Trading Philosophy - Why Famous Investors Have Philosophy Degrees...
And the reasons that contribute to their success!
When studying famous hedge fund managers and investors, one common educational background pops up… A degree in philosophy. This question has always plagued me; Why is it that so many prominent investors have philosophy degrees? As I learn more about the discipline of philosophy I think I have a better understanding of why it may be the case. Let’s first have a look at the famous investors and their backgrounds to get a visual.
Investors with Philosophy Degrees:
Carl Icahn - Bachelor of Arts in Philosophy
George Soros - Bachelor of Science in Philosophy
Peter Thiel - Bachelor of Arts in Philosophy
Peter Lynch - Bachelor of Science (focusing on history, psychology, and philosophy)
Jim Rogers - Bachelor of Arts (focusing on philosophy, politics and economics)
Mark Meldrum - Doctorate in Philosophy
Dr. Mark is one of the leading third-party educational providers of the CFA program. Not as famous as the rest of the names listed but I wanted to include Dr. Mark because he has played a pivotal role in my learning process in the world of finance/ trading. And he is probably one of the most intelligent investors who records free content.
Now, what makes prominent investors gravitate towards educations in philosophy? There are a few reasons this is the case:
(1) Critical Thinking and Analytical Skills
Philosophy trains individuals to think critically, dissect complex problems, and approach them from multiple perspectives. A trader/investor needs to analyze vast amounts of information, assess risk, and make decisions based on incomplete or ambiguous data. Philosophy hones the ability to:
Spot assumptions and question them.
Examine arguments logically and recognize fallacies.
Evaluate scenarios from different angles, which can be crucial in identifying opportunities or risks others might miss.
(2) Problem-Solving and Abstract Thinking
Investing, especially at the hedge fund level, is often about understanding complex, abstract systems (ie. the market) and predicting how they will behave. Philosophy helps cultivate the ability to think in abstract terms and solve intricate problems. For example:
Strategy creation involves thinking about not just what is happening now but what might happen in the future. It also involves a level of open-mindedness to new ideas, especially when they challenge commonly accepted principles
Hedge fund managers often need to grapple with "unknown unknowns," and philosophical training provides comfort with ambiguity and uncertainty. It can be hard to see the forest through the trees; you need to be able to see all possibilities and contingencies and plan accordingly
(3) Risk Management and Decision-Making
Many philosophical disciplines, particularly those focused on epistemology (the study of knowledge), emphasize how we know what we know and how we can make decisions under uncertainty. Philosophy teaches decision theory, which deals with making rational choices, a core component of successful investing. And understanding cognitive biases is key for managing emotional reactions to market fluctuations—philosophy encourages self-reflection and awareness of bias.
(4) Ethics and Logical Frameworks
Philosophy often includes a deep exploration of ethics and ethical frameworks. While religious individuals may adhere to moral codes rooted in scripture or institutions, philosophers develop their ethical principles through rational inquiry and self-reflection.
For investors, developing conviction in their decisions is critical. This conviction doesn’t arise overnight but is built gradually through experience in the market. Over time, investors create a personal set of rules and principles based on what they’ve learned. These principles form the backbone of their trading strategy. However, just as some market assumptions may prove faulty, investors can sometimes develop principles that hinder progress. Recognizing and deconstructing flawed principles is essential for growth.
Philosophy teaches us how to construct a foundation of ethics and principles based on logical reasoning. This process mirrors how an investor refines their understanding of the market: through continuous questioning, evaluation, and adjustment. Just as one must evolve their approach in response to changing market conditions, philosophy encourages ongoing reflection and improvement in one’s ethical and intellectual frameworks.
(5) Skepticism and Contrarian Thinking
Philosophical training encourages skepticism—questioning the status quo, commonly accepted beliefs, or the consensus view. Hedge fund managers often succeed by taking contrarian positions, investing in assets that others may overlook or underestimate. A contrarian mindset can be seen in the old adage “buy the rumor, sell the news”. Philosophy teaches how to evaluate the merits of unpopular views and make decisions based on independent thinking, which is crucial in finding "alpha" in the markets.
(6) Interdisciplinary Knowledge and Big Picture Thinking
Philosophy promotes big-picture thinking—understanding how different parts of a system interact with each other. Philosophers are trained to synthesize information from all sources, to try to understand complex environments where many different forces interact.
Investors must often integrate knowledge from multiple disciplines (economics, psychology, history, etc.) to develop a comprehensive view of the market.
(7) Curiosity and Lifelong Learning
Philosophy fosters a love of learning and intellectual curiosity, which is essential for success in finance. The markets are always evolving, and traders need to stay ahead by constantly learning, questioning their assumptions, and refining their strategies.
Carl Icahn has mentioned on more than one occasion the influence that the poem "If" by Rudyard Kipling had on his career and I think it’s a great read to really understand what lifelong learning means.
Conclusion
Ultimately, just as philosophy challenges us to refine our understanding of the world, investing challenges us to refine our understanding of the market. Both require intellectual flexibility, discipline, and a willingness to question the status quo—all qualities that have undoubtedly contributed to the success of prominent investors with philosophical backgrounds.
Index:
Trading Philosophy - Eating Glass and Staring into the Abyss
Trading Philosophy - Technical Analysis and Printing Money in the Sky
Trading Philosophy - Why Famous Investors Have Philosophy Degrees...
Love it! Great read!