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The Attention Span. "Crisis, Character & Charisma."

In times of market volatility, all correlations trend toward one, and all interest in any other topics trends toward zero.

But market declines and periods of extreme volatility are also excellent opportunities to explore the perennial concepts of character and integrity. The topic can actually go to some pretty strange places.


“Crisis, Character and Charisma.”

[11 minute read]

“A genuine investor in common stocks does not need a great equipment of brain and knowledge, but he does need some unusual qualities of character.”- Benjamin Graham.

Source: Getty Images

My partners at The KCP Group have been helping clients manage their wealth since Dave Knall founded it in 1969. We’ve collectively seen a lot of cycles and a lot of turmoil. Today’s market is moving faster and faster, and the information landscape has never been noisier. A few weeks ago, Tom Pence’s annual letter focused on the hardest task at any transition point: determining what’s constant and what’s transitory. One variable that should ideally remain constant is integrity.

Legendary value investor Arnold Van Den Berg’s excellent interview last year with Bill Brewster repeatedly emphasized the importance of character in investing. This can sound like a relatively abstract and archaic concept until we’re actually in the middle of a crisis. As he puts it; “in the end, how your investments behave is much less important than how you behave.”

Most discussions of this topic revolve around eliminating cognitive biases, reducing emotional attachments and taking a long-term perspective. These are all pretty obvious points, and I doubt any sophisticated reader needs a refresher. Instead, I’d like to approach this topic from another angle entirely; one that goes to some pretty weird places.

A few weeks ago, I wrote about the concept of assembling resonant ideas from other investors to create a style matched to your unique temperament. If your process is exclusively borrowed from Warren Buffett, he might not be there to pick up the phone to tell you what to do in a crisis. Funnily enough, Ricky Sandler of Eminence Capital appeared on the “Invest Like The Best” podcast a couple of weeks ago and emphasized exactly the same message.

“Don't just try to be like one person. Try to take pieces about other people and figure out what you yourself can believe in and internalize and build your own investing framework out of that…. And part of why that's important is because you need conviction amidst volatility and you've developed it over time.”

To make this idea more specific, Van Den Berg believed character was achieved when your unconscious and conscious were aligned.

William Green’s new book Richer, Wiser, Happier profiles some of the world’s greatest investors. What I adore about Green’s general approach is that he’s looking for universal patterns across different wisdom traditions. In his recent podcast with Frederick Gieschen, Green talked about investor Monish Pabrai. Pabrai’s fund was down 67% in 2008, but he was candid with his clients when it came to his own mistakes. This allowed him to build a trust that he says has had an exponential payback.

Pabrai and many other investors have been hugely influenced by a strange little book called Power vs Force by David Hawkins.

“Hawkins argues that “true power” stems from traits such as honesty, compassion, and a dedication to enhancing other people’s lives. These powerful “attractors” have an unconscious effect on people, making them “go strong,” whereas traits such as dishonesty, fear, and shame make them “go weak.” Pabrai took one specific lesson from Hawkins and determined to live by it. “You can’t get away with lying to other humans,” says Pabrai, “and that’s a very profound idea.””

Hawkins is associated with a field called kinesiology, where hearing or speaking the truth makes you feel physically stronger than lying. To be honest, I don’t totally buy a lot of it. But it does have an intriguing resonance with Tibetan Buddhism, Kabbalah, and Dr. Iain McGilchrist’s recent revelatory neurological work.

McGilchrist’s research has found that our brain’s left hemisphere has a tendency to lie that the right does not. One of the leading researchers in cognitive neuroscience, Michael Gazzaniga, has called it the most stunning finding from split-brain research. As the right hemisphere is much more directly connected to signals from the body and world, it does follow that it would have a closer relationship to truth and reality. Hawkins’ point was that lying creates internal, measurable dissonance and conflict, including between your hemispheres.

As I discussed on a recent podcast with Camellia Yang, I’m very intrigued by the Jordan Peterson phenomenon. My views on him are conflicted, as I hopefully made clear if you listened to the interview. If you’re not familiar with him, he’s a (controversial!) Canadian psychologist who ended up writing a book that sold over 5 million copies and packed out venues on a world tour. His YouTube videos have now been viewed over 250 million times. As much as I may personally disagree with many of his current views, my 2022 resolution is to better integrate the best ideas from everyone. There’s a passage from Peterson’s incredibly dense first book Maps of Meaning that’s worth quoting in full. He describes a psychological breakdown from early in his life:

“Something odd was happening to my ability to converse. I had always enjoyed engaging in arguments, regardless of topic. I regarded them as a sort of game (not that this is in any way unique). Suddenly, however, I couldn’t talk - more accurately, I couldn’t stand listening to myself talk. I started to hear a “voice” inside my head, commenting on my opinions. Every time I said something, it said something - something critical. The voice employed a standard refrain, delivered in a somewhat bored and matter-of-fact tone:

You don’t believe that.

That isn’t true.

You don’t believe that.

That isn’t true.

The “voice” applied such comments to almost every phrase I spoke. I couldn’t understand what to make of this. I knew the source of the commentary was part of me, but this knowledge only increased my confusion. Which part, precisely, was me - the talking part or the criticizing part? If it was the talking part, then what was the criticizing part? If it was the criticizing part - well, then: how could virtually everything I said be untrue? In my ignorance and confusion, I decided to experiment. I tried only to say things that my internal reviewer would pass unchallenged.

This meant that I really had to listen to what I was saying, that I spoke much less often, and that I would frequently stop, midway through a sentence, feel embarrassed, and reformulate my thoughts. I soon noticed that I felt much less agitated and more confident when I only said things that the “voice” did not object to. This came as a definite relief. My experiment had been a success; I was the criticizing part. Nonetheless, it took me a long time to reconcile myself to the idea that almost all my thoughts weren’t real, weren’t true - or, at least, weren’t mine.

All the things I “believed” were things I thought sounded good, admirable, respectable, courageous. They weren’t my things, however - I had stolen them. Most of them I had taken from books. Having “understood” them, abstractly, I presumed I had a right to them - presumed that I could adopt them, as if they were mine: presumed that they were me. My head was stuffed full of the ideas of others; stuffed full of arguments I could not logically refute. I did not know then that an irrefutable argument is not necessarily true, nor that the right to identify with certain ideas had to be earned.”

This once again illustrates the importance of understanding your own circle of competence. But it also sounds very much like a hemispheric conflict. Like Hawkins, Peterson also talks about how lying makes you feel physically weaker. One of his more chilling observations is that “if I’ve learned one thing in 20 years of clinical practice, it’s that. I swear I’ve never seen anyone get away with anything in my whole life.”

Pabrai talked about the compounding effect of trust, the compounding cost of lies can be equally catastrophic. The Internet in particular has a long memory.

As Pabrai concluded; we can intuitively detect hypocrisy and lies. Our pattern recognition for social cues is so good we can detect the momentary dissonance of a lie even if we’re not always consciously aware of it. He thinks we unconsciously try and distance ourselves from these people. In complete contrast, Chinese philosophy scholar and professor of embodied cognition Edward Slingerland’s book Trying Not to Try discusses the Taoist concept of “de.” This is a kind of charisma emanated by people who are acting in effortless harmony with the world around them. It brings social and political success, and you move through life with supernatural ease. Slingerland thinks we are drawn to these people because we have evolved to detect those subtle signs of sincerity.

In Hawkins’ framework, and complete alignment with the Taoists, somebody imposing his will on the world acts with force, but someone in harmony acts with true power. This further reinforces the craziest idea that has been emerging for me over the last few years. The ideal existence is a balance between left-hemispheric individual action and a right hemispheric attunement to the world around you. I believe our problem currently is we are too left-hemisphere centric. The Taoist sage is acting in harmony with the environment, the left hemisphere returned to the rightful service of the right. This is what integrity means: the state of being whole and undivided.

As woo-woo as many of these concepts sound, I can’t but be struck by how mutually consistent they are. The slightly meta conclusion is that I’m constantly looking for recurring patterns to indicate truth. By finding those patterns, your own character evolves. Van Den Berg talks about assembling ideas and quotes that deeply resonant on an unconscious level. That aligns them with your whole self. The stronger that alignment, the better you’ll be able to withstand adversity.


Related Reading.

  • Read. Om interview with Brunello Cucinelli (46 minute read).
  • Why Read. A couple of people kindly shared with me a simply wonderful interview with Italian luxury creative director, CEO and founder Brunello Cucinelli. It’s really great and plays into a lot of themes. He talks a lot about building a fundamentally balanced and enduring business while also making time for personal life. He also detects the same cultural phase change shift that I do.
  • “[In the past, people] didn’t know anything about their employer. My father or my brother didn’t know if their employer had a villa on the sea. Whereas with Google Maps, I can see where your house is. That’s where the world is becoming new. Mankind is becoming more ethical, but it is not happening because man has decided to become better than he was 100 years ago. It’s because we know we live in a glass house where everybody can see.
  • In order to be credible, you must be authentic and true. Twenty years ago, something might be written about you in a newspaper. Then this newspaper would be scrapped, and that would be it. But now your statement stays online for the next 20 to 50 years — who knows how long for. To be credible, you must be consistent in the way you behave. Someone can say to you, “Listen, two years ago, you said something different.” In a split second, they know. That’s where lies that wonderful future for mankind.
  • “This century is where enlightenment and romanticism must blend. A great idea that is born out of the mind and then goes through the soul — there is no doubt that the outcome is marvelous.”
  • “Don’t you feel that over the last two or three years? Don’t you smell it? There is an awareness raising, a civil, ethical point of view. The idea of community, dignity. Yes, it’s a strong sensation.
  • “In Italy, this is strong. The 35-year-olds, 40-year-olds, with their children, they’re starting to take a look at the community. They want to go back to living in the countryside. They want to buy good food, good fruit. There is something in the air.
  • “There are three things you cannot buy. Fitness: You have to keep fit, whether you’re rich or not. Diet: You cannot pay someone to be on a diet for you. I think that diet is the biggest sacrifice in my life. Then, looking after your soul.”

Have a great weekend!

Tom

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