Researchers at Stanford recently conducted a study that found that the physical act of walking improved creative thinking in subjects.
We believe creative thinking is an important aspect of investing, so we would encourage anyone faced with important investment decisions to go for a walk.
We know that in investing, we want to avoid using our System 1 processes. Yet when people consider System 2, they usually call to mind focused, critical or convergent thinking. This type of thinking usually involves reasoning along a logical chain to synthesize information and make reasoned judgments. The approach works well when there is a “correct” solution to a problem, especially with a known technique, such as: what is 2+2?
Another approach involves creative, or divergent thinking, which is more spontaneous. In brainstorming sessions, for example, the goal is to generate ideas/possibilities and explore multiple potential solutions. You exercise cognitive flexibility, move beyond established thinking, and sometimes stumble on better alternatives.
For example, Einstein was riding in a street car one day when he happened to pass by a clock tower. He wondered what would happen if the street car increased its speed to the speed of light. In this case, from the moving frame of street car, the time on the clock would appear to stop. Thus, his theory of relativity was born, based on a mental leap he made through spontaneous, creative thinking.
Creative thinking can make sense in investing as well. I had lunch with an RIA last week, and he explained to me that during the financial crisis, his clients only wanted to see “safe” blue chip, large-cap names they were familiar with in their portfolios. Now clearly, the fact that such names make you “feel” safe is not a good reason to be invested in them. So in order to do something different you need to get out of your comfort zone.
This is where creative thinking comes in. Creative thinkers explore new areas, and might consider rejecting something simply because it makes them feel safe, or they might consider contrarian views during the process of brainstorming.
So take a walk and explore what might be possible.
- The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).
- Join thousands of other readers and subscribe to our blog.
- This site provides NO information on our value ETFs or our momentum ETFs. Please refer to this site.