manner, you know, maybe doesn't work when you're making decisions under the pressure of the cloth. And maybe that type of leader needs to be a bit more active in those situations of, you know, going to the expert for their point of view, you know, getting a counter point of view, why are they wrong? You know, it needs to be more directive and how they manage the group dynamics under those situations. But there are also states in which you actually just shouldn't be making investment decisions. Like are there certain hot states where you need a cooling off period?

A hundred percent. And I think that that's particularly true where the investment team's strategy is to look through volatility, is to hold risk through volatility. And maybe that helps them think through some of the edge cases. like where they wouldn't do that. So, you know, here we're putting them in a pressure cooker environment, right, to make all of the mistakes here and think through, you know, and rehearse how they would make decisions in a real setting.

One of the things that I also really like about the game is that when teams are making decisions in volatility in, you know, in the real world, it's often not pleasant. it's often like very painful, you know, and we're drawing down their portfolio in the game in the same way as the portfolio would draw down in real life. But the reactions that they're having when they're playing the game is fun. Like they're stressed, but they're smiling and they're having fun and they're laughing and it's exciting. And so that's also like really interesting to me, right? Like it's the same situation. I'm like when it's a game that gives you an

opportunity, right, to have a totally different emotional experience around the problem solving compared to when you are actually in the situation and actually losing real money. And there, maybe there's a bit of gallows humor, but generally, it's just a very unpleasant, difficult situation. So I really like that contrast because it helps you look at the problem from a totally different emotional standpoint. I remember Bill Miller. once saying to me that, you know, theoretically, everyone on his team was a value investor when he was at Lake Mason, they all understood the theory. And then when he said it came down to it and they were getting absolutely crushed in 2008, 2009, he was like, I discovered

almost nobody was really a value investor. And, you know, I think that's one reason why Samantha McElmore became his successor was because she was one of the few people who really did have kind of an extraordinary temperament when things truly went wrong. And I think that's one of the one of the big challenges, if you haven't gone through a period of real pain, you don't, like, physiologically know what it's actually doing to you. You know, it's like when I gave a, when I gave a speech once and I, um, I totally screwed up. And I just, you know, it's like my body's shaking and my voice was quivery. And it's like, you know, you can practice as much as you want. And then you stand up and it's like, I didn't really have control. How do you deal with that issue that

there's like this gap between the theory and then, you know, the actual reality of when you're losing money, when it's all going to hell. Yeah. I mean, first of all, I've had the exact same experience of you. One of the first times I felt I had like an important piece of public speaking to do. And I look back in that experience now and I am so grateful because any time I have to do public speaking subsequently, I'm like, it's never going to be as bad as that. and I survived that and I learned so much from that.

So I'm really kind of grateful for that experience. And I think the same is true for investors that might make a mistake in volatility, right? Like if they've gone through it and they've panicked into error, right, or they haven't kept their convictions, right? Like, are they gone with the herd instead of like what they believe or what their edges, right? Like if you've gone through that once, right? Like, okay, yeah, that's a horrible experience, but you're not going to make that mistake again. And, you know, that's like a lot of like the point of this exercise is this is the place to kind of like, you know, to make those mistakes. And yes, in real life you might have more like cooling off period or you might have, you know, like research processes. You might have trade diorizing processes, you know, that serve as these cooling off periods. But here's the place like, you know, to make those mistakes and to learn because not everybody's had the benefit of living through a difficult market. environment yet, right? It feels like that's a big part of your life philosophy in general. I remember

we've talked in the past just briefly about Joseph Campbell and the hero's journey and like the power of making mistakes and suffering and going through that sort of initiation phase of the journey. Can you talk a little bit about that? Because it seems like there's a connection between what you're doing in your work, where you're identifying fund managers, mistakes, their vulnerabilities, the ways they screwed up and this part of your kind of life philosophy where, you know, there's this kind of hero's journey where, you know, you were talking when we first had, when we first started the conversation about your sense of your false starts leading in this kind of blessed way to where you are today. Yeah. So I, one of the reasons I really love the hero's journey is I

just think it has so many different messages in it. And one of the, you know, so many that they way, like to show the value of trials and tribulations and not being afraid to come out of your comfort zone and learn new skills and just the understanding that, you know, life is change. Like, it's just everywhere. It's in markets and the economy. It's in the seasons. It's in our aging. There's no coming away from it. And I think that if you stop, you know, resisting change, stop, you know, trying to have, you know, stop expecting like certainty and predictability, right, in your life and in markets. And you begin to instead embrace the adventure that you do much better, right, than if you're, you're clinging to the past or you're clinging to old ways

of doing things. And so, you know, that's part of where, you know, I try to instill that in, you know, investors as they develop their process and learn from their mistakes. And I also try to cultivate it in myself, always trying to do things that put me outside of my comfort zone. And people kind of talk about the imposter syndrome as a problem, right, of people feeling like an imposter. And I kind of think actually, when you don't feel like an imposter, that's the problem, right? Because that means you've just been doing exactly what you've always been doing, right? And you're not pushing yourself forward.

So, you know, so I think there's a lot of lessons there. I think also, like, you know, one of the main lessons of the hero's journey resonates with what we were talking about earlier around ego, where in the hero's journey, there's a kind of, you know, there's almost always this death of the ego or like a sacrifice of the self for some greater good. And the punchline, like the secret is that actually you unlock everything. It's by sacrificing your ego. It's a false sacrifice. And actually, you know, once you align yourself with some greater sense of meaning or mission, you know, whether that's, you know, being a good steward for the millions of people to trust BlackRock

with their money or whether that's, you know, a mission about ESG investing or whatever it is that you're aligning yourself to, it's often these things that feel like sacrifices that actually unlock you from the chains of your own ego and unlock your potential. Yeah, it feels like in a way you found this odd little ecosystem, you know, very idiosyncratic ecosystem where you can kind of listen humanely to people talking candidly about their mistakes and their vulnerabilities and you can kind of guide them to see things in a gentler way. But you can also help them to be honest with themselves and dedicate themselves to continuous improvement and accountability. It's a really unusual position you found yourself in where, I mean, I remember you saying to me, when we spoke, spoke a couple of weeks ago that you always worried about your research, you know, your academic research. What if it's like kind of totally useless and not applicable? And it seems what's, in a way,

like the adventure of your career has been to discover actually that you can be like this very humane, helpful figure in this totally unlikely setting. Yeah. I mean, I think that again, I come back to this, this inclination. Like, I had like as a young person that, There was so much that psychology could bring to bear in the real world. There were so many more application, you know, outside of the disease model of psychology. And then, you know, with positive psychology and focus on wellness, you know, it doesn't even stop there. There's so much that psychology can do in policy, in organizations, to improve things. And when I left academia and I moved from, you know, I moved from the U.S. to London and I moved out of academia into the corporate world, I was really struck that, you know, the greater culture shock was from academia to the corporate world rather than from the U.S. to the U.K. But also I was struck by that fear, that intense fear I had, that everything I was learning might not be applicable, just almost a

immediately got wiped away. And I joined a behavioral finance team at Barclays at the time. And I felt like a kid in a candy shop in that everywhere I looked, I saw the potential to apply behavioral science, to apply psychology, to apply these insights in the corporate world. And that was from everything towards, you know, nudging people to save more or encouraging, you know, wealth clients. to overcome their myopic loss aversion, you know, to become fully invested, or whether that was, you know, doing work in financial well-being for Berkeley's customers. There was so, it was just so many opportunities. And I've continued to see that as I've gone to different firms. Before I let you go, Emily, I wanted to ask you about a very formative influence of yours, who is obviously a really remarkable man, Robert Haisley, who is your father's brother, your uncle. Can you tell us a little about him? Because in some ways, he sort of set you on this path

without you really knowing it. And he just sounds like a really remarkable human being. So I'd love to hear a little more about him. Yeah, he's someone who, you know, like I'm really grateful to, like, I've had so many, like, figures in my life who have introduced me to, like, to, you know, different ways of thinking and different ways of being creative. Like my mother's, like, you know, it's extreme, like, academic focus. And my father was a very creative focus. And my uncle, Robert, was also a very creative person. But he also had, you know, quite a strong, I don't know if I, if I would call it

spiritual angle, but he had this real strong interest in understanding the ego. And he would talk to me, you know, even when I was a young child and give me like very specific literature to read, even taught me how to do yoga as a child. And a lot of what he was really interested in was the conflict that's going on in everybody's brain between like the ego want that might be like ambitious or, you know, concerned with like other people's you know with managing one's impression and then on the other side the part of you that could observe the ego and the part of you that just wanted to live and that just wanted to eat life and that just wanted to sort of you know just in its nature without wanting to be

anything just in its nature was kind of like a positive force of light in the world. world. And he had a very unusual existence. He had an infection in his heart when he was a child. And so he had a very weak heart and the doctors didn't think he would live as long as he would. He lived into his late 70s. But they expected him to die much earlier. And so I think he always felt that death was right around the pointer. He always fully had like internalized that he could die at any moment. And so because of that, he just thought, he just lived in the moment. He just lives without fear. Because once you really take away like that fear of death, like, you know, once you have to confront that fear of death, right? Like what else? Like what else is

really going to scare you if you confronted that? And, you know, that was something as a child, like I really marveled at and something that, you know, as I happened to have like a few, you you know, near-death experiences over the course of my life. I've like, actually like really, really learned from at like how much like this intimacy with death can really like enrich your life. So that that was one thing. You told me also that he, he, so many things. Yeah, I mean, you mentioned that he gave you books and the like. And you mentioned me when we last spoke that he gave you a book by Krishna-Murti, this great Indian sage, who I think was born about 1895, who wrote a book called On Right,

livelihood. And I, of course, being obsessive when I ordered it last week. And so I was reading it the other day. And it's really interesting, right, because Krishna-Murti, who was like obviously a really important figure for your uncle, was in some ways so anti-corporate, right? Like he's warning against being greedy and envious and ambitious and focusing on power

and position and self-seeking because he said, if we're ruthless in our desire to succeed, it leads us to exploit others. And so it's all sort of against. self-aggrandismant and the psychological expansion of oneself, as he put it. And I'm kind of curious about how you've kind of thread that needle because you're operating in a very corporate environment, right, that's sort of, I mean, these are very driven, very smart, very ambitious people, and they're playing in the world of money. And yet you have kind of found right livelihood,

right? You've found a way to kind of help them deal with their pain and their emotions. And like, you know, I just wondered how you think about that sort of eternal question that your uncle kind of set you to thinking about about how to have a kind of meaningful career in a world where we also need to get paid and we need to support ourselves and our families and the like. So you just made the tainted altruism mistake. Yeah. If we pay, we must be doing something bad. And so that, you know, and and I just, I don't think that's necessarily true. I think that. Of course, there are, you know, areas in, you know, in every industry. And, you know, whether you're in government, it's the same. If you're in a nonprofit sector, it's the same.

I think that in every industry, there's opportunities to do harm on like a macro, to do harm in good on a macro scale and a microscale of your daily interactions. But I think that, you know, particularly in like the world of, finance, there can be this perception that it's not serving any public good. And I just think that. I think giving everyday people access to capital markets to invest for their future and to grow their wealth and to do that in a way that is value for money and that is properly risk managed. I think that serves like a real purpose. And I don't see really any contradiction necessarily with that and right livelihood.

And then, you know, in the more micro scale, I'm sure, you know, there are elements of every corporate culture that are dysfunctional or that may be a bit toxic. But that doesn't mean that you can't go into that corporate culture and try. to figure out, you know, what might be driving the dysfunction and alleviate it. And everybody can do their part for that to work towards, you know, the public good of the firm and of society more broadly. And everybody can kind of have that in mind. And at the same time, you know, be really ambitious and make a good living and do, you know, and do their best for themselves. I don't see that there is necessarily that conflict. And boy, do I see a lot of opportunities for doing good

and for doing well for yourself at the same time. Yeah, I totally agree. And also, I mean, BlackRock manages money. It's like 35 million Americans investing for retirement. I mean, there is an aspect of this work that is a kind of sacred trust where you're taking people's life savings and helping them, you know, pay for their kids' education, pay for their retirement. you know, save money for a rainy day. I mean, I think it's a false conflict, but I think it's an

important one to address. And I just knew that you had thought about it seriously. Yeah. And I also have to say that I do still really blessed to be a Black Rock where, you know, I do feel that the culture is, has been created by a very kind and very smart people. And one of the things that I was struck by coming when I first came to Black Rock is how much everybody seems to want to, you know, everybody wants each other to succeed. And, you know, of course, it's not going to be like that every minute of every day.

But, you know, you ask yourself if it's not going that way, what's going wrong? What am I doing? What's the, is there a structural problem here? Is there a personality clash here? And you just try to, you know, is there a real debate to be had that I'm taking to personally, right? Like, you've reflect on those moments.

and you tried to, and you look to the future of how to make things better. I wanted to ask you one last thing before I finally let you go, having exhausted your patients totally. You spend much of your time as a behavioral psychologist. And in academia, when you started off, looking at nudges, these ways of nudging people towards better behavior. And I know that you've used nudges a lot in your own life to nudge yourself toward better habits.

And one aspect of that, that I was really, really interested, it in when we last taught. You mentioned your New Year's resolutions from the last three years, which sort of seemed to me in some ways, ways to nudge yourself. Can you talk about that? Because they were all really beautiful things to be working on that resonated deeply for me as well. So tell us what you do and how you think about these things that you've been working on for the last three or so years. Yeah. So the one that changed my life the most, they've all kind of changed my life. The one that changed my life the most, was for years, you know, I had, and I think many people do, I had the inner critic speaking very loud,

saying very mean things to me. And I, from time to time, see a therapist. And a therapist, like, several, several years ago said to me, I think they are just doing it out of habit. I think it's just a bad habit. And that really landed with me actually years later. And then years later, I decided it was going to be my nearest resolution to stop saying new things to myself. And so, you know, the spiritual practice tells you that the first thing you do is you're just mindful, then you just notice when you do it. And so you just like bring like a scientific lens to it. Like, when do I do it? It's like, oh, I tend to do it more in the morning. And oh, I tend to do it on my commute and to work. And oh, I tend to do it at this particular point in my commute about a minute before I walk through the doors of

the office. And so then it's just like, you know, so then you've turned it into like a game of noticing and you just become curious about it and just noticing it is often enough to release its hold on you. Just notice it and let it go. So I recommend that everybody do that if they are having problems with their inner critic. The second year's resolution that really changed my life quite a lot was to just notice my breath. Just again about noticing, just noticing it. When I'm feeling awkward, notice it. When I'm feeling afraid, notice it. Has it increased?

Am I feeling shame? Am I feeling nerves? What's going on? And you just use the breath again as a way of becoming the observer. And then once you notice it, you of course don't just notice it. If it's shallow, deepen it and it calms you down. So you use it to control your state. And that and some other breath work techniques that I did.

I quite like breathful. I find them quite blissful. So other types of breath work that I've done has just really unlocked like a whole world for me that I never thought, that I never could have imagined was there. And so that's, you know, aside, you know, from, you know, mindsets, sleep, you know, in good sleep hygiene and prioritizing sleep and meditation, breathwork. is right up there with one of the things that I recommend for investors to try. And one of my more recent years resolutions was, you know, I do listen to people all day long,

but is to really try to be a better listener and not only be a better listener of people, but to be a better listener of my nervous system and what my nervous system is trying to tell me that I need in the way of food or rest or stimulation. or different types of people, et cetera, and to just really be present, to really be here, to not go anywhere when I'm having a conversation with somebody

to really listen to them. It's really interesting because in some ways there's a common thread between all three of those, right, where it's getting a little bit more emotional distance from the story and the phenomenon, which is also really, really important for investors, right? I mean, it seems to be one of the key things that you're teaching investors is to kind of get a little bit

more distance from their emotion so that they can see more clearly. 100%. Absolutely. What I'm trying to help them do, I myself, am on my journey as well. Yeah, it's very rich. It really struck me the other day, all three of those things that you shared with me, those resolutions. But as you pointed out, probably the one I'm most likely to be worse at is the one you mentioned

first of stopping thinking mean thoughts about myself. I think it's really hard because I think for most of us who've been strivers who've, you know, gone, gone through super competitive businesses, whether it's journalism or investing or, you know, getting into the best schools and PhD programs and are like, we had to drive ourselves really hard,

which is something, you know, that your mother obviously, you know, you've talked to me about like, you know, she really valued like good degrees and grades and stuff. And then it's,

so we get into this habit. of succeeding by beating ourselves up. And then we get positive reinforcement for it. We're like, oh, well, that worked. I overcame my laziness and procrastination and fear and stuff. And then at a certain point, I had this discussion once with Tony Robbins, who's really smart about this stuff. And he was like, well, yeah, I was like, well, if I stop being like really fearful and

anxious and stuff, won't I kind of lose my edge in some ways? And he's like, you know, William, it's time to upgrade the system. Like, like, that's just your old paradigm. You need to upgrade the system and get, you know, new hardware instead, you know, but it's really hard because it worked for us for so long. Did it work or could we have been better if we didn't have that? Like, we don't have the counterfactual. But I will say, though, that I share that fear that you articulated. I share that fear in myself.

It keeps me clinging to it. But what I at least need to get rid of is, like, I know I burn energy. by thinking, I'm not working hard enough. I'm not doing enough. I'm not smart enough. I'm not X enough. I know those thoughts take my focus and they're about me. Again, I want the focus to be on the task.

The same thing I'm trying to get the investors to focus on is to take their own ego out of the equation and focus on the task at hand. And so, you know, sometimes the things that we think help us hurt us, There's a lot of different experiments in psychology that show, you know, the value of breaks and the value of pacing yourself, going slow to go fast, right? So you don't wind up in a hole that then is inefficient for you to climb out of. And instead, there's this illusion that we should, you know, keep working and pushing and pushing when there's diminishing marginal returns to that work. And actually, we'd be more productive over the long term interstacing the work with more rest. there's a lot of illusions that lock us in.

Yeah. This has been such a rich conversation and I could keep going forever, but I'm looking forward to many more conversations with you over the years. And it's just been a real joy to chat with you, Emily. So thank you so much. Thank you so much, William. Thanks for listening to TIP. Follow richer, wiser, happier on your favorite podcast app

and visit the Investorspodcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice. The content is impersonal and does not consider your objectives, financial situation or needs. Investing involves risk, including possible loss of principle and past performance is not a guarantee of future results. Listeners should do their own research and consult a qualified professional before making any financial decisions. Nothing on this show is a recommendation or solicitation to buy or sell any security or other financial product. Hosts, guests, and the Investors Podcast Network may hold positions in securities discussed and may change those positions.

at any time without notice. References to any third-party products, services or advertisers do not constitute endorsements and the Investor's Podcast Network is not responsible for any claims made by them. Copyright by the Investors Podcast Network. All rights reserved.