Saturday, September 15, 2007

Ayn Rand, Objectivism, and Trading

A New York Times article chronicles the impact of novelist/philosopher Ayn Rand on business leaders. It's quite amazing that her 1200-page book, Atlas Shrugged, is now 50 years old but ranked in the top 500 of all books sold on Amazon.

My experience at various trading firms and with traders across settings confirms the NY Times piece: many market participants are attracted to Ms. Rand's philosophy (which she called Objectivism).

Here are a few Objectivist principles that are especially relevant for trading:

1) The Primacy of Reason - There *is* an objective world out there ("existence exists", as Ms. Rand puts it), and our survival depends upon the exercise of our reasoning mind to grasp reality and base our actions accordingly. Following Aristotle, Rand defines man as "a rational animal": reason distinguishes us from other species. There is no greater moral virtue than the independence exercise of one's reason, for that is what enables us to survive.

2) The Virtue of Self-Interest - This is probably the most misunderstood facet of Rand's philosophy, as what she calls "selfishness" is commonly thought of as hurting others in order to further oneself. Rather, Rand declares that each person has the right to live for him or herself and pursue his or own fulfillment, as long as that does not violate the rights of others. Serving others is not perceived as a moral imperative; rather, the idea is to live a heroic life in which one strives effortfully, using one's reason, to pursue worthwhile goals. Rand defines the "good" as that which furthers life.

3) The Imperative of Freedom - If individuals are to live lives guided by reason and the pursuit of life-furthering goals, they must enjoy the political and economic freedom to do so. The ideal State derives its (limited) power from the consent of individuals who possess fundamental rights; the State does not grant rights to individuals or take them away. Freedom in the political sphere is expressed through democracy, fundamental rights, and rule of law. Freedom in the economic sphere is expressed through the right to own private property and the ability to pursue one's own economic goals (capitalism).

Why do I say these basics of Objectivism are relevant for trading? I believe that the successful trader is, in essence, living out these principles: using independent reason and judgment to pursue self-chosen goals and exercising the prerogatives of economic and political freedom.

Perhaps most important from my own perspective is the way that Rand, as novelist, captures the heroic dimensions of human life and what is possible for each of us. In the characters of Howard Roark in The Fountainhead and John Galt in Atlas Shrugged, we encounter people of principle, who fight for those principles, and make a difference as a result. Her novels, I believe, are as much a spiritual compass for readers as a philosophical one: hence their enduring appeal, particularly to young people.

The best Objectivist advice I can give traders is to not be afraid to dream and dream big, but to always have the determination to act on reality, not fantasy. There is much to be said for having your eyes on the stars and your feet on the ground. If your life is a canvas or ball of clay, your mission is to fashion a work of art. Your life belongs to you: not to other people, not to a sovereign State, and not to religions and cults. Make it count.


Trading and Heroism

Blueprint for an Uncompromised Life