THE FINANCIAL PHILOSOPHER

The Price of Paying Attention

"It is no measure of health to be well-adjusted to a sick society.” ~ Jiddu Krishnamurti

Have you ever stopped to think about what price you pay when you pay attention?  Are you aware of what and how much you are allowing into your mind?  If information were food, would your information diet be “healthy?”

We have evolved into a consumer society and this consumption does not stop with food and material goods – those items that we pay money to obtain – this consumption extends to information, which takes place much more frequently (at often a higher price) than that of food and material goods.

When we pay attention, there is a cost...

To find out this cost and how to avoid the poverty of attention, please read my guest post at GoodLife Zen:  How Much Does it Cost When You Pay Attention?

Thoughts on Taoism, Rip Currents and Market Cycles

Success in any endeavor will likely emanate from a core philosophy, which is then carried out by specific actions or, in many cases, inaction...

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

A significant piece of a core philosophy, if you've not already noticed, that is implicitly and explicitly employed here at TFP, is the Taoist philosophy that may be expressed in modern terms, such as "less is more" and "going with the flow," which are woven into to the profound Taoist respect for nature:

• The pliable reed bends in the strongest of winds, the hardened tree breaks.
• The weak does not contend and so no one in the world can quarrel with it.
• The high and low incline toward one another; therefore the lowest position is the strongest -- the ocean is stronger than the rivers because it is in the lowest position -- all rivers flow to the ocean.
• The weak becomes the strong; however the strong becomes the weak.  Without the one, there would not be the other. 
  
• Everything has its natural cycle and there is no changing this cycle; therefore it is not wise to go against nature -- one should flow along with it.

"In the world there is nothing more submissive and weak than water.  Yet for attacking that which is hard and strong nothing can surpass it." ~ Lau Tzu

I enjoy teaching my two young sons about nature (and life) when we visit the beach, which is only eight minutes from my house.  Living on the coast of South Carolina, my favorite metaphor for passivity (not fighting nature -- going with the flow) is the ocean, specifically rip currents.  Water is inviting and provides peace and comfort, yet its strength is tremendous and worthy of great respect.

As the immediately preceding quote from Lau Tzu suggests, water will (sooner or later) break anything that rigidly stands against it; however, offering no resistance to it almost guarantees survival... 

Take a look at this illustration of a rip current from Howstuffworks:

 

Unfortunately and tragically, the immediate panic reaction of the uninformed swimmer is to swim directly toward the shore  (seen at the bottom of the image) -- where there is perceived safety -- yet this is the most dangerous escape route.  The safest escape is to swim away from (or perpendicular to) the shore -- the least likely of routes the uninformed swimmer would consider. 

Swimmers do not drown as a direct result of the rip current itself -- they drown from the exhaustion of unknowingly going against nature -- and in some places in the U.S., more people die each year in the face of rip currents than from thunderstorms, hurricanes and tornadoes combined.

"Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes." ~ Jesse Livermore

Bringing the point back to the nature of financial markets, the unknowing investor can suffer tremendously by acting as if the markets are not cyclical -- as if history does not rhyme -- as if "things are different this time." 

The truth is that markets will always revert to the mean -- what goes up, must come down and vice versa -- and the denial of this is where investors make their most fatal mistakes.

The quiet but powerful message delivered by ancient philosophy, whether it is Western or Eastern, is that human behavior does not change.  If Lau Tzu observed and warned of greed more than 2500 years ago, then a reasonable person may assume that human behavior is not likely to change any time soon. 

The rip currents of financial markets, and life itself, will claim many casualties as a result of inexperience.  This inexperience, however, is not equivalent to a lack of academic knowledge -- it is a lack of self-knowledge, humility, and a lack of respect for nature -- it is the lack of willingness to bend like the reed.

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Suggested Reading: Tao Te Ching (Penguin Classics)

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

Related Page: Quotes on Contentment

What You Can Learn From 'Old Man Socks'

"Tension is who you think you should be.  Relaxation is who you are." ~ Chinese Proverb

Wearing dress socks with tennis shoes and plaid shorts may be a tragedy of fashion; however, it is a victory of self...

Please read more about the values found underneath these old man socks by reading a guest post I wrote at PickTheBrain, called "Old Man Socks & the Wisdom of Becoming Nobody."

A Review of 'Your Dreams'

"Let's start with a simple question... Why do you live?" ~ Jonathan Mead

There is a good reason why I do not review many books on this blog -- because I only share things with readers (you) that I feel has great potential to impact your life in a positive and meaningful way.  Today I would like to share with you just such a book.  Actually, it's an e-book, called Reclaim Your Dreams, by Jonathan Mead, the author of one of my favorite blogs, illuminated mind.

I knew I enjoyed Jonathan's blog; however, his e-book, Reclaim Your Dreams, successfully captures and communicates his writing themes in one cohesive and digestible unit.  These themes and ideas empower the reader to pursue meaning and purpose in their lives in a deliberate way:

• Social Conventions:  Most of us are not following our own path -- we are following in the path of Social Conventions -- the path formed by societal norms, our parents, our schools and the language we adopt from others and use in our daily lives.  Common sense does not always make sense for the individual.  As Jonathan says, "We need uncommon sense.  We need to follow our hearts."
• Self-Help:  Unlike most personal development books, Reclaim Your Dreams does not provide specific steps that only defeat the purpose of the book -- to help the reader help them self.  Instead, Jonathan inspires readers to define terms, such as success, strength and weakness, for themselves, which is the beginning of finding one's unique path in life.
• Self-destruction:  Most of us are too busy to notice that our behaviors are more self-defeating than self-promoting.  Reclaim Your Dreams profoundly states the obvious truth that most of us overlook everyday when he teaches the reader to "Make the commitment to go with yourself, instead of against yourself."

For a better taste of Reclaim Your Dreams, here are a few quotes from the e-book:

It's time for a new definition of success:  The person that's most alive, not living for something yet to come; not placing their happiness on some future event.

Not sabotaging yourself does wonders for your success rate.

But is the purpose of living to simply get things done?  If you're living this way, you've lost sight of the point of being productive in the first place: To create more time for things you love.

Give yourself permission to be ridiculous.

Always do what you are afraid to do.  The more you do this, the more you'll find doors where you previously only saw walls.

To be quite honest with you, I was particularly struck by how similar Jonathan's thinking is to my own.  I do not say this for egotistical reasons but to express to you that, as a reader of The Financial Philosopher, you are almost by default an ideal candidate for reading Reclaim Your Dreams.  I also highly recommend reading Jonathan's blog, illuminated mind, which is quite aptly named, and will further aid in reclaiming your dreams...

We Are All 'Naive Scientists'

"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

Recently, I was chatting over coffee with a friend, who happens to be a psychologist.  We were discussing the inter-relationships and overlaps of his profession and mine, and he capped our conversation by commenting, "We are all naive scientists."

This idea struck me as profoundly evident, yet uncommonly recognized, in the human condition.  I quickly thought of examples of this naivety in personal finance and investing.

Naturally, I asked my psychologist friend to expand more on this "naive scientist" idea as it pertains to human behavior.  He said, and I paraphrase, that "The basic idea is that all sciences strive to Describe, Explain, Predict and Control" and that "formal sciences are extensions of what we try to do every day anyway." 

Obviously, the problem with this behavior is that most of us go about naively describing, explaining, predicting and controlling without the benefit of methodologies, theories and developed tools applied in formal scientific practices.  Even worse, some of us adopt others' (or even create our own) methodologies, theories or tools with little or no thought as to the proper application or suitability for our particular use -- or even when science need not or should not apply.

"We do not need science and philosophy to know what we should do to be honest and good, yea, even wise and virtuous." ~ Immanuel Kant

After giving this conversation with my psychologist friend further thought, I concluded that, even if we were all brilliant and accomplished scientists, it would still be a mistake to submit to the desire to apply science where science may not apply.

Science, like philosophy, is quite logical in nature and does not often lend itself to describing, explaining, predicting or controlling those things that are non-logical in nature, such as human emotion.  So when we go about trying to apply science to our life experiences, it is more likely than not that we are acting naively.

"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

Search is something we do when we are looking for something; Discovery is something that occurs when  something we may not have been searching for finds us; and Science is an extension of our human desire to search for answers and to find shortcuts to those answers so we may use those shortcuts again when we need them later.

Even in the realm of formal science, some of the greatest discoveries in history were not planned -- they were "accidents;" yet a life consisting of waiting around for these wonderful and random accidents to occur is not prudent either. 

Certainly there is a case to be made both for and against scientific applications to various life experiences -- and the world of personal finance and investing is no exception to this observation.

Balance, therefore, is the non-scientific but prudent life application -- a balance of responsibility and adventure -- that is up to the individual to define.  One simply needs to obtain the necessary level of self-awareness, combined with a bit of humility, to acknowledge and overcome their naive scientist  tendencies.

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Related Posts:

Know Thy Risk

Enabling Opportunities

Balancing Responsibility & Adventure

To Be, or Not to Be... You

"Tension is who you think you should be.  Relaxation is who you are." ~ Chinese Proverb

Social conventions tell us to look and act a certain way and most of us willingly follow these instructions to achieve success:

• We should study business in college -- not the arts;
• We should dress for success or somehow this "success," which is often defined by social conventions, will elude us; 
• We should follow a career path that advances our monetary worth and social status -- not necessarily our self-worth and self-status;
• And we should work hard and sacrifice much of our mental, spiritual and physical health in the first two-thirds of our life so we may finally achieve the holy grail of personal finance, financial freedom, in the final one-third of our life.

"We get so much in the habit of wearing disguises before others that we finally appear disguised before ourselves." ~ Francois de la Rochefoucauld

To be honest with you, the inspiration for this post came primarily from recent discussions I've had with friends and business associates for the purpose of helping me with new marketing materials for my investment advisory firm.

Common advice given to me, specifically with regard to my personal image for use in a brochure, is that the photo should be one of me wearing a suit and tie, because this is an image that meets the "expectations" of society at large, especially those of prospective clients of my firm.

I have a few problems with this conventional financial adviser image:  One problem is that I do not own a "suit and tie" -- I have a few ties and a sport coat but no ensemble that can be defined as such. The other problem I have is that I feel that this formal image is pretentious -- so much to the degree that I do not feel comfortable dressing this way -- almost as if it were a costume or disguise.

"You spent the first half of your life becoming somebody.  Now you can work on becoming nobody, which is really somebody.  For when you become nobody there is no tension, no pretense, no one trying to be anyone or anything.  The natural state of the mind shines through unobstructed -- and the natural state of the mind is pure love." ~ Ram Dass

Perhaps it is a "mid-life" issue I am dealing with, but since I started my own business a few years ago, I have simply felt no desire to "be somebody," or to be anything but completely myself, in everything that I do.

Don't get me wrong, I do occasionally wear ties and I certainly believe in the general business rule that you do not under-dress your clients and you conduct yourself in an appropriate manner given the environment.

In other words, I won't show up to a corporate board meeting wearing flip-flops and a Hawaiian shirt while quoting Plato; however, I simply and firmly believe that I should be who I am -- the mode of being that makes me feel most comfortable, which ultimately translates into a more honest, sincere and effective delivery of service to my clients. 

If society at large and prospective clients expect me to be someone or something different other than my self, then I will assume the supposed risk of refusing this expectation...

"I care not so much what I am to others as what I am to myself.  I will be rich by myself and not by borrowing." ~ Michel de Montaigne

As you may have guessed, I will use the "casual" image (as seen here and in the margin of this page), rather than the formal image of me (which does not exist) in my 2009 marketing brochure!

I would rather have less material wealth as my self than more material wealth as someone else...

What do you think?  Do you expect financial professionals to act and look a certain way?  If so, how should that be?  Bernie Madoff, at one time, certainly met the expectations of social conventions.  Does (or should) that fact change our preconceived notions?

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Related Posts:

The Knowing-Doing Gap

The Deconstruction of Social Convention & The 'Unlearning Process'

 

Why this financial crisis can be a 'gift'

"What is to give light must endure burning." ~ Viktor Frankl

I believe the financial crisis has created opportunities that go far beyond monetary; therefore, I encourage you to read a guest post I wrote titled, Financial Crisis: The Greatest Gift in a Generation, to find out what some of these potentially life-changing opportunities are...

Perhaps you have experienced some of them yourself? 

I wrote the post for Mary Jaksch, who is the author of one of my favorite blogs, called GoodlifeZen.

Enjoy the post and check out Mary's blog while you're at it!

Cheers...

Questions for You...

"Ultimately man should not ask what the meaning of his life is, but rather he must recognize that it is he who is asked." ~ Viktor Frankl

When you read a question that challenges you to think of your own life and reflect upon the path you are currently taking, do you recognize that it is you that is asked the question or do you treat the question as rhetorical in nature?

Today, I have some questions that will actually make you think -- not only about where you have been, but about where you are going -- and how that direction relates to money, happiness, career and the course of your life in general. 

Here's a helpful hint:  Do not force yourself to answer the questions -- simply let your mind freely go where the questions lead...

At the end of the questions, I will provide the source of where you can find many more like them...

When has your life dramatically changed as the result of some seemingly random external influence?  How much do you feel in control of the course of your life?

Is it easy for you to ask for help when you need it?  Will you ask for help?

Where would you choose to be if you could place yourself anywhere on a scale from one to ten, where one is hardship, struggle, and extraordinary accomplishment and ten is comfort, peace of mind, and no accomplishment.  Why?  Where are you now?

If you were to die this evening with no opportunity to communicate with anyone, what would you most regret not having told someone?  Why haven't you told them yet?

If you could spend one year in perfect happiness but afterward would remember nothing of the experience would you do so?  If not, why not?

Would you rather be extremely successful professionally and have a tolerable yet unexciting private life, or have an extremely happy private life and only a tolerable and uninspiring professional life?

Do you have any specific long-term goals?  What is one and how do you plan on reaching it?

For what in your life do you feel most grateful?

Does the fact that you have never done something before increase or decrease its appeal to you?

If 100 people your age were chosen at random, how many do you think you'd find leading a more satisfying life than yours?

Would you like to know the precise date of your death?

Would you accept a guaranteed, lifetime allowance of $50,000 per year (adjusted annually for inflation) if accepting it meant that you could never again earn money from either work or investments?

If you learned you would die in a few days, what regrets would you have?  Were you given five extra years of life, could you avoid those same regrets five years hence?

What would you like to be doing five years from now?  What do you think you will be doing five years from now?

Since so many people place an emphasis on a happy private life, why do people often wind up putting more energy into their professional lives?  If you feel your private life is more important to you, do your priorities support this?  Are you simply unwilling to admit that work is more important?  Do you use work as a substitute?  Do you hope professional success will somehow magically lead to personal happiness?

Do you feel you have enough time?  If not, what would give you that feeling?  How much has your attitude about time changed as you've aged?

Can you envision how you are likely to look back upon things you are doing today?  If so, how much do you try to live now as you think you will one day wish you had lived?

"Freedom from the desire for an answer is essential to the understanding of a problem." ~ Jiddu Krishnamurti

Did you answer the questions or did you allow your mind to go where the questions lead you?  Did you discover anything of value?  Were there certain subjects, such as money, happiness or career, that made you pause to think more than others?  Why do you think that is?

Often it is not the answers that help us in reflecting on our own lives but by going where the questions take us -- to a vision of the past, present and future -- to a place where the answers may be revealed to us as individual people and what steps we may want to be taking going forward...

For more questions like these, I recommend The Book of Questions.  The book sure clarified a few things for me...

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Related Post:  Life Planning Part III:  Creating the Plan

Money Worries Should Be Telling (and Teaching) You Something...

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

Are you worried about money?  If so, why?  How often do you think about money, directly or indirectly?  Are we the consumers of money or does money consume us?  Does money really need to receive so much energy and prominence in our lives? 

Let's lead our forthcoming thoughts with some perspective:  Imagine a child stopping to notice a news segment on television or overhearing an adult conversation about the "global economic crisis."  The child notices anxiety in the adult voices as they shake their heads in disappointment and disbelief.  The child then curiously asks, "Why are people so sad and worried about money?"

How would you answer the child's question?

"We consume our tomorrows fretting about our yesterdays." ~ Persius

Worry and anxiety is useless energy; however, it does not need to be negative energy, especially if we take the opportunity to reflect on our concerns and honestly determine if there is true validity to be found in those concerns.

We may also take this opportunity to identify our worry and use it as a tool to reflect on what areas of our lives are receiving the greatest allocation of our time, energy and resources, and to determine if our priorities and pursuits are properly aligned. 

"Health is the greatest possession.  Contentment is the greatest treasure.  Confidence is the greatest friend.  Non-being is the greatest joy." ~ Lau Tzu

I could write an entire book on this one quote.  Let's break it into a brief lesson by asking more questions for you to answer in your own mind:

• Health is the greatest possession:  Would you trade your entire portfolio of investments for 30 years of good health?  How about exchanging all of your money for a loved one's good health for the remainder of their life?
• Contentment is the greatest treasure: If you are not content with what you have now, what makes you believe something more will make you content?  Have you ever been more happy in your life with less money than you have now?
• Confidence is the greatest friend:  Does worry need to accompany the unknown?  Is it possible that the unknown holds great opportunity?
• Non-being is the greatest joy: Do you feel as if you have to make things happen for them to happen?  Would you rather be well-known and of little use to others or relatively unknown and of great use to others?

"Concern should drive us into action and not into a depression.  No man is free who cannot control himself." ~ Pythagoras

While it is unrealistic, and arguably unhealthy, to attempt absolute control over our thoughts and emotions, it is quite realistic and healthy to become aware of our thoughts and emotions and take appropriate action or inaction.

Perhaps intense feelings about money may reveal that we have unknowingly given it too much energy and prominence in life.

Money worries are quite normal; however, normal is not necessarily a healthy state of being.  Worry has no useful purpose... unless we recognize it, find its cause and give purpose to it.  Only then may we learn and grow from experience.

Without this awareness and consequential learning, we will simply enable another cycle of problems to occur -- and for our worries to manifest again in a similar way in the future...

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Related Post:  The Diminishing Marginal Utility of Wealth

Why it's time to move on...

Somewhere in the world today at this very moment, a middled-aged husband and father of young children is being told by his doctor that he has only months to live;  a mother is learning that her child has died;  and somewhere in the world today, someone will come within a heartbeat of death and have a completely different perspective on life...

Do you think any of those three people are concerned about the "financial crisis?"  Do you think they are thinking of money, material wealth or social status now?

Often it takes some kind of shock for us to realign our priorities.

Let's reflect on a few thoughts from historic figures, both ancient and modern, that have been faced with extreme challenges that make our current financial fears seem like just a speck of dust to be flicked off of our shoulders...

"I tell you that virtue is not given by money, but that from virtue comes money and every other good of man." ~ Socrates, from The Death of Socrates, as quoted by Plato.

Socrates was known for his belief in the virtues of contentment and self-awareness.  He lived a very frugal and simple life and could often be spotted observing Athenians at the market making their purchases.  When his students asked about this, he replied, "I love to go and see all the things I am happy without."

Socrates' pursuit of virtue and his strict adherence to truth clashed with the "might makes right" and increasingly immoral path of Athenian politics and society of the time.  Socrates was given an ultimatum to denounce his philosophies or be forced to die by drinking a cup of hemlock.  Socrates chose death...

"When we are no longer able to change a situation -- we are challenged to change ourselves." ~ Viktor Frankl

Victor Frankl, Jewish psychiatrist, author and Nazi concentration camp survivor, observed human behavior in the concentration camps.  He noticed some people died, others didn't -- and it was tied in no way to physical strength.

Frankl concluded that the most important driving life force for man was the search for meaning. Every human being has to have a task, it doesn't matter what it is but it must be his own.  Without meaning to live for, the energy to pursue life is diminished.

"If your kids want to paint their bedroom, let 'em do it. Don't worry about the resale value on the house." ~ Randy Pausch

Randy Pausch, after given a six-month sentence to live, gave a moving speech to his colleagues and students at Carnegie Mellon University. There was not even one mention of money, material wealth or social status in his last lecture…  He mostly spoke of his life's adventures, passions and relationships.

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

If you do anything today and this weekend, please take a moment to recognize your greatest priorities.

Would you rather have health or wealth? Would you rather have strong personal relationships or strong personal finance? 

We were born with nothing and we will die with nothing.  Now go hug someone you love, embrace life and thank God for the opportunity to realign your priorities today. Do it now.

Turn off the media noise and tune in to your life…

Related Posts:

Dying to Live

Mind vs Brain Part 2: Priorities, Pursuits & Productivity

Weekend Wisdom: The Interview With God