I WAS SURPRISED to realize the other day that, despite the varied topics HumbleDollar has addressed, I couldn’t recall a single mention of Sun-Tzu, the 6th century B.C. military commander who purportedly wrote The Art of War. The book is a favorite read of business schools. Even a cursory search on Amazon shows how often Sun-Tzu and The Art of War are invoked regarding business, finance and investing.
For many years, I taught The Art of War in classes ranging from military history to government to religion. Sun-Tzu is sometimes wrongly used to justify business and financial aggressiveness—always moving forward—rather than to encourage thoughtful planning. Ironically, some who recognize Sun-Tzu’s message of thoughtfulness lambaste him for it.
Most of The Art of War is not about actual battle. As much as possible, for Sun-Tzu, the moment of conflict should be as predetermined as possible, with little room for spontaneous heroism. A general doing right by Sun-Tzu has few surprises to overcome nor any need to save the day.
In more modern terms, trial lawyers often say the perfect trial, unlike those on TV, is one with no surprises. Even better, the ideal trial might be one that doesn’t actually occur, because the matter is successfully resolved without a costly and time-consuming trip to court.
Investors could learn much from The Art of War. They would find guidance on how to make choosing the right option more of a thoughtful process, rather than an impulsive horse-race bet.
If you read The Art of War, choose your translation carefully. I like Samuel Griffith’s for its concise martial understanding and Roger Ames’s for most all else. Once you dip inside, you’ll find not just specific rules, but general attitudes and approaches that maximize the odds of success in a variety of life situations. Here are three:
Know yourself and your resources. How much money do you have to risk? What’s your risk tolerance? What do you anticipate your needs will be in five, 10, 20 years? Before you step into any long-term commitment—from war to investment to marriage—start with a “should I?” analysis. This means taking a full inventory of yourself and your situation. A general knows the strength of his material and troops. An investor knows all his financial assets and has trustworthy advisors to counsel him. Both know their “acceptable losses.”
When considering a long-term engagement, supply lines are especially important. As your operation goes along, how do you plan to secure your daily needs? Will you be cash strapped, with your income consumed by the mortgage, with no extra for upkeep or repairs?
Understand the situation. You might hear a “gotta get in now” hot tip. But what’s the bigger picture? Is the market booming, perhaps bubbled? What does your market analysis say? What do you know of the nature and quality of the money arena you’re about to step into? From famed generals rushing into an ambush to daily investors being hooked by a pump-and-dump stock scheme, Sun-Tzu and Elvis will tell you that only fools heedlessly rush in.
Be flexible. The Art of War really can’t be understood without reference to the prevailing Daoist religious philosophy of its time. The good tactician is constantly moving, evaluating and adjusting. Westerners might think of the turning Taijitu or yin-yang symbol. A better invocation: We should try to be like flowing water, powerful but always moving, and even seeming to yield at times, until we ultimately prevail.
Sun-Tzu explains that we should alternate between a direct (Cheng) and indirect (Ch’i) force. Cheng confronts an opponent or obstacle. Ch’i circles around and tries to flank. If Ch’i is discovered, it can then become the Cheng main force, while a new indirect Ch’i is devised, perhaps even the old Cheng.
The same fluidity is true for investing. Got a great investment strategy today? How will it work tomorrow? Life changes, and we should adapt. Perhaps those high-risk, high-yield stocks should give way to safer annuities as you approach retirement or see an obstacle arising. What was good advice in driving school at age 16 is good investment advice for the rest of life: Keep your eyes on the horizon to spot changing circumstances and be ready to react.
You might notice I didn’t quote directly from The Art of War here. Besides wanting you to read it yourself, I also believe no single line should be taken as conveying a complete message, not even the ubiquitous, “All warfare is based on deception.” Rather, Sun-Tzu’s writings need to be understood as an interlocking whole, like an articulated army of many components, or a varied investment portfolio built to prosper under many circumstances over many years.
Jim Wasserman is a former business litigation attorney who taught economics and humanities for 20 years. He’s the author of a three-book series on how to teach elementary, middle and high school students about behavioral economics and media literacy. He’s also authored several educational children’s books. Jim lives in Texas with his wife and fellow HumbleDollar contributor, Jiab. Together, they’re currently working on a book, “Your Third Life: Reflections on Finding Our Way by Taking the Long Route.” Check out Jim’s earlier articles.