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WHEN PEOPLE MENTION Eastern philosophy, Westerners often have images of mystic monks in saffron robes, surrounded by clouds of incense and speaking in cryptic riddles like, “What is the sound of one hand clapping?”
In fact, Asian philosophy can be very pragmatic in addressing everyday decisions, from family matters to investment choices—and many Westerners welcome the different approach to facing life’s challenges.
Daoism (also called Taoism) is one of the world’s oldest philosophies. It’s believed to have emerged more than 2,000 years ago during a period of dissolution, decline and prolonged warfare in China. Amid the chaos, many had a sense they lacked control over their life. Daoism helped address what to do when faced with such anxious times. Here are some of Daoism’s key points:
De (Te). There is a natural flow (Dao or Tao) to all things, with everything acting in its own way within that flow—birds gotta fly, trees gotta grow toward light. It’s their innate power (De) of tapping into the greater flow (Dao) to thrive. When we feel out of sync or even going against the flow, it does no good to rail against the way things are or fight against them. It’s better is to see how we can operate within what’s happening.
Aware of our own De, we can each take advantage of our unique qualities, natural skills and power to make the best of things. Don’t waste our breath saying the market is irrational. Instead, we should figure out the best way to move within the flow.
Wu wei. This is one of the most misunderstood ideas of Daoism because it is often translated as “nonaction,” seeming to imply that we should sit tight and hope all will be well. A better translation is “effortless action.” Imagine a rock in a stream. The rock seems to “win” by parting the stream. But come back after some years and you’ll find the stream has slowly eroded the rock away. That’s wu wei.
We tell our children to work through seeming setbacks, because the payoff is in the long game. We need to remember this for ourselves, perhaps socking away that little bit extra every year into a retirement account or paying a little more than the minimum due on debt. Such effortless actions can be the key to great long-run success.
Pu. As in Winnie, this concept originates from the idea of an uncut, rough piece of wood. Basically, don’t overcomplicate things and instead keep them as simple as possible. How many times do we start with a simple goal, but our diversions and clever workarounds take us in a far off and unwanted direction?
Make simple goals and maintain those goals. One goal might be time with loved ones. We shouldn’t derail it by spending 10 hours at work so we can somehow give more “quality” to the 30 minutes we end up devoting to the kids. Another goal might be retirement. We shouldn’t derail that goal by diverting boring steady growth investments into a get-rich-quick scheme. When we need something, we should try to get it and nothing more.
Fu. Many people are familiar with the yin-yang (Taijitu) symbol associated with Daoism. What most people don’t know is that the symbol is supposed to be rotating. This is to remind people that not only is life composed of opposites, but also that all things return (Fu) so that balance is restored. Sometimes darker, bad times (yin) prevail, and sometimes it’s lighter and better (yang) times.
We need to be mindful of this constant phasing in and out, and that it’s the totality that makes life what it is. A new job with a big raise doesn’t mean we need to stop saving for future bad times. A setback is not the end of our dreams, but perhaps a delay or an opening for a new direction. A balanced portfolio of stocks and bonds can hedge against the vicissitudes of the long-term market. Daoism also puts great emphasis on timing, that we need both the right outlook and right plan at the right time.
In many ways, a great overall “Daoist” investment is a low-cost target-date fund built around indexing. It doesn’t gamble by trying to “time” the market. It’s simple and goes with the flow of the market, good or bad, over time. It requires minimal maintenance and almost effortless action by investors, who merely need to contribute. The fund will adjust and rebalance at key moments, including shifting to less volatile investments as retirement gets closer.
There’s an old joke that the ancient Chinese invented the first complex bureaucracy, and then had to create the first philosophy to deal with the frustrations wrought by that bureaucracy. We have so many things that are different today. But the frustrations and anxiety that come with feeling things are in flux and beyond our control are timeless. Perhaps that means a philosophical outlook from long ago also still applies.
Jiab and Jim Wasserman just returned to Texas after spending the first three years of their retirement in Spain. Check out earlier articles from both Jiab and Jim.
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I love this. One of my favorite books of all time is The Tao of Leadership by John Heider. I used to give it to every new boss when I started working for them in the corporate bureaucracy we played in. Most of them appreciated it; I didn’t last long with those that didn’t!
Wonderful article. Very wu wei.