What happens when you think about someone who has a ton of money?
Probably nothing.
Unless that person has the power to take your money.
Then something completely different happens.
…argh… temperature… rising… err… pupils… shrinking… ugh… stomach… burning...
In medical parlance it’s called a psychosomatic response, and your life is full of them.
Most are tiny, barely perceptible. Others can’t be ignored. But they influence you constantly. And to many it feels like an abusive relationship.
Here’s what I mean…
I really wanted to buy into the DigixDAO crowdsale. I own gold and cryptocurrencies, so combining them on the blockchain was like hot apple pie a la mode.
I waited for months, and when it finally got here… BAM!…
Gone in 12 hours. I missed it.
Oh, I was pissed. It was fear of missing out made manifest!
So when The DAO crowdsale happened, Hallelujah! A chance for redemption!
It only took 15 minutes of my gut screaming BUY BUY BUY for me to make a decision.
I bought in… deep.
When it was all over, I held over 2,000,000 DAO token.
AN OVERWHELMING TASK
Leaving aside whether I made a good or bad decision, I want to make a point. What mechanism was in charge of my actions?
Clearly I was taking a risk, but was it a calculated one? I believe in smart contracts, so it makes sense that I would get behind the first big one. But I clearly overexposed myself. My mind failed to communicate my investment strategy to my body and my bank account paid the price.
So is my gut the enemy?
Well here’s the interesting thing. The world is complex, and so are our bodies. The sheer multitude of raw information we take in every day staggers the mind. That says nothing about the mountain of information we would need to make perfect investment decisions.
It is simply IMPOSSIBLE for the brain to process enough information to accurately predict market movements. We are consciously aware of only the tiniest sliver of the world, far less information than we would need.
BODY AND MIND
John Coates, in his excellent book The Hour Between Dog and Wolf, points out that the combined bandwidth of all of our senses (yes, scientists have apparently figured this out) is roughly 11 megabits per second.
But here’s the catch. Our conscious mind only receives about 40 bits per second. Yes, bits… not megabits. So for all the information our body takes in every second, only 0.00036364% is processed as conscious thought.
Say WHAT!?
That means almost everything we base our decisions on comes from our subconscious mind. Every emotion connected to every experience we ever had is stored somewhere deep in our lizard brain leaving the conscious mind almost totally unaware.
And the only way our subconscious mind communicates with us is through dreams and… our gut.
A TALE OF TWO EXTREMES
I made the claim in my last article that one of the most important (and most difficult) investing skills is patience.
But it isn’t just the patience to wait for an investment to mature. I’m talking about the communication between the mind and body.
People tend to dismiss the signals from their body as noise. Even worse, some might consider it as something to be suppressed like a catholic priest abstaining from sex.
But when I invested in The DAO, I did the opposite. I allowed my physical urges to dictate my actions. My investment goals were just an afterthought.
I wanted it, and I wanted it now.
So what can we do about it?
You can’t avoid your physiology and still be human. But that doesn’t mean your emotions have to rule you.
It isn't fancy, but here’s my approach.
Acknowledge What You’re Feeling
Anger. Excitement. Frustration. Anticipation. Fear. Greed. This is your body trying to tell you something. Accept that the information contained in your emotions is beyond what your brain can fully process.
Be prepared to open up and listen to what your body has to say.
Focus On Your Feelings
Stop and smell the roses.
If you don’t know why you feel a certain thing, you shouldn’t make an investment move until you do. Take the time to figure it out. Before I commit, I try to account for all my emotions.
Address Concerns
When you find them, fix them.
If you have a concern, but no plan in place to deal with it, you shouldn’t be doing anything else.
Wait To Act
When you are out of position, you are out of position. Period.
Sure it would be nice to be a Steemit millionaire. But you aren’t.
I wanted to be in the Digix crowdsale. But I missed it.
I get it. Missing out causes a very real response. And your body lets you know it. But throwing good money after bad will only make it worse.
If you miss an opportunity, own it, and wait for the next one.
CONCLUSION
The body evolved long before the more advanced parts of our brain. There is no way to untangle the human parts from the ancient animal instincts. But the instincts evolved because they were needed to keep us alive.
The trick is to respect your instincts and listen to them without letting them rule you.
P.S. Dan, if you or one of your buddies are reading this, ignore the 12th sentence back. You are, in fact, Steem millionaires. Way to go.