Financial markets have always been fascinating for me. I started reading André Kostolany when I was a teenager and after many books, I felt as if I knew everything about market psychology. Of course, I did not! Fortunately, I had no money to speculate with at that time.
But to be prepared for the day I would have the resources, I continued reading from world experts and renowned academics. It was only a matter of time until I came across the name George Soros, who studied at the London School of Economics (LSE). His “Theory of Reflexivity” combined psychological aspects and business cycle theory. During his lecture series at the Central European University, he explained how his life philosophy, derived from Karl Popper’s “Open Society and its Enemies,” helped him to succeed financially, but also personally in his philanthropic work. I became immediately interested in Popper’s work and read it myself during a time when I had lost my focus.
Popper, who was a philosophy professor at the LSE, described human fallibility and its implications for our society. The “Open Society” as he called it, operates within a process of continuous improvement and is aware of imperfection. This awareness, hence, excludes the possibility to reach perfect results and invalidates the existence of perfectionism. Perfectionists tend to be discouraged after they did not reach e.g. a perfect score. This attitude is dangerous indeed since it makes people reluctant for criticism and those people never really learn how to appreciate harsh truths.
This book transformed the way I think about society and the endeavour towards perfection completely. The essential idea of human imperfection helped me to overcome difficult times and served to guide me henceforth. As I mentioned in a previous article-“The Personal Growth Model”-knowledge contributes highly to your growth. Reading brought me from finance to philosophy and it changed my life.
Then, half a year ago, I researched the firm “Bridgewater”. The firm’s CEO, Ray Dalio, is a known figure on “Global Macro” and financial markets. But as I became acquainted more and more with Bridgewater’s corporate culture, I realised the firm applied Popper’s philosophy of human fallibility and created its whole culture around it! Remember, Peter F. Drucker once famously said that culture eats strategy for breakfast!
Since the accurate price is already contained in most assets in the markets, Dalio concludes that in order to make a profit you have to see what the consensus does not. But this cannot be achieved by one person because there is always a biased element included. Bringing together different points of views is a form of risk diversification which minimises the risk of one person being wrong. The key is, as Dalio calls it, “Radical Truth and Transparency” within the group. It is the purest form of criticism and the key element for the firm’s success. It seems Peter Drucker was right. If you want to learn more, I would recommend you to visit principles.com for a more in-depth description.
We have established four basic principles:
1. There is no perfection.
2. Through continuous improvement, you can push your boundaries.
3. Do not distinguish between failure and learning.
4. You learn by accepting harsh truths. Therefore, appreciate criticism.
In order to continuously improve, the following process can serve you as guidance:
How do you use this philosophy?
No perfection implies that you should always stay humble no matter how successful you will become. People who think they are perfect and fall into arrogance will not be able to grow anymore, neither personally nor professionally. I greatly believe that people with great abilities and knowledge enjoyed that privilege while others had no chance for higher education and should, therefore, devote their brain power to some extent to support underprivileged people.
How do you distinguish between failure and learning? I really don’t know! Because learning does not only mean sitting in a classroom. It means engaging in activities which challenge you and enable you to be cutting-edge. And if you should fail, it is not because you do not possess that skill or ability but rather because you did not learn it yet.
In order to learn it, you will have to encounter problems by accepting harsh truths and take criticism seriously. This all, embedded within a hungry mind, never satisfied with current results but at the same time aware of the existence of imperfection, leads to a culture of continuous improvement.
Success has no specific definition but with all those principles in mind, you will become successful no matter how you define it.
We all encounter problems in our life. The difference lies in how we perceive them.
Arnold is studying BSc Economics and Finance by distance learning in Germany.