7 Lessons From Socrates on Wisdom, Wealth, and the Good Life

Investors can learn a tremendous amount from one of the greatest philosophers of all time.

Aug 19, 2014 at 10:28AM

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Warren Buffett believes that temperament is more important than IQ when it comes to successful investing. He said recently that "you absolutely have to have the right temperament. Otherwise, something will snap you."

When it comes to developing your temperament, who would be more helpful? The self-assured hedge fund manager talking his own book on CNBC or one of the wisest philosophers in human history?

The answer to that question is pretty obvious. Below are seven quotes from Socrates that might be helpful for those investors who aspire to self-mastery. The quotes were compiled from Bettany Hughes' outstanding book The Hemlock Cup: Socrates, Athens and the Search for the Good Life.

1.  "Those who are already wise no longer love wisdom – whether they are gods or men. Similarly, those whose own ignorance has made them bad, rotten, evil, do not strive for wisdom either. For no evil or ignorant person ever strives for wisdom. What remains are those who suffer from ignorance, but still retain some sense and understanding. They are conscious of knowing what they don't know." Here, Socrates notes that many of us are aware of our intellectual limitations, even while we're striving to acquire wisdom. This is a particularly important insight for investors who can benefit enormously by remaining committed to the pursuit of wisdom throughout their lives.

Buffett's investing partner Charlie Munger has made a persuasive case, on numerous occasions, for the importance of lifelong learning, regardless of your level of expertise. He feels that if he and Buffett had stopped learning at some point, then the "record would have been much worse than it is." The key to the game, according to Munger, is to keep learning about a wide variety of different disciplines. Clearly, Munger has been very successful at the game, having turned his love of reading into a billion-dollar fortune.

2. "Well I am certainly wiser than this man. It is only too likely that neither of us has any knowledge to boast of; but he thinks that he knows something which he does not know, whereas I am quite conscious of my ignorance. At any rate it seems that I am wiser than he is to this small extent, that I do not think that I know what I do not know." Socrates is famous for knowing the limits of his knowledge. His simple insight can be very beneficial for investors.

Every day we witness Wall Street experts – with impressive credentials – who are extremely quick to weigh in on things they can never really know. Many of them, for example, have been predicting a stock market crash, year in and year out, since 2009. Listening to their advice could have cost you a lot of money.

 Just like Socrates, truly wise investors are aware of their own ignorance. They can't predict whether or not the market will go up or down in any given year. Rather, they make long-term bets on the ability of our economy and individual companies to grow over the next decade and beyond. Such wisdom represents a considerable edge for ordinary investors versus Wall Street pros.

3. "Oh my friend, why do you, who are a citizen of the great and mighty and wise city of Athens, care so much about laying up the greatest amount of money and honor and reputation, and so little about wisdom and truth and the greatest improvement of the soul, which you never regard or heed at all? Are you not ashamed of this?" This is a simple plea by Socrates for all us to have more balance in our lives. Far too many executives in America today (particularly on Wall Street) focus too much on power and money, while neglecting ethics and sustainability. Steve Jobs made a similar point when he said, "Being the richest man in the cemetery doesn't matter to me. Going to bed at night saying we've done something wonderful ... that's what matters to me."

4. "For I go about doing nothing else than urging you, young and old, not to care for your persons or your property more than for the perfection of your souls, or even so much; and I tell you that virtue does not come from money, but from virtue comes money and all other good things to man, both the individual and to the state." I love this particular quote, though it's not easy to decipher. He appears to be saying that all of us don't spend enough time striving for moral perfection. If we did, then good things would result.

Of course, we all know people of poor character who are very successful in life, so clearly money can be gained without virtue. But I think Socrates is saying that virtue is the most important thing in life, and that money can't buy it. And those who focus on pursuing virtue will be well-positioned to achieve all those things they desire in life. I'm not sure this is actually true, but I like to think that it's true.

5. "Fellow citizens, why do you turn and scrape every stone to gather wealth, and, yet, take so little care of your own children, to whom one day you must relinquish all." This quote is particularly helpful to those of us who are parents. Many of us work tirelessly on behalf of our children, while ignoring them in the process. The time we spend with them today, however, may actually be more valuable than any material things we might leave them tomorrow.

6. "In truth, the fear of death is nothing but thinking you're wise when you are not, for you think you know what you don't. For no one knows whether death happens to be the greatest of all goods for humanity, but people fear it because they're completely convinced it is the greatest of evils. And isn't this ignorance, after all, the most shameful kind: thinking you know what you don't." When I first read in high school about the trial and death of Socrates, I was very impressed by his stoicism in the face of the ordeal. He wasn't afraid because he had no idea what death would be like. Why do people just assume it's bad, he wondered? He approached the mystery of death in a purely rational way.

Such an approach can be extremely powerful in other areas of life. When Charlie Munger was once asked what accounts for his enormous success, he replied, "I'm rational. That's the answer. I'm rational." In the emotional world of investing, that turned out to be a pretty effective edge.

7. "At the time, I made it clear once again, not by talk but by action, that I didn't care at all about death – if I'm not being too blunt to say it – but it mattered everything that I do nothing unjust or impious, which matters very much to me. For though it had plenty of power, that government didn't frighten me into doing anything that's wrong." To me, this quote is a simple, yet eloquent statement on moral leadership. Socrates is referring to a time when the Athenian government asked him to arrest a general who would then likely be murdered in cold blood. Fortunately, Socrates was able to avoid punishment, despite his refusal.

We all need to stand for something in life, and sometimes we'll need to pay a price for our beliefs. For those of us who approach an investment as business owners, we may want to think hard about what types of companies we'd like to own and not own.

Living the good life
So, what was the good life for Socrates? I think it was spending his days striving for moral perfection, and teaching anyone who would listen what he had learned from his quest. Perhaps he realized along the way that he didn't need a lot of material goods to pursue what he loved. That seems like another important lesson for all of us.

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