The Tao Can Help You When Contemplating The Dow

1/ I’ve often said that reading broadly outside of finance can be useful in understanding and crafting better investment processes. For the next few weeks,

2/ I’m going to illustrate how some of the verses from one of my favorite books, “The Tao Te Ching” by Lao Tzu can help us become better investors.

Verse Three
In the third verse of the book, Lao Tzu looks at how attachment and beliefs can cause frustration and bitterness

3/in our lives. By clinging to a treasured belief or thing, we close our minds to other ideas and to the very notion that we might in fact be wrong.

Lao Tzu says:

4/ “If the sage refuses to be proud then people won’t compete for his attention. Not to value treasures that are hard to come by keeps people from wanting to steal them…You see, if there is nothing to fight for then there is nothing that can break the flow.”

5/ I liken this to having a beginner’s mind.

If we attach huge value to an opinion or to a material procession, we will naturally fight to protect it. Your ego becomes activated, and you will become very protective of that treasured thing, true or not.

6/ What if something you believe is wrong or something you bought a fake? You will expend a huge amount of psychic and emotional energy defending a lie. That will weaken your will and tire your mind.

7/ By embracing Lao Tzu’s advice, we rid ourselves of beliefs that could be wrong and free ourselves from identifying our egos with it. Don’t embrace the cliché “it’s my way or the highway.” As you study, seek out things that may be helpful to your process,

8/ but don’t wed yourself to them no matter what.

Look at all the unresolved arguments on this platform. Are people’s minds changed? Does all the fighting and verbal combat leave anyone better off? I think not. I think it leaves them embittered, angry and exhausted.

9/ In crafting your investment process, remember that “all models are flawed, but some are useful.” As Wittgenstein said, “Don’t look for the meaning: Look for the use!” Because something is useful does not make it a holy truth. It simply makes it useful.

10/ Remember, the more you attach yourself to a thing or a belief, the harder it is to shed it and move on to a better understanding. Always question and keep an open mind to new information. It’s the very opposite of a dogmatic, closed approach to life.

11/ By adopting a flexibility that allows for "strong ideas, loosely held" you will remain an open learner, and that, in my opinion, is one of the keys to developing a successful process for investing.