Motley Fool Money - Ancient Philosophers, Modern Investing Wisdom

Episode Date: September 10, 2022

Do you really own your stocks? The stoics might suggest otherwise. Ricky Mulvey and Brian Stoffel serve up an introduction to stoicism, and why these philosophers from a few thousand years ago have practical advice for investors today. They discuss: - Fundamentals of stoicism - The dichotomy of control (and what it means for investors) - Seneca’s complex relationship with wealth - Company leaders that may exhibit some stoic virtues Companies mentioned: COST, AAPL, BRK.A, BRK.B Host: Ricky Mulvey Guest: Brian Stoffel Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone, I'm Charlie Cox. Join us on Disney Plus as we talk with the cast and crew of Marvel Television's Daredevil Born Again. What haven't you gotten to do as Daredevil? Being the Avengers. Charlie and Vincent came to play. I get emotional when I think about it. One of the great finale of any episode we've ever done. We are going to play Truth or Daredevil.

What? Oh, boy. Fantastic. You guys go hard. Daredevil Born Again, official podcast Tuesdays, and stream season two of Marvel Television's Daredevil Born Again on Disney Plus. trait that I'm zeroing in on here is just kind of equanimity, never got too high, never got too low. And he did have a North Star that replaced just profits, profits, profits, stock up, stock up,

stock up, which was, we are going to provide the most sustainable benefit to our customers possible. And if you look, that maps pretty closely with what the company did. I'm Chris Hill, and that's Motley Fool contributor Brian Stouffle, talking about former Costco CEO, Jim Sinigal. Today, Brian and Ricky Mulvey are serving up an introduction to stoicism and how philosophers from a few thousand years ago have practical advice for investors like us today. We're beginning our journey into stoic philosophy and investing. It's going to get heady, but I think it can make you a better investor. Joining us now as Motley Full contributor, Brian Stoful. Thanks for being here. Thank you for having me. I'm really looking forward to this conversation.

Likewise. And before we scare everybody off by saying we're going to talk about stoicism and grit our teeth through the pain, let's talk about what it is and what it isn't. Yeah. So I think stoicism has a really rough name for itself. You know, Brne Brown is one, someone that I listen to all the time. And I'm sure a lot of other fools do too. And she always talks about the thing you want to avoid is stoicism. And for those who don't know her, she's a very accomplished author and a licensed clinical social worker. But. A lot of people, herself included, believe that stoicism means you don't feel anything. You just ignore the pain, ignore the joy, and you just grit your teeth and you plow through it, and you don't feel anything. And the type of stoicism that I think you and I want to talk about today is actually the exact opposite. It is feeling and accepting everything, the joy, the pain, the discomfort, the excitement.

the thing is, is that what that looks like on the outside can be very similar to someone who ignores all their feelings in so much as you have control over your reaction to all those feelings, and that's where you pour all of your effort into your reaction to them. And sometimes it means you might feel pain or joy, and you decide, hey, I feel pain and joy, but I'm not going to let that determine what my next action is. and so you can be on the outside and say, oh, that just swept right over her. It swept right over him. They're not even paying attention.

It's going into life with best intentions in treating the outcome with equanimity. Maybe that's the quickest way I can do it. Yes, I totally agree. You know, a lot of other shows, you could start out with Epicetus, you could start out with the Roman Emperor Marcus Aurelius, you could start out with Seneca. We're starting with Brunei Brown. I love it. I also think it's important as we dive into the stuff.

conversation to talk about what stoicism is not. There is a thought it could be a religious philosophy, which it is not. Right. It is not. And so there's two parts about that. One, I think when we say philosophy, a lot of times people think that's something that is about big, abstract ideas. But this is actually a philosophy that shuns that. It actually embraces just the practical. The things that anyone could really do, you don't need a PhD in, the philosophy to understand it. So that's first, but it's not a religion either. It's, it does not have an origin story of the world. It doesn't attempt to connect with any specific deity. It's just a way of moving through life, although the philosophy itself does have an interesting origin story.

You want to get into it? Sure. Well, I, you know, I think Zeno was his name and I could be wrong about this. So while I know some about stoicism, there are people who are listening who might say, you got that wrong, and I'll say you're probably correct about that. But My understanding is that he was shipwrecked and he lost everything in a foreign country. And that is something that most people would look at as an absolute travesty and his life was probably terrible after that. But instead, he said, hey, this happened to me. All right, what am I going to do now?

And born from that became this philosophy of what matters most in life is actually not what happens to you. It is what you do with what happens. happens to you. Let's tie this into investing a little bit. So two parts of this question. One is how did you personally get into stoicism? And then also how is your exploration into it affected you as an investor? Sure. Well, one thing I just want to say in terms of, like, I realized retrospectively there were certain parts of stoicism I had in my life that I wasn't aware of. This might sound a little silly, but I played football all the way through college. And one of the

things that drove me crazy was when we had a penalty on us that went against. us. And we would, like, there were people on my team or in the other team who would just, they couldn't drop it. They couldn't let it go. And while they weren't dropping it and letting it go, the game was moving on. There was nothing. It wasn't like you were going to say, sir, I wasn't holding on that play. And then you're still saying that five plays later. And meanwhile, I've never seen a ref be like, you know what? You're right. I'm going to, I'm going to take that back. So there was nothing to be gained from that. And so I learned that, hey, there's something. things that you just got to drop and move forward. So where I got interested in this and got

it, like, stoicism became the word I associated with an approach that's somewhat like this was from a couple different angles. One was the writings of Nassim Nicholas Talib, who talks about Buddhism, Stoicism. He likes to say Stoicism is like Buddhism with an attitude. But also, Mr. Money Mustache is a really popular blogger about early retirement, and he talks about Stoicism a lot. that was where I started to get kind of introduced to it. And then the books of Ryan Holiday really kind of topped it off. How do you think stoicism affects you as an investor? How does it, how do you use the philosophy to make investing decisions? Yeah. So I, you know, I think that the most important thing that stoicism offers me, and I can only, I don't mean to say that, hey, I'm an expert. I don't think

there's any experts. I just think there's veterans. So if you've been thinking like a stoic for a long time, you're not an expert. But you are a veteran because you've been trying to do it for a long time. So the biggest difference I see between myself now and myself when I started as an investor, and I can see it when my friends come to me and they start investing and some of the concerns that they bring up is anchoring bias. So for those that aren't familiar, anchoring bias is, hey, I bought Tesla at $700 a share. It's $500 a share right now. And then what usually follows is one of two things. One is, I'm going to wait until it gets back up to 700 and then sell. That's the first thing.

Or, man, I should probably buy more, not because I think the company's in a better position, but just because I can get it for cheaper. That's anchoring bias. That is trying to control what's already happened. Going back to that football analogy, it doesn't matter that that penalty has been called. It doesn't matter that you've lost $200 a share on Tesla. What happens is what's happening when you're going to be. you look forward. So who cares what Tesla's stock is trading for? Do you still believe in it right now

between now and the future? That is by far the most important thing as it relates to investing that I've been able to take from stoicism. The reverse can be true occasionally as well. I love playing pickup basketball. And one of my favorite phenomenons is when someone scores, they start celebrating and then the defense takes the ball. And then the person they're supposed to be guarding his wide open for a shot and then the effect is completely neutralized because a lot of stoic philosophy is essentially treating good outcomes and bad outcomes with i'm going to use the word again equanimity and the idea that uh these are now think like they shouldn't affect your behavior the past actions which you know as i say that in investing it's more difficult because you do want to continue to

add to your winners i guess anchoring bias can sometimes work both ways yes and it really can and and And, you know, I think that one way of thinking about this, we said, let's talk about the dichotomy of control. Yep. Is this stoicism is process-oriented. It is, it doesn't ignore the outcomes. Those outcomes are important. And the outcomes are important in terms of how they are going to inform changes that you make to the process. But the process is the meat of it.

And really how you should judge yourself. And the dichotomy of control. I don't know if we define that. It's essentially understanding what you can. and can't like what is under your control and what is not. And the Stoics, I would say, had a pretty extreme view of what is not under your control. They essentially said your values, your judgments are under your control, but even things like your property would not qualify as something that is under your control.

Yeah. And it would seem like that's kind of ridiculous, right? Like my house isn't under my control. But talk to someone whose house has been hit by lightning, where there's a fire, where, you know, there's any number of things that can happen, an earthquake. The thing about that is, is if you adopt that viewpoint before something bad happens. If you adopt it afterwards, that's fine. That's part of the learning process.

If you adopt it beforehand, then when that earthquake does hit, when the lightning does strike, when there is a fire, then your ability to deal with that moving forward is probably a lot healthier than if you feel like you lost a part of yourself. The full quote from Epictetus about the dichotomya control that I think really is. captures that Epicetus was a former slave, famous, stoic philosopher. He said, quote, some things are within our power while others are not, within our power or opinion, motivation, desire, aversion, and in a word, whatever is of our own doing, not within our power or our body, our property, reputation, office, and in a word, whatever is not of our own doing. I think there's a pretty clear tie also to stock investing with that. Oh, absolutely. It can be applied in so many different areas of life, but the market doesn't

care about you. And that's okay. It just, it doesn't. And so your job is to take whatever the market or the world, however you want to say it, is giving you, and then decide, okay, this is great, or, okay, this really sucks. Now, what am I going to do about it? Because that's the only, that's the only area where I can move the needle. A big part of the philosophy is not taking bad things personally. and I think the same could be true during, I feel it myself during a stock dropper and bear market. I purchased some stocks, let's say late 2021, and then immediately the market falls in the summer of 2022. And I took that as like, I took that as an affront against me. And I think a lot, like, as silly as that sounds, I think a lot of investors felt a similar way,

which is like, this is something being done to me and that it affects your outlook toward essentially like life. If you're around a lot of financial firms during a bare market, the attitude is dour. One thing about the Stoics that I find particularly interesting is that they didn't ignore, like they didn't ignore wealth and money is an important tool, if you will. They saw it as something that was called a preferred indifferent. They would put it in the same category as health and education. What does that mean when they were talking about wealth and money as a preferred indifferent? did that mean it wasn't something worth pursuing?

Yeah, it's like the thing that we wrestle with all the time. And if they were wrestling with this thousands of years ago and we're wrestling with this now, we're probably going to continue to wrestle with this for thousands of years into the future. And that is the overlap, if you're drawing a Venn diagram, between the good life, whatever that might mean and wealth and money. because I think that, you know, for myself, I thought that they were separate. In fact, I thought that wealth and money could work against the good life. And as I start to, as I grow older and I realized, well, there are some tie-ins.

Autonomy is really important to me. And in the world we live in, you need something to be able to have a certain level of autonomy. I start to realize that maybe there is overlap in that Venn diagram between those two things. But it's really important to juxtapose them with another group that was around at the time, which were the cynics. Now, the cynics are people that, like, they rejected all wealth and power, didn't own property. The story that I like to, that I hear, I can't remember the name of whoever one of the most famous cynics was, but he used to only have a cup.

Like, that was the only thing he had was a cup, and he would sleep on the street. And one day, he saw a child go to the fountain and drink by cupping his hands together. And he said, how stupid I've been, and he threw away his cup. So then he didn't have anything. The stoics were much, they were a more moderate view on wealth and power, whereas, hey, this exists, but if you become a slave to it, that's where you start to run into trouble. So then what would the stoic view be on making yourself a master over your wealth versus having wealth be a master over yourself? because I know that that's how they viewed a lot of rich people back in the time of the Roman Empire.

Well, it's very difficult because it's very easy to slide into making wealth something that you become a slave to instead of it serving you. The problem is if you go the other way and you just try and avoid wealth altogether, you do something I read this term recently called counter dependency. I've never heard it before, but counter dependency basically means if there's something that you hate and then you're going to disagree with that thing on every level, then you're not really in control anymore. We see this in politics all the time when there are people that go out and ask people, hey, what's your opinion on this piece of legislation? And all they do is they spell out what the legislation is.

And you might get like 60% of Democrats or Republicans supporting it. And then to a different group, they say, here's this legislation. It was proposed by, and then it's the other party. And then the amount that are agreeing with it drops to like 10%. And you're like, you're just shooting yourself in the foot. And everybody can do this. And so it's the same idea with wealth and money. If you reject wealth and money altogether, well, then you're just, you're working in opposition

to wealth and money. And wealth and money is actually still defining you. And so the key is, is you. you've got to find something else that's going to define you. And there were different things that the Stoic said you should replace that with, like equanimity, like peace of mind, like contentment. There were different names for it, but it is a very tenuous relationship. There's a lot of argument among the philosophers at the time as well.

One of the famous Stoic teachers was a guy named Seneca, and he gained much of his wealth by working as a writer, tutor for the Roman Emperor Nero. he also charged loans with high interest rates. And so there is a criticism of a lot of his teachings, which were, you know, treat everything with equanimity and treat everything, go with the flow and stick only to your values and judgments. And then there would be the opposing side say, well, that's awfully easy for you to say because you're coming from a much higher perch.

Right. And Seneca did have a very interesting relationship with wealth. And it's complicated. And I don't think anyone's ever going to come to a. a final conclusion about was Seneca right or not. But Seneca said a lot of things that people liked, but then he did a lot of things that weren't always lining up with what he was writing. Now, in the end, I think all that really does is it means that Seneca was a human being,

because we all do that from time to time. He gained a lot of power and wealth by working for someone that ended up leading to his own death. But, you know, it again, it gets to this underlying theme of incentives matter, right? And what you do probably matters more than what you say. So be careful about what you say. And look, I'm, I fall victim to this too all the time. Measure what you're doing as opposed to what you're saying. So, and if you do that, if you're able to do that over time, you're probably able to keep yourself more in balance. Seneca's is one where he says, look, money and happiness, they don't have to be that closely related. There is an upside to wealth, but I'm not dependent

upon it. And then you can look at him and say, well, you're saying you're not dependent upon it, but you're doing a lot of stuff here that kind of goes against what you say you value. So what's going on here? In the end, unfortunately, I think Seneca had to, Seneca had to conclude that. He had to, he had to be able to justify that disconnect by essentially committing suicide. Let's hope that we can find a way to find a better resolution to those tensions that might arise with money and happiness in our own lives. Hopefully we can do that. This is a hard heel turn for a topic change, Brian Stoful.

But one thing that the Stoics really placed a lot of value on was our ability to reason. The Stoics believed that reason and sociability were essentially the two things that made us human. Why did the Stoics look to look to those two things as the highest human values? Well, I think at that point in time, the belief that humans had this unique ability to reason was really high in the list. They said, this is what separates us from all the other animals and things like that. But the thing that I want to tag on to as well with that is you generally have this juxtaposition between reason and emotion, right? And I think in today's world, we say it should, especially in investing, we say it should all be reason and no emotion.

And what we talk about on the mindset and Motley Fool Live all the time is that if you deny emotion, you're actually going to be controlled by emotion. It is something that I'm going to tie it back to Bray Brown here. She says, a lot of people like to say we are rational beings that have occasional emotional experiences. She's done more research than I have than a lot of people have. And she says, no. What we are is we are emotional beings that have occasional rational experiences. And the reason that rational experiences are so highly valued is because they tend to be

enduring, you know, and we see this with investing all the time. My stock goes down. I want to feel better about it. I sell. Or my stock goes down. I want to feel better about it. I buy even more because it's on sale, the key being that I haven't investigated the underlying business. It's just about the movement that the stock made. Whereas if we can hit a pause button, then we can let the waves of the emotions come and go. We don't devalue them, but we also don't let them get behind the driver's seat. And we say, when this subsides and it will subside, what am I going to think is the best path forward now? Yeah, the Stoics were big on essentially.

They thought a lot about anger. And I think that there's a clear tie to what you're saying. One thing Seneca wrote on this was, quote, the greatest remedy for anger is delay. Beg anger to grant you this at first, not in order that it may pardon the offense, but that it may form a right judgment about it. If it delays, it will come to an end, end quote. And I think that that kind of goes to what you're saying,

which is if you're feeling upset about stock drops, the thing you should actually do is just chill for a sec. And that's a much more eloquent way of saying it. Absolutely. You know, one of the things that I think is the greatest tool underappreciated ever of working at the Motley Fool is that we have to wait for permission to buy or sell a stock. Now, that might sound like a pain in the butt, but let me tell you something, it has made me thousands of dollars because it has prevented me from either buying a stock I'm super

excited about when I first find out about it. And then a week later, I'm like, well, yeah, but there's this and this and this and this that, wow, okay, I'm not so sure. Or, or equally important when a stock tanks because something bad is happening, I can't sell. When March 2020 came around, I couldn't sell anything. Like, it was impot. Like, there was no way I was going to be able to. And guess what? That ended up being enormously beneficial for me. Now, if we could figure out something similar to responding with anger when it comes to parenting, then I think you've got a bazillion dollar product on your hands, and I am interested in buying that. We'll call the SEC and see what they can do. Always like tying this back to stocks and companies,

and I want to talk about stoic virtues and how we see them in maybe some of the companies we own, some of the companies we watch, but I think it would be, we'd be remiss to have that conversation without kind of first cautioning against or giving the stoic caution of declaring people and leaders and organizations is virtuous because the intentions are so difficult to judge, especially from the outside. Yes. And you know what? View what we're about to talk about the same way I said we should view Seneca as a human

being who has ideas and actions might not always match those ideas. All right. So when you think about some maybe some leaders or some companies with some Stoic. virtues, what comes to your mind? So I've got two. The first one is Jim Senegal. He was the founder and CEO for a long time at Costco. He's no longer the CEO anymore. The main trait that I'm zeroing in on here is just kind of equanimity, never got too high, never got too low. And he did have a North Star that replaced just profits, profits, stock up, stock up, stock up, which was we are going to provide the most sustainable benefit to our customers possible. And if you look, that maps pretty

closely with what the company did. There's a great story about how they made a deal with a hot dog vendor, because you know, you can buy those hot dogs. And he said, you know what, you got to go back and rework that deal. The catch is that he said, we're not paying them enough. There's no way that they're still going to be around five years from now if we're paying such a low price for these high-quality hot dogs. You don't hear stories like that often. The other one is just, it's Berkshire Hathaway. I mean, yes, Warren Buffett, but really, if you read Charlie Munger, he is kind of a paragon of stoic virtues. I didn't know that he had a whole bunch of really rough things happen in his 30s. Maybe I should know that because everybody has a bunch of rough

things happen in their 30s. But you wouldn't know that because he just, the way that he moves forward, I heard someone say once, look, one of your favorite things to do is to read. And you might lose your eyesight. I mean, he's in his 90s. What are you going to do then? And he said, I'm going to learn Braille. That's a pretty stoic response. That's what he has control over. And the one I would go with, I would say, the easy example for me to reach for, or I shouldn't say the easy example. The example that sticks most prominently in my mind would be Tim Cook and Apple, especially with the privacy changes. With regard to Facebook, Tim Cook said, quote, we could make a ton of money if we monetized our customer. We've elected not to do that, end quote. It is easy.

to make those decisions when you're one of the most valuable companies on the planet. But I do think it does speak to Cook's customer focus. And then also when he was pegged with this question of how he would react to the privacy changes, if he were the CEO of Facebook, he just simply said, quote, I would not put myself in that position. And that seemed to me to be a bit of a stoic response. Yeah. And at the same time, if we're going to take that Seneca approach, you look at the advertising

revenues at Apple and how much they've gone up recently. And you could say, well, is he, is he following that? But I do get what he said about. I wouldn't put myself in that situation. I own a couple of stocks. It's mostly because I run a portfolio with Brian Frode and he gets to choose half the stocks. But I tend to shy away from companies where the user and the customer are not the same person. Facebook is that. Facebook's users are you and I. Their customers are their advertisers. And I think that's what he's getting at when he says that. Well, come on. Let's not end this by blaming Feroldi, but that, I guess, is where we will end. Brian Stofel, thank you so much for your time on this. I really enjoyed the conversation.

Thank you very much for having me. I enjoyed it. As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy yourself stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.