The past 2 years has been a huge wakeup call and a nasty reminder that successful investing requires multiple skills.
One of those skills is discernment—the ability to absorb a tremendous amount of information and distill it into keen insights that are missed by the masses. It’s not an ability to predict the future, rather, it’s an ability to take what’s already known and do a better job than most people of figuring out how what’s currently happening will affect the future. It’s akin to solving a jigsaw puzzle faster than everybody else.
Discernment is a right-brain function. A discerning advisor has the ability to see the big picture and intuitively know how the story will end. They think visually and see patterns that other advisors miss. By contrast, left-brain advisors use logic, analysis and sequence to make investment decisions. Unfortunately, advisors who rely mainly on left-brain thinking cannot effectively process extreme situations that have minimal historical precedent—such as what we find ourselves in now.
Becoming a discerning advisor will make you a more successful advisor because you’ll be able to process the raw data of investing, weave it into a coherent picture based on your intuition, and make better and more timely investment decisions as a result.
As it relates to the markets in 2008, left-brain thinkers had no context for considering the possibility that Wirehouses would cease to exist, Fannie, Freddie and AIG would become wards of the state, oil would soar to $145 per barrel then plummet to under $40, the 10-year Treasury would yield near 2 percent, and worldwide stock markets would shed $30 trillion. As it relates to the markets in 2009, few people using logic jumped in and fully participated in the huge rally. Right-brain thinkers, while not predicting the above outcomes, were able to use the skill of discernment to more quickly see these developing stories and adjust accordingly.
To cultivate discernment, pay closer attention to what’s going on; not so much the details, but the trend. Expand your worldview by reading broadly. Develop various scenarios about what could happen and then ask yourself how you’d respond. Be prepared.
