The most vexing and troublesome thing is to see a friend make a fortune.

Disaster stems from not knowing contentment; fault stems from coveting gain. Therefore, contentment with contentment is constant contentment.

Understanding Bull Market Anxiety and the Geometry of Desire

While bear markets are undoubtedly depressing, bull markets can induce anxiety, as there is always someone making more money than you. This is especially true in a structural bull market, where those riding the trend enjoy daily gains and a sense of euphoria, while those outside the favored sectors not only miss out on the positive atmosphere but may also suffer from a slow erosion of their portfolio's value due to capital being drawn into the hot sectors. The market action since the end of February, following the US-Iran conflict, is a prime example of this extreme dynamic, where everything outside the "AI" sector has been overshadowed. The performance gap between investors "standing in the light" and those not has been stark.

The stock market is an amplifier of human nature, and this amplification effect is on full display during a structural bull market. If bear markets primarily test an investor's patience in a single dimension, this kind of extreme structural bull market tests not only patience but also primal desires like greed and envy. If one cannot see through and manage these desires, it's easy to fall into endless anxiety and even have one's investment actions become distorted, ultimately leading to an unsatisfactory outcome.

However, penetrating these desires is no easy task, as they are hardwired into the human genome. As the philosopher Wang Yangming said, "It is easier to conquer a mountain bandit than to conquer the bandit in one's heart." Coincidentally, I recently read about René Girard's "mimetic desire theory," which I found very enlightening for tackling the "bandit in the heart," so I will use this column to introduce and discuss it.

Exploring Mimetic Desire Theory

René Girard (1923–2015) was a highly innovative contemporary French philosopher, literary critic, and anthropologist, hailed as a "prophet of desire" and the "Darwin of the humanities."

Girard advocated moving beyond the confines of a single discipline. Using the works of literary masters like Shakespeare, Proust, and Stendhal as a starting point, he sought to uncover the patterns of human desire. Before Girard, the prevailing academic interpretation of desire was a linear model: subject → object, meaning a person's desires arise from their own needs, instincts, and preferences. However, Girard found that this theory completely failed to explain numerous contradictory phenomena in life: people often don't know what they want, only frantically chasing what others are pursuing; things that originally had no value suddenly become highly attractive once they become the object of another's desire.

From this, he proposed the theory of "mimetic desire," with the following key points:

First, desire is not a "straight line" but a "triangle." Girard pointed out that desire is actually a complex "triangular" structure composed of three vertices: the subject (the person desiring), the object (the thing or person desired), and the mediator (the role model). Our desire for something is often not due to its inherent value but because "others want it too" or "others have it." This "other" is the mediator; our desires are generated through imitation of the mediator.

Second, desire is "copied." Girard believed that beyond basic physiological needs (like eating when hungry), the vast majority of human desires are not original creations from within but are acquired by imitating others. For example, couples in love feel they must exchange certain gifts, have certain lavish meals, or you might want to buy a certain designer bag—these behavioral patterns often arise because you've seen "others" on social media or friends around you doing the same.

In classic literature, Don Quixote is a typical imitator. His obsession with chivalric romances generates a desire to become a knight-errant, an imitation of a model. The tragedy of Emma Bovary in Flaubert's work lies in her constant imitation of romantic ideals from novels, leading to endless desires for a luxurious life and romantic love.

Third, there are two different types of imitation. Based on the distance between "us" and the "mediator (model)," Girard categorized desire into two scenarios: external mediation, where the mediator is distant (like historical figures, mythical heroes, or celebrities), leading to worshipful imitation without conflict; and internal mediation, where the mediator is on the same level (like colleagues, classmates, or friends), inevitably leading to competition, envy, or even hatred due to limited resources. The "involution" and meaningless comparisons we feel in work or life often stem from falling into the trap of internal mediation.

Girard wrote, "Desire is like gravity; it does not exist in isolation within any thing or individual. It is born in the space where people can influence each other." In other words, all our desires are essentially projections of the desires of others.

The Link Between Desire and Financial Bubbles

The American economist and economic historian Charles P. Kindleberger wrote a piercing line in his classic work on financial bubbles and crises, Manias, Panics, and Crashes: "The most vexing and troublesome thing is to see a friend make a fortune."

Kindleberger said this before Girard developed his theory of mimetic desire; it was an intuitive observation drawn from countless historical financial bubbles. From the earliest Tulip Mania to the South Sea Bubble, canal and railway manias, and the dot-com bubble... bubbles propel new technologies and lifestyles forward while repeatedly generating stories of wealth creation and destruction.

In each bubble cycle, the initial spark is often new technology and invention, igniting imaginations of a grand future. However, it is the desires deep within the human heart that ultimately fan the flames into a roaring fire. Not long ago, I personally heard an investor say at a conference, "If you don't make a hundredfold return, you're letting this era down." Indeed, in this AI bull market, some have made substantial gains. These tenfold or hundredfold wealth creation stories happening around you are precisely what Girard called desire mediators. They stir up greed and envy in human nature, leading people to repeatedly rush into the latest technological trends, ultimately pushing the bubble to its extreme.

From this mechanism, the generation and bursting of bubbles are arguably inevitable. Supporters of the bubble theory argue that it is precisely bubbles that promote the development and growth of new technologies, driving social progress. Indeed, if everyone were perfectly rational, no one would pay for a highly uncertain future. Therefore, we should not simply define "bubble" as a pejorative term; in a sense, it might be synonymous with evolution. This becomes clearer when looking at the biological world. During the annual wildebeest migration across the Serengeti, the frantic rush to cross rivers always triggers intense stampedes, with some wildebeest becoming casualties while survivors move forward over the bodies of their kin.

An insect called the periodical cicada hatches and immediately burrows underground, lying dormant for 17 years by feeding on the sap of plant and tree roots. Upon maturity, billions (some say trillions) of adults emerge in the second week of May and rapidly begin frenzied mating. After laying eggs in trees, all adults die by the end of June. About six weeks later, newly hatched larvae will descend from the trees back into the soil, beginning the next 17-year life cycle. This evolutionary strategy, known as "predator satiation," has been highly successful over the ages because no predator can consume such a vast quantity of prey in just a few weeks.

The "predator satiation effect" is the bubble effect. Therefore, advancing amidst bubbles might be a fundamental law or paradox of evolution. This paradox clearly shows that evolution comes at a cost. The problem is, no one wants to be the trampled wildebeest or the eaten cicada; everyone wants to be the one that successfully crosses the river. Investment behavior objectively benefits technological, economic, and social progress. However, I believe all investors also hope to achieve long-term preservation and growth of wealth through investing, rather than becoming cannon fodder for evolution.

Achieving a balance between the two requires a high degree of skill and wisdom. Fortunately, it has been distilled and crystallized into classics by investment predecessors. Benjamin Graham was a firsthand witness to the epic 1929 stock market bubble and subsequent crash. After the crash, he entered the market too early in 1930 to buy the dip, resulting in a 70% loss for his managed fund and bringing him to the brink of bankruptcy. This painful experience made him realize the dangers of leverage and speculation. After deep reflection, he published Security Analysis in 1934, strictly distinguishing between investment and speculation and distilling three core concepts: the equity owner mindset, the margin of safety, and Mr. Market. He is thus known as the "father of value investing." Warren Buffett later added the crucial component of the "circle of competence" to this foundational framework.

Through the promotion and development by investment masters like Buffett and Charlie Munger, value investing became a prominent school of thought. However, despite the shining examples set by Buffett and Munger, and the annual pilgrimage of thousands to the Berkshire Hathaway shareholder meeting, very few people truly practice value investing in their investment activities. Why is that?

The Challenge of Value Investing and Managing Desire

The difficulty of value investing may lie not in technique but in temperament, as it is an investment philosophy that goes against human nature. The emotionally volatile Mr. Market appears before you daily, sometimes depressed and sometimes manic. When depressed, he makes you despair; when manic, he creates all sorts of "desire mediators" promising overnight riches around you, tempting you to forget discipline and join the game of chasing trends.

I don't know if Buffett has read Girard, but he likely understands the power of "desire mediators" well. In 1956, at age 26, after working for three years at his teacher Graham's firm, Buffett chose to return to the remote hometown of Omaha. Compared to New York, the density of desire mediators there was clearly much lower. Similarly, in 1968, at age 55, Sir John Templeton chose to move from Wall Street to settle in Nassau, The Bahamas, where The Wall Street Journal arrived a week late.

Whether Buffett and Munger or Templeton, they resemble reclusive masters "hidden within the market (stock market)," adept at shielding themselves from external interference. Munger said, "In a sense, we are more like academics than businessmen. I will always sit down and think quietly for hours. I don't mind if nothing happens for a very long time."

Of course, this composure and calmness are also related to their early understanding of the secret to wealth accumulation.

Munger said, "As early as the 1960s, Buffett and I, referring to compound interest tables, had already calculated that we would become very, very wealthy in the future. As long as we proceeded step by step, steadily, without making major mistakes or doing foolish things, taking it slow, we would become very wealthy. We never doubted it."

Munger was around 40 when he said this, and Buffett in his 30s. At a young age, they had already grasped the power of compound interest. Over his more than 60-year investment career, Buffett's average annualized return is 19.7%, with no single year exceeding 60%. Therefore, the path of compounding is not a path to overnight riches but a path to slow wealth. However, slow is fast; this slow-wealth path, leveraged over time, is the true broad road to wealth.

Not everyone can become Buffett, but the principle of compound interest is something everyone should grasp as early as possible. Assume a 20-year-old with a principal of 330,000 achieves a 10% annual return through investment. By age 60, nearing retirement, it would grow to 15 million. If held until age 80, it could reach the "small goal" of 100 million. Jeff Bezos once asked Buffett, "Your investment logic is so simple and effective, why doesn't the whole world copy you and become as wealthy as you?" Buffett replied, "Because no one wants to get rich slowly." Conversely, if you are willing to get rich slowly, then everyone has the potential to become wealthy.

Of course, achieving a long-term 10% annualized return is not easy; it means doubling assets every seven years. In normal times, most people would be satisfied with this return. However, when a feast arrives and the surroundings are filled with stories of doubled returns or even tenfold or hundredfold windfalls, the effect of "desire mediators" begins to ferment, and a 10% return no longer seems appealing. In other words, a 10% return is close to your "intrinsic desire," while doubled or tenfold returns represent your "mimetic desire."

Mimetic desire is powerful; it drives many to join the chase—chasing trends, chasing hot sectors, even using leverage to increase their bets. If you chase early, you naturally get a share of the feast, which is worth celebrating. But if you chase just as the feast is about to end, beware of the painful backlash when the bubble bursts. Mr. Qiu Guogen, founder of Chongyang Investment, once said, "In this line of work, opportunities may be lost, but time will bring new ones." Missing an opportunity is regrettable, but there's no need for excessive remorse. What's truly bad is betraying your investment and life discipline because of it. Opportunities in the stock market are constant. If AI is truly a tangible productivity revolution, it will inevitably transform thousands of industries, and opportunities will emerge endlessly. The rational approach is not to squeeze into an already overcrowded space but to seek the undervalued and not yet fully discovered "next light."

Chapter 9 of the Tao Te Ching says, "To hold until full is not as good as stopping. To sharpen a blade to its keenest edge cannot preserve it for long." Chapter 46 says, "Disaster stems from not knowing contentment; fault stems from coveting gain. Therefore, contentment with contentment is constant contentment." The wise words of Laozi also align with the path of compound interest.

Buffett and Munger have had low material desires throughout their lives, advocating delayed gratification, yet they ultimately attained immense wealth. An old saying in the investment world goes, "Those who achieve fivefold returns in a year are as numerous as fish in the river; those who achieve a single doubling over five years are as scarce as morning stars." The choice between pursuing short-term explosions or long-term compounding hides a vast divergence in values and desires. Therefore, the path to wealth is also a study in how to view and manage desire. What desires you have determine what investment actions you take.

Investing is a marathon, not a hundred-meter dash. Amidst the clamor, we need to constantly ask ourselves: which desires are the intrinsic ones we should hold onto, and which are the mimetic desires imposed on us by external desire mediators? This may help us break free from bull market anxiety and aid us in walking a steadier and longer path in both wealth and life.