Transferring Cognitive Talent Across Domains: The Case of Finance

Abstract We consider Theory of Mind, the ability to correctly predict the intentions of others. The skill requires abstraction from one’s own particular circumstances. Here, we posit that such abstraction can be transferred successfully to other, non-social contexts. We consider the disposition effect, which is a pervasive cognitive bias whereby investors, including professionals, improperly take their personal trading history into account when deciding on investments. We design an intervention policy whereby we attempt to transfer Theory of Mind skills, subconsciously, to personal investment decisions. In a within-subject repeated-intervention laboratory experiment, we record how the disposition effect is reduced by a very significant 85%, but only for those with high Theory of Mind skills. No such transfer is observed in subjects who score well only on the emotional dimension of interpersonal skills. Our findings open up a promising way to exploit cognitive talents in one domain in order to alleviate cognitive deficiencies elsewhere.