How Investors Can Use Stoicism to Their Advantage

In this podcast, Motley Fool producer Ricky Mulvey and Motley Fool contributor Brian Stoffel serve up an introduction to stoicism, and why philosophers from a few thousand years ago have practical advice for investors today.

They discuss:

• Fundamentals of stoicism.
• The dichotomy of control (and what it means for investors).
• Seneca's complex relationship with wealth.
• Company leaders that may exhibit some stoic virtues.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Sept. 10, 2022.

Brian Stoffel: The main trait that I'm zeroing in on here is just equanimity. Never got too high, never got too low. He did have a north-star that replaced just profits, stock-up, which was, we're going to provide the most sustainable benefit to our customers possible. If you look that maps pretty closely with what the company did.

Chris Hill: I'm Chris Hill and that's Motley Fool contributor Brian Stoffel talking about former Costco CEO, Jim Sinegal. Today, Brian and Ricky Mulvey are serving up an introduction to stoicism and how philosophers from a few thousand years ago have practical advice for investors like us today.

Ricky Mulvey: We're beginning our journey into stoic philosophy and investing. It's going to get heady, but I think it can make you a better investor. Joining us now is Motley Fool contributor Brian Stoffel. Thanks for being here.

Brian Stoffel: Thank you for having me. That I'm really looking forward to this conversation.

Ricky Mulvey: Likewise. Before we scare everybody off by saying we're going to talk about stoicism and grit our teeth through the pain. Let's talk about what it is and what it isn't.

Brian Stoffel: Yeah, so I think stoicism has a really rough name for itself. Bernie Brown is one someone that I listen to all the time and I'm sure a lot of other Fools do too. She always talks about other thing you want to avoid is stoicism. For those who don't know where she's a very accomplished author and a licensed clinical social worker. But a lot of people herself included believe that stoicism means you don't feel anything, you just ignore the pain, ignore the joy, and you just grit your teeth and you plow through it and you don't feel anything. The type of stoicism that I think you and I want to talk about today is actually the exact opposite.

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

Ricky Mulvey: It's going into life with best intentions in treating the outcome with equanimity, maybe that's the quickest way I can do it. Yes, I totally agree. A lot of other shows you could start out with Epictetus. You could start out with the Roman Emperor Marcus Aurelius. You could start out with Seneca. We're starting with Bernie Brown. I love it. I also think it's important as we dive into this conversation to talk about what stoicism is not. There is a thought, it could be a religious philosophy which it is not.

Brian Stoffel: Right. It is not. There's two parts about that. One, I think when we say philosophy, a lot of times people think that's something that is about big abstract ideas. But this is actually a philosophy that shuns that it actually embraces just the practical, the things that anyone could really do. You don't need a PhD in philosophy to understand it. That's first, but it's not a religion either. It does not have an origin story of the world. It doesn't attempt to connect with any specific deity. It's just a way of moving through life. Although the philosophy itself does have an interesting origin story.

Ricky Mulvey: You want to get into it?

Brian Stoffel: Sure. Well, I think Zeno was his name and I could be wrong about this. While I know some about stoicism, there are people who are listening who might say you got that wrong and I'll say you're probably correct about that. But my understanding is that he was shipwrecked and he lost everything in a foreign country, and that is something that most people would look at as an absolute travesty, and his life was probably terrible after that. But instead, he said, hey, this happened to me. What am I going to do now? Born from that became this philosophy of what matters most in life is actually not what happens to you. It is what you do with what happens to you.

Ricky Mulvey: Let's tie this into investing a little bit. Two parts to this question. One is, how did you personally get into stoicism? Then also, how is your exploration into it affected you as an investor?

Brian Stoffel: Sure. Well, one thing I just want to say in terms of I realized retrospectively, there's certain parts of stoicism I had in my life that I wasn't aware of. This might sound a little silly, but I played football all the way through college, and one of the things that drove me crazy was when we had a penalty on us that went against us, and there were people on my team or in the other team who would just they couldn't drop it, they couldn't let it go. While they weren't dropping it and letting it go, the game was moving on. There was nothing. It wasn't like you're going to say, Sir, I wasn't holding on that play, and then you're still saying that five plays later.

I've never seen an RFP like you know what, you're right. I'm going to take that back. There was nothing to be gained from that. I learned that, hey, there are some things that you just got to drop and move forward. Where I got interested in this and got it like stoicism became the word I associated with an approach that somewhat like this, was from a couple of different angles. One was the writings of Nassim Nicholas Taleb who talks about Buddhism, stoicism. He likes to say stoicism is like Buddhism with an attitude. But also Mr. Money Mustache is a really popular blogger about early retirement and he talks about stoicism a lot. That was where I started to get introduced to it. Then the books of Ryan Holiday really tapped it off.

Ricky Mulvey: How do you think stoicism affects you as an investor? How do you use the philosophy to make investing decisions?

Brian Stoffel: I think that the most important thing that's stoicism offers me, and I don't mean to say that, hey, I'm an expert. I don't think there's any experts. I just think there's veterans. If you've been thinking like a stoic for a long time, you're not an expert. But you are a veteran because you've been trying to do it for a long time. The biggest difference I see between myself now and myself when I started as an investor and I can see it when my friends come to me and they start investing, and some of the concerns that they bring up is anchoring bias. For those that aren't familiar, anchoring bias is, hey, I bought Tesla at $700 a share, it's $500 a share right now.

Then what usually follows is one of two things. One is, I'm going to wait until it gets back up to 700 and then sell. That's the first thing. Or, man, I should probably buy more, not because I think the company is in a better position, but just because I can get it for cheaper, that's anchoring bias, that is trying to control what's already happened. Going back to that football analogy, it doesn't matter that that penalty has been called. It doesn't matter that you've lost $200 a share on Tesla. What matters is what's happening when you look forward. Who cares what Tesla's stock is trading for? Do you still believe in it right now, between now and the future? That is by far the most important thing that as it relates to investing that I've been able to take from stoicism.

Ricky Mulvey: The reverse can be true occasionally as well. I love playing pickup basketball, and one of my favourite phenomenons is when someone's scores, they start celebrating, and then the defense takes the ball and then the person they're supposed to be guarding his wide open for a shot, and then the effect is completely neutralized. Because a lot of stoic philosophy is essentially treating good outcomes and bad outcomes with, I'm going to use the word again, equanimity. The idea that these are now fake like they shouldn't affect your behavior, the past actions. As I say that in investing it's more difficult because you do want to continue to add to your winners. I guess anchoring bias can sometimes work both ways.

Brian Stoffel: Yes, and it really can. I think that one way of thinking about this, we said, let's talk about the dichotomy of control.

Ricky Mulvey: Yeah.

Brian Stoffel: Stoicism is process-oriented. It doesn't ignore the outcomes. Those outcomes are important and the outcomes are important in terms of how they are going to inform changes that you make to the process. But the process is the meat of it and really how you should judge yourself.

Ricky Mulvey: The dichotomy to control it. I don't know if we define that. It's essentially understanding what you can and can't like what is under your control and what is not. In the stoics, I would say had a pretty extreme view of what is not under your control. They essentially said your values, your judgments are under your control, but even things like your property would not qualify as something that is under your control.

Brian Stoffel: Yeah. It would seem like that's ridiculous. Like my house isn't under my control, but let me talk to someone whose house has been hit by lightning, where there's a fire, where there's any number of things that can happen, an earthquake. The thing about that is if you adopt that viewpoint before something bad happens, if you adopt it afterwards, that's fine. That's part of the learning process. If you adopt it beforehand, then when that earthquake does hit, when lightning does strike, when there is a fire, then your ability to deal with that moving forward is probably a lot healthier than if you feel like you lost a part of yourself.

Ricky Mulvey: The full quote from Epictetus about the dichotomy of control I think really captures it. Epictetus was a former slave, famous stoic philosopher. He said, "Some things are within our power while others are not within our power or opinion, motivation, desire aversion and in a word, whatever is of our own doing. Not within our power or our body or property, reputation, office, and in a word, whatever is not of our own doing". I think there's a pretty clear tile also to stock investing with that.

Brian Stoffel: Absolutely. It can be applied in so many different areas of life, but the market doesn't care about you and that's OK. It just it doesn't, and so your job is to take whatever the market or the world however you want to say it is giving you and then decide, OK, this is great or OK, this really sucks. Now, what am I going to do about it? Because that's the only area where I can move the needle.

Ricky Mulvey: A big part of the philosophy is not taking bad things personally, and I think the same could be true during, I feel it myself, during a stock drop or in bear market. I purchased some stocks, let's say late 2021, and then immediately the market falls in the summer of 2022, and I took that as an affront against me. As silly as that sounds. I think a lot of investors felt as similar way which is like this is something being done to me and that it affects your outlook toward essentially like life. If you're around a lot of financial firms during a bear market, the attitude is dour. One thing about the stocks that I find particularly interesting is that they didn't ignore wealth and money as an important tool, if you will. They saw it as something that was called a preferred indifferent. They would put it in the same category as health and education. What does that mean when they were talking about wealth and money as a preferred indifferent, did that mean it wasn't something worth pursuing?

Brian Stoffel: Yeah. It's like the thing that we wrestle with all the time, and if they were wrestling with this thousands of years ago and we're wrestling with this now, we're probably going to continue to wrestle with this for thousands of years into the future, and that is the overlap. If you're drawing a Venn diagram between the good life, whatever that might mean, and wealth and money. Because I think that for myself, I thought that they were separate. In fact, I thought that wealth and money could work against the good life, and as I grow older and I realized, well, there are some tie-ins. Autonomy is really important to me and in the world we live in, you need something to be able to have a certain level of autonomy, I start to realize that maybe there is overlap in that Venn diagram between those two things.

But it's really important to juxtapose them with another group that was around at the time which were the cynics. Now the cynics are people that they rejected all wealth and power, didn't own property. The story that I hear, I can't remember the name of whoever one of the most famous cynics was but he used to only have a cup. Like that was the only thing you had was a cup and he would sleep on the street, and one day he saw a child go to the fountain and drink by cutting his hands together, and he said how stupid I've been and he threw away his cup so then he didn't have anything. The stoics were more moderate view on wealth and power whereas, hey this exists, but if you become a slave to it, that's where you start to run into trouble.

Ricky Mulvey: Then how would, what would the stoic view beyond making yourself a master over your wealth versus having wealth be a master over yourself. Because I know that that's how they viewed a lot of rich people back in the time of the Roman empire.

Brian Stoffel: Well, it's very difficult because it's very easy to slide into making wealth something that you become a slave to instead of it serving you. The problem is if you go the other way and you just try and avoid wealth altogether, you do something, I read this term recently called counter dependency. I've never heard it before. But counter dependency basically means if there's something that you hate and then you're going to disagree with that thing on every level, then you're not really in control anymore. We see this in politics all the time when there are people that go out and ask people, hey, what's your opinion on this piece of legislation, and all they do is they spell out what the legislation is. You might get like 60 percent of Democrats or Republicans supporting it.

Then to a different group, they say, here's this legislation. It was proposed by and then it's the other party and then the amount that are agreeing with it drops to like 10 percent and you're like, you're just shooting yourself in the foot and everybody can do this. So it's the same idea with wealth and money. If you reject wealth and money altogether, well then you're just, you're working in opposition to wealth and money and wealth and money is actually still defining you. The key is is you've got to find something else that's going to define you, and there were different things that the stoics said you should replace that with like equanimity, like peace of mind, like contentment. There were different names for it, but it is a very tenuous relationship.

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

Brian Stoffel: Seneca did have a very interesting relationship with wealth, and it's complicated and I don't think anyone's ever going to come to a final conclusion about was Seneca right or not but Seneca set a lot of things that people liked. But then he did a lot of things that weren't always lining up with what he was writing. Now, in the end, I think all that really does is it means that Seneca was a human being. Because we all do that from time-to-time. He gained a lot of power and wealth by working for someone that ended up leading to his own death. But, it again, it gets to this underlying theme of incentives matter, and what you do probably matters more than what you say so be careful about what you say, and look, I'm I fall victim to this to all the time.

Measure what you're doing as opposed to what you're saying. If you do that, if you're able to do that over time, you're probably able to keep yourself more in balance. Seneca's is one where he says, look, money and happiness, they don't have to be that closely related. There is an upside to wealth, but I'm not dependent upon it. Then you can look at them and say, well, you're saying you're not dependent upon it, but you're doing a lot of stuff here that goes against what you say you value so what's going on here? In the end unfortunately, I think Seneca had to conclude that. He had to be able to justify that disconnect by essentially committing suicide. Let's hope that we can find a way to find a better resolution to those tensions that might arise with money and happiness in our own lives.

Ricky Mulvey: Hopefully we can do that. This is a hard hill turn for a topic change, Brian Stoffel. But one thing that the stoics really placed a lot of value on was our ability to reason. The stoics believe that reason in sociability were essentially the two things that made us human. Why did the stoics look to those two things as the highest human values?

Brian Stoffel: Well, I think at that point in time, the belief that humans had this unique ability to reason was really high in the list. They said this is what separates us from all the other animals and things like that. But the thing that I want to tag onto as well with that is, you generally have this juxtaposition between reason and emotion. I think in today's world especially in investing, we say it should all be reason and no emotion and what we talked about on the Mindset in Motley Fool Live all the time is that if you deny emotion, you're actually going to be controlled by emotion. It is something that I'm going to tie it back to Bernie Brown here. She says, a lot of people like to say we are rational beings that have occasional emotional experiences.

She's done more research than I have, than a lot of people have and she says no. What we are is we're emotional beings that have occasional rational experiences. The reason that rational experiences are so highly valued is because they tend to be enduring and we see this with investing all the time. My stock goes down, I want to feel better about it, I sell or my stock goes down, I want to feel better about it, I buy even more because it's on sale. The key being that I haven't investigated the underlying business, it's just about the movement that the stock made. Whereas if we can hit a pause button, then we can let the waves of the emotions come and go. We don't devalue them but we also don't let them get behind the driver's seat and we say, when this subsides and it will subside, what I'm I going to think is the best path forward now.

Ricky Mulvey: Yeah. The stoics were big on essentially, they thought a lot about anger and I think that there's a clear title what you're saying. One thing Seneca wrote on this was, "The greatest remedy for anger is delay, beg anger to grant you this at first, not an order that it may pardon the offense but that it may form a right judgment about it, if it delays, it will come to an end." I think that goes to what you're saying, which is if you're feeling upset about the stock drops, the thing you should actually do is just chill for a sec and that's a much more eloquent way of saying it.

Brian Stoffel: Absolutely. You know one of the things that I think is the greatest tool underappreciated ever of working at The Motley Fool is that we have to wait for permission to buy or sell a stock. That might sound like a pain in the butt, but let me tell you something, it's made me thousands of dollars  because it's prevented me from either buying a stock I'm super-excited about, when I first find out about it, and then a week later I'm like, well, yeah, but there's this and this, that wow. I'm not so sure or equally important when a stock tanks because something bad is happening, I can't sell. When March 2020 came around, I couldn't sell anything. There was no way I was going to be able to and guess what? That ended up being enormously beneficial for me. Now, if we could figure out something similar to responding with anger when it comes to parenting, then I think you've got a bazillion dollar product on your hands and I'm interested in buying that.

Ricky Mulvey: We'll call the SEC and see what they can do. Always tying this back to stocks and companies and I want to talk about stoic virtues and how we see them and maybe some of the companies we own, some of the companies we watch. But I think we'd be remiss to have that conversation without first cautioning against giving the stoic caution of declaring people and leaders and organizations as virtuous because the intentions are so difficult to judge, especially from the outside.

Brian Stoffel: Yes. You know what? View what we're about to talk about the same way i said, we should view Seneca as a human being who has ideas and actions might not always match those ideas.

Ricky Mulvey: So when you think about maybe some leaders or some companies with some stoic virtues, what comes to your mind?

Brian Stoffel: I've got two. The first one is Jim Sinegal. He was the founder and CEO for a long time at Costco. He's no longer the CEO anymore. The main trait that I'm zeroing in on here is just equanimity. Never got too high, never got too low and he did have a NorthStar that replaced just profits, profits, stock-up, stock-up, which was, we're going to provide the most sustainable benefit to our customers possible. If you look that maps pretty closely with what the company did. There's a great story about how they made a deal with a hot dog vendor because you can buy those hot dogs and he said, "You know what? You got to go back and rework that deal." The catch is that he said we're not paying them enough. There's no way that there's still going to be around five years from now if we're paying such a low price for these high-quality hot dogs. You hear stories like that often. The other one it's Berkshire Hathaway. I mean, yes, Warren Buffett. But really if you read Charlie Munger, he is a paragon of stoic virtues. I didn't know that he had a whole bunch of really rough things happen in his '30s. Maybe I should know that because everybody has a bunch of rough things happen in their '30s. But you wouldn't know that because he just the way that he moves forward, I heard someone say once, "Look, one of your favorite things to do is to read and you might lose your eyesight." I mean, he's in his '90s. "What are you going to do then?" He said, "I'm going to learn Braille". That's a pretty stoic response. That's what he has control over.

Ricky Mulvey: The one I would go with I would say that the easy example for me to reach for, I shouldn't say the easy example. The example that sticks most prominently in my mind would be Tim Cook and Apple, especially with the privacy changes. With regard to [Meta's] Facebook, Tim Cook said, "We could make a ton of money if we monetized our customer. We've elected not to do that." It is easy to make those decisions when you're one of the most valuable companies on the planet. But I do think it does speak to Cook's customer-focus and then also when he was pegged with this question of how he would react to the privacy changes if he were the CEO of Facebook. He just simply said, "I would not put myself in that position." That seemed to me to be a bit of a stoic response.

Brian Stoffel: Yeah. At the same time, if we're going to take that Sinegal approach, you look at the advertising revenues at Apple and how much they've gone up recently and you could say, well, see following that but I do get what he said about, I wouldn't put myself in that situation. I own a couple of stocks. It's mostly because I run a portfolio with Brian Feroldi and he gets to choose half the stocks. But I tend to shy away from companies where the user and the customer are not the same person. Facebook's users are you and I. Their customers or their advertisers and I think that's what he's getting at when he says that.

Ricky Mulvey: Come on, let's not end this by blaming Feroldi but that I guess is where we will end. Brian Stoffel, thank you so much for your time on this early. Enjoyed the conversation.

Brian Stoffel: Thank you very much for having me. I enjoyed it.

Chris Hill: As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.