Procuring Freedom With a 'Razor'

What does a medieval philosopher, simplicity and a "razor" have to do with freedom?  I'm so happy that you asked!

July, for most of you in the United States, may bring to mind the thought of freedom (in addition to the summer heat) as Americans observe Independence Day.  While many of us think of those things that have made our freedom and independence possible, less of us think of those things that actually take away our freedom and independence.

Freedom means many things to many people, almost to the degree that the word's meaning is abstract.  What represents freedom to one may represent enslavement or subjection to another.  More commonly, those things most considered to be liberating and/or productive have paradoxical consequences.  Today, therefore, I would like to call to mind some things that may be inhibiting your freedom, but perhaps you may have first thought of as liberating or productive.

"Entities should not be multiplied unnecessarily." ~ Sir William of Ockham (c.1288 - c.1348)

Why add complexity if it is not necessary?  Sir William of Ockham certainly agrees.  Who is Sir William of Ockham?  He is credited with the principle of Occam's Razor (or Ockham's Razor), which "recommends the selection of the hypothesis that introduces the fewest assumptions and postulates the fewest entities while sufficiently answering the question."

With regard to the "hypothesis" of how to lead a fulfilled and meaningful life, I submit that simplicity is one of the greatest virtues in this pursuit.  For example, if you reduce your daily activities to half the current level and are able to maintain the same or greater level of meaning and fulfillment, then Occam's Razor says to do so!

Let's consider some of the means of procuring freedom, in the spirit of Occam's Razor, via the pursuit of simplicity, viewed through the lens of personal finance:

• More choices often lead to less decisions, poor decisions or no decision at all.  While some choice may be good, more choice is not necessarily better.  With regard to personal finance, social research has shown that more investment choices in a 401(k) plan has led to lower participation on the part of employees.  How many investments do you need?  If you are a mutual fund investor,  the benefits of diversification will more likely diminish than increase beyond eight or ten funds.
• Allocation of Attention:  Most of us are familiar with investment assets, such as stocks, bonds and cash; however, we tend to forget an asset that may be more important -- our attention -- which is certainly one of the only assets where we can control performance.  Much like the allocation of a portfolio of investments, you should allocate where and how your attention is spent and determine if your information sources are adding to (or reducing) simplicity in your life.  What adds value?  What adds complexity?  What takes time away from your priorities?  Do you need cable tv, video games, newspapers, magazines, cell phones, or blogs?  If so, to what degree? 
• Align who you are with what you do:  This is the essence of freedom.  Do you enjoy what you do?  How much time do you spend on activities that you simply do not care to do?  Why are still doing them?  How soon can you minimize or remove them and increase the time and energy spent on things you enjoy -- your priorities?  Essentially, an increase in time spent on activities you enjoy will reduce time available for activities you do not enjoy; thereby increasing your freedom.
• Outsourcing:  Do you enjoy researching investments and planning your finances?  If not, hire a financial adviser.  How much is your time worth?
• The definition of terms:  Define the word productive.  If anything can slice needless complexity out of your life, this may be the most simple and effective strategy to do so.  To define what productive means to you, simply make a short list of the thing(s) you wish to produce.  Is it time with family?  Is it time to write the book you've always wanted to write?  Is it money for a well-deserved vacation?  Is it money or materials for a charity?  While you're at it, define a few other terms, such as wealth, strength, weakness and happiness.
• Turn down the noise:  One thread running throughout this post may be the idea that conventional wisdom has more influence on the "average person" than is healthy.  Media sources, educational institutions, parents, and other social influences are constantly trying to tell you how to act, what to study in school, what career to pursue, where to invest your money, which car to drive and what things bring you most happiness.  Only YOU should choose these things.  Tune out (or significantly turn down) outside influences and simplify, simplify, simplify...
• Beware of 'Luxury:'  I'll simply quote Socrates here:  "Luxury is artificial poverty."
  

To end this post, I'll add one more thought from the book I'm currently reading, Walden, by Henry David Thoreau, perhaps one of the greatest teachers of simplicity that ever lived (not to reduce the value of our friend, Sir William of Ockham)!

Most of the luxuries, and many of the so-called comforts of life, are not only not indispensable, but positive hindrances to the elevation of mankind.  With respect to luxuries and comforts, the wisest have ever lived a more simple and meager life than the poor.  The ancient philosophers, Chinese, Hindoo, Persian, and Greek, were a class than which none has been poorer in outward riches, none so rich inward.

What are your thoughts?  Do you have examples of procuring freedom via simplicity?  I'd love to hear of them...

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Related Post: 

Mind vs. Brain Part II:  Priorities, Pursuits & Productivity

Suggested Reading: 

Walden, or, Life in the Woods

The Paradox of Choice: Why More Is Less

Comments

[Newbie]

love the blog. am learning as much as I can about active asset allocation and seeking more info on the web...can you point me in the right direction? I don't like bonds at all right now in a deleveraging world of less than creditworthy borrowers of all stripes...FWIW.
cheers

[Kent @ The Financial Philosopher]

Newbie: Thanks for the positive remarks! Your question about active asset allocation is quite broad so I'll send you an email offline...

With regard to bonds, I mostly share your sentiment. For clients, however, I like intermediate-term, high credit-quality corporate bond funds as a diversifier. I believe the timing for long-term bonds, municipal bonds, and low credit-quality (junk) bonds is not good at the moment.

Thanks again...

Kent

[Newbie]

Kent, I could not agree more about bonds at this point. Thanks for the reply and please don't go to the trouble of emailing me to that made-up email address. I am also looking into Commodity index funds as a great diversifier...what do you think?
Best and regards,
Newb
ps. You seem way too "deep" to be a financial advisor...IMHO and with a grin.

[Kent @ The Financial Philosopher]

Thanks, Newb.

I believe Commodity index funds are as great a diversifier as they have ever been. I primarily use Natural Resources funds for this purpose (5 to 10%, depending on the client), which give good broad exposure to energy and commodities.

Thanks for the "grinning" remark on my deepness. I take that as a compliment!

Thus far, I have been able to avoid quoting Lau Tzu or Plato in any of my meetings with clients!

In all seriousness, the philosophy strengthens my mind for analytical work and keeps me calm amidst the noise and chaos of financial markets. Writing this blog is quite good therapy and a way of keeping me sharp...

"I write to keep from going mad from the contradictions I find among mankind - and to work some of those contradictions out for myself." ~ Michel de Montaigne

Cheers...

Kent

[Deb Braidic]

I love your final quote about luxury as artificial poverty - I know you didn't say it the first time it was uttered, but thanks for rescuing it and providing it for us here - it was exactly what I needed to read at this moment in time.