Wednesday, July 23, 2008

The Capacity of Self-Control

A quick checklist that might be of use by one under the influence of temptation… it the temptation to invest outside of one’s circle of competence, the temptation to break a diet, give in to a bad habit one is trying to get rid of, act over an amorous occurrence (per the example of Epictetus below), or anything else.

1. Remind yourself to take care of your _______.

To illustrate, let’s use the example of one who is either on a diet or just trying (or needs) to eat healthy. When that fresh, 2-slice special of double cheese, pepperoni pizza crosses your path, it may be useful to remind yourself of the importance of taking care of your body/health (to fill in the blank above).

To use another example related to investing, when you see a stock with huge upside but it is either a little outside of your circle of competence or has too much debt, it may be a good idea to remind yourself to take care of your downside first, before thinking about the upside potential.

2. Just because something exists and you are able to do something (i.e. it is physically possible for you to do it, whether you should or not), that doesn’t mean it is an option for you to do (way for you to behave).

Just because the pizza exists (or the orange chicken, fried rice and egg roll combo), that doesn’t mean it is has to be an option for you to pursue if you are trying to eat healthy. Consider only what falls within your parameters.

Likewise, just because a stock looks like it is really undervalued by looking at a few numbers or by looking at who else is buying shares, it doesn’t mean it should actually be an option for you to buy if it is outside of your circle of competence, even if you are physically capable of executing the trade.

3. Ask yourself, what capacity do you have to deal with this situation?

This final determination comes from Epictetus in The Encheiridion (#10 – Nicholas P. White translation):

At each thing that happens to you, remember to turn to yourself and ask what capacity you have for dealing with it. If you see a beautiful boy or woman, you will find the capacity of self-control for that. If hardship comes to you, you will find endurance. If it is abuse [abusive words], you will find patience. And if you become used to this, you will not be carried away by appearances.
For other translations of The Enchiridion (aka -The Encheiridion or The Handbook), click HERE.