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The Power of Stoic Thinking: Why Investors Welcome Panics,
Crises and Bear Markets (Part I) |
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Man is troubled not by events, but by the meaning he gives them.
... What,
then, is to be done? To make the best of what is in our power, and take
the rest as it naturally happens. ‒Epictetus Discourses 1.1.17
What mindset underlies successful
investment? How does an investor worthy of the name respond to sudden
and sharp falls, as well as extended contractions, of individual stocks’
prices and overall markets’ levels? I ask these questions in order to
make a vital point: investment – and particularly successful investment
– is primarily a matter of character and only secondarily of cleverness.
In his Preface to The Intelligent Investor, Warren Buffett wrote:
To invest
successfully over a lifetime does not require a stratospheric IQ,
unusual business insights, or inside information. What’s needed is a
sound intellectual framework for making decisions and the ability to
keep emotions from corroding that framework. This book precisely and
clearly prescribes the proper framework. You must supply the emotional
discipline.
Benjamin Graham elaborated this
point: an investor’s results presuppose a particular temperament. Graham
recalled William Shakespeare’s Julius Caesar:
The investor’s
chief problem – and even his worst enemy – is likely to be himself.
(“The fault, dear investor, is not in our stars – and not in our stocks
– but in ourselves” …) [Hence] by arguments, examples and exhortation …
we hope to aid our readers to establish the proper mental and emotional
attitudes toward their investment decisions. We have seen much more
money made and kept by “ordinary people” who were temperamentally well
suited for the investment process than by those who lacked this quality,
even though they lacked an extensive knowledge of finance, accounting,
and stock-market lore (The Intelligent Investor, p. 8; see also
pp. 120-121).
In an interview with Hartman
Butler in the early 1970s (“An Hour with Mr Graham,” reprinted in Janet
Lowe, The Rediscovered Benjamin Graham: Selected Writings of the Wall
Street Legend, John Wiley & Sons, 1999), Graham added:
The main point
is to have the right general principles and the character to stick to
them. … There are two requirements for success in Wall Street. One, you
have to think correctly; and secondly, you have to think independently.(1)
 Perhaps because neither The
Intelligent Investor nor Security Analysis (1934 and
subsequent editions) used the term, and these days few people would
properly understand it if they had, investors don’t recognise how much
Stoicism influenced Graham. This ancient philosophy mitigates the
influence of passion upon thought and action. (As we’ll see, Stoics’
definition of “passion,” among other things, differs greatly from the
contemporary one.) Stoicism encourages the self-control that reasonable
decisions – as well as responses to unexpected developments such as
panics, crises and bear markets – presuppose. By embracing reason and
reducing emotion’s scope to overwhelm it, a Stoical approach increases
the likelihood (assuming that the investor also adopts Graham’s and
Buffett’s framework) that over time the investor will think and act
sensibly. “Individuals who cannot master their emotions,” goes one
insight commonly attributed to Graham, “are ill-suited to profit from
the investment process.” In investment as well as theology, Gnosticism
is nonsense. In other words, there simply is no secret; nor is there an
easy path or shortcut. Discounting and ignoring others’ opinions (unless
you’ve carefully assessed them and no matter the confidence with which
prominent and influential people express them), conducting your own
analyses and drawing your own conclusions – these habits of mind
underpin both Stoic temperament and Graham’s conception of sensible
investing.
Stoicism has spiritual
underpinnings: indeed, it and atheism are incompatible. Some of its
foundations are in some respects similar to Christianity’s (and, for
that matter, Islam’s and Judaism’s). Hence Christianity and Stoicism
overlap in some significant respects.(2)
Accordingly, throughout the centuries influential Christians ranging
from St Ambrose to St Thomas Aquinas to Pope John Paul II have praised
Stoic writings such as the Meditations of Marcus Aurelius. Be
they Christians (or Jews, Hindus, Muslims, etc.) or even agnostics, an
appreciation of Stoicism can greatly benefit investors – indeed, all
people in many aspects of their everyday lives. Stoics understood that
if negative emotions such as anger, envy, greed, fear and grief plague
your life, then soundness and peace of mind will elude you. Serenity in
the midst of adversity – which is hardly the same thing as the modern,
Western and secular notion of “happiness” – is a necessary condition of
a well-lived life. Hence many of us should consider Stoics’ practical
techniques to reconsider negative thoughts and abate disruptive
emotions.
Stoics don’t attempt – as extreme
Calvinists once did and “positive thinkers” now do – somehow to block or
extinguish certain thoughts and emotions. Stoics recognise that damaging
thoughts and upsetting emotions reflect our flawed human nature: hence
they affect all people (albeit some more than others). Stoics show us
how to reconsider our hostile reactions to certain events. In their
view, harmful emotions (including fear of bear markets and recessions,
the panic that occurs during financial crises, etc.) stem from illogical
thinking. Once you understand that these emotions are unfounded, you’ll
cease to think so unfavorably about the events that prompt them – and
these happenings will less frequently and deeply disturb your
equanimity.
Unlike today’s “positive
thinkers,” Stoics don’t reject negative thoughts. Indeed, the modern
stereotype of Stoicism is diametrically incorrect: Stoics DON’T try to
suppress particular emotions. Instead, through dispassionate
analysis they reassess from negative to neutral, neutral to positive – and sometimes negative to positive
– their reactions to events. In his
Meditations, Marcus Aurelius counseled: “Remember too on every
occasion which leads thee to vexation to apply this principle: not that
this is a misfortune, but that to bear it nobly is good fortune.” In one
of The Intelligent Investor’s numerous Stoic passages, Graham
advised (p. 203):
The true
investor … is free to disregard the current price quotation. He need pay
attention to it and act upon it only to the extent that it suits [him],
and no more. Thus the investor who permits himself to be stampeded or
unduly worried by unjustified market declines … is perversely
transforming his basic advantage into a basic disadvantage. That man
would be better off if … stocks had no market quotation after all, for
he would then be spared the mental anguish caused him by other
persons’ mistakes of judgment [second set of italics in the
original].(3)
And on p. 206 he added:
The investor
with a portfolio of sound stocks should expect their prices to fluctuate
and should neither be concerned by sizeable declines nor become excited
by sizeable advances.
Investors or not, Stoics don’t
suddenly force themselves to erect a serene countenance; instead, they
gradually and voluntarily disassemble the artificial (unsettled)
temperament that usually surrounds and otherwise obscures our natural
(calm) one. Precisely because Stoics think negatively – that is, they
regularly and rationally ponder the myriad “bad” things that at one time
or another inevitably happen to us – they become cheerful, peaceful and
thankful. They aren’t killjoys: they appreciate and even relish the
many good things – the best of which are non-material – that life
offers. Yet they don’t regard leisure, luxury, wealth, etc., as good
things per se; hence they neither crave (if they don’t have them)
nor cling to these things (if they do), and they certainly don’t let
material pleasures enslave them.
What Is Stoicism?
These days, “stoical” means
indifferent to “bad” emotions (such as anger, envy or guilt) or events
(like the death of a spouse) as well as “good” actions (such as
generosity, forgiveness or repentance) or occurrences (such as the birth
of a child). The stoic allegedly represses all feelings. This modern
usage, to which I’ll refer with a lower-case “s,” first – and not
coincidentally – appeared in the late-16th century. The
term’s ancient usage (which I’ll denote with an upper-case “S”) is quite
different. Stoicism is a school of Hellenistic philosophy. Although its
pedigree is Greek, we must necessarily view it through Roman lenses.(4)
Zeno of Citium (now Larnaka) in Cyprus founded Stoicism. In Athens in
the third century BC, Zeno taught philosophy at the Stoa Poikile
(“painted colonnade” or “painted porch,” from which the school’s name
derives). Three propositions encapsulate the ethics of Stoicism: first,
errors of judgment produce destructive emotions; second, a sage (i.e.,
person of “moral and intellectual perfection”) neither commits such
errors nor suffers such adverse consequences; third, and accordingly,
everybody can and should adopt the sage as his model.
Stoicism is not merely an
abstract system of idle speculation: it’s also a practical guide to
productive action. In particular, Stoics such as Seneca(5)
and Epictetus(6)
emphasised that because “virtue is sufficient for happiness” and “virtue
is nothing else than right reason,” misfortune does not affect the sage.
From the start, Stoicism was popular in Athens; later, it spread across
ancient Greece; and eventually it became the foremost philosophy of the
educated élite throughout the Hellenistic world and Roman Empire. Marcus
Aurelius (121-180, Emperor 161-180)(7)
was perhaps its most influential and certainly its most prominent
adherent.
Tenets of Stoicism
Stoicism provides a three-part
and unified account of the world. Formal logic, non-dualistic physics
and naturalistic ethics(8)
comprise this account; of these, and particularly among later (i.e.,
Roman) Stoics, ethics is its focus. Stoics devised various metaphors to
clarify the interrelationships among the three pillars of their
philosophy. They drew an analogy, for example, between their philosophy
and a fertile field: “logic being the encircling fence, ethics the crop,
physics the soil” (see A.A. Long, Epictetus: A Stoic and Socratic
Guide to Life, Clarendon Press, 2002, p. 20). As this metaphor
implies, ethics plays a central and practical role: for why tend the
soil, erect a fence and sow seeds unless they produce a crop?
Following Socrates, Stoics
contend that an individual’s misery stems from his vices; his
corruptions, in turn, derive either from his ignorance or defiance of
reason, nature and God.(9)
“Begin each day,” Marcus famously advised in his Discourses, “by
telling yourself: ‘today I shall be meeting with interference,
ingratitude, insolence, disloyalty, ill-will, and selfishness – all of
them due to the offenders’ ignorance of what is good or evil.’” Stoicism
teaches that virtues can surmount vices and that reason can master
ignorance; specifically, it lauds reason and fortitude as means to
overcome destructive actions (such as theft and violence) and the
emotions (such as fear and greed) that underlie them. The four cardinal
virtues of Stoicism, which reflect the teachings of Plato, are wisdom
(Sophia), courage (Andreia), justice (Dikaiosyne) and temperance
(Sophrosyne).
How to develop these virtues? The
key is the recognition that virtues do – and vices don’t – conform to
the natural (that is, divinely-created) order of things. “Virtue
consists in a will that is in agreement with Nature,” said Bertrand
Russell in his analysis of Stoicism (A History of Western Philosophy,
George Allen & Unwin, 1960, p. 254); accordingly, to improve one’s
ethical well-being is to conform one’s thinking and behaviour more
closely to reason, nature and God (Stoics, in diametric contrast to
atheists such as Russell, regard these three things as real and
virtually synonymous).(10)
This principle also applies to personal relationships. Not only do
Stoics desire to liberate themselves from anger, envy and jealousy: they
also seek release from feelings of inferiority and superiority vis-à-vis
other people. Hence they accept all men – including slaves – as “equals
of other men, because all men alike are products of Nature.”(11)
In his Lectures, Musonius Rufus added that both men and women
“have received from the gods the same reasoning power.”
By harnessing mankind’s innate – that is, God-given – capacity to reason, the individual can acquire
knowledge. In principle, a man can distinguish empirical truth and
logical validity from falsehood and fallacy – even if in practice he can
only approximately delineate the boundary between truth and falsehood,
and draw provisional conclusions about whether a given statement belongs
on this or that side of the boundary. In a risky (or, depending upon
your assumptions, uncertain) world, even the Stoic sage must therefore
plot his course humbly.(12)
That’s doubly so for
the rest of us: we must constantly strive to detect and gradually weaken
our many faulty premises, pretentions, etc. “It’s not what a man don’t
know that makes him a fool,” wisely noted “Josh Billings,” the pen name
of American humorist Henry Wheeler Shaw (1818-1885), “but what he does
‘know’ that ain’t so.”(13)
If you reason validly from true assumptions, say Stoics, then you can
understand – perhaps “glimpse incompletely” expresses their position
more accurately – logos. And if you comprehend and practice
reason and appreciate truth then, if you put your mind to it, you can
become more virtuous.
Straight thinking, in other
words, is a necessary condition of virtue. Cleanthes(14)
contended that the wicked man, who succumbs to destructive emotions, is
“like a dog tied to a cart, and compelled to go wherever it goes.” The
problem, noted Diogenes of Sinope, is that “bad men obey their lusts as
servants obey their masters.” Because they fail to control (or even
abate) their desires, their lusts control them. The wicked man
acknowledges that in important respects his body must conform to the
natural order; he readily agrees, for example, that he cannot violate
the law of gravitation, that he is mortal, etc. Yet he emphatically
denies that his actions must submit to some external ethical standard;
instead, he asserts, he can devise his own morals. And in one sense
he’s right: he possesses free will. But from this truth the evil man
invalidly infers that he can successfully resist logos;
accordingly, he invariably struggles unsuccessfully against it.
In contrast, the Stoic surrenders
his mind and body to nature, reason and God. “From Apollonius,”
recounted Marcus Aurelius in his Meditations, “I learnt freedom
of will and undeviating steadiness of purpose; and to look to nothing
else, not even for a moment, except to reason.” As a result, and in the
words of Epictetus (and echoing St Paul and in diametric contrast to the
modern stereotype), the Stoic is “[physically] sick and yet
[temperamentally] joyful, in peril and yet joyful, dying and yet joyful,
in exile and joyful, in disgrace and joyful.” Epictetus posited that the
individual’s will was – or could be – “completely autonomous,” and also
that the universe is “a rigidly deterministic single whole.” In other
words, you certainly can choose to think and act contrary to reason; but
if so you’ll not lead a virtuous life – and consequently will be
miserable.
Stoics thus promote a life of
harmony with one’s true self, whom the individual can to some extent
know, because such a life is in harmony with logos over
which one exerts no control. As Marcus Aurelius put it,
If you work at
that which is before you, following right reason seriously, vigorously,
calmly, without allowing anything else to distract you, but keeping your
divine part pure, as if you were bound to give it back immediately; if
you hold to this, expecting nothing, but satisfied to live now according
to nature, speaking heroic truth in every word that you utter, you will
live [content]. And there is no man able to prevent this.
Benjamin Graham agreed. “Have the
courage of your knowledge and experience,” he urged in The
Intelligent Investor:
If you have
formed a conclusion from the facts and you know your [reasoning] is
sound, act on it – even though others may hesitate or differ. (You are
neither night nor wrong because the crowd disagrees with you. You are
right because your data and reasoning are right.) Similarly, in the
world of [investment], courage becomes the supreme virtue after
adequate knowledge and a tested judgment are at hand.
The Vocabulary of Stoic Ethics
Stoics used many of the same
terms that we do today, but the meanings that they and we attach to them
often differ – sometimes subtly and other times greatly. For this
reason, today we often comprehend Stoic terminology superficially and
occasionally misunderstand it entirely. Stoic ethics teaches that if he
follows logic and truth then man can free himself from his passions’
painful shackles. To grasp this point, one must first appreciate that
Stoics’ conception of ethics is not the same as the modern conception
(we’ll turn to “passion” shortly). Today, we regard ethics as a matter
of specific thoughts and actions that by some criterion are either good
or bad. In contrast, Ancient ethics are concerned not with whether
specific acts are morally right or wrong. Specifically, the central
concern of Stoic ethics is whether the totality of our thoughts and behavior corresponds to a specific purpose
– namely, the purpose for
which our Creator has created us.
What, then, must a man do in
order to live an ethical life? The Stoics answered unambiguously: he
must live virtuously. But beware – Stoics’ and modern man’s
understandings of virtue differ subtly but significantly. Today, we
judge a person’s virtue by listing a person’s good (ethical) deeds and
his bad (unethical) acts, perhaps weighting each action by some
criterion (i.e., some good deeds are better than others, some bad acts
are worse than others, etc.), somehow adding all the ethical and
unethical deeds and – even more implausibly – expressing the former net
of the latter. The bigger the disparity, by this modern conception, the
more virtuous is the person in question.
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“Investors or not, Stoics don’t
suddenly force themselves to erect a serene countenance; instead, they
gradually and voluntarily disassemble the artificial (unsettled)
temperament that usually surrounds and otherwise obscures our natural
(calm) one.” |
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To the ancients, this modern
conception isn’t just crude; it’s absurd. Virtue isn’t a catalogue of
specific episodes of past behavior: instead, it reflects your general
conformity to the function for which you were designed – which is the
function for which Zeus (or, depending upon the writer, Nature) designed
all humans. Just as a “virtuous” hammer performs well its function – namely to drive nails into wood
– the virtuous person performs well the
function for which his Creator designed people: that is, to live in
accordance with God and Nature. How to do that? Strive to use your
faculty of reason. Our Creator has designed us to think and act
rationally, i.e., live peaceably among others and interact in
mutually-beneficial ways. As Marcus – whose Meditations leave the
reader in no doubt that he thought poorly of most men – put it:
“fellowship is the purpose behind our creation … I am bound to do good
to my fellow creatures and bear with them.” If we do these things,
Marcus assures us, we will enjoy “true delight.” The virtuous being
accepts this truth and acts accordingly.
Stoic ethics and logic are thus
closely intertwined. Epictetus emphasised that virtue “is nothing else
than right reason.” Stoic ethics champions the rule: in matters of
thought and action “follow where reason leads.” In particular, the Stoic
strives, through logical validity and empirical truth, to liberate
himself from his passions. To understand Stoicism, one must appreciate
that the ancient meaning of “passion” is akin to today’s conception of
“anguish” or “emotional suffering.” As Stoics conceive it, a passion is
a negative and unthinking – that is, an unreasoning and hence
unreasonable – inner reaction to external events. Passion, by this
conception, is the low road to sure misery.
This ancient notion differs
diametrically from modern usage, which regards “passion” as a laudable,
necessary and perhaps even sufficient condition of emotional health and
material success. Ancient Greeks including Stoics distinguished
pathos (whose plural, “pathe,” is normally translated as “passion”)
from propathos or instinctive reaction (e.g., turning pale and
trembling when confronted by physical danger) and eupathos
(reasoned reaction, whose plural is eupatheia). Eupathos is the hallmark
of the sage (sophos). Just as passions result from faulty reasoning,
eupathos is the calm that stems from sound judgments and correct
reasoning. Stoics thus seek through apatheia (literally, “absence of
passion”) to free themselves from emotional suffering. He who’s free of
it becomes able, through the exercise of virtue (reason), to experience
serenity and joy (mental health).
For Stoics, the goals of
attaining virtue and joy were closely intertwined; accordingly, when
they discuss virtue they also discuss equanimity. Early in his
Discourses, for example, Epictetus advises us to pursue virtue but
reminds us that virtue “holds out the promise … to create … calm and
serenity.” Further, “progress towards virtue is progress towards each of
these states of mind.” Epictetus identifies calm as the result to which
virtue aims. The arrow of causality also runs in the other direction:
the attainment of peace helps us to pursue virtue. Consider someone whom
negative emotions such as anger have distracted. This person will find
it difficult to do what his reason tells him: emotions are shouting so
loud that he can’t hear reason. Emotions thereby conquer reason; as a
result, he becomes confused about virtue, is unable to pursue it
consistently and thus fails to attain it. For the Stoics, the pursuit of
tranquility comprised a virtuous circle whereby the pursuit of one helps
to achieve the other.
By this Stoic conception, peace
of mind entails not just cognition (i.e., clear judgment) but also a
specific kind of temperament (namely equanimity in the face of life’s
inevitable highs and lows). For Stoics, “reason” means not just the
correct application of logic but also the broader and deeper
comprehension of logos – that is, conformity, humble submission to and
hence harmony with the divine universal reason that inheres in all
things. To live according to reason and thus virtue is to live
harmoniously and hence joyously with nature and God. If someone is
angry, cruel, unkind, etc., it’s because, willfully or otherwise, he’s
rebelling against logos – which leads man naturally to
compassion, kindness and mercy.
The Stoic solution to the
individual’s evil and consequent misery thus comprises the examination
of one’s own emotions, judgments and behavior; the determination of
where they diverge from divine and universal reason; and the resolve to
reform one’s emotions so that they conform better to reason. Properly
understood, then, Stoicism is the diametric opposite of today’s
stereotype. According to Seneca (On Tranquility of Mind),
Stoics seek to discover “how the mind may always pursue a steady and
favourable course, be well-disposed towards itself, and view its
conditions with joy.” Seneca adds (On the Happy Life) that the
Stoic “must, whether he wills or not, necessarily be attended by
constant cheerfulness and a joy that is deep and issues from deep
within, since he finds delight in his own resources, and desires no joys
greater than his inner joys.” Along similar lines, in his Lectures
Musonius Rufus tells us that if we conform to Stoic principles, “a
cheerful disposition and secure joy” will automatically follow.
Sounds Great, But How?
Technique #1: Constantly Ask Yourself – “Is This Within or Beyond My
Control?”
Whenever some internal thought or
external event occurs – which is almost constantly – Stoics advise that
you ask yourself: “is this within or beyond my control?” They readily
concede only sometimes can you influence what does and doesn’t
happen to you. They hasten to add, however, that anybody can usually, at
least to some extent, influence how he reacts to life’s real and
imagined vicissitudes. Epictetus is more forthright: he emphatically
rejects the contention (as William Ernest Henley’s poem, “Invictus,”
expressed it) that we are masters of our fates and captains of our
souls. Instead, we are merely actors in a play that others – namely the
Fates – have written.
Yet Stoics are hardly fatalistic.
Regardless of his role in this drama, and whether they’re expected or
unforeseen, the sage determines his reactions to events. “Man is
disturbed not by things,” said Epictetus, “but by the views he takes of
them. If, therefore, any be unhappy, let him remember that he is unhappy
by reason of himself alone.” Marcus Aurelius added: “Get rid of the
judgment, get rid of the ‘I am hurt,’ and you are rid of the hurt
itself.” Epictetus concluded: “there is only one way to [joy] and that
is to cease worrying about things which are beyond the power of our
will.” Jim Collins and Morten Hansen capture this idea:
Clear-eyed and
stoic, [investors] accept, without complaint, that they face forces
beyond their control, that they cannot accurately predict events, and
that nothing is certain; yet they utterly reject the idea that luck,
chaos, or any other external factor will determine whether they succeed
or fail (Great by Choice: Uncertainty, Chaos and Luck – Why Some
Thrive Despite Them All, HarperBusiness, 2011, p. 36).
Epictetus’s Handbook, also
known as the Enchiridion, begins with the sentence: “Some things
are up to us and some things are not up to us.” From an appreciation of
this obvious truth’s implications springs the state of mind – the calm
or equanimity and self-control – for which Stoics are best known: why
let anger or worry you those things which are beyond your control? Why
try to persuade people whose acts and opinions you cannot change? As
Marcus tartly concluded, “Nothing is worth doing pointlessly.” Instead,
concentrate your limited time and resources upon those things over which
you exert influence or can determine.
Don’t fret about the countless
things that always exceed your reach; instead, concentrate upon that
relative handful of matters that sometimes lie partly within your grasp.
If you’re busy influencing the few things you can influence, then the
countless things you cannot control will recede from your thoughts – and
thus neither upset nor worry you. Stoics thus counsel, in effect,
that you abandon your quixotic, egotistical, exhausting and ultimately
misguided and perhaps idiotic quests to change the world – which are
doomed to fail because others’ thoughts and deeds beyond your control.
Reform and improve yourself: and if others did so, then the world,
too, might be a better place. Many passionately proclaim that they
intend to “make a difference;” very few, however, humbly volunteer to do
the dishes.
The wise man modestly recognises
that he cannot affect – never mind change – countless things. (Indeed,
Stoics imply, the frustration of the average man in the street that he
can’t or doesn’t always get what he wants, that others don’t or won’t do
what he wants and that he can’t impose his desires upon everybody else,
is simply disguised hubris that his thoughts somehow can or should
transform their desires into reality.) Particularly noteworthy in this
context is the unalterable reality that all things in this world are
impermanent. “All things human,” Seneca wrote in To Marcia (whom
we’ll meet shortly), “are short-lived and perishable.” Marcus Aurelius
added that “the flux and change” in the world is neither accidental nor
ephemeral, but is an essential and permanent part of Nature.
This insight has a vital
application. In “Investors Dealing With a Loss of Control” (The Wall
Street Journal, 7 October 2008), Jason Zweig expressed it simply:
As an
investor, … it’s absolutely vital to separate what you can truly control
from what is beyond your control. The only thing you can know for sure
is that [in J.P. Morgan’s words, “prices will fluctuate”] You cannot
control whether or not the market will continue to trash stocks, but you
can control how you respond.
Even during
the Great Depression, the best investment results were earned not by the
people who fled stocks for the safety of bonds and cash, but by those
who stepped up and bought stocks and kept buying on the way down. A man
named Floyd Odlum made millions of dollars putting his cash into
battered stocks. His motto throughout the market nightmare of 1929 to
1932 never changed: “There’s a better chance to make money now than ever
before.”
Technique #2: Picture the Worst-Case Scenario
Why contemplate the possibility
that bad things will affect you? Why, to use modern language, think
negatively? Any sensible person will occasionally ponder the many
unlucky and tragic things that might befall him. He will also consider
the absolute certainty that unfortunate occurrences of some kind (such
as his own death) will eventually affect him. Why do Stoics advise that
the sensible person should regularly cast his mind towards these things?
The first reason is that a bit of forethought may provide plenty of
prevention. A homeowner, for example, may consider the possibility that
a burglar or intruder might enter his home, assault his nearest and
dearest and steal his possessions. If he concludes that this risk is
sufficiently great, he should take precautions such as the installation
of deadbolts on doors, locks on windows, a security system, etc. These
concrete actions “manage” or mitigate the risk that prompted the
negative thoughts. Paradoxically, negative thinking can produce
positive results. And positive thinkers, who purportedly somehow “will”
that their home be safe, are more likely to suffer the negative
consequences of their mismanagement of risk.
Clearly, however, no matter what
actions we take to prevent the occurrence of particular bad events (that
is, however well we “manage risks”), unfortunate events of some
description will certainly befall us at some point. For example, no
matter how much you wish otherwise, one day both of your parents and all
of your siblings and children (if any) – indeed, all of your family and
friends – will die. Hence a second reason to think negatively and
contemplate undesired events: if we do, then, when they eventually do
occur, these things won’t affect us so badly. Hence the positive
thought: thank heavens that we, too will die – and thus avoid the pain
of continuous loss of family and friends. Because we expect them, when
they happen these events don’t shock and distress us so much.
Seneca put it thus in To
Marcia: “He robs present ills of their power who has perceived their
coming beforehand.” Misfortune weighs most heavily, he added in On
Tranquility of Mind – positive thinkers take note! – upon those who
“expect nothing but good fortune.” The critical point, which Epictetus
emphasised, is that in this life nothing lasts forever and all things
are perishable. If we ignore this obvious and indisputable truth, and
instead assume irrationally that we’ll always be able to enjoy the
things we value, then we subject ourselves to considerable distress when
these valued things disappear.
Stoics recommend that we
contemplate the certainty that we will eventually lose all of the things
and people we value. Thinking these negative thoughts, which Paul Veyne
(Seneca: the Life of Stoic, Routledge, 2003, p. 178) calls the
“premeditation of evils,” provides three benefits. First, it might,
through preventative action, decrease the chance that some of these
events occur; second, before these unfortunate events inevitably occur,
we will value these things and people more highly; and third, after
these events occur we will suffer less.
Imagine, for example, that your
wife dumps you or that your employer sacks you. If you think about it
rationally, you might ask “why might she do so?” And if you consider
this question dispassionately, you might confess to yourself that from
your wife’s point of view you’re hardly the best husband and from your
boss’s point of view you’re not a valuable employee. Why not? To answer
this question honestly suggests means whereby you can mend your ways,
e.g., become a better husband, more productive employee, etc. And if you
put these means into action, you might decrease the likelihood that your
wife and/or boss give you the boot. More generally, this
“premeditation of evils” decreases the chances that “worst-case
scenarios” actually eventuate. In modern terms, this Stoic technique
is simply “proactive risk management.” Today’s legion of positive
thinkers tries to block negative thoughts – and thereby deludes itself
and fails to prepare for unwanted but nonetheless possible, likely and
inevitable events. From the point of view of positive thinkers, it’s
perverse and even anathema. But Stoics know it’s true: thinking negative
thoughts and acting rationally in response to them helps to achieve
positive (or, at least, less negative) results.
In his letter of condolence to
Marcia, a woman who, three years after the death of her son, was as
inconsolable as on the day he died, Seneca alludes to the premeditation
of evils. In effect, he counsels that by overcoming her present grief
Marcia can prepare for the anguish she will almost inevitably experience
at some point in the future. How, then, might Marcia cope with the loss
of her son? Seneca gently reminded her that all we have – or, more
precisely, all we think we have – actually isn’t ours: in truth, these
things are merely a loan from Fortune, which can reclaim them at any
time, certainly without our permission and often without giving us any
advance notice. Marcia didn’t lose her son: she returned
something that God had temporarily entrusted to her and was therefore
His to reclaim at any time. Therefore, says Seneca, we should certainly
“love all of our dear ones … but always with the thought that we have no
promise that we may keep them forever – nay, no promise even that we may
keep them for long.”
So by all means let’s cherish our
personal relationships. Indeed, precisely because we know that they will
end one day (if nothing else, our death, which is certain, will
terminate them) let’s henceforth treasure them all the more. For similar
reasons, Epictetus also advocates this rational form of negative
thinking. “In the very act of kissing [our] child,” he counsels in his
Discourses, “we should silently reflect upon the possibility that
she will die tomorrow.” In his Meditations, Marcus Aurelius
approvingly quotes this advice. Knowing that you won’t have her forever,
you’ll likely cherish her even more today. So forget about the Test
rugby on TV and spend time with her doing what she wants to do.
The implication is obvious: for the sake of you and your loved ones’
present benefit, you should contemplate your and their eventual demise.
Indeed, because one day would certainly be his last, Seneca advised that
his friend Lucilius live each day as if it were his last. Does Seneca
thereby imply that he should undertake all kinds of hedonistic excess?
After all, if this is his last day then Lucilius will pay no earthly
price for any immoderation or improvidence: tomorrow he won’t have a
hangover because there is no tomorrow; similarly, he need not fear the
adverse consequences of sexual promiscuity, financial profligacy and so
on. Anticipating St Paul and St Thomas à Kempis, Seneca condemns such
behaviour. Why? Because it isn’t virtuous: we simply weren’t created
to be hedonists. Hedonism is irrational; accordingly, to varying
extents hedonists are miserable.
To live each day as if it were
your last – or that your fortune will disappear overnight – will likely
prompt you to reprioritise your daily activities; it will almost
certainly exert a much bigger change upon your state of mind with
respect to those activities. Stoics show us that by contemplating our
own death and accepting the loss of our possessions we can enhance our
appreciation of and thankfulness for life. This attitude, concluded Musonius Rufus in his Lectures, will “set [you] free from the
fear of death” – and of bear markets and financial crises.
Part II, January 2016...
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1. What is an “intelligent” investor? In the first (1949)
edition of The Intelligent Investor, Graham stated that
intelligence has nothing to do with IQ. It comprises patience,
discipline, humility and the willingness to learn; it also
entails the ability to harness one’s emotions, learn from one’s
mistakes and above all think independently. This kind of
intelligence, said Graham, “is a trait more of character than of
the brain.”
2. “Overlap” does not mean “coincide.” Stoicism is
pantheistic. In plain English, Stoics affirm that God exists but
deny that God created the world and all things visible and
invisible. Instead, they believe God is the world and all
things. The idea that one God created the world is a
monotheistic (i.e., Christian, Jewish and Islamic) conception.
To these three faiths’ adherents, God is the Creator and the
world is his creation. God, in other words, is the cause and the
world – including man and his ethics – is the consequence. In
sharp contrast, Stoics regarded “God” and “the universe” as
coterminous and synonymous. Also, and unlike Christians, Stoics
do not posit a beginning to the universe; nor is the
individual’s life after death a tenet of their faith.
Stoics’ pantheism and the monotheism of Christianity, Judaism
and Islam are incompatible. On this and other grounds, the early
leaders of the Christian Church came to regard Stoicism as a
“pagan philosophy;” nonetheless, they adopted (albeit with
adjustments of meaning and emphasis) some of its tenets. Hence
Stoics and Christians proclaim that:
-
human fellowship and communion with God is possible.
Specifically, Stoics claim that the Gods created man, care about
his well-being and gave to him a divine element (the ability to
reason); Christian confess that God has created man, cares about
him in a very personal way, and has given him divine elements
(i.e., a sanctified brain and soul);
-
an innate depravity (to Stoics, “persistent evil;” to
Christians, man’s fallen status and the inability of human acts
or works to achieve their salvation) plagues human nature;
-
in order to escape his bondage, the individual must
surrender in toto – mind as well as body – to Nature
(Stoics)/Christ (Christians);
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worldly possessions and attachments are temporary,
and the desire to amass more goods merely for the sake of more
goods is futile. Yet wealth and money per se are not
problematic. The dependence upon wealth and the love of money is
the issue;
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people should resist vice and to pursue virtue.
3. Of this passage, Jason Zweig wrote: “this may well be
the most important paragraph in Graham’s entire book. In these …
words Graham sums up his lifetime of experience. You cannot read
these words too often … If you keep them close at hand and let
them guide you throughout your investing life, you will survive
whatever the markets throw at you.”
4. Scholars usually divide the history of Stoicism into
three phases: (1) Early Stoa, (2) Middle Stoa and (3) Late Stoa.
Unfortunately, no complete work by any Stoic philosopher
survives from the first two phases. Moreover, Romans wrote the
only texts that survive from the Late Stoa.
5. Lucius Annaeus Seneca (often known simply as Seneca;
ca. 4 BC – AD 65) was a Roman philosopher, statesman and
dramatist. He was also a tutor, and later an advisor, to Emperor
Nero – and forced to suicide as punishment for his alleged
complicity in a conspiracy to assassinate Nero. Seneca wrote his
essay “On the Happy Life” for his older brother Gallio – the
same Gallio mentioned in Acts (18:12-16) for his refusal to try
Paul the Apostle in Corinth.
6. Epictetus (AD 55-135)
was a Greek sage and Stoic philosopher. He was born a slave at
Hierapolis, Phrygia (present day Pamukkale, Turkey),
subsequently acquired by Epaphroditus, secretary to Emperor Nero
and subsequently to Emperor Domitian, and lived in Rome until
his banishment to Nicopolis in northwestern Greece. His pupil,
Arrian, compiled and published his writings and teachings in the
Discourses.
7. Marcus Aurelius Antoninus (usually known as Marcus
Aurelius) was born Marcus Annius Verus and his parents died when
he was very young. First his grandfather (who ensured that
Marcus received a good education) and then, when he was
seventeen, his uncle (Aurelius Antonius, who had recently become
emperor and had no sons) adopted Marcus. Aurelius Antonius
changed Marcus’ surname and married him to his daughter. She
bore him five children – none of whom survived into adulthood
except the awful Commodus, who succeeded Marcus as emperor.
Marcus and Lucius Verus ruled as co-emperors from 161 until
Verus’ death in 169. Marcus was the last of the Five Good
Emperors, and also one of the most important Stoic philosophers.
Natural disasters, famine, plague and barbarian
invasions blighted his reign – but didn’t disturb his composure.
In 167, he left Rome to join his legions on the Danube. Apart
from a brief journey to Asia to crush a revolt (whose followers
he treated leniently), Marcus spent the rest of his life along
the Danube.
During this time Marcus consoled himself by writing a series of
reflections which he entitled To Himself (which has
become known as his Meditations). They reveal a powerful
and humble mind, albeit a rambling one, and show how to find and
preserve calm in the midst of tumult. Revered in Christian
Europe during the Middle Ages, today these writings are still
admired as a monument to a philosophy of service and duty. In
the words of William Lecky (History of European Morals,
Braziller, 1955, p. 249), Marcus was “the last and most perfect
representative of Roman Stoicism.”
8. In physics, dualism refers to phenomena whose
properties are associated with two mechanics. Because these
mechanics are mutually exclusive, both are required in order to
describe the phenomenon’s behaviour. All matter, for example,
has wave-particle duality. In philosophy, ethical naturalism
(also called moral naturalism) claims that: (a) sentences about
ethics express propositions (i.e., aren’t mere babble); (b) some
propositions about ethics are true; (c) in particular, objective
features of the world, which are independent of human opinion,
render these propositions true; and (d) these moral features of
the world can be reduced to some set of non-moral features.
9. Stoics were like virtually all ancients in the sense
that few were atheists. A general spiritual tone pervades
lengthy passages of major Stoics’ writings; frequent, too, are
specific references to particular deities. Perhaps most notably,
Epictetus mentions Zeus more than anybody except Socrates.
10. According to Stoics, the universe is a material
substance, known as God (or Nature). Stoics divide it into two
classes: active and passive. The passive substance “lies
sluggish, … ready for any use, but sure to remain unemployed if
no one sets it in motion.” The active substance, dubbed Fate or
Universal Reason (Logos), acts on the passive matter.
Everything is subject to the laws of Fate – including the souls
of people (Stoics also thought that animals have souls). Since
Reason is the foundation of both humanity and the universe, it
follows that the goal of life is to live according to Reason,
that is, to live a life according to Nature (i.e., God).
11. Cosmopolitanism is a distinctive feature of Stoicism.
One spirit has created all people; accordingly, everybody should
readily accept one another. Accordingly, external differences
such as race, rank and wealth are of no importance in social
relationships. Seneca, for example, exhorted, “Kindly remember
that he whom you call your slave sprang from the same stock, is
smiled upon by the same skies, and on equal terms with yourself
breathes, lives, and dies.”
12. In “The Depression of 2008? Don't Count on It” (The
Wall Street Journal, 30 September 2008), Jason Zweig wrote:
“’Investors hate uncertainty.’ Well, that’s just tough.
Uncertainty is all investors ever have gotten, or ever will get,
from the moment barley and sesame first began trading in ancient
Mesopotamia to the last trade that will ever take place on
Planet Earth. If tomorrow were ever knowable with absolute
certainty, who would take the other side of a trade today? The
financial future is no more uncertain now than it used to be; in
fact, it's far less uncertain than it was in the summer of 2007,
when the Dow shot above 14000, the future seemed bright, and
utterly no one foresaw the disaster that would befall the
financial system. The absolute certainty of blue skies ahead was
an illusion then, and the notion that we all know that worse
misery lies in store is an illusion now. The only true certainty
is surprise.”
13. To Stoics, wisdom is the recognition that we usually
know less (and often far less) than we think. Socrates claimed
that he could be certain only of his own ignorance. That’s a
sound basis for humility and curiosity – both of which are
characterise successful investors. Indeed, investors know that
the greatest danger is the “certainty” that arises from the
suspension of critical thought.
14. Cleanthes of Assos (ca. 330 BC – ca. 230 BC) was the
successor to Zeno as the second head (scholarch) of the Stoic
school in Athens. Originally a boxer, he came to Athens where he
took up philosophy. Listening to Zeno’s lectures during the day,
he supported himself by working as water-carrier at night.
Cleanthes preserved and developed Zeno’s doctrines; his pupil,
Chrysippus, became one of the most important Stoic thinkers. |
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From the same author |
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▪
Will Interest Rates Remain Permanently Low?
(no
331 – April 15, 2015)
▪
Frank Knight's Economic and Social Theology
(no
326 – November 15, 2014)
▪
Austerity, What Austerity? Europe Desperately Needs
"Genuine Austerity"
(no
317 – December 15, 2013)
▪
The shameful treatment of Ron Paul by the mainstream
media
(no
300 – May 15, 2012)
▪
The Evil Princes of Martin
Place – Introduction
(no
286 – February 15, 2011)
▪
More...
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First written appearance of the
word 'liberty,' circa 2300 B.C. |
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Le Québécois Libre
Promoting individual liberty, free markets and voluntary
cooperation since 1998.
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