The Intuitive Investor: Non-Attachment Is the Key Intuition Skill

In my last column I promised to share how to bring intuition more into your conscious awareness and how to translate it into something useful. Recall that in "The Intuitive Investor: A Simple Model of Intuition," I said intuition is sensory stimulus followed by interpretation. I also said that if intuition fails an investor, it is usually because of poor awareness and poor interpretation, which are admittedly hard to overcome.

It is my belief that awareness of intuition is made difficult by the many intellect- and emotion-based biases introduced in the interpretation phase. This is largely due to a lack of cultural appreciation for intuition and consequently a lack of structure and resources to help you improve. For most, intuition remains serendipitous rather than a tool. So before I can share some of the skills needed to increase awareness of intuition, we need to focus on the interpretation part of the equation since it is the primary obstacle. To that end:

The key intuition skill is non-attachment.

What Is Non-Attachment?

Non-attachment is another way of saying “having a minimum of bias.” Non-attachment also means you are indifferent to the sensations provided by your intuition. Attachment to your intuitive sensations, by comparison, means that you care very much about your sensory experience. An example is “I always trust my gut,” or “I never trust my gut.” This is attachment because the words “always” and “never” are judgments made in advance of your sensation. Ideally you experience your intuition without preferring an outcome, such as: “I need some sort of insight about whether to buy this stock or not considering that my model does not provide a definitive answer.”

When Does Attachment Happen Most?

Attachment arises much more frequently in the interpretation phase of intuition. This is because interpretation requires a judgment and it is very difficult not to invoke mental models or be blinded by behavioral biases. Non-attachment is also not detachment, with which it is frequently confused. This is because, similar to attachment, detachment is an active mindset, whereas non-attachment is neither active nor passive — it is simply the observation of what is happening.

An unfortunate case of attachment from early in my career was buying an initial position of shares in a company (International Rectifier: $IRF) because I had recently been promoted to portfolio manager and wanted to have an immediate effect on the returns of the fund I managed. This ran counter to my intuition, which indicated that the market’s skepticism for the company was appropriate. My poor choice occurred because I was predisposed to buy shares independent of my intuition in order to fulfill a biased mandate. Put another way, if there is attachment you can torture your financial models to generate any outcome you desire.

How to Overcome Attachment

To succeed as an investor your conscious awareness must be as in accord with reality as possible. Any distortions added by mental models, prejudices, preferences, memories, and emotions corrupt the purity of the initial signal. Non-attachment means awareness of reality’s pure signal without immediately jumping to conclusions. To be clear, mental models are not discarded. Instead, in practicing non-attachment you recognize that your intuition is primary and shapes your choice of mental model, rather than conforming your intuition to a preferred mental model.

An example may help to illustrate non-attachment in action. Can you be indifferent about the music on the radio as you commute to work? After all, music is just sound waves transmitted through a medium that are received by your ear, converted from acoustic energy to electricity, and then passed on to your mind. At that point you are free to listen or to interpret what you are hearing as the music has an independent and objective reality separate from your preferences. Most people prefer only certain types to the exclusion of others. That is, their preference interferes with the pure signals provided by the music itself.

As an exercise in non-attachment, try listening to music you normally would not listen to and see if you are able to just experience it without judgment. Pay close attention to the emotions that arise while listening to the music. Are you mapping the music you do not like to models or archetypes, such as: “loud music is for dumb people”? It is okay to have general preferences, but the point is to begin recognizing the distinction between objective signals and our filtering of those signals with our prejudices and preferences.

Here are other non-attachment examples specific to the investment business: if you lost money and shed lots of alpha with an investment in a waste company last year, are you able to listen to a new waste company pitch objectively? What about being overweight in commodities for the last five years with great success, are you able to sell now? Or are you still attached to your winning position? Say you are at an industry conference and hear an executive pitch her company for the third time in the last 18 months. Do you experience the presentation objectively and as a unique moment? Or does it sound exactly the same?

Each of these are examples of experiences in which attachment is likely to be triggered. Consequently, these moments are rich in lessons on how to notice attachment and learn how to sense it when it fires into operation. As an exercise in practicing investing wisdom — and not just intelligence — after you begin noticing your attachments, see if you are able to interrupt the blind, reflexive firing of prejudices, preferences, mental models, and so forth. Each time you can track your mind at work increases your ability to learn non-attachment. This alone will help your intuition to improve.

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Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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