#85: Financial philosophy > Financial psychology > Hot investment tips

2nd May, 2022

Welcome to the Idiot Money newsletter. This week, becoming wiser with money by understanding that without a financial philosophy, you’re making everything pointlessly difficult, including:

  • The difference between information, knowledge, understanding, and wisdom, and how (and how not) to progress through their ranks.

  • Why a grounding philosophical outlook is more important than a bag full of psychological tricks.

  • And why, despite craving it, reassurance is not what you want from a financial adviser.

This is part of a series mapping our relationships with money to the foundationally important work of Iain McGilchrist, as set out in the two best non-fiction books I've ever read. Because you know money with only half a brain, and it’s the stupid half. And this, more than anything else, prevents you making more (a lot more) of the money in your life.

Whole-Brain Personal Finance Lesson #3: Making more of your money starts with philosophy, not behaviour-change hacks

There’s a spectrum of how well behaviour change attempts actually work:

1. No change – It doesn’t work. Plans are in place, but they’re mostly ornamental. You tell yourself you’ll get to it later. You never do.

2. Action change – Actions change but it feels like a chore, and lasts as long as most New Year’s Resolutions. Those best at bullying themselves can sustain a desired action for longer, though it never stops being a matter for ‘grit’, ‘grind’, and ‘hustle’.

3. Mindset change – Here we start to change not only our actions, but our perceptions of the possible, and our stories of who we are. Either we change the story directly, or, more commonly, via sustained action changes. A six-pack goal can become an appreciation for living healthily. A weight-loss goal can become a realisation that a ‘sweet tooth’ is psychological not biological. Changes are domain-specific: becoming someone that can learn a language, say, does not improve exercise-based decision-making skills.

4. Worldview change – You make better decisions by default, end the merry-go-round of problem-creation and hack-hunting and embrace a self-reinforcing wiser way of seeing the world.

That fourth one sounds great! How do we do that? Is there a hack?

These four types of change can be mapped to a hierarchy of change-making tools and the type of knowing associated with each one:

1. Information (propositional knowing) – Knowing all the facts may feel helpful, but it’s a con. Just look at the ratio, amid those who have the goal of being healthy, between those who know eating crap and being sedentary is a suicidally bad idea and those who do it anyway.

2. Knowledge (procedural knowing) – Knowing how to do something (having a plan) is a bit handier, but it’s still a long way from actually doing it in flow, and it’s no guarantee that what you’re doing feels at all fulfilling.

3. Understanding (perspectival knowing) – Doing something with an understanding of the context of your life is a big step up in the fulfilment stakes, though changes are still trapped within their specific domain.

4. Wisdom (participatory knowing) – Now we’re talking! This is the level of not merely what knowledge you have, and how you use it to manipulate the world, but of who you are, and how you dance with the world.

Yay wisdom!


If you want information, you probably pop off to the internet to look up the facts.

If you want knowledge, you maybe go look at the science to find a hot new psychological hack.

If you want to move from mere explanation to something akin to understanding, perhaps you go and chat with an expert, to work that hot hack into your environment in a way that fits with your psychology.

But where do you go for wisdom? How do you transcend the facts, the hacks, and the personalised environment control to transform how you both see and subsequently show up in your world?

Life isn’t a computer game

Much to the undoubted disappointment of those that came here looking for cheat codes as if ‘The Road to Financial Wisdom’ were a computer game, where you graduate from one level to the next, you cannot ‘buy’ the ‘solution’ to these questions, or ‘earn’ them by getting really good at the first levels of the game. Because it’s the very act of playing one game that’s stopping you from seeing the existence of another one, which requires a fundamentally different way of playing.

You can become the best information junkie in the world without that translating into becoming a jot wiser. It may do. But it may also get in the way. And it can even screw you over. Tempting as it is, you can’t lounge around satisfied that getting to grips with mainlining information and piling up knowledge is good enough to one day magically translate into something transcendent.

As McGilchrist put it:

Knowing how to do something is not the same as understanding it; expanding know-how, our power to control, exponentially, without any concomitant advance in wisdom, is dangerous.

Because how you do anything is how you do everything, the longer you spend in ‘explicit/explanation/having’ mode, the less likely it becomes that you’ll ever see the benefit of, let alone experience what it feels like to play in, ‘implicit/understanding/becoming’ mode.

Blindly loading up on information, for example listening to a million personal-finance podcasts, won’t make you any better at living with money any more than reading about a million different exercises will make someone fitter. And to the extent that doing so doesn’t challenge the belief that wisdom comes from accumulated information, it’ll only make it harder.

Central to appreciating McGilchrist’s arguments is understanding that in talking of the differences between your brain’s two ‘takes’ on reality, he’s talking about something truly foundational to your experience of your whole life… how you show up in relating with reality – your ‘way of being in the world’.

The phrase ‘way of being in the world’ may seem a bit mannered, but I can’t think of a good substitute. It isn’t just about thinking differently, or feeling differently, or behaving differently, though each of those is an important part (and each is bound up with the others). It involves a difference in the type of attention paid to the world. It is about having a whole different take on the world, a different disposition towards the world, in which certain features stand forward and others inevitably recede.

Okay! When it comes to my finances, I realise I’m stuck in the propositional game, stuck seeing money as an isolated ‘thing’ rather than an expression and shaper of my way of relating with the world. How do I get unstuck? What’s the solution?

Many readers who share my deep alarm at the world we are creating asked the obvious question: ‘So, what’s the solution?’ Some may have hoped for a five-point plan, but of course there isn’t one. We need to address the problem at a much more fundamental level. We need to look at the roots of the malaise. We need to do nothing less than reconceive our world, our reality in a way that, far from subordinating the right hemisphere, acknowledges that it alone has access to the world beyond us, ‘out there’. We need to learn again to look, to see. That’s to say, we need to redirect our attention to what-out-there-is-not-us in a way that rebalances the contributions of the two hemispheres so as to bring a world into being that is truer, richer and within which we can live less harmfully, more peacefully and with much greater fulfilment.

Which maps rather neatly to this early part of my book: ‘How do you get unstuck from financial confusion?’

Which in turn leads to the importance of starting with philosophy, rather than seeing it as some esoteric 'nice to have' bolted on at the end, when you’ve ‘arrived’ at a point of sufficient satiety with all the explanatory stuff. ‘True philosophy, in the words of Merleau-Ponty, ‘entails learning to see the world anew.’ As I wrote here:

The journey towards financial enlightenment begins with philosophy. You can sort your finances ‘perfectly’, but without getting your philosophy sorted first, you may be less f-cked up, but you’ll be far from flourishing.

Fertilising our neural soil with philosophy allows us to nurture an all-weather wisdom that transforms how we think, feel, and act with money, that strengthens us from the inside out, and that makes the right call the effortless one, forever more.

This is wisdom in the sense described by historian Will Durant: ‘an application of experience to present problems, a view of the part in the light of the whole, a perspective of the moment in the vista of years past and years to come.’

McGilchrist calls upon Alfred North Whitehead to make the same point:

A philosophic outlook is the very foundation of thought and of life. The sort of ideas we attend to, and the sort of ideas which we push into the negligible background, govern our hopes, our fears, out control of our behaviour. As we think, we live.

He also backs it up with words of his own:

Philosophy is not, then, purely a matter of impersonal reason, but living: bound up in the temperament, character and history of the person who expounds it.

Form, not inform

In short, the point of philosophy is not to inform, but to form.

If only this were so easy. As I wrote here:

The trouble with philosophy for a lot of people is that despite its highly practical aims, there exists a chasm between abstract thought and its real-life expression. Some people’s minds are fluid enough to think themselves into better living with an obsessive openness to experience and a few rounds of reflecting on the helpfulness or otherwise of an action. Others… can’t. Money is the best bridge across the chasm.

Western philosophy speaks of the importance of living an examined life. What better way to do this than with the unequivocal accounting record of your life choices that your credit-card statements provide? Eastern philosophy centres on a meditative process of overcoming self-deception. As we’ll see on just about every page of this book, nothing keeps the fires of our self-deceptions burning like money.

Philosophy is not something to look at; it’s something to look through. It’s a way of seeing. It’s a way of studying yourself, the world, and the interplay between the two. It’s a set of lenses that brings clarity to the complexity and fuzziness of your vision. It is lived, not possessed. It is brain surgery. If it doesn’t literally change you, and better equip you to interact with the world, then it’s not working.

Crucially, this goes beyond psychology. Where financial psychology describes, explains, and occasionally prescribes means of controlling an environment to improve in-the-moment behaviours, and consequently financial outcomes (which can be extraordinarily valuable!), financial philosophy is about rewiring your brain to defeat self-deception by seeing more clearly, rather than playing behavioural whack-a-mole.

Behavioural tricks are brilliant because they reduce the cognitive load of taking the right action at the right time. But psychological tricks are less necessary when you defeat the problematic self-deceptive tricks that triggered their need.

Philosophy is a means of trusting your own truth so you don’t get waylaid by someone else’s. Personal finance therefore demands a philosophy. A way of understanding yourself, and how you live with money. Without one, you waste money, time, and energy chasing other people’s dreams, and flick from one siren-call of investment advice to the next, never sure if what you’re doing is right for you.

Describing systematically silly behaviours and ‘nudging’ people away from them does help people buy better investments. This is a good thing. But the point of nudges is that their prescriptions are followed without the follower noticing. Unhelpful tendencies are to be side-stepped, rather than explained, understood, engaged with, and consciously changed. This again is a good thing… in most circumstances. Not only because through the new actions, one may become a new person (rendering the old problems redundant), but also because most things aren’t worth the extra effort engaged choice demands. When it comes to increasing the efficiency of collecting taxes, or reducing the inefficiency of washing hotel towels, it is better to be blindly led along society’s preferred path.

Your relationship with money is different. Because blindly following society’s preferred path is precisely most people’s main money problem. And save perhaps for a few dozen people living in anarcho-syndicalist collectives in hippie communes, whether you want to or not you engage with money every damn day, even when – especially when – you’re deliberately trying not to.

Seek enlightenment not enablement

Most financial advice isn’t about providing convincing answers; it’s about providing persuasive reassurance. Why we’re spending or investing, and what we’re spending or investing on or in isn’t nearly as important as doing enough to stop the nagging feeling we need to do something. We pay advisers not to think up a suitable solution, but to avoid having to think of one ourselves.

However, this reassurance illusion doesn’t change unhelpful behaviours. It enables them. Buying a blindfold stops you seeing, not the things seen.

Our daily money engagements are central to determining who we are and the goodness or otherwise of our life. There is nothing more crucial to do consciously. Engaged, conscious choices come from the way we relate with the world. This is the job not of investment analytics, but of philosophy.

Next post in the Whole-Brain Personal Finance series:

page#87: Sum malfunction: a sure-fire way to spot if you’re being a financial idiot

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