THE FINANCIAL PHILOSOPHER

The 'Four F's': Pressing Your Buttons

"Memes involving danger, food, and sex spread faster than other memes because we are wired to pay more attention to them--we have buttons around those subjects." ~ Richard Brodie

In his best-selling book,Virus of the Mind: The New Science of the Meme, Richard Brodie provides an interesting and insightful look into the impact of memes--what he calls the DNA of human society. 

A meme is a basic unit of imitation.  All trends, social conventions and religions are built on memes.  Like DNA, a meme's purpose is to copy itself.  Genetic evolution can take decades, centuries or millennia.  However, a meme--an idea, a catchy phrase, a trendy behavior--can evolve almost instantaneously, especially in the incredibly interconnected world in which we live today.   

The most effective memes are the ones that spread the easiest.  Think of a photograph or video that gets spread quickly on the Internet.  It is said to have gone "viral."  Memes can also survive beyond the short-term trend and spread across vast regions of space and time. 

But what makes the most effective memes successful?  How do some ideas, images and messages catch our attention more than others?  According to Brodie, memes are like a computer software that builds on basic brain functions or "hardware design."  The hardware (brain) is driven by the most basic human drives, such as hunger, fear and sex.  The software (memes) enhance the functionality of the hardware.  This hardware/software design has been fundamentally the same since primitive man.

"In other words, our brains made us better at pursuing the four basic drives animals have, fondly referred to by zooligists as the "four F's": fighting, fleeing, feeding, and--er--finding a mate." ~ Richard Brodie Virus of the Mind: The New Science of the Meme

The marketing adage, "sex sells and we're buying," is true.  This can be extended to fear, food and fighting.  From these basic brain functions our figurative buttons are formed.  Mass media and marketing messages use these buttons to get your attention.  The buttons are commonly pressed by asking questions with one of the four F's imbedded:

• Are your children safe riding the bus?
• Got milk?
• Hungry for Pizza?
• Will the European Debt Crisis Tip the World into Recession?

One of the key lessons I took away from this book is that there are few human beings who are conscious of their surroundings and are therefore rarely acting authentically -- they live in a kind of dream state -- by eating, buying and socializing without knowing why they do what they do -- they imitate and replicate -- memes and DNA go on surviving long after we are gone.

"The word pay in 'pay attention' is quite apt.  As we are conscious beings, attention is our most precious commodity.  Attention is a piece of our consciousness, a slice of our human life.  When we direct our attention at something, we are spending a piece of conscious life." ~ Richard Brodie,Virus of the Mind: The New Science of the Meme

Imitation is human but it may be best used as a tool for learning, especially when young.  Once we learn how to function in our environment, we may then move on to learning about ourselves.  The challenge, however, is that self-knowledge and self-awareness take a conscious mind, which is not part of our hard-wiring.

It is not necessary for a computer to understand how it is programmed--it just runs the program.  Similarly, our brains naturally and automatically perform very simple and specific tasks.  Therefore the natural tendency for humans is to go on through life without consciousness and our buttons are easily pressed.

Try finding the memes that have become your programming:  Where did your attitudes about money come from?  Why do you tend to vote for the same political party?  What made you buy the food item that wasn't on your list?  Begin by recognizing how you are programmed to think and act in a certain way.  You are then enabled to "de-program" yourself and act consciously and authentically. 

Now, if we can only spread this meme to others we may build a better world!

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Source: Virus of the Mind: The New Science of the Meme

Related Post: The Paradox of Habit Part II: Antonyms of Creative Thought

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

Balancing Human and Being

"You are a human being. What does that mean? Mastery of life is not a question of control, but of finding a balance between human and Being." ~ Eckhart Tolle

Does the stock market make you anxious?  Do you get angry when someone cuts you off in traffic?  Do you spend more time thinking about and planning for the future than you spend living in the present moment?  Have you put off taking steps toward the life you've imagined?   Of course you do!  You're human!  But how human are you?

If you answer 'yes' to most of these questions, you have an unhealthy balance of human and being; you are more brain than mind, more ego than authentic self, more money than meaning, more plan than purpose, more somewhere else than where you are now, more human than being.

"The ego doesn’t know that the source of all energy is within you, so it seeks it outside." ~ Eckhart Tolle

There is no denying the fact that you are human--you are flawed. So you easily forget who you are and why you live because you get caught up in the illusion of a world of forms (thoughts, words, things perceived by the senses) that your brain/ego can grasp and use as identity.  Translation:  You think you need outside things (money, material wealth, other people) to give you a sense of self; and as you continue seeking these things, you lose the life that you are.  You need to get back to Being.

"Whatever has being does not become; whatever becomes does not have being." ~ Friedrich Nietzsche

Conversely, the attempt at denying the human in you--to move too far from human--can create its own illusion.  Even the attempt to force away outside influences--to become an island unto yourself, if you will, is a work of ego.   You decide to create your own reality and rationalize away anything that disagrees with your thoughts and ideas. 

So what can be done?  Your human nature can be self-destructive and denying it can cause incredible tension and inner termoil. Accepting your human flaws is to flow with nature.  However, the human that exists without awareness is a child without a parent, a brain without a mind, a mindless existence.

"What this has taught me I think all of us had better learn.  There are no perfect human beings!  Persons can be found who are good, very good indeed, in fact, great.  There do in fact exist creators, seers, sages, saints, shakers, and movers.  This can certainly give us hope for the future of the species even if they are uncommon and do not come by the dozen.  And yet these very same people can at times be boring, irritating, petulant, selfish, angry, or depressed.  To avoid disillusionment with human nature, we must first give up our illusions about it." ~ Abraham Maslow

The antidote to the disease we may call the human condition is simple awareness--a balance of Human and Being.  The mind becomes the adult and the brain is the child.  Both have their redeeming qualities; both have their destructive tendencies; but together they strike a healthy balance of responsibility and adventure, chaos and order, dreaming and consiousness, wrecklessness and control, play and work, observer and observed, lost and found, planner and wanderer, selfishness and unselfishness and so on.

Human and Being are not opposing forces but rather two parts that create a balance.  See it, enjoy it, embrace it.

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Related:

Mind vs Brain Part I: We are only Human

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

Reason for Market Freefall in One Word

"Because your brain uses information from the areas around the blind spot to make a reasonable guess about what the blind spot would see if only it weren't blind, and then your brain fills in the scene with this information. That's right, it invents things, creates things, makes stuff up! It doesn't consult you about this, doesn't seek your approval. It just makes its best guess about the nature of the missing information and proceeds to fill in the scene..." ~ Daniel Gilbert

Just before turning out the light, you finish reading a news article about unexplained murders in the city where you live.  As you turn out the light, you hear an odd sound; the room is dark and you are alone.  In the instant before turning on the light, what rushes through your mind?

Anxiety is caused by the imagination, which is the same mechanism that thinks monsters lurk in the dark.  In this previous scenario, what might fill your imagination if you had seen your cat or dog walking across the room just before turning out the light?

When there is missing information--when there is uncertainty--the imagination will fill the blind spot of your mind with information largely based upon the emotion or experience that immediately precedes the event.

"And as imagination bodies forth the forms of things unknown, the poet's pen turns them to shapes, and gives to airy nothing a local habitation and a name." ~ Shakespeare

Imagination is the primary culprit in the recent stock market decline.  When the light eventually turns back on, something terrible (i.e. the murderer) may be standing before us or there may be something much less frightening (i.e. the family pet).  Personally, I believe that the debt ceiling standoff, which ended with the S&P downgrade of the US credit rating was the psychological event that set the stage for filling the investor herd's collective imagination with monsters that may or may not exist.

It has been said many times before that uncertainty is the greatest enemy of the investor.  While this may be true, I would add that it is the imagination that creates the scene from which one acts and reacts.  For this reason, and placing the current market decline in perspective, the present reality, which is currently in the dark, may not be pretty but it is likely attractive in comparison to what is now being imagined. 

The Power of Words (and Perspective)

"I can see, and that is why I can be happy, in what you call the dark, but which to me is golden. I can see a God-made world, not a man-made world." ~ Helen Keller

This YouTube video (email subscribers click here to view it) is a brief but profound message on the power of words.

The video's underlying meaning, in my humble opinion, is really one of perspective.  Once the woman passerby changed the words of the blind man's sign, she actually changed the perspective to that of a person with sight.  Therefore, there was a greater sense of sympathy for the blind man, which is why he received more handouts.

There is another perspective of this video, however, that I believe is lost in the heartwarming act of the woman.  It is the perspective that those of us with sight are not necessarily in a greater position to live a life of meaning and purpose than those without sight.  Vision is a wonderful sense but it also adds intensity to the potential of self-destructive behaviors and the physical world distractions money, materiality and social status.

The woman’s new message is one of marketing power but not necessarily one of truth. If the truth were told, this would be the sign’s new message:

"I need only spare change because my blindness empowers me
to see a world without judgment, comparison or materiality.
Therefore, I need less money than you.
Spare yourself a mindless purchase today and
help a blind person buy the bare necessities of life."

Of course, this new message would result in less money, not more for the blind man, primarily because people would either not take the time to read this lengthy message or they would think the blind man is some arrogant and/or dillusional hermit and go about their meaningless financial pursuits of the day.

If you could change the words of the sign, what would you write?

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Hat tip to The Big Picture for the Video

Why the Blind Can See

What is 'the Good Life' & Why Do You Want It?

Master (or Be Mastered By) Language

Still Haven't Found What You're Looking For?

"Slow down and the thing you are chasing will come around and catch you." ~ Zen Saying

There are three ways to find whatever it is you may be looking for, whether it is a new career, your next best investment idea, a new pair of shoes, or anything you can imagine: 1) By doing nothing, 2) by searching, or 3) by discovery.

It should go without saying that the first means is the most foolish and that the other two are wise to some degree.  We know that doing nothing is certainly the easiest among the three but 'degree of difficulty' is not always the best criterion for choosing a particular course of action or inaction. 

By deduction, therefore, we may conclude that the most prudent means of finding something are search or discovery.  But which is best?

"We have to recognize accident, i.e., the fact that there is no formula, no 'principle', which covers all things; that there is no totality or system of things. And this recognition at once supports a life of 'responsibility and adventure' and leads to scientific discovery." ~ John Anderson

The answer lies in the balance of science and art--of search and discovery.  In my investment advisory work, for example, I rarely gather client data for the purpose of making any particular investment recommendation.  The process of search is used as a tool to uncover and discover what was not previously known to the client and certainly not known to me:  The scientific means of search is not used for scientific ends--there is no particular expectation of results; only an expecation that something hidden is likely to be revealed after the search begins.  In other words, I search for the purpose of discovery.

Search is a formal, scientific process that relies on the known to find something that is not known; discovery is the result of finding something you may not have been looking for (or when something finds you).

An important distinction to make between search and discovery is that the former does not necessarily lead to anything more than an observation and that the latter is an actual finding. The challenge with discovery, however, is that it can also be a distraction.  For example, how many times have you "discovered" something on the Internet?  Was this discovery productive and useful or was it a distraction?

"It is clear, then, that the idea of a fixed method, or a fixed theory of rationality, rests on too naive a view of man and his social surroundings." ~ Paul Feyerabend

The theme of last week's post on 'living laterally' is that many people make the mistake of relying on scientific formulas--to think linearly, inside the box; whereas scientific processes are often too rigid to produce the greatest results.  To use another example from my advisory practice, I stopped using financial planning software two years ago because the "plans" it generated, by necessity, are only financial snapshots--static information that is history the moment it is printed.  Life is not static or quantitative; it is dynamic and qualitative.  Financial markets are no different.  How many of the greatest moments, occurences and ideas in your life were planned?  Financial plans are illusions.

Before I digress, I will make a summation: Don't search for answers or results of any kind without expecting the discovery of unforeseen opportunities (or unforeseen distractions).  In fact, I will go out on a limb and say that the process of search should be used for the sole purpose of discovery. 

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Related:

Are Financial Plans Illusions?

The Greatest Source of 'News You Can Use'

Stop Looking for a List of Things to Do

Tool's Lesson on Fibonacci: Think 'Laterally'

Whether you are an investment trader, a music fan, a mathematician, a curious observer wishing to learn more about human nature, or any combination thereof, you will appreciate this lesson on the Fibonacci Sequence (more on this after the YouTube link):

The video, created by a college student to help explain the Fibonacci sequence, features images of space from the Hubble Telescope and music from the cerebral and progressive hard rock band Tool.  What makes the video and song incredibly compelling is the lyrics, which teach a lesson on pattern recognition.

For those non-traders and non-mathematicians out there, a Fibonacci sequence is a series of numbers where, after two starting values, each number is the sum of the two preceding numbers.  For example, the number sequence 2, 3, 5, 8 and 13 are a Fibonacci sequence (2+3=5, 3+5=8, 5+8=13, and so on).

Making the video and song more interesting is that the cadence of the lyrics (number of syllables of succeeding verses) follows a Fibonacci sequence.  What’s more, the meaning and lesson of the lyrics implies that humans are hopelessly addicted to looking for patterns everywhere they turn:  The "over-thinking" and "over-analyzing," as the lyrics suggest, have an effect of dulling intuitive thought and often results in missed opportunities.

Pattern Recognition: Strength, Weakness or Both?

Philosopher and mathematician, T.L. Fine, once said, "A keen eye for pattern will find it anywhere." This profound statement is neither a compliment nor an affront to humankind but it suggests that a fundamental awareness of the human tendency for pattern recognition allows for a healthy balance of intuitive thought and science.

Pattern recognition is a means of making sense of randomness.  This search for understanding, which is rooted in the desire for control and safety, can be self-defeating.   Wanting to find patterns can be considered thinking "inside the box," but the answers are not always in the box.  Additionally, being comfortable without having answers can often open doors to new ideas, new opportunities and success.  Therefore asking questions is more important than having answers.  As 19th century philosopher and spiritual leader Jiddu Krishnamurti once said, "Freedom from the desire for an answer is essential to the understanding of a problem."

Balance Linear And Lateral: Seek But Remain Open to Discovery

Returning to the message within the Tool song, aptly named Lateralus, too many people think and live linearly (in straight lines, black and white, inside the box), whereas thinking and living laterally (randomness, color, outside the box)–embracing the unknown–is healthy.

Perhaps the wisest solution is to balance the linear with the lateral.  There is no stopping your nature to seek and find patterns; and to eliminate this nature is nothing less than attempting to become something other than a human being.  Just be aware of your nature, and its potential limitations, and you’ll open doors to intuitive thought–expand beyond the narrow-minded linear thought–balance responsibility with adventure–seek but remain open to discovery.

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Related: Beware of Confirmation Bias

The Paradox of 'Financial Freedom'

"The real opposition is that between the ego-bound man, whose existence is structured by the principle of having, and the free man, who has overcome his egocentricity." ~ Erich Fromm

What a paradox!  In a financial context, the quest to reach financial freedom tomorrow is an egocentric pursuit that limits or even removes freedom today.

In a previous post, we discussed the two types of freedom, which are freedom from and freedom to.  If, as the 20th century philosopher Erich Fromm says, your life is "structured by the principle of having," you are not free because you seek freedom from something--the freedom from your current life, from the daily grind, from debt, from financial insecurity.

There is nothing wrong or right about seeking money, material wealth or social status; money is not the root of evil, but rather the most common way to lose oneself.  Therefore you must make a conscious effort to find the non-financial meaning and purpose in your life.  Do not seek, for example, the freedom from debt for financial well-being--seek the freedom to something meaningful that perhaps your debt is preventing you from being.

You will then be enabled to make money a tool to reach these things.  This is freedom to--the freedom to be your true self.

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Related:

Freedom From vs Freedom To

Curing Affluenza

The Diminishing Marginal Utility of Wealth

10 Potentially Perilous Paradoxes on Investing Planning & Life