What’s Your Magic Number?

The life expectancy for a newborn baby in the United States is expected to soon reach eighty years.1 Although life expectancy varies by gender and other factors, this means that the typical baby born in the 2020s can reasonably expect to see the dawn of the 22nd century. Eighty years might seem like a long time, but it is just over 29,000 days, and just a sliver of time in the context of human existence. Our lives are brief and transitory and our most precious resource is our limited time. Wealth can purchase many things, including better health and longevity, but no millionaire or billionaire has yet been able to purchase immortality. However, what wealth can do is to provide us with control over how we spend our limited time by relieving us of having to trade our time for income unless we choose to do so for non-monetary reasons.

The goal of financial independence is best viewed as a means to an end rather than an end in itself. Simply defined, financial independence is achieved when a person can generate a stream of cash flows from accumulated assets that exceeds his or her spending needs. It is easy to see that there are two sides to this equation and that there is no specific “magic number” that translates into independence for everyone. The level of wealth that implies independence for a person of modest needs could be $1 million or less while a person of very expensive tastes could require tens of millions of dollars and still not find it to be enough.

If you ask most Americans how much they need in order to achieve financial independence, the response will almost always be given in terms of the level of wealth that they aspire to accumulate. However, thinking about the problem in this manner has a number of deficiencies. The primary issue is that it is not the level of wealth that matters as much as the cash flow that can be safely drawn from that wealth every year.

When aiming to achieve a goal, it is important to focus on what the goal actually is, and that goal is not being able to look at a net worth figure but to fund expenses and to be relieved of having to trade precious time for income.

In Where Are the Customers’ Yachts, which I reviewed last month, Fred Schwed makes an interesting observation regarding the difference between American and British attitudes regarding wealth:

Have you ever noticed that when you ask a Britisher about a man’s wealth you get an answer quite different from that an American gives you? The American says, “I wouldn’t be surprised if he’s worth close to a million dollars.” The Englishman says, “I fancy he has five thousand pounds a year.” The Englishman’s habitual way of speaking and thinking about wealth is of course much closer to the nub of the matter. A man’s true wealth is his income, not his bank balance.

Where Are the Customers’ Yachts, p. 149-150

I find the British manner of thinking about wealth much more satisfactory for several reasons that are worth exploring in greater depth.

Focus on Spending

The simple fact is that financial independence is more attainable for someone with modest needs who avoids the ratcheting lifestyle trap. Especially during the early years of accumulating capital, the most important factor facing a younger person is how quickly to ramp up spending as his or her income increases. The standard approach taken by almost everyone is to consume the vast majority of income and to increase spending as income increases.

Most personal finance articles urge people to save a certain percentage of their income. In recent decades, personal savings has been pitifully low and rarely has approached ten percent.2 Generally, saving 10-20 percent of income is considered a healthy level. The problem is that this implies a consumption rate of 80-90 percent of income and also implies that it is acceptable to increase consumption as income rises. This is not a path to financial independence.

A few years ago, I wrote an article proposing that a married couple earning $100,000 per year could theoretically achieve financial independence within fifteen years starting with no savings at all. What was the catch? The after-tax savings rate for the couple would need to be around 55 percent, which is obviously far in excess of what is considered normal. What about a 10 percent savings rate? The couple would not be anywhere close to financial independence even after thirty years!

Obviously, the amount saved at a 10 percent savings rate will be far lower but the other side of the equation is that the level of spending the couple needs to replace is much higher. The gulf between spending and passive income is simply too large to overcome.

Avoid Fixed Magic Numbers

Let’s say that a person decides that he needs $2 million to be financially independent based on his desire to spend $60,000 per year and his belief that drawing down 3 percent of his portfolio annually can be done safely on a long term basis. Should he mentally anchor to the $2 million or to the $60,000?

Anchoring to the fixed $2 million number is not helpful for a number of reasons. Perhaps most importantly, the $60,000 income requirement will not remain static over time simply due to the rising cost of living. The Federal Reserve has explicitly stated that their inflation target is 2 percent and it is certainly possible that inflation will run much higher than that over time. Ten years from now, the income requirement will be over $73,000 to maintain the same purchasing power as $60,000 today assuming that inflation runs at 2 percent.

The prospect for returns on financial assets also changes over time. For a long time, many financial advisors advocated a “4 percent rule” — that is, conventional wisdom was that an investor could draw down 4 percent of a balanced portfolio of stocks and fixed income securities indefinitely without having to worry about running out of money. With interest rates on fixed income securities plummeting in recent years and stock valuations at elevated levels, it may no longer be conservative to draw more than 3 percent per year. This may change in the future. If a safe withdrawal level returns to 4 percent in the future, the investor may need less than the $2 million number. If the safe withdrawal level declines to 2 percent, on the other hand, more than $2 million will be required.

Sustaining the Long Term Effort

Going back to the couple earning $100,000, the pursuit of financial independence over fifteen years would be a long term effort and maintaining a very high savings rate for a long period of time is not psychologically easy. There is a risk that as the couple’s portfolio value increases past various milestones, they will feel “wealthy” and be tempted to increase spending.

During the accumulation phase, it is very helpful to not think in terms of net worth milestones. For example, reaching the six figure savings milestone is a major event for most people. $100,000 still represents a very significant amount of money and, while it isn’t a huge amount of wealth, it can make someone feel relatively well off.

Instead of thinking of having $100,000, the couple should instead think of having $3,000 of untapped passive income potential, assuming that they are targeting a 3 percent withdrawal rate. Viewed in this way, the $100,000 is really not a huge amount relative to the income needs that the couple aspires to fund. They are still at an early stage of their accumulation phase.

Rather than going out and buying a $40,000 car, the couple might instead spend $100 on a nice dinner to celebrate the milestone and keep focusing on the long term target of financial independence.

Conclusion

Money can be an emotional topic full of psychological pitfalls. Much of the battle when it comes to achieving financial independence is really an adult version of the famous “marshmallow test” in which children are given the choice of consuming one marshmallow immediately or waiting a short period to be able to consume two marshmallows.

There are some people who are relatively immune to the impulse of ratcheting up their spending as income increases but most people will succumb to the temptation. A check on that temptation will exist if we think about financial independence in terms of being able to generate an adequate passive income sufficient to fund the spending that we are accustomed to.

The fact is that a person who ratchets up his or her lifestyle and goes from needing $50,000 to $100,000 per year has dramatically lengthened the time required to achieve financial independence. This is not to say that all spending is ill advised or unjustified. We should just be sure that when we ratchet up our spending, we fully understand the implications of financial independence being further out on the horizon as a result.


  1. See Living Longer: Historical and Projected Life Expectancy in the United States, 1960 to 2060, published by the United States Census Bureau in February 2020. []
  2. See Personal Saving Rate data series published by the St. Louis Fed. []

The Joys of Compounding

“Your beliefs become your thoughts. Your thoughts become your words. Your words become your actions. Your actions become your habits. Your habits become your values. Your values become your destiny.”

— Mahatma Gandhi

The school of hard knocks provides everyone with life lessons, whether we like it or not. Tuition is payable not in dollars or gold or bitcoin but in the more indirect form of opportunity cost. It is the nature of the world to inform us when we act without knowing what we are doing, and that information often comes at a high personal cost. Some things in life can only be understood through personal experience but much can be learned vicariously, and if we pass up such opportunities, we needlessly subject ourselves to paying more “tuition” than necessary.

Learning vicariously through the wisdom and mistakes of others is surprisingly uncommon given the vast benefits that can be obtained in exchange for investing time and effort in the process. The best information available to humanity is either free or very inexpensive compared to the benefits of knowledge. The cost of formal education has continued to skyrocket in the twenty-first century while the cost of information on the internet has continued to plummet. For a tiny fraction of the cost of a year of university tuition, one can purchase the Great Books of the Western World and have plenty of money left over to see the world as well. Best of all, this type of education is not dry and boring but exciting and adventurous.

When it comes to investing, the best MBA program is free of charge and the wisdom found in a core collection of investing classics can be purchased for a few hundred dollars or borrowed for free at the library. In addition to the “core education” provided by these classics, numerous books are published every year that provide the thoughts and advice of contemporary investors who offer their life experiences to the reader. Gautam Baid’s new book, The Joys of Compounding, is destined to become a must-read investment classic. Baid does an excellent job of taking several steps back from financial analysis and relating how his life story shaped who he is as an investor, how seeking a broad-based education and the “worldly wisdom” that comes from it formed his intellectual foundation, and only then describing how this has translated into financial independence through intelligent investing. It might sound like a cliché, but value investing is more than a profession. It is also a lifestyle.

Especially during times of high volatility, which has certainly been the case so far in 2020, stock markets gyrate in ways that make it seem as if the people doing the trading are absolute lunatics. Novice investors often look at the overall state of the markets and assume that the obvious presence of speculative lunacy means that it ought to be easy to “beat the market”.

Of course, nothing could be further from the truth!

The ability to beat the market in any meaningful way over a sustained period of time is hard.

Very hard!

The vast majority of investors utterly fail to beat a passive strategy of simply owning a low-cost index fund.

Why is this? For one thing, by definition, it is impossible for the average investor to outperform the market averages and when you add the often invisible frictional costs of trading, the average investor is sure to lag the overall market.

It is not enough to be smart and follow the news. Everyone does that, and there is no advantage to merely doing what everyone else is doing. To start off an investment book by diving into financial statement analysis is putting the cart before the horse.

Self-Improvement and Worldly Wisdom

Baid starts his book by pointing out that self-improvement is the best investment anyone can make. Investing in your own intellectual and emotional development is not only a pre-requisite for investing success but also necessary to live a complete and full life.

In a world of constant context switching, achieving a state of flow is essential, and one must understand the horrific cost of wasting even a single hour:

It is essential to understand the opportunity cost of this one hour. On one hand, you can indulge in getting dopamine-laced rushes from emails and social media feeds while multitasking. On the other hand, you can dedicate the time to deep work and self-improvement. An hour’s time spent acquiring in-depth knowledge about an important principle pays off in the long run. This current investment is minuscule compared with the significant net present value that results over a lifetime. It is akin to buying a dollar for less than one cent. This is why good books are the most undervalued asset class: the right ideas can be worth millions, if not billions, of dollars over time.

The Joys of Compounding, p. 6

In what ways should we seek out self-improvement by investing in ourselves?

Clearly, some focus is important here and Baid draws heavily on the concept of “worldly wisdom” that is most associated with Berkshire Hathaway Vice Chairman Charlie Munger. Munger’s advocacy of learning the core principles of mental models in various disciplines while avoiding the most common psychological pitfalls has helped countless value investors in recent decades. Farnam Street’s mental model book series and Poor Charlie’s Almanack are great resources to draw upon. Baid also does an excellent job of providing key quotations from Buffett, Munger, and many others driving home the importance of a multi-disciplinary mindset.

The reason we cannot succeed as investors by taking a purely quantitative approach and ignoring human nature is because financial markets are social constructs that are driven by human beings subjected to the entire range of human emotions. To attempt to understand financial markets without understanding human psychology and the fundamentals of mental models would be like trying to understand a hard science such as physics without first comprehending the underlying mathematics. Financial markets are more than numbers and equations and the first step is to understand how human beings think.

Many economists and market seers engage in “physics envy” by attempting to reduce human behavior and market action to a set of equations, usually littered with Greek letters and often resorting to higher mathematics.

Don’t be fooled.

As Warren Buffett has pointed out repeatedly, basic arithmetic is all that is needed to succeed as an investor and, since most of us learn this arithmetic before entering high school, the place to focus when it comes to gaining a competitive edge resides in the great mental models of other disciplines.

Humility and Good Karma

“When you get to my age, you’ll really measure your success in life by how many of the people you want to have love you actually do love you.”

— Warren Buffett

Do you need to be a good person with a sense of humility to succeed in business and investing? An honest answer would be that there are plenty of examples of terrible people with poor ethics who seem to do quite well in terms of building their net worth. Most of us probably know at least a few people in this category. If your only goal in life is to accumulate wealth, it would be naive to suggest that the only path to a large bank account is to be a good human being.

For some reason, the value investing community seems to broadly reject the notion of pursuing wealth as the sole objective in life. This is not to say that value investors are not driven by the pursuit of wealth. Clearly Buffett, Munger, and probably most of you reading this article are driven by the desire to be wealthy. Baid relates his personal story and how he was driven to reach financial independence but, like many others, takes a more enlightened approach when it comes to how wealth fits into a broader notion of a life well lived.

Baid devotes a large portion of his book to self-improvement and the need to build and sustain good character. He regards these efforts as worthwhile for their own sake but also recognizes that traits of people who constantly strive to improve also tend to lead to insights that can compound into great wealth. For example, the ability to be humble is a mindset that allows us to be open to new ideas and opinions. Arrogance, on the other hand, closes our minds to alternate ways of seeing the world and can blind us to views divergent from our own best-loved ideas:

The deeper one dives into any field, the more humble one generally becomes (also known as the Dunning-Kruger effect). By demonstrating intellectual humility and acknowledging what we don’t know, we place ourselves into a beneficial position to learn more — thus, the dawning of wisdom. True expert knowledge in life and investing does not exist, only varying degrees of ignorance. This is not a problem to solve; it is simply how the world works. We cannot know everything, but we can work hard to become just about smart enough to make above-average decisions over time. That is the key to successful compounding.

The Joys of Compounding, p. 52

People who approach life with a sense of humility and seek to broaden their worldly wisdom often find serendipitous opportunities through interactions with like-minded individuals. In many ways, the value investing community fosters this type of good karma. The nature of being generous with your time and insights is that you never receive a direct benefit from doing so immediately. And the truth is that you may never receive any tangible benefit. However, over a long lifetime, you have a much greater chance of good things happening to you through “luck” that really had less to do with luck than with good karma built up by being a decent human being.

Nuts and Bolts

You cannot hope to succeed as an investor without achieving fluency in the field of … investing!

Understanding the great mental models of other disciplines is necessary but not sufficient. To be a great investor, one also needs a solid process and a circle of competence in one or more areas that provides variant views on investable securities.

Nuts and bolts are a critical part of any investment book. Baid presents several ideas in his sections on common stock investing and portfolio management that helps to illuminate his evolution as an investor. The nature of this business is that every investor’s path is different because we all bring to the game different sets of interests, varying backgrounds, and our unique temperament.

Baid’s familiarity and experience with the Indian economy is apparent throughout these sections and many of the specific examples and case studies he presents are of names that may not be familiar to American investors. This can actually be viewed as a positive aspect of the book in the sense that investors unfamiliar with the Indian stock market are exposed to companies that they would otherwise not read about. Obviously, reading this book isn’t sufficient to invest in Indian securities, but perhaps some readers will be inspired to learn more. As Baid points out, India is a fast growing economy sure to have many winners in the decades to come.

It is also interesting to note that Baid has clearly internalized the benefits of long-term investing but is not averse to taking advantages of opportunities that he perceives in shorter term commitments. The chapter on commodity and cyclical stocks is interesting because the timeframe for holding such investments is measured in weeks and months rather than years and decades. Baid achieved financial independence through his “tryst with commodity investing”. The case study he presents is in an area that many value investors might shy away from but actionable insights are rare and valuable. Baid felt that he had such an insight, acted on it, and achieved financial independence as a result.

The Essence of Compounding

It is fitting that Baid concludes his book by discussing the many different types of compounding that exist in life. Understanding the exponential function at the heart of compounding money is, of course, essential, but similar functions exist in many other areas of life.

Baid believes that compounding positive thoughts, good health, good habits, knowledge, and goodwill all have enormous benefits in life that go well beyond money. But the fact is that the side effect of compounding in these areas can also lead to compounding wealth.

Indeed, value investing, viewed in this way, is more than an investing approach but also constitutes a lifestyle, a way of living that puts the odds in your favor and is also worth pursuing for non-monetary reasons.

Baid’s book reminds me of another investing classic, The Education of a Value Investor, by Guy Spier which I reviewed in 2014. Spier also presented a highly personal account of his evolution as an investor. The best books on investing go beyond financial statements and Baid and Spier both do a great job of providing this broader context.


Disclosure: The Rational Walk LLC received a review copy of The Joys of Compounding from the publisher.

Man’s Search for Meaning

“Everything can be taken from a man but one thing: the last of the human freedoms — to choose one’s attitude in any given set of circumstances, to choose one’s own way.”

— Viktor E. Frankl

World War II is quickly receding into the murky fog of history. Within another quarter century, there will likely be no one alive who still has any personal recollection of the conditions leading up to the war, the war itself, the many atrocities perpetuated by Axis forces, and the eventual triumph of humanity over unmistakable evil. When no one is left to tell their personal stories, we will be left with the accounts that they painstakingly left for us, scarred permanently by a conflict that forever defined the remainder of their lives and shaped the rest of the twentieth century.

Seventy-five years now separates us from the end of the Second World War. Eighty years separated the end of the Second World War from the end of the Civil War. And eighty-two years separated the end of the Civil War from the end of the Revolutionary War. Each of these periods of separation is about the length of time that an average modern human being might expect to live — a full lifetime of separation. The way in which many of us now think of the Second World War is probably similar to how people in the 1940s thought of the Civil War, and how people in the 1860s thought of the Revolutionary War.

World War II was a long time ago.

The atrocities committed by Adolf Hitler’s Third Reich seem to defy adequate description. Although exact figures are necessarily imprecise, according to the United States Holocaust Museum, Nazi Germany murdered over seventeen million civilians and prisoners of war.1 The overall death toll of World War II, military and civilian, in all its theaters is estimated at 75 to 80 million people, of which 50 to 55 million were civilians.

World War II was the deadliest military conflict in history.

As Joseph Stalin, another tyrant of the twentieth century once said, “A single death is a tragedy; a million deaths is a statistic.” We risk looking at the overall statistics and forgetting that each of the individuals behind these numbers was a human being, someone with a purpose for living, and someone who was deprived of that life.

On May 8, 1945, Nazi Germany surrendered to Allied forces ending the war in Europe. Japan would surrender a little over three months later, on August 15. The bloodiest conflict in human history was finally over and those who survived had to make sense of it, had to find meaning in all that had been lost, and in many cases had to rediscover their purpose in life.

V-E Day, May 8, 1945, Times Square (Source: History.com)

Nearly all of us, as school children, were informed of the horrors of World War II in history classes and, in many cases, by our parents and grandparents. Yet few students at a young age are presented with the true depth of what took place in that war, both due to constraints of time and the common reluctance to look too closely at unpleasant realities of the past. As adults, we can more carefully examine the past, with many decades of our own life experience to draw from as well. It was in that spirit, as the seventy-fifth anniversary of the end of the war approached, that I decided to read William Shirer’s epic account of Nazi Germany, The Rise and Fall of the Third Reich.

William Shirer was an American journalist and foreign correspondent who lived in France for several years starting in 1925 and later lived and worked in Nazi Germany from 1934 to 1940. As a print journalist and a radio reporter, Shirer was a witness to the rise of Adolf Hitler and helped to write the “first draft of history” as a war correspondent traveling on the front lines with German forces. Facing increasing calls to publish misleading accounts of the war, Shirer left Nazi Germany in December 1940 but continued his reporting, later returning to post-war Europe to cover the Nuremberg trials. One could hardly ask for a better single-volume book if the goal is to read a sweeping account of how an unemployed and penniless veteran of the First World War somehow built around himself such a powerful cult of personality that he succeeded in not only gaining power but nearly achieving a total and complete conquest of Europe.

Books of the magnitude of Shirer’s account of the Third Reich defy summarization. One should not even attempt to do so. I had not planned to do so and I did not read it with the intention of reviewing it or even mentioning it on this website. The 1,147 page tome simply seemed like an ambitious, yet achievable goal for my reading project for the month of April 2020, a continuation of the practice of reading one “serious” book every month by dedicating an hour of focused concentration early in the morning.

Although I was aware that I would be reading the book close to the seventy-fifth anniversary of the end of the war, it was with some surprise that I found myself reading the account of Adolf Hitler’s suicide nearly seventy-five years to the day after it took place on April 30, 1945. Hitler did not appear to fear death itself — the man who puts a gun into his mouth and pulls the trigger welcomes death as an escape — but he was a coward nonetheless because he did not face death in a final confrontation with his enemies, nor did he face death after a trial in which he would have to account for his crimes.

The problem with reading a book like Shirer’s is that one comes away from it still asking the unanswerable question of Why? We know what Hitler did, we know how he did it, and we know the racial animus and hatred that was the reason behind what he did, but what in the human condition creates monsters like Hitler in the first place and is there any sense we can make of it? None of the 1,147 pages of The Rise and Fall of the Third Reich can possibly answer these questions adequately because they are questions of an existential nature beyond the scope of what a historian can possibly deliver.

The Brandenburg Gate, Berlin in June 1945

“He who has a why to live for can bear almost any how.”

— Nietzsche

The victims of World War II were far greater than the number who lost their lives, suffered grievous personal injuries, or lost every earthly possession they had. Millions of people had also lost loved ones and risked falling into a depression and despair from which there would be no escape. The emotional toll of the war no doubt resulted in the ruin of millions of human lives in the years and decades that followed – human lives that never reached their fulfillment due to the losses they directly suffered and their memories of the past. In the aftermath of all the suffering, millions continue to ask the unanswerable question of Why? And to question the very meaning behind their continued existence.

Survivors of the Nazi concentration and extermination camps faced tremendous struggles in the years following their liberation. After months or years of indescribable suffering and diminution of their human dignity, survivors had to navigate the world looking for a renewed purpose in life, all the while wondering why they had survived when so many had perished. Viktor E. Frankl’s account of his three years in Nazi concentration camps was not an attempt to document history, but was instead a documentation of “personal experiences, experiences which millions of prisoners have suffered time and again.” Man’s Search For Meaning, however, is much more than one man’s account of his years in the Theresienstadt, Auschwitz-Birkenau, Kaufering, and Türkheim camps. Frankl was in his late 30s at the time of his captivity and was an accomplished Austrian neurologist and psychiatrist.2 He brought with him an preexisting view of human psychology that was further refined by the searing conditions of his long captivity.

In 1940, two years after the Nazi annexation of Austria, Frankl joined the Vienna Rothschild Hospital as the head of the neurology department. As the only hospital in Vienna still admitting Jews, Frankl helped many patients escape the Nazi “euthanasia” program for the mentally ill before the hospital was eventually shut down. Frankl was told that he qualified for an American visa in 1942 but he chose not to go because doing so would mean abandoning his elderly parents who would not be able to accompany him. In September 1942, Frankl and his family were separated and deported to concentration camps.

Frankl suffered all of the widely reported humiliations that greeted new arrivals at a concentration camp — that is, for those who were not immediately put to death upon arrival. He was deprived of all of his possessions except the clothes he wore, but he attempted to hide the manuscript of a book in his coat pocket. In his mind he had to “keep this manuscript at all costs; it contains my life’s work.”

But the manuscript was lost.

The physical manifestation representing purpose of Viktor Frankl’s life up to that point was gone. If he did not live to recreate the book from the contents of his mind, his ideas would be lost forever. No one else in the world could replicate what he needed to do in order to fulfill his purpose.


Part one of Man’s Search for Meaning is Frankl’s personal account of his observations, not only of his own reactions, but the reaction of other prisoners to the different “phases” of camp life. Frankl recounts the first days of captivity in which prisoners often continued to get by on an “illusion of reprieve”, or the false promise of imminent escape or rescue. This was often followed by apathy, a form of emotional death, in which many prisoners simply gave up on life.

One unmistakable sign that a man’s days were numbered was when he actually smoked a cigarette rather than using it as currency to trade for food, even though everyone was in the process of slowly starving. As the disgust and horror of what the men saw progressed to habituation to death, some men refused to even rise to relieve themselves or to work, not even responding to torture and violence.

Yet even in the midst of the horror of the camps, Frankl observed that one can still have a sense of purpose and a sense of inner meaning amid suffering. “Man can preserve a vestige of spiritual freedom, of independence of mind, even in such terrible conditions of psychic and physical stress.” One may not be able to control one’s ultimate destiny within such conditions, but there were still decisions to be made, decisions that would have to be made under conditions of indescribable suffering.

Frankl chose to volunteer for medical duties in a camp containing typhus patients. Why did he do it rather than simply give up and await death?

Against the urgent advice of my friends (and despite the fact that almost none of my colleagues offered their services), I decided to volunteer. I knew that in a working party I would die in a short time. But if I had to die there might at least be some sense in my death. I thought that it would doubtless be more to the purpose to try and help my comrades as a doctor than to vegetate or finally lose my life as the unproductive laborer that I had been.

Man’s Search for Meaning, p. 49

Frankl knew, perhaps innately or more due to the nature of his work, that he had to find a reason to persist, a cause greater than himself that he could devote his time to, or that he himself would soon perish. Of course, he understood that his ultimate fate was still likely to be death, but there would be meaning in that death and in his suffering. His alternative was to succumb to the fate of the majority of men in the camp:

Instead of taking the camp’s difficulties as a test of their inner strength, they did not take their life seriously and despised it as something of no consequence. They preferred to close their eyes and to live in the past. Life for such people became meaningless.

Man’s Search for Meaning, p. 72

Crucially, Frankl also well understood the connection between a human being’s mental state and his physical well-being, as he gave the example of a friend who died of typhus in a state of mental despair:

Those who know how close the connection is between the state of mind of a man — his courage and hope, or lack of them — and the state of immunity of his body will understand that the sudden loss of hope and courage can have a deadly effect. The ultimate cause of my friend’s death was that the expected liberation did not come and he was severely disappointed. This suddenly lowered his body’s resistance against the latent typhus infection. His faith in the future and his will to live had become paralyzed and his body fell victim to illness…

Man’s Search for Meaning, p. 75

Perhaps most unique about the first part of Frankl’s book is that he makes a point of emphasizing that all human beings, regardless of their circumstances, do have free will and the ability to make choices.

This choice was most clearly made by the Kapos, Jewish collaborators who helped the Nazi SS run the concentration camps. These men had chosen to make themselves complicit by aiding and abetting their Nazi masters in exchange for better living conditions and a chance to survive longer than ordinary prisoners. They betrayed their fellow prisoners for the transitory pleasures of cigarettes, larger rations, and better accommodations.

In contrast, Frankl recounts the rare cases where a Nazi guard showed him some minimal human kindness, such as providing an extra piece of bread and a story of a camp commander who had personally spent his own money for medication for prisoners.

Frankl did not believe in collective punishment and held that humans kindness can be found in all groups, even those groups such as the Nazi SS that as a whole are universally condemned:

From all this we may learn that there are two races of men in this world, but only these two — the “race” of the decent man and the “race” of the indecent man. Both are found everywhere; they penetrate into all groups of society. No group consists entirely of decent or indecent people. In this sense, no group is of “pure race” — and therefore one occasionally found a decent fellow among the camp guards.

Man’s Search for Meaning, p. 86

Years later, long after the war was over, Victor Frankl was asked by a group of students to express in one sentence the meaning of his own life. Frankl wrote down his response but before revealing what it was, he asked the students to guess what he had written down. One of the students guessed that “The meaning of your life is to help others find the meaning of theirs.” Frankl replied: “That was it, exactly. Those are the very words I had written.”

Frankl is best known for his therapeutic doctrine called Logotherapy. In part two of the book, Frankl attempts to provide the basics of Logotherapy “in a nutshell”, warning the reader that the treatment of the subject would necessarily be a brief account of what took twenty volumes of scholarly work to fully describe. The basic premise of Logotherapy is that man’s search for meaning is the primary motivation in his life. The term Logotherapy is derived from the Greek word Logos, which has many interpretations and translations but ultimately denotes the concept of “meaning”. Striving to find a meaning in life and then seeking to actualize that meaning is the primary motivational force in man. In other words, the “will to meaning” is what makes life worth living.

Some people are aimless, in which case Logotherapy aims to help such a patient find meaning in his or her life. However, there is also the case of what Frankl calls “existential frustration” which occurs when a person has a sense of purpose in life, but the path to achieving that purpose is somehow blocked which can result in neuroses. Some level of tension between what a person wishes to accomplish and what he or she has accomplished is necessary for mental health:

I consider it a dangerous misconception of mental hygiene to assume that what man needs in the first place is equilibrium or, as it is called in biology, “homeostasis,” i.e., a tensionless state. What man actually needs is not a tensionless state but rather the striving and struggling for a worthwhile goal, a freely chosen task. What he needs is not the discharge of tension at any cost but the call of a potential meaning waiting to be fulfilled by him.

Man’s Search for Meaning, p. 105

Those who fail to find the purpose of their lives risk falling into an “existential vacuum” in which a person risks either simply doing what other people want him to do or what conforms to what other people are already doing. Frankl warned, in 1960, that such problems will grow increasingly common as automation replaces work done by human beings and people gain more leisure time. He also warns of a crisis of existential vacuum among the elderly. Those who lack a “will to meaning” also risk falling into a “will to power” or a “will to money” — the pursuit of objectives that ultimately will not yield mental satisfaction.

Many have already discovered their purpose in life, but Frankl cited surveys showing that a large percentage of his students exhibited signs of existential vacuum. How do you discover the meaning of life if you do not already know what it is?

Logotherapy states that we can discover the meaning in life in three different ways:

  1. By creating a work or doing a deed.
  2. By experiencing something or encountering someone.
  3. By the attitude we take toward unavoidable suffering.

Frankl emphasizes that the third route to discovery — suffering — is not one to be sought out because deliberately subjecting oneself to suffering in pursuit of enlightenment amounts to masochism, not meaning. Yet, for those who do find themselves in untenable situations from which they see no means of escape, one can still find meaning in how we react to adversity. We can also reframe the situation. If we cannot change a situation, we always have the option of changing ourselves instead.

In a postscript to his book, written in 1984, Frankl states that the ultimate goal for many people — happiness — is not one that can be directly pursued. Instead, it must ensue. If a human being has a reason to become happy, he or she will achieve happiness. And the reason to become happy is invariably the achievement of one’s purpose in life. As an analogy, he points out that one cannot will oneself to laugh, at least not authentically. Laugher instead ensues when something humorous happens. Someone who directly seeks happiness, whether through wealth or some other means, risks not finding it if the manner in which the goal was achieved did not ensue from a life of meaning.

Rather than further describing Logotherapy, the interested reader would do better to simply read Man’s Search for Meaning since it only takes a few hours to read both parts of the book. The video appearing below of Frankl describing his theories in 1963 should also be of interest.


A baby born this year, in 2020, has an excellent chance of living into the twenty-second century. An eighty year old living in 2100 will look at the Second World War, 155 years in the past, just as we look at the Civil War from our vantage point today. It will appear as a series of terrible events in the dim past, replete with the stories of human beings long since dead who they never knew personally. Yet, it is important to ensure that future generations see World War II as more than a distant disaster because the world cannot afford to descend into such a condition ever again.

Frankl, writing in 1984, noted that the world is in a bad state, but that everything could become still worse unless everyone does their best — meaning attempt to fulfill their human potential and their reason for being. The stakes could not be higher, especially if one accepts the duality of two “races” of men — the decent and the indecent. Frankl closes his postscript as follows:

So let us be alert — alert in a twofold sense:

Since Auschwitz we know what man is capable of.

And since Hiroshima we know what is at stake.

Man’s Search for Meaning, p. 154

We cannot afford to take for granted the fact that World War II will always remain the world’s bloodiest conflict.

There remain individuals like Adolf Hitler in our world and should someone of similar depraved outlook and temperament ever gain control of a country with a nuclear arsenal, the future of humanity will clearly be at stake. Whether there is a 2100 at all, in terms of human civilization, depends on the decent “race” of mankind prevailing in the decades to come.


  1. The exact number of civilians and captured soldiers killed by the Nazi regime and its collaborators will never be known with precision. The United States Holocaust Museum estimates that 6,000,000 Jews, 7,000,000 Soviet civilians, including 1,300,000 Soviet Jews, 3,000,000 Soviet prisoners of war, 1,800,000 non-Jewish Polish civilians, 312,000 Serb civilians, 250,000 disabled people living in institutions, up to 250,000 Roma Gypsies, 70,000 repeat criminals, 1,900 Jehovah’s Witnesses, and an undetermined number of homosexuals and German political opponents were murdered by the Nazi regime. []
  2. See Viktor Frankl’s Wikipedia page for a brief summary of his early years. []
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