THE FINANCIAL PHILOSOPHER

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

"Nature does not hurry, yet everything is accomplished." ~ Lau tzu

Why do we always seem to be in a hurry?  Where are we going that requires such eagerness to act in such a way?  Why do we sacrifice our highest priorities for the least likely means of finding true happiness?  If we want to become more productive, then what is it that we are trying to produce?

I recall telling my then four-year old child, when he asked why I was away from home so much, that I had "to work hard for money to support our family and pay for all the things we have."  After two years and one profound life change later, his quick response, "I'd rather have my Daddy than money," rings absolutely clear in my mind to this day.  How could more time away from my family be better for my family?  I had unknowingly made money my highest priority and my son became the impetus to turn that around...

Given a moment to think about it, the vast majority of people, regardless of financial status, would list family, health and overall happiness or well-being as their highest priorities in life.  In my investment advisory practice, I have yet to hear any of my clients say that money is their highest priority.  In fact most of my clients, and people in general, don't even list money as a priority at all... yet our actions speak otherwise.

To extend upon last week's post, Mind vs. Brain Part I: We are only Human, let's define what I would regard as "self-destructive" behavior.  When possible, I like to defer to other sources of wisdom to clarify my thought.  In this spirit, here are some excerpts from An Interview With God, where "God" responds to the question, "What surprises you most about mankind?"

That they lose their health to make money... and then lose their money to restore their health.

That they live as if they will never die and die as if they had never lived.

That they get bored with childhood, they rush to grow up, and then long to be children again.

"If the human brain were so simple that we could understand it, we would be so simple that we couldn't." ~ Emerson M. Pugh

So what happened to us?  Is this mis-alignment of priorities and pursuits a natural evolution of the human brain or has it always been wired for the same basic behavior? 

As I stated in the 2007 post, Know Thy Risk, humans are wired for simple,  survival-oriented pattern recognition.  This wiring has been referred to as our rat brain, which prefers problem-solving heuristics, or mental shortcuts that link patterns to potential rewards (Heimer).  These shortcuts and patterns were quite effective in aiding primitive man to find food but have since evolved from a pursuit of necessity to modern man's flawed pursuit of short-term physical-world rewards, such as money, material objects and social status.

To give primitive man some credit, he (or she) used their rat brain out of necessity -- the pursuit of food was a question of survival and essentially never-ending -- not one of a discretionary and material nature.  Now that we have evolved where most humans on the planet no longer need to spend all of their waking hours looking for food and meeting the other basic needs of shelter and clothing, there is more time to move beyond the basic necessities of life and into pursuits that provide meaning beyond the physical world -- our self-awareness and self-actualization.  But do we seek those metaphysical rewards or do we continue to seek rewards that are largely absent of meaning and purpose?

"Happiness is when what you think, what you say, and what you do are in harmony." ~ Mahatma Gandhi

Now that we have personal computers, cell phones and the Internet, we have become so productive and time-efficient that we have created more time for our meaningful pursuits, right?  If we are more productive, then why are we not happier?  In my humble opinion, it is because we are chasing the kind of rewards that do not bring long-term well-being.   

The business world has a definition of productivity.  Why don't we individuals have one for our personal use? Corporations seek to produce more units of output with the same units of input.  In other words,  business owners and shareholders look to improve the bottom line by leveraging technology and squeezing more work out of the employee for the same pay. Have we simply adopted this economic definition of productivity and applied it to our personal lives?  If so, does this definition align with our priorities?  Shouldn't we, as individuals, seek the kind of profit that produces true and long-term happiness -- the kind that places meaning before money?

To arrive at your own definition of productivity, you should ask yourself what it is that you want to produce and transform the definition into action. Do you want to produce more time with your family?  Do you want to produce greater physical, mental and spiritual health?  Do you want to create true happiness or well-being?  Once you arrive at this definition, you must align your priorities, pursuits and productivity accordingly. 

Then you must form habits that maintain that alignment... 

We will address those habits and some corresponding actions in our next installment of Mind vs. Brain posts, so stay tuned...

What do you think?  Can you share your own story of aligning priorities, pursuits and productivity?

Relative Posts:

Can Money Really Buy Happiness?

Know Thy Risk

Source:

Heimer, M. "Outsmarting Your Brain." (subscription only) Smart Money. January 2005.

TFPAuthor, Kent N. Thune, QPFC, is the President and founder of Atlantic Capital Investments, LLC (ACI), a 'fee-only' financial planner and Registered Investment Advisory firm located in Mount Pleasant, SC.

Weekend Wisdom: The Certainty of Doubt

"If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainties." ~ Francis Bacon, Advancement of Learning

Last week we pondered the media pundit ponderings over the definition of recession and if the U.S. economy is (or is not) in the midst of one now.  I noticed similar questions this week across the blogosphere that essentially wondered if we are in a Bear market rally (temporary but significant rise in stock prices during a Bear market), or if a new Bear market has begun at all.

In the true spirit of a philosopher, I am inclined, as Francis Bacon suggests, to "begin with doubts" by addressing those kind of questions with more questions:  Even if we could, with absolute certainty, say that we are in a recession or not and that we are in a Bear market rally or another leg of a Bull market, what would we do with the information?  How can we be certain either way?  Shouldn't we adhere to the same investment strategies, regardless of current economic and market conditions?

"Those who have knowledge, don't predict.  Those who predict, don't have knowledge." ~ Lau-tzu

I understand that the answers to those questions will differ, depending on the nature of your investment style and strategy.  And, of course, I frame this in the context of a long-term view, but the prudent investor will frame investment decisions through the lens of risk management rather than market timing and prediction science.  Is it not prudent to act as if we are in a Bear market rally and that we are in the midst of recession rather than wager that the Bull market is alive and well?  Is the apparent  risk worth the prospective return?  Should an investor not be at least a bit more defensive now than they were one year ago? 

Let's consider a few points (hat tip to The Kirk Report) that should have us yielding  to the side of doubt and asking more questions for our own investment style and strategy:

• Oil is blowing past $125.
• Weak home sales data.
• Consumers turning to credit cards in surprising numbers.
• A significant decrease in boomer spending.

Of course, the real prudent investor will do as one of my favorite financial philosophers, Warren Buffett, advised to a long-term investor this week:

I would just have it all in a very low-cost index fund from a reputable firm, maybe Vanguard.  Unless I bought during a strong bull market, I would feel confident that I would outperform... and I could just go back and get on with my work.

Well said, Mr. Buffett.  Ultimately, our money should not be a means to an end but quite the opposite and our priorities should be shaped accordingly...

What do you think?  Are we in a bear market rally?  Does it matter if we know?  Won't the market just do what it does, anyway?

Personally, my only real certainty is that there is much to doubt...

Related Posts: 

Finding God in Personal Finance

Where to Invest 2008

TFPAuthor, Kent N. Thune, QPFC, is the President and founder of Atlantic Capital Investments, LLC (ACI), a 'fee-only' financial planner and Registered Investment Advisory firm located in Mount Pleasant, SC.

Mind vs. Brain Part I: We are only Human

"Be master of mind rather than mastered by mind." ~ Zen Proverb

Why do most of us blow our diets and financial budgets with chocolate cake and impulse buys?  Why does the investor herd seem to buy high and sell low rather than buy low and sell high?  This behavior is not only more the rule rather than the exception, but it is precisely the opposite of what we know is in our best interests. 

Why is this?  Do we have some kind of built-in, self-destructive genes that seem to wreck almost every plan we make?  The short answer is, yes...

I've been looking for a way to introduce a series of posts that will illustrate (and provide steps to overcome) the human condition that inspires self-destructive behavior -- the same condition that inhibits our ability to become our ideal self -- by falling prey to media noise, social conventions, and self-inflicted inertia...

A recent Los Angeles Times article, Does your brain have a mind of its own? (hat tip to Donna at Changing Places) provokes the kind of thought that makes for a good starting point for my new TFP blog post series, Mind vs. Brain:

Human beings are, to put it gently, in a unique position in the animal world.  We're the only species smart enough to plan systematically for the future -- yet we remain dumb enough to ditch even our most carefully made plans in favor of short-term gratification...

If we are, as the selfish-gene theory would have it, organisms that exist only to serve the interests of our genes, why do we waste so much of our time doing things that are not, in any obvious way, remotely in the interest of our genes? 

How can one explain, for example, why a busy undergraduate would spend four weeks playing 'Halo 3' rather than studying for his exams?

Our attempts to pursue our goals are often thwarted by the fact that evolution has built our most sophisticated technologies on top of older technologies -- without working out how to integrate the two...

Still, all is not lost.  Even though our short-term desires are pretty good at grabbing the steering wheel of our consciousness, our more recently evolved deliberate minds are powerful enough to regain at least some measure of control...

Our conscious, deliberate systems will never have total control, and our memories will never be perfect, but as they say in Alcoholics Anonymous, recognition is the first step.  If we come to recognize our limitations, and how they evolved, we just might be able to outwit our inner kluge.

"All that we are is the result of what we have thought.  The mind is everything.   What we think we become." ~ Buddha

While I do not agree with all of the points in the LA Times article, it does a fine job of framing the human tendency that places us on the path of perpetual self-destruction rather than the one toward self-awareness and, ultimately, to self-improvement of the highest order.

Once we simply recognize, as the final point in the article illustrates, that we have limitations, but more importantly how they evolved, we have taken the first step toward self-awareness or what I refer to as our knowing...

As most TFP readers may have already guessed, the next step is to begin the process of properly aligning our knowing and our doing, which may be aided by philosophy's power of thinking about thinking and ultimately lead us to victory in the battle for our minds...

What are your thoughts?  Can you share any examples, articles or philosophical quotes that we can build upon to strengthen this Mind vs. Brain series of posts?

As always, I would be quite interested to hear them...

TFPAuthor, Kent N. Thune, QPFC, is the President and founder of Atlantic Capital Investments, LLC (ACI), a 'fee-only' financial planner and Registered Investment Advisory firm located in Mount Pleasant, SC.

Weekend Wisdom: Recession is in the Eye of the Beholder

"It's important to choose not who you think is the prettiest girl, but who the judges think is the prettiest girl." ~  John Maynard Keynes

Are we in a recession?  The answer to that question depends on who you ask...

Some believe we are already in a recession while others believe we are not, never were, and probably won't be any time soon.

Does it really matter if we know, by definition, that we are in a recession?  Do we need the National Bureau of Economic Research (NBER) to officially say, "Yep, the U.S. Economy, as measured by growth in Gross Domestic Product (GDP), has been negative for two consecutive quarters; therefore, we are now in a recession. You may now worry about your money and jobs accordingly," before we alter our behavior or attitudes in our personal lives?

I am certainly no economist so perhaps someone can help me here...

It would seem that close analysis of macro-economic trends to gain some form of truth or insight into the direction of financial markets is rooted a bit too deeply in reality where reality does not factor into the big picture equation.

"The market can remain irrational longer than you can remain solvent." ~ John Maynard Keynes

Here's where I need some help or, perhaps, your feedback and even anecdotal observations of recession in your life:

• Perception is reality and it can not be quantitatively measured.  Financial market movements are defined by the behavior of its participants.  This herd behavior will move on its collective perception of reality, and does not take its behavioral cues from quantitative reports.
• Financial markets are not, to say the least, always rational.  People spend more when they feel wealthy and spend less when they do not;  Investors pile into stocks when prices are higher and jump out when prices are lower;  and our human perception of risk is lowest when real risk is highest and vice-versa.  This behavior is not rational (insert your example of historic booms and busts  in financial markets here). 
• The average Joe and Jane on the street do not behave according to Government reports.  I believe those who have lost jobs and are having difficulty finding a new one believe we are in a recession;  I believe people who are stealing gas believe we are in a recession; and, despite what the out-of-touch politicians think, average Americans suffer in times like this, recession or not.
• What do we do with the information, anyway?  Whether or not we are in a recession, what are we to do with knowledge of the truth?  Do we change our investment portfolio?  Do we change our personal spending habits?  Why or why not?

The economy is complex and there are many factors involved, such as food, energy  and commodities prices, currency valuations, job creation, inflation, and the list goes on.  But who really looks at the macro-economic data and reports and bases any significant financial or personal decisions on that information?  Why or why not?

I would love to know your thoughts:  Can you help me by answering any of my previous questions?  What signs of recession (or lack thereof) do you see where you are?  Do you feel the economists and politicians are so disconnected from daily life, such as buying groceries and pumping gas, that their own perception of reality is flawed?  Does reality really matter if people's perception defines their reality anyway? 

Through a prudent investor frame and in the spirit of Keynes' Beauty Contest, is it not wise to think how the judges will think rather than what YOU think?  As with beauty, is recession in the eye of the beholder?

TFPAuthor, Kent N. Thune, QPFC, is the President and founder of Atlantic Capital Investments, LLC (ACI), a 'fee-only' financial planner and Registered Investment Advisory firm located in Mount Pleasant, SC.

Curing 'Affluenza'

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

Have you ever, knowingly or unknowingly, placed money above all other priorities in your life?  Have you ever passed over the lower-cost, generic product for the higher-priced product that carries more social prestige?  Do you believe the only thing that can bring more happiness than money is more money?

If we are being honest, I will be the first to raise my hand and admit my guilt on all three of those, especially in my past.  If you can make the same admission you may have been struck by a case of affluenza.

According to Wikipedia, affluenza is a term used by critics of consumerism that derives its name and meaning from a blended combination of affluence and influenza.  I've run across the term before but thought it would be interesting to make our own philosophical observation and analysis here at TFP...

Before doing so, let's take a look at a few more of the key points made on the Wikipedia entry:

• Affluenza: a socially transmitted condition of overload, debt, anxiety and waste resulting from the dogged pursuit of more.
• Proponents of the term consider the costs of prizing material wealth vastly outweigh the benefits.  They claim those who become wealthy will find the economic success leaving them unfulfilled and hungry for more wealth.
• Affluenza is considered to be most present in the United States, where the culture encourages its citizens to measure their worth by financial success and material possessions. 
• Mainstream media outlets, such as television broadcasts, tend to demonstrate how pervasive the idea has become; and by the same token, the same media outlets reinforce the values to the viewers.

My observation is that, while there are some exceptions, these points are generally true.  As you may expect, however, I disagree with the fundamental suggestion that affluenza is a disease.  Instead, I believe that it is a symptom of the greater disease of being human, and the only cure to that disease is self-awareness. 

I find myself agreeing most with the final point that highlights the mainstream media's misleading promotion of wealth and the acquisition of material things as a means to obtain happiness. 

There certainly is no shortage of media sources, especially books, that tell us to spend less than we make or suggest ways to get rich and retire young.  The majority of these sources, with good intentions or not, suggest that our unhappiness may be only a flaw in our strategy to pursue material wealth but rarely suggest that the pursuit of material wealth, itself, is actually the flaw. 

"What is important in life is life, and not the result of life." ~ Johann Wolfgang von Goethe

The path to a meaningful existence is, without a doubt, found through the pursuit of self-awareness. This path is long and winding but absolutely fulfilling.  Here are a few sources that appeal to me that may be of use to you in curing affluenza and in finding your own path:

• Human vs Individual: In summary, once we recognize that our human tendencies are often in conflict with our best interests, we are on our way to a meaningful life.
• We Can't Predict Happiness:  Dr. Daniel Gilbert, author of "Stumbling on Happiness," says that "people have an inability to predict what will make us happy -- or unhappy.  If you can't tell which futures are better than others, it's hard to find happiness.  The truth is, bad things don't affect us as profoundly as we expect them to.  That's true of good things, too.  We adapt very quickly to either.  So the good news is that going blind is not going to make you as unhappy as you think it will.  The bad news is that winning the lottery will not make you as happy as you expect." Read the full New York Times article, A Conversation With Daniel Gilbert:  The Smiling Professor, (Hat Tip to TFP Reader, "Charles").
• Where Can We Find Happiness? True happiness or well-being is entirely an internal creation and not one from the physical world.  Recent studies reveal that the old science assumption that the adult brain is unchangeable is fundamentally incorrect.  The studies further demonstrated that mental training had the power to change the physical structure of the brain.  The brain can be rewired so there is hope for you after all!
• More Money is not More Happiness: Happiness Economics reveal that the richest nations, such as America, are not the happiest.  Rich countries may be generally happier than poor ones, but once extreme poverty is overcome, the connection between wealth and happiness weakens.

What are your thoughts of affluenza?  Once our basic and physiological needs are met, can more money really bring us more happiness?  How much is enough?

TFPAuthor, Kent N. Thune, QPFC, is the President and founder of Atlantic Capital Investments, LLC (ACI), a 'fee-only' financial planner and Registered Investment Advisory firm located in Mount Pleasant, SC.

Weekend Wisdom at The Change Blog

“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

This week I had the privilege of writing a "guest post" for one of the "holdings" in my Blog Portfolio, The Change Blog (formerly known as Iwillchangeyourlife).  The post, Finding the Path to a Meaningful Existence, I believe, sums up what I try to do here at TFP...

Here's an excerpt:

People want to be told what to do; they want to be “inspired;” they want to be influenced from external sources; and they want their “life instructions” to be delivered in neat and convenient little packages. Although our deepest desire is to find “the path to a meaningful existence,” it is our human nature to seek “the path of least resistance.” We prefer to take one sure step to find what we want, rather than taking many uncertain steps to find what we really need… Why?

There is a tension that exists between who we are as humans and who we can become as unique individuals.  Why is that? And what can be done, if anything, about it?  Please check out the post at The Change Blog for more... 

If you have an extra minute, make a comment on the post so everyone will know that TFP readers are the smartest and wisest in the blogosphere!

Cheers...

TFPAuthor, Kent N. Thune, QPFC, is the President and founder of Atlantic Capital Investments, LLC (ACI), a 'fee-only' financial planner and Registered Investment Advisory firm located in Mount Pleasant, SC.

The Lesson of the Moth

"People have a hard time letting go of their suffering.  Out of a fear of the unknown, they prefer suffering that is familiar." ~ Thich Nhat Hanh

Do you know anyone who seemingly prefers to complain about everything rather than do something about it?  Is that person you?  Perhaps a greater enemy to our personal growth than complacency and apathy is inertia.  Most people who suffer from inertia, or the condition of being stuck, do not realize it. 

Today, I would like to share the lesson of the moth with you in hopes it will awaken a sense of self-awareness that may be the beginning of the end of inertia in your life:

I was talking to a moth the other evening.  He was trying to break into an electric light bulb and fry himself on the wire.

'Why do fellows pull this stunt?' I asked him.  'Because it is a conventional thing for moths?  Or why, if that had been an uncovered candle, instead of an electric light bulb, you would now be a small, unsightly cinder.  Have you no sense?'

'Plenty of it.'  he answered, 'but at times we get tired of using it.  We get bored with the routine and crave beauty and excitement.  Fire is beautiful and we know that if we get too close it will kill us,

But what does it matter?

It is better to be happy for a moment and be burned up with beauty than to live a long time and be bored all the while.  So we wad all our life up into one little roll, and then we shoot the roll.

That's what life is for.

It is better to be a part of beauty for one instant and then cease to exist, than to exist forever and never be a part of beauty.  Our attitude toward life is Come easy, go easy.

We're like human beings used to be before they became too civilized to enjoy themselves.'

And before I could argue him out of his philosophy, he went and immolated himself on a patented cigar lighter.

I do not agree with him.  Myself, I would rather have half the happiness and twice the longevity.  But at the same time, I wished there was something I wanted as badly as he wanted to fry himself.

Source:  Bennis, Warren & Nanus Burt. Leaders: Strategies For Taking Charge. Harper: New York, 1985, 1997.

I certainly do not suggest risking your life for a brief moment of beauty but I believe the lesson of the moth tells us that there is self-fulfillment and even self-actualization in placing our energy into our passion, rather than in routine, ritual and "longevity." 

I believe, for the moth, the beauty, or meaning, was actually found in the pursuit of it rather than in the end result... 

The moth was not seeking death but seeking life...

What do you think?

TFPAuthor, Kent N. Thune, QPFC, is the President and founder of Atlantic Capital Investments, LLC (ACI), a 'fee-only' financial planner and Registered Investment Advisory firm located in Mount Pleasant, SC.

Weekend Wisdom With Mohnish Pabrai

"All truly wise thoughts have been thought already thousands of times; but to make them truly ours, we must think them over again honestly, till they take root in our personal experience." ~ Johann Wolfgang von Goethe

Mohnish Pabrai wears shorts to work but doesn't "short" stocks.  He's more likely to be caught napping in the afternoon than caught glued to a BlackBerry or sorting through e-mails.  If you do not know Pabrai, you may be at least a little impressed or even surprised that he is a hedge fund manager that has outpaced the market averages by nearly 25 percent on an annualized basis since 1999, when he set up shop.  The impressive part, for me at least, is not the returns but that his stock selection strategy is a simple, traditional, and largely unoriginal approach patterned after the style of Warren Buffett...

This week, I'll share some selected excerpts from an article I recently read in The Wall Street Journal's, Smart Money magazine, May 2008 edition:  "Looking Up To Buffett."  What I found most interesting was Mr. Pabrai's comment on a common investor mistake -- using the market to tell you what a business is worth -- and why the mistake occurs:

If a stock goes from $10 to $3, most people freak out and sell out.  You  have to have your own internal yardstick.  Sell to the market when the price is lower.  Another problem is that our brains are very poorly evolved to deal with the stock market.

Our brains are in sync with the speed at which the market is moving and totally out of sync with the speed at which a business is moving.  It seems obvious:  The market is repricing a company's stock very quickly.  I can process quickly; therefore, I make decisions based on that.  You have to learn to dramatically slow your brain, which is very hard for most people.  The reality is that you should make decisions based on how that business is changing, and that's a very slow process...

Wow!  A wildly successful fund manager that actually uses logic and emotional intelligence to define his strategies rather than allowing the market to make his decisions?  (sarcasm intended)

I'm consistently urging investors to Know Thy Risk by understanding our human tendencies first and, second, by understanding ourselves as unique personalities via self-awareness.  Once understanding on both levels is obtained, I'm convinced a rational investor will take the path of simplicity and relative moderation via the use of index funds, ETFs, and other passive investments rather than fooling themselves into believing that they can consistently "beat the market." 

For those who are "active investors," success is obtainable but emotional intelligence is absolutely necessary...

"Do not seek to follow in the footsteps of the wise.  Seek what they sought." ~ Basho

A secondary purpose for posting the thoughts of Mohnish Pabrai is to follow up on a previous post, The Pursuit (and Price) of Original Thought, published several months ago, where I questioned Mr. Pabrai's reasoning behind paying $650,100 at a charity fund-raising event just to eat lunch with Warren Buffett -- hardly a "value investment" decision... 

Here's the response in Mr. Pabrai's own words:

It's not an investment.  It's a debt I owe Mr. Buffett.  The best way to thank him for all I have learned was to support a cause he cares about. The lunch is a bonus.

Makes sense to me.  I don't have an extra $650,100 but I hope a simple "thank-you" to Mr. Pabrai will suffice for sharing his wisdom with us...

Does it matter that Pabrai imitated Buffett's style and philosophies and made them his own?  Didn't Buffett do the same by imitating Ben Graham?  Who did Graham learn from? Many observers have even drawn parallels between Buffett's colorful philosophies and the ancient eastern philosophies of Lau-tzu and Taoism, which dates back more than 2,500 years... 

Is there such thing as "original thought?"  I don't think so.  As you may imagine, I prefer to tap into the "distilled knowledge" of others and apply their experiences in such a way that makes them my own.  Is that not what the study of philosophy is all about?

TFPAuthor, Kent N. Thune, QPFC, is the President and founder of Atlantic Capital Investments, LLC (ACI), a 'fee-only' financial planner and Registered Investment Advisory firm located in Mount Pleasant, SC.