The Tao of the Dow

Posted on December 4, 1999 by lion

Confucianism and Taoism
Final Paper
Autumn, 1999
W. Thomas Grové

In this paper, I will draw a parallel between Taoism and capitalism. This will be accomplished by comparing the origins, ideology and social impact of Taoism with the origins and social impact of the stock market as represented by the Dow Jones Industrial average and the nature of good investment ideology.

Taoism emerged from the sea of philosophy that had been evolving and responding to itself, or its new and refined philosophies, in ancient China. Much of this philosophy was expounded by, and intended for, the literate, governing, and financially advantaged members of society. Out of this chaotic mix, that was attempting to find order in society, arose a sect who wrote down their ideals which would be added to and later given the name of the Lao Tzu or the Tao Te Ching. Taoist thought is some of the first metaphysical thought of China. In that way the Tao Te Ching does not aim to establish social rules and structure in the way that Confucianism did, although it definitely paints actions and personalities that would affect society. The Tao Te Ching instead offers an alternate perspective on the world to those perspectives offered before. Proposing a more passive role in life and an ideal that is more illusive, Taoism encourages the reader to observe the flow of the Tao and, from the later view of Chuang Tzu, to view situations from an impartial and high vantage point. This illusive ideal is perhaps best illustrated in the first chapter of the Tao Te Ching: “always rid yourself of desire in order to observe its secrets; But always allow yourself to have desires in order to observe its manifestations.”

The stock market, at first, was a playing field reserved only for the elite. However, keeping information secret is like holding water in a canvas bag, it’s bound to drip. Before long everyone was playing the stock market, but the information on what a company was worth was still kept only to industry insiders. At this point a man entered the scene whose background was representative of Lao Tzu’s lowly uncarved block. “Charles Dow came from humble origins, yet managed to transform the world of investing more than any high-powered money manager or investment banker.” (TMF).

Charles Dow, who didn’t complete secondary school, worked on a farm performing menial labor jobs from the age of 6 to 18. Dow went on to form a company with two partners in 1882, Dow Jones & Co. They released a daily paper called The Customer’s Afternoon Letter which printed consolidated stock tables and quarterly and annual information regarding company financials. “Dow’s publication leveled the playing field between the Wall Street elite and the individual investor.” (TMF) The Customer’s Afternoon Letter later became the Wall Street Journal, the preeminent publication of capitalism.

“Without stirring abroad, One can know the whole world; (Lao Tzu, XLVII)” By knowing a part, one can have a good idea of what the whole is like. Another aspect to be added to Dow’s publication was “an index that could be used to gauge the activity of the New York Stock Exchange as a whole.” (TMF) Today this index is known as the Dow Jones Industrial average. This index averages the stock prices of 30 companies that are considered to best represent American business. Their performance is used as a gauge to predict the value of the market at large. This information, which is unbiased, is interpreted by investors who use it to make investment decisions.

A good investor is like one who understands Tao and the value of the invaluable. What better time is there to get in on the investment action than the ground floor; the “uncarved” block of a company that has the possibility to grow into something quite valuable. “Adapt the nothing therein to the purpose in hand, and you will have the use of the cart. Knead clay in order to make a vessel. Adapt the nothing therein to the purpose in hand, and you will have the use of the vessel. Cut out doors and windows in order to make a room. Adapt the nothing therein to the purpose in hand, and you will have the use of the room. Thus what we gain is Something, yet it is by the virtue of Nothing that this can be put to use.” (Lao Tzu, XI). But an investor can not be blind. He must have a “Well polished mirror”. His mind must be sharp and he must have the perspective and foresight to know what will be a good investment. He must not be overcome by greed but he must instead use decisions based on reason, and intuition. “Hence the sage is for the belly and not for the eye. Therefore he discards one and takes the other.” (Lao Tzu, XII)

An aspect of the nature of the Tao can be described in a desirable/non desirable model. There are things that a person finds to be desirable. These include furniture, internet stocks with a high value, cars, flowers, books, et cetera. The undesirable things in the world give birth to these desirable things. Raw materials such as dirt, rock, wood, and a market are examples of this undesirable material. Yet, without these raw materials we would not be able to manufacture, grow, or create the desirable. As time passes, desirable things break, die, wear down, and eventually decompose. They once again return to their source and are undesirable. This cycle can be represented as an oscillation of continuous movement… things constantly flowing into and then out of “value” only for the process to repeat again… again… again… This is the Tao. Since the theory of the Tao attempts to describe nature, or the way things are, it only follows that this theory would also describe local, country, imperial, and world economies. This Tao can also describe the Dow Jones, the market, capitalism.

The stock market crash of 1929 is an example of the “flowing of water towards the lowest point” in capitalism. When the ability to purchase stocks in companies became public province, it was not long before purchasing stocks in companies became public practice. While the value of companies did gradually increase, the influx of predominantly unsophisticated investors drove the market higher than the companies’ valuations could support. A frenzy of greed developed in the market. In the years leading up to 1929, everyone got into the act. It is said that “shoeshine boys” were trading stocks on the sidewalks of Wall Street. Speculative buying and selling reached a peak in October, 1929.

The following article by Mark Underwood describes how this flow back to the valley occurred:

The rapid increase in industrialization was fueling growth in the economy, and technology improvements had the leading economists believing that the uprise would continue. During this boom period, wages increased along with consumer spending, and stock prices began to rise as well. Billions of dollars were invested in the stock market as people began speculating on the rising stock prices and buying on margin.
The enormous amount of unsecured consumer debt created by this speculation left the stock market essentially off-balance. Many investors, caught up in the race to make a killing, invested their life savings, mortgaged their homes, and cashed in safer investments such as treasury bonds and bank accounts. As the prices continued to rise, some economic analysts began to warn of an impending correction, but they were largely ignored by the leading pundits. Many banks, eager to increase their profits, began speculating dangerously with their investments as well. Finally, in October 1929, the buying craze began to dwindle, and was followed by an even wilder selling craze.
On Thursday, October 24, 1929, the bottom began to fall out. Prices dropped precipitously as more and more investors tried to sell their holdings. By the end of the day, the New York Stock Exchange had lost four billion dollars, and it took exchange clerks until five o’clock AM the next day to clear all the transactions. By the following Monday, the realization of what had happened began to sink in, and a full-blown panic ensued. Thousands of investors — many of them ordinary working people, not serious “players” — were financially ruined. By the end of the year, stock values had dropped by fifteen billion dollars.
Many of the banks which had speculated heavily with their deposits were wiped out by the falling prices, and these bank failures sparked a “run” on the banking system. Each failed bank, factory, business, and investor contributed to the downward spiral that would drag the world into the Great Depression.

All things eventually flow back to the valley.

This market crash came as a huge shock to the thousands of “blind” investors caught up in the craze. Something had caught their eye and they had ignored their bellies, investing money that they didn’t have. “Rather than fill it to the brim by keeping it upright, Better to have stopped in time; Hammer it to a point and the sharpness cannot be preserved for ever; There may be gold and jade to fill a hall, But there is none who can keep them. To be overbearing when one has wealth and position is to bring calamity upon oneself. To retire when the task is accomplished is the way of heaven.” (Lao Tzu, IX) You have to know when to buy and when to sell. If an investor knows the Tao then they know that “The Way is to the world as the River and Sea are to rivulets and streams”(Lao Tzu, XXXII) and a company’s value is to its stock price.. “That towards which they flow” (Zipporyn)

If an investor pulls back to this birds eye Taoist perspective, not only will they have a better idea of stock value, but also of market trends. If you examine a stock’s price on a graph that covers one month you may see a steep increase or decline in said stock’s market value. However, if you pull back, to say… one year, you may see that the stock has slowly been rising in value for the past 3 fiscal quarters. This gradual rise may have many sub peaks and valleys but the average stock value has continued to perform in a somewhat predictable way. Now, pull back even further on the graph to the company’s past 20 years of performance. You’ll most definitely see multiple instances when the stock rose slowly in value and then declined in value. If the company had a steep rise then the decline was probably likewise steep. If it was gradual, then perhaps the decline was also gradual. Knowing this kind of information, or seeing a company from this perspective, would help an investor to be comfortable with a company’s stock valuation corrections and even larger scale market corrections.

“The spirit of the valley never dies. This is called the mysterious female. The gateway of the mysterious female is called the root of heaven and earth. Dimly visible, it seems as if it were there, yet use will never drain it.” (Lao Tzu, VI) The valley in the stock market are the blue chip, good quality stocks. These are the companies who, year after year return good investment results, but who do not double overnight. The current speculation in the sector of the market represented by the internet stocks is a reason for major concern. Companies are valued at many times their revenue, if they even have any revenue. These are the mountains, and eventually all the money invested in these companies will flow back to the valleys. The blue chip companies.

Trees don’t grow to the sky… rivers don’t run uphill. The frenzy in the market will eventually always return to the Dow. Sometimes it appears to be bloated, other times it looks as though in a drought. But the long term investor knows that it’s just part of the cycle and that Dow is like the Tao in that, so long as people are doing business then, use will never drain it. That is the Tao of the Dow.

References

Quoted Material:

Lau, D. C., translator. Lao Tzu / Tao Te Ching.
Penguin Books, first published 1963

Befumo, Randy & Schay, Alex. The Motley Fool. History of the Dow
< http://www.scribe.fool.com/school/dowinvesting/HistoryOfTheDow.htm>

Underwood, Mark. Home page. < http://sac.uky.edu/~msunde00/hon202/p4/>

Ziporyn, Brook. Commentary taken from class lecture.

Additional Knowledge Referenced From:

Watson, Burton, translator. Chuang Tzu: Basic Writings.
New York. Columbia University Press. © 1964, 1996

Grové, William T.: Father and Investment Advisor.

Ziporyn, Brook: Teacher of Philosophy and Religion, Northwestern University.

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Sincerity

Posted on October 28, 1999 by lion

Confucianism and Taoism
Midterm Paper
W. Thomas Grové
Autumn 1999

Sincerity is one of the most important traits that a sentient being should display. This concept is at the core of Confucianism and, in a perfect world, the core of any religious (or should I say social language) system. In an even more perfect world, sincerity would be displayed in the realm of politics and commerce (but perhaps with universal sincerity politics would not exist?). The inherent wish that humans have for sincerity is linked directly to their basic needs and the human tendency to avoid sincerity (or perceive others to be withholding sincerity) is a manifestation of fear and survival (another animal instinct). It is in our root nature to be sincere and I believe that great people are true to this nature. In the animal world there is nothing but sincere thought. A bird thinks “I will kill and eat that snake” and the snake thinks, “I will hide in the grass. I will hunt mice and hopefully I will not be eaten by a bigger animal than myself.” The snake also thinks, “If another animal gets too close to me, then, I will bite it. I might not survive, but I’ll leave my mark.” Animals might use camouflage and tactics and bluffs to accomplish their goals but I wouldn’t consider these traits to be insincere for these actions are conditioned and evolved responses. They work, more or less, the same every time.

Humans are different. Humans not only deceive other animals, but also other humans and themselves. This is probably a side effect of the tree of knowledge’s fruit. The moment in our common (birth/mutation) history when something broke (or became fixed) and our brains made one too many neuron links. Well, it’s like the feeling that you get when you strap into a roller coaster, walk/jump off a cliff, put something in your mouth, or lose your virginity (not limited to sexual virginity). It’s a liberating and sometimes scary feeling, the feeling that we’re past the point of no return. So, since we can’t go back we have two choices: stay where we are, being content with an imperfect and unpleasant state of affairs, or move forward. I think that it’s like the maneuver pulled in The Hunt for Red October when the renegade submarine goes full speed towards a torpedo, striking it before the warhead has become armed. Timing is, and position is, what’s important here. To quote Hsun Tsu: “A gentleman must be careful where he takes his stand”.

The reason for insincere action is probably linked to experience. Upbringing and interaction with society comprises the majority of this experience. The inability to embrace sincerity in a sober frame of mind becomes a bit of a feedback loop or more appropriately a ring modulator. The results are chaotic, very interesting, and sometimes scary. One person’s negative, untrusting, or deceitful actions have physical and mental effects on all of those who were exposed to those actions and the ripples that said action triggered. This altered mindset causes responsive actions, not necessarily true to said affected individual’s nature, and thus, unconsciously, insincere action are generated. So, where is forward from here, and what kind of step and position is required to move in that direction? The direction is evolution and the steps might be social, individual, or scientific(genetic, chemical, technological). Since there is only one person writing this paper, and only a few people reading it, I am going to suggest an individual evolution. When individuals display Ren (goodness nature) in their sphere of influence, they are making an impact on other individuals and thus society. When society has a major social movement, then, policies change. If current policies (or political mindsets) were to change, it would be, because of, and result in, sincerity.

“Confucius said, ‘In hearing litigations, I am as good as anyone. What is necessary is to enable people not to have litigations at all.'(Analects of Confucius, 12:13) Those who would not tell the truth will not dare to finish their words, and a great awe would be struck into people’s minds. This is called knowing the root.” (The Great Learning, 4) I believe sincerity is a part of this root and necessary for knowing the root. If one is clouded by self-delusion, then they will not see the root. If said person is open and unafraid of pain then they will not lie to themselves, by not deceiving themselves they will be able to tell whether or not they are deceiving others. This is the pinnacle point and where the “moral codes” suggested by major philosophies can come in handy. The good or the dark side of the force? I am inclined to think that the moral/personal cultivation and conduct required in achieving a state of sincerity towards yourself and the awareness of your actions’ effect on others will yield a positive result. To shape the future, a better future, right?

If we get to this stage, then I would like to suggest a redefinition of sincerity. Kindness and compassion, virtue and respect, clear thinking and right timing. These basic human virtues, if applied with sincerity, are all of what makes up a great individual. The embodiment of Ren and a deity among men. I’ve known a few of these people in my lifetime. If you have too, then you know what I’m talking about. They’re the people who look you in the eye and who shake your hand or hug you with strength. They are the people who give you the time of day as if you were their own son, even if you’re socially or physically different than they are. They smile with a warm heart and, without expectation, offer the right words at the right time. What they say and what they do impacts your reality (perception of it) more than anything else does. They have become true to their nature and their nature is the same as the animals’ but with an understanding and compassion made possible from their advanced (and calm/well aimed) brains (mindset).

There’s a quote from The Great Learning (one of The Four Books, a compilation of four Confucian texts considered to be some of the core teachings of Confucianism) that must have influenced me greatly when reading it (or have expressed ideas that I found to be true/good) because it goes along perfectly with what I have said so far. “What is meant by ‘making the will sincere’ is allowing no self-deception, as when we hate a bad smell or love a beautiful colour. This is called satisfying oneself. Therefore the superior man will always be watchful over himself when alone. When the inferior man is alone and leisurely, there is no limit to which he does not go in his evil deeds. Only when he sees a superior man does he then try to disguise himself, concealing the evil and showing off the good in him. But what is the use? For other people see him as if they see his very heart. Therefore the superior man always makes his will sincere.” The only part that I would really modify here is in the last sentence. It was probably a translation mistake or something. I would change it to say: The superior man’s will is always sincere. Otherwise you run into a paradox, if the man is “making” his will “sincere”, than it isn’t really sincere, right?

This statement is echoed (I’m probably the one echoing) in the Analects of Confucius. This mention of sincerity is in regards to ritual (very important for Confucius), specifically the ritual of a three year mourning period for the death of one’s parent. I can’t find this passage (I know it’s in there!) so I’m just going to paraphrase it. One of Confucius’ disciples seeks some advice. His mother has just died and he wants to know if he must adhere to the ritual of mourning for three years. He asks “isn’t mourning for one year just as good as mourning for three?” Confucius answers: “If you would truly feel comfortable (sincere in your action) to mourn for just one year, than do it. But a good man wouldn’t feel right about this. After all of the years that your parent spent raising you, there aren’t enough years left in your life to mourn for them (yourself) properly. But three years is the custom.” I think that the overall lesson from this passage isn’t a prescribed time length of mourning. Sure Confucius is a big proponent for following ritual (to bring about social harmony), but that’s not the message either. It isn’t important how long you mourn, it’s whether or not you are feeling a loss. If you just go through the motions then you’re not really mourning.

So, why is the superior man’s will sincere? Because it is his nature. He does what he does because it feels GOOD! Why does it feel good? I think that Mencius (a Confucian, wandering advice giver, and a book) offers a nice perspective on this. Mencius believed that a good ruler would recognize that the wants and needs of everyone else in the empire were the same wants and needs that he had. If the emperor or feudal lord could “extend” their desires to those of the common people than there would be harmony and strength in the empire. Why? Because by doing this, the emperor would recognize that the other and the self were more or less the same. That in helping others he would be helping himself. This works on a physical and emotional level. Physically, if the people are in good health and treated with respect (as the emperor would like to be) than they would be happy. A happy civilization is one that will not over through the government and that will indeed support the government in times of war. On an emotional level, it is human nature to feel happiness when you see others who are happy, especially if something you did helped to make them happy. This, of course, isn’t exclusive to an emperor and can be practiced by everyone. Once this extension system is realized and known as true in the subconscious, than a person will naturally do the right thing, or honestly do what they believe to be the correct thing.

If sincerity can be realized, in you, in me, and in people in positions of influence and policy making, then virtuous decisions/action will be made. In such a world, progress (social and thus individual and thus social) unlike any other could be achieved. It would be nice if you didn’t have to worry about being screwed over. It would be nice if everyone was treated with respect. It would be nice if everyone acted in ways deserving of respect. I am doubtful that this will ever be universally true on this planet. But I hope that the reader will take something away from this (hopefully something positive) and apply it to their life. The world might not change but “your empire” can change. Right mind and right action are worthwhile goals. To paraphrase (bastardize?) Confucius one more time in this paper: “For some the way is hard and requires constant effort, for other it comes naturally and with little effort. Some are over ambitious and need to be told to be less ambitious and others are not ambitious enough and need to be encouraged to be more ambitious.” .

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Package & Seal

Posted on November 1, 1998 by lion

Ping ing ing … THUNK
Ping ing ing … THUNK

Psz zaa zee … EEZZH

Ping zng zee … THUZK

Textile, steel, plastik, Alloy
stamp, press, weave, stick.

zoom, tik tik tik, zoom.
PACKAGE & Seal, Fork lift.

Spend more, eat more, think less
EAT the overrated, fuel the
Demise of genious

artists starve, fucks get fat.

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Cutting The Edge of Möbius

Posted on October 1, 1998 by lion

On the horizon
I see in high contrast
ideal aesthetics
a closer look
a second pass.

Creating concrete from dream
blurring the lines
escaping reality
movement
shutter speed, kaleidoscope.

Dark long spiky hair
climb the summit
close my eyes
release my ego
souring consciousness.

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Electric Tunnel

Posted on September 1, 1998 by lion

Looking
through space
through time
A tunnel that breaks the surface

Break through lightning
my heart pounds faster
hair wisps by like feather drops
The wind leaves me here on
a concrete island.

Look for transit, a way through the tunnel
a faster train
a ship off this island.

My life spreads out
flowing cape of angel wings
take flight,
rip space,
transcend,

Does love wait?

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Cloud Dreams

Posted on March 1, 1998 by lion

Look at the sky,
so vast and wide;
keeps life moving,
like an endless dream.

Sometimes a bird,
or cloud passes by;
every so often,
someone stops to say hi.

And every morning,
as I wake from this dream;
I stare and I marvel,
at how real it did seem.

Wander on, travel,
experience new things;
keep on searching, for
the answers to your dreams.

In maybe a year,
a decade or two;
my dream searching
will lead me back to you.

Now I stare,
at the sky;
twilight approaches,
quick now i close my eyes.

Not to escape,
a reality;
but to travel,
to a new place.

Where adventure is waiting,
and friends whom i miss;
and life keeps on moving, changing,
like clouds or a kiss.

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Can I Say?

Posted on October 1, 1997 by lion

I miss you every day,
I miss you every day.

Can I say, how the night unfolds?
I can’t say, how my story ends.

Every little bit of sun,
can i say?
Catch it, lick the dew of dawn.

Just another day alone.

When i think of you I hold onto my arms;
I want to be with you and not alone,
can I say???

One day perhaps I’ll come to stay,
on that day a happy day.

All the fools will run around;
on lilly pads and under leaves.

Oh what joy to be with you!
My greatest dream, how long’s it been?

Can I say, I miss you ev er y daaaaayy.

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Blue

Posted on May 1, 1997 by lion

Blue angel dust whisked past my view, clouding my vision, grabbing my attention. Some sort of magic aura these pixies of the third race possess. I followed the blue cloud into the brass, wood, and stone chamber where I was to sleep out the night. Now that the fairies had left, the only illuminations came from a series of dark red candles which adorned my bed stand and the tops of a few old oak chests. What a soft light they produced, dim but ever so warm and comforting.

Undressing from my clothes, worn from heavy travel, I could see my image reflected in the polished silver mirror that stood to the left of the chamber’s door. The thick bed covers and straw-filled mattress were such a welcome sight. I blew out one of the candles on the dresser by which I had stripped my clothes. Dim.

I hardly noticed the numbing feel of the stone floor as I dragged my feet on the way to bed. It was cold but my thoughts drifted towards thinking about the landscape which I had seen today… and those who I had met. No mysticism like this had I ever known before.

Gliding into bed I blew out my bed-side candle, seeing the wax drip like blood with the dying light. Dark. I said my prayers and closed my eyes as thoughts raced through my head of what work Avalon would have me do… and the outside world dreamed of dying candlelight.

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