#67 The Ideal Investor: Learning from Ulysses
Timeless Wisdom for the Modern Market
The investing landscape, with its unpredictability and complexity, often mirrors the intricate tales of mythology more closely than the clear-cut, “perfect,” and engineered models of current academia. This dichotomy underscores a profound truth: reality often subverts the neatly laid principles that economists, much like theologians or moralists, propose. The behavior of individuals and markets frequently aligns more accurately with the narratives found in novels than with the rigid frameworks of theoretical models.
In a world of uncertainty and challenge, the ancient story of Ulysses, celebrated not just for his bravery but also for his unmatched wit and resilience, stands as a surprisingly relevant beacon for today's investors. This connection, masterfully explored in Georg Von Wallwitz's "Odysseus und die Wiesel - Eine fröhliche Einführung in die Finanzmärkte" and base for this article, spans millennia, positing that the attributes of a classical hero can impart significant insights into modern financial strategies. It serves as a testament to the idea that the core elements of human nature and decision-making endure, even as the contexts in which they operate evolve dramatically.
John Maynard Keynes recognized that investors, distinct from speculators like his younger self, require something beyond mere calculation: an entrepreneurial spirit, or what he termed "animal spirits." This concept is further elaborated in the "Dialectic of Enlightenment" by Max Horkheimer and Theodor Adorno, who portray the ideal entrepreneur through the lens of the Greek hero Ulysses. This portrayal suggests that, akin to entrepreneurs, investors ought to embody the qualities of Ulysses—combining foresight, courage, and resilience to navigate the financial odyssey with wisdom and integrity.
If you enjoy Edelweiss Capital Research, then you should check out Shareholder Vote Exchange (SVE).
Owning stocks gives you the right to vote in major decisions that a company makes, such as choosing the board of directors or approving M&A deals. And yet, more than 80% of individual investors waste these valuable voting rights each year.
With SVE, you can now earn passive income by monetizing your unused shareholder votes. SVE enables investors to trade their voting rights, so passive investors can earn value from their votes, while engaged shareholders can have an outsized impact on corporate affairs.
✅ Register on SVE to start earning!
Ulysses 101: Prelude
The stories of Ulysses (Odysseus in Greek) span two of the most epic poems in human history: Homer's "Iliad" and "Odyssey." These ancient texts not only capture the essence of Greek mythology and heroism but also offer profound insights into human nature, leadership, and the quest for homecoming against insurmountable odds.
The Iliad primarily recounts the events of the Trojan War, focusing on the rage of Achilles and the siege of Troy. Ulysses, known for his cunning and diplomatic skill, plays a crucial role in the Greek strategy against the Trojans. He is portrayed as a man of wisdom, resilience, and strategic thinking, often serving as the voice of reason and a mediator among the Greek leaders. His contributions to the war effort, including his participation in critical missions and his role in the deception of the Trojan Horse, highlight his importance as a hero who relies on intellect as much as on bravery.
The Odyssey follows Ulysses' tumultuous journey home to Ithaca after the fall of Troy. It is a tale of survival, temptation, and the longing for home and family. Ulysses faces numerous challenges, from the wrath of Poseidon and encounters with mythical creatures like the Cyclops Polyphemus, to the seductive Sirens and the perilous passage between Scylla and Charybdis. Throughout his journey, Ulysses' adaptability and unwavering determination guide him through hardships.
These epic tales of Ulysses offer a rich tapestry of lessons that resonate through the ages, making the character an apt metaphor for the modern investor navigating the complex and often unpredictable journey of the financial markets. Just as Ulysses navigated the challenges of gods and monsters, investors too must chart their course through economic uncertainties and market volatilities with wisdom, patience, and foresight.
1. The Quest for Wisdom: Intelligence in Investing
Ulysses has endured countless critiques and comments about his character, but his most notable quality is his intelligence. This is why the Greeks valued his counsel so highly during the siege of Troy. He's the man of sound judgment, moderating emotions when others are boiling with rage and despair after years of warfare. A good investor maintains calm, reflects, and isolates from the constant stream of information. Ulysses is the Greeks' main liaison with Athena, who prefers the company of intelligent men, after all, she is the goddess of wisdom.
"Ulysses' intelligence is akin to that of a cat watching a mouse hole. A smart cat knows the world isn't just cats and mice. If it wants to live a long life in addition to catching mice, it does well to glance sideways while stalking the hole. It's always good to keep an eye on the door, in case a dog appears. It senses that just as it hunts, it can be hunted. It's aware that in the world, there are cats, mice... and dogs. To succeed, our cat must not forget its hunting instinct and must always be aware that something can go wrong. Ulysses' skepticism allows him to weigh the risks and stay alive." How often do we read endless investment theses repeating the same arguments that do nothing but confirm our own ideas and biases, lacking any critical thinking at all? Things are not always as they seem. Risks can be evident, or not. It's our job to always look sideways and expect the unpredictable, even in opportunities that seem "too good to be true."
Ulysses is cold and calculating, attributes that don't exactly make him likable. When Circe tells him that to get home, he must pass between Scylla and Charybdis, he hesitates but is willing to sacrifice his companions. Scylla will devour six of them. When there's no alternative, he doesn't overthink it. Perhaps what a great German bank president once said is true: "If you want loyalty, buy a dog." People often fall in love with the companies in their portfolio. It's a beautiful love story, until it ends. Being critical and pointing out the negatives of any investment makes us seem repulsive when it's much easier to nod along and follow the stream of thought.
A perpetual dissatisfaction, a fighting heart, prompts him to always look for a way out even in the most desperate situation, as in the cave of the man-eating Cyclops Polyphemus. He knows Scylla and Charybdis are an exceptional case. Normally, there is a solution for every problem. Ulysses never panics; on the contrary, he analyzes the situation to discover what options he has. He often contemplates several possibilities and tries one after another until he hits the nail on the head. This is the entrepreneurial spirit we talk about. That capacity for reinvention, to try, to change, to make mistakes and fall, but to have the spirit and strength necessary to get up, learn, and move forward, is identical to the entrepreneurial spirit of the investor.
For example, with the strategy of the Trojan Horse. He doesn't mind lying if it serves his ends. In this, he is very much like his mentor, Pallas Athena. The important thing is the goal he is trying to achieve; the means don't concern him. Whenever he can, he resorts to a ruse. He tries to avoid open confrontation by all means. In such a situation, it's never clear who will come out victorious. He's not inclined towards a heroic death. He has seen too many heroes die. Sound familiar? "Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1."
2. Risk and Skepticism: Learning from the Sirens
Ulysses secures his bets and rejects risks he cannot calculate. He's a fighter who, before facing his enemy, tries to foresee the final outcome. Ulysses does not relax. He's always thinking about his next goal. This makes living with him not easy. The nymph Calypso, who was his lover for many years, bitterly laments when the relationship with the hero comes to an end: "You're a real rogue, you never take your mind off the end you're pursuing." This passage is especially inspiring and is reflected in the day-to-day life of the investor. Investing is a never-ending task, because you're never going to know everything you need to be able to invest rationally. That's why it's so important for investors to be continuously learning more, looking at more companies, turning over each stone on the path. This insatiable need to know more is what makes this so attractive (for the nerds who consider this attractive). This carries, like everything, a trade-off in life and relationships. And a clear example we have in Buffett and the relationship with his wife and children.
Moreover, the best friend of the goddess of wisdom always seeks a rational solution. He knows his emotions can play tricks on him and takes appropriate measures to avoid it. When necessary, he chains himself to reason. He ardently wants to hear the siren's song but knows their end is to attract sailors, mock them, and watch as they crash against the rocks in front of them. That's why he puts wax in his companions' ears and has them tie him to the ship's mast. In this way, he can hear the song without risking losing his good judgment. Why do great investors stay away from the futile noise of Wall Street or London and go to places like Omaha or deep in the Swiss mountains to be focused on what's really important?
Perhaps what's most surprising about Ulysses is that he doesn't boast or become vain. The importance of doing homework beforehand, critical and rational thinking. Ulysses has a high concept of himself (which leads him to be able to stand firm in his beliefs when they go against the rest) and doesn't need to prove anything to the rest of the world. He denies his name and condition when it comes to deceiving the Cyclops or staying at the house of the swineherd Eumaeus. Ulysses can be very humble when it suits him. He doesn't mind admitting he was wrong and corrects his mistake. If he weren't so calculating, the moderation with which he behaves would make him a likable guy.
Ulysses always covers his back. He thinks of nothing before his own survival. Ulysses survived the Trojan War and, although it took him a while, he finally managed to return home happily. Part of the criticism has taken it badly because a hero should die for his cause. The fate of a hero is sealed with the fight in which he finds his end. Hector succumbs fighting Achilles, and his corpse is dragged through the dust; Apollo guides the arrow towards Achilles' heel, his only vulnerable point, and thus ends him. That's how heroes die.
3. The Long Journey Home: Patience and Persistence
Ulysses' personality is too complex for us to see him as a hero. The truth is, it's hard to identify with him unless one considers oneself an entrepreneur or businessman. Often his soul is divided. Perhaps that's why the only thing he wants is to return home.
The profile of the protagonist of the Odyssey is that of a man who has learned a lot during his travels, who adapts to circumstances but does not resign himself to his supposed fate, who has no scruples, who acts with intelligence, who is not greedy, who does not settle, and above all, who is very lucky. However, above all, Ulysses is a skeptic. He is always threatened by new dangers, he counts on it and always considers whether the risk might even be greater than it seems. There is no one he fully trusts; he suspects everyone and everything. Homer does not grant Ulysses the qualities of a hero, but those of a person who (essentially) is successful and reaches (over time) his goals. Isn't this the day-to-day of millions of investors on their journey toward knowledge and freedom?
But let's be realistic. In general, people like Ulysses are not liked. It's not at all clear what women like Circe or Calypso see in him, except for his status and cunning intelligence. The only thing we can ascertain is that Ulysses obviously has qualities that allow him to survive--and find peace and rest at the end of his path in a cruel world, where both his friends and enemies are destined to succumb.
The Dialectic of Enlightenment argues that the qualities shown by Ulysses greatly facilitate the life of an entrepreneur or investor. This is true, but unfortunately, it is an ideal. If all those who invest in the stock market had so many resources, were so intelligent, practiced such healthy skepticism, and didn't tremble when making decisions, there probably would be no business at all. No one would fall into the traps set by others, because someone like Ulysses can smell the traps. Everyone would have tremendous success with formidable women like Circe, Calypso, and Penelope. What more could you ask for? Unfortunately, we are far from reaching that ideal, and upon reflection, maybe it should be that way, because an ideal that is within everyone's reach ceases to be an ideal. But that's another question.
If you enjoyed this piece, please give it a like and share!
Thanks for reading Edelweiss Capital Research! Subscribe for free to receive new posts and support our work.
If you want to stay in touch with more frequent economic/investing-related content, give us a follow on Twitter @Edelweiss_Cap. We are happy to receive suggestions on how we can improve our work.
great piece as always, thank you!