Bogleheads® Chapter Series – Stoicism and Behavioral Finance

00:00:00.000 | (upbeat music)

00:00:02.840 | - Welcome to the "Bogleheads Chapter Series."

00:00:05.480 | This episode was jointly hosted by the New York City

00:00:08.240 | and San Antonio Bogleheads Chapters

00:00:10.480 | and recorded August 24th, 2022.

00:00:13.780 | It features a discussion on the philosophy of stoicism

00:00:16.600 | and concepts of behavioral finance.

00:00:19.320 | Bogleheads are investors who follow John Bogle's philosophy

00:00:22.160 | for attaining financial independence.

00:00:24.520 | This recording is for informational purposes only

00:00:26.840 | and should not be construed

00:00:27.760 | as personalized investment advice.

00:00:30.100 | (upbeat music)

00:00:32.680 | - What we're showing here, is that clear to everybody?

00:00:39.240 | Great, great.

00:00:40.800 | Well, thank you for the introduction, Miriam.

00:00:43.400 | And also thank you, Jim, Lady Geek for the help

00:00:47.860 | and getting this all set up.

00:00:49.960 | So yeah, what we'll be presenting on today

00:00:52.600 | is stoicism and behavioral finance, right?

00:00:56.920 | So one of the first questions is,

00:01:00.200 | how can stoicism benefit your personal finance goals, right?

00:01:05.200 | The connection between stoicism and finance concepts

00:01:09.720 | can help us achieve our personal finance goals

00:01:12.400 | and peace of mind, right?

00:01:14.240 | So this is kind of why we're here, right?

00:01:16.000 | And why we're presenting on this topic.

00:01:17.960 | So one of the ideas behind this is framing

00:01:24.720 | to help us make good financial decisions,

00:01:27.280 | even in turbulent markets.

00:01:29.280 | And one of the key ideas here is the idea of framing, right?

00:01:34.280 | Another big concept within stoicism

00:01:38.280 | is the idea of focusing on what is in your control

00:01:42.480 | and differentiating between what we can change

00:01:45.340 | and what we cannot.

00:01:46.480 | You'll hear what is in our control,

00:01:48.760 | that's something you'll hear a lot

00:01:50.720 | when people are talking about stoicism.

00:01:54.280 | Another idea here, which is kind of related to framing,

00:01:58.480 | right, is appreciating what we have

00:02:01.760 | more than feeling of misery over what we don't have, right?

00:02:06.100 | So learning appreciation.

00:02:08.360 | Another is focusing on putting in our best efforts

00:02:13.280 | rather than defining success by the outcome.

00:02:16.480 | So the idea here being focusing a little bit more

00:02:19.440 | on the process rather than explicitly on results, right?

00:02:24.160 | Another idea here is kind of learning

00:02:26.920 | to control your reaction rather than letting the outcome

00:02:31.840 | define our experience and our reaction.

00:02:34.860 | And then also in finding strength and tranquility

00:02:40.060 | through objectivity and rationality.

00:02:42.480 | So a lot of these ideas you'll kind of hear us reiterate

00:02:46.360 | throughout this presentation.

00:02:49.320 | And then another idea is to identify biases

00:02:54.320 | to help us make better choices.

00:02:56.740 | And then another big idea is understanding loss, aversion.

00:03:03.160 | Next, Guri is gonna walk through the agenda.

00:03:08.640 | - Fantastic, thank you, Luke.

00:03:10.000 | And similarly, thanks to the many people

00:03:13.280 | who helped make this possible.

00:03:14.680 | - Guri, could you raise your volume, please?

00:03:18.160 | - Sure, sorry, my mic was far away from my mouth, thanks.

00:03:21.640 | So similar to Luke's comments,

00:03:23.960 | many thanks to the team of people

00:03:26.640 | who helped make this possible.

00:03:28.280 | So as Luke mentioned, I'll cover the agenda.

00:03:31.520 | He just covered item number one here,

00:03:33.600 | which is how stoicism can benefit you

00:03:36.040 | with your personal finance decisions.

00:03:39.440 | Following this slide, I'll cover three early contributors,

00:03:43.920 | three Roman contributors to Stoic philosophy.

00:03:47.000 | Luke will cover some similarities

00:03:49.160 | between Stoicism and Boglehead philosophy.

00:03:52.240 | He'll also cover a metaphor of a greyhound and a rabbit

00:03:56.240 | and the takeaway lesson to that.

00:03:58.880 | And Luke will also cover, interestingly, Seneca,

00:04:02.960 | one of the early Roman contributors

00:04:05.000 | and a prolific writer, wrote to his friend

00:04:10.000 | a letter called "On Retirement."

00:04:12.880 | And so Luke will cover that.

00:04:15.800 | We'll cover an intro to Stoicism really high level

00:04:18.920 | for folks who aren't yet familiar with it.

00:04:21.520 | Luke will cover mental impressions and objectivity

00:04:24.640 | and through a working diagram,

00:04:27.440 | walk through a practical application

00:04:29.600 | of a lot of what we're talking about.

00:04:31.360 | Luke will then cover some of Jack Bogle's overlay

00:04:35.840 | on emotions and reason.

00:04:37.960 | And then I'll cover five slides

00:04:41.000 | on the philosophy of Stoicism in a little more detail.

00:04:44.120 | There's so much depth to Stoicism,

00:04:46.160 | but we want to keep it somewhat digestible.

00:04:48.880 | So we'll cover some foundational concepts there.

00:04:53.880 | And from that, we'll transition to behavioral finance.

00:04:57.600 | Specifically in the invite,

00:04:59.680 | a lot of folks would have seen the link to the wiki.

00:05:02.800 | There's a comprehensive summary

00:05:04.720 | of behavioral finance pitfalls.

00:05:06.520 | So we'll touch on a few of those.

00:05:08.840 | We'll specifically highlight some of the work

00:05:10.860 | of Daniel Kahneman, who won a Nobel

00:05:13.440 | for his work in applying psychology to behavioral finance.

00:05:17.280 | Then we'll close with some quotes.

00:05:19.440 | We'll post some additional resources like books,

00:05:23.320 | and then we'll turn Q&A over to the audience.

00:05:26.040 | And with that, we'll begin

00:05:30.120 | with three early Roman contributors.

00:05:32.960 | So they're not in chronological order,

00:05:35.520 | starting with Marcus Aurelius.

00:05:37.320 | He's one of the more famous

00:05:39.200 | because a work of his indirectly got published.

00:05:44.160 | So for context, he was Roman emperor for 20 years.

00:05:48.160 | That's a big deal.

00:05:49.000 | He was the most powerful man in the world,

00:05:51.320 | given how sprawling the Roman empire was.

00:05:54.000 | And he was considered the last of the five good emperors.

00:05:57.500 | What does that mean?

00:05:58.340 | So many emperors were brutal, self-serving, and destructive.

00:06:04.440 | Marcus, on balance, was very good

00:06:08.440 | for his community and the empire.

00:06:10.460 | And what we know from him as it relates to Stoicism

00:06:15.960 | is he kept a private journal to himself.

00:06:18.840 | These weren't notes meant to be published,

00:06:22.160 | but academics compiled them, translated them,

00:06:25.040 | and it came to be called "Meditations."

00:06:27.440 | So folks interested, and I'd highly recommend it,

00:06:30.980 | it's worth reading.

00:06:32.120 | His insights are timeless and super practical.

00:06:35.800 | You'll find, if you choose to read it, how relatable it is.

00:06:40.000 | He went through so many struggles,

00:06:41.520 | as you can imagine, as emperor.

00:06:43.120 | And he just had these profound insights and practical tools

00:06:47.840 | to approach his obstacles.

00:06:50.120 | And with that, his guidance is still empowering

00:06:53.760 | 2,000 years later.

00:06:55.680 | So that's Marcus.

00:06:56.640 | Next, Seneca the Younger.

00:06:58.600 | He's the most prolific writer of these three.

00:07:02.280 | He was a playwright, and he was also

00:07:05.120 | one of the wealthiest people in Rome at his time.

00:07:07.920 | The equivalent, he would be a billionaire for his time.

00:07:12.120 | He was an advisor to Nero,

00:07:13.880 | and for which he was ultimately exiled.

00:07:17.680 | But he was, as a playwright and prolific author,

00:07:21.420 | much of his work survives, and he was such a good writer

00:07:24.780 | that his contributions to Stoicism are longstanding.

00:07:29.780 | And the last that we'll cover here is Epictetus.

00:07:32.700 | Epictetus was born a slave, but he earned his freedom.

00:07:37.700 | And he became a philosophy teacher.

00:07:39.900 | He studied philosophy and became a teacher.

00:07:42.860 | And although he didn't write directly,

00:07:44.860 | one of his students transcribed his teaching.

00:07:47.420 | So his work survives and contributes to us today.

00:07:51.940 | So that's some context for the Stoicism

00:07:56.940 | that we have access to via original sources

00:08:00.360 | or semi-original sources.

00:08:02.020 | And I say that to differentiate

00:08:03.400 | from academics who write about it.

00:08:05.100 | Okay.

00:08:07.100 | - Great.

00:08:09.420 | Next, we'll be discussing some philosophical similarities

00:08:14.420 | between the philosophy of Stoicism

00:08:16.580 | as well as the Boglehead investment philosophy.

00:08:21.000 | Which kind of funny story when I was building this slide,

00:08:26.000 | originally I'd planned on talking about things

00:08:28.560 | that were strictly Stoic

00:08:31.000 | and things that were strictly Boglehead,

00:08:33.480 | and then just kind of talking about some similarities.

00:08:36.760 | But what was interesting,

00:08:38.040 | I actually had a very difficult time finding something

00:08:41.200 | that could fit into this category.

00:08:43.120 | So I kind of was forced to revise how we did this slide.

00:08:49.000 | I thought that was kind of interesting

00:08:51.080 | since the Boglehead tends to be applications and prudence.

00:08:54.460 | So the first, right?

00:08:58.560 | So within the philosophy of Stoicism,

00:09:03.400 | the founder of this was actually Zeno of Sidium,

00:09:07.080 | who founded Stoicism

00:09:09.160 | during the Hellenistic era of Greece, right?

00:09:13.320 | So he was in Athens

00:09:17.360 | when he founded this school,

00:09:19.460 | which is one of the many schools in Athens at that time.

00:09:24.460 | And then of course, the Boglehead investment philosophy,

00:09:32.720 | which is based on Jack Bogle, the founder of Vanguard,

00:09:37.400 | who of course is a proponent of index funds,

00:09:40.800 | who lived from May 8th, 1929 through January 16th, 2019.

00:09:46.400 | One other thing I would note about Zeno

00:09:51.120 | is he lived somewhere around 334 to 262 BC, right?

00:09:56.120 | So we're talking about 2,300 years ago.

00:10:02.280 | So quite a while ago.

00:10:04.080 | And some of the other folks that we had mentioned earlier,

00:10:06.880 | some of the Romans, right?

00:10:08.360 | That was 100 plus years AD, right?

00:10:14.560 | So we're talking about hundreds of years

00:10:17.920 | of the school of philosophy thriving

00:10:22.480 | within the Greek and Roman eras.

00:10:24.800 | A couple of similarities, right?

00:10:29.920 | We're talking about applications and prudence, right?

00:10:32.320 | Wisdom, applied wisdom.

00:10:34.740 | These are things that you find similar

00:10:36.240 | between the Boglehead and the philosophy of Stoicism.

00:10:41.040 | The idea of focusing on what you control, right?

00:10:44.480 | A lot of the wisdom that you find within Jack Bogle

00:10:47.240 | and his philosophy is really focusing

00:10:51.200 | on the things that you control.

00:10:54.040 | And then also there's the idea

00:10:55.920 | of recognizing human psychological tendencies

00:10:59.000 | and then changing your opinions through rationality

00:11:02.800 | based on recognizing some of your own self behaviors, right?

00:11:11.040 | And then there's also strategies to replace

00:11:14.400 | certain unhealthy and possibly irrational emotions

00:11:18.240 | and try to replace those by healthy and rational ones.

00:11:22.400 | And then another idea that these two groups

00:11:28.280 | tend to think similarly is spending time on forethought

00:11:32.040 | and preparation, as well as learning from the past, right?

00:11:36.840 | What can the ancients teach us?

00:11:40.920 | Or if we look at history, what can we learn?

00:11:43.980 | A couple of things that we are not gonna,

00:11:49.120 | well, I guess one idea that I do want to address

00:11:52.680 | is the word stoic, right?

00:11:56.200 | If you look it up in a dictionary,

00:11:57.920 | it actually kind of means cold and emotionless,

00:12:00.580 | which is actually a bit of a misinterpretation.

00:12:05.840 | And sometimes you have to,

00:12:09.040 | that's basically that that word throughout time

00:12:11.640 | has changed its definition.

00:12:13.440 | But really, so when you're talking about stoic philosophy,

00:12:19.400 | a lot of times how they make this distinction

00:12:24.320 | is with a capital S is stoic.

00:12:27.960 | And this is in reference to the school of philosophy

00:12:31.380 | versus stoic with a small S,

00:12:34.280 | which is cold and emotionless.

00:12:36.280 | And what's actually interesting

00:12:38.160 | is practicing stoic philosophy

00:12:41.400 | actually has the exact opposite effect

00:12:45.360 | of being cold and emotionless.

00:12:47.200 | It actually, there's recent studies that have shown

00:12:52.200 | that it actually makes people more warm and empathetic.

00:12:56.400 | So it's actually interesting how the definition

00:12:59.640 | of the word stoic can be completely misrepresentative

00:13:03.920 | of the stoic school of philosophy.

00:13:06.640 | And then, oh, one other thing, the word stoic,

00:13:10.480 | what that means, that came from the Greek word porch, right?

00:13:14.040 | So they used to practice their philosophy

00:13:16.440 | on the porch of the stoapokile,

00:13:21.440 | which forgive my mispronunciation of that,

00:13:28.820 | but it's basically where they went and practiced philosophy.

00:13:32.320 | So really they were the group of folks

00:13:35.120 | that would go talk on the porch.

00:13:36.720 | All right, so next we're gonna touch on a metaphor

00:13:45.960 | that Jack Vogel, he actually used

00:13:49.680 | during a March 23rd, 2007 commencement speech

00:13:53.960 | at the New York NYU Stern School of Business.

00:14:00.700 | And this is a story originally by Reverend Fred Craddock.

00:14:05.220 | And interestingly enough,

00:14:06.500 | it's between the Reverend and a Greyhound.

00:14:09.540 | So of course it's a true story.

00:14:11.840 | So it started off, so the Reverend asked,

00:14:18.180 | "Are you still racing?"

00:14:19.820 | To which the Greyhound says, "No."

00:14:22.580 | The Reverend asked, "Well, what is the matter?

00:14:24.540 | Did you get too old to race?"

00:14:26.680 | "No, I still had some race left in me," said the Greyhound.

00:14:30.220 | "Well, what then, did you not win?"

00:14:32.980 | "I won over a million dollars from my owner."

00:14:35.900 | "Well, then what was it, bad treatment?"

00:14:38.720 | "Oh no, they treated us royally when we were racing."

00:14:42.460 | "Well, did you get crippled?"

00:14:43.840 | "No, didn't get crippled."

00:14:45.980 | "Well, then why?"

00:14:47.260 | "Why, I quit," said the Greyhound.

00:14:50.180 | "You quit?"

00:14:51.560 | "I quit."

00:14:52.400 | "Why did you quit?"

00:14:54.680 | And then the Greyhound responds,

00:14:57.820 | "I just quit because after all that running

00:15:01.340 | and running and running,

00:15:03.040 | I found out that the rabbit I was chasing wasn't even real."

00:15:08.040 | Right, so what's kind of the idea here, right?

00:15:12.500 | So we'll kind of pose a question, right?

00:15:16.340 | So, you know, what rabbit are you chasing, right?

00:15:20.840 | Is the rabbit you are chasing real, right?

00:15:23.520 | And so kind of the idea that we maybe wanna highlight here

00:15:26.900 | is, you know, perhaps it's worth considering

00:15:29.620 | if what you pursue is real and really worth that pursuit.

00:15:35.000 | And that kind of gets into the idea of priorities.

00:15:39.680 | So next, we're gonna come into some sayings from Seneca,

00:15:45.660 | right, which this is on saving for retirement.

00:15:49.880 | And this is kind of a couple of ideas here

00:15:54.500 | is discussing financial wealth versus wealth of mind.

00:15:58.500 | So the first idea here, right?

00:16:00.700 | For many people, the acquisition of wealth

00:16:03.780 | is not the end of troubles, but only a fresh start.

00:16:06.900 | So no surprise there.

00:16:07.940 | The fault is not in one's surrounding,

00:16:11.020 | but in the mind itself.

00:16:13.560 | Will you wait for interest to accrue,

00:16:17.100 | for ventures to pay off, for some fat inheritance,

00:16:20.780 | when you could become rich right away, right?

00:16:23.940 | Wisdom pays off immediately.

00:16:25.700 | It's wealth is bestowed on all

00:16:28.060 | to whom wealth has come to seem irrelevant.

00:16:31.620 | So trust me, you should make philosophy your out advocate.

00:16:36.500 | It will persuade you not to linger over your balance sheet.

00:16:40.580 | And so just to kind of keep in mind,

00:16:42.940 | this is around 62 AD, right?

00:16:46.340 | So this is, you know, just under 2000 years ago

00:16:50.740 | that we're talking about.

00:16:52.180 | And he's talking about these ideas, right?

00:16:54.500 | So kind of highlighting the idea that the, you know,

00:16:58.020 | the human condition, you know,

00:17:00.540 | it extends quite a bit into the past.

00:17:02.900 | And some of this wisdom that, you know,

00:17:05.700 | the ancients can teach us, it's applicable to us today.

00:17:08.960 | But there's an idea here, right?

00:17:11.740 | A distinction between financial wealth

00:17:15.060 | and the idea of a wealth of mind, right?

00:17:18.500 | The idea of, you know, peace of mind,

00:17:21.300 | your character, that sort of thing.

00:17:24.060 | And so the Stoics,

00:17:29.060 | they actually don't deem financial wealth

00:17:33.580 | as either virtuous nor vicious.

00:17:36.500 | It's something that it depends on how you use it, right?

00:17:40.220 | So you can use wealth in a virtuous way

00:17:43.340 | or it can be used in a vicious way, right?

00:17:46.980 | So it is treated in that way

00:17:49.820 | that dependent on how you use it,

00:17:52.040 | which depends on your mind,

00:17:54.340 | depends is basically how they would view wealth.

00:17:57.900 | So the next slide, we'll,

00:18:02.260 | Gauri is gonna talk about intro to Stoicism.

00:18:06.060 | - Great, thanks Luke.

00:18:07.700 | So again, we'll get into detail

00:18:10.860 | with some foundational Stoic concepts after a few slides.

00:18:15.540 | So the next two slides will be really high level.

00:18:18.560 | There's some debate in academia

00:18:22.020 | about the primary purpose of Stoicism.

00:18:24.300 | So we're keeping it pretty general here.

00:18:28.220 | One of the main concepts is to live virtuously,

00:18:31.340 | just like Luke was talking about how folks spend money.

00:18:36.340 | Money itself is objective.

00:18:39.220 | It's neither good nor bad.

00:18:41.020 | So virtue is the potential to pursue virtue

00:18:46.020 | is within each of us.

00:18:47.520 | And the Stoics focused on four cardinal virtues,

00:18:50.740 | those being courage, justice, temperance,

00:18:54.020 | and practical wisdom.

00:18:55.180 | Temperance meaning moderation

00:18:57.520 | and practical wisdom meaning

00:18:59.060 | not just intellectual knowledge,

00:19:01.340 | but to put what you've learned into practice.

00:19:04.480 | They felt so strongly about this.

00:19:06.260 | They felt that just learning something

00:19:07.920 | and not practicing it was almost as good as not learning it.

00:19:12.500 | Another core foundational concept to Stoicism

00:19:16.820 | is that we can avoid unnecessary negative emotions.

00:19:20.940 | And I'll differentiate as Luke did

00:19:23.700 | that it's not about being emotionless,

00:19:27.020 | but Stoicism and even as Luke mentioned

00:19:31.560 | how it survived 2000 years,

00:19:33.860 | folks familiar with CBT or Cognitive Behavioral Therapy,

00:19:37.840 | which is rooted in Stoicism

00:19:39.660 | finds that we don't need to suffer

00:19:42.800 | through our negative emotions.

00:19:44.540 | We may experience them reflexively for a variety of reasons,

00:19:48.500 | but we don't need to stay in that state.

00:19:50.600 | Moving on.

00:19:52.380 | So again, academia debates is it about happiness,

00:19:55.340 | contentedness, some say tranquility,

00:19:57.620 | but the idea is similar enough

00:20:00.500 | that through Stoic philosophy,

00:20:03.420 | contentedness and tranquility are within us

00:20:06.400 | and the overlay to personal finance or behavioral finances,

00:20:10.000 | obviously the substitutes of the market,

00:20:12.220 | how your portfolio performs.

00:20:13.760 | So we'll go into more detail later on that.

00:20:18.160 | But the immediate practicality

00:20:20.400 | is you are able to empower yourself with tools

00:20:23.920 | that help you reduce worries and anxiety.

00:20:27.400 | And as mentioned earlier, the converse of what Stoicism,

00:20:32.400 | we should talk about what Stoicism isn't.

00:20:35.960 | So it doesn't say that you shouldn't enjoy positive things.

00:20:39.460 | You certainly can.

00:20:41.220 | You can enjoy positive emotions and positive possessions,

00:20:44.860 | experience happiness, but not define yourself,

00:20:48.900 | your contentedness, your self-worth on these things.

00:20:52.400 | So you can enjoy a big house or a fancy car,

00:20:55.020 | even though bogleheads may be less likely

00:20:57.580 | to define themselves with those things.

00:20:59.700 | Stoicism says our character and our virtue,

00:21:03.440 | our core and other things are,

00:21:06.460 | we'll get to a phrase called preferred and different

00:21:08.860 | so that it's absolutely okay to enjoy things.

00:21:13.060 | So that's an important clarification

00:21:15.260 | for folks who are attached to the kind of lowercase Stoic.

00:21:20.260 | And then Stoicism allows us to meet challenges

00:21:25.660 | with calmness and reason.

00:21:27.380 | So we'll discuss a tool for that,

00:21:29.500 | which is preparing for catastrophes in advance

00:21:32.900 | so that when they finally present,

00:21:34.660 | you're empowered to deal with them.

00:21:36.720 | And this will come up over and over again

00:21:39.100 | because it's so fundamental

00:21:41.240 | and it's focusing on things within your control.

00:21:45.160 | And part of that is how you respond to things.

00:21:48.100 | So in retrospect, we may regret having done something

00:21:52.860 | or having said something.

00:21:54.620 | And Stoicism reminds us that we're not defined

00:21:58.980 | by what happens to us.

00:22:02.180 | We're more defined by how we meet those things.

00:22:06.740 | So the path to that is pausing, reflecting

00:22:11.180 | and being thoughtful and intentional about how you respond

00:22:14.840 | and also separating yourself from those external events.

00:22:18.260 | And Stoic philosophy tells us that most things in the world

00:22:23.060 | are things external to us have an objectivity

00:22:27.660 | and we often assign our own judgments to them.

00:22:31.420 | We often label them as positive or negative,

00:22:34.900 | but many of these things in fact are neutral

00:22:38.020 | and minus our own judgments, they exist in that neutrality.

00:22:42.080 | So next slide.

00:22:44.900 | In summary, again, Stoicism is meant to be

00:22:49.900 | a practical toolkit.

00:22:52.200 | You can use it throughout the day, whatever challenges,

00:22:55.640 | and you can find equanimity and contentedness

00:22:58.300 | and tranquility by practicing a lot of it.

00:23:01.300 | It does get easier with practice like many things.

00:23:04.660 | And again, it's not intended

00:23:06.420 | to just be intellectual knowledge.

00:23:09.020 | And we'll leave off this slide with a quote from Seneca

00:23:12.920 | or a concept from Seneca.

00:23:14.060 | He says, "The outside world will not give us happiness

00:23:17.740 | or unhappiness.

00:23:19.480 | Our character is the only guarantee

00:23:22.620 | of everlasting carefree happiness or tranquility."

00:23:26.500 | And with that, I'll turn it back to Luke.

00:23:30.420 | - Great.

00:23:31.260 | So now we're gonna touch on a couple of ideas

00:23:36.260 | within Stoic philosophy.

00:23:38.600 | This idea of mental impressions

00:23:41.380 | and the idea of objectivity.

00:23:43.440 | And these fall within, they have the Stoics,

00:23:46.900 | they have different, they call them different disciplines.

00:23:48.940 | And this is the idea of discipline of ascent.

00:23:53.260 | And a high level way of thinking about this

00:23:56.500 | would be to only accept and act

00:24:00.220 | on objective mental impression, right?

00:24:02.940 | So what on earth does that mean?

00:24:04.720 | So let's kind of walk through that a little bit.

00:24:08.280 | So there's the idea of something,

00:24:13.260 | there's an impression on your senses, right?

00:24:15.780 | You hear something, you see something,

00:24:17.820 | that sort of thing, right?

00:24:20.780 | So for example, the news media says, sell, sell, sell.

00:24:24.940 | So this is, by the way,

00:24:25.780 | this is gonna be a financial example.

00:24:27.480 | So we tried to make this a little bit practical

00:24:29.940 | to kind of give an idea of what we're talking about, right?

00:24:32.620 | So then you'll kind of have a mental impression, right?

00:24:36.020 | So something outside of you

00:24:38.100 | and then an impression on your mind, right?

00:24:41.300 | And that's kind of where, for example,

00:24:43.520 | the idea enters your mind that you may consider selling

00:24:47.220 | some of your assets in a downturn or something.

00:24:50.440 | And so here, what we're gonna show here

00:24:54.580 | is you have the external,

00:24:56.020 | things that are kind of external to your mind,

00:24:58.300 | and then you have what's happening internally,

00:25:01.420 | within your mind, right?

00:25:03.320 | And then there's this other aspect of it, right?

00:25:07.060 | So this is kind of a certain aspect of it, right?

00:25:12.060 | But then you kind of have your judgment and your will, right?

00:25:17.360 | Some of your more conscious ideas, right?

00:25:21.860 | That, so for example,

00:25:24.000 | you may have studied historic market resilience.

00:25:27.140 | You kind of understand market behavior, right?

00:25:30.940 | So then basically these two things kind of combine

00:25:35.940 | and result in this idea that you can either accept

00:25:40.100 | or reject this mental impression, right?

00:25:42.980 | So this is basically your judgment

00:25:45.260 | and your will evaluates this.

00:25:48.460 | And then you can accept or reject that idea, right?

00:25:53.100 | So for example, you may reject the idea of selling

00:25:57.180 | based on your knowledge of historic market resilience,

00:26:00.780 | right?

00:26:01.900 | So then you may take action or inaction, right?

00:26:05.060 | So in this case, right?

00:26:06.460 | Do nothing and you'll stay the course,

00:26:09.340 | which of course is, as Bogleheads know,

00:26:11.960 | is a very Boglehead saying, right?

00:26:14.900 | And then there's some type of outcome, right?

00:26:17.980 | And history has shown that this is,

00:26:20.140 | you're more likely to achieve your financial goals.

00:26:23.160 | Or at least that's one of the core tenants of Bogleheads,

00:26:26.700 | right?

00:26:27.540 | And that's, so the Stoics would overlay another idea here,

00:26:33.460 | right?

00:26:34.460 | So they're gonna say, well, guess what?

00:26:37.860 | When you think about this whole process,

00:26:40.540 | what aspects of this are in your control

00:26:43.660 | versus what things are outside of your control, right?

00:26:46.980 | And so what they say is your judgment and your will

00:26:51.900 | and its interaction with things that are outside

00:26:56.220 | of your control is really what you need to focus on, right?

00:27:00.100 | So their whole idea is to focus on things

00:27:03.620 | that are in your control.

00:27:05.580 | And all the practices, so Gorey's gonna,

00:27:09.820 | he's gonna talk about various practices

00:27:13.500 | that'll kind of help.

00:27:15.320 | They're all kind of intended to impact your judgment

00:27:19.180 | and will with the intent of allowing you

00:27:22.980 | to have better ascent, right?

00:27:26.260 | So an example that the Stoics often use

00:27:30.180 | was the idea of an archer, right?

00:27:33.180 | So what things is the archer in control of, right?

00:27:37.140 | So he's in control of how much he practices,

00:27:42.020 | where he's aiming, how hard he's pulling the string back.

00:27:45.280 | So like that's basically his angle of launch.

00:27:50.960 | So, and his steadiness, some of those things

00:27:55.880 | are the things that he's in control of.

00:27:58.160 | But at the end of the day,

00:27:59.200 | he has to release the arrow, right?

00:28:01.800 | And at that point, it becomes outside of his control

00:28:05.000 | and things in life can have its own influences, right?

00:28:09.500 | Wind, that sort of thing.

00:28:13.160 | And so where it ends up hitting on the target, right?

00:28:17.760 | Is that this is where the Stoics would say

00:28:20.960 | you are not in control of, right?

00:28:23.240 | You can do your best, but at the end of the day,

00:28:26.000 | there are still things that you do not control.

00:28:29.840 | So what the Stoics say is focus on the things

00:28:34.120 | that you control and then do your best, right?

00:28:38.040 | And don't focus necessarily on the outcome.

00:28:41.620 | And then a couple of labeling,

00:28:44.780 | a couple of things on this diagram here, right?

00:28:47.900 | So the Stoics would say,

00:28:49.700 | you wanna focus on your center of rationality, right?

00:28:53.460 | This is kind of your virtue.

00:28:56.660 | This is where virtue is.

00:28:58.140 | This is where it lies.

00:28:59.540 | This is where your character lies, right?

00:29:01.980 | So this is where you wanna spend your time improving, right?

00:29:05.580 | And then the idea of the discipline of ascent, right?

00:29:10.580 | Is to be objective, right?

00:29:14.400 | In what the things that you object and reject, right?

00:29:17.960 | And so a more modern way of thinking about this

00:29:21.000 | would be maybe some of your biases, right?

00:29:23.240 | You want to use objectivity

00:29:26.680 | to help eliminate some of these biases.

00:29:29.960 | And Gorey's gonna explain some more on biases here

00:29:33.680 | a little bit later.

00:29:35.380 | A couple of other examples of things

00:29:38.300 | that are in our control and outside of our control.

00:29:40.800 | For example, and these are like Boglehead type examples,

00:29:45.740 | right?

00:29:46.760 | Your asset allocation,

00:29:48.280 | that's something that is in your control.

00:29:50.680 | Your investment policy statement, right?

00:29:53.240 | Typically you're gonna write that

00:29:54.680 | when you're in a rational state,

00:29:57.920 | not in a hyper emotional and reactive state, right?

00:30:03.480 | There's within the idea of lifestyle creep, right?

00:30:06.640 | So as you get older

00:30:08.960 | or as you basically your desires kind of creep up,

00:30:13.000 | you want a bigger house, a bigger, fancier car,

00:30:15.800 | that sort of thing, right?

00:30:18.660 | So this kind of ties back into the idea of desire, right?

00:30:22.520 | So there, and the Stokes believe

00:30:26.840 | that a large portion of your desires

00:30:30.120 | are under your control, right?

00:30:31.960 | And so that part of the practices would aim

00:30:35.040 | at trying to keep some of your desires in check, right?

00:30:39.620 | Some things that are outside of your control, right?

00:30:43.320 | And this is relevant to the personal finance

00:30:47.000 | that we're talking about here, right?

00:30:49.980 | Is market performance, political events,

00:30:52.560 | interest rates, inflation, right?

00:30:54.380 | These aren't things that you can control, right?

00:30:57.300 | So you can take action to mitigate these things,

00:31:01.920 | but you have to recognize that at the end of the day,

00:31:04.400 | you do not control these things.

00:31:06.000 | And so Jack Bogle recognized a lot of these ideas, right?

00:31:12.920 | And in his article, "Clash of Cultures,"

00:31:18.720 | he kind of touched on a lot of these ideas.

00:31:22.120 | Jack was always very good with words and articulate, right?

00:31:27.120 | So he said that intelligent investors

00:31:30.440 | try to separate their emotions of hope, fear, and greed

00:31:34.640 | that separates the volatile market of short-term expectations

00:31:39.340 | from the real market of long-term intrinsic value

00:31:42.440 | and trust in reason to prevail over the long-term.

00:31:46.620 | And the last sentence here, he says,

00:31:48.640 | "In this sense, long-term investors must be philosophers

00:31:53.200 | rather than technicians," right?

00:31:55.240 | So here, you see Jack highlighting the idea

00:32:00.760 | of reason and trying to separate out your emotions,

00:32:04.800 | which is pretty on par with a lot of the things

00:32:09.800 | that the Stoics say and try to practice.

00:32:13.100 | So next, we'll hand off to Gauri,

00:32:19.440 | who's gonna touch on the philosophy of Stoicism.

00:32:24.320 | - Excellent, thanks, Luke.

00:32:26.080 | So again, we'll keep it somewhat high level,

00:32:29.700 | but go into a little more detail

00:32:31.520 | with some foundational concepts.

00:32:33.800 | Again, the key purpose can be debated within academia,

00:32:37.960 | so we'll keep it pretty general here.

00:32:40.800 | Stoicism offers tools for a life of meaningful equanimity,

00:32:47.640 | reduced anxiety, and heightened virtue,

00:32:50.080 | which we spoke about,

00:32:51.480 | avoiding unnecessary negative emotions.

00:32:54.480 | And what is unnecessary negative emotions?

00:32:56.520 | So on the spectrum of emotions,

00:33:00.340 | Stoicism maintains that worry, envy, and regret

00:33:05.340 | are overall avoidable and destructive.

00:33:09.260 | So they have a purpose, and folks can say,

00:33:11.960 | "Well, I worry, so I prepare for things,

00:33:14.660 | or I preempt things, and I solve things."

00:33:17.340 | But again, to stay in a sustained state of worry

00:33:22.500 | is often unnecessary,

00:33:24.140 | and Stoicism helps us with that perspective.

00:33:28.480 | Another purpose of Stoicism is to enjoy positive things,

00:33:33.140 | but not rely on them with such a dependency

00:33:36.760 | that it affects your self-worth,

00:33:39.080 | so that you can enjoy these externalities, as we mentioned,

00:33:43.340 | but the phrase they have for these external things

00:33:48.340 | is preferred and different.

00:33:50.260 | So that can be good health, wealth.

00:33:54.420 | But while you'd say good health

00:33:57.860 | is fundamental to a content life,

00:34:02.860 | Stoicism argues that even without good health,

00:34:07.140 | you have your character.

00:34:08.340 | So as long as you have your character,

00:34:10.620 | and you can pursue virtue, you can do without good health.

00:34:14.340 | And it's easy to expand on that with wealth.

00:34:19.420 | Sure, having money is great,

00:34:21.780 | but even without money, you have your character.

00:34:24.460 | So it would take a lot

00:34:27.500 | to have your character removed from you.

00:34:30.140 | And there are many examples of this.

00:34:31.940 | John's Admiral Stockdale,

00:34:35.300 | his plane got shot down, and he was parachuting,

00:34:39.420 | and he knew that he was gonna be a POW for a while,

00:34:42.700 | and he said, "I'm entering the world of Epictetus."

00:34:45.000 | And he was the highest-ranking officer

00:34:47.220 | while he was in captivity,

00:34:48.900 | and he maintained his character,

00:34:50.980 | and through Stoicism, practiced leadership

00:34:53.580 | that also inspired the men who were also imprisoned with him.

00:34:58.580 | Moving on.

00:35:01.060 | Satisfaction in life comes from overcoming challenges

00:35:04.580 | and benefiting society.

00:35:05.980 | This last piece, "Benefiting Society,"

00:35:07.980 | is also foundational to Stoicism.

00:35:10.480 | They were encouraging of being active in community,

00:35:16.540 | active in politics.

00:35:17.820 | So it's not about being apathetic,

00:35:19.780 | and we'll talk about that more.

00:35:21.380 | It's about taking action to affect,

00:35:25.140 | I'll say noble outcome.

00:35:26.340 | There's a lot of subjectivity in that,

00:35:27.900 | but it wasn't to resign yourself

00:35:30.100 | and accept the world around you.

00:35:31.740 | It was to cause change

00:35:34.740 | where it was in your ability to do so.

00:35:37.400 | And when we say satisfaction comes

00:35:40.580 | from overcoming challenges,

00:35:42.340 | if you think about in our own lives,

00:35:44.820 | it's often something we overcame that was super difficult

00:35:49.820 | in whatever it is, personal, or career, or sports.

00:35:54.640 | Those things, we derive a lot of satisfaction from those.

00:35:59.220 | This next one, "Building Habits and Practices,"

00:36:03.140 | it's a reference to Seneca.

00:36:04.980 | He said, "How great is it to have a disposition to good?"

00:36:08.980 | So what does that mean?

00:36:10.540 | What if in modern day life,

00:36:13.820 | so many things that we enjoy are bad for us,

00:36:17.540 | or to a certain extent, bad for us.

00:36:19.100 | And so many things that are good for us

00:36:21.340 | take a lot of effort or a lot of time.

00:36:23.740 | And you could argue saving and investing

00:36:25.940 | is more of a marathon.

00:36:27.740 | It's delayed gratification.

00:36:30.620 | But within stoicism and within Boglehead philosophy,

00:36:35.220 | there are many things that are easily accessible to us

00:36:39.380 | that are entirely enjoyable,

00:36:42.300 | and also not particularly expensive.

00:36:44.780 | So listed here are some nurturing habits, like a lifestyle,

00:36:49.780 | where your natural preferences are satisfying and healthy.

00:36:54.140 | And examples of that are healthy eating,

00:36:56.360 | preparing your own food, right?

00:36:57.820 | You can derive a lot of satisfaction from that,

00:37:00.560 | and it happens to be good for you.

00:37:02.460 | Taking walks in nature,

00:37:03.900 | hosting a game night amongst your friends, right?

00:37:06.060 | These things cost very little,

00:37:08.100 | and they're super satisfying.

00:37:10.220 | Pursuing self-improvement.

00:37:12.460 | Stoics were big on journaling.

00:37:14.340 | We mentioned Marcus Aurelius kept a journal earlier.

00:37:17.780 | Meditation, not necessarily

00:37:20.980 | in the modern sense of meditation,

00:37:22.420 | but reflecting on the day's events in advance,

00:37:27.420 | as well as when I say reflecting.

00:37:30.100 | So looking at what you expect from the day ahead of you,

00:37:34.300 | and then reflecting on it at the end.

00:37:36.140 | These were common stoic practices.

00:37:38.540 | We'll end this slide with a quote.

00:37:40.060 | It is not death a person should fear,

00:37:42.340 | but never beginning to live, Marcus.

00:37:47.340 | And so we'll go to the next slide, dichotomy of control.

00:37:52.320 | Again, you'll hear about this throughout,

00:37:55.480 | determining what's in our control and what's not.

00:37:58.180 | We each, whether it's ourselves,

00:38:00.380 | or family, or friends, or coworkers,

00:38:02.760 | people are frustrated by all these things,

00:38:04.700 | but if they, or we, can separate,

00:38:07.740 | okay, here's a situation.

00:38:09.740 | What can we affect?

00:38:11.260 | What's in our control and what's not, right?

00:38:13.460 | It could be global politics.

00:38:14.820 | It could be something so much broader

00:38:18.920 | than ourselves and beyond us.

00:38:20.940 | If you're able to effectively separate

00:38:23.660 | what's not within your control,

00:38:25.640 | as Luke mentioned, market performance,

00:38:28.260 | we'll get more specific with examples like that.

00:38:30.660 | The concept is so foundational,

00:38:34.260 | and it's not exclusive to stoicism, obviously.

00:38:37.300 | The serenity prayer, which a lot of people know,

00:38:40.060 | grant us the serenity to accept the things we cannot change,

00:38:44.380 | courage to change the things we can,

00:38:47.020 | and wisdom to know the difference.

00:38:48.900 | The serenity prayer is directly rooted in Stoic philosophy.

00:38:52.940 | And again, stoicism is not about resigning yourself

00:38:58.200 | to just accepting the world around us.

00:39:00.040 | It's separating, okay, this frustrates me,

00:39:03.780 | or this brings me joy.

00:39:04.980 | What's within my control?

00:39:06.740 | So local politics, you can obviously vote,

00:39:09.420 | you can write letters, you can start a campaign,

00:39:13.100 | you can affect your community,

00:39:14.420 | you can affect your relationships.

00:39:16.100 | And to a large extent, you can affect your health.

00:39:19.340 | But stoicism reminds us that our health

00:39:21.980 | is not entirely in our control.

00:39:24.020 | So separate the two and take action where you can.

00:39:29.020 | And then you find comfort that you took action.

00:39:33.100 | And for those things that are out of your control,

00:39:35.700 | try to let them go.

00:39:36.900 | And stoicism will come easier and naturally

00:39:40.580 | to a lot of folks.

00:39:41.540 | Like some people have a natural affinity for it.

00:39:43.460 | Some people were practicing stoicism

00:39:45.620 | without knowing that term or that label

00:39:48.420 | for years or decades.

00:39:49.620 | Like you can go an entire lifetime

00:39:51.580 | living aligned with Stoic philosophy,

00:39:54.620 | just not knowing that label.

00:39:56.460 | And then there are other folks who will hear this and say,

00:39:59.540 | yeah, that sounds nice, but that's not really me,

00:40:02.260 | or that's not possible.

00:40:03.500 | So I would say, know that these tools are within you,

00:40:07.620 | are within your reach,

00:40:08.900 | but some people it'll come much more naturally to,

00:40:12.500 | and some people, if it interests them,

00:40:14.660 | will find it'll take a little more work,

00:40:16.860 | but they really are practical, effective tools.

00:40:20.820 | Another core, don't tie your contendedness to the outcome.

00:40:25.340 | So we take action.

00:40:27.380 | Lucas mentioned the Archer example.

00:40:29.100 | I'll reiterate it on the next slide, I think,

00:40:31.420 | just because it's so important,

00:40:33.900 | but know that you did everything within your control

00:40:37.500 | the best you could,

00:40:39.140 | and the outcome is not necessarily within your control.

00:40:43.100 | So we just accept the outcome.

00:40:44.900 | And you could apply that to portfolio construction.

00:40:48.940 | That's within your control.

00:40:51.780 | Withdrawal rate is within your control.

00:40:54.100 | Market performance, obviously, not within your control.

00:40:56.900 | So if you know that you aligned your goals,

00:41:01.100 | timeframe, risk tolerance with your portfolio construction,

00:41:04.020 | and you stayed the course when appropriate,

00:41:06.780 | if you find your asset allocation wasn't appropriate,

00:41:10.020 | that's within your control to change it.

00:41:12.460 | So those are practical applications

00:41:15.380 | of this core foundational concept.

00:41:19.060 | Another one, people think like,

00:41:22.540 | oh, so much of my finances aren't in my control,

00:41:25.060 | but to some extent, you can increase your savings rate.

00:41:29.060 | You can try to increase your income.

00:41:30.580 | A lot of people will say, oh, that's not within my control.

00:41:33.500 | You can often reduce your expenses.

00:41:36.940 | Fogelheads are completely adept at this.

00:41:40.260 | In terms of, I'll revisit the income for this last bullet.

00:41:44.220 | A lot of people think, oh, I'm paid what I'm paid,

00:41:47.500 | but you can negotiate a raise, obviously.

00:41:51.260 | You can work towards a promotion,

00:41:54.820 | and you can say that those things aren't in your control,

00:41:58.260 | and it's true, but you can influence them,

00:42:00.500 | and you can learn negotiating techniques.

00:42:02.220 | There's tons of YouTube videos or books or blogs,

00:42:06.580 | and a technique is at your mid-year review

00:42:09.700 | or end of year review, you meet with your manager,

00:42:11.700 | and you say, okay, X, Y, Z happened, and I expected this,

00:42:15.860 | and it may or may not have occurred,

00:42:18.580 | but can we agree on our approach for next year

00:42:22.100 | that if I accomplish X, Y, and Z and do it really well,

00:42:25.820 | that I'll be considered for a raise or promotion?

00:42:28.140 | So that's an example of something

00:42:30.140 | that is in your control applied to influence something

00:42:34.460 | that largely, like a promotion or a raise,

00:42:36.820 | can be seen conclusively is not within your control,

00:42:40.100 | but you can learn what tools are in your control to affect it.

00:42:45.380 | And with that, we'll go to the next slide,

00:42:49.940 | focusing on process and systems, not outcome.

00:42:53.620 | So we kind of touched on this,

00:42:55.540 | and Lucas mentioned the example of the archer.

00:42:59.420 | I'll reiterate it.

00:43:00.540 | So the choice of arrow is within your control.

00:43:04.420 | The quality of the arrow may or may not be,

00:43:07.100 | but you'll get the best arrow you can.

00:43:09.460 | The tension on the bow, the direction, your focus,

00:43:13.700 | when to let go, to send the arrow towards the target.

00:43:18.340 | A lot of these things are within your control,

00:43:20.660 | but stoicism teaches us that once you let go,

00:43:24.580 | that arrow and so many other examples

00:43:28.780 | that this applies to,

00:43:30.580 | that arrow is no longer in our control.

00:43:32.540 | So there could be wind, the arrow could be faulty,

00:43:35.940 | someone could move the target, any of these things can happen.

00:43:39.100 | So why is that important?

00:43:40.900 | We should not tie our self-esteem or self-worth,

00:43:45.140 | or in a lot of cases, portfolio performance,

00:43:48.740 | self-worth to our net worth, right?

00:43:51.620 | That for the things that are out of our control,

00:43:54.380 | realize that you did everything you could

00:43:57.260 | and what's out of your control doesn't define you, okay.

00:44:02.260 | So a practical application of that,

00:44:06.300 | and the following bullet, "Atomic Habits" by James Clear,

00:44:10.380 | highly, highly recommend if folks haven't read it already.

00:44:14.820 | It's an amazing, empowering book that helps you,

00:44:18.540 | whether it's going to the gym or pursuing a hobby,

00:44:23.540 | turning a hobby into a side hustle.

00:44:26.220 | So many things, they say,

00:44:28.940 | we overestimate what we wanna do in a short period of time,

00:44:33.820 | like a week or a month,

00:44:34.740 | but we really underestimate what we can do

00:44:37.260 | in a year or five years.

00:44:39.060 | And "Atomic Habits" lays out,

00:44:41.420 | as you improve your process and your systems

00:44:44.140 | and your efforts, that desired outcome

00:44:46.940 | that we keep saying isn't within our control,

00:44:49.140 | you improve the odds of that desired outcome

00:44:52.620 | coming to fruition just by improving your systems.

00:44:56.620 | Another important point,

00:44:57.740 | don't rely on willpower or motivation.

00:45:00.020 | A lot of people say,

00:45:01.340 | oh, I'll exercise tomorrow when I feel like it, right?

00:45:04.420 | We think our future self is gonna be more motivated

00:45:07.940 | or more agreeable to doing these things.

00:45:11.500 | It's just unreliable.

00:45:13.100 | But if you have the system, if you say,

00:45:15.340 | in the morning, I'm gonna do this,

00:45:17.300 | you're more likely to achieve these goals.

00:45:20.820 | And another important concept,

00:45:23.300 | and Marcus is big on this, he says,

00:45:25.980 | let doing the right thing be reward enough.

00:45:29.660 | So just know that you did the right thing

00:45:32.740 | and that should be sufficient.

00:45:34.060 | What does that mean?

00:45:34.900 | A lot of people do things for praise, appreciation,

00:45:37.820 | credit, public recognition,

00:45:40.020 | and then those things do or don't happen,

00:45:41.940 | or they happen to a lesser extent than we wanted.

00:45:44.580 | So stoicism empowers us by saying,

00:45:47.220 | those things are out of our control.

00:45:49.540 | Focus on what's important to you, meaningful to you,

00:45:54.020 | what you feel is the right thing to do.

00:45:56.420 | And if you do that, that is reward enough.

00:46:00.300 | So practical application,

00:46:02.540 | applying these things to your health, your finances,

00:46:05.140 | career, side hustle, et cetera.

00:46:07.860 | With that, we'll go to the next slide.

00:46:10.380 | And I will try to pick up the pace.

00:46:13.340 | So here we'll talk about premeditatio malorum,

00:46:19.620 | this is Latin for,

00:46:22.060 | it's basically premeditating on catastrophes

00:46:25.860 | or evils or troubles.

00:46:27.060 | So it's probably self-explanatory at this point,

00:46:30.540 | we spoke about a market downturn.

00:46:32.740 | So don't just imagine it as a remote possibility.

00:46:37.740 | As you adjust your lifestyle, your spending,

00:46:42.220 | your income, your savings, your withdrawal,

00:46:43.940 | your portfolio construction, think, okay,

00:46:46.860 | could I survive a 20% sustained downturn?

00:46:49.980 | What if the market tanked and remained down 20% or 30%

00:46:54.980 | or even 50% for X number of years,

00:46:58.300 | how would you handle that?

00:46:59.900 | So you could really play it out.

00:47:03.500 | You could do the numbers and you could say,

00:47:05.340 | okay, I parked this much cash or whatever,

00:47:08.820 | or you have dividend investments or other income sources

00:47:11.860 | so that you are equipped if and when

00:47:14.460 | that terrible thing happens,

00:47:16.700 | that you don't have to experience the level of anxiety

00:47:20.380 | that other people might or that you otherwise would have.

00:47:23.220 | Similarly, you can prepare for illness or adversity.

00:47:28.900 | This quote, sweat more in training,

00:47:31.060 | bleed less in war, self-explanatory.

00:47:33.260 | And Mike Tyson has a famous quote,

00:47:35.060 | "Everybody has a plan until they get punched in the face."

00:47:38.140 | The Stoics would say, plan to get punched in the face.

00:47:42.940 | And with that, we'll move to the next slide,

00:47:46.540 | slide five, or rather.

00:47:49.300 | - By the way, credit to Gorey for that,

00:47:52.380 | by the way, that's great.

00:47:53.620 | (laughing)

00:47:55.100 | - Thank you, I'm sure someone else would have said that.

00:47:58.340 | So framing, very important here.

00:48:00.460 | A lot of this is probably intuitive,

00:48:03.180 | just that using your ability to change your perspective

00:48:07.900 | to your advantage can be very powerful.

00:48:10.460 | So if you view obstacles as opportunities to improve,

00:48:15.460 | you can be strengthened by them.

00:48:18.100 | And you can also respond with virtue.

00:48:20.220 | And there are many examples of this.

00:48:22.340 | And I'm sure every person has some challenge

00:48:27.340 | they experienced in their life where they met that challenge

00:48:30.460 | and exited stronger.

00:48:32.180 | And a lot of people will say life was better

00:48:36.500 | on the other side of that challenge.

00:48:38.980 | Marcus talks about this in meditations

00:48:42.660 | that are reflexive reaction.

00:48:45.900 | You could feel overwhelmed or you could feel self-pity.

00:48:50.020 | Charlie Munger will say self-pity

00:48:52.540 | is one of the most useless emotions.

00:48:54.380 | But again, these are reflexive.

00:48:56.020 | So we can't expect ourselves to not experience them.

00:48:58.980 | But the tool to apply here is Marcus would say,

00:49:03.220 | who better than me to handle this, right?

00:49:06.100 | He was in a position of power and influence.

00:49:09.500 | And instead of dwelling in this feeling

00:49:13.100 | of being overwhelmed, he said, okay,

00:49:15.900 | what can I do to make this better?

00:49:17.660 | And who better than me to solve this?

00:49:20.660 | And we can each find things in our life to apply that to.

00:49:25.100 | In the FIRE community, there's a well-known phrase

00:49:27.660 | called one more year syndrome.

00:49:29.340 | A lot of people who make good incomes

00:49:32.820 | have significant savings.

00:49:34.220 | They've mapped out via spreadsheets

00:49:36.540 | and they think with a high probability

00:49:39.740 | they can retire early.

00:49:42.260 | But then they say, I'll work for one more year, just in case.

00:49:45.300 | I'll save up one more year of income

00:49:47.580 | for that additional buffer.

00:49:49.500 | And perhaps there's nothing wrong with them.

00:49:51.260 | Perhaps that's the right choice for them.

00:49:54.020 | But using framing, we could say,

00:49:57.660 | what's the worst that could happen if you stopped working?

00:50:01.980 | You could probably go back to work

00:50:03.620 | so that if you, and this is exhaustively studied,

00:50:07.140 | a lot of people say they wish they retired early.

00:50:10.100 | And there are many reasons for that.

00:50:12.100 | But a lot of people don't act on that.

00:50:15.180 | And they stay working.

00:50:17.460 | And then when they finally retire,

00:50:19.300 | they say, oh, I'm not physically able

00:50:21.780 | or I'm not whatever, it could be capacity

00:50:26.380 | or family or friends.

00:50:27.420 | They're not able to enjoy life

00:50:29.220 | to the extent they would have had they retired early.

00:50:33.340 | And you could apply that to many other things.

00:50:36.740 | I'll try to pick up the pace

00:50:38.220 | 'cause we still have a lot to cover.

00:50:40.060 | Feeling grateful for what you have.

00:50:41.540 | This is obviously not limited to stoicism.

00:50:43.820 | This is found in probably all of the world's philosophies.

00:50:48.620 | Realize that we take things for granted.

00:50:50.820 | That seems to be human nature.

00:50:52.340 | But if you zoom out from your own life

00:50:54.980 | and see how others would see you from far away

00:50:58.180 | or from way up above,

00:51:00.500 | we each have many things to feel appreciative of

00:51:04.780 | and grateful for.

00:51:06.380 | And more specifically, I feel this is factual,

00:51:08.460 | it sounds exaggerated,

00:51:09.540 | but several billion people around the planet

00:51:13.620 | would probably trade their life for yours.

00:51:16.780 | Your comforts, your conveniences,

00:51:18.620 | your access to healthcare or amenities.

00:51:21.620 | These are things we so take for granted

00:51:23.820 | we lose sight of it day to day.

00:51:25.220 | But other people would give a lot

00:51:29.300 | to have what we take for granted.

00:51:31.220 | And overlaying that to as recently as 100 years ago,

00:51:36.180 | some kings had less quality of life than we have today,

00:51:41.180 | be it running water or effective medicine.

00:51:47.140 | So these are things that even the most powerful,

00:51:49.900 | the wealthiest people in the world 100 years ago

00:51:53.100 | didn't have that we have.

00:51:56.580 | And then the last, I'll skip to the last bullet,

00:51:59.940 | imagine you died or were severely injured

00:52:02.260 | or had something taken away.

00:52:03.460 | It could be a family member, a loved one.

00:52:06.340 | Sam Harris talks about this.

00:52:07.820 | He says, they're around a dinner table and the family,

00:52:11.580 | everyone was on their phone,

00:52:12.780 | everyone was depressed and sullen.

00:52:15.060 | And he joined in that mindset.

00:52:17.420 | And then he kind of zoomed out and he said,

00:52:20.220 | you know, what if something,

00:52:21.340 | what if I died tonight, right?

00:52:22.860 | That could happen to any of us.

00:52:25.340 | He would give anything for this moment

00:52:27.380 | to be with his family, to have a quiet basic dinner.

00:52:30.500 | So with that framing, that's the tool here,

00:52:34.100 | he was able to re-engage and appreciate what he had.

00:52:38.020 | So with that, we'll move to behavioral finance.

00:52:43.820 | So hopefully people found philosophy of stoicism

00:52:47.860 | relatable, practical.

00:52:49.940 | There are tools that we can use throughout the day,

00:52:53.820 | any day throughout our lives.

00:52:56.180 | And the overlap with behavioral finance,

00:52:59.260 | hopefully people previewed this Wiki page.

00:53:04.100 | The link is here and it was in the invite.

00:53:06.940 | Listed on the screen are common pitfalls.

00:53:09.580 | On the next slide, we'll talk more about anchoring

00:53:12.740 | and loss aversion more specifically.

00:53:15.660 | But these behavioral pitfalls are so embedded in us

00:53:20.660 | and in our daily lives that we don't realize

00:53:23.780 | they're going on.

00:53:25.100 | And what behavioral finance teaches us is,

00:53:28.540 | these are unconscious biases a lot of times, right?

00:53:32.100 | If you ask the average person or even ourselves,

00:53:35.340 | are you being rational, factual, logical, objective?

00:53:40.060 | A lot of times we would say yes,

00:53:41.620 | many instances we would say no by intent.

00:53:45.300 | But a lot of times our decision-making,

00:53:47.740 | we think we're being rational, factual, logical.

00:53:52.380 | And it's just not the case.

00:53:53.940 | So behavioral finance has studied this

00:53:56.540 | and teaches us about these biases in more detail.

00:54:01.460 | So highly encourage people to get more familiar

00:54:04.460 | via the Wiki page.

00:54:05.540 | And there are many online resources about this.

00:54:08.660 | Just high level confirmation bias.

00:54:11.220 | Search engines are a huge example of this,

00:54:15.420 | that we are more likely to Google something

00:54:19.940 | the way we phrase it,

00:54:22.380 | the result will more likely confirm our existing beliefs.

00:54:26.700 | And we would often benefit

00:54:29.660 | by seeking out disconfirming evidence.

00:54:32.060 | So we need to be aware that sometimes,

00:54:36.380 | it's well-known now,

00:54:37.220 | especially in the political environment,

00:54:39.340 | a lot of us live in echo chambers.

00:54:40.900 | So it's important to realize

00:54:44.500 | that we are kind of hindering

00:54:48.220 | the broadening of our perspective

00:54:50.820 | with something as simple as a search engine.

00:54:54.620 | - Yeah.

00:54:55.460 | Well, on the confirmation bias,

00:54:57.660 | Gauri, I was just gonna point out,

00:55:00.940 | just think, imagine the tool,

00:55:03.620 | the Boglehead forum is, right?

00:55:06.260 | In terms of challenging your confirmation bias, right?

00:55:10.020 | Stating, hey, these are the advantages, disadvantages,

00:55:13.940 | and having debate, people having healthy challenges, right?

00:55:18.660 | So it's, I mean, just what a wonderful resource we have

00:55:22.860 | in modern day life to have somewhere

00:55:25.820 | where you can have the internet poke holes

00:55:30.060 | in a lot of these behavioral pitfalls, right?

00:55:34.580 | Is my logic clear?

00:55:37.620 | Am I reasoning properly, right?

00:55:39.580 | During market downturns, right?

00:55:40.860 | You see, there's actually more people

00:55:43.540 | visit the Boglehead forum during market downturns, right?

00:55:48.180 | Is that, basically, folks who use it as a tool

00:55:53.180 | to help mitigate some of these behavioral pitfalls

00:55:59.820 | that are known to plague humans

00:56:02.820 | and our behavior towards personal finance.

00:56:05.700 | - Excellent point.

00:56:08.100 | I'll mention two others on this slide

00:56:12.460 | before we go to the next slide.

00:56:14.180 | One, framing effect.

00:56:16.540 | I'll share a recent personal example,

00:56:18.460 | and this will be less finance,

00:56:19.940 | but the importance of framing.

00:56:21.540 | So my wife and I went on a retreat a few weekends ago

00:56:25.180 | to a few hours north of New York City, really scenic place.

00:56:29.300 | We were with a great group.

00:56:31.460 | It was actually on stoicism.

00:56:33.340 | And one of the attendees flew in from Denver

00:56:37.020 | and his flight got canceled.

00:56:39.380 | Fortunately, we exchanged info, contact info,

00:56:43.940 | before we parted and he ended up staying with us.

00:56:48.660 | His flight from Newark got completely canceled

00:56:52.300 | and they put him on a flight out of LaGuardia,

00:56:55.500 | which is closer to where we live within New York City.

00:57:00.500 | So he ended up staying with us

00:57:02.260 | and he had time in the morning to enjoy New York City.

00:57:06.300 | So we went to the Metropolitan Museum of Art

00:57:09.260 | and we just had a nice time spending time with him.

00:57:11.820 | We had a healthy meal together.

00:57:13.700 | And he wrote that he could easily have been so upset

00:57:18.700 | about the canceled flight

00:57:20.580 | and he could have been screaming

00:57:21.660 | just like so many other people in the airport,

00:57:23.860 | but he reframed it,

00:57:25.420 | that he got better memories from his flight being canceled

00:57:29.860 | than he would have otherwise.

00:57:31.860 | Okay, and the last one I'll talk about on this slide

00:57:35.300 | is recency bias.

00:57:36.380 | You see it in the third column, second from the bottom.

00:57:38.780 | A clear example of this is

00:57:40.900 | how we sometimes instinctively react to a market downturn

00:57:45.900 | or sometimes a bubble fueled by euphoria, right?

00:57:50.220 | Although we know the market's performance over decades

00:57:54.580 | that it keeps chugging along,

00:57:56.060 | despite World War I, World War II, recessions,

00:57:59.460 | depression, COVID, tech bubble, housing bubble,

00:58:03.740 | the market trends upwards.

00:58:05.500 | But recency bias, if the news like Lucas's slide,

00:58:10.700 | the media says sell, sell, sell,

00:58:13.220 | recency bias is so powerful,

00:58:15.740 | it can override our conscious decision-making

00:58:19.860 | because we believe this,

00:58:24.860 | recency bias is so powerful,

00:58:27.300 | the belief can override our logic.

00:58:29.860 | And the same is on an uptrend, right?

00:58:32.380 | We can believe in this euphoric bubble

00:58:35.540 | and often people enter just before the peak.

00:58:39.980 | So with that, again, we encourage folks to visit that,

00:58:43.020 | to start at least with this Wiki page.

00:58:46.420 | With that, we'll go to the next slide

00:58:48.260 | and we'll talk about Daniel Kahneman,

00:58:52.100 | huge contributor in behavioral finance.

00:58:54.100 | He won the Nobel in economics for his work,

00:58:59.460 | bridging psychology with behavioral finance.

00:59:03.020 | His contribution, one of the foundations of his work

00:59:08.780 | is framing our thinking through two systems,

00:59:12.820 | system one and system two.

00:59:14.340 | And this is well written about in his book,

00:59:17.740 | "Thinking, Fast and Slow."

00:59:19.980 | So it's thinking fast and slow.

00:59:22.340 | And system ones basically are reflexive,

00:59:25.580 | call it reptilian brain.

00:59:27.580 | And this is evolutionarily very important, right?

00:59:30.940 | On the savannas, we didn't have time to reason

00:59:34.540 | and think and analyze

00:59:35.740 | and reach the most logical decision, right?

00:59:37.860 | You're being chased by a tiger

00:59:39.980 | and you need to, a lot of tribal behavior

00:59:44.340 | ties to evolutionary psychology.

00:59:48.020 | And it makes sense why system one is so powerful.

00:59:51.500 | And system two complements system one.

00:59:54.140 | And that is, it requires more effort, more intense focus,

00:59:59.140 | and it operates methodically.

01:00:01.140 | So his work isn't about squashing one with the other.

01:00:05.420 | It's not like system two is in fact better, they coexist.

01:00:09.500 | We just need to separate and recognize

01:00:12.940 | which one is being active.

01:00:15.220 | And then from that, we can make better decisions.

01:00:18.260 | So if we go to the top two bolded questions,

01:00:21.300 | how often are we in control of our decisions?

01:00:23.980 | We would think most of the time or a lot of the time.

01:00:27.220 | And it's frequently, it depends how you define we,

01:00:30.460 | but there's so much going on unconsciously or around us.

01:00:33.900 | Externally, we can be manipulated.

01:00:35.980 | A lot of marketers take advantage of these biases

01:00:41.380 | and manipulate us and even people informed get manipulated.

01:00:45.980 | So the second question,

01:00:47.100 | how often are we rational when making decisions?

01:00:49.860 | Frequently not, even though we think we are.

01:00:53.180 | So jumping to the last two.

01:00:57.300 | So loss aversion, this is well-studied.

01:01:00.460 | Folks, and it's almost human nature

01:01:02.940 | to be more averse to losing than we are winning.

01:01:07.940 | And sometimes in this example,

01:01:11.100 | losing $100 hurts more than winning $150.

01:01:15.980 | And that's, you could argue irrational or illogical,

01:01:19.340 | but this is how powerful loss is to us.

01:01:23.500 | So that's the bias of loss aversion.

01:01:26.500 | And then anchoring has many examples in personal finance.

01:01:31.500 | And one is, in any negotiation,

01:01:36.140 | an opening price will become the anchor.

01:01:38.940 | And so you can think about it in terms of,

01:01:41.620 | we were speaking on a earlier Bogleheads call,

01:01:44.820 | a parent has an adult child getting married

01:01:48.780 | and they said, here's the price per person.

01:01:51.980 | And if the kid was using anchoring

01:01:56.980 | as a negotiation technique,

01:01:58.940 | they could start with a super high price,

01:02:00.700 | like 300 a person or 500 a person,

01:02:02.820 | whatever it is these days.

01:02:04.540 | And then the parent can react

01:02:06.500 | and then the kid can say the real price

01:02:08.780 | or a much lower price.

01:02:09.820 | Oh, how about 150?

01:02:12.620 | And then the person writing the check feels relieved.

01:02:16.940 | An example of this in the retail marketplace,

01:02:20.060 | let's say someone puts out a high-end designer shoe,

01:02:22.860 | markets it for $500, right?

01:02:25.420 | And no one buys it, but it's marketed for 500.

01:02:28.940 | And then suddenly the retailer marks it down to 200.

01:02:32.980 | All of a sudden people think, wow, it's on sale.

01:02:35.340 | Wow, it's such a discount.

01:02:36.940 | And they buy it.

01:02:37.780 | Even though they may not have bought it at 200 originally,

01:02:41.340 | they suddenly buy it because of anchoring bias.

01:02:44.580 | Another example of this,

01:02:46.340 | you can have a contractor give a quote

01:02:48.780 | and that first quote will affect

01:02:53.380 | how you frame that project or the cost

01:02:55.580 | or how agreeable you are to it.

01:02:57.220 | So hopefully, oh, and a stock purchase price.

01:03:01.020 | I'll close with that example for anchoring.

01:03:03.180 | A lot of people won't sell a stock

01:03:06.060 | until they say it recovers,

01:03:08.340 | but the universe doesn't care about your purchase price

01:03:11.140 | and the stock may never recover.

01:03:13.820 | So we are anchored to this purchase price

01:03:16.140 | because we think we may be entitled to recoup our losses.

01:03:20.260 | And it's just, I wanna say it's just not the case,

01:03:24.060 | but I can't say what you're entitled to or not,

01:03:25.940 | but it's basically an effect of anchoring.

01:03:30.940 | So we should close to leave enough time for Q&A.

01:03:35.780 | I do wanna mention a book called "Scout Mindset"

01:03:40.780 | by Julia Galliff.

01:03:42.180 | She has a TED Talk on YouTube also

01:03:44.540 | where she uses a phrase motivated reasoning.

01:03:47.580 | And that explains evolutionarily why we hinge

01:03:51.900 | to these beliefs that are influenced by desires and fears

01:03:56.900 | and why we let those things

01:04:00.660 | cause us to misinterpret information.

01:04:05.740 | And sometimes it's because we want to win, right?

01:04:08.700 | Winning is more important or in tribal behavior

01:04:11.260 | or our evolutionary ancestors needed to exude confidence.

01:04:16.260 | And so sometimes we're less likely to admit we're wrong.

01:04:22.460 | And so I would say in closing,

01:04:27.380 | just in terms of practical tools,

01:04:30.260 | what can we do to improve on all these biases

01:04:34.220 | and our unconscious tendencies?

01:04:36.740 | And one approach is distancing yourself

01:04:40.660 | from the feeling of shame of being wrong, right?

01:04:43.580 | Like we sometimes make investments

01:04:46.140 | and we're committed to them

01:04:47.540 | and stay the course has a lot of value to it

01:04:50.180 | if the portfolio is well-structured

01:04:52.300 | and the investment choices are good.

01:04:54.260 | But a lot of times we make bad investments

01:04:57.780 | and we cling to them because of the shame of being wrong

01:05:00.820 | or that applies to a lot of things in life.

01:05:02.860 | But if you distance yourself from that and you zoom out

01:05:06.060 | and you kind of apply objectivity,

01:05:08.540 | you can work towards a more rational decision.

01:05:11.780 | And you can take pride in being someone

01:05:14.060 | who is comfortable changing their minds.

01:05:15.820 | A lot of leaders or a lot of people publicly think

01:05:20.020 | it's a weakness to change your mind.

01:05:21.580 | But if you get new information, new material information,

01:05:24.500 | it makes sense to change your mind.

01:05:26.380 | Another tool is seeking out blind spots, right?

01:05:29.940 | I mentioned disconfirming evidence earlier.

01:05:32.020 | Fine, try to figure out what you're missing.

01:05:35.740 | We spoke about portfolio construction.

01:05:38.780 | Once you have a good alignment in terms of your goals,

01:05:42.580 | timeframe, risk tolerance, asset allocation,

01:05:44.820 | diversification, right?

01:05:46.020 | Fundamental for the bogleheads,

01:05:47.900 | you need not check your portfolio constantly.

01:05:51.740 | And that will protect you from these unconscious biases,

01:05:56.220 | right?

01:05:57.060 | We're human, we are subject to fear and greed

01:05:59.780 | and our willpower is often weaker

01:06:03.220 | than our ability to reason and be logical.

01:06:06.100 | So by not checking your portfolio often,

01:06:09.220 | and bogleheads know this.

01:06:10.220 | So I say this in part for our friends and family

01:06:13.300 | and coworkers and the broader community

01:06:15.900 | that comes to bogleheads for guidance.

01:06:18.180 | It's sort of like not trusting your willpower around snacks.

01:06:23.180 | So they say the war with healthy foods

01:06:28.020 | is won or lost at the supermarket.

01:06:29.820 | So you think, oh, I'll get these cookies or chips

01:06:32.100 | and I'll have the willpower to not eat them.

01:06:33.540 | But once they're in the house, your willpower is weak

01:06:36.300 | and you're very likely to eat them.

01:06:39.340 | So how does that apply to a portfolio?

01:06:40.900 | By checking it constantly,

01:06:42.500 | you're subjecting yourself to testing your willpower.

01:06:45.060 | By saying, I don't need to check it,

01:06:46.460 | I'm gonna stay the course,

01:06:47.780 | you're more likely to not make impulsive changes.

01:06:52.740 | With that, we can go to the next slide for closing quotes.

01:06:59.860 | "You have power over your mind, not outside events.

01:07:03.420 | Realize this and you will find strength."

01:07:05.940 | So hopefully folks can tie Marcus's wisdom there

01:07:11.220 | to many things in life.

01:07:13.740 | Jack Bogle in "Enough" spoke about the importance

01:07:16.420 | of character, which is mentioned,

01:07:19.180 | is fundamental to stoicism,

01:07:20.660 | fundamental to how we can define ourselves.

01:07:23.780 | So he says, "In life, we too often allow the illusory

01:07:28.220 | to triumph over the real.

01:07:29.820 | We focus too much on things

01:07:31.340 | and not enough on the intangibles

01:07:33.380 | that make things worthwhile.

01:07:35.500 | Too much on success, a word I never liked,

01:07:38.580 | and not enough on character

01:07:40.580 | without which success is meaningless."

01:07:43.340 | So completely aligned with the philosophy of stoicism.

01:07:48.140 | And the last quote,

01:07:49.380 | this, I believe Miriam found,

01:07:54.580 | and Jack was a participant on the forum

01:07:57.940 | and he posted to the Bogleheads.

01:08:00.940 | And he wrote, "Good morning, my friends.

01:08:03.180 | A lot will happen in the coming 12 months.

01:08:05.620 | It's a perilous world out there.

01:08:07.500 | So get your asset allocation right for you

01:08:10.700 | and then just stay the course.

01:08:12.580 | Best always, Jack."

01:08:14.620 | With that, we'll go to additional resources.

01:08:18.500 | Folks will have this via the PDF,

01:08:22.020 | various books written by people we've spoken about.

01:08:25.020 | Dan Ariely, another leader in the space,

01:08:27.220 | "Predictably Irrational."

01:08:29.100 | Richard Thaler, if folks are interested, co-wrote "Nudge."

01:08:33.100 | There's so much there.

01:08:35.180 | There's just too much.

01:08:38.580 | Opting in and opting out for 401(k) plans is now normal.

01:08:43.420 | And this is something that "Nudge" talks about,

01:08:46.060 | that people have inertia

01:08:47.900 | and they're less likely to enroll in a 401(k) plan

01:08:51.660 | if they see all these choices.

01:08:53.020 | So Congress passed the Pension Protection Act,

01:08:55.580 | I think it was 1996,

01:08:57.620 | and folks can be automatically opted in

01:09:01.500 | to their 401(k) plan as a result.

01:09:03.820 | Another example of that is organ donation.

01:09:06.860 | So I think Dan Ariely writes about this,

01:09:09.780 | that some of the, say, Sweden, Denmark type,

01:09:14.780 | that area of countries have different opt in and opt out

01:09:20.260 | for organ donations.

01:09:21.540 | And so the organ donor participation rate

01:09:26.540 | is so dramatically different

01:09:28.780 | just because of the opt in, opt out,

01:09:30.780 | because people experience inertia.

01:09:33.380 | And if you opt them into organ donation, it's shocking.

01:09:36.420 | Many people will agree to donate their organs.

01:09:39.020 | Okay, "Winner's Curse," another one by Thaler.

01:09:42.780 | And then in terms of stoicism,

01:09:45.900 | we spoke about Marcus as an original source.

01:09:48.700 | Bill Irvine, "A Guide to the Good Life,"

01:09:50.580 | is a great portal, a starting point to stoicism.

01:09:54.140 | Very digestible, very practical.

01:09:56.060 | He's a modern day academic.

01:09:58.500 | He lives and teaches in Ohio.

01:10:01.140 | There are other modern day academics.

01:10:04.740 | Massimo Pellucci, who's listed here,

01:10:08.500 | has very accessible free blogs.

01:10:10.500 | He has free eBooks.

01:10:12.380 | He has dozens of YouTube videos,

01:10:14.500 | incredibly articulate and practical.

01:10:18.180 | So with that, we'll open it up for Q&A.

01:10:23.180 | - Thank you.

01:10:25.980 | Thank you, Gorey.

01:10:26.820 | Thank you, Lucas.

01:10:28.300 | That was very interesting.

01:10:30.500 | I enjoyed it very much.

01:10:32.340 | I'm sure Mr. Vogel would have enjoyed it also.

01:10:35.980 | Thank you for the quotes, Gorey and Mr. Vogel.

01:10:38.860 | - Sure.

01:10:40.860 | - Do we have any questions?

01:10:42.860 | Are there any questions in the chat?

01:10:45.820 | Anybody like to start out with questions,

01:10:47.700 | raising your hand?

01:10:48.860 | We do have one chat question.

01:10:52.660 | - Okay.

01:10:54.060 | - It's from Yuli G.

01:10:56.220 | "Why do we say that action or inaction

01:10:58.260 | "is out of our control?

01:10:59.460 | "I believe that was posted during your Archer example."

01:11:02.580 | - Okay.

01:11:08.420 | I can comment, but Luke, did you wanna take it?

01:11:10.820 | - Yeah, yeah, sure.

01:11:14.420 | So yeah, so the question,

01:11:15.940 | why do we say action or inaction, right?

01:11:18.780 | So kind of, this is,

01:11:20.940 | why is this considered out of our control?

01:11:23.780 | So without getting too philosophical,

01:11:27.940 | the Stoics, they, I mean, they're pretty big

01:11:32.060 | on the part that you control in your mind.

01:11:35.460 | And really, once things,

01:11:39.580 | once like outside of your mind,

01:11:42.380 | you don't necessarily control it, right?

01:11:45.460 | So they actually, the way they describe it

01:11:47.980 | is there's actually something else in between here,

01:11:50.900 | which this is just a model, right?

01:11:52.860 | Some models are useful,

01:11:54.540 | but it's not always 100% accurate.

01:11:56.220 | But there's actually, it would be an impulse,

01:12:00.660 | a mental impulse to action, right?

01:12:03.900 | That you control, which would then lead to that,

01:12:06.900 | that your body, which would take the action.

01:12:09.780 | But you aren't necessarily in control of your body.

01:12:13.540 | Example would be,

01:12:15.140 | let's say you go throw at a baseball, right?

01:12:17.860 | Maybe 99 times out of a hundred,

01:12:20.260 | you know, that your arm's gonna function

01:12:22.860 | exactly as you want it to.

01:12:24.980 | But, you know, maybe that one time,

01:12:27.100 | you know, something happens

01:12:28.140 | and your arm just isn't functioning the way it does, right?

01:12:31.420 | Or, you know, even like a major league pitcher is,

01:12:36.260 | you know, they try to control their action

01:12:38.740 | as best they can, right?

01:12:40.300 | To, you know, make sure that they're

01:12:42.340 | throwing the best pitch possible.

01:12:44.580 | But even then, even the most trained athletes

01:12:47.340 | in the world lose control.

01:12:50.500 | So that's kind of the idea

01:12:52.780 | that you're in control of the impulse to action,

01:12:55.860 | not necessarily the action.

01:12:58.700 | And definitely not in control of the outcome of the action.

01:13:02.940 | That answers that question.

01:13:06.060 | - Lucas, would you say then

01:13:09.460 | that when the archer releases the arrow,

01:13:12.500 | this action or inaction there

01:13:16.340 | would start as soon as the arrow is released

01:13:19.220 | and then the outcome is the target?

01:13:21.180 | - Well, I mean, going off of our example,

01:13:25.140 | it actually would probably,

01:13:26.540 | the part that he controls would probably stop at his mind.

01:13:30.700 | Even though, I mean, it is,

01:13:35.100 | it's kind of a,

01:13:37.260 | and I know philosophers debate about this, right?

01:13:39.900 | Like where exactly do you draw the line

01:13:41.700 | of what you control and what you don't control, right?

01:13:44.820 | And it's, but yeah, that's my understanding.

01:13:49.820 | By the way, I'm absolutely 100%

01:13:52.860 | not a professional philosopher.

01:13:55.260 | This is just to the best of my knowledge.

01:13:58.260 | And I'm sure there's a grad student somewhere

01:14:00.660 | that may watch this video that is rolling their eyes

01:14:04.540 | at some of these responses.

01:14:05.820 | But that's my understanding is the things that we control,

01:14:10.820 | it starts and stops within the mind.

01:14:16.900 | And that's kind of a core tenant of Stoic philosophy.

01:14:21.900 | - Well, if we have any grad students rolling their eyes,

01:14:29.300 | you can raise your hand or speak up.

01:14:33.460 | - Yeah.

01:14:35.180 | - What about when it says do not, on this slide,

01:14:38.500 | I think what the question might have meant was

01:14:41.300 | action or inaction with our portfolio.

01:14:44.940 | In other words, we can do nothing, we can stay the course

01:14:48.340 | when the markets around us are in turmoil,

01:14:51.900 | but that is really an action that we take.

01:14:55.300 | It's not something that is out of our control.

01:14:59.460 | We can, for example, move some of our money

01:15:03.700 | if we're going to retire in the next year or two,

01:15:06.420 | we might wanna preserve some of our 401k that is in stocks,

01:15:11.420 | preserve it in a stable value fund or something,

01:15:15.420 | just to make sure that when we retire in a year or two,

01:15:19.180 | it doesn't tank really bad for us.

01:15:22.940 | That is an action that we take based upon external events,

01:15:28.940 | but it's our reading of them.

01:15:30.780 | And also it's being practical.

01:15:33.420 | And I think Mr. Bogle would agree that changing the course

01:15:36.860 | for practical, personal reasons

01:15:39.100 | based upon your life situation is appropriate,

01:15:43.260 | but not to react to the markets and say,

01:15:49.180 | the market's tanking, therefore I'm gonna sell.

01:15:51.460 | That would not be what he would advocate.

01:15:55.140 | So would you say in that case, you're not really,

01:15:58.340 | maybe that needs to be moved into the-

01:16:01.860 | - Well, so maybe the way to think about it

01:16:04.100 | is like a cause and effect relationship, right?

01:16:06.860 | So your cause is really impacting the effect, right?

01:16:11.340 | So the effect of it would be the action.

01:16:15.180 | And maybe it's kind of,

01:16:17.020 | this is kind of what philosophers end up talking

01:16:19.460 | about definitions of words all the time, right?

01:16:22.380 | So it may end up being exactly,

01:16:24.380 | how are we gonna define action versus the impression

01:16:27.900 | and at what point in between?

01:16:30.300 | But I think the baseline underlying idea, right,

01:16:34.020 | is the causes, the cause that you are,

01:16:39.020 | that have effects in the world outside of us

01:16:43.540 | all come from initially from the mind

01:16:46.500 | and then the impulse to action,

01:16:50.060 | which then the effect of which is action.

01:16:53.060 | I mean, it's kind of a,

01:16:56.220 | I'm trying not to give too philosophical of an answer,

01:16:59.100 | but that's, I don't know,

01:17:00.620 | I don't know if, Gauri, if you have a better answer,

01:17:02.180 | but that's about as best as the one

01:17:04.340 | that I can give right now.

01:17:05.780 | - Yeah, I think that's reasonable.

01:17:07.140 | And I'd reiterate what Miriam said

01:17:10.300 | in terms of how Jack would answer this.

01:17:12.860 | I think that quote that we read of Jack's,

01:17:15.020 | he inserts that to make sure the portfolio is right for you.

01:17:20.020 | If you go to that quote, Lucas,

01:17:23.580 | it was the ending closing quotes.

01:17:28.580 | And I think that's what Miriam was commenting towards.

01:17:31.580 | I think that's what Miriam was commenting towards.

01:17:33.900 | And I think that's what Miriam was commenting towards.

01:17:36.900 | And I think that's what Miriam was commenting towards.

01:17:39.420 | And I think that's what Miriam was commenting towards.

01:17:41.780 | Yeah, this one, so he says,

01:17:43.740 | so get your asset allocation right, pause, for you.

01:17:48.300 | So I think that's what Miriam was commenting towards,

01:17:50.780 | that as long as the allocation is right for you,

01:17:55.580 | and for you means at this particular phase of life,

01:17:57.740 | you want to be more conservative.

01:17:59.140 | But if you have other income sources

01:18:00.780 | and you're not relying on your portfolio,

01:18:03.100 | maybe you don't necessarily want it to be more conservative.

01:18:06.140 | So there's no single answer here.

01:18:08.660 | So it's for you, it's very, that specific piece,

01:18:12.380 | and then stay the course.

01:18:14.180 | But to Miriam's point, if it's not appropriate for you,

01:18:18.660 | let's say your circumstances change.

01:18:20.500 | Let's say there's a medical event

01:18:22.100 | or a family friend in need,

01:18:24.140 | or it could be any of dozens of things

01:18:26.900 | for you is a material change,

01:18:29.500 | then it would warrant the change.

01:18:31.620 | That's how I read it.

01:18:33.060 | Any other questions in the chat or live questions?

01:18:38.860 | Anyone want to raise their hand?

01:18:40.740 | Since we have about six minutes in the allocated time.

01:18:44.940 | In the absence of questions, I, and if it's okay, yep.

01:18:50.820 | - We have one, someone said, is asking,

01:18:56.540 | is there truly a reliable, stable fund?

01:18:59.460 | And then of course I fire it back

01:19:00.620 | with the link to the Wiki article,

01:19:02.060 | but was there anything more involved

01:19:05.020 | with the word stable value in terms of finance?

01:19:08.420 | Actually, a stable value fund is our insurance contracts,

01:19:11.860 | but maybe there was something implied there.

01:19:14.980 | - I was the one that used that example.

01:19:17.620 | In my 401k, there was a stable value fund

01:19:21.060 | and a stable value fund is like Lady Geek says,

01:19:24.900 | it's offered by insurance companies,

01:19:26.780 | but it's in part of a 401k or a 547B plan.

01:19:31.780 | My understanding is they're not offered

01:19:38.100 | outside of workplace employer plans.

01:19:41.620 | And what it is, it's kind of like a money market.

01:19:44.060 | No, it's not a money market.

01:19:45.100 | It's not a short-term paper fund.

01:19:47.140 | It is more like a CD, shall we?

01:19:50.340 | My stable value fund was actually offered by Voya

01:19:55.340 | through T. Rowe Price.

01:19:58.140 | And they would guarantee a certain percent.

01:20:02.220 | You would earn a certain percent and it was a lot.

01:20:04.980 | It was like 4% for a year or a year and a half.

01:20:09.340 | At that point, it would be,

01:20:10.500 | they would tell you when it was up

01:20:12.140 | and then they would renegotiate.

01:20:14.500 | And you could guarantee for that period of time,

01:20:16.980 | that's what it was.

01:20:18.500 | So in that sense, the stable value fund was stable,

01:20:22.460 | but it was within the workplace.

01:20:25.020 | It's not with outside in a 401k or something.

01:20:27.860 | You can't buy them on the open market is my understanding.

01:20:30.780 | And Jim, do you have a question?

01:20:35.420 | - They have an area in their life that maybe they got.

01:20:42.140 | - We can't hear you, we can't understand you.

01:20:46.180 | - Oh, I'm sorry.

01:20:47.020 | I'm on a weird remote connection.

01:20:49.420 | So I'm gonna just sit down, sorry.

01:20:51.980 | Can you hear me now?

01:20:56.060 | - Yeah, yep, yeah.

01:20:57.260 | - Oh, I'm sorry.

01:20:59.540 | Okay, so my question to both presenters is,

01:21:01.420 | is there an area in your life

01:21:02.980 | that which you use stoicism to get control of

01:21:06.500 | or to get it on the stoicism line?

01:21:11.460 | And then what things do you feel

01:21:13.700 | that you might be slipping away from that?

01:21:16.980 | Whether the trigger items or what gives you that sense

01:21:20.740 | that you're falling off the wagon for stoicism?

01:21:24.500 | - Lucas, do you wanna start?

01:21:30.140 | - Yeah, so I mean, there's two questions there.

01:21:32.820 | The first was kind of, I guess,

01:21:36.180 | I think it was kind of how did you kind of get into it?

01:21:39.780 | Was that, that was kind of the first question, right?

01:21:42.900 | - Or something that you really thought

01:21:45.220 | you had a control over by using stoicism.

01:21:49.380 | But now you felt at times you slip away

01:21:52.740 | and what's telling you that?

01:21:54.980 | - Well, when I kind of first started paying more attention

01:22:02.620 | to my personal finances,

01:22:05.180 | I'm gonna back up.

01:22:11.340 | One idea within stoicism,

01:22:12.900 | you don't control other people, right?

01:22:15.500 | You can offer suggestions,

01:22:16.780 | but you don't control other people.

01:22:18.940 | When I first started focusing a little bit more

01:22:22.700 | on personal finance,

01:22:24.020 | I had to learn that I do not control my spouse's spending.

01:22:28.660 | And that was something that, right?

01:22:32.780 | In terms of budgeting and that sort of thing, right?

01:22:38.140 | That you don't completely control the other person, right?

01:22:41.500 | And so that was something that it was,

01:22:45.900 | a bit of a learning from my end.

01:22:49.620 | - Cool, I'll answer kind of more broadly.

01:22:57.020 | I think it's so practical daily,

01:23:01.620 | like you can meet most any challenge with it.

01:23:04.580 | Like, let's say I drop something

01:23:08.620 | and it spills all over the floor.

01:23:11.020 | I think, man, it's very upsetting.

01:23:14.580 | And then I just, before reacting,

01:23:17.340 | like before losing one's temper or whatever,

01:23:22.300 | I'll just like zoom out and say,

01:23:23.860 | all right, it's actually no big deal.

01:23:25.420 | I could clean that up pretty easily.

01:23:27.260 | And then you do.

01:23:28.100 | And that might be a really simple example,

01:23:30.100 | but you could expand on that to almost many unwanted things

01:23:35.100 | in life and just zoom out and reframe

01:23:40.580 | and then realize this has a solution.

01:23:42.900 | This has a practical approach and I can take action for it.

01:23:46.580 | And then it's like instantly empowering.

01:23:49.020 | I'll respond to what the other thing you asked

01:23:52.060 | about veering from it to the credit of Stoic philosophers.

01:23:58.580 | Seneca referred to himself as a patient in the hospital

01:24:03.500 | amongst other patients.

01:24:04.700 | So he was writing to his friend

01:24:06.380 | and he wasn't claiming to have

01:24:08.860 | like some superior enlightenment.

01:24:10.900 | He was just saying, these are things that work,

01:24:13.660 | that helped me, that may help you.

01:24:15.660 | And so Stoicism was big on pulling the best ideas

01:24:20.660 | wherever they existed.

01:24:22.980 | It was not confined to these certain beliefs

01:24:28.500 | and in fact, I think Seneca said,

01:24:31.860 | he doesn't mind being a spy in the enemy's camp

01:24:36.860 | as long as they're doing something better

01:24:39.940 | that he can learn from, he's happy to take that knowledge.

01:24:44.180 | And so when you said veering from it,

01:24:46.660 | there are many instances where you really have to reach,

01:24:50.820 | like it's not immediate, but if you find something better

01:24:55.020 | and Marcus says this too,

01:24:56.220 | if you find something better than courage, justice,

01:25:00.260 | temperance, and wisdom, then go for it.

01:25:02.860 | But in his lifetime and his practicing

01:25:06.220 | of running the empire for 20 years,

01:25:09.020 | he did not find anything better

01:25:10.740 | than the combination of those four.

01:25:13.020 | So I see we're at 9.30.

01:25:14.940 | If folks wanna stay on, I think in a minute or two,

01:25:21.460 | I could highlight some takeaways

01:25:23.180 | from this Scout Mindset book 'cause it's so relevant.

01:25:26.900 | We didn't include it as an additional resource

01:25:29.500 | 'cause it's not behavioral finance, but.

01:25:32.140 | - I have another behavior finance question.

01:25:34.740 | - Oh, sure.

01:25:36.340 | - And it has to do with the losing of $100.

01:25:41.340 | We hate more than making $150.

01:25:48.500 | I've read that before and that relates

01:25:51.820 | to the stoic view of what, I can't remember what.

01:25:56.820 | And actually it occurred to me when you posted that slide,

01:26:00.980 | there might be an evolutionary reason for it.

01:26:03.700 | In other words, when you had the savanna,

01:26:08.700 | running from the tiger in the savanna,

01:26:11.740 | that if you, sometimes losing something has greater risk.

01:26:19.260 | You're more at risk when you lose something

01:26:21.860 | than making something.

01:26:23.620 | That as long as you make something, you're okay.

01:26:26.180 | But losing something, you can lose your life.

01:26:29.340 | - Sure, and there's also a sentimentality.

01:26:31.500 | There's an emotional attachment to things.

01:26:33.980 | They've done this experiment with what people will pay

01:26:37.060 | for concert tickets or show tickets.

01:26:39.660 | And once they own that ticket, they experiment by saying,

01:26:43.780 | if we offered you X percent more

01:26:46.740 | or X dollars more than what you paid,

01:26:49.180 | people will hold onto that ticket,

01:26:52.140 | even though they were only willing to pay

01:26:55.180 | up to a certain amount for it.

01:26:56.660 | Logically, you think they would sell it for a higher price,

01:27:00.140 | but not necessarily 'cause there's an emotional bias.

01:27:03.980 | And I think that was included more so for behavioral finance

01:27:07.540 | and less so than a stoic concept,

01:27:10.460 | but included there as an overlap into behavioral finance.

01:27:14.380 | - And I see that, Jim, you have your hand up.

01:27:19.380 | Did you have another question?

01:27:22.420 | - Jim, did you wanna, did you want to lower your hand?

01:27:30.780 | - You're on mute, we're just talking.

01:27:32.860 | - Nope, okay, lowered his hand.

01:27:35.140 | - Okay, so I don't know if folks are staying on,

01:27:39.460 | but I think there's so much value in that.

01:27:42.900 | I think there's so much value in this scout mindset

01:27:47.900 | that I'll just quickly cover some of her points

01:27:51.260 | because part of the theme of this presentation

01:27:54.980 | is that we are often not rational,

01:27:57.180 | but it's within our power to find tools

01:28:00.580 | and use those tools and strengthen our ability

01:28:03.140 | to be rational, logical,

01:28:05.460 | and less influenced by unconscious biases.

01:28:08.540 | So she says, how do we get there?

01:28:11.380 | And her paradigm is scout versus soldier.

01:28:15.220 | Soldiers are performing a certain function.

01:28:17.620 | Scouts go out and try to get the lay of the land

01:28:21.100 | aligned with reality, an objective reality.

01:28:23.780 | That's part of how she defines a scout's purpose.

01:28:27.380 | And she says, what traits are in people

01:28:30.740 | who are more likely to be good scouts?

01:28:34.180 | So what traits are more likely?

01:28:35.620 | And she found curiosity is a commonality.

01:28:39.020 | Feeling pleasure from learning new information.

01:28:42.260 | So that can help you identify objective reality.

01:28:45.900 | Itching to solve a puzzle

01:28:47.500 | versus just accepting things how they are.

01:28:50.060 | Being intrigued when you encounter something

01:28:54.380 | that contradicts your expectations

01:28:56.860 | or your assumptions or your conclusions.

01:28:59.660 | And all of these things might sound,

01:29:01.180 | oh, intuitive or easy or yeah, who wouldn't do that?

01:29:04.180 | But realistically, day-to-day and year-to-year

01:29:07.700 | and entire lifetimes,

01:29:09.340 | we are often ingrained in our ways and our habits

01:29:12.500 | that we don't realize we're not being logical,

01:29:16.460 | rational, practical, as we've said.

01:29:18.380 | So she said, they feel virtuous testing their own beliefs.

01:29:23.380 | And this was fundamental to Stoics.

01:29:25.500 | When I say Marcus said, if you find anything better

01:29:29.500 | than courage, justice, temperance, and wisdom,

01:29:31.860 | he adamantly meant test your assumptions,

01:29:36.460 | test your conclusions.

01:29:38.660 | And if your assumptions were wrong,

01:29:42.300 | your hypothesis had holes in it, strengthen it.

01:29:45.860 | So not being married to early conclusions.

01:29:50.660 | We spoke about being less likely to consider someone weak

01:29:57.460 | if they change their mind.

01:30:00.180 | Like in politics, we saw this phrase waffling

01:30:02.580 | and it was framed negatively.

01:30:06.060 | But as you find new information,

01:30:09.260 | it's actually a strength to sometimes evolve

01:30:14.100 | with that new information.

01:30:15.820 | So those were some traits

01:30:18.380 | for what she found to be a scout mindset.

01:30:22.380 | - Thanks for sharing, Gary.

01:30:27.780 | - Thank you, thank you.

01:30:29.020 | Do we have any other questions?

01:30:32.500 | - No.

01:30:33.340 | - Nothing in the chat.

01:30:40.780 | One thing, Liguri.

01:30:43.500 | - Yep.

01:30:44.340 | - The Finance Buff, also known as, his name is Harry Sitt.

01:30:49.980 | He often gets, he's a Boglehead

01:30:51.860 | who writes on the Boglehead Forum.

01:30:53.700 | He has his own blog, thefinancebuff.com.

01:30:57.820 | No, dot, yeah, dot com, I think.

01:31:00.660 | He had a wonderful article years ago

01:31:03.580 | and he called it "Safety in the Mainstream."

01:31:08.580 | And basically, it relates to the stoic values

01:31:12.580 | that you were talking about,

01:31:15.780 | or the value of that you do the best you can

01:31:19.620 | with what you can control.

01:31:21.660 | And what you cannot control,

01:31:23.740 | you don't lose your sleep over, you don't stress over it.

01:31:27.620 | You do the best you can.

01:31:29.500 | And he related that to index funds,

01:31:33.700 | investing in index funds.

01:31:35.620 | So that is why he invests in index funds.

01:31:39.540 | He said, "Because I do the best I can,

01:31:43.460 | "I create my portfolio with index funds,

01:31:46.420 | "knowing that at least I will receive market returns.

01:31:51.420 | "That if the market tanks, if the market goes down,

01:31:54.900 | "if there's a recession, if there is just a bear market,

01:31:59.300 | "my index funds are going to go down,

01:32:01.980 | "my stock funds are gonna go down.

01:32:04.020 | "But I did not cause that.

01:32:06.900 | "The market caused that.

01:32:09.180 | "I invested in index funds

01:32:12.260 | "and I know that they will go up and down,

01:32:15.060 | "but I don't have to worry.

01:32:16.420 | "I am safe from my own emotions of kicking myself

01:32:21.180 | "that I invested in a stupid stock.

01:32:24.100 | "I did not invest in a stupid stock.

01:32:26.500 | "I put my money in the index fund

01:32:30.060 | "that invests in 3000 stocks

01:32:33.660 | "and it is doing what I expected it to do.

01:32:37.220 | "It is following the market.

01:32:39.420 | "And so I'm happy, I'm safe.

01:32:44.420 | "I was safe in what I did in my own mind."

01:32:47.860 | - Yeah, excellent example, super practical.

01:32:52.020 | And again, sometimes it takes convincing ourselves

01:32:57.020 | like it's an exercise, right?

01:32:58.700 | If your portfolio goes down,

01:33:00.140 | it's really hard to feel isolated from that experience,

01:33:05.140 | but you can do exactly what Miriam just said.

01:33:10.860 | Think about the decision you made, how you made it,

01:33:15.300 | that you made the best decision at the time

01:33:17.500 | with what was available to you.

01:33:19.380 | And you can find consolation in that.

01:33:21.140 | You can find comfort and peace of mind.

01:33:23.700 | The thing is, I think so many Bogleheads know this,

01:33:27.460 | that it's interesting,

01:33:29.020 | folks who might benefit the most from this message

01:33:35.260 | are not hearing it as easily

01:33:39.180 | 'cause there's so much noise in the world and the media

01:33:42.620 | that this practical approach gets drowned out.

01:33:45.860 | But yeah, I'll reiterate another thing

01:33:51.020 | that overlaps that a lot of these things

01:33:53.660 | are so much easier to say,

01:33:56.540 | but they are in fact within our reach.

01:33:59.220 | They are able to be practiced

01:34:02.300 | and they do strengthen with time.

01:34:04.740 | So understanding that there are more natural intuitive.

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