As the U.S.-Iran conflict enters its ninth week, oil prices have experienced significant volatility amid fluctuating reports of ceasefires and negotiations.
Geopolitical analysis reports, never before forwarded as frequently as now, become outdated in as little as twenty-four hours or even one to two hours after being superseded by the next news update.
The amount of information is increasing, but making decisions is becoming more difficult.
Many investment managers privately admit that they are currently in a difficult-to-describe state: their portfolio strategies have little to do with macro factors, and there is not much they can actively adjust within their portfolios.
However, amidst the information overload and client inquiries, it is almost impossible not to feel anxious. Managing other people's money is more stressful than managing your own because you are not only competing with the market but also racing against the emotions of your clients.
This situation exemplifies the classic case where psychological noise overwhelms judgment.
It is not a matter of insufficient ability or lack of information; rather, it is a distortion mechanism almost inevitably triggered in the human brain when operating in an environment of extreme uncertainty.
Forty years ago, someone conducted in-depth research on this issue and brought solutions into one of the world’s top hedge funds.
01, The Crossover of a Psychiatrist
In the U.S. investment community, the presence of a specific role has become standard practice: dedicated psychological coaches for hedge funds.
In the TV series "Billions," the intelligent and elegant Wendy Rhoades sits in the office of Axe Capital, helping traders manage fear, rebuild confidence, and maintain decision-making clarity during moments of extreme pressure.
This role is realistic because this profession indeed exists in reality.
However, few people know that the first person to truly embed psychologists into the core decision-making layer of hedge funds was a psychoanalyst named Aaron Stern.
Stern holds both an MD and a PhD and has held teaching positions at Columbia, Yale, NYU, and UCLA.
He also has an obscure Hollywood background. From 1971 to 1974, he served as the chairman of the Classification and Rating Administration (CARA) of the Motion Picture Association of America, where he presided over the formulation of the G, PG, and R rating standards still in use today.
The most famous action during his tenure was personally calling director William Friedkin to inform him that *The Exorcist*, which would leave many viewers fainting, could be rated R and released without cuts.
After his departure, Jack Valenti, then president of the MPAA, later admitted: 'Hiring a psychiatrist to run the organization was a mistake I made.'
This statement is quite profound, and it proved that Stern was indeed very different, and the world at that time was not ready to understand him.
But Julian Robertson was ready.
Yes, the one known as the 'godfather of hedge funds', Julian Robertson, who founded Tiger Management.
02 The Real Battlefield of Tiger Management
In 1980, Robertson founded Tiger Fund with 8 million US dollars. Over the next two decades, he delivered a performance record that continues to command respect on Wall Street: an annualized return of 31.7%, compared to 12.7% for the S&P 500 Index during the same period.
Over 21 years, the fund experienced losses in only four years.
This performance was not achieved in a calm market environment.
The era during which Tiger Fund grew was marked by almost non-stop macro shocks: the Gulf War (1990), the European exchange rate crisis triggered by German reunification (Black Wednesday in 1992), the collapse of the Mexican peso (1994), the Asian financial crisis (1997), and the simultaneous eruption of the Russian debt default and the LTCM crisis (1998).
Every few years, a major geopolitical or financial shock would occur, rewriting everyone's forecasts.
A Bloomberg report at the time noted that Robertson 'was ahead of every major trend, from the European stock markets after the fall of the Berlin Wall to the turbulence in the global bond markets between 1992 and 1993.'
After the smoke of the Gulf War cleared, Tiger Fund achieved a pre-fee annual return of over 80% in 1993, marking its peak year in history.
This was not because their macro models were more accurate, but because they could still discern what had truly changed and what had not, even in the noisiest moments.
Section 03, Stern’s Discovery: You Think You’re Analyzing, But Actually, You’re Defending.
In the early 1990s, Robertson began inviting Aaron Stern to build a systematic talent selection system for Tiger Fund, and officially invited him to join the management of Tiger Fund in 1993.
Because Robertson realized one thing: the endgame of market competition is not numbers, but human nature.
In Stern's 1979 book, 'Me: The Narcissistic American,' he coined a clinical term for this distortion mechanism—'narcissism' in the psychoanalytic sense.
But his meaning was not arrogance or conceit. In the context of psychoanalysis, narcissism is a defense mechanism: emotional feelings within oneself fill the judgment of external reality.
Put simply, psychological noise drowns out real signals.
When the sound of artillery and K-line charts bombard the nervous system simultaneously, the brain's automatic response is to substitute feelings for judgment.
The rise in oil prices means 'the world is going to be in chaos'—this is a feeling, not an analysis.
The news of a ceasefire brings the thought that 'the crisis is over'—this too is a feeling, not a conclusion.
This mechanism is already dangerous enough for ordinary investors. For professional investment managers, it is compounded by another layer of pressure: the money you manage is not your own, but the trust of clients.
Clients' anxiety seeps in, urging you to act, to make statements, to 'appear in control.' Thus, an already distorted judgment is further armored with a layer of professional pride—losses can be blamed on the market, but 'doing nothing' is even harder to admit.
Under this dual pressure, many investment decisions made by investors do not represent their judgment of the market. Instead, they reflect their fear of 'how to account to clients.'
Stern saw through this. Thus, he designed a set of personnel selection tools.
04. What exactly are those 450 questions screening for?
In the early 1990s, Tiger Management began systematically using the evaluation system designed by Stern, which consisted of 450 questions and lasted over three hours.
It does not measure IQ.
Stern's insight was that once candidates surpass a certain intellectual threshold, higher IQ yields almost negligible marginal returns.
What he was truly looking for were three other qualities:
First, extroversion and competitiveness. He favored athletes and admired the fundamental drive of “never giving up.” Such individuals would not shy away during market downturns but would actively confront reality.
Second, generalists rather than specialists. He rejected those who relied on a single analytical framework. He sought individuals capable of understanding the same story from multiple perspectives and bold enough to question authority. In the face of geopolitical conflicts, a single framework is the most dangerous.
Third, the ability to maintain an authentic connection with reality even under pressure.
This was the investment version of what Stern referred to as the "capacity to love"—the ability to perceive others (clients, companies, counterparties), markets, and the true state of enterprises under pressure, rather than merely perceiving one’s own emotions.
The subsequent achievements of this group serve as the best testament to the efficacy of this methodology.
Lee Ainslie (Maverick Capital), Steve Mandel (Lone Pine), Andreas Halvorsen (Viking Global), Philippe Laffont (Coatue), Chase Coleman (Tiger Global)... The 'little tigers' spawned by Julian Robertson have now grown into 'tiny tigers,' collectively managing trillions of dollars in assets globally, with outstanding performance sustained over three decades of market fluctuations.
This is not a matter of luck but rather an indication of a replicable psychological framework.
05. The most profound lesson lies hidden in the closure of Tiger Management.
However, Tiger Management ultimately closed its doors in 2000.
It was not geopolitical shocks or flawed macroeconomic forecasts that led to its closure. On the contrary—Robertson’s assessment of the tech bubble was accurate. He firmly believed the frenzy in Nasdaq represented a 'Ponzi scheme destined to collapse' and refused to chase after technology stocks lacking fundamental support.
As it turned out, he was absolutely right.
But before his judgment was vindicated, the fund’s assets under management had plummeted from $22 billion to $6 billion due to client redemptions, turning his correct prediction into an unfulfilled prophecy.
This is one of the harshest lessons from this chapter of history: Even the most rigorously trained teams can see their frameworks collapse when clients’ fears begin to drive decision-making.
This was not merely Robertson’s personal failure; rather, it reflects a structural dilemma all professional investors must eventually confront. The anxiety of clients represents real pressure, not background noise that can be ignored.
The only way out is not to eliminate this pressure, but to first detach one's judgment system from it.
And this is precisely the problem Stern spent his life solving.
06, Three Questions for Psychological Noise Reduction: Operational Protocols for Mature Investment Managers in Times of Chaos
Stern's framework, translated into practice, involves three sequential self-calibrations. Each question aims to strip away a layer of noise.
First Question of Noise Reduction: What I am feeling now, is it reality or fear?
Separately write down 'what has been confirmed to have happened' and 'what I am worried might happen.' If you cannot write them down or distinguish between them, it indicates that psychological noise has not yet dissipated.
Do not make any decisions at this moment—not because you are not professional, but because any decision made at this time is not truly yours.
Second Question of Noise Reduction: Beneath this noise, what has truly changed, and what has not?
Geopolitical conflicts may cause price volatility, but to what extent can they alter the ten-year competitive landscape of the companies in your portfolio?
Stern believed that real structural changes occur slowly, while noise is what creates dramatic fluctuations.
First, identify the constant element before taking action.
The third question on noise reduction: Am I currently making decisions for the market or for the emotions of the principal?
This is the hardest of the three questions to answer honestly and a unique dilemma faced by professional investment managers.
If the direction of your current operation is one you would never choose when calm, postpone it for 24 hours.
This is not cowardice; it is professionalism.
07, The Eternal Theme
In 2021, Dr. Aaron Stern passed away in Connecticut at the age of 96.
He lived through World War II, the Cold War, the oil crisis, the Gulf War, the dot-com bubble, and the financial tsunami. He witnessed many top-tier intelligent individuals lose their judgment amidst the loudest noise, mistaking emotion for analysis and fear for signals.
He also observed a few who, amid the same noise, maintained a kind of quiet clarity.
That clarity does not stem from better information or more precise models. It comes from daily training: knowing when the market is speaking and when you are shouting.
The conflict between the US and Iran will have an outcome, the Strait of Hormuz will resume navigation, and this round of geopolitical premium will eventually dissipate. However, the next event creating disruptions is always on the horizon. Trade wars, currency crises, technological disruptions, abrupt policy shifts...the noise never ceases; it merely changes form.
Mental noise reduction is not a one-time crisis response, nor is it a course in emotional management, nor does it aim to make you indifferent. Instead, it represents daily practice to protect judgment from erosion in an era of perpetual turbulence.
In a sense, this is precisely Stern's most important legacy for every generation of investment managers.
Editor /rice