There’s Alpha in Your (Right) Brain

Categories: Drivers of Value, Getting Help, Philosophy, Private Wealth Management
There’s Alpha in Your (Right) Brain

Modern investing is a numbers game, an analysis game, an equations and computers and data game. And so when CNBC reports that alpha is at a three-decade low, it may feel natural to go back and look at your own numbers and ask yourself what’s wrong with them. What new data can you integrate to deliver alpha to your clients, or how can you improve your statistical analyses to exceed your benchmark? It’s a comfortable approach, but according to Jason Voss, CFA, it’s a hare-brained approach — or at least a half-brained approach.

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Taking the stage in Mumbai at the India Investment Conference last week, Voss advocated a whole-brain approach to seeking alpha, one that integrates not only the traditional left-brain investment skills (technical analysis, mathematical prowess, logical reasoning), but also the often ignored right-brain skills (intuition, creativity, nonlinear understanding). “The right brain is important,” Voss says, “because there is no such thing as a future fact.” You’ll need intuition, creativity, and wisdom — which he defines as “the degree to which your awareness or consciousness is in accord with reality” — to make the leap from historical facts to future predictions. In fact, he says that modern alpha exists almost entirely in the space of right-brain skills because nobody’s using them.

Voss’s argument is very much in line with the cultural explosion of mindfulness, meditation, and reflection that we saw in 2014. As the world’s yogis, dancers, and outdoor enthusiasts encouraged us to step away to look for calm, so did Voss encourage stepping away to look for alpha. He touts the benefits of meditation: It puts you more in touch with your right brain, but studies also show that it decreases stress, increases creativity, and encourages ethical behavior. What’s not to like, especially if you’re a CFA charterholder?

He closes with a shortcut to a meditative state, one that, rather appropriately, activates alpha brain waves. He tells the audience to “remember awe,” to try to remember what it felt like the last time they were awe-struck. Neuroscience tells us that this generates alpha brain waves, and Voss says that you’ll be better at problem-solving as a result.

A brief theory of the mind, some insights from Daniel Kahneman’s Thinking, Fast and Slow, and lessons from the Dalai Lama — it’s all there in Voss’s talk.

If you’re interested in meditation, join the LinkedIn CFA Inititute Members Meditation Group [Note: you must be a Member of CFA Institute to join].

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Photo credit: ©iStockphoto.com/hidesy

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4 comments on “There’s Alpha in Your (Right) Brain

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  3. Savio Cardozo said:

    Hello Pat
    Thank you for the interesting article.
    I am in the process of reading the Intuitive Investor written by Jason Voss and I can confirm that it is not just a fascinating read but he does an excellent job at making the concepts easily accessible to the reader which clearly demonstrates his command of the subject.
    I am sure he was well received by the audience in India.
    Thanks again and best wishes
    Savio

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