Category: Psychology of Investing

  • For Professional Investors:  Why you won’t follow your own rules and What to do about it

    For Professional Investors:  Why you won’t follow your own rules and What to do about it

    Rule-Breaking:  Looking at the Psychology of Finance through a Psychoanalytic Lens

    Third in a Series

    Introduction

    Experienced investors believe in the importance of rules.  Rules that specify entry and exit triggers, acceptable volatility ranges, trade size parameters and so on. They organize their rules into trading plans and systems, the uniqueness of which gives them their edge. But except for someone who surrenders control entirely to a computer algorithm, there comes a moment when even the most experienced investor breaks one of his own rules.

    This post uses a psychoanalytic lens to explain why it is inevitable that you will break your own rules and how to  decrease the frequency and minimize damage.

    The Inevitability of Breaking Rules

    Rule breaking is often attributed to lack of consistency, discipline and/or confidence. (for example Crist and Dennis).

    This diagnosis is subtly moralistic.  If you break rules, you obviously lack discipline or confidence—the implication is you’re “bad” or “weak”. Besides being unhelpful, this viewpoint also ignores human nature and the inevitable power of emotion.

    So why do people, including those who are quite confident and disciplined, regularly and inevitably break their own rules? And this despite the pain that usually follows?

    Investment guru Howard Marks is closer to the cause with his focus on emotion:

    “Most people are driven by greed, fear, envy and other emotions that render objectivity impossible and open the door for significant mistakes” (The Most Important Thing Illuminated).

    Reasons for Rule Breaking[i]

    Temperament

    Temperament is your innate way of behaving and reacting, a stable way of perceiving and responding to the world.  Temperament and personal history effect decision making (and therefore rule breaking).  The variations are endless, but here are two common patterns:

    • Stimulus-seeking. Following rules is boring.  You wouldn’t be in this business if you liked doing things in a predictable, rule-bound way. Rule breaking can come from a drive to pursue excitement in the form of daring bets.  And inhibiting yourself can be irksome to the point of fomenting rebellion.
    • Market observers describe states of cyclical euphoria and despondency.  If your temperament includes a component of what psychiatrists call “cyclothymia” —mood variability that alternates between excited, energetic, overly optimistic highs and depleted, pessimistic lows– it’s likely that you will be extra-sensitive to the market’s mood swings which may resonate with and amplify your own. In an elevated mood state, people are universally more impulsive and risk taking.  In a down cycle, people are pessimistic and slow to make decisions.  These overall affective states can be powerful and could easily tip you into the temptation to break one of your rules.

    Group Psychology, aka Jumping on the Bandwagon

    This danger has been widely noted[ii] yet humans being humans, people keep jumping. This is not surprising, since we have evolved to be social creatures.  Our DNA whispers to most of us “stick with the crowd if you want to survive”.  The feelings and thinking of the group exert a magnetic, biologically based pull to match your thoughts and emotions with the herd. Especially if your rules dictate a position that is contrary to the larger group’s prevailing attitude and behavior, you’re likely to experience increasing internal tension. No one enjoys feeling left out of a party, or out on a limb when everyone else is retreating. You start to wonder, maybe everyone knows something you don’t know. The temptation to break your rules grows as your own positions depart from the herd’s.

    What about contrarians?  They are certainly less susceptible –though not entirely immune—to the pressure to join the herd. However, if you are a hard-boiled contrarian you can even rebel against rules you’ve placed voluntarily on your own trading.  I’m a contrarian myself so I’m sympathetic to this position.  If someone tells me I can’t do something I feel a nearly irresistible urge to do it.  If I tell myself I can’t do something, I just as strongly want to say, “oh yeah, just watch me.”

    Emotional forces

    Emotional forces are more fluid and tend to occur in reaction to specific experiences.  While cognitive biases have garnered most of the attention in discussions of the psychology of investing, a smart handful of people have warned about the power of emotion (Once again, see Marks, Buffet, Tuckett[ii] ) . Relevant emotional forces include those that are ubiquitous—everyone experiences them at some time or another–and those that are idiosyncratic-part of your unique makeup and perception/reaction system.

            Ubiquitous emotions

    Investment guru Howard Marks identifies a quiver of emotions and emotional forces that affect every investor:  greed, fear, tendency to conform to the view of the herd, envy and “ego”.  I would add the wish to avoid shame and humiliation. Any powerful emotion can lead you to rationalize departure from your system and rules.  Especially if you are unaware of them, emotions can always override rational thought and considered discipline.

            Idiosyncratic emotions

    Getting acquainted with emotional reaction patterns unique to you requires some practice in self-reflection.  Each of us has triggers for emotional reactions that are idiosyncratic and sometimes counterintuitive.  For one person, boredom becomes a nearly intolerable itch to act and make something happen. Another is hypersensitive to competition with sibling substitutes. Still another person reacts paradoxically to success.

    “Disavowal”

    This is a sneaky and pernicious psychological defense mechanism that everyone is vulnerable to and all investors should know about. It’s complicated, so I explain it in depth in a separate post.  Briefly, it’s a mental disconnect–the strange capacity of the mind to know something very clearly but act in a way that defies the implications of that knowledge.

     What can you do?

    Howard Marks: “What, in the end, are investors to do about these psychological urges that push them toward doing foolish things…Learn to see them for what they are…Be realistic—you’re not immune to these forces” [iv].

    His prescription? “Although we will always feel them [emotions], we must not succumb; rather, we must recognize them for what they are and stand against them.  Reason must overcome emotion. [emphasis added]”

    Marks’ prescription reminds me of Bob Newhart’s famous line as a TV psychotherapist faced with a patient’s irrational fear: “Stop it”.

    If only we could stop ourselves from being driven by emotion.  The Stoics tried it centuries ago, and I suppose a few people can pull it off. But for the clear majority of humans it’s important to understand you are beset by irrational emotional forces AND you can’t just will yourself stoically to resist them.

    Acceptance and Humility

    As Marks correctly insists, know you are as susceptible to these forces as the next person.

    Practice Self Awareness

    You need to learn how the forces of temperament and emotions –both ubiquitous and idiosyncratic– apply to you personally.The key operation in gaining self-awareness is looking at sequences.  Investors are used to doing this in analyzing the market.

    You start with a critical event—you broke a rule, made a mistake– and work backwards.  What mental state were you in before?  What emotions can you identify that preceded your action?  And what came before that spike in emotion?

    If you do this after-action analysis for every instance of rule-breaking, you’ll start to see typical patterns that will clue you into your personal, unique tilts, triggers and vulnerabilities. Take a look at my blog post on “Why professional investors need to know about the concept of psychological regression” which alerts you to some predictable situations that make rational behavior less accessible. Once you know when you are more susceptible to breaking your investing rules, you can set up extra stop-gaps and alerts to try to get you to think before acting when you’re in a similar frame of mind in the future.

    Make Two New Rules

    # 1 WAIT.  Hopefully, you now believe there will be times you want to depart from your system.  Try to put a wait time in place.  Even a 30-minute pause can give you a chance to reconsider your impulse and remember why you have a system in the first place.

    #2 TALK TO A DESIGNATED HUMAN BEING BEFORE YOU BREAK YOUR RULES.  Choose someone to be your external braking system.  The rule is you must get in touch with them before you break a rule or deviate from your system.  If you can’t reach them, you can’t make the trade.  You’re not asking for their permission; you’re just telling them you’re going to break your own rule and you’re willing to listen to their reaction.

    **

    What’s to stop you from this breaking these rules?  Well, you could do that too.  Then it’s time to ask yourself why you might be sabotaging your own success.  Meanwhile, I also suggest a goal of diminishing the frequency and impact of rule breaking, rather than eliminating it entirely.  Your best defense is to know yourself in as much depth as possible and be realistic about and alert to the ubiquity and power of emotional forces.

     

    [i] You might notice I’m not including cognitive biases, which are well known in the industry, as one of the causes of rule breaking. Disciplined following of a set of rules ought, theoretically at least, to eliminate the effect of cognitive biases such as loss aversion, confirmation bias, disposition effect etc.  So, departures from rules can’t be explained by the usual concepts from behavioral finance.

    [ii] See, for example, Howard Marks, The Most Important Thing Illuminated, David Tuckett, Minding the Markets, and Warren Buffett, The Essays of Warren Buffett

    [iv] Howard Marks, The Most Important Thing Illuminated

     

     

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    Copyright: Invantage Advising

    August 2017

     

     

     

     

  • Why Professional Investors Need to Understand the Concept of Disavowal

    Why Professional Investors Need to Understand the Concept of Disavowal

    Disavowal:  Looking at the Psychology of Finance through a Psychoanalytic Lens

    Second in a Series

    What is Disavowal and Why Does It Matter?

    Disavowal is a psychoanalytic term that describes a sneaky and pernicious defense mechanism that leads to very risky and foolish behavior.  It is the fundamental mental flaw behind most white-collar crimes. Disavowal is one of the reasons people break their own well-thought out investing rules.    Disavowal is the prime mover in the dumbest stuff you’re likely to do.

    Everybody knows about disavowal’s cousin, denial, which is so familiar it’s a part of everyday vocabulary.  Disavowal is not necessarily less common— and certainly not less dangerous— but it’s harder to understand, and that may be why you never heard of it before.

    Disavowal is not Denial, But They’re Related

    The easiest way to get at an understanding of disavowal is to understand the idea of denial, and then go through the looking glass to the crazy world of disavowal.

    Denial is straightforward.  Your mind rejects a fact, to avoid the pain that accepting it would cause.  A problem drinker does not believe she has a drinking problem.  A person with an illness does not accept that it has affected his performance.

    With disavowal, facts are accepted as true, but bizarrely, they have no impact your behavior.  It’s as if your mind has been split in two with a glass wall in between.  On one side is logic, a bunch of reality based facts, and awareness of consequences. You see it all.  You know it all.  On the other side is “you”, who really wants to do something, often something risky.  The reality and known dangers hanging on the far side of the wall are disconnected from emotion and your motivational system, and therefore fail to have an impact on the decisions you’re making.  You go ahead and do the Really Dumb Thing. 

    You know when a famous person, let’s say a Congressman or Governor, gets caught doing something illegal, immoral or incredibly embarrassing?  And they lose everything?

    We think, incredulously, “You’re a smart person! How could you be so stupid to think you wouldn’t get caught?”

    Intelligence, obviously, has nothing to do with it.  Most likely, the individual in question knew the law, the risks, even the potential consequences. He probably wasn’t even thinking “the rules don’t apply to me.”  He wasn’t thinking!   Knowledge was split off from emotion and a subjective sense of reality.  It just didn’t feel real, relevant, important, or worth paying attention even though a rational assessment would conclude that the consequences of ignoring reality could be dire.

    AKA Willing Suspension of Disbelief

    Famed investor Howard Marks, who understands the central role emotion plays in investing (especially as a source of mistakes!) borrowed the term “willing suspension of disbelief” from the world of theater to describe one of the key emotional gremlins that can lead the most experienced investor to do stupid things.  Marks writes, “Many times over the course of my career, I’ve been amazed by how easy it is for people to engage in willing suspension of disbelief…people’s tendency to dismiss logic, history and time-honored norms.” (The Most Important Thing Illuminated)

    I think what Marks is amazed at is the frequency with which people employ disavowal, which is the mental mechanism behind the “dismissal” of logic, etc.  It’s not that we bury known facts (such as laws and rules and the consequences of breaking them) —disavowal sets up a situation where these facts and the logical conclusions that link them can’t gain any traction and therefore, weirdly, don’t impact our decisions.

    Marks again: “Time and time again, the postmortems of financial debacles include two classic phrases: ‘It was too good to be true’ and “What were they thinking?’.”

    Adaptive in Small Doses, Catastrophic in Large Ones

    In small doses, disavowal is necessary for survival and essential for risk taking.  Who would get in a car or airplane if the known reality of potential accidents had a strong emotional impact?  We split off what we know about risks in life on an everyday basis in order to be able to do anything.  What surgeon would start an operation if she really felt the reality of what she was about to do?  No investor could tolerate any risk if he deeply felt the full impact of what could go wrong.

    But in larger doses, or when it becomes an organized way of living life, disavowal is tremendously dangerous and a very hard habit to break.

    What to do?

    If it’s you?

    • Be vigilant.
    • Don’t assume you’re too smart to be so dumb.
    • Don’t assume it can’t happen again, because the inherent structure of disavowal, that “split”, is that it can and will.
    • Have a trusted partner who knows your vulnerability to disavowal—what realities are you tempted to disconnect from—and give them the power to stop you when you need to be stopped.

    When it happens on your team

    • Teach the concept.
    • Be vigilant.
    • Take rapid action.
    • Don’t accept “It won’t happen again.”
    • Set alarms and fail-safes in place.
    • Assign a manager or coach specifically alert to this behavior to work with the investor.

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    Copyright: Invantage Advising

    August 2017

     

     

     

     

  • Why Professional Investors Need to Understand the Concept of Regression

    Why Professional Investors Need to Understand the Concept of Regression

    Regression:  Looking at the Psychology of Finance through a Psychoanalytic Lens

    First in a Series

    We often labor under the misconception that once we reach adulthood, our level of psychological functioning is more or less consistent.  A sophisticated asset manager or investor knows that he must contend not just with cognitive biases (anchoring, recency, loss aversion, confirmation bias and all the other little demons the behavioral economists have identified) but also with “dangerous” emotional forces- greed, fear, the herd effect and so on.  He has also made an effort to identify some personal and unique decision patterns—watching out for a habit of being too impulsive, or too conservative, or risk averse, or overly risk tolerant.

    But it is useful to add to this mix the concept of “regression”—defined as the “reversion to an earlier mental or behavioral level” (Merriam Webster).  There is no such thing as a steady state of mental functioning.  We humans are inherently fluid and changeable.  No matter how experienced, mature or calm, everyone is subject to the phenomenon of psychological regression from time to time.

    Think about it this way.  You know what you’re like at your highest level of functioning.  How you think, perceive, feel, decide, anticipate, plan and understand. But when you’re tired, sick, freaked out about something at home?  It is inevitable that there will be times when you slide down from your highest level of performance to a regressed, or earlier level of psychological functioning.  In that regressed state, your cognitive and emotional capacities are not working at their best– most critically, decision-making and self-control.

    It’s important to know (1) when regression is likely to occur, (2) what happens when it does, (3) how to recognize that it is occurring, and (4) what to do about it.

    When does regression occur?

    Well, it’s complicated.  There are generic and expectable triggers for regression that no one is immune to—excessive fatigue, illness, preoccupying anxiety.  If your wife is just about to have a baby, or your husband just lost his job, you better know that your decision-making capacity is not going to be at its best and your emotionality is going to be heightened.

    Then there are other triggers for regression that are less obvious but also nearly universal:  group pressure is a key example of this.  Another is an experience of shame or humiliation.

    And finally, there are idiosyncratic triggers for psychological regression.  You can be in a more regressed state on the anniversary of a loss or traumatic event in your life.  Some people get regressed when things are too good, or too exciting.  You need to learn your personal thumbprint—when are you personally most vulnerable to regression?

    What happens when a person is regressed?

    Just as there are generic as well as idiosyncratic triggers for regression, there are universal manifestations of psychological regression and some that are unique to you.

    First, this is what happens to everyone in a regressed state:  your ability to think critically and exercise judgment is inherently lessened and more apt to be swayed by emotion.

    Specifically, in a regressed state you are more likely to:

    • Make impulsive decisions
    • Rationalize breaking your investing rules
    • Have blind spots to crucial information
    • Reveal too much
    • Jump on the bandwagon
    • Fail to notice and override cognitive bias errors

    Let’s break down “thinking” into some of its components:  discrimination, ability to see the big picture, ability to compare, categorize, rank, assess and predict.  Judgment includes, importantly, risk assessment and anticipation of the consequences of your decisions. Perceptual capacity is altered in a regressive state, though at times intuition and creativity can actually be increased. Emotions are stronger and closer to the surface; discipline is diminished.  Memory can play tricks on you, subtly weaving aspects of the past into the present.  And you’re much more likely to act before thinking.

    Now, what are some of the unique emotional and cognitive states a person can slide into when a regression is triggered?  The variations are innumerable, since they are dependent on the specifics of an  individual’s personality and life history, but here are a couple of examples.  One client of mine  would become pre-occupied with office politics, especially what he saw as injustices, and lose his focus.  Another gets rebellious, chafes at the rules imposed on his trading, even the ones he’s laid down himself, and makes impulsive trades.  Still another gets anxious about irrelevant factors and can’t pull the trigger on decisions.

    Of course, there are degrees of regression. Some regressive states can be quite subtle but nevertheless have a significant impact on decision making.  And to make it even more insidious, unless alert to the possibility you may not even be aware that you are in the midst of a regressive process.

     How to recognize that psychological regression is occurring

    Recognition requires some practice in self-awareness and reflection. On a day when you lose your phone, leave your laptop at the hotel, and your suitcase at the restaurant checkroom, you definitely know you’re regressed.  (No kidding, all this happened to me in one 3-hour period).  Physical symptoms can be a clue—headaches, GI problems, uncharacteristic sleep disruption.  A flurry of errors and oversights is another sign—sending an email by “mistake” to the worst possible recipient, going through a stop sign because you didn’t “see” it, or forgetting to make a promised call.   A general feeling of being confused or muddled, or overly emotional can be a signal that you are somewhat regressed.

    What to do about it?

    Often, merely recognizing the state is enough to get you on your way back to your normal, higher level of functioning.  Wait till it passes, because it will.  You will return to your usual level of functioning.  If you can, take a break, get rehydrated, eat something, go home.  Meanwhile:

    • Return to your investing rules and follow them rigorously —it’s no time for improvisation.
    • Don’t make major decisions.
    • Stop yourself from making significant judgments, including about yourself and whether you’re worthless or great.
    • Be very alert to your vulnerability to group psychological pressures—it’s not the time, if there ever is one, to jump on the bandwagon.
    • Postpone conversations with anyone who is in a position to judge you or anyone who makes you feel more confused.

    Regression is not another word for “stress”.  It is a complex state where a person functions at an earlier, more emotional, less disciplined level.  It can be triggered by stress, and often is.  But it can just as easily be triggered by a big increase in your portfolio or positive recognition from your fund’s Manager.

    Understanding regression, knowing when it is likely to befall you personally, and having a response plan in place gives you a significant competitive advantage—because regression happens to everyone, and not infrequently.  The difference can be you know about it and they don’t.

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    Copyright: Invantage Advising

    July 2017

     

     

     

     

  • Billions’ Wendy Rhoades-A Performance Review of the Superstar Performance Coach

    Billions’ Wendy Rhoades-A Performance Review of the Superstar Performance Coach

    I’ve heard several portfolio managers say they wish they could find someone like Wendy Rhoades, performance coach extraordinaire on the wonderful TV show Billions.  With the TV show  about to launch it’s second season, I thought it would be a good time (and fun) to offer a professional critique of Wendy’s technique. Bottom line–she’s not bad.  Especially later in Season 1, she shows how  unconscious motivations can lead to very costly decisions, and more importantly how reflection and self awareness of the emotions involved in critical decisions can potentially avoid costly mistakes.  Below is the text of a blog post I wrote for Huffington Post, which you can read on HuffPo here.

     

     

    Just how good is Wendy Rhodes?  She’s described by her admirers as “the best performance coach in the business”.  I thought the launch of Season 2 of Billions might be a good time for a performance review for Wendy herself.

     

    Showtime, the cable network home of Billions, where Wendy plies her trade, describes her as

     

    “A psychiatrist by trade, Wendy Rhodes combines an avid intellect with a keen understanding of human nature.  She used those skills to help Bobby Axelrod build his edge run from the ground up and now works as the company’s star in-house performance coach.”

     

    Until the prequel, we have to take Bobby’s word for it that Wendy helped him build his hedge fund from the ground up.  I’m not going to quibble with an “avid intellect” and a “keen understanding of human nature.”

     

    Like Wendy, I’m a psychiatrist, do performance coaching and business consulting.  Foregoing modesty, I will describe myself as also having an avid intellect, and share her keen understanding of human nature.  I thought viewers might appreciate an assessment of the quality of Wendy’s work.  I don’t think Wendy would mind.  Peer consultation and supervision is a standard tool psychiatrists and analysts make use of to keep us on our toes.  We use colleagues to help us overcome blind spots and check for systematic errors.  Not unlike a how a good performance coach can help an investor!

     

    Wendy calls the people she works with “patients” —a mistake in my opinion, for lots of reasons.  They are her clients, or more correctly Axe Capital is her client. One hopes she doesn’t prescribe medication if they get clinically depressed, or for their ADHD, and that when they need therapy—for relationship problems, significant anxiety or depression, or anything outside the field of their investment performance– she refers them to a competent colleague for confidential treatment outside the transparent walls of Axe capital.  I’m sure she would agree.

     

    How good is her technique and skill when actually working with a client?  To my eye it ranges from pretty cheesy to not-too-bad (Pilot, Season 1) to pretty damn good (Season 1, Episode 11).

    In the pilot we see Wendy at work in two “sessions” (Personally I’d call them meetings.  This is business.  It’s like therapy, but it’s not therapy).

     

    image: Showtime

    Mick Danzig, played by Nathan Darrow, has scheduled an appointment because he feels he’s “lost his mojo”. Everyone else in the firm is up double digits, and he’s down 4%.  He’s lost his confidence, wonders if he’s depressed and needs some Prozac (or something).  After asking a few good and important questions (is he sleeping, eating, exercising, having sex, ok at home?) Wendy firmly announces that he doesn’t need medication—he needs to believe in himself again.  She says he’s listening to the “wrong voice”—the loud one telling him he’s “just fucking stupid” rather than the quiet one inside that is telling him “where the alpha is.”

    Using the word “alpha” correctly in a sentence immediately identifies Wendy as a true insider.  I’m not going to try, but suffice it to say that being good at “finding where the alpha is” is what makes you a superstar, and a lot of money. Wendy makes Mick stand up and “confess” that he made 7.2 million last year. She insists he’s got to FEEL that power inside.  There’s some chest pounding and impassioned encouragement. Wendy tells Mick forcefully that he’s among the elite— “you’re in the special forces here—you are a Navy SEAL—Did the SEALS make a mistake signing you up?  No the SEALS don’t make mistakes!  So get out there and do what needs to be done!”

    This is kind of clever.  Wendy appeals to Mick’s narcissism (“you’re part of the elite”) while simultaneously reminding him of a broader network of authority and brotherhood (the SEALs) that has decided he’s of value so he doesn’t need to make his own decision about himself.  In a sense he can lean on the group identification while he regains his balance.

    Mick leaves looking decidedly perkier, returning later in the episode with a good bet that earns Bobby’s approval, millions for the firm, and a shy grateful smile for Wendy.

    With Mick, Wendy is using the tools of suggestion and motivational exhortation.  She uses the force of her own personality and alleged belief in Mick (I didn’t find this entirely convincing) to transfer some energy and confidence into him.  I’d call this good old sports coaching and not much more sophisticated than a talented high school football coach. Clever in parts, this session is fraught with manipulation and suggestion, and contains no help for Mick that will foster self-awareness or growth.

    Contrast it with an encounter in the pilot between Wendy and Bobby. Bobby is wrestling with an impulse to buy an extraordinarily lavish and expensive house.  He tells Wendy that he knows that buying the beach mansion will “unleash the hounds” (of envy and criticism) and that “makes me want it even more”.   Wendy congratulates him for understanding the motivation before he makes the purchase, saying that he’s come a long way since they first started working together— “You wouldn’t have recognized the motivation until after the fact”.  She’s underlining that through their work he’s increased his capacity for self-reflection, gained  knowledge about his own motivation and developed a greater ability to delay action in favor of reflective thought.  Wendy leaves him with the thought that understanding is still not enough—he also needs to exercise control.  Axe says he has no one else to talk to like this, and that’s undoubtedly true.  Wendy is working at a much more sophisticated level here compared to her session with Mick. There’s an ongoing process with Bobby, where they’re working on his capacity to be reflective and self-aware and use that to make better decisions (i.e. exercise control when needed).  After praising Wendy for her contribution to his greater self-awareness and self-control, Bobby gets provoked by her husband Chuck and knowingly overrides his self-awareness, giving in to the impulse to buy the house.

    Fast forward to Season one, Episode 11—Bobby has just made a colossal mistake on a company.  Deliberately ignoring the warnings of his entire staff of analysts, he places an enormous bet that leads to a loss of hundreds of millions of dollars.  Impressively (maybe we have Wendy to thank for this) he doesn’t blame anyone, but immediately knows that the misjudgment arose from his head, not a miscalculation of the market, and asks Wendy for an emergency meeting.  In a long, intimate conversation (that Wendy’s husband observes and mistakenly imagines to be romantic or sexual) the two of them explore the “mistake”. Wendy keeps bringing Bobby back to Donny, his long time friend and co-worker who has recently died (with a very complicated backstory).  The viewer knows, but Wendy doesn’t, that Bobby has a secret reason to feel guilty about Donny’s death—for his own gain, he withheld information about potential treatment that could have prolonged Donny’s life.

    Nevertheless, Axe has plenty of other things to feel guilty about.  He admits to Wendy that he felt relief when Donny died; that if he felt any sadness it was deeply buried.  He admits his greatest fear to Wendy—could he be a sociopath, someone who doesn’t have the capacity to feel?  With great insight and compassion, I thought, Wendy tells him that he showed his guilt by blowing the bet—punishing himself via both the financial loss and the humiliation in front of his people. She points out that a normal person wouldn’t engage in the behavior he does—but a sociopath wouldn’t care about the consequences.  He comes back with a penetrating observation about himself and Wendy — that neither of their “wires” are where they should be—they’re both outliers.

    This encounter is moving and effective as drama, and also good TV psychoanalysis.  Together Wendy and Bobby explore the way unconscious feelings—in this case guilt—can lead to apparently irrational decisions.  But there is a psychic logic to Bobby’s action.  Unconscious guilt led to a need to punish himself which led to the bad bet which “fixed” the psychological problem.  This is the real deal, and shows how unconscious motives can cause terrible mistakes in business.  The process also offers the hope that when making consequential decisions, a deeper understanding of one’s psychology including unconscious feelings and fantasies, could actually prevent costly repeated mistakes.

    Wendy is identified from the outset as a psychiatrist, but this later work with Bobby makes it clear that her orientation is at least in part psychoanalytic.  She listens in an analytic way, hearing not just the words but the spaces between, the evasions and changes of topic, showing that sometimes the “negative space” in a conversation points to the most important issues.  And she uses her understanding of the unconscious and its link to motivation and choice to powerful effect.  She was great.

    A few details in the series made me squirm.  That’s a problem all professionals face, I think, when they see dramatic representations of their work.  The departures from real life practice, whether done out of ignorance by the writers and producers, or more probably for dramatic purposes, are ridiculously painful.  I want to yell at Wendy for being so stupid about her supposedly confidential notes—for one thing they were dumb and unnecessary, and for another, leaving them on her laptop on bed at home was inexcusable.  Couldn’t the writers have found another way to give Chuck a shot at Bobby without such a dumb violation of professional practice? Wendy should have known enough to keep no notes at all.

    OK, and I have to say something about her clothes.  Black leather leggings in the pilot, some low cut tops later on.  A little too sexy, but more importantly too intrusive into the relationships she’s engaged in. She also works a little too hard to maintain control of the physical space—for example, forcing Bobby to come to the “patient” chair before she’ll begin their “session”.  She’s forcing people to pay attention to her and acknowledge her power —my read is rather than demonstrating her power with these moves, she’s showing a bit of lack of confidence. She’s trying a little too hard, I think, to prove she’s as powerful as the boys.  And all along, they’re desperate for her attention and care.

    Compared to other television and film psychiatrists, Wendy’s awfully damn good.