Epictetus’ Teachings and Difficult Markets

Crashes, bear markets, and other blunders are a good time for learning and reflection, and what better teacher during this time is a crippled-slave turned stoic-teacher, Epictetus?

We will not be troubled at any loss, but will say to ourselves on such an occasion: “I have lost nothing that belongs to me; it was not something of mine that was torn from me, but something that was not in my power has left me.” Nothing beyond the use of our opinion is properly ours. Every possession rests on opinion. What is misfortune, or a quarrel, or a complaint? All these things are opinions; opinions founded on the delusion that what is not subject to our own choice can be either good or evil, which it cannot.^[34] By rejecting these opinions, and seeking good and evil in the power of choice alone, we may confidently achieve peace of mind in every condition of life.^[40]

Epictetus

The quote sounds familiar. One’s wealth rarely exceeds his wisdom. When one does encounter wealth beyond his own maturity, it eventually snaps back to his own capacity. Thus one should instead refine his own character and accept any fortune that comes with it. We call it “fortune” since there are no guarantees in this life, only requisites to sustainable wealth.

Black swan events in markets are ironic in that you can gain a great deal of wisdom from them, but won’t be able to use that wisdom for some time in a similar scenario. These events of course being rare and extreme. Unless, we can somehow salvage those lessons and apply them to other areas of life, or on a microcosm, or an inversion of these events. What is a steep correction, but a mini black swan? What is a big rally, but a mini white swan?

Related quotes by Epictetus and material loss:

Be careful to leave your sons well instructed rather than rich, for the hopes of the instructed are better than the wealth of the ignorant.

Know, first, who you are, and then adorn yourself accordingly

People are not disturbed by things, but by the view they take of them.

Make the best use of what is in your power, and take the rest as it happens.

One that desires to excel should endeavor in those things that are in themselves most excellent.