Investors’ Interoceptive Awareness

This post is based on a new book by Annie Murphy Paul with some new ideas and data. The subtitle is The Power of Thinking Outside the Brain.

Ms. Paul writes, “Successful financiers are exquisitely sensitive to subtle physiological cues. What’s more, they seem to pick up on such signals early on, just as these feelings start to emerge—and act on them in that moment, rather than dismissing them, suppressing them, or holding them off for later inspection. Because this approach proceeds rapidly and with little mental effort, it’s much better suited to addressing the complex, fast-paced decisions that many of us are called upon to make,, says Fenton-O’Creevy. And going around our cognitive biases in this way is more effective than laboriously trying to correct them. ‘De-biasing approaches which rely primarily on shifting cognitions from System 1 to System 2 are unlikely to succeed’, he maintains. ‘The human capacity for self-monitoring and effortful System 2 cognition is limited and is rapidly depleted. Attempt to reduce biases by learning about biases and engaging in self-monitoring rapidly come up against human cognitive limits.’

Fenton-O’Creevy has experimented with techniques intended to increase investors’ interoceptive awareness—through the practice of mindfulness, and through the provision of frequent physiological feedback. In his lab, he had participants play a specially designed video game called Space Investor. As part of the game, they periodically estimated how fast their hearts were beating. The more accurate their guesses, as gauged by a wireless sensor placed on the chest, the more game points they accrued. Fenton-O’Creevy reports that repeatedly playing this game appears to produce lasting improvements in participants’ interoceptive awareness.”

Ms. Paul continues, “This approach suggests a novel way to support smart decision making: not through the cultivation of what we might call a brief account of ‘interoceptive learning.’ This is a process of learning first, how to sense, label, and regulate our internal signals—and second, how to draw connections between the particular sensations we feel within and the pattern of events we encounter in the world. When we feel a flutter in the stomach as we embark on a particular course of action, what consequences seem to follow? When we feel our heart leap at the thought of one options before use, and our heart sinks at the mention of another, what does that portend for the choice we ultimately make?

We can clarify and codify the body’s messages by keeping an ‘interoceptive journal’—a record of the choices we make, and how we felt when we made them. Each journal entry has three parts. First, a brief account of the decision we’re facing. Second, a description—as detailed and precise as possible—of the internal sensations we experience as we contemplate the various options available. An interoception journal asks us to consider the paths that lie before us, one by one, and take note of how we feel as we imagine choosing one path over another. The third section of the journal entry is a notation of the choice on which we ultimately settled and a description of any further sensations that arise upon making this final selection. Then, once you know how a particular decision turned out you can return to the record of the moment when you made the choice.”

A word of caution is in order here. The Healthymemory blog is a strong advocate of System 2 processes. Ignore Fenton-O’Creevy. He is not just providing bad but dangerous advice. System 2 processes provide the best means of not making bad life choices. There are times when the decision time is extremely limited and interoception-based decisions might be warranted. But these are exceptions and not the rule.

Important decisions should not be time limited. With the exception of decisions that have strict time limitations, always engage in System 2 processing.