There are many pop psychologists who sell the ancient idea – mind forms reality. Their ideas find root in a saying attributed to Buddha
“The mind is everything. What you think you become.”
There is little doubt the idea has deep meaning. If you think you can, you can. If you think you cannot, you will be right too. It is wise to choose to build a self image that is positive and productive.
Buddha was right and wrong at the same time. Right about the long term, less so in the short term and therein lies the problem. People usually fail to contextualize the idea over time.
The long term is about what you think about, but the short term is more closely connected to how you think. The two are eventually connected but the long term forms poorly if short term thinking deficiencies propagate.
Conclusion jumping fails. Gullibility fails. Theories that can absorb contradictory evidence fail, but not so quickly. Preconceived ideas fail, as does “received wisdom.”
Open-minded and curious seems a better path.
The ancient method of science proposed by Francis Bacon in 1620 involved observation, a simple explanation, verification of the explanation, a wider observation, probably with experiments, followed by a more general law. The inductive approach lasted for a long time.
David Hume later argued that you cannot reach a universal rule this way because you cannot make all possible observations. He further argued that using this method people see a sequence of events and not causality.
In financial matters, the untrained see a sequence of events and infers a law. The sequence of events does not include causality although it may provide fruitful places to look for causality. Acting as if coausality exists is risky.
People seem to think that a rising market is safer than a falling market. The opposite is more true. Certainly so if the only evidence is the sequence of market prices. High prices have more inherent risk than lower prices.
If I want to commit suicide I can do so by jumping from a window on the 20th floor but not from jumping out a basement window.
There are people who make a living by discussing stock market activity. They need rising prices or at the very least potentially rising prices. They almost always attribute a cause to the sequence as a way to validate it. Hume pointed out that cannot work, so why do we pay attention? Because we are drawn to cause and effect. It makes us believe we have control.
Our last philosopher is Karl Popper. His philosophy relates to science but its ideas apply to everyday events.
“In so far as a scientific statement speaks about reality, it must be falsifiable; and in so far as it is not falsifiable, it does not speak about reality.”
Popper’s falsifiability means there is a test whose result could invalidate the idea.
Opinion, predictions, religious faith, and conspiracy theories fall into the not-falsifiable category. The market went up today because….. , is not falsifiable. Interest rates must rise/fall because……… is another. Predictions are inherently not falsifiable so generally useless by themselves.
We will be wiser when we notice we are seeing a sequence of events, or a general law that is not yet fully formed, maybe a non-falsifiable theory, or something real.
Life evolves better for us if we notice reality. Including reality about ourselves and how we think.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.