My 2-step approach to a stress free life

I’m sitting here in a busy coffee shop writing this.

I look around me, and I notice that most of the people sitting here have a smile on their face.

It strikes me as odd.

Not because I don’t like it - quite to the contrary.

It strikes me as odd because it’s the exact opposite of what I typically notice at restaurants, coffee shops, airport lounges, etc: most people tend to have that “blank stare” look. A look which says “I’m not happy, I’m continuously worried, and I don’t know what to do about it”.

That’s what people probably said about me until a few years ago. I was one of those faceless characters in an airport lounge: not really unhappy, but not happy either.

What changed? many things changed, but it all started with a change in my “life’s philosophy”.

A few years ago, I discovered Stoic Philosophy. I read Seneca, Marcus Aurelius, Epictetus, and others.

Stoic philosophy made me “think”.

It made me look at my life from a completely different perspective.

Did Stoic philosophy make me a calmer, happier person?

No, it didn’t.

Stoic philosophy did set me on a path of research, exploration, self-discovery, and experimentation however.

It is through that journey that I discovered how to make Stoic Philosophy “work for me”.

It is through that journey that I discovered how to use a “Stoic” way of thinking and living to live a stress-free life.

I approached this through 2 major steps: Contemplation & Hedging.

STEP 1: STOIC CONTEMPLATION

Stoic philosophers spent a lot of time thinking and mentally rehearsing negative events which might occur in life.

Their belief was that spending the time to imagine the “worst case scenarios” in life actually happening, living them mentally and feeling the emotional pain would “vaccinate you” against the negative impacts of such events when they happen in real life.

Yes, you may still be surprised by a negative development in your life, but to a lesser extent.

Yes, you may still get deeply hurt by such events, but the pain will be weaker and more familiar.

You no longer feel that such events are “the end of the world”, because you imagined them and you thought about them, and you developed a strong belief that they are NOT the end of the world.

Spending a couple of hours on the last weekend of every month in solitary contemplation of such matters will make you mentally stronger, more resilient, and will build in your the resolve needed to overcome life’s challenges.

STEP 2: HEDGING

I worked in the hedge fund industry for a number of years, and the biggest lesson I learned is this:

There are 4 reasons a “common” investor can loose money in the markets:

1. “Small” and “Predictable” events.

2. “Small” and “Unpredictable” events.

3. “Large” and “Predictable” events.

4. “Large” and “Unpredictable” events.

A sophisticated investor will recognise “predictable” events and protect him/herself against it.

A sophisticated investor will not care about “small” events, whether they’re predictable or not.

Therefore you will rarely see a “sophisticated” investor loose money because of 1, 2 or 3.

However we saw HUGE losses from “sophisticated” investors in 2008-2009, losses which wiped out all of their profits from many YEARS!

And all of them were hit by such losses because of reason number 4: “Large” and “Unpredictable” events.

Who were the ones that survived and made money during that period? Those were the “smart and sophisticated” investors (most of them hedge funds) who were very much aware of Number 4 and they protected themselves against them.

I approach my life in the same manner.

The Stoic Contemplation exercise I talked about earlier is meant for one thing: Identify my “Number 4s” - identify events that are UNLIKELY  to happen, but if they were to happen, would have a HUGE IMPACT on my life.

What are examples of my Number 4s?

- Getting a life-threatening disease.

- The bank where my money is going bankrupt and my money disappearing.

- Loosing my health and ability to work.

- Loosing my job.

- Loosing a loved one.

- Being hit by a PR scandal.

- Loosing my ability to walk.

- Etc.

I spend the time through my Stoic Contemplation imagining such things “actually happening”. I “live” them in my mind as if they have actually happened. I inoculate (vaccinate) myself against them.

But this is not enough, I take things a step further and do what these successful hedge funds do: I “HEDGE” (protect) myself against them.

What if I get a life-threatening disease?

1. I make sure I have enough medical knowledge “today” to make the right choices and navigate with confidence if this happens.

2. I have a life insurance policy in place to financially support people I’m responsible for.

What if I loose my ability to work?

1. I have a disability insurance policy in place that provides me with a large payment if I’m physically unable to work.

What if my bank goes bankrupt?

1. I make sure I properly assess the health of my bank, the banking sector and the country.

2. I make sure to distribute my money across a number of banks and minimise such risks.

And so on and so forth.

The end result is that I live a stress-free life because I imagine the “absolute worst case scenario” in EACH area of my life and I have plans (Plan A, Plan B, Plan C) to deal with such scenarios if they were to happen.

I don’t expose myself to the “unknown”, I protect myself against it as best I can.

Is it 100% crisis-proof? Of course not! But it’s certainly better than being completely exposed and at the mercy of “chance”.