By James Saft
April 17 From Ray Dalio to Bill Gross, some of
the biggest names in money management are practicing meditation.
At a conference last week in Washington, Dalio expounded on
how his practice of meditation has helped his investment
performance. Georgetown University, at the same
conference, announced it would begin to offer a semester-long
class on the discipline at its graduate business school. ()
While money managers often joke that clients are the biggest
impediment to beating the market because they make emotional
mistakes, the truth is that all investors, big and small, share
traits which get in the way of making the best choices.
Meditation, which uses breathing and relaxation exercises in
an attempt to bring stillness and repose to our usually chaotic
minds, may offer some help.
"Meditation more than anything in my life was the biggest
ingredient for whatever success I've had," Dalio, founder of
$130 billion hedge fund firm Bridgewater Associates, said in an
interview at Georgetown in October. "(Meditation) gives me a
centeredness, it gives me an ability to look at things without
the emotional hijacking, without the ego, in a way that gives me
a certain clarity."
Bond king Bill Gross of Pimco has also said he leaves the
trading floor every day for yoga and meditation.
Dalio says the practice has been useful for him, both for
generating creative thought, and in evaluating and responding to
the huge overload of stimulus which presses upon a money manager
Some money managers who meditate say they believe it helps
them to deal with information overload, not just in the sense of
remaining calm when events are frantic but also in being able to
recognize the most significant bits of data from among the
ZEN, EGO AND BEHAVIOR
The attraction meditation has for some money managers is
that it can put them into a frame of mind where they are less
liable to fall into costly and self-defeating thinking patterns.
The so-called "confirmation bias," the human tendency to
seek out information that confirms your preconceptions while
remaining blind to things which don't, is among the most common
errors money managers make.
Confirmation bias itself is driven in part by ego, by
people's desire to be proven right once they've publicly
espoused a position. People become personally identified with
their ideas and suppositions, and take too long to relinquish
them even when they are plainly shown to be wrong.
One of the claims of meditation, in contrast, is that it
allows people to accept reality as it really is. This perhaps
reduces the pain of accepting that one may be wrong.
"Meditation helps with bias," said Jason Voss, a former
money manager who now works for the CFA Institute and who has
written a book about meditation and investment. "You're trying
to remove all of the filters off of your thinking so you can see
reality as closely as possible."
Philip Yim Kwong Cheng of the Australian Catholic University
theorized in a 2010 article in the Journal of Behavioral Finance
that unconscious thought, which meditation is intended to
facilitate, might help in limiting overconfidence, a trait which
is often found among money managers and which is documented to
lead to poor financial decisions.
Meditation's results are hard to quantify. For one, many
practitioners say that meditation brings about creativity, but
this is almost impossible to prove. Creativity is hugely
important in a world filled with funds doing more or less the
same thing and producing more or less the same results, but
demonstrating a direct link between meditation and creativity is
a lot more difficult. It may simply be that calm people are more
able to be creative than frenzied ones, or it might in turn be
that meditators wrongly attribute their good ideas to the
The lack of data is probably the biggest impediment to
evaluating the impact of meditation on investment performance.
It is also why we are not likely to see it becoming a widespread
marketing point for fund managers any time soon.
Meditation is likely to continue spreading among fund
managers in the way it has in the rest of society: from hand to
hand as something that people do and find helpful.