THE FINANCIAL PHILOSOPHER

Socrates' Advice to Today's Greece

"I do nothing but go about persuading you all, old and young alike, not to take thought for your persons or your properties, but and chiefly to care about the greatest improvement of the soul. I tell you that virtue is not given by money, but that from virtue comes money and every other good of man, public as well as private. This is my teaching, and if this is the doctrine which corrupts the youth, I am a mischievous person." ~ Socrates

Every time I see news coverage of street protests in today's Greece or of political leaders discussing Greek Austerity, I imagine if Socrates would be there among the protestors and, if so, what he might say or do.  Would he support the protestors?  What might he say to the government leaders?  Would he approve of Greek Austerity measures?

Luxury is Artificial Poverty

Socrates never recorded any of his thoughts or ideas on paper and all that is known about him comes from the writings of his contemporaries, such as Plato.  However, it is clear from these writings that Socrates cared little about money and materiality and he certainly shared no affection with the ruling Aristocrats.  Many accounts of Socrates make him out to be something of a poor, unattractive hermit wandering the streets of Athens teaching his philosophies to anyone who would listen.  In a time when men labored for a living and spent much of their free time working for the affairs of the city and aspiring to political power, Socrates did neither.

In today's Greece, I imagine Socrates would still find himself in the unique position of standing in a corner completely his own--neither with the protestors, nor with the government.  While he might sympathize for the struggle of the Greek people against the governing leaders, he would remind the people that money is the corrupting force at the root of all of their troubles and that they would find contentment to let go of their material desires and to end their reliance on government to cure their ills.

Socrates to Greece: Die But Don't Forget to Pay 'Debt'

The featured quote at the beginning of this post comes from Plato's account of the trial of Socrates, where Socrates was accused of "corrupting the youth of Athens" and was given the choice to either denounce his philosophies or die by drinking the poison hemlock.  Socrates chose death.

His last words were reportedly spoken to Crito, where Socrates said, "We owe a rooster to Asclepius. Please, don't forget to pay the debt." Asclepius was the Greek god for curing illness.  Therefore these words are interpreted to mean that death is a cure and a means to freedom.

I would never expect a political body to take the path of a wise philosopher, but Socrates would likely say today that Greece must metaphorically die--to split from the European Union--to be cured of its ills... And, yes, don't forget to pay your debt to Asclepius...

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Related: What Would Plato Think of the Greek Financial Crisis?

Defeating the 'Hobgoblin of Little Minds'

"A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. With consistency a great soul has simply nothing to do." ~ Ralph Waldo Emerson

This quote from Emerson comes from his essay, "Self-Reliance," which in the essay's title itself reveals the wisdom within the famous quote:  Foolish consistency in this context is a kind of mindless state (habit) that supports herd behavior and group-think; it is conformity, it is mindlessness, it is inauthentic, it is ultimately self-defeating, and it is normal.  But normal is not healthy...

The self-reliant person is not necessarily someone who resists crowds or abhors outsourcing certain tasks to others--an island unto oneself, if you will--but rather a person who does not fall into sheepish behavior. 

Here are a few general examples of 'foolish consistency' for context:

• Continuing a certain behavior because "that's the way it's always been done."
• Following the paved road of conventional wisdom for fear of following (and possibly failing in) your own path.
• Choosing a career path that pays well with little or no consideration for how the career aligns with your personal priorities, passions and skills.
• Failing to look at ideas from a different perspective because they don't match your pre-conceived (and possibly distorted) views of the world.

As author Richard Brodie says in his recent top-selling book, Virus of the Mind, "the hobgoblin of little minds" is "what keeps people from making the most of their lives."  In different words, the hobgoblin is an absence of mind--an absence of self, an absence of consciousness.

"Not choice, but habit rules the unreflecting herd." ~ William Wordsworth

To defeat the 'hobgoblin of little minds' one must be aware of their tendency to fall into the lazy and mindless habit of conforming to conventional thought and behavior.  For most people it is a matter of deconstructing and unlearning what you've learned. 

This can be done by reflecting upon your daily activities and by discovering which ideas, thoughts and behaviors are not your own -- it is deprogramming and reprogramming your mind.  Why do I continue to hold this losing stock?  Why have I always voted for the same political party?  Am I trying to please others and never pleasing myself?  If I were born in a different country or to a different family or in a different time, would I think and feel the same about things? Is there more than one side of the truth -- more than one perspective? 

How do you know?  Now go and find out...

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Related:

Mind vs Brain Part III: Habits of the Reflective Mind

The Paradox of Habit Part III: Discovering the New Shore of Authenticity

Notes & Quotes on Reflection

"As a single footstep will not make a path on the earth, so a single thought will not make a pathway in the mind. To make a deep physical path, we walk again and again. To make a deep mental path, we must think over and over the kind of thoughts we wish to dominate our lives." ~ Henry David Thoreau

The annual ritual of looking back over the year-to-pass while looking forward to the year-to-come can be healthy but why must this brief moment of reflection occur just once per year?  And why must this reflection be just a turning of the page?  Reflection is too important to take so lightly, as if it were an occasion for entertaining ourselves or for making resolutions for the sake of making resolutions.

Reflecting is...

Reflecting is a simple meditative process of cleansing the mind of clutter and of turning down the noise of outside influence so that you may listen clearly to the inner self.

Reflecting is the most crucial activity for an individual’s overall well-being; it is the practice of stepping outside of and returning to the self; and it is the periodic meditation that maintains all of the greatest virtues, especially that of humility, patience and contentment.

Reflecting is the act of tapping on your own shoulder to be sure you are awake—to be sure you are alive—living a life of authenticity, meaning and purpose—being here now and not somewhere else, not wishing or wanting to be someone or something else other than yourself. In a sense, reflecting is not an ending or a beginning but may be better described as a perpetual beginning again. Every day and every moment is a new beginning; and every time you reflect, you begin again.

Quotes on Reflection

For a guide to reflection at this year-end, and to inspire ongoing reflection in your life, here are some quotes for forming your new reflecting habits:

The more developed reflection is, the more quickly it can collect itself; like a passport officer checking foreign travelers, it comes to be so familiar with the sight of the most fabulous characters that it is not easily taken aback. ~ Soren Kierkegaard

It's quite true what philosophy says, that life must be understood backwards. But one then forgets the other principle, that it must be lived forwards. A principle which, the more one thinks it through, precisely leads to the conclusion that life in time can never be properly understood, just because no moment can acquire the complete stillness needed to orient oneself backward. ~ Soren Kierkegaard

Every one rushes elsewhere and into the future, because no one wants to face one's own inner self. ~ Michel de Montaigne

Not choice, but habit rules the unreflecting herd. ~William Wordsworth

What we call the beginning is often the end. And to make an end is to make a beginning. The end is where we start from. ~ T.S. Eliot

Admittedly, I am aware of a certain weakness in me, in that I am unable to keep my attention fixed on one and the same item of knowledge at all times; but by attentive and repeated meditation I am nevertheless able to make myself remember it as often as the need arises, and thus get into the habit of avoiding error. It is here that man’s greatest and most important perfection is found… ~ Rene Descartes

Two things fill the mind with ever new and increasing wonder and awe, the more often and the more seriously reflection concentrates upon them: the starry heaven above me and the moral law within me. ~ Immanuel Kant

The perfect man uses his mind as a mirror. It grasps nothing, it rejects nothing. It receives but does not keep. ~ Chuang tzu

Ask not that events happen as you will, but let your will be that events should happen as they do, and you shall have peace. ~ Epictetus

Whenever I prepare for a journey I prepare as though for death.  Should I never return, all is in order. ~ Katherine Mansfield

People usually fail when they are on the verge of success. So give as much care to the end as to the beginning; Then there will be no failure. ~Lau Tzu

As you reflect on the passing year, perhaps you may form only one resolution for the New Year--a resolution to continue reflecting every day...

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Related: Mind vs Brain Part III: Habits of the Reflective Mind

Angles

As a child, I would roll down the window in our family car while travelling on the highway and put my hand a few inches outside until I felt the pressure placed upon it from the strong and rushing wind.  The force was enough to push my arm to the back of the window. 

However, if I placed my hand flat and parallel to the ground, it would slice through the air like a hot knife through butter.  If I angled my hand by tilting it slightly upward, my hand would lift up much like I imagined a bird would fly.  The opposite was true:  I could angle my hand down and the wind would push it down. 

That was an early lesson in angles.

"Thus what we gain is Something, yet it is by virtue of Nothing that this can be put to use." ~ Lau Tzu

Today, if I think my young children are in a listening mood, I'll pass along to them this lesson that combines physical science and Taoism: 

• Resistance is the root of all suffering; non-resistance is the root of contentment.
• The rigid tree breaks in the strong wind; the reed bends.
• Swimming against a rip tide is a cause of drowning; swimming with the rip current will save your life.
• The forceful and outspoken attract adversity; the mild and reserved remain at peace.

These yins and yangs do not need to be either/or; they can be balanced and comined or they can be altered slightly.  This lesson takes little imagination to apply to our every day lives:

• Investing passively (not trying to time the stock market) most often produces the best results but a well-chosen and slight angle can produce greater results.
• Going with the crowd can be advantageous but a slight deviation from it can be better for the individual.
• The human eye prefers right and complimentary angles--it seeks patterns--but an obtuse or odd angle can be much more interesting and attracting.
• In music, the notes of a scale work together to create melodies or harmonious chords but bend a note just the right way or strike a dissonant chord and you can communicate an entirely different and powerful emotion.

The flat hand slices through the air, but a slight angle can make it fly.  Conversely the wrong angle will make the hand turn down dramatically.  In other words, non-resistance can be good; but just the right amount of resistance--the right angle--the right perspective--can be better if you can find it.

"The little reed, bending to the force of the wind, soon stood upright again when the storm had passed over." ~ Aesop

One only needs to learn when to resist (or bend) and by how much.  I've found many advantageous angles in life but when I find one that doesn't work I can always return to the flat hand of non-resistance.

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Related:

Thoughts on Taoism, Rip Currents & Market Cycles

The Desirable Way to Dance: On Becoming Passive Instruments

What's Next for this Blog

"As for the future, your task is not to foresee it, but to enable it." ~ Antoine de Saint-Exupery

November 1 marks the fifth anniversary for the beginning of this blog.  As I noted last month, one of the top 5 lessons I've learned in 5 years is that planning for the future can be beneficial but the plan itself is almost useless because life is so fluid.

With that said, I won't give you a luandry list of "things to expect in the next 5 years" but rather some general things I know will occur over the next several months:

• Broadening Horizons & Expanding the Dialogue:  Avoiding herd behavior and thinking for myself has helped me tremendously in the past several years but I've also learned much from other people.  Starting next week, I will begin publishing posts from guest authors.  I do not anticipate guest posts to be frequent but I will put as much thought into selecting guest authors as I do the topics I write.  Next week's post will be from a long-time TFP reader who happens to be a thought-provoking writer.  Stay tuned for that!
• Seeing Projects to Completion:  I have several book ideas in my mind, on paper and in electronic documents.  2012 will finally be the year where I begin expanding to other outlets for the themes presented in this blog.  The first project will be an Ebook, which will hopefully be ready by the beginning of the year.  It will be an annotated book of quotations that will actually do more for the reader than provide inspiring words that fade from the mind and escape personal application.  The quotes, along with my notes, will be organized into sections that will methodically take the reader through an awakening progression that can help the reader live an authentic life of meaning and purpose.  Other book projects may come later next year.
• Moving to a New Blog Platform:  This point is more of a blogger's preference (not necessarily of great interest to most readers) but I will move this blog from TypePad to WordPress.  The move should allow me to create a greater look and feel to the blog for a greater overall reading experience and also open the doors wider to dialogue with readers by making the comments section more user-friendly.

Sharing my plans with you helps me to commit to them and make them reality.  So I appreciate your enduring this selfish reflection.  I look forward to sharing more thoughts with you and hearing more of yours in the years to come...

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Related:

Balancing Life and Planning

My Purpose is to Help You Help Yourself

Reasons Not to Subscribe to This Blog

"When I find the road narrow, and can see no other way of teaching a well established truth except by pleasing one intelligent man and displeasing ten thousand fools—I prefer to address myself to the man." ~ Maimonides

I've had the honor and priveledge of communicating with many of this blog's readers.  You are truly some of the most impressive humans I've experienced in my life.  From time to time, I also come across some readers (or I may imagine those who quietly come and go without my knowledge) and think to myself, good riddance.

In that spirit, here are some reasons why you should not subscribe (or if you are currently subscribed, should unsubscribe) to this blog:

• You are afraid of what you might find inside yourself once the layers of physical world distractions (e.g. media noise, conventional thought, social pressures, excuses for failure) are removed.
• You are looking for some kind of a shortcut (e.g. get-rich-quickly schemes, answers to your questions).
• You may judge me, your humble author, after reading one blog post or, even worse, you perceive value from this blog for an extended period of time then unsubscribe after one blog post does not please you.
• You think "self-improvement" means reading other people's words, becoming inspired for a while, then returning to your mindless existence.
• You don't want to challenge your biases or pre-conceived notions.
• You don't realize, if you are still reading, that all of the above reasons not to subscribe to this blog are actually and absolutely the reasons you need this blog or others like it!

"The worst readers are those who proceed like plundering soldiers: they pick up a few things they can use, soil and confuse the rest, and blaspheme the whole." ~ Friedrich Nietzshe

I could go on with a longer list but I think you get the idea:  At the core, I am a philosopher, which explains why I don't have 100,000 readers, why I am not financially wealthy and why I may seem arrogant or non-feeling to people who don't know me.  I suspect this may be why most philosophers in history never married (I'm fortunately an exception to this pattern).  But I digress...

My writing will never speak to the wants and whims of your brain; this is a job for media sources having the ultimate purpose of making money by attraction and distraction.  My writing, at least as it is intended, will speak to your mind, which will hopefully become the master of your brain and ultimately of your life.

If you are still reading, good for you and thanks for enduring my rare but sincere rant.

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Related:

Thanks for Reading The Financial Philosopher

Hell is Other People

Speak to the Past, Listen to the Future

"Have you ever looked back and thought, 'If I had done this or that five years ago I'd be better off now?' But the opportunity was there; why didn't you see it? Are you sure that you are not closing your eyes at this moment to one which you will see later in retrospect?" ~ Dorothea Brande

The saying, "Hindsight is 20/20," with regard to personal reflection, is a thinly veiled excuse to justify laziness.  It's most often used in the place of this:  "I made a mistake and I can't do anything about it now."  Why not?  The value of the past is often dismissed because it is already behind us; but recognizing missed opportunities, for example, is a valuable lesson in humility.  Hindsight may be 20/20 but foresight need not be blind.

Follow me closely here:  Do you ever speak to your past self?  If not, why don't you?  If you could speak to your past self, what would you say?  "Go ahead and make plans but you probably won't succeed at any of them."  This is what you say or think, isn't it?

"When the mind is thinking it is talking to itself." ~ Plato

Speaking to your past self can provide the foundation of a dialogue with your future self.  For example, your present self might say to your past self, "Don't make rigid plans for your future because you will not be able to predict or control what happens.  Therefore, be mindful of unforeseen opportunities and be ready to recognize them and turn them into greater realities than your original plans could have achieved."  This same advice is essentially what your future self would say to you now.  In other words, from the perspective of your past self, your present self is the future self.  Therefore listen to your own advice!  Here are some sage words my "future self" is telling me now:

• Extreme hardships are easier to overcome than you are currently imagining.  As Winston Churchill once said, "If you're going through hell, keep going."  
• Stop killing the present by wishing for the future.
• Money, material wealth and social status are wonderful things but they are only things.  Health is your greatest asset.
• Don't be afraid to take more risk.
• Listen to the inner voice; it's usually correct.
• The smallest of pleasures are the greatest of joys.
• Surprise yourself every day; push beyond your comfort zones (mental, spiritual, emotional and physical).
• Listen intently to people when they speak.  Catch yourself wanting to inject your feedback, opinion or solution and wait until they have finished speaking.
• Don't be the person that says, "Here I am!" when entering a room; be the person that says, "There you are!"
• Money isn't nearly as important as the world projects it to be.

What is your future self saying to you now?  Are you listening?  Are you following the advice?

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Related:

The Greatest Source of 'New You Can Use'

The Knowing-Doing Gap

How to Break Your Own Will to Fail

5 Lessons I've Learned in 5 Years

"I do nothing but going about persuading you all, old and young alike, not to take thought for your persons or your properties, but and chiefly to care about the greatest improvement of the soul. I tell you that virtue is not given by money, but that from virtue comes money and every other good of of man, public as well as private. This is my teaching, and if this is the doctrine that corrupts the youth, I am a mischievous person." ~ Socrates

Five years ago today I stopped "workin' for the man" and started my own investment advisory firm.  I've learned many lessons along the way, none of which I would have predicted.  Here are five of those lessons:

1. Plans Are Useless, Planning is Essential: This lesson, with words borrowed from Dwight Eisenhower, speaks to the nature of life itself.  Life is constantly evolving; unforeseen obstacles and opportunities will continue to arise. Plans may account for the unforeseen but it is impossible to predict the timing or intensity of unforeseen events.  I'm a CFP and an MBA.  You'd think I'm as good of a planner one might find (I even received an 'A' in my graduate entrepreneurial business course for my business plan).  My business plan did not foresee The Great Recession of 2008 and it did not foresee my creation of The Financial Philosopher.  However, with that said, the planning process, whether it is financial or otherwise, often brings to the surface information, thoughts or feelings that may not have been recognized if not for engaging in planning.  Create the plan for the purpose of engaging in the planning process but file away the plan and form a new one within a year to 18 months.

2. Wisdom is More Powerful Than Knowledge: As Sir Francis Bacon profoundly stated, "Knowledge is power."  However the only knowledge that is truly empowering is self-knowledge.  Certainly, knowledge of external things (i.e. money, material and social matters) can aid in acquiring external wealth but the lack of self-knowledge has the potential to destroy the self along with the acquired external wealth.  For example, throughout the credit crisis and ensuing recession, I've witnessed clever but criminal behavior (i.e. Bernie Madoff) destroy financial wealth and the lives of many people--all because of knowledge in the absence of wisdom.  In my personal and professional life, I've minimized the pursuit of external knowledge (I stopped my subscription to all magazines and newspapers and I no longer use financial planning software) and noticed my judgment has become much more clear, confident and prudent.

3. True Wealth is Not Measured by Financial Means:   From the beginning of this five-year journey, I set out to follow the wise advice of my then 4-year old son: "I'd rather have my Daddy than money."  Think about all you wish to accomplish with money:  Do any of these accomplishments align with your highest priorities?  You may find that your financial pursuits, no matter how good your intentions, are eroding at your most valuable possessions.  What is more important than your health, personal relationships and connection with the present moment?

4. Happiness is Found Easier When Not Looking For It:  Happiness, by its own definition, is not something that can be created or manufactured--it "happens."  By virtue of finding contentment with all that you have now enables happiness to happen because you have effectively reduced the perceived benchmark for happiness to the present moment.  In different words, if you already have enough, all that you acquire from this moment is more, which brings higher levels of satisfaction.  It is not wrong to desire more; this is your nature.  However, it is unhealthy to desire more in absence of contentment.

5. The Fear of Death Does Not Come From a Love of Life: The combination of reading philosophy and losing people and animals I love (along with passing my own 40-year mark) has provoked a profound reflection on life. If one is to begin with the end in mind, the true end is not some destination reached in a financial plan, a career path or some other end. All ends in life are subordinate to the end of life; the plans we make—financial, career, and personal relationships—may be given meaning and purpose by holding close the thought of mortality: Death gives meaning to life—your life—and it enables the perspective that will allow you to form your own philosophy—your life philosophy—the meaning and purpose of your life and all that you do. To embrace death is to embrace life and all that it contains.

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Related: Thanks For Reading The Financial Philosopher

The Most Powerful Force in the Universe

Albert Einstein was wrong when he said, "Compounding interest is the most powerful force in the universe."  Although this is quite a statement coming from the father of modern physics, I believe Mr. Einstein could have found at least one more force greater than compounding interest.

The idea for this post struck me when I was reading another post, Compound Interest vs. Increased Income--Which Matters More?, on one of my favorite blogs, GetRichSlowly.  The general theme was to acknowledge the power of compounding but to remind readers that increasing income can be much more effective for growing financial wealth.

After reading it, I thought for a moment:  Yes, compounding interest over long periods of time can turn small amounts of money into a large nest egg; and yes, increasing your income can be even more effective if applied properly.  But isn't there something more powerful that can build both financial worth and self worth?

"Contentment is natural wealth, luxury is artificial poverty." ~ Socrates

Your desire for material wealth and social status can negate or neutralize anything that compounding and/or increases in income can accomplish.  In other words, without contentment, no financial tools or strategies will be able to satisfy your desire for more.  Therefore contentment is the most powerful force in the universe (at least in the financial universe).

It's really a simple philosophy:  If you are happy with what you have now--if you already have enough--you spend less and save more--you are already rich.

"If thou wilt make a man happy, add not unto his riches but take away from his desires." ~ Epicurus 

I believe my posting here underscores the importance of philosophy in finance (or any other aspect of human life) and it highlights the primary theme of The Financial Philosopher.  If you do not address some of the basic and timeless philosophical questions, such as Who am I? and What is my purpose? and What is the meaning of my existence?, your lack of self-knowledge, no matter how much external knowledge you may acquire, will erode your quality of life, both inward and outward.

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Related:

You Can't Have Everything. Where Would You Put It?

Sound Financial Advice: Don't Identify With Things

Don't Try to Predict Your Own Behavior

"It's easy to see, hard to foresee." ~ Ben Franklin

How often have you accurately predicted your reaction to emotion-provoking events in your life?

When the stock market gets volatile as it has been in recent weeks, I am reminded of the irrelevence of risk tolerance questionnaires.  If you've ever sat down with an investment advisor or financial planner, you've likely seen or heard the questions that try to predict how you might react in various stock market scenarios. 

For example: 

"If your investment portfolio were to fall by 20% in the course of one year, how would you react?  Would you A) Do nothing, B) Wait a few months to make a decision, or C) Sell your stocks immediately?"

After answering about 20 questions like this, the advisor or planner then assesses your risk tolerance and will likely label you as one of three investor types--aggressive, moderate or conservative.

"A man’s knowledge is like an expanding sphere, the surface corresponding to the boundary between the known and the unknown.  As the sphere grows, so does its surface; the more a man learns, the more he realizes he doesn’t know.  Hence, the most ignorant man thinks he knows it all." ~ L. Sprague de Camp

The problem I have with these questionnaires is that no human being can consistently or accurately predict their own behavior, especially if they've never experienced the scenarios given on the questionnaire.  I have several clients who had once thought they were "aggressive" investors--able to tolerate high risk, high volatility--but were ready to bail out of stocks immediately after a 5 or 10% decline.  This is not poor judgment on their part--it is simply human.

Consider life scenarios.  If your spouse died, how would you react?  If you lost an arm, what would you do?  If you survived a terrible car crash, what emotions would you be feeling just moments after it occured?  The honest answer is "I don't know."

"Fantasy may call the grapes of reality sour, but those who have tasted them know at last a dependable delight." ~ Dorothea Brande

Predicting behavior is at the root of most failure.  For example, something that seems difficult to endure is often not as terrible as you might imagine; but because you hesitate or fail to make an attempt at accomplishing a goal, you fail.  Conversely, you may imagine something causing extreme happiness so you pursue it.  However, if and when the thing is obtained, the happiness fades quickly or doesn't happen as you had once imagined.

Humans underestimate their ability to endure difficult times and they overestimate the happiness they will feel.  Therefore the seemingly difficult goals might never be attempted and the pursuit of happiness can be misleading.  The most accurate prediction, with regard to your future behavior, is that your prediction won't be accurate.  Embrace transcience; be content with the way things are now; be satisfied with not knowing the future or attempting to control it; and allow your imagination to be your friend, not your enemy.

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Related:

Understanding Markets: Nature Not Naivety or Narcissism

We Are All 'Naive Scientists'

The Experience-Stretching Hypothesis