Behavioral Economics in Investment Strategies in the Thoroughbred Industry

Behavioral Economics in Investment Strategies in the Thoroughbred Industry

Behavioral Economics in Investment Strategies in the Thoroughbred Industry

Position Paper By: Kerry M Thomas

The economics of behavior is a reality in any business that involves anything more than an automated machine, and yet I have long been of the opinion that it is perhaps the least considered and at times underappreciated truth in business planning. The impact of neglecting behavior, both patterns and inclinations, can be very costly for your bank account as well as the program or business.

In any relationship, and business itself is often comprised of many relationships, there are two parts; the physical development and the emotional nurturing. Horses are not machines nor are they race cars, horses are emotional athletes, and just like us humans in any field or family, are very often reflections of their environment. When we are scouting for talent, or as I always say, ‘panning for gold’, we at THT Bloodstock seek to identify the psychology of success within the individual as a primary focus point.

Probability of success is based upon the individual’s likelihood to achieve to their physical ability; this likelihood is not housed purely in breeding, body and skill, but also in aptitude. No matter the business structure we are building, the team being assembled, or the relationships we are hoping to build in our lives in general, we must always be mindful that ultimately skill-sets are driven by personality, inclinations are governed by emotional caprice, and stress is filtered by the psycho-sensory system. The number one thing to consider in my opinion; what is the probability that the horse being scouted has the mental capacity to optimize its physical abilities and breeding. In human terms it could be compared to hiring someone based not just on “book” smarts, but “street” smarts, real life abilities; can your hire in effect, think on their feet?

The mental capacity of the equine controls the physical output of the athlete.

Any business model that does not incorporate the impact of behavioral economics is short sighted. How much time and money have been wasted away by only looking at half the picture, half the horse, and thus not completing the relationship. If the horses (or humans) we invest in for our programs were machines and their personality of zero impact, then any horse with the ‘right page’ and the ‘right body-type’ would certainly go on to find that expected success, just like every person in a room with the same degree would perform the exact same in their jobs. But this is most obviously not the case.

I feel that the very best investment strategy, the most effective use of dollars per probability, and the most responsible way to acquire, is to think of horse acquisitions as a job fair, or perhaps an NFL Combine for horse athletes. You narrow the field of applicants and hopefuls based upon physical requirements; skill and ability, and then you take this short-list of prospects and narrow this down by working to identify those with the psychologies most suited for their physical fulfillment as well as best suited for your long term goals.

I have long felt that many programs repeat their sufferings because they take the same approach each and every time, making investment choices based on only half the information that is attainable is to me a gross misappropriation of funds and irresponsible investing. Horse racing is a game inherently fraught with countless things that can go wrong even when you do everything ‘right’, and so if you can chip away the element of pure chance by adding both parts of the two part horse, mental and physical, to your scouting process, why wouldn’t you? In a world where not every investor can stock-pile in numbers to increase the chances of success, information, not numbers, is their key to success.

Another very important aspect is the fit; how will your prospective athlete or hire ‘fit’ in the environment that is your business. We must absolutely remember that environmental impacts along the way can shape-shift the emotions; how will the horse handle the unforeseen? Environment is far more than a location after all, it is an attitude. Whenever we are considering the horse, as much as possible, we also try very hard to consider what environment the horse is going to be in and how will this impact its likelihood of succeeding. No smart GM or Executive should hire any individual who they feel cannot emotionally handle the realities they will face, when you do this it is a liability. But I find in horses that quite often this very real emotional side is only slightly if at all, given the weight of consideration that it should be given.

It’s a bad investment strategy to put the wrong emotional components into the ‘right’ physical machine. A lack of flexibility in a business plan is also a bad investment strategy. Not every horse athlete should be coached the same; one must develop the athlete while nurturing the horse. It’s the ‘grooming’ of an employee to move up; this is not based purely on their physical skill but rather their personality. By the same token coaching the two part horse for physical ability without grooming their emotional strengths can lead the horse straight to a plateau of achievement that may well be below their actual level. Physical ability is achieving, mental fortitude is over-achieving. The same race car driven by two different people, one a NASCAR driver the other not, will be able to achieve for both but only over-achieve for one. To give yourself the best chance to compete, in other words, you want to consider who will be driving and how well they can optimize the ability within.

Applying behavioral economics properly also means following through once they are in the fold. When a horse is selected with the combined information of physical and mental, they should also be transitioned into a program that has the same vision. Just like it is important in any relationship emotional wellness plays a very big part in physical fulfillment and goal achievement; any owner who wants to increase their probability of success should pay close attention to the details of how the environment created translates to how the environment is interpreted. The reason that greatness can come from even the most obscure places is because it is not the actual place, but the attitudes in it. Simply because you take your child to a fancy high tech batting cage does not automatically mean that he or she will be a better hitter than the kid who had to take pitches from his mom or dad in the back yard with an old bat.

The application of behavioral economics looks beyond what is, and see’s what could be, without the prejudice of appearance based caprice.

Communication is the foundation of success, and emotional communication is the highest and purest form. In a world of emails, texting and emotionless dialogue we too often are removed from being responsible for the impact of our words. This is not a convenience with horses any more than is with any team members or in any family. Using behavioral economics in your investment strategy must come with the element of communication at its core because what is being communicated can be skewed by how it is being communicated. I am of the opinion that emotional communication is the primary form for horses just like it is with people (the proof is inherent in the human/horse relationships over all time) and body language is the by-product of “thought”, for lack of a better term. It’s about relationships every step of the way, and the strength of every relationship, and the fabric of every team, is based upon the ability to communicate. How many break-ups or disbanded programs, or unfulfilled ability, has its root and weaknesses traced to a lack of communication in some form or another.

From how you communicate your product to the market, to how a groom approaches a stall and every place in between, emotional communication is the choreographer of the “attitude of environment” regardless of the location or circumstances. You want a team around you assembled because they seek to better themselves, because it is not what someone does but how they do it, which defines them and this is a governing factor of team success.

From weanling to refined athlete there are two parts of the horse juxtaposed, one we see in action, and one we often only see in reaction. At THT Bloodstock we are motivated by a visionary framework, determined to challenge what is with what could be by focusing on the horse’s emotional strengths, sensory soundness and blending their ability to optimize their physical attributes. Making an investment with only half the information available being considered never made a lot of sense to me, especially in a business where so many things can go wrong.

Scouting talent, “panning for gold”, is more than seeking out ability, it is seeking out the emotional aspects that both sustain and fulfill that ability. Whether in a business of people or a business of horses, the economics of behavior, simply make sense.

“Innovation knows no boundaries, only vision…”


Kerry Thomas is a pioneer of equine athletic psychological research and Herd Dynamics. He created emotional conformation profiling, which measure’s the mental and emotional capacities of the equine. Emotional Conformation Profiling is the study of Emotional Intelligence & Ability in three key areas; Trainability, Behavioral Genetic Traits, Aptitude, with Communication being the primer.

Thomas’ theories on herd dynamics and equine communication have applications on all equine disciplines, in addition to human team communication and performance. His first book Horse Profiling: The Secret to Motivating Equine Athletes was released on the international market on April 25th, 2012 and continues to grow in international favor and popularity.


Thomas made the breakthrough discovery that it was mental/emotional conformation of the horse, and not the physical body, that governed the dynamics of the herds. With an understanding that this was the foundation of the equine world, no matter the breed of horse or career choices we as people make for them, an entire new world became visible.

Focusing on this research, Thomas began to identify ways in which horses could be mentally conditioned toward a given goal. He spent 10 years streamlining his unique system of Emotional Conformation Profiling of equine athletes. In 2008 he officially created his company The Thomas Herding Technique (THT). Kerry’s study of Patterns-Of-Motion have reached an international audience in the last several years because of THT’s work in profiling the Kentucky Derby fields.

Teaming up with now THT Director of Equine Services, Pete Denk, Kerry’s work has gravitated to international Bloodstock where profiling “who the horse is” and how well balanced their sensory system is, is helping THT clients hone on suitable athletes.

Thomas’ work in the field of equine behavioral genetics has pioneering applications in all the sport horse industries, but Thoroughbred Racing embraces the most of his efforts owing to his intensive study of Herd Dynamics & Behavioral Genetic Sequencing. Exciting new efforts are currently being made into the study of how emotional stress affects physical performance.

Considered by many the “Money Ball” approach for horse racing, Kerry moves forward with the belief that “the economics of behavior, simply makes sense.”

A few High-Lights:

*Kerry was featured on the front page of the Wall Street Journal Friday, May 1st 2015

*Kerry is often contacted for quotes and Derby thoughts by the LA Times etc..

*Kerry is a board member of Quest Therapeutic Services in West Chester Pa.

*Kerry help found the Octorara HS Equestrian Sports team

*Brand Ambassador at

~Organic Feed Line:

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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