Forget about not being emotional in your investment process. Tap into those emotions! According to today’s guest Denise Shull @DeniseKShull, that is the recipe for success. Denise is the Founder of the ReThink Group and leverages her neuroscience and modern psychoanalysis background to solve the mental mysteries of successful investing, trading, competing, and leading teams.
In this episode, we talk through Denise’s days as a trader, the differences between trading and athletic performance, why systematic traders can still use some help from time to time, and of course, all things Winter Olympics [enter gold medal-winning client Lindsey Jacob Ellis], which she still tears up talking about. Tune in to discover the power of using your emotions and having someone like Denise in your corner!
About Denise:
Denise Shull, ReThink’s Founder and CEO, leverages her background in neuroscience and modern psychoanalysis to solve the mental mysteries of successful investing, trading, competing and leading teams. She is known for her uncanny effectiveness in resolving mental blocks and decision conundrums. Her Wall Street career began in 1994 when she joined one of the first electronic trading firms in Chicago. She then traded at Schonfeld Securities before she was recruited to run her own desk at Sharpe Capital in NYC.
She founded The ReThink Group to apply the radical finding to assisting pension funds, hedge funds, asset managers and trading firms all over the globe in making better market decisions.
Check out the complete Transcript from this weeks podcast below:
Using Emotions to Make Better Decisions and Deliver Results with ReThink’s Denise Shull
Jeff Malec 00:07
Welcome to the Derivative by our RCM Alternatives, where we dive into what makes alternative investments go analyze the strategies of unique hedge fund managers and chat with interesting guests from across the investment world. Happy Holi Thursday everyone sounds like something Robin would say in the old Batman show. Happy Holy Thursday Batman. But I digress a couple of good shows coming up for you to close out April with quant Archer set next week on to talk through how he creates models and strategies in the crypto space. Then our friends at resolve Asset Management The week after to check in on their return stacking approach now that bonds have tanked and commodities are flying. On this episode where we have performance coach Denise Shaw, founder of the rethink group, talking through her days as a trader, the differences between trading and athletic performance why even systematic traders can need some help from time to time and of course all things Winter Olympics and our gold medal winning client Lindsey Jacob Ellis, which she’s still tears up talking about. That’s powerful stuff to have someone like that in your corner. Send it this sense was brought to you by RCMs China division. If you think commodity markets have been a little crazy here you should see some of the eye popping numbers happening over there are China division helps both traders access Chinese markets and managers access Chinese investors. More info go to www.rcmalts.com/ China’s that’s rcmalts.com/china. Now back to the show. Hi, everyone. I’m dealing with a bit of a cold here today. Sorry if you hear a few sniffles. But we’ve got performance coach Denise Shaw on with us to get me through and deliver the best pod possible. Welcome, Denise.
Denise Shull 01:48
Thank you. Happy to be here.
Jeff Malec 01:50
Yeah. Had a little bit of tech difficulties getting here. So happy to finally hear
Denise Shull 01:54
you loud and clear. Welcome to Sun Valley.
Jeff Malec 01:58
Right and insanely jealous that you live in the mountains there in Sun Valley. You’re saying you’re not long for Sun Valley?
Denise Shull 02:06
Yeah, we’re gonna move to Park City. I mean, we moved to Sun Valley in the middle of the pandemic, like escape New York City. And it’s great I mean, we’re not unhappy we did it. But they don’t get enough snow actually.
Jeff Malec 02:21
And the prices there and Park City are through the roof right.
Denise Shull 02:26
Oh my gosh, mountain towns.
Jeff Malec 02:28
Yeah. Talk about inflation.
Denise Shull 02:31
It started in the summer of 2020. I mean, we would have originally gone to ask but I haven’t gone to Aspen since I was 25 We got married there and like all the billion all the billionaires got there before Yeah.
Jeff Malec 02:43
We I grew up actually going out to Aspen Snowmass and then after college lived in Aspen for a year and a half slap and Chile up on the mountain Cafe Susana
Denise Shull 02:55
mas we probably paths crossed paths. Yeah.
Jeff Malec 02:59
That was fun. Now when I go back, I’m like who’s happier that guy slapping the chili or me?
Denise Shull 03:04
It’s it’s a tough, it’s a tough call.
Jeff Malec 03:06
It’s a tough call. And are you a skier or snowboarder skier?
Denise Shull 03:10
Skier although I coach in the Olympic snowboarder who just won two gold medals.
Jeff Malec 03:15
I know I’ll get to that hold off again. Just want to make sure
Denise Shull 03:18
my son, son, whatever involvement in snowboard,
Jeff Malec 03:23
I know I could spend the whole time pod talking about skiing snowboarding and mountain so let’s we’ll come back to that if time that makes sense. So your backgrounds too expensive to get all the way through but take me into the little nugget I saw of you were doing the first electronic futures trading here in Chicago. Oh, gosh.
Denise Shull 03:42
Um, yeah, it was actually equities. 94 I was with a friend of mine, who had been a floor trader at the CBOE equities options. And we heard literally turning left from LaSalle. On to Jackson, when he saw this guy who he apparently knew it. Oh my god. I’m like, Hey, I’m so happy to see we’re starting this upstairs trading firm and you should come in. And Don had always thought I should be a trader and when we’d go on the floor and buy or whether futures Satanists like, what you’re talking about? And the answer’s no.
Jeff Malec 04:21
Those never really took off. Yeah,
Denise Shull 04:23
no, no. And I remember reading about them thinking what on earth is this? But in any event, I was in the process of writing my thesis for a master’s degree at University of Chicago. And he was like, come on, come on, you can just keep track of our p&l. We’ll teach how to trade and yours writing their own master’s thesis, which isn’t doing anything anyway. So I did it, and then started trading equities intraday. They were on their own for their p&l and then later became a member of the Board of Trade for financial futures. That obviously became
Jeff Malec 04:56
part of the mark. Nice. What What were you trading at Board of Trade?
Denise Shull 05:00
You know, s&p, NASDAQ Dow. I
05:03
love it.
Denise Shull 05:04
I never really I mean, I’m sure I’ve done a bond trade in my life but
Jeff Malec 05:11
and done that wasn’t done. Wilson wasn’t?
Denise Shull 05:13
No, it was done Winton known as SAP, in whatever the CBOE
Jeff Malec 05:19
Yeah, his his badge was zap. Go. And so where they were doing electronic options market making,
Denise Shull 05:27
it was a guy named Bob Cantor, who had been an options trader here in New York are very New York, I’m so used to living in New York. And I don’t know he got wind of the technology and you know, real time intraday quotes on a network. And he had a vision for electronic trading. So he started this company called Electronic trading group moved from New York to Chicago to do it. Turns out, you know, there’s such a difference between trading in New York and trading in Chicago. But anyway, it was that firm, I didn’t stay there all that long, like, I don’t know, a year or so. It ETG at Bob’s firm, there were traders trading all different strategies, like the guy in front of me was scalping. That was back when we were eight. The guy over there was doing like risk are, you know, the guy next to me was trading banks. Like, I don’t know if anybody was really trading what you call momentum. But I had of my own observation discovered that like stocks have and thought, think this is my style, like no one said one thing that I now know, like, figure out what your style is, and stick with it. Like figure out how the market makes sense to you and and then go with that. But in any event, I started went to show and fell across town, that was definitely trading intraday momentum in equities.
Jeff Malec 06:48
And then did you start to see in these early days of some of these traders just being crazy and emotional and yelling and screaming and affecting their p&l?
Denise Shull 06:59
Well, there was two things, there was two things I had known my friend Don for quite a while. And he had this story of like, losing a half a million dollars in like two hours, if the CBOE thing, whatever that was, like, I was like, what my dad has spent his entire life like, you know, saving up to have a half a million dollar portfolio, how in the world did you lose? Like I could never comprehend that right. So that was my backdrop to becoming a trader. And then, you know, I started reading the trading psychology and Market Wizards and I’d see all this stuff that taking the emotion out of it. But actually, that guy said over there, Steve was his name, who was trading like a risk ARB kind of thing was the most emotional guy I’ve ever seen. He’s constantly jumping up and down screaming, he was also making the most money in the office. Just sounds like a not all ad. And I had this background and neuro psychology, but I wasn’t really using it at the time, they seem completely unrelated. And it was really only years later 2003 When this institute I was studying at wanted to publish my master’s thesis. And I had to update it for them to publish it because I didn’t want to look the psychoanalysts look idiotic by having a decade old neuroscience paper. And Antonio Damasio, who’s at University of Southern California now, but at the time he was at Iowa had started to show that we cannot make any decision without emotion. And I was like, okay,
Jeff Malec 08:30
like, it’s physically impossible.
Denise Shull 08:32
It’s physically impossible. Yeah. In everybody was going well, that can’t be true. It’s like, at a minimum, it’s confidence, you have a belief in some level of competence that the decision you’re about to make is correct. And if you don’t have that, you go back and forth, back and forth, back and forth. That’s what he was showing. But I was like, Wow, this like, really changes all that trading psychology. And by that time, I was trading at a prop firm in New York. And I, it turned out, this guy lived across the street from me, and we met at Starbucks, and I’m just talking to him about it. And he’s like, You got to write a paper, you got to write an article. And I’m like, yeah, like, right, like he’s gonna publish an article by me like, nobody. It turns out that he was undercover, working for Linda Bradford Rasky, this famous trader, and he had a whole fake identity in the Prop firm, but he was really close to her and she’d written a lot of articles. So he knew all these editors. He’s like, I can get you an article. So I read this article, it’s called Freud’s path to profits came out in December 2004 in stocks, futures and options, and it’s basically about conscious and unconscious emotions and have a bit affect your trading because I had this background and psychoanalysis and how we repeat things. And I literally I thought, Well, that’s it. That’s cool. I got my master’s thesis published, and I got an article published in a magazine, and like that was gonna be it. And then with one strike, then the phone started ringing. Now here we are 18 years later, it took on a life of its own, because it answers so many otherwise unanswerable questions about trading and investing behavior, such as why people do what they do, why they have pattern and mistakes, you know why they get stubborn and lose a half million dollars in two hours? Why they get into early out too early into late, too big, too small, have a good day, Give three quarters of it back. You understand what’s going on for the person? I’ll say psychologically, but what that actually means is consciously, emotionally and unconsciously, emotionally. You can you can explain anything. Now solving, it’s a separate problem, but you can at least explain it. And at a very minimum, I contend like, you can’t really solve a problem until you really understand it.
Jeff Malec 11:06
And so as you early focus was on these traders, coaching these traders, what were some of the differences you found in helping traders have other people’s money versus traders have their own money? Was it?
Denise Shull 11:19
Yeah, that’s a really good question that hardly anyone ever asks, it totally depends on the person. Some people are like, hyper responsible. And if they’re trading someone else’s money, they just get way too worried about losing anybody else’s money. And so it creates a whole nother less level level of stress. Other people for whatever reason, can trade other people’s money with less stress, and they can trade their own. I can’t 100% Explain that side of it. From a character point of view, but it’s true.
Jeff Malec 11:54
I’ve seen it the first one is more common in my experience, like, yeah, they’re kind of wild with their own money, and they’re willing to take all these risks. And when they’re starting to trade other people’s money they get, they pulled the reins way back. And that’s probably why we’re not allowed to show proprietary results in our industry without a hefty disclaimer, because the psychology is so different, you’re not going to get the same results.
Denise Shull 12:16
I have a client, this is a slightly different version of that, but it’s just super interesting. He’s really talented, really smart investor, you know, long, short, equity, holds positions, supposedly holds positions for months to years. But I mean, he was always moving his book around. So is this typical of most of these people? Name and he has his main Fund, which, you know, has all these rules and you know, what its volatility should be and all that, why these investors gave him a chunk of money in a no rules fund. Like, do whatever, have whatever volatility. He’s routinely up 5060 70%. And the no rules Fine. Fine, Barry’s got the, you know, normal sort of investment management roles. He does. Okay, but nothing like, you know, jaw dropping. So what is that about? Like? It’s not, it is about he was given roles, and not given roles. But why is he reacting so differently?
Jeff Malec 13:19
And what, so if he’s a client of yours, you’re helping him through that? Or you’re helping him say, on that no roles, fun, just let it ride.
Denise Shull 13:27
I don’t even have to say anything about the numbers. The only thing I ever say about it is hey, is how as the other I’m doing 60% We only ever talked about the rules fun. I mean, he hired me, because in 2020, and I had a lot of a lot of clients who came to me and 2020 For this reason they caught the downturn. And they couldn’t believe the upturn. Yeah, so they fought it. And then, you know, they started out with these spectacular years, you know, around this time two years ago, and then slowly just gave it back over the year. And then they came to like doubt themselves. In so like when he first called in the fall of 2020, it was to help him recognize his true market intuition. But it was also really from like, I had another CIO from a huge fund, called for the same reason and like, I think I’ve lost it. I just don’t know how to read markets anymore. And it wasn’t really that it was that both of them had fought that uptrend in 2020. And people will, that will definitely have an impact on your competence.
Jeff Malec 14:36
And what makes me think of like that as a allocator as an investor, that’s why I prefer to have like, some systematic program, right? So those emotions don’t get in the way.
Denise Shull 14:48
I should put my glasses on and read an email I have from a systematic programmer that came in about an hour. Okay. I probably won’t, but it’s literally this Go ahead, you still have to have conviction and intuition in developing the models, choosing which algorithms to run,
Jeff Malec 15:12
sticking with them when they’re not working. Yeah.
Denise Shull 15:15
Exactly. Choosing concludes not choosing, you know, discretionary factors like implied volatility, what timeframe Are you going to use when they’re still judgment calls?
Jeff Malec 15:28
Right. And we’ve seen much more interest in that kind of trader, right? It seems like a performance coach is mostly made for the intuition based guy. But have you the world’s moving towards more of the automated systematic type guy or girl? So have you seen more of those types come approach you?
Denise Shull 15:47
I guess I would have to say yes, at this moment, because I have three, this year and three years, probably, at least two more than I’ve had in recent years. I went through a phase from, excuse me, I think it was must have been January of 2008. Till around 2011 12, where I got on the client speaking circuit. And so I had lots of clients and conversations and was at lots of conferences and spoke on lots of panels. I kind of actually took myself out of it. But I’ve had clients, I had a client who became the CIO of a quant fund, and it’s either Sweden or Switzerland. I can never keep those countries straight. Anyway, he said, Denise, I now have 1000 algorithms to choose from, and I have the same problem I had when I was actually trading stocks. It’s like, how do I know which ones to be reading on any given day?
Jeff Malec 16:53
Need an algorithm of the algorithms? Yeah,
Denise Shull 16:55
exactly.
Jeff Malec 17:02
And so getting a little bit if you could to the you call the show method, right? Yeah. Right. And I go back to Barry Ritholtz, I think you’re probably familiar with he had a good piece when saying our primitive brains aren’t wired for the modern investment world, right? We have this wetware that’s doing fight or flight. And investing requires this other skill set? Where you shouldn’t be scared or or go after it. Yeah, sorry. Go ahead. There’s not a question in there. But yeah, explain the method and how you how you kind of square that of like, the emotions versus you’re kind of saying you need the emotions, you want to embrace this?
Denise Shull 17:39
Well, you know, technically, you could never prove anything in science, right. But if you, you know, we’re as close to have proven proven, that not only do you have to have emotion to make a decision, you’re always have an expectation of how our decision is going to make you feel in the future. And that cornerstone changes everything about how we understand ourselves and how we work with ourselves. There’s also a growing contingents of science that doesn’t even believe in a primitive brain, you could say they believe in fight or flight for slightly different reasons, which I can come back to, but that we’re actually using all of our brain all of the time, that it’s not, you know, thought is superior to motion thoughts in the frontal cortex, like it doesn’t actually work like that. We’re always predicting, based on everything we’ve learned. And in that prediction, there’s always this expectation of a future emotion. So the real problem with the human brain versus the market is not this old fight or flight, you know, being on the savanna doesn’t apply is that we misunderstand both the game because the game is predicting other people’s future perception. And we misunderstand ourselves how we should play the game, using all of our senses, feelings and emotions, along with all of the knowledge that we’ve accumulated about what this game is. So for example, there is a handful there are a handful of decent studies showing that uneducated people, meaning uneducated market, participants can if they watch price action, perform short term price prediction relatively well. Like how could that be? Well, how it is, is they’re using something called theory of mind, which is I have a theory of your mind, which is our innate ability to predict other people. And they’re relying on that. So as they watch prices move, they get a sense of what you know, what’s the speed and rhythm Right, what’s the dance of this, and they don’t know how they’re doing this. But they’re not using math, so to speak at all. We get into the scientific debate about that, but they’re just using their innate ability to predict other people. And they’re feeling it through the dance or the price action.
Jeff Malec 20:19
That seems like particularly true back in the pit days of Chicago with the guys just in that zone, right. And the really good traders could just feel where the, where the pit was, most certainly
Denise Shull 20:29
be I mean, you can see the other people and you can, you know, feel the energy and hear the volume, you know, and hear the intensity. But people have done it on the screen, also, right. And there’s an actual experiment out of Caltech, that showed, ultimately, you know, people who nothing about the market who could show they were good at predicting price action were using as parts of their brain associated with people in social prediction. And they weren’t using math at all. And even me, like, way back in 94, it was like, headed, I noticed that Pfizer and Lilly and Merck were going up on a Friday afternoon, told Bob Cantor, the chairman of the firm that we should get long drug stocks and came in and, you know, Monday morning, and I don’t know what it was if there was an acquisition or what but you know, they were all up like, $4. And he was like, you’re amazing. Yeah. I’m like, No, they were all ticket. It was two o’clock. They were all taking up. I don’t know what else. But that study account that t test 2007 Caltech study. It’s called the nature of traitor intuition. And I mean, it was a real first of all, it’s Cal Tech. And it was done by an engineering PhD student. So like, you know, this series quanti kind of guy, right?
Jeff Malec 21:59
This is before GameStop. And all this memes and all that kind of stuff back in 2020. This is, yeah, yeah. What’s your take on all that on the kind of YOLO traders and crypto Bros and people just trying to make a gazillion dollars because they only live once?
Denise Shull 22:17
Well, and you step back again, like if anybody really thinks about what the game is, the game is to take a position. And what you’re making a bet on is that other market participants are going to in the future, whether that futures two minutes, two months, two years, two decades, whatever other mark to market participants are going to value that position at a different price down the road. Now, for some reason, my quantum guy is actually very fundamental. And I sure when I read that email, it will be all about the art the projected earnings of these companies, and how does that fit into his model. But it doesn’t matter. If you knew what the vast majority of market participants or good majority are going to perceive in the future, you got what you want to know, right? Well, the Gamestop excetera phenomenon was the professionals never know, they always assumed that the retail contingent was wrong. Right? And take the opposite side. What they didn’t realize is that a very large retail contingent had grown up during the pandemic. And we’re, you know, operating to some degree is one unit. So they miss calculated the other market participants.
Jeff Malec 23:37
But that’s in and of itself, like in this modern world, do you think there’s more of a kind of a hive brain that gets enabled by technology and social media and whatnot, that we can kind of have a better handle on what the group’s perceptions are? Or kind of artificially use the group’s perceptions to either drive price up or down.
Denise Shull 24:01
But But yes, but the truth is, there are different groups with different levels of power. Yeah, they underestimated the power of the, of the retail trader sitting at home with their pandemic capital, and how many of them there were. I had a client, client slash friend, who was always really good. I mean, he was always very intuitive, intuitive, he used as much quantity as he could but still very intuitive. Who ended up and like mapping out different market participants. Likely perception for example, around the Fed meeting. That’s an exercise I now take people through because theory of mind the ability to predict other people we all have it, like you have to have it to walk to drive to do anything where other people are involved, which is why things
Jeff Malec 24:54
actually gonna stop at the stop sign or it’s, you know,
Denise Shull 24:57
we’re always on the, you know, on the high way, like, okay, somebody’s coming around me really fast on the right. Okay, like you’re always doing it. So basically, the game has been misunderstood. And we’ve been misunderstood. But if you get the right understanding of the game, and you get a better understanding how you really make a decision, the whole we’re not suited to do this is not as true as so many people say,
Jeff Malec 25:24
because we’re all doing it together. Right, right. It’s not this abstract thing over here. And we’re, we’re doing it together. So we’re suited to it because we’re squaring off against the other human doing. Exactly, exactly. Maybe I could argue maybe not anymore, because we’re more and more computerized and you’re sometimes fighting against algorithms instead of humans.
Denise Shull 25:44
My client is a global macro guy who came out of the quant world. And he just keeps regular tabs on what he thinks the algos are doing any given day. You know, hold bigger process that has lots of other things in it. That’s, you know, one leg of a multi leg table or, you know, one. Now he’s the only client I’ve ever had, he’s been as organized about that. Plenty of other clients will say you can see the algos operating in this kind of price action, or you can discount some of these prices, because it’s algo driven. Like there’s a lot of clients who become aware of it. But this particular one is very organized about it.
Jeff Malec 26:31
And we we see on our algorithmic execution group, and they program these right, like iceberg orders and that kind of thing, but they can see the anti gaming logic that the high frequency firms build profiles on some of these big traders, right. So when they start to see 1010 10 Come in, they know it’s that right? They don’t know who it actually is. But they’ll say client 123. And based on all the past things, they know the profile of that client, so it’s right. Okay, we know when 10 comes in 16 times in a row, there’s another 2000 behind it, typically.
Denise Shull 27:05
So what have they done? They’ve just like memorialized some other market participants behavior.
Jeff Malec 27:10
Exactly. Right.
Denise Shull 27:11
To your point. Yeah. Yeah. That’s all it is. I mean, it doesn’t. You know, like, I love the book. I’m Jim. I never know if it’s assignments or assignments, I guess, right? Yeah.
Jeff Malec 27:22
Yeah.
Denise Shull 27:24
You read that book? His genius. I mean, I’m sure now I got that one. It’s the only one of the only books I’ve like read cover to cover relatively quickly. But one of the things I was amazed about it was he talked repeatedly about patterns that I knew lots of people recognized in the 90s. Yeah. Just none of us thought to imply insane amount of computing power to prove they exist. And then to trade them. That was his genius. That came from his other background, now that he knew that you could take all the market data in the world and prove these things really happen, and know what your actual statistics are, you know, this happens 55% of the time, or, for that matter, he says, at some point 50.2% of the time,
Jeff Malec 28:10
right? That’s a small.
Denise Shull 28:14
Everyone was trying to do that. But you ran into the belief, like he created the belief that you could trade on it, because he’d analyze all the market data, there was Dan lives. not that different than what anyone else did. He just
Jeff Malec 28:29
I loved the bit where he they were losing money, right? And they dug back into the code and they were multiplying the contract by the wrong man for like a super simple mistake. Like you’ve have all these competing wonder brains, and you made the simplest mistake possible. Now you, you’ve moved a little more into more and more into the sports type Pinetown. Yeah, yeah. What are some of the biggest similarities and biggest differences you seen between those sports, the athletes and the traders?
Denise Shull 29:03
Well, let me talk about the situation first, then the personalities. You know, sports analogies get way misapplied to trading. Because the games are so different. Like in sports, you know, whether you’re winning or losing, you know, when the game’s over, like the game’s over, scores marked, you get a break, then you get another try. Never happens in trading, the game is never over. You never really know whether you’re winning or losing, right? You’re winning this moment. You’re losing the next moment, you’re winning today, you’re losing like, you never really know. And if you’re even a fundamental long short equity trader, and you know, you’re willing to buy on value, like if something pulls back, does it mean you should get out or does it mean it’s an opportunity you never know? So, the markets are a totally different man. Until talent and sports, then probably the most important one is in sports, your job is to make something happen in the market, you basically can’t make anything happen. You know, the only only sports you can sort of liken it to are sailing or surfing, you know, where you’re trying to navigate the wind or the waves. But still, there are some physics to sailing or sporting that there are not to this. So you just need to realize that, you know, an athlete prepares in order to cause something to happen. In a black and white time limited world. We prepare in order to navigate a very gray, unlimited, unclear, ambiguous world, totally different mental problems. From a mentality point of view mean that one thing that is similar is back to the theory of mind, for the most part, you know, in most sports, you’re playing the other people, like ski racing would be a little borderline, because you know, you’re on the course by yourself. And there’s nobody else there right that second, right. So from a mental point of view, that’s going to be a little bit different. So obviously, in trading and investing, you’re playing the other people. From a personality point of view. You know, if you’re a professional or an Olympic athlete, you have spent your entire life becoming that person. And yes, you have a personality, obviously, but all of those personalities like are so consumed with their craft. That that’s what you see with those people, you see their obsession with their craft. As opposed to like in trading and investing, we see these kind of different styles, you know, a more engineering style or, you know, a more momentum kind of style, or a more, you know, what I’ll call the CFA, like, people, the stock price is going to go to the, you know, fair valuation of the expected future cash flow, right. Like that’s a little bit like playing different types of sports, you know.
Jeff Malec 32:38
You could argue, like Michael Burry and write The Big Short right was just consumed with that trade and sleeping in the office and finding that stuff. But you could also your side of it, like he wasn’t doing that every year for 40 years up to that point,
Denise Shull 32:54
yeah. Or eating most of these. Most of the professional Olympic athletes, I’ve dealt with, you know, they started 567 years old. By the way, there’s, there’s information now that you shouldn’t really do. You shouldn’t focus on just one sport, when you’re that young. But you know,
Jeff Malec 33:12
which I’ve read all that I have a 10 year old and a 12 year old and already that people are like, Hey, you should really focus more on baseball, get rid of these other sports. I’m like, haven’t you seen the articles? So like the youth coaches are still trying to push that?
Denise Shull 33:27
Well, they’ll say
Jeff Malec 33:32
Yeah, well, it makes I think it’s for profit, kind of travel teams and that kind of stuff, too. Right? If Hey, if you focus more on you come in and you pay for the time and the cages and all that.
Denise Shull 33:43
Are you you’re in Chicago, right?
Jeff Malec 33:44
Yeah. Yeah. Kind of near Wrigley Field. Roscoe village.
Denise Shull 33:48
Does that make you a Cubs fan? Yeah, cubs. You. I’m kind of a Cleveland Indians fan because I grew up in Cleveland. But Marcus, Stroman is a client of ours. And he’s been public about it. So I can say it. The pitcher for the Cubs? Yeah. And actually one of my guys who was a trader at the Merck, John Burns, and my client and then eventually, I needed help and I started giving him some pliers. He’s worked with markers.
Jeff Malec 34:21
Well, we’ll see Matt don’t have high hopes for the Cubs this year. And so what where does all this n teams, every pro now has a mental coach, every hedge fund or prop shop has people like you come talk to them. Like just from an edge perspective, it seems like the edge is sort of gone and having this tool added to the toolkit. Oh, well, like if everyone’s doing it. Is there still alpha in it? What are what are your thoughts are? A is is everyone doing it? B if
Denise Shull 34:51
not everyone’s doing it. But even if they were okay, so forgive the hubris of this Yeah. If you get the model of the mind right You have a way bigger edge, and almost nobody’s getting them out of the rat mind, right? Because they don’t know any better. They’re only doing what they’ve been taught. So for the better part of the past 50 years, the cognitive behavioral model of the mind, well, clearly the better part of the last 500 years. But um, you know, we think, and that creates our behavior, we use our frontal thinking cortex to optimize our behavior. That’s the model most everyone’s working on. It’s wrong.
Jeff Malec 35:33
Or, to me what you see most like the old golf thing, right? Like, just focus on process versus results.
Denise Shull 35:39
Yeah. It helps a bit, and help some people more than other people. And it’s not irrelevant. But you’re still doing what you do based on how you feel and how you expect to feel. And that’s being left out. Like almost no one knows it, sort of the neuroscientists know it. Like Lisa Feldman Barrett is someone that we rely on a lot. You know, she’ll say this old triune three part of the brain is outdated. There’s a great article called Zombie ideas in Psychological Science 2019, you know, three part brain which is, you know, superior frontal intellect outdated, you know, emotion and reason separate, outdated. So 90 some percent of the mental coaching going on out there is cognitive behavioral, based on the old model,
Jeff Malec 36:43
which is separate your emotions from the right, yeah,
Denise Shull 36:46
and that you can and that.
Jeff Malec 36:50
That’s all for right of like, okay, just be a robot do the same process every time keep the emotions at bay.
Denise Shull 36:57
Yeah, but every time that you have that club in your hand, you have a feeling you think you’re supposed to override it, the way to get better is to listen to it. Because, like, we don’t decide based on data and facts and analysis, and even what we know our process to be, I mean, our sports has the aspect of you have a physical skill. You know, I don’t think about how I’m moving my legs as I mean, I think about it a little bit, but I don’t completely think about it when I’m skiing, right? But what is that that’s unconscious pattern recognition, that’s knowledge that at one time was explicit, linear, do this, then do that? And the more I did it, or the more the golfer does it, the more that explicit conscious knowledge gets pushed into the body, as a feeling as a sense. So the golfer senses, you know, the slope of the Gree, senses, the wind, like, they may consciously think about it. But that knowledge is bodily, it’s called visceral intelligence, it’s physical. You can learn to use that intentionally, systematically in an organized way. And it tells you all kinds of things.
Jeff Malec 38:19
And then was interesting, like Bryson D Shambo, right, he went the other way, and said, like, No, I’m going to math it all up. And so I’m not getting a feel for the slope, I’m actually stepping it off and measuring it before the round. And it’s in my book, he’s knows exactly how many inches back, he’s going to bring the putter and exactly how many inches forward to hit it to the.
Denise Shull 38:39
And just like Simon’s what he did in doing that was create confidence, he created the feeling that if he executed that system, it would work. And it’s that feeling about his system that will make it work. So like, even if you go back to Markowitz, who, you know, first said we should allocate assets, you know, through a quantitative way. What no one notices is that Markowitz said, the first step is taking your observations and experiences and figuring out what you believe. And the second step is taking your release and allocating to different asset class. And he said, I’m not talking about step one, in this paper, I’m talking about step two in the paper that won the Nobel Prize. But at that he said three times at the end of the paper, don’t forget, you have to figure out how to how to analyze your beliefs and ease I think he said, I mean, so many people said this kind of thing like Frank Knight and other these academics talking about the market in the early 1900 20th century, I guess that beliefs matter. But we don’t analyze them. I think you can analyze them and I think you can untangle them and I think you can in doing so You can create beliefs about your ability to do something, which is what, you know, the quantitative golfer or the quantitative trader is done, or any anybody for that matter.
Jeff Malec 40:14
And at some point, the whole process over results fails, right? If you’re an Olympic athlete, guess what, you have to get results in order to make it to the Olympics in order to earn a medal. So you can emotionally be stable that you’ve followed the process, and you didn’t get the result. But the goal is the result, right. And especially in trading and investing, the goal is the result.
Denise Shull 40:33
I can’t tell you how many clients I have, who, you know, will talk about focusing on their process will have me help them clarify their process, you know, I will get in a room and we’ll write their whole process on a board. And I’ll be looking for the discretionary factors and the factors that they really have competence and in the ones they don’t. And then they’ll call me and say, How do I know when I can deviate from my process and use my intuition, even the email that I’m not reading, because it’s, we, we have some way of analysis, analyzing anything we do, out of that way of analyzing, we get some intuition, some sense of what’s going to happen, we have some variable level of competence. In that sense, we might have fear that we would act up to slightly separate or at least more complex, but like, that’s how we do things, that’s how any of us do anything, we have some level of knowledge. And in that we have some level of confidence in that knowledge. And out of those two feelings, which are really intuition and conviction or intuition and incompetence, we act. And we act in the expectation that if we, you know, take what we know. And we predict into the future that will get us what we want and will feel good. That prediction of a future emotion. And when you start to make that expectation of how this is going to feel in the future, conscious, like this whole world of decision making opens up where you get a way wider set of choices. And you also get yourself really in the game you’re playing, because you start to be able to separate just your expectation from your past experience, from whatever you know, and whatever you’re seeing in the moment, it can be more about like, what is this price action? Or what is this market action? Or where should I hit the ball?
Jeff Malec 42:38
Back to our shared Mountain Sports obsession. So your most famous client perhaps is Lindsey Jacobellis.
Denise Shull 42:48
Jacob, Jacob
Jeff Malec 42:50
Jacob Ellis. Um, so did she come? Let’s start with her disaster and oh six where you came after that?
Denise Shull 42:59
Yeah, I met us ski and snowboard in April of 2016. I was invited to come give a talk about emotions and sports for their like annual coaches meeting. And at the end, this coach came up to me and said, Have I got a project for you? And I was like, okay, and then he I guess they emailed me the YouTube link. And I didn’t I mean, I only had the most peripheral tangential knowledge of this ever happening. And I said, Okay, you know, she’s whatever she was at the time. 30 or 31. I’m like, can she still do it? He’s like, Absolutely. He’s like, she’s won like every medal and more medals than anyone but she’s had a block in the Olympics.
Jeff Malec 43:54
And people that quit. She in Oh, six and what was it Terina. She was well ahead well ahead in the snow cross and on the last jump, kind of tried to do it with some style throughout and on the landing slip found that they passed her so she didn’t get her mouth.
Denise Shull 44:11
She got to silver. She snatched silver from gold. Yeah, yeah. So you know, I wasn’t the first like performance catch they’d had in there. But I started working with her in the summer of 16. And, like, I know this, when someone’s in a slump, you know, when there’s a repetitive mistake that doesn’t actually make any sense given their ability. I would have known this even if I knew nothing about her background. Because when a trader a portfolio manager comes to me is the same thing. Let’s go back to when this started. I know in those circumstances there’s always a mistake the person regrets now with Lindsay It was obvious what the mistake was she regretted and they’ve never Ever been given the right help to process that mistake in the right way, they’ve been told you to shake it off, get it over, it doesn’t matter, you know, in trading, you know, you’re still successful you know and at, but they have a set of feelings about that mistake, you know mad at themselves embarrassed all kinds of things that have never been worked through. So like with traders but it was same with Lindsay but with traders will go back to when it started I once had a trader who called me up and been the slump for 10 years and managed to sort of switch from hedge fund to bank to hedge fund to bank and like, you know, tried everything and hadn’t solved it and their wife had been kidnapped actually, grazie story. And she turned out to be fine. But they sort of felt guilty and responsible and never really processed it in the kind of, you know, be positive, think about the future kind of thing. So what happens is, there’s a lot of pressure to be positive. But yet the person feels still has a whole set of so called negative feelings about the mistake. And they’re in their negative feelings in their pure form have information for us. But they also get really distorted because no one knows how to feel them or talk about them. And so many people can’t cope with them and you get pressured and not have them. And so you never get to work through it in a grieving sort of way. Like we allow people to grieve. You know, when I met family member dies, we don’t allow anyone to grieve when they make a mistake in trading or sports. They’re supposed to just get over it. Well, guess what? There’s a grieving process.
Jeff Malec 46:37
Flush it, our little league coach tells the kids flush it immediately.
Denise Shull 46:43
Yeah, yeah. And apparently that works for a lot of people. But there comes a point where it doesn’t work. And then the person feels guilty because they can’t flush it. Like so they have the original problem, the original thing they feel bad about. And then they’re given this advice, which is use your intellect to get rid of the feeling. Literally, that’s what flush it is. And sometimes it doesn’t work. And then the person thinks what’s wrong with me. So they have their original mistake. And now they have the fact that something’s wrong with them. And the only thing that’s wrong with them is you weren’t giving advice according to the way your brain really works. So anyway, with Lindsay, you know, I think and I said this in the New York Times, so I’m not telling any secrets. I think there was an aspect of that, that was a bit of a rebellious teenager. She had just turned 20 She had been slated to be Little Miss snowboard cream for you know, forever. It was the first time boardercross was in the Olympics. You know, consciously she was celebrate Well, consciously she was she thought it was she would like give the crowd something to cheer about. Right. You know, some people who said she was celebrating early, I think these things always exist in layers. So I think yes, she was trying to give the cat something to celebrate. She was celebrating a moment too early, which I think is part of a coaching problem like Teach your athletes to cross the finish line. Yeah, before they do anything.
Jeff Malec 48:12
Do you see in football, the guy holding up the ball before he crosses the goal line?
Denise Shull 48:16
Yeah. But a part of it, I think was also defining herself as a separate human being that wasn’t just an Olympic athlete. And no one had helped her process that. So our work together, enabled her to see herself as Lindy Jacob Ellis, who happens to be an amazing snowboarder. Not Lindsey jacobellis, the snowboard
Jeff Malec 48:42
right or an amazing snowboard, her name linty.
Denise Shull 48:45
Yeah, yeah. So she came very close in 18. I mean, she dominated really until the bottom third of the course in a team. We’ve actually always been suspected there was some sort of wax issue even then. But as she went into this year, and I’ve worked with they’re basically the entire time she’s also a coach for us now. She’s on our website, and she coaches a young surfer. And if she ever retires, I think she’ll do more that I know for sure. She was being herself. Like the race right before the Olympics she opted out of because she thought the course was dangerous. And she just come into her own where she felt like it was okay to say that not do what the coaches wanted her to do, or anyone else wanted her to do. And that her coming into herself. was like I think the issue back then like, like I told her like but if you’ve been a 20 year old girl at college, you would have David the wrong guy and your dad would have been mad at you.
Jeff Malec 49:52
Instead you’d like blue though, right? Did this thing with 100 million people.
Denise Shull 49:57
thing you had to do because you weren’t in college with the optics. If they throw out a guy, so all kinds of 20 year olds do things to define themselves. So once she could see it that way, she could start to forgive herself.
Jeff Malec 50:09
And then what does that mean? So that’s all you mean by processing, it is just talking through it and identifying it.
Denise Shull 50:16
There is an emotional logic to everything every human being does, meaning you can make sense of it from their perspective. And they generally, I mean, obviously, murder and stealing, accepted, like, don’t have to feel like something’s wrong with them, because they chose to do something that resulted in a mistake. There was some reason. But we all ended up beating ourselves up because we think we made some, you know, ridiculous mistake. And I mean, in her case, she was excoriated by her sponsors in the press. I mean, even in whatever year it was at the Cleveland Cavaliers Jr. Smith passed the ball with like, two seconds left, when really he needed to shoot it because they were tied. So the next day Sports Illustrated did an article of like, the worst sports bloopers of all time. And this was like 17 or 18. So it was, you know, 1112 years from from Lindsay’s. She was three, she was number three in the Worst Sports areas of all time. 12 years later, in boardercross. So she suffered a lot like and she also went, she went this year to the to the Olympics said, You know what, I’m not going to answer the presses questions about 2006. And her coach said, Well, you never had to answer them. And she’s like, No, you guys always told me I had to do the press stuff. But this year, she just I’m not doing it. So she was she was just able to be herself. And then I talked to her the Friday before her race, which was Tuesday night here. And then I texted her right before I’m like, you just go be like I’m restarting. Your discovery, Lindsey jacobellis, and I knew she would say Lindsey jacobellis, like, you know, screwed up. So I preempted and I said, the Lindsey Graham Allison Swan, every other like world cabinet, every other X Games, you’d be that Lindsey jacobellis? Because that’s the real one. And you’ll be fine.
Jeff Malec 52:20
Sorry, there’s 99 of those. And one of the other ones. Yeah, yeah. And that does it? Do you think it matters? What if the narratives even true or not like if you say, Let’s process all this, let’s get a narrative around it, of why it happened? Does it even matter if it’s true that narrative or not, like a lot of in the investment world a lot of times, right, every day, the market did this because x, y, z, which is usually just some made up narrative, right, of why it went up or down.
Denise Shull 52:45
It matters if the person’s narrative about their behavior is true. Because if it’s not, it won’t have the power they need it to have, it’ll restart because that little voice will be you know, they’ll have some sense of this, really, which is what goes wrong, by the way with the process process process. I mean, if a person can get to the point where they can, like be completely dependent on the process with no self narrative, but that’s nearly impossible. So if we bring it to do that, you know, literally. So there’s always that self narrative talk reflection assessment going on. And human beings are really good at sensing what’s true and what’s not true. We’re just not taught to listen to it. So when you’re trying to create a higher level of performance, getting the truth out about what someone’s perspective is, which by the way, is often not true. It’s their truth. That’s how they perceive themselves. But it’s not objectively true. But you have to get that out in the table, you know, shine the light on and untangle it. So they see what’s what the way Lindsey saw like, okay, and some level I was just being 20 year old, rebel, like everybody else does not under the spotlight, then the person can go okay, well, who do I want to be now? You know, who am I now? Like, that’s my history. And then they actually get more truthful, not less truth, but usually, the self expectations are a mirage. They’re like, based on some misunderstanding from childhood, like, you know, you’re the youngest or you’re the smartest or you’re the dumbest, or you’re the one who always screws up like we have these stories about ourselves that we get in the first 1020 years of life. And the market is a perfect place to play those stories out. Because it’s like a Rorschach blot, you can protect anything. You have this implacable, unmovable authority figure and you can make You know, why do so many traders feel like the market had to get them?
Jeff Malec 55:04
The feds out again, it’s not personal.
Denise Shull 55:06
But it feels like it is. So when you untangle how it feels personal, and that resonates with the person, they start to be able to detach that from how they would otherwise act out that feeling in their decision making.
Jeff Malec 55:32
And so how do you approach the market person? Like, what do you do with your investments? You probably don’t trade anymore. And you still trade I trade a
Denise Shull 55:41
little bit. So I can Gamestop I, during GameStop, I said to my husband, who actually does the trading these days. I said, You got to short that thing. Like, and he’s very much, you know, hedged, you know, long puts and calls at the same time, they’re gonna play out and a little blah, all that. I started with options traders, but it’s just not my thing. I was like, no, no, no, no, no, like, just buy puts. And he’s like, what, what’s the I’m like, no, no, just buy puts. So we, you know, that some puts it like, when it was like 340 or something, then I looked at the screen and bottom bracket at pi, or sold them or whatever you do. But like, so like, that’s what I tell some of my clients, you know, my market knowledge these days. I keep CNBC on in the living room. And Master when I walk by the screen and see the quotes, like and so what that enables me to do actually is some sort of what would it be called swing trading in a momentum sort of way, right? Because that’s what that Gamestop thing is right? Now, I will have clients who will say you should buy the stock.
Jeff Malec 56:57
But uh, you’re able to practice what you preach and not get too emotional about your wins and losses. But
Denise Shull 57:03
what I’m really able to do is tell you listen to my intuition.
Jeff Malec 57:06
Totally listen to my intuition. Right. Do it with confidence.
Denise Shull 57:10
Yeah, like, and I can do that with everything now. But I mean, everything I’ve used in skiing, I do it in business decisions. I do it in personnel decisions. I do it like, I do it when I meet a new client. Like, I first talked to somebody, well, What feeling do I get from this person? I mean, there is a phenomenon where human beings have induced feelings. So in that it would happen so much on the screen. That’s one of the things that doesn’t work with Zoom. But if I’m on the phone, just listening to a person, I can feel feelings they’re feeling even if they’re not telling me that’s called induce feelings, and all human beings can do it, and you can learn to do it. Yeah. So I use that, which is what it’s a form of visceral intelligence. I was talking to somebody this morning and my job, my job was quivering. Never quivers, that was it was the person’s anxiety.
Jeff Malec 58:04
I mean, alien you Yeah, yeah, it
Denise Shull 58:06
didn’t really get crazy about it. I mean, this is people who have animals will understand this. My dog barks when certain clients start talking. You know, with their sense of hearing, like he can hear the tone right through the, you know, I had one client with this was a different dog. Literally, that client would start talking every Tuesday morning at 10 o’clock, and that dog will start barking like crazy.
Jeff Malec 58:29
I feel good. The dog hasn’t barked during the pot.
Denise Shull 58:32
He’s in the door. But, but, but that my point is there’s there’s this this, there is a body of knowledge all human beings have it’s called visceral Intelligence and Research. It’s what we call instinct, intuition, physical intelligence, somatic intelligence, you give advice? In other words, what the best one is visceral, you know, intelligence in your body. It’s what expertise is. I mean, I said this to a group of professionals just a couple weeks ago, even if you’re totally a math guy, you have visceral intelligence, and you’d look at some problem that can be analyzed through math. And you’d have this sense of what math to use.
Jeff Malec 59:10
Right? Yeah. Especially at the higher levels of like, how am I going to approach this? This theorem, right? Yeah, you’ve learned
Denise Shull 59:16
all this stuff. It’s innate to you now. It’s in your body, and you look at it and you go, this is the right way to approach I couldn’t do that, because I don’t have that expertise. So even if something is concrete, that becomes whatever some algebra or calculus to solve some problem the person doing, it has a sense of what’s the right way to approach it. And that sense is the thing I’m talking about. That sense is something that everybody can get better at that task and being able to know what the dictionary on yourself is. How does that sense feel, versus how to something impulsive, energized, that you want to do? For is for some other reason, other than just the problem that you’re facing, whether that’s market or engineering or whatever. Right? That’s a
Jeff Malec 1:00:10
skill. That’s the trick, right? How do you not let the intuition take over so to speak, right, and we go with every whim and every,
Denise Shull 1:00:18
well you have to learn you have to develop, as Lindsey calls it, mental awareness of what’s really going on for you. And this is a body of knowledge that anyone can undertake and will become an actual edge, particularly in the moments of stress, right? Particularly, when it’s like should I get big now? Or should I get out of this now or, you know, whatever, should I take more risk should I take less risk if someone starts to learn their physical signals visceral intelligence, they can start to use them and in a way your it gets easier, not harder. All this stuff about setting all of that aside, and using only only your intellect you’re just fighting the way a human being actually makes a decision. You’re fighting your best self
Jeff Malec 1:01:14
don’t do it. Don’t fight yourself. I know we gotta let you go. Tell everyone where they can learn more about you. The website all that good stuff. Yeah,
Denise Shull 1:01:23
yeah. So my company is the rethink group and it’s the rethink group.net all kinds of information on there way too much information. I my Twitter is Denise my middle initial K show s Hu LL. M.
Jeff Malec 1:01:43
Perfect. Yeah. So all you hedge fund managers out there listening, give her a call. Improve your performance, improve your results for our investors. Thanks so much. These been a pleasure. Hopefully we’ll get out your way. Utah, maybe next year. year run or two together.
Denise Shull 1:02:03
That’d be great.
RCM Alternatives 1:02:04
That’d be awesome.
