Investing in the Classics

Descartes’ Meditations on First Philosophy: On Skepticism

Please note that for the purposes of this analysis, I use the Donald A. Cress translation of Descartes’ Meditations on First Philosophy.


René Descartes was a famous French mathematician and philosopher. Despite his fame for inveting the Cartesian coordinate system and founding the field of analytic geometry, he is most famous for his little book, Meditations on First Philosophy (Latin: Meditationes de Prima Philosophia), published in 1641, in which he provided a philosophical groundwork for the possibility of the sciences. In this work, Descartes made such a characteristic break with the scholastic-medieval canon before him and raised issues that have bedeviled philosophy ever since, so much so that he is widely thought of as the father of the modern intellectual tradition. Descartes’ skeptical approach to epistemology and his goal of reaching a foundational point of certain knowledge from which all knowledge is based upon still yields great insights for investors even today.


In his Meditations, Descartes tried answer the question, “What can we know with certainty?” He was attempting to reconcile the newfound schism of the 17th century: the Aristotelian-scholastic tradition based on God and the new sciences of Galileo and Newton. Descartes, like any true and prudent investor, is concerned with learning about truth and its nature, not for accolades. Descartes writes, “it is the reverse in philosophy: since it is believed that there is no issue that cannot be defended from either side, few look for the truth, and many more prowl about for a reputation for profundity by arrogantly challenging whichever arguments are the best” (Letter of Dedication, 5). Armed with only vigor and his wits, Descartes meditates, allegedly alone in a cabin during a bitter cold winter, on first philosophy, which is an Aristotelian term for the study of the fundamental type of being or substance upon which all others depend and with the most fundamental causes (i.e. in looser terms, metaphysics).


Descartes was looking for a foundation, an ‘Archimedean point’ for all knowledge. Archimedes was alleged to once say, “Give me a place to stand and with a lever [long enough] and I will move the whole world.” Descartes was looking for an absolute crux of certainty upon which all understanding could be built up from. Descartes writes:

“I will accomplish this by putting aside everything that admits of the least doubt, as if I had discovered it to be completely false. I will stay on this course until I know something certain, or, if nothing else, until I at least know for certain that nothing is certain. Archimedes sought but one firm and immovable point in order to move the entire earth from one place to another. Just so, great things are also to be hoped for if I success in finding just one thing, however slight, that is certain and unshaken” (Med. Two, 24).

Descartes’ method was unconventional and yet brilliant. He set out to literally doubt every thought and mode of knowing that was in his head in order to see what knowledge, if any, could survive this scrutiny. The bar he set to judge these categories of belief was indubitably high, it required absolutely certainty. He only needed only find some reason to doubt his present opinions in order to prompt him to seek sturdier foundations for his knowledge. Rather than doubt every one of his opinions individually, he reasons that he might cast them all into doubt if he can doubt the foundations and basic principles upon which his opinions are founded. I argue that investors today ought to search for their own foundational point for which they build all of their knowledge upon, and I will put forth my own assertion of what this ‘Archimedean point’ ought to be.


Descartes begins by doubting the most obvious and easy target, the senses. Descartes states that “I have noticed that the senses are sometimes deceptive; it is a mark of prudence never to place our complete trust in those who have deceived us even once” (Med. One, 18). Once again, Descartes’ threshold for certainty is high, for he posits that even if his senses deceive him only once, then he cannot be absolutely sure beyond doubt that his senses will never fail him again. Sensory information is information that comes from external sources, thus for investors I will draw this analogy of sensory information to be the outside opinions and news that investors take in during the investment research process.


Descartes’ acknowledges that his doubting of the senses is in a sense (excuse the pun) trivial. Surely distant objects appear smaller than they really are, but can we doubt that I don’t correctly perceive my own hand, or the chair that I sit on? Descartes holds this concern:

 “But perhaps, even though the senses do sometimes deceive us when it is a question of very small and distant things, still there are many other matters concerning which one simply cannot doubt, even though they are derived from the same senses: for example, that I am sitting here next to the fire, wearing my winter dressing gown, that I am holding this sheet of paper in my hands, and the like” (Med. One, 18).

Analogous to investors, these trivial forms of external information, such as news, market noise and hearsay, are unsurprisingly deceptive from time to time and have a strong reason to be doubted.  Descartes points us to more serious forms of sensory knowledge, such as my direct, unobstructed perceptions. For investors, if news and noise is the equivalent to Descartes’ trivial sensory knowledge, then I posit that Descartes’ more serious forms of sensory knowledge would be analogous to analyst reports, trade journals, industry studies, and the like. Though by no means infallible, it is not as easy to disregard these knowledge, especially when one is much less knowledgeable than the author of what he or she is reading.


Not even these apparent truths about direct perception can escape Descrates’ skeptical mind.  Descartes realizes that he is often convinced when he is dreaming that he is sensing real objects. He writes, “How often does my evening slumber persuade me of such ordinary things as these: that I am here, clothed in my dressing gown, seated next to the fireplace – when in fact I am lying undressed in my bed!” (Med. One, 19). He feels certain that he is awake and sitting by the fire, but reflects that often he has dreamed this very sort of thing and been wholly convinced by it. From this Descartes concludes that “As I consider matters more carefully, I see so plainly that there is no definitive signs by which to distinguish being awake from being asleep” (Med. One, 19). For investors today, Descartes can be shown that dreaming and reality are merely frames of thinking. In this way, investors can be deceived by these serious forms of external knowledge because they can limit perspectives by putting the investor in one particular paradigm of viewership or understanding, in other words, false dilemmas. Acting as a mask, the investor may be blind to underlying reality or paradigm shifts if he is not prudent and diligent. Thus the prudent investor must seek to go beyond these conventional modes of analysis to what Howard Mark’s calls ‘Second-Level Thinking’ in order to catch himself when he is dreaming like Descartes. Marks writes, “Second-level thinking is deep, complex and convoluted. The second-level thinker takes a great many things into account” (The Most Important Thing, p.4).


Next, Descartes confronts analytic truths about the world, such as ‘2 + 3 = 5’ and ‘Socrates is a man, all men are mortal, therefore Socrates is mortal.’ These forms of knowledge have been the trump card ever since Plato. Descartes states, “For whether I am awake or asleep, two plus three make five, and a square does not have more than four sides. It does not seem possible that such obvious truths should be subject to the suspicion of being false” (Med. One, 20). These analytic truths seem to be based on universals and not on experience, he argues. While he can doubt imaginary and empirical things, which can exist equally in dreams or reality, he concludes that we cannot doubt studies based on simple things, like arithmetic and geometry. This is when he stumbles upon his next great conclusion. Descartes writes, “Be that as it may, there is fixed in my mind a certain opinion of long standing, namely that there exists a God who is able to do anything and by whom I, such as I am, have been created” (Med. One, 21). It occurs to Descartes that his concept of truth is determined by his belief in God, a perfect being and his creator. He realizes that God could make even our conception of mathematics false, and that one ought not to jump to the presupposition that God is supremely good and would not lead him to believe falsely all these things. Descartes says that “I will no suppose a supremely good God, the source of truth, but rather an evil genius, supremely powerful and clever, who has directed his entire effort at deceiving me” (Med. One, 22). In more modern terms, Descartes is asking, “How do we know we are not in The Matrix?” For if he can imagine an evil genius who is placing these mathematical ‘truths’ in his mind, then he cannot be have absolute certainty in them.


For investors, the analogy to the supremely good God is useful one. In a perfect world, one ought to think of management, auditors, rating agencies, and regulators as perfectly reliable in representing the truth. But this is not always the case, for sometimes management teams prefer to act like Descartes’ evil and clever genius, bent on deceiving investors with every chance. Far too often investors find themselves trying to warp reality and truth to reflect the story that the financial statements are telling them. Instead, many investors fail to first assess the validity and reliability of the financial statements themselves. Thus, not even financial statements and audited company filings can be counted on as the foundation point for the investor’s knowledge. More importantly, Descartes’ skeptical mindset is something that prudent investors ought to imitate and always be cognizant of, especially in not absolutely trusting anything that has deceived one before, even once as Descartes argues.


Having doubted everything that he can think of in the first mediation, Descartes wonders if the only certain thing remaining is that there is no certainty. This yields unsettling consequences for Descrates, as he states that “I have already denied that I have any senses and any body. Still I hesitate; for what follows from this? […] Is it then the case that I too do not exist?” (Med. Two, 24-5). It is here that Descartes set the agenda for much of the rest of modern philosophy:

“But doubtless I did exists, if I persuaded myself of something. But there is some deceiver or other who is supremely powerful and supremely sly and who is always deliberately deceiving me. There too there is no doubt I exist, if he is deceiving me… Thus, after everything has been most carefully weighed, it must finally be established that this pronouncement ‘I am, I exist’ is necessarily true every time I utter it or conceive it in my mind” (Med. Two, 25).

Descartes concludes that even if my mind is being deceived about everything, it must be that I have a mind. If my mind is doubting everything, then it must be true that I have a mind that is doubting. Even if all of the knowledge in my mind is false, I still must have a mind. When I say ‘I doubt my sense experience,’ or ‘I doubt my memories,’ then it must be the case that ‘I doubt’ for it presupposes that I am, I exists. This becomes his crux of absolute certainty from which he builds the rest of his knowledge upon in the third through sixth meditations, but that will be discussed in a separate analysis.


Despite the valid flaws pointed out by later philosophers, most notably the brilliant 19th century philosophers Kierkegaard and Nietzsche, in Descartes aforementioned conclusion ‘I think, therefore I am,’ investors still can learn much from it. I argue that for the ‘Archimedean point’ for any investor must always be himself. The only thing that an investor can have absolute control over and knowledge about is oneself. One cannot trust news, noise, analyst, reports, filings, and financial statements with 100% certainty. But the prudent investor who is always shows a healthy dose of skepticism and is diligent enough to come to believe those conclusions that are his alone will find himself in a pickle far more infrequently that those not capable of ‘Second-Level Thinking.’ The investor must rely on himself, from a fixed and firm internal disposition, to discern fact from fiction in all else. In this way, the investor will build on the most solid foundation.


Descartes than asks, ‘surely I must exists, but what does the ‘I’ refer to?’ He states, “But I do not yet understand sufficiently what I am – I, who now necessarily exists” (Med. Two, 25). He initially thought that he had a soul, by means of which he was nourished, moved, could sense and think; and also that he had a body. All these attributes have been cast into doubt, except one: Descartes cannot doubt that he thinks. He may exist without any other of the above attributes, but he cannot exist if he does not think. He writes:

“Here I make my discovery: thought exists; it alone cannot be separated from me. I am; I exist – this is certain. But for how long? For as long as I am thinking; for perhaps it could also come to pass that if I were to cease all thinking I would then utterly cease to exist… I am therefore precisely nothing but a thinking thing; that is, a mind, or intellect, or understanding, or reason” (Med. Two, 27).

Descartes argues that indubitably that insofar as my mind exists, ‘I’ am a thinking thing, a thing that thinks. Therefore, thought above all else is inseparable from being. Descartes concludes that, in the strict sense, he is only a thing that thinks. While this notion carries some ambiguous baggage, I think it is an aesthetically illuminating concept for investors. True investors, like Descartes, are concerned with truth and not reputation or riches for their own sake. Intellectual curiosity and Second-Level Thinking are the essence of what it means to be an investor, and as such this is the foundation of investment success.

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