Having survived over four decades in this fine world, I am settling on a philosophy about money that diverges from the operating model that I’ve used for a good portion of my life. That is the operating model of most finance professionals and other nerds.

To be more precise, I’m talking about the approach to the accumulation and accounting of money, the pursuit of numbers on a spreadsheet.

the classics

The ideas that helped me rethink money come from the classics. Here they are:

idea 1: Pythagorean classes of people

Pythagoras came up with this classification to describe people who went to the Olympic games:

1. People who buy and sell things
2. People who compete
3. The philosophers

He places the first group, the lovers of gain or money, at the bottom of the hierarchy.

Next come those who compete; these are not folks who compete to play the game, these are the people who compete to win. The lovers of honor.

At the top of the pyramid, he placed the philosophers. I think that, as a lover of wisdom and of himself, he had to place this group at the top. I would replace “philosophers” with “liberal men”. Liberal not in a political sense, but rather as having sufficient free time, ability, and drive to pursue virtue.

In any case: lovers of money go at the bottom.

idea 2: debt as a form of slavery

Here are the Greeks again. They view debt as a form of slavery: debt bondage. In ancient Greece, the debtor could become a slave of his creditor and be traded or sold as a form of debt repayment.

The great statesman Solon put an end to this in Athens, prohibiting all claims to the person of the debtor by the creditor.

In sum: debt as a burden and a catalyst to serfdom.

idea 3: Samuel Johnson on poverty

Dr. Johnson in the eighteenth century wrote:

“Resolve not to be poor: whatever you have, spend less. Poverty is a great enemy to human happiness; it certainly destroys liberty, and it makes some virtues impracticable, and others extremely difficult.”

Lack of money brings the danger of making one a despicable and miserly person. Not a rigorous “if then” function but generally correct when talking about the average individual.

what then?

For me, therefore, two things:

1. work hard and aim to have enough cushion and cash flow to avoid falling into the well of the despicable and miserly,
2. if fortunate to satisfy 1 above, then the next thing to avoid is the maximizer trap

The maximizer is the MBA nerd that will try squeeze every basis point of ‘alpha’ from his endeavours, market-related or not. Maximizing one variable, by definition, means de-emphaszing others. Life is too rich, too long, and too unpredictable to be obssesing over the wrong things.

Too rich, too long, too unpredictable. Ask the Athenians that went to Piraeus to send their best to Syracuse in the fifth century B.C.

It’s quite the paradox, but I’ve come to a place where financial theory is the wrong tool for personal finance.