Not all knowledge is created equal; life is lived beyond the boundaries of the textbook – your knowledge of how to live it needs to match
Philosophy is pointless if it doesn’t help you live better. It does this through upgrading the quality of your decision-making. This is not, however, about individual decisions. It’s about cultivating underlying wisdom that makes wiser decisions your default setting. Any plan predicated on being able to summon peak perspicacious powers on cue is doomed to fail, especially when those powers are most in need.
What counts as wisdom is a complicated topic. Focusing on money helps to keep our eyes on a guiding, practical prize.
There are four ways we can ‘know’ about money.
This concerns statements of fact. It is knowing what stuff is, usually in the form of ‘I know that…’. It is universal, unchanging, and independent of context. The numbers in a bank account, for example. Indeed, wherever numbers are the focus, we’re in the realm of propositional knowing, and we no more have any insight about money than we have insight about what it’s like to share a meal with someone when we know how long the table is and what our companion is wearing. Propositions are related to beliefs. To do anything with them, we need to add some procedural knowing.
This concerns technical skill; pragmatic, practical know-how. It is how stuff works, not just what stuff is. It is variable and context-dependent. It is knowledge garnered through competence on the road to mastery, that requires the sort of refined motor patterns and brain maps that can’t be trained from reading a textbook: think of the difference between the action of swinging a tennis racquet and the physics of it. Most advice gets stuck here, because for the dispensers of advice, it’s simply so much easier to sell you an objective blueprint than it is to help you more deeply. Note that tailoring a blueprint to your situation is different to developing an understanding of the interplay of you and your situation from within (which is what we ultimately want). Procedural knowing can take a factual proposition like not chasing performance and put it into a set of investment principles. However, living those principles, using them to improve not only your portfolio, but what that portfolio does for your life, requires additional perspective.
This concerns awareness and perception in context. It is knowing what is relevant right now, in your current circumstances. Right now, these words are (hopefully) standing out for you, but the feel of your clothes on your skin is likely not (at least before you read that). In the world of money, perspectival knowing is about awareness of opportunity costs. Every time you do anything with money, you are not doing another thing. This is too-easily and too-often forgotten when we’re blinded by the shininess of short-term super-salient things thrust into our faces by sales tactics.
Intention is important here. Just as the same chat-up line can bomb if delivered from a place of desperation where it would successfully woo if delivered with confidence, so can the same purchase action work if the intention is to live aligned with a personal version of the Good Life, rather than one borrowed from an advert. Society will solve neither the opioid crisis nor its web of individual meaning crises when it thinks the solution is for sale.
Perspectival knowing is to know money by knowing what it is like to be a person that has some, to see it in the context of a universe of opportunity costs. It is the knowledge of what it is like to be something, i.e. a human in a particular time, place, and situation. This makes it closely linked to the next type of knowing. Because to be that human is a snapshot, but that human is also always becoming another human.
This concerns a shared, symbiotic, identity-based knowing. There is an inherent degree of internalisation (rather than mere ownership) of object by subject. It is money becoming part of the same pool of a human’s resources, as their intelligence, network, bodily abilities, life expectancy, etc. – one of many resources all aimed at a single goal. The classic example is the knowledge of what it is like to be a parent. It is a transformative experience, that cannot be known in advance by any amount of propositions, mastery of any procedure, nor even understanding of a parental worldview from either the parent’s or the world’s perspective. Because the act of becoming a parent changes the person doing the knowing, the only way to know what it’s like is to be, or rather become, one.
More crudely, a pen takes on a use only when there is a human hand there to pick it up and write with it, and a human-pen hybrid is fundamentally different to a human and a pen side by side; the act of writing with the pen is fundamental to neither human nor pen. Our participatory relationship with money is incessant. Our interactions with it are constantly shaping our identity and the environment in which that identity is finding its way. And the money-environment in turn shapes us.
Leverage participatory knowing for lasting behaviour change
In Alchemy, Rory Sutherland relates how ‘Robert Zion, the social psychologist, once described cognitive psychology as “social psychology with all the interesting variables set to zero” ’.[i] Analysing human behaviour outside of social context is of very limited value. Knowing money in a propositional and procedural way is incidental to our lives. Knowing it in a perspectival and participatory way is instrumental and integral to them.
I’d read Aristotle many years before working in financial advice, but seeing people relate to money, and the effect of those relationships on the quality of an individual’s life transported the different-types-of-knowing theory from the ancient world into something more modern and more practical.
By definition, if you want to change a behaviour, your knowledge of a thing must extend beyond its narrow technical boundaries. Otherwise you’ll be like every other schmuck who has ‘tried everything’ in a battle against an unwelcome behaviour, save for questioning if the identity that is bankrolling the resistance must continue to be supported (for example, a belief in a ‘sweet tooth’ or other narrative-backed as opposed to biologically backed addiction).
What we’re aiming for is practical insight. When you know the role something plays in your life, how it becomes a part of you, and how that subject-object hybrid fits into the wider world – only then can you claim any sort of insight into using this knowledge in the service of something practically wise. As Jung wrote, ‘Does a thing or fact ever mean anything in and of itself? We can only be sure that it is always the human being who interprets, that is, gives meaning to a fact. And that is the gist of the matter for psychology.’[ii]
If you know what a thing is, how it works, how it sits in context, and how it works with who you are, there’s no excuses for not using it well. This book is about cultivating a philosophically grounded conviction within you, rather than the old-school sales model of trying to persuade you of something for long enough to guide an action or two until a more persuasive idea comes along. To return to Jung, ‘The artful denial of a problem will not produce conviction; on the contrary, a wider and higher consciousness is called for to give us the certainty and clarity we need.’[iii]
Right now, we’re too deep in the weeds to make sense of it all. The wiring of our money-mindset neurons is as messed up as a pair of headphones that’s been stored in a salad spinner. And of course this is taking place in a society incentivised to be painfully unhelpful in both prescriptions and how obnoxiously they’re promoted. We need to zoom out.
There is, naturally, a posh technical term for a psychological zooming out – construal level theory. This is psychologist for chilling out and stepping back for a second to make challenging tasks easier. It doesn’t matter if the distance you create is in time or space, or is more mental or hypothetical. Think of acting as a devil’s advocate or of Brian Eno’s set of ‘oblique strategies’ cards. So what does the world of money relationships look like when viewed from above?
One of the best tools in a financial planner’s toolkit is time travel – breaking the usual ‘buy now’ framing of financial decisions, and considering the consequences of a decision in 10 minutes, 10 days, 10 months, or 10 years’ time? How long did the uplift from the last similar purchase last? Did you adapt to a new world that was the same as your old world, only more expensive? Or did life become consistently better thereafter? What does one small decision now look like when aggregated into a lifestyle choice?
This simple exercise works because it forces you to break out of the first two types of knowing and reminds you that your financial decisions have relevance only in the context of your life. It helps you see yourself and your circumstances – and the interplay of the two – differently, reframing what appears relevant, and then applying your powers of reason to make a wiser decision. Making wise decisions without such a transformation in your view of both yourself and what is most salient to that self, especially when it comes to money, is nigh-on impossible. Seeing money issues as a series of isolated incidents is at the heart of how people mess things up. People see money in isolation and forget themselves. If we want to make proper changes, we need something more systematic.
As John Vervaeke explains, ‘If you try to change your behaviour and you’re not doing things that give you skills and identities for altering your salience and your sense of self, your ability to change a behaviour fails.’[iv] Recall how even with all the propositional and procedural knowledge in the world – a perfect nutritional blueprint – a diet is doomed to fail if the dieter never changes the belief that they possess a ‘sweet tooth’.
Your beliefs about yourself have both internal and external origins. Those imposed by society are often the most resistant to challenge. Zooming out makes this easier. As Vervaeke continues, ‘You’re less easily pushed around by social influences precisely because you’ve lifted yourself out of that usually unchallenged arena of behaviour. It makes you more creative, it generates systematic insight.’
Moving between levels of construal – zooming in and out – produces the sort of systematic insight that improves your relationship with money. Flipping between high-level theories and their real-world application aims at changing behaviours right from their roots in your brain. To become a better thinker is to become a better person who consequently becomes a better thinker, and so on. Procedure becomes process becomes perspective becomes participation.
This is the map for our journey out of the cave of faulty financial thinking, and towards an embedded practical wisdom.
 These correspond to the Ancient Greek terms episteme, techne, noesis, and gnosis. Though these terms (and indeed other ancient words to do with knowledge, wisdom, intelligence, insight, etc.) have been around for millennia, I am hugely indebted to John Vervaeke for breathing new life into them in a modern cognitive-science context. Where possible, I’ve avoided using uncommon words, though it has not always been possible. Unfortunately accurate understanding is a casualty of the drive for simplicity over precision. Simple is great, but simplicity for simplicity’s sake is a false economy. Precision is paramount if we are to avoid fooling ourselves with equivocation and the illusion of true understanding.
 To borrow the language of L.A. Paul, from Transformative Experience.
 A deck of cards designed to help artists break creative blocks by encouraging lateral thinking, e.g. work at a different speed.
[i] Rory Sutherland, Alchemy
[ii] Carl Jung, Modern Man in Search of a Soul
[iii] Carl Jung, Modern Man in Search of a Soul