The Signal : Socratic take on what does it take to be a successful investor

While going through a series of philosophies purported by popular Greek philosophers, I stumbled upon a piece from Plato’s Euthydemus [278–282]. What caught my attention is the collaborative inquiry and rather articulate hypothesising of the root cause of happiness.

Before moving on to draw a parallel with key tenets of investment success, I believe it would be equally interesting to go through an excerpt from the original (translated) content.

Most quoted text is perceived as translated and abridged from the original publication. Inquisitive research and cross-verification across credible references leads me to believe that the following must be as close as one could get to accurate translation of the text with the least loss of context.

The text is presented as a record of the conversation between Socrates and Clinias as they explored the correctness of the Socratic thesis that wisdom is sufficient for happiness.

Right before the exploration, it was essential for Socrates and Clinias to agree upon some basic assumptions: Everyone wants to be happy. Happiness comes from possession of good things like health, honour, courage, wisdom, and good fortune.

Having already reconsidered the last of these assumptions by arguing that good fortune need not be added to a list that already includes wisdom, Socrates now revisits the second of these assumptions, that happiness comes from having many good things. He argues that happiness requires not only the possession of good things but that these goods be used as well.

“We agreed, I said, that if we possessed many good things, we would be happy and do well.”

He agreed.

“Then would we be happy through possessing good things if they didn’t benefit us, or if they did benefit us?”

“If they benefitted us,” he said.

“Then would they provide some benefit, if we only had them, but did not use them? For example, if we had much food, but didn’t eat any, or drink, but didn’t drink any, would we benefit from these things?”

“Clearly not,” he said.

“Well then, if every craftsman had all the requisite provisions for his own work, but never used them, would they do well through the possession, because they possessed everything which a craftsman needs to possess? For example, if a carpenter were provided with all the tools and enough wood, but never built anything, would he benefit from the possession?”

“In no way,” he said.

“Well then, if someone possessed wealth and all the good things we just said, but did not use them, would he be happy through the possession of these good things?”

“Clearly not, Socrates.”

“Then it seems,” I said, “that the one who is going to be happy must not only possess such goods, but also use them. Otherwise, there is no benefit from the possession.”

“That’s true.” (280b5–d7)

In this section Socrates drives home he point that mere possession of good things does not necessarily result in happiness. Possessions deliver happiness only if it yields any benefit to the possessor.

Next, Socrates also establishes that the benefit can be derived from a possession only if it is used.

The first thesis is that good things contribute to our happiness only if we possess it and use it as well. It is absolutely necessary that both conditions be fulfilled to derive happiness through good things.

However, the condition still seems weak and Socrates continues to strengthen it.

“So then, Clinias, is this now sufficient to make someone happy, to possess good things and to use them?”

“It seems so to me.”

“If,” I said, “he uses them correctly, or if not?”

“If he uses them correctly.”

“Well said. For I think it is a greater harm if someone uses something incorrectly than if he leaves it alone. For in the former case there is evil, but in the latter case there is neither evil nor good. Or don’t we say this?”

He agreed. (280d7–281a1)

Now, the principle is modified and strengthened.

It is not just necessary to possess and use, but also imperative that it be used correctly to be able to derive happiness from good things.

Diving deeper into the premise, Socrates goes on to explore just what results in correct use given its defining role in happiness.

“Well then, in working and using things concerning wood, surely there is nothing else that produces correct use than knowledge of carpentry?”

“Clearly not,” he said.

“And also in work concerning utensils the producer of the correctness is knowledge.” He agreed.

“Then,” I said, “also concerning the use of the first of the goods we spoke of — wealth and health and beauty — was it knowledge which directed and made our action correct with respect to using all such things correctly, or something else?”

“Knowledge,” he said.

“It seems then that knowledge provides men not only with good fortune but also with well-doing, in all possession and action.”

He agreed. (281a1–b4)

So far, Socrates has established that knowledge always guarantees correct use of whatever it is applied to.

However, it is not yet imperative if it is absolutely necessary that correct use can be facilitated only through knowledge. He probes further.

“Then, by Zeus,” I said, “is there any benefit from other possessions without intelligence and wisdom? Would a man benefit more from possessing many things and doing many things without sense, or from possessing and doing little with sense? Examine it this way: Doing less, wouldn’t he err less? And erring less, wouldn’t he do less badly? And doing less badly, wouldn’t he be less miserable?”

“Certainly,” he said.

“Then would someone do less if he were poor, or wealthy?”

“Poor,” he said.

“And if weak or strong?”

“Weak.”

“And if honored or without honor?”

“Without honor.”

“And would he do less if courageous and temperate or cowardly?”

“Cowardly.”

“So then also if he were lazy rather than hard-working?”

He agreed.

“And if slow rather than fast, and dull of sight and hearing rather than sharp?”

With all such things we agreed with one another. (281b4–d2)

The conversation highlights a common behavioural tendency wherein a person with lesser knowledge will do less with an objective to fail less.

Maybe, it would not be very wrong to infer that a person who fails less does so because he does less and he does less because he knows less. Perhaps, at the end, lesser failure is anything but a sign of higher success or superior knowledge.

While there could be other philosophers who may add their own flavour to the thesis on happiness, there’s definitely a couple of strong takeaways for investors.

i. Investment success comes only to those who invest.
(It is necessary to use a possession to derive happiness)
ii. Investment success comes only to those who invest correctly
iii. One can invest correctly only if one possesses the knowledge to invest correctly.
iv. Ones without knowledge will be better off earning lesser from their savings while ones with knowledge will earn significantly more than the former.