Thread by @jposhaughnessy

1/ The Tao Can Help You When Contemplating The Dow—Part 3

In verse 20 of the “Tao Te Ching,” Lao Tzu tells us that having too many thoughts and opinions can make us troubled and anxious.

2/ “Listen, give up trying to be so learned and things will go a lot easier…Between yay and nay how much difference is there? Is there really much difference between being angry and pretending not to be? What others fear I must also fear.”

3/ And we come by it naturally. Jed McKenna says"
“Humans are fear-based creatures. We are primarily emotional and our ruling emotion is fear…and [almost] all fear is fear of the unknown.”

Thus, our constant craving for forecasts, reasons, and arguments for why the

4/ market may tank or soar.

I liken this to thinking too much about what might *possibly* happen rather than what is probable to happen. Thinking of every possible thing that might happen is impractical and weighs you down with an unnecessary burden.

5/ Indeed, if you consider too many possible scenarios, you will become paralyzed with doubt and, yes, fear. It also makes deciding that much harder. Pay attention to all the ‘doom and gloom’ headlines and you must “fear what others fear” Things that might have a tiny chance

6/ of happening now occupy your thoughts and gain an inordinate amount of your attention. In addition to pulling perceived troubles out of thin air, one thing leads to another and either paralyzes you or makes you run by throwing in the towel and selling everything.

7/ Fight or flight was very helpful while we were roaming the African plains but is rarely helpful in making good investment choices.

Lao Tzu continues:
“My mind is that of a fool—how blank! Vulgar people are clear, I alone am drowsy. Vulgar people are alert, I alone am

8/ muddled. And the people, the people are so busy! But I have nothing to bother about. The multitude all have a purpose. I alone am foolish and uncouth. Most people seem to be bright and sharp. And how do I feel? Like a blunted sword.”

9/ Lao Tzu is saying that most people are forever trying to outsmart others and demonstrate how clever and superior they are. He hints that people who try to show off and one-up others are deluding themselves and inviting hubris and a hard fall. Truly wise people recognize

10/ how little they actually know and admit it. They understand that many of their even firmly held beliefs may be illogical and inaccurate and that they will eventually mislead and confuse you, causing your decisions to fail. They search instead for an often-simple process that

11/ will work specifically for them and don’t concern themselves with what others are saying or doing. Lao Tzu contrasts himself to this calling himself “a fool, drowsy, muddled. A blunted sword.” What I think he means is that he does not attach his emotions and self-worth to

12/ things that ordinary people aspire to—he has recognized that trying to inflate his ego only leads to anxiety, anger and turmoil. He has rejected the common aims and ideas of his fellow men, and by doing so, allowed himself to be entirely self-reliant and free of illusions.

13/ This is something that only a handful of us can do—something I’ve tried to do for most of my career and have not yet mastered. But it nevertheless is a good thing to remind ourselves of when we are thinking that we are smarter, better informed investors than others and that

14/ we are unique in our superior ability to make the right investment choices. A look at the historical results confirms that we are not.

My solution to this has been to study which characteristics have historically led to good performance and then stick with them through

15/ thick and thin. This excludes being able to brag about how ‘right’ I was about a stock or the market’s direction, even if only in my own imagination. But it has worked for me in my investing career and might help you in yours.