Overview of RWH069: The Psychology of Investing with Emily Haisley
In this episode of Richer, Wiser, Happier, William Green speaks with Emily Haisley, head of BlackRock’s behavioral finance team, about how psychology shapes investing decisions, portfolio performance, and team dynamics. The conversation explores how biases like loss aversion and the disposition effect show up in real portfolios, how BlackRock uses behavioral analytics and physiological data to improve decision-making, and why self-awareness, humility, and cognitive diversity matter as much as skill in investing.
What Emily Haisley Does at BlackRock
Emily leads a behavioral finance group inside BlackRock’s risk and quantitative analysis function. Her team acts as an independent, consultative resource for investors across the firm.
Core responsibilities
- Identify behavioral biases in investment teams and portfolios
- Analyze trading data, portfolio history, and trade journals to spot patterns
- Help managers improve process, team dynamics, and decision quality
- Support portfolio managers in maintaining the right mental and physiological state
- Use wearable data, especially the Oura Ring, to connect stress and sleep patterns with portfolio behavior
Central philosophy
- Investor psychology is itself a form of risk
- The goal is not to eliminate emotion, but to keep it from distorting judgment
- Better process, not just better intentions, is what reduces bias
Major Behavioral Biases Discussed
Emily explains how BlackRock identifies common behavioral mistakes using portfolio analytics and qualitative review.
Myopic loss aversion
- Investors often enter new positions too slowly because new risk feels emotionally uncomfortable
- This can happen even when the investment thesis is sound
- BlackRock may counter this with:
- default initial position sizes
- clear rules for deviations
- documentation of why a position should be smaller or larger
Disposition effect
- The tendency to sell winners too soon and hold losers too long
- BlackRock measures this by comparing the probability of realizing gains versus losses
- The bias is only a real problem if it leads to worse portfolio outcomes
Authority bias and tribal bias
- William shares a personal example of buying Alibaba partly because Charlie Munger and Lou Simpson were bullish on it
- Emily notes that when a decision is driven by admiration for people rather than analysis of the asset, the bias is usually about the self, not the investment
Tainted altruism
- A bias where people assume anything socially beneficial cannot also be profitable
- Emily argues sustainability should be viewed through both risk and opportunity, not dismissed as “non-commercial”
How BlackRock Improves Decision-Making
Emily describes BlackRock’s structured, behavioral approach to helping investment teams make better decisions.
Portfolio analytics
- Use historical holdings, returns, and trading behavior to identify systematic mistakes
- Compare actual behavior against behavioral finance research
- Look for patterns that may be costing returns
Process review
- In private assets or other areas with less data, her team reviews the decision process itself
- They ask whether the investment workflow is disciplined, efficient, and aligned with best practices
Team dynamics
- Her work draws from social psychology and group decision-making research
- A major theme is that teams should challenge each other more, not less
Mental and physiological state
- She emphasizes sleep, stress management, and recovery
- The goal is to keep investors in a “positive stress” state, where stress energizes rather than overwhelms
Group Decision-Making and Cognitive Diversity
A major theme of the conversation is that good investing teams are built to surface disagreement, not suppress it.
Why disagreement helps
- Teams naturally prefer shared information and agreement
- But disagreement improves decision quality by exposing blind spots
- Diverse, independent perspectives help cancel out correlated errors
How BlackRock structures better debate
- Independent pre-votes before investment committee meetings
- Anonymous final voting to reduce pressure and conformity
- A designated challenger or devil’s advocate
- Premortems: imagining a deal has failed and asking why
- Strong encouragement for junior members to challenge senior decision-makers
Why team composition matters
- Not just gender diversity, but diversity of:
- geography
- culture
- political perspective
- professional background
- The goal is not to add “clones” of existing experts, but people who make different mistakes
Ego, Humility, and Leadership
Emily argues that ego is one of the biggest threats to good investing.
Traits of strong leaders
- Willingness to discuss mistakes openly
- Delayed judgment
- Genuine interest in other viewpoints
- Ability to update when new information emerges
- Comfort with being challenged
What makes a great investor
- Someone more interested in markets than in being right
- Someone whose identity is not overly tied to their own opinions
- Someone who can maintain strong convictions while remaining open-minded
Psychological safety
- Leaders who admit their own errors help create a culture where others can speak honestly
- This makes it easier for teams to challenge bad ideas before they become costly
Investor Physiology: Stress, Sleep, and Performance
One of the most distinctive parts of Emily’s work is her use of physiological data to understand investing behavior.
What the data shows
- Stress affects risk-taking
- Sustained cortisol levels can bias people toward risk aversion
- Portfolio performance can also affect the body’s stress state
- Prolonged drawdowns can create chronic stress without investors fully realizing it
Why this matters
- Investors should not be making decisions based on internal stress unrelated to markets
- Emotional and physiological state can become a hidden source of poor risk management
Practical lessons
- Rest is as important as work
- Sleep deprivation is harmful to both health and judgment
- Investors need to recover, not just grind harder
- Stress should be met with awareness, rest, and sometimes social connection
Mindset Shifts That Help Investors
Emily emphasizes that changing behavior often starts with changing mindset.
Reframe stress
- Stress can be fuel, not just danger
- Nerves can be redirected into focus, energy, and care
- Oxytocin is also part of the stress response and can draw people toward others for support
Treat volatility as a learning environment
- Modern markets, especially with AI disruption, are stressful but also highly educational
- Investors can learn from difficult periods instead of only fearing them
Use simulated stress
- BlackRock built an AI-driven “war game” for investment teams
- It loads real portfolio positions and runs them through stressful headline scenarios
- Teams practice how they would trade under pressure and learn how their process changes in volatile conditions
Personal Lessons and Practices
William and Emily also discuss her own practices for self-regulation and growth.
New Year’s resolutions that changed her life
- Stop saying mean things to herself
- She began noticing the inner critic as just a habit
- Awareness reduced its power
- Notice her breath
- A way to observe emotion without being controlled by it
- Helps regulate stress and anxiety
- Be a better listener
- Not just to people, but to her own nervous system
- Helps her notice what she needs physically and emotionally
Broader life lesson
- Self-observation creates emotional distance
- That distance improves both personal well-being and investment judgment
Career, Meaning, and “Right Livelihood”
Emily and William discuss whether a meaningful career can exist in finance.
Her view
- Finance can serve a real public purpose when it helps ordinary people invest for retirement, education, and long-term security
- The key is to do the work responsibly and ethically
- There is no necessary conflict between making a good living and doing meaningful work
Her origin story
- She was influenced by a creatively and spiritually inclined uncle, Robert Haisley
- He introduced her to yoga, literature, and ideas about ego and mortality
- His example helped shape her interest in self-awareness and purposeful work
Key Takeaways for Investors
- Your own psychology is one of your biggest risks
- Biases matter only when they hurt outcomes
- Structure beats intention: defaults, checklists, and process design reduce errors
- Good teams need disagreement, not just harmony
- Ego is often the enemy of learning
- Stress management is part of portfolio management
- Sleep, recovery, and physiological balance affect judgment
- AI may be most valuable when used to reinforce disciplined decision-making, not replace it
Practical Action Items
- Review your own portfolio for signs of:
- holding losers too long
- entering positions too slowly
- selling winners too fast
- Build “kill criteria” for investments before emotions take over
- Add a sparring partner who naturally disagrees with you
- Use a premortem before making major decisions
- Track sleep and stress if your decisions are affected by volatility
- Treat self-criticism as a habit that can be replaced, not a fact about yourself
- Focus more on process quality than on short-term outcomes
Notable Ideas from the Episode
- “Investor psychology is a form of risk.”
- “The responsibility of everyone else on the team is to de-bias the decision maker.”
- “Disagreement leads to much better decisions, objectively.”
- “It is not just your job to work hard; it is your job to rest hard.”
- “The best investors of the future will be the ones best leveraging AI to support a disciplined process.”