How to See Yourself As You Really Are – Dalai Lama – Reviewing the Meditative Reflections

Part 1. The Need for Insight

1. Laying The Ground For Insight to Grow

1. All counterproductive emotions are based on and depend upon ignorance of the true nature of persons and things.
2. There are specific ways to suppress lust and hatred temporarily; but if we undermine the ignorance that misconceives the nature of ourselves, others, and all things, all destructive emotions are undermined.
3. Ignorance sees phenomena-which actually do not exist in and of themselves-as existing independent of thought

2. Discovering The Source of Problems
Consider:
1. Does the attractiveness of an object seem to be integral to it?
2. Does the attractiveness of an object obscure its faults and disadvantages?
3. Does exaggeration of the pleasantness of certain objects lead to lust?
4. Does exaggeration of the unpleasantness of certain objects lead to hatred?
5. Notice how you:
• First perceive an object
• Then notice if the object is good or bad
• Then conclude that the object has its own independent basis for existing
• Then conclude that the object’s goodness or badness exists inherently in the object
• Then generate lust or hatred according to your previous judgment.

3. Why Understanding The Truth is Needed

Consider this:
1. Ignorance leads to exaggerating the importance of beauty. ugliness, and other qualities.
2. Exaggeration of these qualities leads to lust, hatred, jealousy, belligerence, and so on.
3. These destructive emotions lead to actions contaminated by misperception.
4. These actions (karma) lead to powerless birth and rebirth in cyclic existence and repeated entanglement in trouble.
5. Removing ignorance undermines our exaggeration of positive and negative qualities; this undercuts lust, hatred, jealousy; belligerence, and so on, putting an end to actions contaminated by misperception, thereby ceasing powerless birth and rebirth in cyclic existence.
6. Insight is the way out.

Part II. How to Undermine Ignorance

4. Feeling The Impact of Interrelatedness

1. Bring to mind an impermanent phenomenon, such as a house.
2. Consider its coming into being in dependence upon specific causes: lumber, carpenters, and so forth.
3. See if this dependence conflicts with the phenomenon’s appearance of existing in its own right.
Then:
1. Bring to mind an impermanent phenomenon, such as a book.
2. Consider its coming into being in dependence upon its parts-its pages and cover.
3. See if its dependence upon its parts conflicts with its appearing as if it exists in its own right.

Then:
1. Consider consciousness paying attention to a blue vase.
2. Reflect on its coming into being in dependence upon its parts-the several moments that constitute its continuum.
3. See if its dependence upon its parts conflicts with its appearing as if it exists in its own right.

Then:
1. Consider space in general.
2. Reflect on its coming into being in dependence upon its parts-north, south, east, and west.
3. See if its dependence upon its parts conflicts with its appearing as if it exists in its own right.
Also:
1. Consider the space of a cup.
2. Reflect on its coming into being in dependence upon its parts-the top half and the bottom half of the cup.
3. See if its dependence upon its parts conflicts with its appearing as if it exists in its own right.

5. Appreciating The Reasoning of Dependent-Arising

Consider:
1. Dependent and independent are a dichotomy. Anything that exists is either the one or the other.
2. When something is dependent, it must be empty of being under its own power.
3. Nowhere in the parts of the body and mind that form the basis for the “I” can we find the “I”. Therefore, the “I” is established not under its own power but through the force of other conditions-its causes, its parts, and thought.

6. Seeing The Interdependence of Phenonmenon

Consider:
1. Inherent existence never did, never does, and never will exist.
2. However, we imagine that it does exist and thereby are drawn into distressing emotions.
3. The belief that phenomena inherently exist is an extreme of exaggeration. a frightful chasm.
4. The belief that impermanent phenomena cannot perform functions, or act as cause and effect. is an extreme form of denial, another frightful chasm.
5. The realization that all phenomena are empty of inherent existence because of being dependent-arisings avoids both extremes. Realizing that phenomena are dependent-arisings avoids the extreme of dangerous denial; realizing that they are empty of inherent existence avoids the extreme of dangerous exaggeration.

7. Valuing Dependent-Arising and Emptiness

Consider:
1. Because persons and things are dependent-arisings they are empty of inherent existence. Being dependent, they are not self-instituting.
2. Because persons and things are empty of inherent existence, they must be dependent-arisings. If phenomena did exist in their own right, they could not depend on other factors: either causes. their own parts, or thought. Since phenomena are not able to set themselves up, they can transform.
3. These two realizations should work together, the one furthering the other.

Part III. Harnessing the Power of Concentration and Insight

8. Focussing Your Mind

1. Look carefully at an image of Buddha, or some other religious figure or symbol, noticing its form, color, and details.
2. Work at causing this image to appear internally to your consciousness, imagining it on the same level as your eyebrows, about five or six feet in front of you, about one to four inches high (smaller is better), and shining brightly.
3. Consider the image to be real, endowed with magnificent qualities of body, speech, and mind.

9. Tuning Your Mind For Meditation

1. Place your mind on the object of meditation.
2. Using introspection, from time to time check to see whether your mind remains on the object.
3. When you find that it has strayed, recall the object and put your mind back on it as often as needed.

Then:
1. To counter laxity, which is a too-loose way of perceiving the meditative object:
• First try to tighten just a little your way of holding the object.
• If that does not work, brighten or elevate the object or pay closer attention to its details.
• If that does not work, leave the intended object and temporarily think about a joyous topic, such as the marvelous qualities of love and compassion or the wonderful opportunity that a human lifetime affords for spiritual practice.
• If that does not work, leave off meditating and go to a high place or one where there is a vast view:

2. To counter excitement, which is a too-tight way of perceiving the meditative object:
• First try to loosen just a little your way of imagining the object.
• If that does not work, lower the object in your mind and imagine it as heavier.
• If that does not work, leave the intended object and temporarily think about a topic that makes you more sober, such as how ignorance brings about the sufferings of cyclic existence, or the imminence of death, or the disadvantages of the object to which you have strayed and the disadvantages of distraction itself.

Part IV. How to End Self Deception

10. Meditating On Yourself First

Consider:
1. The person is at the center of all troubles.
2. Therefore, it is best to work at understanding your true nature first.
3. After that, this realization can be applied to mind, body, house, car, money, and all other phenomena.

11. Realising That You Do Not Exist in And of Yourself

1. Imagine that someone else criticizes you for something you actually have not done, pointing a finger at you and saying, “You ruined such-and-such.”
2. Watch your reaction. How does the “I” appear to your mind?
3. In what way are you apprehending it?
4. Notice how that “I” seems to stand by itself, selfinstituting, established by way of its own character.

Also:
1. Remember a time when you were fed up with your mind. such as when you failed to remember something.
2. Review your feelings. How did the “I” appear to your mind at that time?
3. In what way were you apprehending it?
4. Notice how that “I” seems to stand by itsel£ selfinstituting, established by way of its own character.

Also:
1. Remember a time when you were fed up with your body or with some feature of your body such as your hair.
2. Look at your feelings. How did the “I” appear to your mind at that time?
3. In what way were you apprehending it?
4. Notice how that “I” seems to stand by itself self-instituting, established by way of its own character.

Also:
1. Remember a time when you did something awful and you thought, “I really made a mess of things.”
2. Consider your feelings. How did the “I” appear to your mind at that time?
3. In what way were you apprehending it?
4. Notice how that “I” seems to stand by itself, self-instituting. established byway of its own character.

Also:
1. Remember a time when you did something wonderful and you took great pride in it.
2. Examine your feelings. How did the “I” appear to your mind at that time?
3. In what way were you apprehending it?
4. Notice how that “I” seems to stand by itself, self-instituting. established by way of its own character.

Also:
1. Remember a time when something wonderful happened to you and you took great pleasure in it.
2. Watch your feelings. How did the “I” appear to your mind at that time?
3. In what way were you apprehending it?
4. Notice how that “I” seems to stand by itself, self-instituting. established by way of its own character.

12. Determining The Choices

1. Analyze whether the “I” that is inherently self-established in the context of the mind-body complex could have a way of existing other than being part of or separate from mind and body.
2. Take other phenomena, such as a cup and a table, or a house and a mountain, as examples. See that there is no third category of existence. They are either the same or different.
3. Decide that if the “I” inherently exists as it seems to, it must be either one with or separate from mind and body.

13. Analyzing Oneness

Consider the consequences if the “I” is established in and of itself in accordance with how it appears to our minds and if it also is the same as mind-body:

1. “I” and mind-body would have to be utterly and in all ways one.
2. In that case, asserting an “I” would be pointless.
3. It would be impossible’ to think of “my body” or “my head” or “my mind.”
4. When mind and body no longer exist, the self also would not exist.
5. Since mind and body are plural, one person’s selves also would be plural.
6. Since the “I” is just one, mind and body also would be one.
7. Just as mind and body are produced and disintegrate, so it would have to be asserted that the “I” is inherently produced and inherently disintegrates. In this case, neither the pleasurable effects of virtuous actions nor the painful effects of nonvirtuous actions would bear fruit for us, or we would be experiencing the effects of actions we ourselves did not commit.

14. Analyzing Difference

Consider the consequences if the “I” is established in and of itself in accordance with how it appears to our minds and if it also is inherently different from mind-body:

1. “I” and mind-body would have to be completely separate.
2. In that case, the “I” would have to be findable after clearing away mind and body.
3. The “I” would not have the characteristics of production, abiding. and disintegration, which is absurd.
4. The “I” would absurdly have to be just a figment of the imagination or permanent.
5. Absurdly, the “I” would not have any physical or mental characteristics.

15. Coming To A Conclusion

Repeatedly review the four steps to realization:

1. Zero in on the target, the appearance of the “I” as if it is established in and of itself
2. Determine that if the “I” exists the way it seems to, it must be either one with mind and body or separate from mind and body.
3. Thoroughly contemplate the problems with “I” and the mind-body complex being the same.
• “I” and mind-body would have to be utterly and in all ways one.
• Asserting an “I” would be pointless.
• It would be impossible to think of “my body” or “my head” or “my mind.”
• When mind and body no longer exist, the self also would not exist.
• Since mind and body are plural, a person’s selves also would be plural.
• Since the “I” is just one, mind and body also would be one.
• Just as mind and body are produced and disintegrate, the “I” is inherently produced and inherently disintegrates. In this case, neither the pleasurable effects of virtuous actions nor the painful effects of nonvirtuous actions would bear fruit for us, or we would be experiencing the effects of actions we ourselves did not commit.

4. Thoroughly contemplate the problems with “I” and the mind-body complex being inherently different.
• “I” and mind-body would have to be completely separate.
• In that case, the “I” would have to be findable after clearing away mind and body.
• The “I” would not have the characteristics of production, abiding, and disintegration, which is absurd.
• The “I” would absurdly have to be just a figment of the imagination or permanent.
• Absurdly; the “I” would not have any physical or mental characteristics.

16. Testing Your Realization

1. Go through the four steps of analysis described in Chapter 15.
2. When the sense that the “I” is self-instituting falls apart and vanishes in a void, switch to considering your arm, for instance.
3. See whether the sense that your arm inherently exists immediately vanishes due to the previous reasoning.
4. If the previous analysis does not immediately apply to your arm, your understanding is still on a coarser level.

17. Extending This Insight To What You Own

1. Internal phenomena, such as your mind and your body; belong to you and therefore are “yours.”
2. External belongings, such as your clothing or car, also are “yours.”
3. If the “I” does not inherently exist, what is “yours” could not possibly inherently exist.

18. Balancing Calm And Insight

For the time being, alternate a little stabilizing meditation with a little analytical meditation in order both to taste the process and to strengthen your current meditation.

1. First focus your mind on a single object, such as a Buddha image or your breath.
2. Use analytical meditation as described in the four steps for meditating on the nature of the “I” (see Chapter 15).
3. When you develop a little insight, stay with that in sight in stabilizing meditation, appreciating its impact.
4. Then, when feeling diminishes a little, return to analytical meditation to reinstate feeling and develop more insight.

Part V. How Persons and Things Actually Exist

19. Viewing Yourself As Like An Illusion

1. Remember a time when you mistook a reflection of a person in a mirror for an actual person.
2. It appeared to be a person but was not.
3. Similarly; all persons and things seem to exist from their own side without depending on causes and conditions, on their parts, and on thought, but they do not.
4. In this way, persons and things are like illusions.

Then:
1. As you did earlier, bring the target of your reasoning. the inherently established “I,” to mind-by remembering or imagining an instance when you strongly believed in it. .
2. Notice the ignorance that superimposes inherent existence, and identify it.
3. Put particular emphasis on contemplating the fact that if such inherent establishment exists, the “I” and the mind-body complex would have to be either the same or different.
4. Then forcefully contemplate the absurdity of assertions of the self and mind-body as either the same or different, seeing and feeling the impossibility of those assertions:

ONENESS
• “I” and mind-body would have to be utterly and in all ways one.
• In that case, asserting an “I” would be pointless.
• It would be impossible to think of “my body” or “my head” or “my mind.”
• When mind and body no longer exist, the self also would not exist.
• Since mind and body are plural, a person’s selves also would be plural.
• Since the “I” is just one, mind and body also would be one.
• Just as mind and body are produced and disintegrate, so it would have to be asserted that the “I” is inherently produced and inherently disintegrates. In this case, neither the pleasurable effects of virtuous actions nor the painful effects of nonvirtuous actions would bear fruit for us, or we would be experiencing the effects of actions we ourselves did not commit.

DIFFERENCE

•”I” and mind-body would have to be completely separate.
•In that case, the “I” would have to be findable after clearing away mind and body.
• The “I” would not have the characteristics of production, abiding. and disintegration, which is absurd.
• The “I” would absurdly have to be just a figment of the imagination or permanent.
• Absurdly; the “I” would not have any physical or mental characteristics.

5. Not finding such an “I,” firmly decide, “Neither I nor any person is inherently established.”
6. Remain for a while, absorbing the meaning of emptiness, concentrating on the absence of inherent establishment.
7. Then, once again let the appearances of people dawn to your mind.
8. Reflect on the fact that, within the context of dependent-arising. people also engage in actions and thus accumulate karma and experience the effects of those actions.
9. Ascertain the fact that the appearance of people is effective and feasible within the absence of inherent existence.
10. When effectiveness and emptiness seem to be contradictory, use the example of a mirror image:
• The image of a face is undeniably produced in dependence on a face and a mirror, even though it is empty of the eyes, ears, and so forth it appears to have, and the image of a face undeniably disappears when either face or mirror is absent.
• Similarly; although a person does not have even a speck of inherent establishment, it is not contradictory for a person to perform actions, accumulate karma, experience effects, and be born in dependence on karma and destructive emotions.
11. Try to view the lack of contradiction between effectiveness and emptiness with respect to all people and things.

20. Noticing How Everything Depends on Thought

1. Revisit a time when you were filled with hatred or desire.
2. Does it not seem that the hated or desired person or thing is extremely substantial, very concrete?
3. Since this is the case, there is no way you can claim that you already see phenomena as dependent on thought.
4. You see them as existing in their own right.
5. Remember that you need frequent meditation on emptiness to counter the false appearance of phenomena.

Then Consider:

1. The “I” is set up in dependence upon mind and body.
2. However, mind and body are not the “I”, nor is the “I” mind and body.
3. Therefore, the “I” depends on conceptual thought, set up by the mind.
4. The fact that the “I” depends on thought implies that the “I” does not exist in and of itself
5. Now notice that you have a better sense of what it means for something to exist in and of itself the inherent existence that realization of emptiness is aimed at refuting.

Part VI. Deepening Love with Insight

21. Feeling Empathy

Apply these six similarities to yourself to understand the nature of your suffering and develop a strong intention to transcend this dynamic.

1. Just as a bucket in a well is bound by a rope, so I am constrained by counterproductive emotions and actions driven by them.
2. Just as the movement of a bucket up and down the well is run by an operator, so the process of my cyclic existence is run by my untamed mind, specifically through mistakenly believing that I inherently exist, and that “mine” inherently exists.
3. Just as a bucket travels up and down the well over and over, so I ceaselessly wander in the great well of cyclic existence, from the uppermost states of temporary happiness to the lowest states of temporary pain.
4. Just as it takes great exertion to draw the bucket up but it descends easily; so I have to expend great effort to draw myself upward to a happier life but easily descend to painful situations.
5. Just as a bucket does not determine its own movements, so the factors involved in shaping my life are the results of past ignorance, attachment, and grasping; in the present, these same factors are continually creating more problems for my future lives, like waves in the ocean.
6. Just as a bucket bumps against the walls of the well when it ascends and descends, so I am battered day by day by the suffering of pain and change, and by being caught in processes beyond my control.
7. Therefore, from the depths of my heart I should seek to get out of this cyclic round of suffering.

Then:
Bring a friend to mind and think with feeling:

1. Just as a bucket in a well is bound by a rope, so this person is constrained by counterproductive emotions and actions driven by them.
2. Just as the movement of a bucket up and down the well is run by an operator, so the process of this person’s cyclic existence is run by his or her untamed mind, specifically through mistakenly believing that he or she inherently exists, and that “mine” inherently exists.
3. Just as the bucket travels up and down the well over and over, so this person ceaselessly wanders in the great well of cyclic existence, from the uppermost states of temporary happiness to the lowest states of temporary pain.
4. Just as it takes great exertion to draw the bucket up but it descends easily, so this person has to expend great effort to rise upward to a happier life but easily descends to painful situations.
5. Just as a bucket does not determine its own movements, so the factors involved in shaping this person’s life are the results of past ignorance, attachment, and grasping; in the present, these same factors are continually creating more problems for his or her future lives, like waves in the ocean.
6. Just as a bucket bumps against the walls of the well when it ascends and descends, so this person is battered day by day by the suffering of pain and change and by being caught in processes beyond his or her control.

Now cultivate three levels of love:
1. This person wants happiness but is bereft. How nice it would be if she or he could be imbued with happiness and all the causes of happiness! ,
2. This person wants happiness but is bereft. May she or he be imbued with happiness and all the causes of happiness!
3. This person wants happiness but is bereft. I will do whatever I can to help her or him to be imbued with happiness and all the causes of happiness!

Now cultivate three levels of compassion:
1. This person wants happiness and does not want suffering. yet is stricken with terrible pain. If this person could only be free from suffering and the causes of suffering!
2. This person wants happiness and does not want suffering. yet is stricken with terrible pain. May this person be free from suffering and the causes of suffering!
3. This person wants happiness and does not want suffering. yet is stricken with terrible pain. I will help this person be free from suffering and all the causes of suffering!

Now cultivate total commitment:
1. Cyclic existence is a process driven by ignorance.
2. Therefore, it is realistic for me to work to achieve enlightenment and to help others do the same.
3. Even if I have to do it alone, I will free all sentient beings from suffering and the causes of suffering. and set all sentient beings in happiness and its causes. One by one, bring to mind individual beings- friends, then neutral persons, and then enemies, starting with the least offensive-and repeat these reflections with them.

22. Reflecting On Impermanence

Take this to heart:
1. It is certain that I will die. Death cannot be avoided. My life span is running out and cannot be extended
2. When I will die is indefinite. Life spans among humans vary; The causes of death are many and causes of life comparatively few. The body is fragile.
3. At death nothing will help except my transformed attitude. Friends will be of no help. My wealth will be no use, and neither will my body.
4. We are all in this same perilous situation, so there is no point in quarreling and fighting or wasting all our mental and physical energy on accumulating money and property.
5. I should practice now to reduce my attachment passing fancies.
6. From the depths of my heart I should seek to get beyond this cycle of suffering induced by misconceiving the impermanent to be permanent.

Then consider:
1. My mind, body, possessions, and life are impermanent simply because they are produced by causes and conditions.
2. The very same causes that produce my mind, body, possessions, and life also make them disintegrate moment by moment.
3. The fact that things have a nature of impermanence indicates that they are not under their own power; they function under outside influence.
4. By mistaking what disintegrates moment by moment for something constant, I bring pain upon myself as well as others.
5. From the depths of my- heart I should seek to get beyond this round of suffering induced by mistaking the impermanence for permanence.

Then:

Bring a friend to mind and consider the following with feeling:
1. This person’s mind, body, possessions, and life are impermanent because they are produced by causes and conditions.
2. The very same causes that produce this person’s mind, body, possessions, and life also make them disintegrate moment by moment.
3. The fact that things have a nature of impermanence indicates that they are not under their own power; they function under outside influence.
4. By mistaking what disintegrates moment by moment for something constant, this friend brings pain upon himself or.herself as well as others.

Now cultivate three levels of love:
1. This person wants happiness but is bereft. How nice it would be if she or he could be imbued with happiness and all the causes of happiness!
2. This person wants happiness but is bereft. May she or he be imbued with happiness and all the causes of happiness!
3. This person wants happiness but is bereft. I will do whatever I can to help her or him to be imbued with happiness and all the causes of happiness!

Now cultivate three levels of compassion:
1. This person wants happiness and does not want suffering, yet is stricken with terrible pain. If this person could only be free from suffering and the causes of suffering!
2. This person wants happiness and does not want suffering, yet is stricken with terrible pain. May this person be free from suffering and the causes of suffering!
3. This person wants happiness and does not want suffering, yet is stricken with terrible pain. I will help this person be free from suffering and all the causes of suffering!

Now cultivate total commitment:
1. Cyclic existence is a process driven by ignorance.
2. Therefore, it is realistic for me to work to achieve enlightenment and to help others do the same.
3. Even if I have to do it alone, I will free all sentient beings from suffering and the causes of suffering, and set all sentient beings in happiness and its causes. One by one, bring to mind individual beings-first friends, then neutral persons, and then enemies, starting with the least offensive-and repeat these reflections with them.

23. Absorbing Yourself In Ultimate Love

1. As you did earlier, bring the target of your reasoning, the inherently established “I,” to mind by remembering or imagining an instance when you strongly believed in it.
2. Notice the ignorance that superimposes inherent existence, and identify it.
3. Put particular emphasis on contemplating the fact that if such inherent establishment exists, the “I” and the mind-body complex would have to be either the same or different.
4. Then forcefully contemplate the absurdity of assertions of the self and mind-body as either the same or different, seeing and feeling the impossibility of those assertions:

ONENESS

• “I” and mind-body would have to be utterly and in all ways one.
• In that case, asserting an “I” would be pointless.
• It would be impossible to think. of “my body,” or “my head,” or “my mind.”
• When mind and body no longer exist, the self also would not exist.
• Since mind and body are plural, a person’s selves also would be plural.
• Since the “I” is just one, mind and body also would be one.
• Just as mind and body are produced and disintegrate, so it would have to be asserted that the “I” is inherently produced and inherently disintegrates. In this case, neither the pleasurable effects of virtuous actions nor the painful effects of nonvirtuous actions would bear fruit for us, or we would be experiencing the effects of actions we ourselves did not commit.

DIFFERENCE

• “I” and mind-body would have to be completely separate.
• In that case, the “I” would have to be findable after clearing away mind and body.
• The “I” would not have the characteristics of production, abiding, and disintegration, which is absurd.
• The “I” would absurdly have to be just a figment of the imagination or permanent.
• Absurdly, the “I” would not have any physical or mental characteristics.

5. Not finding such an “I.” firmly decide, “Neither I nor any person is inherently established.”
6. Resolve: From the depths of my heart I should seek to get beyond this round of suffering brought on myself by misconceiving what does not inherently exist as inherently existing.

Then:
Bring a friend to mind and, while remembering the process of self-ruinous cyclic existence, consider the following:
1. Like me, this person is lost in an ocean of misapprehension of “I” as inherently existent, fed by a huge river of ignorance mistaking mind and body to be inherently existent, and agitated by winds of counterproductive thoughts and actions.
2. Like someone mistaking a reflection of the moon in water for the moon itself, this person mistakes the appearance of “I” and other phenomena to mean they exist in their own right.
3. By accepting this false appearance, this person is powerlessly drawn into lust and hatred, accumulating karma and being born over and over again in a round of pain.
4. Through this process this person unnecessarily brings pain upon himself or herself as well as others.

Now cultivate three levels of love:

1. This person wants happiness but is bereft. How nice it would be if she or he could be imbued with happiness and all the causes of happiness!
2. This person wants happiness but is bereft. May she or he be imbued with happiness and all the causes of happiness!
3. This person wants happiness but is bereft. I will do whatever I can to help her or him to be imbued with happiness and all the causes of happiness!

Now cultivate three levels of compassion:
1. This person wants happiness and does not want suffering, yet is stricken with terrible pain. If this person could only be free from suffering and the causes of suffering!
2. This person wants happiness and does not want suffering. yet is stricken with terrible pain. May this per’ son be free from suffering and the causes of suffering!
3. This person wants happiness and does not want suffering. yet is stricken with terrible pain. I will help this person be free from suffering and all the causes of suffering!

Now cultivate total commitment:

1. Cyclic existence is a process driven by ignorance.
2. Therefore, it is realistic for me to work to achieve enlightenment and to help others do the same.
3. Even if I have to do it alone, I will free all sentient beings from suffering and the causes of suffering. and set all sentient beings in happiness and its causes. One by one, bring to mind individual sentient beings first mends, then neutral persons, and then enemies, starting with the least offe.nsive-and repeat these reflections with them.

How to See Yourself As You Really Are – Dalai Lama

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Chapter 4
Feeling the Impact of Interrelatedness

Through reflecting on dependent-arising, you will lose the belief that things exist in and of themselves. Nagarjuna says:

The apprehension of inherent existence is the cause
of all unhealthy views.
Afflictive emotions are not produced without this error.
Therefore, when emptiness is thoroughly known,
Unhealthy views and afflictive emotions are
thoroughly purified.

Through what is emptiness known?
It is known through seeing dependent-arising.
Buddha, the supreme knower of reality, said

What is dependently produced is not inherently
produced.

Nagarjuna’s student Aryadeva similarly says that understanding dependent-arising is crucial for overcoming ignorance:

All afflictive emotions are overcome
Through overcoming ignorance.
When dependent-arising is seen,
Ignorance does not arise.

Dependent-arising refers to the fact that all impermanent phenomena-whether physical, mental, or otherwise-come into existence dependent upon certain causes and conditions. Whatever arises dependent upon certain causes and conditions is not operating exclusively under its own power.

Meditative Reflection
1. Bring to mind an impermanent phenomenon, such as a house.
2. Consider its coming into being in dependence upon specific causes: lumber, carpenters, and so forth.
3. See if this dependence conflicts with the house’s appearing as if it exists in its own right.

Dependent Arising and Realism

The theory of dependent-arising can be applied everywhere. One benefit of applying this theory is that viewing a situation this way gives you a more holistic picture, since whatever the situation is-good or bad-it depends on causes and conditions. An event is not under its own power but depends on many present causes and conditions as well as many past causes and conditions. Otherwise, it could not come into being.

When you think from this viewpoint, you can see much more of the whole picture, and from this wider perspective, you can see the reality of the situation, its interdependence. With the help of this relational outlook, the action that you take will be realistic. In international politics, for example, without such an outlook a leader might see a problem as created by a single person, who then becomes an easy target. But that is not realistic; the problem is much wider. Violence produces a chain reaction. Without a broader perspective, even if the motivation is sincere, any attempt to handle the situation becomes unrealistic; the actions taken will not be well founded because of the lack of a holistic picture, of understanding the web of causes and conditions involved.

In the field of medicine also, it is not sufficient to concentrate just on one specialty. The whole body needs to be considered. In Tibetan medicine, the diagnostic approach is more holistic, taking into consideration interactive systems. Similarly. in economics, if you just go after profit, you end up with corruption. Look at the increasing corruption in many countries. By considering all commercial actions to be morally neutral, we turn a blind eye to exploitation. When, as they say in China, “It doesn’t make any difference whether a cat is black or white,” the result is that a lot of black cats-morally bankrupt people-are creating a lot of problems!

Failure to look at the whole picture means realism is lost. The attitude that money alone is sufficient leads to unforeseen consequences. Money is certainly necessary; for instance, if you thought that religious retreat in meditation alone was sufficient, you would not have anything to eat. Many factors have to be considered. With awareness of the fuller picture, your outlook becomes reasonable, and your actions become practical, and in this way favorable results can be achieved.

The chief drawback of afflictive emotions is that they obscure reality. As Nagarjuna says:

When afflictive emotions and their actions cease,
there is liberation.
Afflictive emotions arise from false conceptions.

False conceptions here are exaggerated modes of thought that do not accord with the facts. Even if an object-an event, a person, or any other phenomenon-has a slightly favorable aspect, once the object is mistakenly seen as existing totally from its own side, true and real, mental projection exaggerates its goodness beyond what it actually is, resulting in lust. The same happens with anger and hatred; this time a negative factor is exaggerated, making the object seem to be a hundred percent negative, the result being deep disturbance. Recently, a psychotherapist told me that when we generate anger, ninety percent of the ugliness of the object of our anger is due to our own exaggeration. This is very much in conformity with the Buddhist idea of how afflictive emotions arise.

At the point when anger and lust are generated, reality is not seen; rather, an unreal mental projection of extreme badness or extreme goodness is seen, evoking twisted,-unrealistic actions. All of this can be avoided by seeing the fuller picture revealed by paying attention to the dependent-arising of phenomena, the nexus of causes and conditions from which they arise and in which they exist.

Looked at this way, the disadvantages of afflictive emotions are obvious. If you want to be able to perceive the actual situation, you have to quit voluntarily submitting to afflictive emotions, because in each and every field, they obstruct perception of the facts. Viewed from the perspective of lust or anger, for example, the facts are always obscured.

Love and compassion also involve strong feelings that can even make you cry with empathy, but they are induced not by exaggeration but by valid cognition of the plight of
sentient beings, and the appropriateness of being concerned for their well-being. These feelings rely on insight into how beings suffer in the round of rebirth called “cyclic existence,” and the depth of these feelings is enhanced through insight into impermanence and emptiness, as will be discussed in Chapters 22 and 23. Though it is possible for love and compassion to be influenced byafflictive emotions, true love and compassion are unbiased and devoid of exaggeration, because they are founded on valid cognition of your relationship to others. The perspective of dependent-arising is supremely helpful in making sure that you appreciate the wider picture.

Dependence Upon Parts

Dependent-arising also refers to the fact that all phenomena-impermanent and permanent-exist in dependence upon their own parts. Everything has parts. A pot, for in stance, exists in dependence upon its parts, whether we consider coarse parts, such as the lid, handle, or opening, or subtle parts, such as molecules. Without its essential parts, a pot simply cannot be; it does not exist in the concrete, independent way that it seems to.

What about the atomic particles that are the building blocks of larger objects? Could they be partless? This too is impossible, since if a particle did not have spatial extent, it could not combine with other particles to form a larger object. Particle physicists believe that even the tiniest particle can be broken down into smaller parts if we can create tools powerful enough to do so, but even if they found a physically unbreakable entity, it would still have spatial extent and thus parts; otherwise it could not combine with other such entities to form anything larger.

Meditative Reflection

1. Bring to mind an impermanent phenomenon, such as a book.
2. Consider its coming into being in dependence upon its parts-its pages and cover.
3. See if its dependence upon its parts conflicts with its appearing as if it exists in its own right.

Examining Consciousness

The consciousness involved in looking at a blue vase does not have spatial parts because it is not physical, but it exists as a continuum of moments. Consciousness looking at a blue vase has earlier and later moments in its continuum, and these are parts of a stream of consciousness-no matter how short.

Then consider the briefest moments in a continuum. If even the briefest of moments did not have a beginning, middle, and end, it could not join with other brief moments to become a continuum; it would be equally dose to an earlier moment and to a later moment, in which case there would be no continuum at all.

As Nagarjuna says:

Just as a moment has an end, so it must
have A beginning and a middle.
Also the beginning middle, and end
Are to be analyzed like a moment.
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Chapter 5
Appreciating the Reasoning of Dependent-Arising

As explained in the previous chapter, all phenomena, whether impermanent or permanent, have parts. The parts and the whole depend on other, but they seem to have their own entities. If the whole and its parts existed the way they appear to you, you should be able to point out a whole that is separate from its parts. But you cannot.

There is a conflict between the way the whole and its parts appear and the way they actually exist, but this does not mean that there are no wholes, because if wholes did not exist, you could not speak of something as being a part of anything. The conclusion must be that there are wholes but their existence is set up in dependence upon their parts-they do not exist independently. As Nagarjuna’s Fundamental Treatise on the Middle called “Wisdom” says:

That which arises dependently
Is not one with that on which it depends
And is also not inherently other than it.
Hence, it is not nothing and not inherently
existent.

How the Reasoning of Dependent-Arising Works

Dependent or independent: there is no other choice. When something is one, it is definitely not the other. Because dependent and independent are a dichotomy; when you see that something cannot be independent, or functioning under its own power, there is no other option but to see that it is dependent. Being dependent, it is empty of being under its own power. Look at it this way:

A table depends for its existence on its parts, so we call the collection of its parts the basis upon which it is set up. When we search analytically to try to find this table that appears to our minds as if it exists independently. we must look for it within this basis-the legs. the top, and so forth. But nothing from within the parts is such a table. Thus, these things that are not a table become a table in dependence upon thought; a table does not exist in its own right.

From this viewpoint, a table is something that arises, or exists, dependently. It depends on certain causes; it depends upon its parts; and it depends upon thought. These are the three modes of dependent-arising. Of these. one of the more important factors is the thought that designates an object.

Existing in dependence upon conceptuality is the most subtle meaning of dependent-arising. (Nowadays. physicists are discovering that phenomena do not exist objectively in and of themselves but exist in the context of involvement with an observer.) For example, the Dalai Lama’s “I” must be within this area where my body is; there is no other place it could possibly be found. This is clear. But when you investigate in this area, you cannot find an “I” that has its own substance. Nevertheless, the Dalai Lama is a man, a monk, a Tibetan, who can speak, drink, eat, and sleep. This is sufficient proof that he exists, even though he cannot be found.

This means that there is nothing to be found that is the “I,” but this fact does not imply that the “I” does not exist. How could it? That would be silly. The “I” definitely does exist, but when it exists yet cannot be found, we have to say that it arises in dependence upon thought. It cannot be posited any other way.

Emptiness Does Not Mean Nothingness

There is no question that persons and things exist; the question is how, or in what manner, they exist. When we consider a flower, for instance, and think, “This flower has
a nice shape, nice color, and nice texture,” it seems as if there is something concrete that possesses these qualities of shape, color, and texture. When we look into these qualities, as well as the parts of the flower, they seem to be qualities or parts of the flower, such as the color of the flower, the shape of the flower, the stem of the flower, and the petals of the flower-as if there is a flower that possesses these qualities or parts.

However, if the flower really exists the way it appears, we should be able to come up with something separate from all of these qualities and parts that is the flower. But we cannot. Such a flower is not found upon analysis, or through other scientific tools, even though previously it seemed so substantial, so findable. Because a flower has effects, it certainly exists, but when we search to find a flower existing in accordance with our ideas about it, that is not at all findable.

Something that truly exists from its own side should become more and more obvious when analyzed-it should be clearly found. But the opposite is the case. Nevertheless, this does not mean that it does not exist, for it is effective-it creates effects. The fact that it is not found under analysis just indicates that it does not exist the way it appears to our senses and to our thoughts-that is, so concretely established within itself

If not finding objects when they are analyzed meant that they did not exist, there would be no sentient beings, no Bodhisattvas, no Buddhas, nothing pure, and nothing impure. There would be no need for liberation; there would be no reason to meditate on emptiness. However, it is obvious that persons and things help and harm, that pleasure and pain exist, that we can free ourselves from pain and gain happiness. It would be foolish to deny the existence of persons and things when we are obviously affected by them. The idea that persons and things do not exist is a denial of the obvious; it is foolish.

The Indian scholar-yogi Nagarjuna demonstrates that phenomena are empty of inherent existence by the fact that they are dependent-arisings. This itself is a clear sign that the view that phenomena do not inherently exist is not nihilistic. He does not give as the reason why ‘phenomena are empty that they are unable to function; instead, he calls attention to the fact that they arise dependent on causes and conditions.

Meditative Reflection
Consider:
1. Dependent and independent are a dichotomy. Anything that exists is either the one or the other.
2. When something is dependent, it must be empty of being under its own power.
3. Nowhere in the parts of the body and mind that form the basis for the “I” can we find the “I.” Therefore, the “I” is established not under its own power but through the force of other conditions-its causes, its parts, and thought.

Chapter 6
Seeing the Interdependence of Phenomena

Realizing the doctrine of dependent-arising, The wise do not at all partake of extreme views. – Buddha

Because phenomena seem, even to our senses, to exist from their own side even though they do not, we mistakenly accept the view that phenomena exist more substantially than they actually do. In this way we are drawn into afflictive emotions, creating the seeds of our own ruin. We need to undo these problems by reflecting, again and again, on the dependent nature of everything.

All phenomena-helpful and harmful, cause and effect, this and that-arise and are established in reliance upon other factors. As Nagarjuna says in his Precious Garland of Advice:

When this is, that arises,
Like short when there is long.
Due to the production of this,
that is produced,
Like light from the production of a flame.

In this context of dependence, help and harm arise, impermanent phenomena can function (and are not just figments of the imagination), and karma-actions and their effects-is feasible. You are feasible, and I am feasible; we are not just mental creations. By understanding this, you are free from what Buddhists call “the extreme of nihilism,” drawing the mistaken conclusion that just because a phenomenon cannot be found to exist independently it does not at all exist. As Nagarjuna says:

Having thus seen that effects arise
From causes, one asserts what appears
In the conventions of the world
And does not accept nihilism.

These two extremes-the exaggerated notion that phenomena exist under their own power, and the denial of cause and effect-are like chasms into which our minds can fall, creating damaging perspectives that either exaggerate the status of objects beyond their actual nature or deny the very existence of cause and effect. Falling into the chasm of exaggeration, we are drawn into satisfying a conception of ourselves that exceeds how we actually are-an impossible feat. Or, falling into the chasm of denial, we lose sight of the value of morality and are drawn into ugly actions that undermine our own future.

To be able to balance dependent-arising and emptiness. we need to differentiate between inherent existence and mere existence. It is also crucial to recognize the difference between the absence of inherent existence and utter nonexistence. This is why when the great Buddhist sages in India taught the doctrine of emptiness. they did not use the argument that phenomena are empty of the capacity to perform functions. Rather, they said that phenomena are empty of inherent existence because they are dependent-arisings. When emptiness is understood this way, both extremes are avoided. The exaggerated notion that phenomena exist from their own side is avoided through realizing emptiness, and the denial of the existence of functionality is avoided through understanding that phenomena are dependent-arisings and therefore not utterly nonexistent.

As Chandrakirti says:
This reasoning of dependent-arising
Cuts through all the nets of bad views.

Dependent-arising is the route for steering clear of the two chasms of mistaken outlooks and their attendant pains.
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PART III
Harnessing The Power of Concentration and Insight

Chapter 8
Focusing Your Mind

Let distractions melt away like clouds disappearing in the sky. -Milarepa

In all areas of thought, you need to be able to analyze, and then, when you have come to a decision, you need to be able to set your mind to it without wavering. These two capacities-to analyze and to remain focused-are essential to seeing yourself as you really are. In all areas of spiritual development, no matter what your level is, you need both analysis and focus to achieve the states you are seeking, ranging from seeking a better future, to developing conviction in the cause and effect of actions (karma), to developing an intention to leave the round of suffering called cyclic existence, to cultivating love and compassion, to realizing the true nature of people and things. All these improvements are made in the mind by changing how you think, transforming your outlook through analysis and focus. All types of meditation fall into the general categories of analytical meditation and focusing meditation, also called insight meditation and calm abiding meditation.

If your mind is scattered, it is quite powerless. Distraction here and there opens the way for counterproductive emotions, leading to many kinds of trouble. Without clear, stable concentration, insight cannot know the true nature of phenomena in all its power. For example, to see a painting in the dark, you need a very bright lamp. Even when you have such a lamp, if it is flickering you cannot see the painting clearly and in detail. Also, if the lamp is steady but weak, you cannot see well either. You need both great clarity of mind and steadiness, both insight and focused concentration, like an oil lamp untouched by any breeze. As Buddha said, “When your mind is set in meditative equipoise, you can see reality exactly as it is.”

We have nothing but our present mind to accomplish this with, so we must pull the capacities of this mind together to strengthen it. A merchant engages in selling little by lime in order to accumulate a pile of money; the capacities of the mind to comprehend facts need to be drawn together and focused in the same way so that the truth can be realized in all its clarity. However, in our usual state we are distracted, like water running everywhere, scattering the innate force of mind in multiple directions, making us incapable of clear perception of the truth. When the mind is not focused, as soon as something appears, it steals away our mind; we run first after this thought and then after that thought, fluctuating and unsteady; powerless to focus on what we want before being pulled away to something else, ready to ruin ourselves. As the Indian scholar-yogi Shantideva says:

A person whose mind is distracted
Dwells between the fangs of afflictive emotions.

Focusing

Despite the fact that distraction is our current state, the capacities for knowledge which we all possess can be drawn together and focused on an object we want to understand, as we do when we listen to important instructions. Through such focus, all practices-whether love, compassion, the altruistic intention to become enlightened, or insight into your own nature and the actual condition of all other phenomena-are dramatically enhanced, so your progress is much faster and more profound.

Buddhism offers many techniques for developing a form of concentration called “calm abiding.” This powerful state of concentration earns its name because in it all distractions have been calmed and your mind is-of its own accord-abiding continuously; joyously; and flexibly on its chosen internal object with intense clarity and firm stability. At this level of mental development, concentration does not require any exertion at all.

Overcoming Laziness

Laziness comes in many forms, all of which result in procrastination, putting off practice to another time. Sometimes laziness is a matter of being distracted from meditation by morally neutral activities, like sewing or considering how to drive from one place to another; this type of laziness can be especially pernicious because these thoughts and activities are not usually recognized as problems.

At other times, laziness manifests as distraction to thinking about non-virtuous activities, such as an object of lust or how to pay an enemy back. Another type of laziness is the sense that you are inadequate to the task of meditation, feeling inferior and discouraged: “How could someone like me ever achieve this!” In this case you are failing to recognize the great potential of the human mind and the power of gradual training.

All of these forms of laziness involve being unenthusiastic about meditation. How can they be overcome? Contemplation of the advantages of attaining mental and physical flexibility will generate enthusiasm for meditation and counteract laziness. Once you have developed the meditative joy and bliss of mental and physical flexibility, you will be able to stay in meditation for as long as you want. At that time your mind will be completely trained so you can direct it to any virtuous activity; all dysfunctions of body and mind will have been cleared away.

Conditions For Practice

For beginners, external factors can have considerable impact on meditation because your internal mental capacity is not particularly strong. This is why limiting busy activities and having a quiet place to meditate are helpful. When your internal experience has advanced, external conditions will not affect you much.

At this early stage of cultivating calm abiding, you need a healthful place to practice, away from busy activities and persons who promote lust or anger. Internally, you need to know satisfaction. not having strong desires for food. clothing, and so forth but being satisfied with moderation. You need to limit your activities. giving up commotion. Busyness should be left behind. Of particular importance is moral behavior, which will bring you relaxation, peace, and conscientiousness. All of these preliminaries will help to reduce coarse distractions.

When I became a monk. my vows required limiting my external activities, which placed more emphasis on spiritual development. Restraint made me mindful of my behavior and drew me into considering what was happening in my mind in order to make sure I was not straying from my vows. This meant that even when I was not purposely making an effort at meditation, I kept my mind from being scattered and thus was constantly drawn in the direction of one-pointed, internal meditation.
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Chapter 18
Balancing Calm and Insight
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To combine calm abiding with special insight, you need to alternate focusing meditation with analytical meditation and bring them into harmony. Too much analysis will promote excitement, making the mind slightly unstable, but too much stability will make you not want to analyze. As the Tibetan sage Tsongkhapa says:

If you solely perform analytical meditation. the calm abiding generated earlier will degenerate. Therefore, upon having mounted the horse of calm abiding, you should remain within analysis and then periodically alternate this with stabilizing meditation.

Union of Calm Abiding and Special Insight

Previously, calm abiding and analysis were like the two ends of a scale, the one becoming slightly lighter when the other became manifest. But now, as you skillfully alternate between stabilizing and analytical meditation, the power of analysis itself induces even greater mental and physical flexibility than before, when calm abiding was achieved by stabilizing meditation. When calm abiding and insight operate in this way; simultaneously with equal power, it is called the “union of calm abiding and special insight.” It is also called “wisdom arisen from meditation,” as contrasted to the wisdom arisen from hearing, reading, study; or thinking.

Earlier, while reading and thinking about emptiness, your consciousness was aimed at emptiness as an intellectual object of inquiry; so your mind and emptiness were
separate and distinct. But now you have the experience of penetrating emptiness without the sense that subject and object are distant from each other. You are approaching a state in which insight and emptiness are like water put into water.

Gradually; the remaining subtle sense of subject and object vanishes, with subject and object entirely merging in total nonconceptuality. AB Buddha says, “When the fire of knowing reality just as it is arises from correct analysis itself, the wood of conceptuality is burned, like the fire of sticks rubbed together.”
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Chapter 20
Noticing How Everything Depends on Thought
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When I was about thirty-five years old, I was reflecting on the meaning of a passage by Tsongkhapa about how the ”I” cannot be found either within or separate from the mind-body complex and how the “I” depends for its existence on conceptuality. Here is the passage:

A coiled rope’s speckled color and coiled form are similar to those of a snake, and when the rope is perceived in a dim area, the thought arises, “This is a snake.” As for the rope, at that time when it is seen to be a snake, the collection and parts of the rope are not even in the slightest way a snake. Therefore, that snake is merely set up by conceptuality. In the same way, when the thought “I” arises in dependence upon mind and body, nothing within mind and body-neither the collection that is a continuum of earlier and later moments, nor the collection of the parts at one time, nor the separate parts, nor the continuum of any of the separate parts-is in even the slightest way the “I.” Also there is not even the slightest something that is a different entity from mind and body that is apprehendable as the “I.” Consequently; the “I” is merely set up by conceptuality in dependence upon mind and body; it is not established by way of its own entity.

Suddenly; it was as if lightning moved through my chest. I was so awestruck that, over the next few weeks, whenever I saw people, they seemed like a magician’s illusions in that they appeared to inherently exist but I knew that they actually did not. This is when I began to understand that it is truly possible to stop the process of creating destructive emotions by no longer assenting to the way “I” and other phenomena appear to exist. Every morning I meditate on emptiness, and I recall that experience in order to bring it into the day’s activities. Just thinking or saying “I,” as in “I will do such-and-such,”will often trigger that feeling. But still I cannot claim full understanding of emptiness.
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On Not Knowing How to Live – Allen Wheelis

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Chapter I
The Stranger
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“I am now forced to admit,” writes Cyril Connolly, “that anxiety is my true condition, occasionally intruded upon by work, pleasure, melancholy or despair. “
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Chapter III
Grail-Hunger
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Life becomes a strange mixture of the mean and the tender, of clandestine meetings, lying to wife, dissimulating before colleagues, fabricating excuses, furtive weekends. We are in each other’s offices almost constantly, sneaking in and out in the hope of avoiding notice. Occasionally we lie together on my office couch, fearful that someone may knock, and I feel a strange unease at the thought that presently I will be sitting behind this couch, considering with clinical detachment, presumably, just such prisons of passion as this. Sonya is an apostle of intimacy, her joy the breaching of barriers. We find in each other such intensity, such deepening fulfillment, that the relationship becomes the greatest possible good. I stop seeking how to live, I know. For the first time work becomes the ordinary activity of a happy man rather ? than a driven and tormented struggle. Guiltily we begin to consider divorce and remarriage.

After a few months things become difficult. Our colleagues begin to sense something. Rumor of our affair spreads among the patients. We begin to have fights. Sonya weeps and clings to me as if we were being torn apart, says we must end it because of my children. I decide to proceed with a divorce, she dissuades me. A sane decision is not possible in this setting, the strain is too great. We have to get away somehow, be with each other alone and in peace. I fabricate a research conference in New Orleans, and Sonya is reportedly called to Europe on busine. Leaving separately, we meet the following day New York and take a plane for Mexico.

We have then our time of being with each other alone. For a month we travel together without meeting anyone we know. Yet things go wrong from the start. Nothing sudden, nothing definite; we have no fights, but something is awry. We are puzzled and anxious.

I don’t know why it has happened but after a few days I know what has happened: the magic is gone. She had been the woman without whom I could not live; now she is only a woman very dear to me. We had for each other an affinity which flowered into love. This we have lost and do not find again. When I ask myself if I love her I feel sure I do, but I never had to ask before. It is a sensible love now, capable of being weighed in the same balance with contending claims.

I can tell she feels as I, but we are ashamed and do not talk about it. She says our trouble is that we are running away, which makes us feel like cowards. Another time she says she feels guilty toward her hm band and I, toward my wife and children. I agree, but it isn’t my wife toward whom I feel guilty, but Sonya. I am sad and bewildered by our loss but not deeply upset, nostalgic but not determined to have it back, and feel guilty because of not being more distressed.

We seem willing to let it be lost, make only token efforts to find it again.

In the afternoon we sit in the village square in Taxco before the crumbling cathedral. Children swarm around us offering fake antiquities. At dusk we walk up the narrow cobblestone path to the hotel at the top of the hill. The lonely Englishman, drinking gin as always in the damp lobby, looks up with a sickly smile in the hope we will stop to chat with him. In our room we close the door, and standing there by the cold bed embrace tenderly and are enveloped by such a stillness the world seems deserted. Our relationship has become sentimental; we treat each other with unusual gentleness. In Oaxaca we walk behind the loquacious guide through the ruined streets of Monte Alban and Mitla, holding hands, saying little, feeling a deep affection, knowing the madness is gone. Our exaltation had been the meaning of life; and the sad thing is that, having lost it, we are willing to deem it madness. We love each other but are no longer in love, are good for each other but no longer indispensable. It does not seem justified to break up two marriages in order to make a third which would be no more final than either of those we would be scrapping. We do not talk about it, the decision is implicit. When our month is up and we start back we know what has been decided.

We created for each other an illusion. We fell in love, not with each other, but each with the image of himself in the other’s eyes. These reflections, flashing back and forth, expanded a modest affection into an overwhelming passion. At the file cabinet I saw a tragic beauty in her face, and on that foundation built a fairy castle. For at that moment she saw my perception of her, found the image pleasing, and thought better of me for my discernment. My next perception discovered in her, therefore, not only the beauty already noticed, but her enhanced appraisal of me; whereupon I realized her to be a woman of unusual sensitivity. And when next she glanced at me she noticed this added element in my perception of her, which led her again to revise upward her image of me. So it progressed, with lightning rapidity. I came to believe that she had found in me something for which she would risk all she had, and I responded with thumping affirmation of that fineness in her which enabled her to discover this quality in me. But she had looked, not into my heart, but into the mirror of my eyes and had seen there an embellished image of herself. A single candle of affection, reflected back and forth between us, became a blaze of illumination and, finally, the meaning of life itself.

Such a passion feeds on its own hunger, consumes itself. We could not long live on reflected appraisals. There are other things to life, troubles and tasks and preoccupations, and one day, looking at Sonya, I see, not myself, but her concern with other persons, , other matters. Failing to find in her that retouched portrait of myself to which I have become so attached, I no longer feel that passionate approval of her which she had so merited. And when next she looks at me she fails to see herself, for I too have other concerns, or else finds an image of herself scaled down from that to which she has become accustomed, whereupon her feeling for me is correspondingly diminished.

It was a small thing that got this magic started, and a small thing that made it start to disappear. Of all those qualities which I perceived in her when I was so enraptured, only one is now missing. Everything else is still there-the soft hair, the receptive body, the generous heart, the impassioned spirit-but the blaze of love has diminished to the candlelight of affection and left us where we started. The affair has ended, but we remain friends. I think of her fondly; and sometimes, looking at her across the conference table, I feel her in my arms again, hear her whispering that she cannot live without me. She has developed the habit of chewing slightly at the inside of her cheek, which gives her face a ruminative cast. For a while after our return from Mexico she was remote and sad, but now her old intensity and enthusiasm have returned.

Apostate without alternative creed, I’m sick in search of something holy. Grail-hunger is making me mad.

To kneel in fear is despicable. In our stricken nights we struggle to hold honor above survival. Evil lurks and we stride forever the silent streets of fear.

Not to kneel at all is madness, is to look only down, to be alone in the universe, to have no place in any thing larger than one’s self.

To kneel in reverence, by choice, without fear, this is man’s glory.

Ah but where is God? Where might we find him?
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What is to follow? Getting up? dressing? parting? Could I tolerate a life of such encounters, of relationships so truncated? Would I not rather be appalled that the exalted and selfless relatedness of which man is capable can be reduced to this carnal straining at each other? Would I not be moved to elevate it, to transform it into love? And would not that loving, because of its more intimate connections with dependence and vulnerability, come quickly to place faithfulness above variety? And would not then the mind and character of one’s lover, her style, generosity, and above all her heart-qualities all more rare and special, and much harder to find, than physical contours-would not these things stand forth as what I sought, displacing the curves of undifferentiated flesh which plague me now? And would not this vision of what, in those circumstances, I would most desperately want, be, indeed, exactly what I already have?

Whence then this ache for which, even in principle, there is no relief? this hunger that can be fed but never satisfied?

Girl-hunger, grail-hunger-two views, perhaps, of the same striving. Lips and legs, smiles and breasts, drawing us on, ceaselessly-is this not spirit thrusting itself into the future, creating and extending itself into ever more knowing forms of life, rushing on profligately, endlessly, through wave after wave of unresisting and expendable flesh? It sweeps through us, uses us, discards us, whirls on into a future we shall not know. Yet we yearn terribly, not to be left behind. We want to be, not the medium through which the wave passes, but the wave itself which rushes on. So we go searching after God-and is this not spirit, becoming aware of itself, reaching for a vision of that toward which it moves? We want to see what it is this striving strives toward. Being used, we seek to know the purpose we serve, want then to give to the great design our holiest word, God.

On being asked “Do you love each other?” those who live only in the present become confused, do not understand the question, don’t know what to say. “We get along,” they say uneasily, or “We get a lot of kicks,” or “We get it together.”

Love is created anew by each generation from lust, and loneliness. For this to come about, primary needs may not be primarily spent, must be accumulated. But the promiscuous accumulate nothing. They wander about improvidently paying out the common need in a common and recurrent coupling, never bringing together enough of the elemental drives, never subjecting them to sufficient pressure, to ignite them into love.

What eventually becomes reality appears first as illusion. The hope attached to illusion sustains life when all else is lost.

All my life I have been in search of God. That’s why I’ve never been able to enjoy anything. One has to have found God-to have a place in something larger than one’s self, to which one belongs-to enjoy anything. Lacking it one is in anguished search, or else, despairing, becomes one’s self God and then is responsible for everything.

A woman of lively interests is my wife. She loves to travel, to walk about in strange cities, breathe a foreign air, hear another tongue. Swimming delights her; the presumptuous intimacy of the unresisting medium makes her laugh. She likes to talk with friends, always wants to know what they are doing, to hear about their children. She loves to walk, to feel the sun on her face, to browse in new stores, to visit museums and look reverently upon the past.

All these things, so desirable to her, I find tedious. She does not, however, like to do them alone; so I go along and, while apparently participating, actually am waiting for whatever it is we are doing to be done with. And as I go on like this, tolerating in benign martyrdom a way of life created from her initiative, it comes somehow to seem that, on my own, I could arrange things better, that I know how to live, but am constrained by her needs to banal diversions.

One day something goes wrong with my knee. I’m not so crippled as I portray, but enough to be excused from obligations. My wife is all sympathy. tells me it will get better. “What do you want to do?” she says. “Come! Get in the car. I’ll drive. It’s a marvelous day. We’ll go anywhere you want. do anything you like. It’s Sunday. it’s springtime. the sun is shining. You mustn’t be sad. Where do you want to go?”

I have no idea. Anywhere. Nowhere. My mind is not blank, but neutral. Places parade before imagination and all are equal. She drives us to the beach, thousands of people swimming, oiling themselves on bright towels, playing in the sand; along a golf course where we pause to watch a man take three practice swings, then hit a perfect drive, the ball sailing straight away, up, up, and out of sight; by a museum with a show of French Impressionists, throngs of people entering and leaving. In the park we drive by picnickers, teen-agers throwing Frisbees, barefoot girls playing volleyball, young couples pushing baby carriages, smells of cooking, of charcoal fires, sounds of baseball, of guitars, and of laughter. My wife, delighted with this panorama, drives slowly, glances at me eagerly, ready to stop wherever my inclination may suggest, do anything I want, go on to any place I wish, while I, looking out on this unhesitating life process, fall into a well.

Everyone of these people knows what to do, how to enjoy it. It looks terribly simple, yet I have not the knack. I can do these things, go through the motions, simulate the responses-to an observer it might seem that I, too, know how to enjoy a holiday-but in the manner of a brain-damaged patient who, thinking intently what each leg must do, can somehow get there, but not with a natural walk. I lack a kind of native knowing which is the legacy of everything that lives. Now, suddenly, without the obligation to do those many things which, as it seemed, I have not really wanted to do, I have nothing better to put in their place, indeed nothing whatever to put in their place. Free, I cannot improvise. Relieved of my burden, I am bereft.

How strange! I have worked hard all week, now along comes a day of utter leisure. Must there not be something I want? something that would give me pleasure? I must observe these people more closely. There must be a secret, some simple solution.

Always and forever the student and still I don’t know how. Are there no classes in living? Would someone take me as an apprentice?

Not knowing how to live is separateness, the division of the world into self and others. I sit inside my skull and look out as a frightened man from a moated castle. Me in here and the world out there. We negotiate, we make deals, exchanges, but we are not one. I am an entity, complete. Never do I lose sight of where I stop and the world begins. With sleepless vigilance I patrol the edges of selfhood, warn visitors away. I am independent within this domain, but am dying. It is my wholeness that destroys me. I long for partness in a greater whole.

Knowing how to live is oneness with the world. I die of the hunger of oneness. I find it never. I read about it, and the words are ghosts. Dharma is not for me, nor “the way” of Lao Tzu. I feel it in the patience of trees, the wind in their branches sighs about it. hear it in the rote of the surf and the song of the lark. I see it in animals and in children. I touch it but cannot make it mine. Mine! I’m trying to grab it, suppose, ravage it back into this moated castle, and that’s the trouble-this division of everything into self and others which I can’t escape because it’s not, something that limits me, it is me.
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Chapter IV
The Task
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Nothing endures but a futile yearning. There’s a natural grace to youth, age hovers on the grotesque.

I’ll try no more to force myself into acts of creation on a field of nihilism. I must find new ground. What I seek is a vision of life within which love and joy are possible. I cannot go back to discarded beliefs of the past, cannot go on in this desert, must seek something new.

Seek to find or seek to create?

We are plunging down a cataract, and what’s important is to call out. Not for help, there is no help. Not in despair-what can anyone do but shrug, look away? But to give a signal. A gesture of love and humor to acknowledge drowning so others who drown will know they are not alone. We are all drowning; deny it with blindness, transcend it with laughter. The laughter I seek is that which looks straight in the eye of despair and laughs. The proper subjects for comedy are fear, loneliness, and death.

I dream of escape, a change of view, a different life, a rebirth perhaps of the will to go on searching. One more surge, Lord, before I’m through.

Life as the acting out of illusion, life as the achievement of meaning. The distinction itself may be illusory. Maybe there is no meaning but only life; and in art, no meaning but only the illusion of life. Maybe that’s the whole thing-to observe life so closely, to search it out so carefully, with so much love, that it comes alive, that it is.
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I do not use myself up in living. A part of myself I save, like a miser, hoping to transmute it into something that will go on living for me in the future. With the quick I have little to do; the eminent dead are my models, the yet unborn my legatees. I am a time-binder, obsessed with mortality, spend my life creating an effigy to outlast me. In the graveyard, ceaselessly I carve at my epitaph, trying to make of it something so beautiful, so compact of meaning, that people will come from afar to read.

It need not be in vain, this elaboration of self-great treasures have been so fashioned. What gets served up to the future may be a tasty dish indeed, but what shall we say of the chef, oblivious of the hungry ones around him, garnishing himself for the gourmets of the future? Rather than miss a day of painting, Cezanne did not attend his mother’s funeral. Rilke could not spare from his poetry the time for his daughter’s wedding. The world cannot do without such people, but pity those whose lot it is to live with them.

I think rather more of those who use themselves up, die with nothing left over, disappear without a trace. My wife holds nothing back, spends her life on the living, gives herself to the hungry who feed on her, consume her substance. I see her getting smaller, becoming transparent, beginning to disappear. But look at her face! It grows finer, more beautiful! She has time. Come and be fed. She prepares no delicacies for the future, but soup today for everyone, even for those hungry chefs who think only of future banquets. Better get to know her now, for she will soon be gone, and you’ll not then recover her from the history of our time. But without the likes of her there would be no future for which the present could be a history.

I find myself wanting to fall in love again. With her of the volatile spirit, the open and generous heart. I have been holding myself aloof for years, invulnerable, to protect the search. But love can’t live on the shelf, must be fed with those confidences which create vulnerability. Without risk of hurt there is no love. Not, anyway, of the kind we used to have, she and I-the soaring, the despair, the exaltation. Now I have no search to protect, have lost direction, find nothing, create nothing, want back the deep, deep
joy. I must open myself to pain, must see it as minor beside the passion it makes possible.

I have defined and clarified the nihilistic position until it includes everything, and goodness itself becomes a random throw. Yet even so it is unthinkable not to try. Standing by the freeway and seeing there before me in the fast lane an injured child, would I not try?

But there is an injured child. In Vietnam, Biafra, Bangladesh, Babi Yar-the list is endless. Always there is an injured child. Of what trying then am I capable, I who for so long have burrowed within, ever more deeply down and inward, who live now in an airless world of phantoms, who no longer know even where the fast lane is?

I must give up this lamentation. Life offers no task with transcendent authorization, no goal the accomplishment of which can be guaranteed to have lasting value. I must accept that whatever I undertake is as risky, of both achievement and value, as darting out on that freeway. Probably I shall be killed before reaching the child, or, if I succeed in snatching him up, he will die of injuries already received-or survive to become a murderer. There’s nothing sure to go on-only that it’s unthinkable not to try, that there isn’t anything else. If ultimate tasks are illusory I must have at the tasks near at hand, at the transient tasks, the cries for help in a confused and changing field.

I fall at times into such a brave, constructive mood. It doesn’t last. The possibility of doing useful work commands no energies of mine. What these energies will respond to, and to nothing else, is a task which is faithful to the crushing and exceptionless nihilism by which I am riven and yet shot through-like Mahler’s Ninth Symphony-with a vision of lyric beauty. The former without the latter is intolerable; the latter without the former is trivial. I must maintain the search for a task which will embody both. Were I to find it, energies would become available, would bend to this vision.

Chapter V
The Path of Spirit
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Man is the vessel of the Spirit,” writes Erich Heller; “. . . Spirit is the voyager who, passing through the land of man, bids the human soul to follow it to the Spirit’s purely spiritual destination.”

Viewed closely, the path of spirit is seen to meander, is a glisten of snail’s way in night forest; but from a height minor turnings merge into steadiness of course. Man has reached a ledge from which to look back. For thousands of years the view is clear, and beyond, though a haze, for thousands more, we still see quite a bit. The horizon is millions of years behind us. Beyond the vagrant turnings of our last march stretches a shining path across that vast expanse running straight. Man did not begin it nor will he end it, but makes it now, finds the passes, cuts the channels. Whose way is it we so further? Not man’s; for there’s our first footprint. Not life’s; for there’s still the path when life was not yet.

Spirit is the traveler, passes now through the realm of man. We did not create spirit, do not possess it, cannot define it, are but the bearers. We take it up from unmourned and forgotten forms, carry it through our span, will pass it on, enlarged or diminished, to those who follow. Spirit is the voyager, man is the vessel.

Spirit creates and spirit destroys. Creation without destruction is not possible; destruction without creation feeds on past creation, reduces form to matter, tends toward stillness. Spirit creates more than it destroys (though not in every season, nor even every age, hence those meanderings, those turnings back, wherein the longing of matter for stillness triumphs in destruction) and this preponderance of creation makes for that over-all steadiness of course.

From primal mist of matter to spiraled galaxies and clockwork solar systems, from molten rock to an earth of air and land and water, from heaviness to lightness to life, sensation to perception, memory to consciousness-man now holds a mirror, spirit sees itself. Within the river currents turn back, eddies whirl. The river itself falters, disappears, emerges, moves on. The general course is the growth of form, increasing awareness, matter to mind to consciousness. The harmony of man and nature is to be found in continuing this journey along its ancient course toward greater freedom and awareness.
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But could it be that man, recognizing spirit in others, exercising forbearance, creating morality, brotherhood-could it be that just here he ceases to be the advancing edge of spirit? Could it be that those rules whereby man determines that the continuing upward journey of spirit shall be infused with love halt the journey altogether? Could it be that the thrust of spirit leaps now from man to those aggregates of men, nations, which know not rules, which preserve in sovereignty the no-means-excluded struggle for power whereby spirit from the very beginning has advanced? Who is man, himself a latecomer, his civilization and morality later still, and still aborning, to make rules for universal spirit? Will spirit take heed? Or will we but legislate ourselves to some dark eddy, some back-looping current which spirit, unheeding, unhindered, will remorselessly rush by?
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Two hundred years have passed and the world is greatly changed. We have become, as Descartes promised, lords and possessors of the earth. It is unclear whether we shall destroy it or preserve it, but the enormity of our power is beyond doubt. We have not now the confidence of Hegel. We find but a faltering progression of spirit, a contingent universe in which anything may happen and all may be lost, in which historical figures mayor may not, and often do not, serve spirit. An opposing tendency is afoot: as spirit becomes conscious of itself the vessels of spirit lose moderation, grow arrogant as well as drunk with power.

No longer can we see man as a puppet jiggled by a beneficent God. Freedom is concentrated in man; God stands in awe of what we shall do. As the vessels of spirit become more conscious and more powerful, reaching in man an explosive acme of knowing and of power, spirit becomes more vulnerable to its carriers. It has lost divine protection without gaining safe conduct from us who carry it forward. Man chooses, may go this way or that, may worship spirit, move on in its ancient path, or may oppose it, deny it, perhaps destroy it utterly.

Spirit does not contend with freedom. We are as free as we are able to be, are dangerously free, and may in our arrogance destroy more than we can afford to lose. Nothing guarantees our progress or even our survival. Forms perish. Spirit does not require mankind. We now are the leading edge of spirit but nothing insures we shall so remain. The place of vision, the opportunity created by freedom, is so to live as to further the voyage of spirit, to remain its swiftest vessel.

The jungle, we say in our civilized arrogance, is lawless. Struggle is to the death; everything that grows and develops does so by killing something else which itself would want to grow and develop. Civilization invents morality, reduces this ruthlessness to a competition according to rules. Morality, that is to say, marks the advent of something radically new in the adventure of spirit: the attempt to continue according to law a journey which from the start has been lawless.

Spirit has come an enormous journey in darkness, blindly achieving ever-increasing form and awareness, leaping forward and upward with whatever force its leading vessel can command, ruthlessly discarding forms it has used and surpassed, catching a ride on whatever goes its way and goes the fastest, destroying anything that would stop or slow its going on. Living forms are transient vessels of something which passes through them and on, leaving them broken and forgotten, used-and used up-for a purpose not their own. The activities of these perished forms by which spirit so used them would seem to have served the individual purposes and the species purposes of these living things-to survive, to grow strong, to prevail-and so they did, so do they still, but behind these limited purposes, these ends in view, rides a larger purpose without end. The strong devour the weak, growth follows upon destruction, struggle is to death, and on the crest of this ceaseless wave of agony and triumph spirit is borne forward. Civilization, no more than thirty thousand years old, is but the latest moment in this long wash, and morality but the fledgling creation of that moment. With civilized man, for the first time ever, a living form decrees a change in the mode by which spirit shall advance. Morality is born of that moment in which spirit becomes aware of itself and aspires to direct its own future progress. It attempts to revoke the ruthlessness which heretofore has been the means of progress, and to continue that progress according to rules.

It is a grand view, but turns the truth around. Jungle and civilization are indeed opposed, but it is civilization that is lawless. Animals do not make rules, know not that they obey them, yet behave within the limits of what is permitted by norms inscribed in their nature. Only man denies the authority of such norms, declares that everything is permitted. Morality stands against this license but not, thus far, with great success.

Long did spirit live and move in the leaves of plants, in branches, in flowers. The movement of spirit is glacial. Animals seize for themselves a freedom unimaginable to plants, move about, roar, pounce, copulate. Their wanderings and their struggles conform to looser norms, but still conform; they wander within limits. Spirit rides their still lawful backs, and the movement of spirit is slow. During the span of man’s time this movement becomes faster, most dizzyingly fast in the latest moment which is civilization.

Now arises a dark question. Could it be man’s increasing lawlessness which yields this accelerating pace of upward-leaping spirit?

One by one and then in bunches, indiscriminately, have we challenged those traditional norms which limit what we may do. Ever faster do they fall, none now are left. Everything is permitted. Never has spirit been so free. Shall we get away with this arrogance? Do we overreach ourselves? Do we prepare in the atomic furnace of our Titans a great immolation? Perhaps spirit will be thrown back, will then once more move forward at a slower pace, borne by forms which know that some things are not permitted. And then? Will the whole tale be told again and again, endlessly?

The end of certainty chastens morality. For what justifies violence is the certainty of being right. Having lost this certainty we must accept that we struggle toward provisional goods, oppose provisional evils. Because of this provisionality we should undertake to resist evil rather than to destroy it, to support the good rather than to instate it by murder. The absolute must take refuge in absolute modesty.

Chapter VI
The Flail
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Valery speaking beyond the grave to Rilke, recalling their last meeting at Muzot: “. . . a terribly lonely, very small chateau in a vast sad mountain region; old-fashioned, serious rooms with dark furniture, narrow windows: it constricted my heart. My imagination could not restrain itself in your rooms from eavesdropping on the endless monologue of a completely isolated soul with nothing to distract it from itself and from the consciousness of its uniqueness. A life so withdrawn seemed hardly possible to me, eternal winters long in such excessive intimacy with silence, so much space for dreams, so much freedom for the quintessential, the all too concentrated spirits which inhabit books, for the writer’s Fluctuating powers, for the forces of memory. Dear Rilke, you seemed to me locked up in pure time, and I feared for you the transparence of the too monotonous life which through the line of eternally similar days gives a clear view of death.”

Friends die and the mystery envelops us. Something here calls for attention. With tenacious thought it might be grasped and understood. But from the nothingness toward which our lives are tending we are easily distracted. We lay it aside. Values are winnowed by bereavement and pain, by loneliness and guilt, but death is the ultimate Hail. It may revoke any prior position on value, and it precludes any subsequent revision.

To see death clearly one may wait till one is dying, but to see life in the momentarily brilliant illumination of death one may not wait so long. For then fear supervenes. One dares not look, or else looks through blurred eyes and sees not what is there, but a landscape of longing. He who would see life clearly in its final illumination must invoke death early. When only a murmur is audible he must conjure the panic roar. From the serenity of the placid stream he must transport himself in imagination to the lip of the cataract. How then, looking back, seems the course of the river?

Friends die more frequently as we get older, and each death brings back the mystery, reminds us there is something here to be contemplated, some wisdom to be sifted from fear. But the empty heavens are too much, we turn away. There is so much to be done. We rush back to our problems, for the existence of problems affirms our existence. Unfinished business means that we, too, are unfinished. We lose ourselves in the daily round.

Then one day it’s not someone else. The coronary occlusion is happening to the heart inside; the name on the report of malignancy is one’s own. Then it’s too late.
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Chapter VII
The Man of Reason
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Betrayed by transcendence, we return to the present. We look around, we touch, we taste, we feel. Presently we begin to say, “This is better than that.” We value it, we want to hold on to it, point it out to others, and almost at once there’s a trying to create, to contribute, a drive for transcendence which leads us to betray the present, commit our energies to the future. Love of the present leads us to betray the present; the effort to hold something forever leads us to lose even that moment of possession we might otherwise have.

It is not the disorder and confusion of the marketplace which drives me to the mountaintop; it’s my delight in the marketplace that impels me to desert it. Love of life leads me to betray life; love of the actual sends me searching after the ideal; love of the present leads to the sacrifice of the present to a future that never comes.
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Prof. Jayanth R. Varma’s Financial Markets Blog – 07 Mar 2010

Sun, 07 Mar 2010

Bayesians in finance redux

In November last year, I wrote a brief post about Bayesians in finance. The post was brief because I thought that what I was saying was obvious. A long and inconclusive exchange with Naveen in the comments section of another post has convinced me that a much longer post is called for. The Bayesian approach is perhaps not as obvious as I assumed.

When finance professors walk into a classroom, they want to build on what the statistics professors have covered in their courses. When I am teaching portfolio theory, I do not want to spend half an hour explaining the meaning of covariance; I would like to assume that the statistics professor has already done that. That is how division of labour is supposed to work in a pin factory or in a university.

Unfortunately, there is a problem with this division of labour – most statistics professors teach classical statistics. That is true even of those statisticians who prefer Bayesian techniques in their research work! The result is that many finance students wrongly think that when the finance professors talk of expected returns, variances and betas, they are referring to the classical concepts grounded in relative frequencies. Worse still, some students think that the means and covariances used in finance are sample means and sample covariances and not the population means and covariances.

In business schools like mine where the case method dominates the pedagogy, these errors are probably less (or at least do less damage) because in the case context, the need for judgemental estimates for almost everything of interest becomes painfully obvious to the students. The certainties of classical statistics dissolve into utter confusion when confronted with messy “case facts”, and this is entirely a good thing.

But if cases are not used or used sparingly, and the statistics courses are predominantly classical, there is a very serious danger that finance students end up thinking of the probability concepts in finance in classical relative frequency terms.

Nothing could be farther from the truth. To see how differently finance theory looks at these things, it is instructive to go back to some of the key papers that established and developed modern portfolio theory over the years.

Here is how Markowitz begins his Nobel prize winning paper (“Portfolio Selection”, Journal of Finance, 1952) more than half a century ago:

The process of selecting a portfolio may be divided into two stages. The first stage starts with observation and experience and ends with beliefs about the future performances of available securities. The second stage starts with the relevant beliefs about future performances and ends with the choice of portfolio.

Many finance students would probably be astonished to read words like observation, experience, and beliefs instead of terms like historical data and maximum likelihood estimates. This was the paper that gave birth to modern portfolio theory and there is no doubt in Markowitz’ mind that the probability distributions (and the means, variances and covariances) are subjective beliefs and not classical relative frequencies.

Markowitz is also crystal clear that what matters is not the historical data but beliefs about the future – historical data is of interest only in so far as it helps form those beliefs about the future. He also seems to take it for granted that different people will have different beliefs. He is helping each individual solve his or her portfolio problem and is not bothered about how these choices affect the equilibrium prices in the market.

When William Sharpe developed the Capital Asset Pricing Model that won him the Nobel prize, he was trying to determine the market equilibrium and he had to assume that all investors have the same beliefs but did so with great reluctance:

… we assume homogeneity of investor expectations: investors are assumed to agree on the prospects of various investments – the expected values, standard deviations and correlation coefficients described in Part II. Needless to say, these are highly restrictive and undoubtedly unrealistic assumptions. However, … it is far from clear that this formulation should be rejected – especially in view of the dearth of alternative models

But finance theory quickly went back to the idea that investors had different beliefs. Treynor and Black (“How to use security analysis to improve portfolio selection,” Journal of Business, 1973) interpreted the CAPM as saying that:

…in the absence of insight generating expectations different from the market consensus, the investor should hold a replica of the market portfolio.

Treynor and Black devised an elegant model of portfolio choice when investors had out of consensus beliefs.

The viewpoint in this paper is that of an individual investor who is attempting to trade profitably on the diiference between his expectations and those of a monolithic market so large in relation to his own trading that market prices are unaffected by it.

Similar ideas can be seen in the popular Black Litterman model (“Global Portfolio Optimization,” Financial Analysts Journal, September-October 1992). Black and Litterman started with the following postulates:

1. We believe there are two distinct sources of information about future excess returns – investor views and market equilibrium.
2. We assume that both sources of information are uncertain and are best expressed as probability distributions.
3. We choose expected excess returns that are as consistent as possible with both sources of information.

Even if we stick to the market consensus, the CAPM beta itself has to be interpreted with care. The derivation of the CAPM makes it clear that the beta is actually the ratio of a covariance to a variance and both of these are parameters of the subjective probability distribution that defines the market consensus. Statisticians instantly recognize that the ratio of a covariance to a variance is identical to the formula for a regression coefficient and are tempted to reinterpret the beta as such.

This may be formally correct, but it is misleading because it suggests that the beta is defined in terms of a regression on past data. That is not the conceptual meaning of beta at all. Rosenberg and Guy explained the true meaning of beta very elegantly in their paper (“Prediction of beta from investment fundamentals”, Financial Analysts Journal, 1976) introducing what are now called fundamental betas:

It is instructive to reach a judgement about beta by carrying out an imaginary experiment as follows. One can imagine all the various events in the economy that may occur, and attempt to answer in each case the two questions: (l) What would be the security return as a result of that event? and (2) What would be the market return as a result of that event?

This approach is conceptually revealing but is not always practical (though if you are willing to spend enough money, you can access the fundamental betas computed by firms like Barra which Barr Rosenberg founded and later left). In practice, our subjective belief about the true beta of a company involves at least the following inputs:

• The beta is equal to unity unless there is enough reason to believe otherwise. The value of unity (the beta of an average stock) provides an important anchor which must be taken into account even when there is other evidence. It is not uncommon to find that simply equating beta to unity outperforms the beta estimated by naive regression.
• What this means is that betas obtained by other means must be shrunk towards unity. An estimated beta exceeding one must be reduced and an estimated beta below one must be increased. One can do this through a formal Bayesian process (for example, by using a Bayes-Stein shrinkage estimator), or one can do it purely subjectively based on the confidence that one has in the original estimate.
• The beta depends on the industry to which the firm belongs. Since portfolio betas can be estimated more accurately than individual betas, this is often the most important input into arriving at a judgement about the true beta of a company.
• The beta depends on the leverage of the company and if the leverage of the company is significantly different from that of the rest of the industry, this needs to be taken into account by unlevering and relevering the beta.
• The beta estimated by regressing the returns of the stock on the market over different time periods provides useful information about the beta provided the business mix and the leverage have not changed too much over the sample period. Since this assumption usually precludes very long sample periods, the beta estimated through this route typically has a large confidence band and becomes meaningful only when combined with the other inputs.
• Subjective beliefs about possible future changes in the beta because of changing business strategy or financial strategy must also be taken into account.

Much of the above discussion is valid for estimating Fama-French betas and other multi-factor betas, for estimating the volatility (used for valuing options and for computing convexity effects), for estimating default correlations in credit risk models and many other contexts.

Good classical statisticians are quite smart and in a practical context would do many of the things discussed above when they have to actually estimate a financial parameter. In my experience, they usually agree that (a) there is a lot of randomness in historical returns; (b) the data generating process does not remain unchanged for too long; (c) therefore in practice there is not enough data to avoid sampling error; and (d) hence it is desirable to use a method in which sampling error is curtailed by fundamental judgement.

On the other side, Bayesians shamelessly use classical tools because Bayes theorem is an omnivore that can digest any piece of information whatever its source and put it to use to revise the prior probabilities. In practical terms, Bayesians and classical statisticians may end up doing very similar stuff.

The advantage of shifting to Bayesian statistics and subjective probabilities is primarily conceptual and theoretical. It would eliminate confusion in the minds of students on the ontological status of the fundamental constructs of finance theory.

I am now therefore debating in my own mind whether finance professors must spend some time in the class room discussing subjective probabilities.

How would it be like to begin the first course in finance with a case study of subjective probabilities – something like the delightful paper by Karl Borch (“The monster in Loch Ness”, Journal of Risk and Insurance, 1976)? Borch analyzes the probability that the Loch Ness monster exists (and would be captured within a one year period) given that a large company had to pay a rather high 0.25% premium to obtain a million pound insurance cover from Lloyd’s of London against that risk? This is obviously a question which a finance student cannot refuse to answer; yet there is no obvious way to interpret this probability in relative frequency terms.