Investing Lessons from Epictetus: Focus on What You Can Control
The Enchiridion, a manual of ethical advice by the Stoic philosopher Epictetus, begins with a simple distinction:
“Some things are up to us and some are not up to us. Our opinions are up to us, and our impulses, desires, aversions — in short, whatever is our own doing. Our bodies are not up to us, nor are our possessions, our reputations, or our public offices, or, that is, whatever is not our own doing.”
Those things that fall into the first category are “free” in Epictetus’s view, while those in the second are “enslaved.” If we understand how to distinguish between the two, we can free ourselves from wasted time and energy.
Epictetus has something to teach the investment profession.
As individuals and organizations, we can’t determine how markets will move. We have little control over short-term alpha, how regulators will act, or how the competitive landscape will evolve. The behavior of clients and end investors is largely beyond our ability to influence. These things are not up to us.
But Many Others Are
Our integrity, our purpose, our organizational culture, and how we invest are up to us. The way we treat clients, end investors, and staff is within our control. The conditions we create for learning and development within our organization are our doing.
More is within our control than we tend to believe. But we often confuse what is and isn’t up to us.
What about the Things We Can Control?
We spend too little energy building a strong connection to our purpose. In a 2016 survey of finance professionals conducted by the State Street Center for Applied Research and CFA Institute, a mere 28% of respondents said that they work in the investment management industry to help end clients achieve their long-term financial goals.
We don’t discuss our values and how they should influence our behavior as much as we should. Only 41% of those surveyed said that their leaders communicate about their most important values and beliefs. We also seem reluctant to learn at a deeper level: Just 40% of survey respondents think their leaders question important assumptions and beliefs.
We want engaged and driven employees, but instead of using motivators that create flexibility and encourage learning, we construct controlled and constrained environments.
Truly caring about clients creates trust, and trust fosters social sustainability. But as an industry, we have distanced ourselves from our clients and lost a degree of their trust. Nearly two-thirds of investment professionals believe that their organization puts its own interests ahead of its clients. And 54% of retail investors believe that financial institutions are more likely to offer products and services that benefit the firm rather than the client.
The things we can control, we seem to let go of because we believe they are not within our sphere of influence.
If we follow the advice of Epictetus and focus our energy back on what we can and should control, we might be surprised by the value we produce. Epictetus wrote:
“If you think that only what is yours is yours, and that what is not your own is, just as it is, not your own, then no one will ever coerce you, no one will ever hinder you, you will blame no one, you will not accuse anyone, you will not do a single thing unwillingly, you will have no enemies, and no one will harm you, because you will not be harmed at all.”
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
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