How do you know if you’ve reached the right investment conclusion? Understanding the commonly used techniques in brainwashing might give you an edge. This will be the craziest article you will ever read about trading psychology, so buckle up.
The human brain is easily manipulated and even something as simple as a song or a piece of chocolate can alter your state of mind. We can talk about conditioning a dog with treats and coercing employees to act unethically to keep their job. But brainwashing is more complex – and more fascinating. Hear me out. By reverse engineering the more radical methods used in wartime brainwashing of prisoners at war, we can reduce the risk of reaching poor investment decisions. If we know what is required to completely brainwash someone, we also know what attributes are important for the opposite ie. decisions that are in line with your own identity. Even though the opinions are subjective, we can ensure that your opinion about a company is then truly your opinion.
Let’s look at the 7 steps to brainwash a prisoner at war (PAW) and find comparable attributes for anti-brainwashing a portfolio manager.
- Isolation – Remove all external contact and information sources.
- Mind clouding – Malnutrition and sleep deprivation.
- Endangerment – A constant threat of physical harm.
- Identity Crisis – A sense of guilt, shame and general disorientation.
- Leniency – A token of kindness to persuade the target to reciprocate with a confession.
- Replacement of belief system – old mental anchors are associated to the pain in steps 2-4. The new belief system is built with step 1, but with new external influences.
- Rebirth – The target makes an independent choice to embrace the salvation and agrees to complete obedience.
Come to think of it, the method above resembles a crueler form of parenting. Anyway… Before we look at the comparable attributes in portfolio management, it’s worth noting that the military counter-training for brainwashing is based on mantras, meditation, mental detachment and awareness. That should ring some bells already and give us some hints about our seven steps to sound trading based on the reverse-engineering of the above brainwashing technique:
1. Involvement – From being affable and approachable to being socially active, fighting isolation can be as simple as not staring at green and red candle sticks 10 hours a day in your man cave. The less obvious steps is to relocate to an information rich city (according to your niche), follow international press and read material in a non-native language. Keep portraits around you of people you respect to align your thinking to theirs. Interact in the society and physically visit businesses that you intend to invest in. Build networks of relationships in your area of expertise. And yes, of course, read Vanilla Equity articles on LinkedIn.
2. Optimal health – Ensure good sleep and nutrition to perform optimally. If you feel tired most of the time and look worse than in your wedding photo, then I recommend following the unconventional tips for workaholics in the Fit Businessman book (www.fitbusinessmanbook.com).
3. Stress free mindstate
Deadlines, To-Do-lists, unpaid debts, unexpected expectations and pushy bosses can push any trader to push the Buy and Sell buttons too soon.
There is also a big difference in
- Trading when you have time and trading when there is opportunity.
- Trading with your own capital and trading with someone else’s.
- Trading on margin or trading with small stakes.
- Trading for profit or trading for a living.
Depending on your personality and your circumstances, you might not be in a stress-free state of mind in all the above cases. Cross those out. If you feel more nervous trading other people’s money, then simply don’t do it. No use pretending to be something you’re not.
4. Strong identity – If your spouse can sense the market direction based on your mood at the dinner table, portfolio management might not be for you. Self-secure persons tend to not be noticeably affected by external events. Insecure persons tend to post motivational quotes on social media. Sometimes it’s a question about age and experience, but only you truly know yourself. There is nothing wrong about feeling insecure, but indecisiveness in trading can be costly.
The PAW’s that managed to avoid brainwashing, did it by successfully retaining their identity. A self-confident person can laugh at herself and is impossible to bully. (There’s a simple way to test if you are self-confident: simply make another person laugh based on a joke about one of your weaknesses.)
After a year of trading, you will have a pretty good idea of what type of trader you are. Some traders use a journal to keep track of their performance. I bet a prisoner was not allowed a pen a paper to write down important notes about their personality traits and trading history. So that’s exactly why you should be writing down experiences, not only to learn from your past, but to re-enforce your identity.
5. Discipline
Do you break trading rules that you set up for yourself? Maybe divert from your trading plan on a whim? If you feel trading is an emotional roller coaster or that DCA is always better than realizing a loss, then maybe you need a boss to look over your shoulder. Just like the agent plays mind games on the target in brainwashing, the market can trick you into believing you are a super trader. The trend might be your friend but don’t fall in love with a stock. Don’t believe everything you think.
6. Stick to your plan
The PAW is persuaded to think that their past is linked to pain and shame. What is the opposite of that? Well, looking back at your past will give you clues of your strengths and weaknesses. It would appear as if highlighting the highlights, celebrating small victories and honoring traditions will keep you grounded.
By step 4 you’ve probably figured out what type of trader you are (a technical trader, value trader, long-term investor, intra-day trader, swing trader, gambler, bond-only trader etc). Finding your role and continuing in your role is actually easy for humans since we tend to fight change by nature. Just make it a main character role.
7. Going back to your roots
If you’ve built an unbreakable character in step 4, then you might as well skip steps 5-7. But continuing in our reverse engineering quest, we will try to do the opposite of what brainwashers are doing to POW’s.
The final step in the brainwashing, is to make the target decide “independently” to take action to enforce theire new belief. (This is comparable to the independent decision a consult company would make you believe you did.)
And… this one is interesting. In doing the opposite, we would try to avoid taking action just to prove our belief… I think I need your help to develop this idea. Please post your immediate thoughts in the comments below:
#brainwash #prisoneratwar #portfoliomanagement
Reverse engineering the brainwashing techniques used for prisoners at war can make you a better portfolio manager.