Posts filed under “Philosophy”

Listening to Dead Philosophers

This post was originally published today at The Financial Philosopher.

Whenever a timely milestone, such as this new calendar quarter and the second half of the year, is reached I do my best to resist the tiresome looking-back-and-looking-forward ritual.  To remove myself from the timely chatter, I indulge in the timeless words of philosophers from another age.

Who better to provide the greatest unbiased perspective on today’s world than those who are not living in it?  Who would you prefer–today’s politicians, technocrats and mainstream media?

As we move into the third quarter, consider this guidance from dead philosophers:

…those who wish to know in what direction they are going would do well to give their attention not to the politicians but to the philosophers, for what they propound today will be the faith of tomorrow. ~ I.M. Bochenski (1902-1995)

Even if someone knew the entire physical history of the world, and every mental event were identical with a physical, it would not follow that he could predict or explain a single mental event (so described, of course). ~ Donald Davidson (1917-2003)

We do not, in fact step out of the movement of things, ask ‘What am I to do’ and, having obtained an answer, step in again.  All our actions, all our questionings and answerings, are part of the movement of things, and if we can work on things, things can work on us… ~ John Anderson (1893-1962)

All human situations have their inconveniences. We feel those of the present but neither see nor feel those of the future; and hence we make troublesome changes without amendment, and frequently for the worse. ~ Benjamin Franklin (1706-1790)

A crust eaten in peace is better than a banquet partaken in anxiety. ~ Aesop (620-560 BC)

And as imagination bodies forth the forms of things unknown, the poet’s pen turns them to shapes, and gives to airy nothing a local habitation and a name. ~ Shakespeare (1564-1616)

A hidden connection is stronger than an obvious one. ~ Heraclitus (c.536-470 BC)

It is the mark of an educated mind to rest satisfied with the degree of precision which the nature of the subject admits and not to seek exactness where only an approximation is possible. ~ Aristotle (384-322 BC)

When the mind is in a state of uncertainty the smallest impulse directs it to either side. ~ Terence (195/185 – 159 BC)

Reasoning draws a conclusion and makes us grant the conclusion, but does not make the conclusion certain, nor does it remove doubt. ~ Roger Bacon (c.1214-1292)

It’s quite true what philosophy says, that life must be understood backwards. But one then forgets the other principle, that it must be lived forwards. A principle which, the more one thinks it through, precisely leads to the conclusion that life in time can never be properly understood, just because no moment can acquire the complete stillness needed to orient oneself backward.~ Soren Kierkegaard (1813-1855)

The crowd is untruth. ~ Soren Kierkegaard(1813-1855)

Stubborn and ardent clinging to one’s opinion is the best proof of stupidity. ~ Michel de Montaigne (1533-1592)

If you do not change direction, you may end up where you are heading. ~ Lau Tzu (fl. circa 600BC)

Do any of these thoughts align with your philosophies?  If so, which one(s)?  If not, how would you describe your overall philosophy of money and investing?  Also, who do you listen to/watch/read to get the information that forms your philosophies and, hence, your actions?

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This is a guest post from Kent Thune, blog author of The Financial Philosopher.

Category: Philosophy, Psychology

Happy Birthday, America, but it’s time to grow up.

> I have a new column out in the Sunday Washington Post business section on, well, America. “It’s been 235 years already? America, it’s time to grow up.”  The sub hed is “Happy birthday, America. But at 235 years old, you’re flabby, creaky and easily led astray.” The column speaks to the nation as if…Read More

Category: Apprenticed Investor, Philosophy

Wisdom from the Wealthy: Sunday’s WaPo Column

> In case you missed it, my Sunday Washington Post column is on the interesting life lessons I have learned from people of great wealth. I excerpted it yesterday. Rather than run yet another excerpt, I’d rather a) Point you to “7 life lessons from the very wealthy,” and 2) pull some of the quotes…Read More

Category: Philosophy

Shiller on EMH

I hope you did not miss the weekend post of Yale Professor Bob Shiller’s Efficient Market Hypothesis discussion. Shiller: More Expectations Theory, Less Efficient Market Hypothesis Well worth your time . . .

Category: Philosophy, Really, really bad calls

Yale professor Bob Shiller’s column in the Sunday NYT ( The Sickness Beneath the Slump) is filled with interesting tidbits, data and analysis. You may be tempted to think of his column as the typical Residential Real Estate analysis, looking at historical prices and current trends. Don’t. What the good professor does this morning is…Read More

Category: Philosophy, Real Estate, Really, really bad calls

Investment Advice from George Carlin

I believe philosophers can be the best investors and that comedians can be the best philosophers. Therefore one may logically deduce that comedians can make the best investors. Look no further than the philosophy of the late and great George Carlin to prove my point: Don’t confuse causation with correlation. “Death is caused by swallowing small…Read More

Category: Philosophy, Psychology

Apocalypse Thinking: All Too Human Pattern Seeking

I was a little surprised about some of the pushback to the Oh, No, Not the End of the World (Again) column. Which made this column in New Scientist all the more delightful. It starts with pattern seeking: “Cognitively, there are several processes at work, starting with the fact that our brains are pattern-seeking belief…Read More

Category: Philosophy, Psychology, Science

Welcome to Socialist America!

To those of you who irrationally fear the US is turning into a Socialist state, I say unto thee: YOU ARE TOO LATE! We’ve already turned into a red nation of commies! At least, that seems to be how some folks see it.  It is a quite a bit more accurate to describe the current…Read More

Category: Economy, Philosophy

The Power of Words

This short film illustrates the power of words to radically change your message and your effect upon the world: Created by RedSnappa (www.redsnappa.com) Filmed/directed & edited by Seth Gardner Music by Giles Lamb ‘One to One’ Homage to Historia de un letrero, The Story of a Sign by Alonso Alvarez Barreda Music by: Giles Lamb…Read More

Category: Philosophy, Weekend

Minsky Conference “Gary Gorton” Debate

Last week, the Levy Economics Institute hosted the 20th Annual Hyman P. Minsky Conference, a wonkish discussion on all things Hyman Minsky. This year’s focus was on Financial Reform and the Real Economy.

For those of you who are not academic economists, Professor Hyman Minsky argued that stability eventually leads to instability. The stable economic backdrop causes people to become complacent and take on more risks than they might during riskier times.

For some background, see this discussion on Minsky by Prof. Steve Mihm. You can see our earlier guest posts on the Minsky Conference here and here.

The purpose of the Minsky Conference was to “address the ongoing effects of the global financial crisis on the real economy, and examine proposed and recently enacted policy responses. Should ending too-big-to-fail be the cornerstone of reform? Do the markets’ pursuit of self-interest generate real societal benefits? Is financial sector growth actually good for the real economy? Will the recently passed US financial reform bill make the entire financial system, not only the banks, safer?”

I was unable to attend, but several colleagues not only went, but reported back what they saw. The following discussion was art of a longer email thread on some of the emails; it is reproduced here with the permission of the authors.

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Steve Waldman (Interfluidity)  writes about the original updates:

I find little to disagree with in your note, except that I find little resemblance between what you say and what I heard in Gorton’s speech.

You write “His key observation is that what is gained by having the Fed and other policymakers guarantee bank liabilities –- namely, financial stability –- is lost through the ensuing complacency which tends to spawn longer, more damaging crises.”

That’s just not what I took from the speech. What I heard was quite the opposite, that the crisis was basically a result of the financial system having evolved means of duration-mismatched finance that were NOT guaranteed, and that therefore the liquidity crises endemic to the system pre-Fed/FDIC had returned.

Gorton carefully avoided making specific policy recommendations, preferring instead to shelter in his self-aggrandizing evidence fetish and putting all hope in Dodd Frank’s Office of Financial Research.

But it seems to me that the clear implication of Gorton’s story — which described the crisis as an old-fashioned, individually rational but collectively destructive bank run — is to guarantee the shadow banking system. I heard nothing of a critique of, say, FDIC in his speech. (Gorton did point out that FDIC was something of a policy accident. Neither FDR nor the banks initially supported deposit guarantees but popular support forced Congress to act. But my sense was that he took this to be a happy accident, that despite an odd process we had stumbled into good policy.)

If you think the crisis was a run on the shadow banking system, AND you think that the sponsors and guarantors of the shadow banking system actually did an okay job in underwriting, AND you think that the right way to prevent “sunspot” bank runs is with deposit guarantees, then the logical policy response is to guarantee the shadow banking system, and not to worry so much about regulating or holding to account sponsors and guarantors, since market forces have in fact proven sufficient to enforce good-enough behavior.

This is almost a syllogism. Gorton set up all three assumptions quite explicitly. That he didn’t state the conclusion was rhetorically savvy, but doesn’t alter the implicit recommendation.

And yet what you heard was almost precisely opposite to what I heard. You see Gorton’s speech as a criticism of complacency due to guarantees, as a warning about moral hazard. I heard Gorton explicitly mock people for “jumping” to moral hazard as an explanation without “evidence”.

Maybe I misheard, and your description is a better characterization of Gorton’s view than my own. If I’m going to write so much about it, maybe I should give the speech another listen. Perhaps others can weigh on with their recollections.

I like your suggestion that lender of last resort activity should be provided, but carefully rationed to parties relatively distant from poor decisionmaking like money market funds, and that more comprehensive guarantees as were provided to several of the larger banks should be explicit and accountable rather than implicit and deniable, as they were via the “no more Lehmans / SCAP” approach.

I wish I had heard Gary Gorton use his considerable intellect and rhetorical skill to make that case. But that is not at all what I heard.

-SW

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Category: Economy, Philosophy, Really, really bad calls