AlphaBrain

Smarter decision-making based on cognitive science

AlphaBrain is the investor's guide to achieving more, doing better, and reaching higher. At its core, the magnitude of your success is based on the quality of your decisions. The problem is that human beings are poor decision-makers; we tend to approach problems after they arise instead of planning for them in advance. We put too much weight on instinct, belief, and "gut feeling." We make the same mistakes over and over again—so reliably, in fact, that cognitive science can accurately predict exactly which mistakes we'll make and when. This book offers a way to understand and plan for the human mind's usual tendencies to help you make smarter investment decisions. Using a framework based on cognitive research, you'll learn how to approach decisions objectively, systematically, and constantly review your process; you'll take action based on evidence instead of intuition, and get ahead of potential problems before they get the best of you.

With so much riding on the correctness of your choices, natural tendency can be a dangerous thing. This book shows you how to remove the bias and emotion to start making choices backed by hard evidence and objective data and lower your stress.

• Shift your processes from reactive to proactive
• Base decisions on reality over belief
• Eliminate cognitive bias and reduce common mistakes
• Make better decisions with a systematic, objective approach

Why do we begin managing risk only once it becomes apparent? Why do we react to the market instead of making the big decisions before emotion takes over? Investing has always been a largely reactive field, but those who dominate it approach decision-making less like a human and more like a machine. AlphaBrain shows you how to get real about investing, with cognitive techniques that lead to smarter, evidence-based decisions.

Preface ix

Acknowledgments xv

About the Author xvii

Part I Decision Analysis 1

Chapter 1:Marginal Improvement, Significant Impact 3

Chapter 2:Blinded by Bias 21

Chapter 3:Rational Decisions 33

Chapter 4:Decision Analysis 49

Chapter 5:How to Solve Any Problem 63

Chapter 6:Cerebral Junk Food 85

Chapter 7:The Input Paradox 101

Chapter 8:Auditing Mental Accounting 111

Part II Decisions In The Financial Context 123

Chapter 9:Mistakes at the Heart of Investment Management 125

Chapter 10:Manager Selection 135

Chapter 11:Prophecy of Value 149

Chapter 12:Mind over Matter 161

Chapter 13:Coaching 181

Chapter 14:Trading Decisions 191

Chapter 15:How to Stop Losing Money 221

Chapter 16:The Danger of Shortcuts 241

Chapter 17:The Power of the Unexpected 255

Index 275

STEPHEN DUNEIER is CEO of Bija Advisors. Through coaching, workshops and publishing, Bija Advisors uses cognitive science to help the world's most successful institutional investors and business leaders make better decisions and achieve better results.

AlphaBrain offers investors a hands-on guide to better decision-making in order to achieve more, reach higher, and increase profits. Author Stephen Duneier—CEO of Bija Advisors—reveals that most investors make their decisions based on emotions and explains how to tap into the power of cognitive science to greatly improve our decision-making abilities and our investments' bottom line. Most human beings are poor decision makers. We approach problems after they arise rather than planning for them in advance and rely too heavily on gut feelings, beliefs, and instincts. Throughout the book, Duneier reveals what it takes to view the world through the lens of cognitive decision-making and shows how to focus on investment decisions as problems to be solved.

AlphaBrain outlines a proven method for overcoming flawed, emotion-based decision making that can lead to unwise and costly investments. This approach will help you understand and plan for the human mind's usual tendencies and develop the skill to make smarter investment decisions. AlphaBrain's framework is based on cognitive research and is objective, systematic, proactive, algorithmic, and evidence based.

AlphaBrain gives you the guidance needed for ignoring bias and emotion and adopting an approach for making choices defined by hard evidence and objective data. Become the investor who shifts their decision-making process from reactive to proactive. Discover how to base your investment decisions on reality rather than belief. With AlphaBrain you can become a savvy investor who relies on a systematic and objective approach, reduces common mistakes, and watches their investments grow like never before.

BECOME AN INVESTOR WHO MAKES CONSISTENTLY SMARTER DECISIONS BASED ON COGNITIVE SCIENCE

Most investors make their decisions in a reactive, emotionally driven manner. When they don't get the results they want, they tend to blame outside forces and bad luck rather than their own decision-making process. Those who excel in the investment world approach decision making less like an emotional human and more like a machine. In AlphaBrain, investment guru Stephen Duneier reveals how he used cognitive scientific techniques to become a successful investment expert.

Written for anyone who wants to improve the quality of their investment decisions, AlphaBrain describes in detail how to overcome our natural tendency to go with our "gut" and become an investor who is objective, systematic, and thorough. The author outlines a process-driven approach to decision-making that reduces the frequency and magnitude of mistakes and helps investors get the results they want.