Simply Seeking Not to Screw Up: A Formal Foundation in Finance and Philosophy

SeekerFive

May 28

Do you ever notice formal patterns that seem to occur in quite different material domains? I occasionally do, and it's always an intriguing type of thing to notice. Lately, I've been observing a sort of principle of praxis which occurs both in financial investing and in philosophy, and perhaps in medicine as well.

In Financial Investing

In financial investing or trading, this is essentially the principle of preserving your principal. In other words, in order to make money, one must prioritize not losing money. I've been reading a good deal about highly successful investors and traders, and this seems to be a common priority, both mentally and in terms of actual investment strategies.

It makes sense too, mathematically: In order to recoup a loss of 50%, for example, it requires a subsequent gain of 100%, and that just to break even! I recall one exceptionally successful investor -- it may have been Charlie Munger (Warren Buffet's late business partner), although I'm not certain -- having said that he succeeded by not trying to do anything brilliant, but focusing instead on avoiding doing anything stupid. A sound strategy, evidently.

Epictetus' Stoic Training

Epictetus, the famous Stoic philosopher and teacher, recommended a type of three-stage training. The first stage is that of the discipline or desire and aversion. Desire, in this case is desire for something, desire to have, be, or experience something. Aversion, in contrast, would be desire to avoid or get rid of something, desire not have, be or experience something.

Neither desire or aversion, the these senses used by Epictetus, are intrinsically good or bad. What determines desire or aversion to be good or bad are its objects and motives. When desire is good, it is ultimately aimed only at becoming good and embodying the good. When aversion is good, it is aimed only toward remaining bad or embodying the bad.

The Same Formal Pattern

Here is where the same formal pattern comes in, or at any rate, a strikingly analogous formal pattern. Epictetus advises that the person who is new to training, or who is simply not sufficiently advanced in the discipline of desire and aversion, to "put away desire entirely for now," and focus on training (or re-training" one's aversion.

This might sound strange to us, but remember, first that "aversion is also a form of desire. It is just the capacity to desire not to have, be, or experience various particular things. Second, remember that aversion is not intrinsically bad. Training aversion doesn't mean squelching it or getting rid of it. Training means carefully crafting it to target only what we might call one's own ethically bad inclinations or potentials.

Its Function In Stoicism

Why would Epictetus advise this? It is at least in part because I cannot be or become good if I have not trained myself out of the bad. Think in terms of actions. If I desire to act only appropriately and with virtue, this will not be possible unless I am fully averse to doing anything unvirtuous, and unless I am not averse to anything else, since aversion to suffering, for example, may undermine my ability to embody virtue and void the morally wrong. Thus my desire to act only with virtue will not succeed,I will be discouraged, and will also be distracted from the task or training my aversion.

To me, this focus on avoiding what is bad -- in this case, the ethically-spiritually bad -- as a foundational principal of practice, seems formally very similar to the first principle within investing of avoiding the financially bad, which is to say losing money.

In Buddhist Philosophy

Briefly, such a pattern is obvious in Buddhist philosophical practice and discourse as well. Simply consider the Ethics portion of the Eightfold Path, viz. Right Speech, Action, and Livelihood. All these begin from a foundation of avoiding the wrong and unskillful, in that they have an initial focus on not inflicting needless harm on oneself or others. And similarly in the case of Right Effort (see links below), the first two Great Efforts concern preventing unskillful states from arising, and overcoming unskillful states which have already arisen. It is only the third and fourth Great Efforts which directly seek to bring into being and maintain skillful states.