The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.

The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.

To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical.

A perfect democracy, a ‘warm body’ democracy in which every adult may vote and all votes count equally, has no internal feedback for self-correction. It depends solely on the wisdom and self-restraint of citizens… which is opposed by the folly and lack of self-restraint of other citizens. What is supposed to happen in a democracy is that each sovereign citizen will always vote in the public interest for the safety and welfare of all. But what does happen is that he votes his own self-interest as he sees it… which for the majority translates as ‘Bread and Circuses.’

‘Bread and Circuses’ is the cancer of democracy, the fatal disease for which there is no cure. Democracy often works beautifully at first. But once a state extends the franchise to every warm body, be he producer or parasite, that day marks the beginning of the end of the state. For when the plebs discover that they can vote themselves bread and circuses without limit and that the productive members of the body politic cannot stop them, they will do so, until the state bleeds to death, or in its weakened condition the state succumbs to an invader—the barbarians enter Rome.

The parasites have long taken over.

— The Economist

Maybe he didn’t actually say those words since I just made that up but he must have said something to that effect. All smart people come to that realization, and we have to admit that the old chap was smart if he was anything. I will get the reference sometime later.

But for now, I have a more authentic quote on committing from W.H. Murray’s The Scottish Himalayan Expedition (1951):

… but when I said that nothing had been done I erred in one important matter. We had definitely committed ourselves and were halfway out of our ruts. We had put down our passage money — booked a sailing to Bombay. This may sound too simple, but is great in consequence. Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative (and creation), there is one elementary truth the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then providence moves too. A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents, meetings and material assistance, which no man could have dreamt would have come his way. I learned a deep respect for one of Goethe’s couplets:

Whatever you can do or dream you can, begin it.
Boldness has genius, power and magic in it!

India was the motherland of our race, and Sanskrit the mother of Europe’s languages: she was the mother of our philosophy; mother, through the Arabs, of much of our mathematics; mother, through the Buddha, of the ideals embodied in Christianity; mother, through the village community, of self-government and democracy. Mother India is in many ways the mother of us all.
[Wikiquote]

It is hard to reconcile today’s India with the great civilization that India once was. Something must have gone wrong. Durant wrote, “A great civilization is not conquered from without until it has destroyed itself from within.”

Was it corruption that destroyed India from within in the past? And is it now in its final phase being totally destroyed by corruption?

To dream the impossible dream
To fight the unbeatable foe
To bear with unbearable sorrow
To run where the brave dare not go

I love Elvis Presley’s version of the song that he performed at the Madison Square Garden

Awesomely inspiring words sung beautifully by Elvis.

What brought it to mind was “The Impossible Project“, which is attempting to “re-start production of analog instant film for vintage Polaroid cameras in 2010.” They are re-inventing Polaroid photography. Here’s the inspiration as shown on their site:

Much of what needs to be done for India to recover can be best described as “manifestly important and nearly impossible.” What we need are leaders who have the brains to understand what needs to be done, and the guts to attempt the nearly impossible.

“There is one notable thing about our Christianity: bad, bloody, merciless, money-grabbing and predatory as it is – in our country particularly, and in all other Christian countries in a somewhat modified degree… Ours is a terrible religion. The fleets of the world could swim in spacious comfort in the innocent blood it has spilt …The gospel history of Jesus consists of fabrications,superstitions and fanaticism… I consider the book of Revelation, the ravings of a maniac…. Due to Christianity, millions of innocent men, women and children have been burnt alive as witches.”

Postscript: Pankaj Narula has cast doubts in a comment below on the authenticity of the quote. It appears to be a composite quote. I will do a follow up on this post in a short while. I regret the error.

And now a quote from Romer about economic growth.

Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material.

. . .

Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. The difficulty is the same one we have with compounding: possibilities do not merely add up; they multiply.

- Paul M. Romer, “Economic Growth”, The Concise Encyclopedia of Economics, 2007

Imagine, in 1996, asking some net-savvy soul to expound on the potential of craigslist, then a year old and not yet incorporated. The answer you’d almost certainly have gotten would be extrapolation: “Mailing lists can be powerful tools”, “Social effects are intertwining with digital networks”, blah blah blah. What no one would have told you, could have told you, was what actually happened: craiglist became a critical piece of infrastructure. Not the idea of craigslist, or the business model, or even the software driving it. Craigslist itself spread to cover hundreds of cities and has become a part of public consciousness about what is now possible. Experiments are only revealed in retrospect to be turning points.

In craigslist’s gradual shift from ‘interesting if minor’ to ‘essential and transformative’, there is one possible answer to the question “If the old model is broken, what will work in its place?” The answer is: Nothing will work, but everything might. Now is the time for experiments, lots and lots of experiments, each of which will seem as minor at launch as craigslist did, as Wikipedia did, as octavo volumes did.

It’s a long piece on newspapers, and the challenges they face from the change brought about by the information technology revolution. The story is instructive and the lessons apply to domains other than news. Here’s a bit more:

The curious thing about the various plans hatched in the ’90s is that they were, at base, all the same plan: “Here’s how we’re going to preserve the old forms of organization in a world of cheap perfect copies!” The details differed, but the core assumption behind all imagined outcomes (save the unthinkable one) was that the organizational form of the newspaper, as a general-purpose vehicle for publishing a variety of news and opinion, was basically sound, and only needed a digital facelift. As a result, the conversation has degenerated into the enthusiastic grasping at straws, pursued by skeptical responses.

“The Wall Street Journal has a paywall, so we can too!” (Financial information is one of the few kinds of information whose recipients don’t want to share.) “Micropayments work for iTunes, so they will work for us!” (Micropayments work only where the provider can avoid competitive business models.) “The New York Times should charge for content!” (They’ve tried, with QPass and later TimesSelect.) “Cook’s Illustrated and Consumer Reports are doing fine on subscriptions!” (Those publications forgo ad revenues; users are paying not just for content but for unimpeachability.) “We’ll form a cartel!” (…and hand a competitive advantage to every ad-supported media firm in the world.)

Round and round this goes, with the people committed to saving newspapers demanding to know “If the old model is broken, what will work in its place?” To which the answer is: Nothing. Nothing will work. There is no general model for newspapers to replace the one the internet just broke.

With the old economics destroyed, organizational forms perfected for industrial production have to be replaced with structures optimized for digital data. It makes increasingly less sense even to talk about a publishing industry, because the core problem publishing solves — the incredible difficulty, complexity, and expense of making something available to the public — has stopped being a problem.

Time to once again ponder the Schumpeterian idea of “creative destruction”. Note the sequence of events: First, something changes. That change creates new capabilities. I call this the “new capability creating change.” This makes possible the supply of new goods and services. This, in turn, creates new demand which displaces the old demand.

What happens to the old model is not that is breaks but that it becomes irrelevant. Absent the “new capability creating change”, that model would have continued to supply those goods and services to meet the demand. With the change, the old goods and services are replaced by new goods and services.

Instead of the causal direction implied by “new capability creating change” (where change creates new capability), you could also have “new capability created change” (where new capability creates the change), the opposite causal direction. I think both work in a kind of feedback loop. Change –> new capabilities –> more changes –> more capabilities –> and so on.

The model which used telegraph for transmitting information was rendered irrelevant when the capacity to transmit voice became available. It is not that telegraph gradually morphed into the telephone system. Technological change is discontinuous. You could say that technological change is digital, not analog. Also, changes in digital technology forces discontinuous (and therefore “digital” rather than “analog”) changes on systems.

It may be worth considering systems such as the economy, or its subsystems such as governance, transportation, education, energy, etc., in light of the idea that technological change is digital and that change in digital technologies have a profound impact on those systems.

Widespread intellectual and moral docility may be convenient for leaders in the short term, but it is suicidal for nations in the long term. One of the criteria for national leadership should therefore be a talent for understanding, encouraging, and making constructive use of vigorous criticism.

… Professional publicists know there is always a good living to be made by catering to the public’s craving for optimistic reports. Such behaviour finds no justification in the attitude of the Buddha, expressed five centuries before Christ: “I teach only two things: the cause of human sorrow and the way to become free of it.” The present work, though written by a non-Buddhist, proceeds along the Buddhist path — first to reveal the causes of human sorrow in population matters and then to uncover promising ways to free ourselves of the sorrow.

Hearing the Buddha’s statement today many people think, “How depressing! Why accept such a pessimistic outlook on life?” But they are wrong: it is not a pessimistic view if we reword it in terms that are more familiar to our science-based society. Reworded: “Here is something that isn’t working right. I want to fix it, but before I can do that I have to know exactly why it doesn’t work right.” One who looks for causes before seeking remedies should not be condemned as a pessimist. In general, a great deal of looking for causes must precede the finding of remedies.

We cannot reward an act. We can only reward the agency that selected that strategy, the agent who wisely activated the first agent, and so on. Alas for those behaviorists who wasted their lives by missing this simple principle.

To reward all those agents and processes, we must propagate some message that they all can use to credit what they did; the plans they made, their strategies and computations. These various recipients have so little in common that such a message of approval, to work at all, must be extremely simple. Words like good are almost content-free messages that enable tutors, inside or outside a society, to tell the members that one or more of them has satisfied some need, and that tutor need not understand which members did what, or how, or even why.

Words like ’satisfy’ and ‘need’ have many shifting meanings. Why, then, do we seem to understand them? Because they evoke that same illusion of substantiality that fools us into thinking it tautologous to ask, why do we like pleasure? This serves a need: the levels of social discourse at which we use such clumsy words as ‘like’, or ‘good’, or ‘that was fun’ must coarsely crush together many different meanings or we will never understand others (or ourselves) at all. Hence that precious, essential poverty of word and sign that makes them so hard to define. Thus the word ‘good’ is no symbol that simply means or designates, as ‘table’ does. Instead, it only names this protean injunction: Activate all those unknown processes that correlate and sift and sort, in learning, to see what changes (in myself) should now be made. The word like is just like good, except it is a name we use when we send such structure-building signals to ourselves. [Emphasis added.]

The line that I like best and deeply appreciate in the quote above is “that precious, essential poverty of word and sign that makes them so hard to define.” It is the ambiguity of some words that lends them power. I also think that all ambiguous things — ideas, people, stories, objects — are more interesting and signal greater depth than things that are easily defined and categorized.

“Ah love, could thou and I with fate conspire,
To grasp this sorry scheme of things entire;
Would we not shatter it to bits,
And remold it nearer to our hearts’ desire!”

But interfering in a world one does not fully understand is dangerous. “Let me save you from drowning,” said the monkey to the fish and put it up on a tree. Too many monkeys trying to save fish from drowning leads to the sorry scheme we see around us. Monkeys do make a difference; it’s only that they make it worse.

Here’s Thomas Sowell on making a difference, for the record:

Sowell: I think in the U.S. and in most of the world the public understanding of economics is abysmal. But it’s one thing not to understand something. I don’t understand brain surgery. It’s another to want to form policies on things on which you are ignorant. I hear the wonderful phrase “I want to make a difference” when it comes to policy. I would be horrified if I wanted to make a difference in brain surgery. The only difference is more people would die on the operating table.

So you have to pick and choose even among the crème de la crème.

What am I going on about? I think that you should read Charlie Munger’s speech that he gave at the USC Business School way back in 1994. It’s long. It will take you a good hour — if you are a slow reader like me. But trust me, that hour will be save you years of trouble if you really understand what Charlie is saying. I have half a mind to sit down and annotate his talk. If I did that, I would end up writing a book — so rich and deep is his talk. But it is also very simple. It is about worldly wisdom.

Economists are called worldly philosophers, and with good reason. Economics is about systematically thinking about the world of people. What I find fascinating is the insights that a study of microeconomics provides into the workings of the world. Charlie, smart that he is, appreciates the value of micro. Charlie is a worldly philosopher.

While reading his talk, first I thought I would just highlight some bits. That was distracting. It deserves to be read and understood without distraction. I will not write a book-length exposition of Charlie’s talk. But I will refer to it in my posts from time to time. By the time I am done with my annotations, I am sure it would go a long way in improving my education.

Which reminds me. If you can understand what he is saying, you have a sound educational background. That is what we must aim for: every student who passes out of college (and the brighter among those of pass out of high school) should be able to comprehend and understand the value of Charlie’s wisdom.

For now, sit down comfortably with a cup of whatever that you like to have when you are engrossed in learning important stuff, switch off your mobile phone, put a do-not-disturb sign on your door, dim the lights, and read the following. (And if you want to read even more Munger, go read his 2007 Law School Commencement address at the University of Southern California in May 2007 — which starts off with “Safest way to get what you want is to deserve what you want.”)

A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business

Charles Munger, USC Business School, 1994

I’m going to play a minor trick on you today because the subject of my talk is the art of stock picking as a subdivision of the art of worldly wisdom. That enables me to start talking about worldly wisdom—a much broader topic that interests me because I think all too little of it is delivered by modern educational systems, at least in an effective way.

And therefore, the talk is sort of along the lines that some behaviorist psychologists call Grandma’s rule after the wisdom of Grandma when she said that you have to eat the carrots before you get the dessert.

The carrot part of this talk is about the general subject of worldly wisdom which is a pretty good way to start. After all, the theory of modern education is that you need a general education before you specialize. And I think to some extent, before you’re going to be a great stock picker, you need some general education.

So, emphasizing what I sometimes waggishly call remedial worldly wisdom, I’m going to start by waltzing you through a few basic notions.

What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ‘em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.

You’ve got to have models in your head. And you’ve got to array your experience—both vicarious and direct—on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You’ve got to hang experience on a latticework of models in your head.

What are the models? Well, the first rule is that you’ve got to have multiple models—because if you just have one or two that you’re using, the nature of human psychology is such that you’ll torture reality so that it fits your models, or at least you’ll think it does. You become the equivalent of a chiropractor who, of course, is the great boob in medicine.

It’s like the old saying, “To the man with only a hammer, every problem looks like a nail.” And of course, that’s the way the chiropractor goes about practicing medicine. But that’s a perfectly disastrous way to think and a perfectly disastrous way to operate in the world. So you’ve got to have multiple models.

And the models have to come from multiple disciplines—because all the wisdom of the world is not to be found in one little academic department. That’s why poetry professors, by and large, are so unwise in a worldly sense. They don’t have enough models in their heads. So you’ve got to have models across a fair array of disciplines.

You may say, “My God, this is already getting way too tough.” But, fortunately, it isn’t that tough—because 80 or 90 important models will carry about 90% of the freight in making you a worldly-wise person. And, of those, only a mere handful really carry very heavy freight.

So let’s briefly review what kind of models and techniques constitute this basic knowledge that everybody has to have before they proceed to being really good at a narrow art like stock picking.

First there’s mathematics. Obviously, you’ve got to be able to handle numbers and quantities—basic arithmetic. And the great useful model, after compound interest, is the elementary math of permutations and combinations. And that was taught in my day in the sophomore year in high school. I suppose by now in great private schools, it’s probably down to the eighth grade or so.

It’s very simple algebra. It was all worked out in the course of about one year between Pascal and Fermat. They worked it out casually in a series of letters.
It’s not that hard to learn. What is hard is to get so you use it routinely almost everyday of your life. The Fermat/Pascal system is dramatically consonant with the way that the world works. And it’s fundamental truth. So you simply have to have the technique.

Many educational institutions—although not nearly enough—have realized this. At Harvard Business School, the great quantitative thing that bonds the first-year class together is what they call decision tree theory. All they do is take high school algebra and apply it to real life problems. And the students love it. They’re amazed to find that high school algebra works in life….

By and large, as it works out, people can’t naturally and automatically do this. If you understand elementary psychology, the reason they can’t is really quite simple: The basic neural network of the brain is there through broad genetic and cultural evolution. And it’s not Fermat/Pascal. It uses a very crude, shortcut-type of approximation. It’s got elements of Fermat/Pascal in it. However, it’s not good.

So you have to learn in a very usable way this very elementary math and use it routinely in life—just the way if you want to become a golfer, you can’t use the natural swing that broad evolution gave you. You have to learn—to have a certain grip and swing in a different way to realize your full potential as a golfer.

If you don’t get this elementary, but mildly unnatural, mathematics of elementary probability into your repertoire, then you go through a long life like a onelegged man in an asskicking contest. You’re giving a huge advantage to everybody else.

One of the advantages of a fellow like Buffett, whom I’ve worked with all these years, is that he automatically thinks in terms of decision trees and the elementary math of permutations and combinations….

Obviously, you have to know accounting. It’s the language of practical business life. It was a very useful thing to deliver to civilization. I’ve heard it came to civilization through Venice which of course was once the great commercial power in the Mediterranean. However, double-entry bookkeeping was a hell of an invention.
And it’s not that hard to understand.

But you have to know enough about it to understand its limitations—because although accounting is the starting place, it’s only a crude approximation. And it’s not very hard to understand its limitations. For example, everyone can see that you have to more or less just guess at the useful life of a jet airplane or anything like that. Just because you express the depreciation rate in neat numbers doesn’t make it anything you really know.

In terms of the limitations of accounting, one of my favorite stories involves a very great businessman named Carl Braun who created the CF Braun Engineering Company. It designed and built oil refineries—which is very hard to do. And Braun would get them to come in on time and not blow up and have efficiencies and so forth.
This is a major art.

And Braun, being the thorough Teutonic type that he was, had a number of quirks. And one of them was that he took a look at standard accounting and the way it was applied to building oil refineries and he said, “This is asinine.”

So he threw all of his accountants out and he took his engineers and said, “Now, we’ll devise our own system of accounting to handle this process.” And in due time, accounting adopted a lot of Carl Braun’s notions. So he was a formidably willful and talented man who demonstrated both the importance of accounting and the importance of knowing its limitations.

He had another rule, from psychology, which, if you’re interested in wisdom, ought to be part of your repertoire—like the elementary mathematics of permutations and combinations.

His rule for all the Braun Company’s communications was called the five W’s—you had to tell who was going to do what, where, when and why. And if you wrote a letter or directive in the Braun Company telling somebody to do something, and you didn’t tell him why, you could get fired. In fact, you would get fired if you did it twice.

You might ask why that is so important? Well, again that’s a rule of psychology. Just as you think better if you array knowledge on a bunch of models that are basically answers to the question, why, why, why, if you always tell people why, they’ll understand it better, they’ll consider it more important, and they’ll be more likely to comply. Even if they don’t understand your reason, they’ll be more likely to comply.

So there’s an iron rule that just as you want to start getting worldly wisdom by asking why, why, why, in communicating with other people about everything, you want to include why, why, why. Even if it’s obvious, it’s wise to stick in the why.

Which models are the most reliable? Well, obviously, the models that come from hard science and engineering are the most reliable models on this Earth. And engineering quality control—at least the guts of it that matters to you and me and people who are not professional engineers—is very much based on the elementary mathematics of Fermat and Pascal:

It costs so much and you get so much less likelihood of it breaking if you spend this much. It’s all elementary high school mathematics. And an elaboration of that is what Deming brought to Japan for all of that quality control stuff.

I don’t think it’s necessary for most people to be terribly facile in statistics. For example, I’m not sure that I can even pronounce the Poisson distribution. But I know what a Gaussian or normal distribution looks like and I know that events and huge aspects of reality end up distributed that way. So I can do a rough calculation.

But if you ask me to work out something involving a Gaussian distribution to ten decimal points, I can’t sit down and do the math. I’m like a poker player who’s learned to play pretty well without mastering Pascal.

And by the way, that works well enough. But you have to understand that bellshaped curve at least roughly as well as I do.

And, of course, the engineering idea of a backup system is a very powerful idea. The engineering idea of breakpoints—that’s a very powerful model, too. The notion of a critical mass—that comes out of physics—is a very powerful model.

All of these things have great utility in looking at ordinary reality. And all of this cost-benefit analysis—hell, that’s all elementary high school algebra, too. It’s just been dolled up a little bit with fancy lingo.

I suppose the next most reliable models are from biology/ physiology because, after all, all of us are programmed by our genetic makeup to be much the same.

And then when you get into psychology, of course, it gets very much more complicated. But it’s an ungodly important subject if you’re going to have any worldly wisdom.

And you can demonstrate that point quite simply: There’s not a person in this room viewing the work of a very ordinary professional magician who doesn’t see a lot of things happening that aren’t happening and not see a lot of things happening that are happening.

And the reason why is that the perceptual apparatus of man has shortcuts in it. The brain cannot have unlimited circuitry. So someone who knows how to take advantage of those shortcuts and cause the brain to miscalculate in certain ways can cause you to see things that aren’t there.

Now you get into the cognitive function as distinguished from the perceptual function. And there, you are equally—more than equally in fact—likely to be misled. Again, your brain has a shortage of circuitry and so forth—and it’s taking all kinds of little automatic shortcuts.

So when circumstances combine in certain ways—or more commonly, your fellow man starts acting like the magician and manipulates you on purpose by causing your cognitive dysfunction—you’re a patsy.

And so just as a man working with a tool has to know its limitations, a man working with his cognitive apparatus has to know its limitations. And this knowledge, by the way, can be used to control and motivate other people….

So the most useful and practical part of psychology—which I personally think can be taught to any intelligent person in a week—is ungodly important. And nobody taught it to me by the way. I had to learn it later in life, one piece at a time. And it was fairly laborious. It’s so elementary though that, when it was all over, I felt like a fool.

And yeah, I’d been educated at Cal Tech and the Harvard Law School and so forth. So very eminent places miseducated people like you and me.

The elementary part of psychology—the psychology of misjudgment, as I call it—is a terribly important thing to learn. There are about 20 little principles. And they interact, so it gets slightly complicated. But the guts of it is unbelievably important.

Terribly smart people make totally bonkers mistakes by failing to pay heed to it. In fact, I’ve done it several times during the last two or three years in a very important way. You never get totally over making silly mistakes.

There’s another saying that comes from Pascal which I’ve always considered one of the really accurate observations in the history of thought. Pascal said in essence, “The mind of man at one and the same time is both the glory and the shame of the universe.”

And that’s exactly right. It has this enormous power. However, it also has these standard misfunctions that often cause it to reach wrong conclusions. It also makes man extraordinarily subject to manipulation by others. For example, roughly half of the army of Adolf Hitler was composed of believing Catholics. Given enough clever psychological manipulation, what human beings will do is quite interesting.

Personally, I’ve gotten so that I now use a kind of two-track analysis. First, what are the factors that really govern the interests involved, rationally considered? And second, what are the subconscious influences where the brain at a subconscious level is automatically doing these things—which by and large are useful, but which often misfunction.

One approach is rationality—the way you’d work out a bridge problem: by evaluating the real interests, the real probabilities and so forth. And the other is to evaluate the psychological factors that cause subconscious conclusions—many of which are wrong.

Now we come to another somewhat less reliable form of human wisdom—microeconomics. And here, I find it quite useful to think of a free market economy—or partly free market economy—as sort of the equivalent of an ecosystem….

This is a very unfashionable way of thinking because early in the days after Darwin came along, people like the robber barons assumed that the doctrine of the survival of the fittest authenticated them as deserving power—you know, “I’m the richest. Therefore, I’m the best. God’s in his heaven, etc.”

And that reaction of the robber barons was so irritating to people that it made it unfashionable to think of an economy as an ecosystem. But the truth is that it is a lot like an ecosystem. And you get many of the same results.

Just as in an ecosystem, people who narrowly specialize can get terribly good at occupying some little niche. Just as animals flourish in niches, similarly, people who specialize in the business world—and get very good because they specialize—frequently find good economics that they wouldn’t get any other way.

And once we get into microeconomics, we get into the concept of advantages of scale. Now we’re getting closer to investment analysis—because in terms of which businesses succeed and which businesses fail, advantages of scale are ungodly important.

For example, one great advantage of scale taught in all of the business schools of the world is cost reductions along the so-called experience curve. Just doing something complicated in more and more volume enables human beings, who are trying to improve and are motivated by the incentives of capitalism, to do it more and more efficiently.

The very nature of things is that if you get a whole lot of volume through your joint, you get better at processing that volume. That’s an enormous advantage. And it has a lot to do with which businesses succeed and fail….

Let’s go through a list—albeit an incomplete one—of possible advantages of scale. Some come from simple geometry. If you’re building a great spherical tank, obviously as you build it bigger, the amount of steel you use in the surface goes up with the square and the cubic volume goes up with the cube. So as you increase the dimensions, you can hold a lot more volume per unit area of steel.

And there are all kinds of things like that where the simple geometry—the simple reality—gives you an advantage of scale.

For example, you can get advantages of scale from TV advertising. When TV advertising first arrived—when talking color pictures first came into our living rooms—it was an unbelievably powerful thing. And in the early days, we had three networks that had whatever it was—say 90% of the audience.

Well, if you were Procter & Gamble, you could afford to use this new method of advertising. You could afford the very expensive cost of network television because you were selling so many cans and bottles. Some little guy couldn’t. And there was no way of buying it in part. Therefore, he couldn’t use it. In effect, if you didn’t have a big volume, you couldn’t use network TV advertising which was the most effective technique.

So when TV came in, the branded companies that were already big got a huge tail wind. Indeed, they prospered and prospered and prospered until some of them got fat and foolish, which happens with prosperity—at least to some people….

And your advantage of scale can be an informational advantage. If I go to some remote place, I may see Wrigley chewing gum alongside Glotz’s chewing gum. Well, I know that Wrigley is a satisfactory product, whereas I don’t know anything about Glotz’s. So if one is 40 cents and the other is 30 cents, am I going to take something
I don’t know and put it in my mouth—which is a pretty personal place, after all—for a lousy dime?

So, in effect, Wrigley , simply by being so well known, has advantages of scale—what you might call an informational advantage.

Another advantage of scale comes from psychology. The psychologists use the term social proof. We are all influenced—subconsciously and to some extent consciously—by what we see others do and approve. Therefore, if everybody’s buying something, we think it’s better. We don’t like to be the one guy who’s out of step.

Again, some of this is at a subconscious level and some of it isn’t. Sometimes, we consciously and rationally think, “Gee, I don’t know much about this. They know more than I do. Therefore, why shouldn’t I follow them?”

The social proof phenomenon which comes right out of psychology gives huge advantages to scale—for example, with very wide distribution, which of course is hard to get. One advantage of Coca-Cola is that it’s available almost everywhere in the world.

Well, suppose you have a little soft drink. Exactly how do you make it available all over the Earth? The worldwide distribution setup—which is slowly won by a big enterprise—gets to be a huge advantage…. And if you think about it, once you get enough advantages of that type, it can become very hard for anybody to dislodge you.

There’s another kind of advantage to scale. In some businesses, the very nature of things is to sort of cascade toward the overwhelming dominance of one firm.

The most obvious one is daily newspapers. There’s practically no city left in the U.S., aside from a few very big ones, where there’s more than one daily newspaper.
And again, that’s a scale thing. Once I get most of the circulation, I get most of the advertising. And once I get most of the advertising and circulation, why would anyone want the thinner paper with less information in it? So it tends to cascade to a winnertakeall situation. And that’s a separate form of the advantages of scale phenomenon.

Similarly, all these huge advantages of scale allow greater specialization within the firm. Therefore, each person can be better at what he does.

And these advantages of scale are so great, for example, that when Jack Welch came into General Electric, he just said, “To hell with it. We’re either going to be # 1 or #2 in every field we’re in or we’re going to be out. I don’t care how many people I have to fire and what I have to sell. We’re going to be #1 or #2 or out.”

That was a very toughminded thing to do, but I think it was a very correct decision if you’re thinking about maximizing shareholder wealth. And I don’t think it’s a bad thing to do for a civilization either, because I think that General Electric is stronger for having Jack Welch there.

And there are also disadvantages of scale. For example, we—by which I mean Berkshire Hathaway—are the largest shareholder in Capital Cities/ABC. And we had trade publications there that got murdered where our competitors beat us. And the way they beat us was by going to a narrower specialization.

We’d have a travel magazine for business travel. So somebody would create one which was addressed solely at corporate travel departments. Like an ecosystem, you’re getting a narrower and narrower specialization.

Well, they got much more efficient. They could tell more to the guys who ran corporate travel departments. Plus, they didn’t have to waste the ink and paper mailing out stuff that corporate travel departments weren’t interested in reading. It was a more efficient system. And they beat our brains out as we relied on our broader magazine.

That’s what happened to The Saturday Evening Post and all those things. They’re gone. What we have now isMotocross—which is read by a bunch of nuts who like to participate in tournaments where they turn somersaults on their motorcycles. But they care about it. For them, it’s the principal purpose of life. A magazine called Motocross is a total necessity to those people. And its profit margins would make you salivate.

Just think of how narrowcast that kind of publishing is. So occasionally, scaling down and intensifying gives you the big advantage. Bigger is not always better.

The great defect of scale, of course, which makes the game interesting—so that the big people don’t always win—is that as you get big, you get the bureaucracy. And with the bureaucracy comes the territoriality—which is again grounded in human nature.

And the incentives are perverse. For example, if you worked for AT&T in my day, it was a great bureaucracy. Who in the hell was really thinking about the shareholder or anything else? And in a bureaucracy, you think the work is done when it goes out of your in-basket into somebody else’s in-basket. But, of course, it isn’t. It’s not done until AT&T delivers what it’s supposed to deliver. So you get big, fat, dumb, unmotivated bureaucracies.

They also tend to become somewhat corrupt. In other words, if I’ve got a department and you’ve got a department and we kind of share power running this thing, there’s sort of an unwritten rule: “If you won’t bother me, I won’t bother you and we’re both happy.” So you get layers of management and associated costs that nobody needs. Then, while people are justifying all these layers, it takes forever to get anything done. They’re too slow to make decisions and nimbler people run circles around them.

The constant curse of scale is that it leads to big, dumb bureaucracy—which, of course, reaches its highest and worst form in government where the incentives are really awful. That doesn’t mean we don’t need governments—because we do. But it’s a terrible problem to get big bureaucracies to behave.

So people go to stratagems. They create little decentralized units and fancy motivation and training programs. For example, for a big company, General Electric has fought bureaucracy with amazing skill. But that’s because they have a combination of a genius and a fanatic running it. And they put him in young enough so he gets a long run. Of course, that’s Jack Welch.

But bureaucracy is terrible…. And as things get very powerful and very big, you can get some really dysfunctional behavior. Look at Westinghouse. They blew billions of dollars on a bunch of dumb loans to real estate developers. They put some guy who’d come up by some career path—I don’t know exactly what it was, but it could have been refrigerators or something—and all of a sudden, he’s loaning money to real estate developers building hotels. It’s a very unequal contest. And in due time, they lost all those billions of dollars.

CBS provides an interesting example of another rule of psychology—namely, Pavlovian association. If people tell you what you really don’t want to hear what’s unpleasant—there’s an almost automatic reaction of antipathy. You have to train yourself out of it. It isn’t foredestined that you have to be this way. But you will tend to be this way if you don’t think about it.

Television was dominated by one network—CBS in its early days. And Paley was a god. But he didn’t like to hear what he didn’t like to hear. And people soon learned that. So they told Paley only what he liked to hear. Therefore, he was soon living in a little cocoon of unreality and everything else was corrupt—although it was a great business.

So the idiocy that crept into the system was carried along by this huge tide. It was a Mad Hatter’s tea party the last ten years under Bill Paley.

And that is not the only example by any means. You can get severe misfunction in the high ranks of business. And of course, if you’re investing, it can make a lot of difference. If you take all the acquisitions that CBS made under Paley, after the acquisition of the network itself, with all his advisors—his investment bankers, management consultants and so forth who were getting paid very handsomely—it was absolutely terrible.

For example, he gave something like 20% of CBS to the Dumont Company for a television set manufacturer which was destined to go broke. I think it lasted all of two or three years or something like that. So very soon after he’d issued all of that stock, Dumont was history. You get a lot of dysfunction in a big fat, powerful place where no one will bring unwelcome reality to the boss.

So life is an everlasting battle between those two forces—to get these advantages of scale on one side and a tendency to get a lot like the U.S. Agriculture Department on the other side—where they just sit around and so forth. I don’t know exactly what they do. However, I do know that they do very little useful work.

On the subject of advantages of economies of scale, I find chain stores quite interesting. Just think about it. The concept of a chain store was a fascinating invention. You get this huge purchasing power—which means that you have lower merchandise costs. You get a whole bunch of little laboratories out there in which you can conduct experiments. And you get specialization.

If one little guy is trying to buy across 27 different merchandise categories influenced by traveling salesmen, he’s going to make a lot of poor decisions. But if your buying is done in headquarters for a huge bunch of stores, you can get very bright people that know a lot about refrigerators and so forth to do the buying.

The reverse is demonstrated by the little store where one guy is doing all the buying. It’s like the old story about the little store with salt all over its walls. And a stranger comes in and says to the storeowner, “You must sell a lot of salt.” And he replies, “No, I don’t. But you should see the guy who sells me salt.”

So there are huge purchasing advantages. And then there are the slick systems of forcing everyone to do what works. So a chain store can be a fantastic enterprise.
It’s quite interesting to think about Wal-Mart starting from a single store in Bentonville, Arkansas against Sears, Roebuck with its name, reputation and all of its billions.

How does a guy in Bentonville, Arkansas with no money blow right by Sears, Roebuck? And he does it in his own lifetime—in fact, during his own late lifetime because he was already pretty old by the time he started out with one little store….

He played the chain store game harder and better than anyone else. Walton invented practically nothing. But he copied everything anybody else ever did that was smart—and he did it with more fanaticism and better employee manipulation. So he just blew right by them all.

He also had a very interesting competitive strategy in the early days. He was like a prizefighter who wanted a great record so he could be in the finals and make a big TV hit. So what did he do? He went out and fought 42 palookas. Right? And the result was knockout, knockout, knockout—42 times.

Walton, being as shrewd as he was, basically broke other small town merchants in the early days. With his more efficient system, he might not have been able to tackle some titan head-on at the time. But with his better system, he could destroy those small town merchants. And he went around doing it time after time after time. Then, as he got bigger, he started destroying the big boys.

Well, that was a very, very shrewd strategy.

You can say, “Is this a nice way to behave?” Well, capitalism is a pretty brutal place. But I personally think that the world is better for having Wal-Mart. I mean you can idealize small town life. But I’ve spent a fair amount of time in small towns. And let me tell you you shouldn’t get too idealistic about all those businesses he destroyed.

Plus, a lot of people who work at Wal-Mart are very high grade, bouncy people who are raising nice children. I have no feeling that an inferior culture destroyed a superior culture. I think that is nothing more than nostalgia and delusion. But, at any rate, it’s an interesting model of how the scale of things and fanaticism combine to be very powerful.

And it’s also an interesting model on the other side—how with all its great advantages, the disadvantages of bureaucracy did such terrible damage to Sears, Roebuck. Sears had layers and layers of people it didn’t need. It was very bureaucratic. It was slow to think. And there was an established way of thinking. If you poked your head up with a new thought, the system kind of turned against you. It was everything in the way of a dysfunctional big bureaucracy that you would expect.

In all fairness, there was also much that was good about it. But it just wasn’t as lean and mean and shrewd and effective as Sam Walton. And, in due time, all its advantages of scale were not enough to prevent Sears from losing heavily to Wal-Mart and other similar retailers.

Here’s a model that we’ve had trouble with. Maybe you’ll be able to figure it out better. Many markets get down to two or three big competitors—or five or six. And in some of those markets, nobody makes any money to speak of. But in others, everybody does very well.

Over the years, we’ve tried to figure out why the competition in some markets gets sort of rational from the investor’s point of view so that the shareholders do well, and in other markets, there’s destructive competition that destroys shareholder wealth.

If it’s a pure commodity like airline seats, you can understand why no one makes any money. As we sit here, just think of what airlines have given to the world—safe travel, greater experience, time with your loved ones, you name it. Yet, the net amount of money that’s been made by the shareholders of airlines since Kitty Hawk, is now a negative figure—a substantial negative figure. Competition was so intense that, once it was unleashed by deregulation, it ravaged shareholder wealth in the airline business.

Yet, in other fields—like cereals, for example—almost all the big boys make out. If you’re some kind of a medium grade cereal maker, you might make 15% on your capital. And if you’re really good, you might make 40%. But why are cereals so profitable—despite the fact that it looks to me like they’re competing like crazy with promotions, coupons and everything else? I don’t fully understand it.

Obviously, there’s a brand identity factor in cereals that doesn’t exist in airlines. That must be the main factor that accounts for it.

And maybe the cereal makers by and large have learned to be less crazy about fighting for market share—because if you get even one person who’s hell-bent on gaining market share…. For example, if I were Kellogg and I decided that I had to have 60% of the market, I think I could take most of the profit out of cereals. I’d ruin Kellogg in the process. But I think I could do it.

In some businesses, the participants behave like a demented Kellogg. In other businesses, they don’t. Unfortunately, I do not have a perfect model for predicting how that’s going to happen.

For example, if you look around at bottler markets, you’ll find many markets where bottlers of Pepsi and Coke both make a lot of money and many others where they destroy most of the profitability of the two franchises. That must get down to the peculiarities of individual adjustment to market capitalism. I think you’d have to know the people involved to fully understand what was happening.

In microeconomics, of course, you’ve got the concept of patents, trademarks, exclusive franchises and so forth. Patents are quite interesting. When I was young, I think more money went into patents than came out. Judges tended to throw them out—based on arguments about what was really invented and what relied on prior art. That isn’t altogether clear.

But they changed that. They didn’t change the laws. They just changed the administration—so that it all goes to one patent court. And that court is now very much more pro-patent. So I think people are now starting to make a lot of money out of owning patents.

Trademarks, of course, have always made people a lot of money. A trademark system is a wonderful thing for a big operation if it’s well known.

The exclusive franchise can also be wonderful. If there were only three television channels awarded in a big city and you owned one of them, there were only so many hours a day that you could be on. So you had a natural position in an oligopoly in the pre-cable days.

And if you get the franchise for the only food stand in an airport, you have a captive clientele and you have a small monopoly of a sort.

The great lesson in microeconomics is to discriminate between when technology is going to help you and when it’s going to kill you. And most people do not get this straight in their heads. But a fellow like Buffett does.

For example, when we were in the textile business, which is a terrible commodity business, we were making low-end textiles—which are a real commodity product. And one day, the people came to Warren and said, “They’ve invented a new loom that we think will do twice as much work as our old ones.”

And Warren said, “Gee, I hope this doesn’t work because if it does, I’m going to close the mill.” And he meant it.

What was he thinking? He was thinking, “It’s a lousy business. We’re earning substandard returns and keeping it open just to be nice to the elderly workers. But we’re not going to put huge amounts of new capital into a lousy business.”

And he knew that the huge productivity increases that would come from a better machine introduced into the production of a commodity product would all go to the benefit of the buyers of the textiles. Nothing was going to stick to our ribs as owners.

That’s such an obvious concept—that there are all kinds of wonderful new inventions that give you nothing as owners except the opportunity to spend a lot more money in a business that’s still going to be lousy. The money still won’t come to you. All of the advantages from great improvements are going to flow through to the customers.

Conversely, if you own the only newspaper in Oshkosh and they were to invent more efficient ways of composing the whole newspaper, then when you got rid of the old technology and got new fancy computers and so forth, all of the savings would come right through to the bottom line.

In all cases, the people who sell the machinery—and, by and large, even the internal bureaucrats urging you to buy the equipment—show you projections with the amount you’ll save at current prices with the new technology. However, they don’t do the second step of the analysis which is to determine how much is going stay home and how much is just going to flow through to the customer. I’ve never seen a single projection incorporating that second step in my life. And I see them all the time. Rather, they always read: “This capital outlay will save you so much money that it will pay for itself in three years.”

So you keep buying things that will pay for themselves in three years. And after 20 years of doing it, somehow you’ve earned a return of only about 4% per annum.

That’s the textile business.

And it isn’t that the machines weren’t better. It’s just that the savings didn’t go to you. The cost reductions came through all right. But the benefit of the cost reductions didn’t go to the guy who bought the equipment. It’s such a simple idea. It’s so basic. And yet it’s so often forgotten.

Then there’s another model from microeconomics which I find very interesting. When technology moves as fast as it does in a civilization like ours, you get a phenomenon which I call competitive destruction. You know, you have the finest buggy whip factory and all of a sudden in comes this little horseless carriage. And before too many years go by, your buggy whip business is dead. You either get into a different business or you’re dead—you’re destroyed. It happens again and again and again.

And when these new businesses come in, there are huge advantages for the early birds. And when you’re an early bird, there’s a model that I call “surfing”—when a surfer gets up and catches the wave and just stays there, he can go a long, long time. But if he gets off the wave, he becomes mired in shallows….
But people get long runs when they’re right on the edge of the wave—whether it’s Microsoft or Intel or all kinds of people, including National Cash Register in the early days.

The cash register was one of the great contributions to civilization. It’s a wonderful story. Patterson was a small retail merchant who didn’t make any money. One day, somebody sold him a crude cash register which he put into his retail operation. And it instantly changed from losing money to earning a profit because it made it so much harder for the employees to steal….

But Patterson, having the kind of mind that he did, didn’t think, “Oh, good for my retail business.” He thought, “I’m going into the cash register business.” And, of course, he created National Cash Register.

And he “surfed”. He got the best distribution system, the biggest collection of patents and the best of everything. He was a fanatic about everything important as the technology developed. I have in my files an early National Cash Register Company report in which Patterson described his methods and objectives. And a well-educated orangutan could see that buying into partnership with Patterson in those early days, given his notions about the cash register business, was a total 100% cinch.

And, of course, that’s exactly what an investor should be looking for. In a long life, you can expect to profit heavily from at least a few of those opportunities if you develop the wisdom and will to seize them. At any rate, “surfing” is a very powerful model.

However, Berkshire Hathaway , by and large, does not invest in these people that are “surfing” on complicated technology. After all, we’re cranky and idiosyncratic—as you may have noticed.

And Warren and I don’t feel like we have any great advantage in the high-tech sector. In fact, we feel like we’re at a big disadvantage in trying to understand the nature of technical developments in software, computer chips or what have you. So we tend to avoid that stuff, based on our personal inadequacies.

Again, that is a very, very powerful idea. Every person is going to have a circle of competence. And it’s going to be very hard to advance that circle. If I had to make my living as a musician…. I can’t even think of a level low enough to describe where I would be sorted out to if music were the measuring standard of the civilization.

So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction that you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.

If you want to be the best tennis player in the world, you may start out trying and soon find out that it’s hopeless—that other people blow right by you. However, if you want to become the best plumbing contractor in Bemidji, that is probably doable by two-thirds of you. It takes a will. It takes the intelligence. But after a while, you’d gradually know all about the plumbing business in Bemidji and master the art. That is an attainable objective, given enough discipline.

And people who could never win a chess tournament or stand in center court in a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence—which results partly from what they were born with and partly from what they slowly develop through work.

So some edges can be acquired. And the game of life to some extent for most of us is trying to be something like a good plumbing contractor in Bemidji. Very few of us are chosen to win the world’s chess tournaments.

Some of you may find opportunities “surfing” along in the new high-tech fields—the Intels, the Microsofts and so on. The fact that we don’t think we’re very good at it and have pretty well stayed out of it doesn’t mean that it’s irrational for you to do it.

Well, so much for the basic microeconomics models, a little bit of psychology, a little bit of mathematics, helping create what I call the general substructure of worldly wisdom. Now, if you want to go on from carrots to dessert, I’ll turn to stock picking—trying to draw on this general worldly wisdom as we go.

I don’t want to get into emerging markets, bond arbitrage and so forth. I’m talking about nothing but plain vanilla stock picking. That, believe me, is complicated enough. And I’m talking about common stock picking.

The first question is, “What is the nature of the stock market?” And that gets you directly to this efficient market theory that got to be the rage—a total rage—long after I graduated from law school.

And it’s rather interesting because one of the greatest economists of the world is a substantial shareholder in Berkshire Hathaway and has been for a long time. His textbook always taught that the stock market was perfectly efficient and that nobody could beat it. But his own money went into Berkshire and made him wealthy. So, like Pascal in his famous wager, he hedged his bet.

Is the stock market so efficient that people can’t beat it? Well, the efficient market theory is obviously roughly right—meaning that markets are quite efficient and it’s quite hard for anybody to beat the market by significant margins as a stock picker by just being intelligent and working in a disciplined way.

Indeed, the average result has to be the average result. By definition, everybody can’t beat the market. As I always say, the iron rule of life is that only 20% of the people can be in the top fifth. That’s just the way it is. So the answer is that it’s partly efficient and partly inefficient.

And, by the way, I have a name for people who went to the extreme efficient market theory—which is “bonkers”. It was an intellectually consistent theory that enabled them to do pretty mathematics. So I understand its seductiveness to people with large mathematical gifts. It just had a difficulty in that the fundamental assumption did not tie properly to reality.

Again, to the man with a hammer, every problem looks like a nail. If you’re good at manipulating higher mathematics in a consistent way, why not make an assumption which enables you to use your tool?

The model I like—to sort of simplify the notion of what goes on in a market for common stocks—is the pari-mutuel system at the racetrack. If you stop to think about it, a pari-mutuel system is a market. Everybody goes there and bets and the odds change based on what’s bet. That’s what happens in the stock market.

Any damn fool can see that a horse carrying a light weight with a wonderful win rate and a good post position etc., etc. is way more likely to win than a horse with a terrible record and extra weight and so on and so on. But if you look at the odds, the bad horse pays 100 to 1, whereas the good horse pays 3 to 2. Then it’s not clear which is statistically the best bet using the mathematics of Fermat and Pascal. The prices have changed in such a way that it’s very hard to beat the system.

And then the track is taking 17% off the top. So not only do you have to outwit all the other betters, but you’ve got to outwit them by such a big margin that on average, you can afford to take 17% of your gross bets off the top and give it to the house before the rest of your money can be put to work.

Given those mathematics, is it possible to beat the horses only using one’s intelligence? Intelligence should give some edge, because lots of people who don’t know anything go out and bet lucky numbers and so forth. Therefore, somebody who really thinks about nothing but horse performance and is shrewd and mathematical could have a very considerable edge, in the absence of the frictional cost caused by the house take.

Unfortunately, what a shrewd horseplayer’s edge does in most cases is to reduce his average loss over a season of betting from the 17% that he would lose if he got the average result to maybe 10%. However, there are actually a few people who can beat the game after paying the full 17%.

I used to play poker when I was young with a guy who made a substantial living doing nothing but bet harness races…. Now, harness racing is a relatively inefficient market. You don’t have the depth of intelligence betting on harness races that you do on regular races. What my poker pal would do was to think about harness races as his main profession. And he would bet only occasionally when he saw some mispriced bet available. And by doing that, after paying the full handle to the house—which I presume was around 17%—he made a substantial living.

You have to say that’s rare. However, the market was not perfectly efficient. And if it weren’t for that big 17% handle, lots of people would regularly be beating lots of other people at the horse races. It’s efficient, yes. But it’s not perfectly efficient. And with enough shrewdness and fanaticism, some people will get better results than others.

The stock market is the same way—except that the house handle is so much lower. If you take transaction costs—the spread between the bid and the ask plus the commissions—and if you don’t trade too actively, you’re talking about fairly low transaction costs. So that with enough fanaticism and enough discipline, some of the shrewd people are going to get way better results than average in the nature of things.

It is not a bit easy. And, of course, 50% will end up in the bottom half and 70% will end up in the bottom 70%. But some people will have an advantage. And in a fairly low transaction cost operation, they will get better than average results in stock picking.

How do you get to be one of those who is a winner—in a relative sense—instead of a loser?

Here again, look at the pari-mutuel system. I had dinner last night by absolute accident with the president of Santa Anita. He says that there are two or three betters who have a credit arrangement with them, now that they have off-track betting, who are actually beating the house. They’re sending money out net after the full handle—a lot of it to Las Vegas, by the way—to people who are actually winning slightly, net, after paying the full handle. They’re that shrewd about something with as much unpredictability as horse racing.

And the one thing that all those winning betters in the whole history of people who’ve beaten the pari-mutuel system have is quite simple. They bet very seldom.
It’s not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it—who look and sift the world for a mispriced be—that they can occasionally find one.

And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple.

That is a very simple concept. And to me it’s obviously right—based on experience not only from the pari-mutuel system, but everywhere else.

And yet, in investment management, practically nobody operates that way. We operate that way—I’m talking about Buffett and Munger. And we’re not alone in the world. But a huge majority of people have some other crazy construct in their heads. And instead of waiting for a near cinch and loading up, they apparently ascribe to the theory that if they work a little harder or hire more business school students, they’ll come to know everything about everything all the time.

To me, that’s totally insane. The way to win is to work, work, work, work and hope to have a few insights.

How many insights do you need? Well, I’d argue: that you don’t need many in a lifetime. If you look at Berkshire Hathaway and all of its accumulated billions, the top ten insights account for most of it. And that’s with a very brilliant man—Warren’s a lot more able than I am and very disciplined—devoting his lifetime to it. I don’t mean to say that he’s only had ten insights. I’m just saying, that most of the money came from ten insights.

So you can get very remarkable investment results if you think more like a winning pari-mutuel player. Just think of it as a heavy odds against game full of craziness with an occasional mispriced something or other. And you’re probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It’s just that simple.

When Warren lectures at business schools, he says, “I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches—representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all.”

He says, “Under those rules, you’d really think carefully about what you did and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”

Again, this is a concept that seems perfectly obvious to me. And to Warren it seems perfectly obvious. But this is one of the very few business classes in the U.S. where anybody will be saying so. It just isn’t the conventional wisdom.

To me, it’s obvious that the winner has to bet very selectively. It’s been obvious to me since very early in life. I don’t know why it’s not obvious to very many other people.

I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, “My God, they’re purple and green. Do fish really take these lures?” And he said, “Mister, I don’t sell to fish.”

Investment managers are in the position of that fishing tackle salesman. They’re like the guy who was selling salt to the guy who already had too much salt. And as long as the guy will buy salt, why they’ll sell salt. But that isn’t what ordinarily works for the buyer of investment advice.

If you invested Berkshire Hathaway-style, it would be hard to get paid as an investment manager as well as they’re currently paid—because you’d be holding a block of Wal-Mart and a block of Coca-Cola and a block of something else. You’d just sit there. And the client would be getting rich. And, after a while, the client would think, “Why am I paying this guy half a percent a year on my wonderful passive holdings?”

So what makes sense for the investor is different from what makes sense for the manager. And, as usual in human affairs, what determines the behavior are incentives for the decision maker.

From all business, my favorite case on incentives is Federal Express. The heart and soul of their system—which creates the integrity of the product—is having all their airplanes come to one place in the middle of the night and shift all the packages from plane to plane. If there are delays, the whole operation can’t deliver a product full of integrity to Federal Express customers.

And it was always screwed up. They could never get it done on time. They tried everything—moral suasion, threats, you name it. And nothing worked.
Finally, somebody got the idea to pay all these people not so much an hour, but so much a shift—and when it’s all done, they can all go home. Well, their problems cleared up overnight.

So getting the incentives right is a very, very important lesson. It was not obvious to Federal Express what the solution was. But maybe now, it will hereafter more often be obvious to you.

All right, we’ve now recognized that the market is efficient as a pari-mutuel system is efficient with the favorite more likely than the long shot to do well in racing, but not necessarily give any betting advantage to those that bet on the favorite.

In the stock market, some railroad that’s beset by better competitors and tough unions may be available at one-third of its book value. In contrast, IBM in its heyday might be selling at 6 times book value. So it’s just like the pari-mutuel system. Any damn fool could plainly see that IBM had better business prospects than the railroad. But once you put the price into the formula, it wasn’t so clear anymore what was going to work best for a buyer choosing between the stocks. So it’s a lot like a pari-mutuel system. And, therefore, it gets very hard to beat.

What style should the investor use as a picker of common stocks in order to try to beat the market—in other words, to get an above average long-term result? A standard technique that appeals to a lot of people is called “sector rotation”. You simply figure out when oils are going to outperform retailers, etc., etc., etc. You just kind of flit around being in the hot sector of the market making better choices than other people. And presumably, over a long period of time, you get ahead.
However, I know of no really rich sector rotator. Maybe some people can do it. I’m not saying they can’t. All I know is that all the people I know who got rich—and I know a lot of them—did not do it that way.

The second basic approach is the one that Ben Graham used—much admired by Warren and me. As one factor, Graham had this concept of value to a private owner—what the whole enterprise would sell for if it were available. And that was calculable in many cases.

Then, if you could take the stock price and multiply it by the number of shares and get something that was one third or less of sellout value, he would say that you’ve got a lot of edge going for you. Even with an elderly alcoholic running a stodgy business, this significant excess of real value per share working for you means that all kinds of good things can happen to you. You had a huge margin of safety—as he put it—by having this big excess value going for you.

But he was, by and large, operating when the world was in shell shock from the 1930s—which was the worst contraction in the English-speaking world in about 600 years. Wheat in Liverpool, I believe, got down to something like a 600-year low, adjusted for inflation. People were so shell-shocked for a long time thereafter that Ben Graham could run his Geiger counter over this detritus from the collapse of the 1930s and find things selling below their working capital per share and so on.

And in those days, working capital actually belonged to the shareholders. If the employees were no longer useful, you just sacked them all, took the working capital and stuck it in the owners’ pockets. That was the way capitalism then worked.

Nowadays, of course, the accounting is not realistic because the minute the business starts contracting, significant assets are not there. Under social norms and the new legal rules of the civilization, so much is owed to the employees that, the minute the enterprise goes into reverse, some of the assets on the balance sheet aren’t there anymore.

Now, that might not be true if you run a little auto dealership yourself. You may be able to run it in such a way that there’s no health plan and this and that so that if the business gets lousy, you can take your working capital and go home. But IBM can’t, or at least didn’t. Just look at what disappeared from its balance sheet when it decided that it had to change size both because the world had changed technologically and because its market position had deteriorated.

And in terms of blowing it, IBM is some example. Those were brilliant, disciplined people. But there was enough turmoil in technological change that IBM got bounced off the wave after “surfing” successfully for 60 years. And that was some collapse—an object lesson in the difficulties of technology and one of the reasons why Buffett and Munger don’t like technology very much. We don’t think we’re any good at it, and strange things can happen.

At any rate, the trouble with what I call the classic Ben Graham concept is that gradually the world wised up and those real obvious bargains disappeared. You could run your Geiger counter over the rubble and it wouldn’t click.

But such is the nature of people who have a hammer—to whom, as I mentioned, every problem looks like a nail that the Ben Graham followers responded by changing the calibration on their Geiger counters. In effect, they started defining a bargain in a different way. And they kept changing the definition so that they could keep doing what they’d always done. And it still worked pretty well. So the Ben Graham intellectual system was a very good one.

Of course, the best part of it all was his concept of “Mr. Market”. Instead of thinking the market was efficient, he treated it as a manic-depressive who comes by every day. And some days he says, “I’ll sell you some of my interest for way less than you think it’s worth.” And other days, “Mr. Market” comes by and says, “I’ll buy your interest at a price that’s way higher than you think it’s worth.” And you get the option of deciding whether you want to buy more, sell part of what you already have or do nothing at all.

To Graham, it was a blessing to be in business with a manic-depressive who gave you this series of options all the time. That was a very significant mental construct. And it’s been very useful to Buffett, for instance, over his whole adult lifetime.

However, if we’d stayed with classic Graham the way Ben Graham did it, we would never have had the record we have. And that’s because Graham wasn’t trying to do what we did.

For example, Graham didn’t want to ever talk to management. And his reason was that, like the best sort of professor aiming his teaching at a mass audience, he was trying to invent a system that anybody could use. And he didn’t feel that the man in the street could run around and talk to managements and learn things. He also had a concept that the management would often couch the information very shrewdly to mislead. Therefore, it was very difficult. And that is still true, of course—human nature being what it is.

And so having started out as Grahamites which, by the way, worked fine—we gradually got what I would call better insights. And we realized that some company that was selling at 2 or 3 times book value could still be a hell of a bargain because of momentums implicit in its position, sometimes combined with an unusual managerial skill plainly present in some individual or other, or some system or other.

And once we’d gotten over the hurdle of recognizing that a thing could be a bargain based on quantitative measures that would have horrified Graham, we started thinking about better businesses.

And, by the way, the bulk of the billions in Berkshire Hathaway have come from the better businesses. Much of the first $200 or $300 million came from scrambling around with our Geiger counter. But the great bulk of the money has come from the great businesses.

And even some of the early money was made by being temporarily present in great businesses. Buffett Partnership, for example, owned American Express and Disney when they got pounded down.

Most investment managers are in a game where the clients expect them to know a lot about a lot of things. We didn’t have any clients who could fire us at Berkshire Hathaway. So we didn’t have to be governed by any such construct. And we came to this notion of finding a mispriced bet and loading up when we were very confident that we were right. So we’re way less diversified. And I think our system is miles better.

However, in all fairness, I don’t think a lot of money managers could successfully sell their services if they used our system. But if you’re investing for 40 years in some pension fund, what difference does it make if the path from start to finish is a little more bumpy or a little different than everybody else’s so long as it’s all going to work out well in the end? So what if there’s a little extra volatility.

In investment management today, everybody wants not only to win, but to have a yearly outcome path that never diverges very much from a standard path except on the upside. Well, that is a very artificial, crazy construct. That’s the equivalent in investment management to the custom of binding the feet of Chinese women. It’s the equivalent of what Nietzsche meant when he criticized the man who had a lame leg and was proud of it.

That is really hobbling yourself. Now, investment managers would say, “We have to be that way. That’s how we’re measured.” And they may be right in terms of the way the business is now constructed. But from the viewpoint of a rational consumer, the whole system’s “bonkers” and draws a lot of talented people into socially useless activity.

And the Berkshire system is not “bonkers”. It’s so damned elementary that even bright people are going to have limited, really valuable insights in a very competitive world when they’re fighting against other very bright, hardworking people.

And it makes sense to load up on the very few good insights you have instead of pretending to know everything about everything at all times. You’re much more likely to do well if you start out to do something feasible instead of something that isn’t feasible. Isn’t that perfectly obvious?

How many of you have 56 brilliant ideas in which you have equal confidence? Raise your hands, please. How many of you have two or three insights that you have some confidence in? I rest my case.

I’d say that Berkshire Hathaway’s system is adapting to the nature of the investment problem as it really is.

We’ve really made the money out of high quality businesses. In some cases, we bought the whole business. And in some cases, we just bought a big block of stock. But when you analyze what happened, the big money’s been made in the high quality businesses. And most of the other people who’ve made a lot of money have done so in high quality businesses.

Over the long term, it’s hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you’re not going to make much different than a 6% return—even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you’ll end up with a fine result.

So the trick is getting into better businesses. And that involves all of these advantages of scale that you could consider momentum effects.

How do you get into these great companies? One method is what I’d call the method of finding them small get ‘em when they’re little. For example, buy Wal-Mart when Sam Walton first goes public and so forth. And a lot of people try to do just that. And it’s a very beguiling idea. If I were a young man, I might actually go into it.

But it doesn’t work for Berkshire Hathaway anymore because we’ve got too much money. We can’t find anything that fits our size parameter that way. Besides, we’re set in our ways. But I regard finding them small as a perfectly intelligent approach for somebody to try with discipline. It’s just not something that I’ve done.

Finding ‘em big obviously is very hard because of the competition. So far, Berkshire’s managed to do it. But can we continue to do it? What’s the next Coca-Cola investment for us? Well, the answer to that is I don’t know. I think it gets harder for us all the time….

And ideally and we’ve done a lot of this—you get into a great business which also has a great manager because management matters. For example, it’s made a great difference to General Electric that Jack Welch came in instead of the guy who took over Westinghouse—a very great difference. So management matters, too.

And some of it is predictable. I do not think it takes a genius to understand that Jack Welch was a more insightful person and a better manager than his peers in other companies. Nor do I think it took tremendous genius to understand that Disney had basic momentums in place which are very powerful and that Eisner and Wells were very unusual managers.

So you do get an occasional opportunity to get into a wonderful business that’s being run by a wonderful manager. And, of course, that’s hog heaven day. If you don’t load up when you get those opportunities, it’s a big mistake.

Occasionally, you’ll find a human being who’s so talented that he can do things that ordinary skilled mortals can’t. I would argue that Simon Marks—who was second generation in Marks & Spencer of England—was such a man. Patterson was such a man at National Cash Register. And Sam Walton was such a man.

These people do come along—and in many cases, they’re not all that hard to identify. If they’ve got a reasonable hand—with the fanaticism and intelligence and so on that these people generally bring to the party—then management can matter much.

However, averaged out, betting on the quality of a business is better than betting on the quality of management. In other words, if you have to choose one, bet on the business momentum, not the brilliance of the manager.

But, very rarely, you find a manager who’s so good that you’re wise to follow him into what looks like a mediocre business.

Another very simple effect I very seldom see discussed either by investment managers or anybody else is the effect of taxes. If you’re going to buy something which compounds for 30 years at 15% per annum and you pay one 35% tax at the very end, the way that works out is that after taxes, you keep 13.3% per annum.

In contrast, if you bought the same investment, but had to pay taxes every year of 35% out of the 15% that you earned, then your return would be 15% minus 35% of 15%—or only 9.75% per year compounded. So the difference there is over 3.5%. And what 3.5% does to the numbers over long holding periods like 30 years is truly eye-opening. If you sit back for long, long stretches in great companies, you can get a huge edge from nothing but the way that income taxes work.

Even with a 10% per annum investment, paying a 35% tax at the end gives you 8.3% after taxes as an annual compounded result after 30 years. In contrast, if you pay the 35% each year instead of at the end, your annual result goes down to 6.5%. So you add nearly 2% of after-tax return per annum if you only achieve an average return by historical standards from common stock investments in companies with tiny dividend payout ratios.

But in terms of business mistakes that I’ve seen over a long lifetime, I would say that trying to minimize taxes too much is one of the great standard causes of really dumb mistakes. I see terrible mistakes from people being overly motivated by tax considerations.

Warren and I personally don’t drill oil wells. We pay our taxes. And we’ve done pretty well, so far. Anytime somebody offers you a tax shelter from here on in life, my advice would be don’t buy it.

In fact, any time anybody offers you anything with a big commission and a 200-page prospectus, don’t buy it. Occasionally, you’ll be wrong if you adopt “Munger’s Rule”. However, over a lifetime, you’ll be a long way ahead—and you will miss a lot of unhappy experiences that might otherwise reduce your love for your fellow man.

There are huge advantages for an individual to get into a position where you make a few great investments and just sit back and wait: You’re paying less to brokers. You’re listening to less nonsense. And if it works, the governmental tax system gives you an extra 1, 2 or 3 percentage points per annum compounded.

And you think that most of you are going to get that much advantage by hiring investment counselors and paying them 1% to run around, incurring a lot of taxes on your behalf’? Lots of luck.

Are there any dangers in this philosophy? Yes. Everything in life has dangers. Since it’s so obvious that investing in great companies works, it gets horribly overdone from time to time. In the “Nifty-Fifty” days, everybody could tell which companies were the great ones. So they got up to 50, 60 and 70 times earnings. And just as IBM fell off the wave, other companies did, too. Thus, a large investment disaster resulted from too high prices. And you’ve got to be aware of that danger….

So there are risks. Nothing is automatic and easy. But if you can find some fairly-priced great company and buy it and sit, that tends to work out very, very well indeed—especially for an individual,

Within the growth stock model, there’s a sub-position: There are actually businesses, that you will find a few times in a lifetime, where any manager could raise the return enormously just by raising prices—and yet they haven’t done it. So they have huge untapped pricing power that they’re not using. That is the ultimate no-brainer.

That existed in Disney. It’s such a unique experience to take your grandchild to Disneyland. You’re not doing it that often. And there are lots of people in the country. And Disney found that it could raise those prices a lot and the attendance stayed right up.

So a lot of the great record of Eisner and Wells was utter brilliance but the rest came from just raising prices at Disneyland and Disneyworld and through video cassette sales of classic animated movies.

At Berkshire Hathaway, Warren and I raised the prices of See’s Candy a little faster than others might have. And, of course, we invested in Coca-Cola—which had some
untapped pricing power. And it also had brilliant management. So a Goizueta and Keough could do much more than raise prices. It was perfect.

You will get a few opportunities to profit from finding underpricing. There are actually people out there who don’t price everything as high as the market will easily stand. And once you figure that out, it’s like finding in the street—if you have the courage of your convictions.

If you look at Berkshire’s investments where a lot of the money’s been made and you look for the models, you can see that we twice bought into twonewspaper towns which have since become onenewspaper towns. So we made a bet to some extent….

In one of those—The Washington Post—we bought it at about 20% of the value to a private owner. So we bought it on a Ben Grahamstyle basis—at onefifth of obvious value—and, in addition, we faced a situation where you had both the top hand in a game that was clearly going to end up with one winner and a management with a lot of integrity and intelligence. That one was a real dream. They’re very high class people—the Katharine Graham family. That’s why it was a dream—an absolute, damn dream.

Of course, that came about back in ‘73-74. And that was almost like 1932. That was probably a once-in-40-yearstype denouement in the markets. That investment’s up about 50 times over our cost.

If I were you, I wouldn’t count on getting any investment in your lifetime quite as good as The Washington Post was in ‘73 and ‘74.

But it doesn’t have to be that good to take care of you.

Let me mention another model. Of course, Gillette and Coke make fairly lowpriced items and have a tremendous marketing advantage all over the world. And in Gillette’s case, they keep surfing along new technology which is fairly simple by the standards of microchips. But it’s hard for competitors to do.

So they’ve been able to stay constantly near the edge of improvements in shaving. There are whole countries where Gillette has more than 90% of the shaving market.
GEICO is a very interesting model. It’s another one of the 100 or so models you ought to have in your head. I’ve had many friends in the sick business fixup game over a long lifetime. And they practically all use the following formula—I call it the cancer surgery formula:

They look at this mess. And they figure out if there’s anything sound left that can live on its own if they cut away everything else. And if they find anything sound, they just cut away everything else. Of course, if that doesn’t work, they liquidate the business. But it frequently does work.

And GEICO had a perfectly magnificent business submerged in a mess, but still working. Misled by success, GEICO had done some foolish things. They got to thinking that, because they were making a lot of money, they knew everything. And they suffered huge losses.

All they had to do was to cut out all the folly and go back to the perfectly wonderful business that was lying there. And when you think about it, that’s a very simple model. And it’s repeated over and over again.

And, in GEICO’s case, think about all the money we passively made…. It was a wonderful business combined with a bunch of foolishness that could easily be cut out. And people were coming in who were temperamentally and intellectually designed so they were going to cut it out. That is a model you want to look for.

And you may find one or two or three in a long lifetime that are very good. And you may find 20 or 30 that are good enough to be quite useful.

Finally, I’d like to once again talk about investment management. That is a funny business because on a net basis, the whole investment management business together gives no value added to all buyers combined. That’s the way it has to work.

Of course, that isn’t true of plumbing and it isn’t true of medicine. If you’re going to make your careers in the investment management business, you face a very peculiar situation. And most investment managers handle it with psychological denial just like a chiropractor. That is the standard method of handling the limitations of the investment management process. But if you want to live the best sort of life, I would urge each of you not to use the psychological denial mode.

I think a select few—a small percentage of the investment managers—can deliver value added. But I don’t think brilliance alone is enough to do it. I think that you have to have a little of this discipline of calling your shots and loading up—you want to maximize your chances of becoming one who provides above average real returns for clients over the long pull.

But I’m just talking about investment managers engaged in common stock picking. I am agnostic elsewhere. I think there may well be people who are so shrewd about currencies and this, that and the other thing that they can achieve good longterm records operating on a pretty big scale in that way. But that doesn’t happen to be my milieu. I’m talking about stock picking in American stocks.

I think it’s hard to provide a lot of value added to the investment management client, but it’s not impossible.

I hope I have not broken any copyright laws. I take the risk only because I don’t want to not be able to find this article when I need to re-read it.

Written-down ideas still have hooks, however, even if they’re not readily taken up by others and only remain in one’s own mind — at least for a while longer than otherwise. In this case their “hookability” is active rather than passive because it’s only when one’s ideas are written down that they can much more readily latch onto almost anything else that might have relevance from a much wider swathe of observations — and others’ written-down ideas.

This is the way I have engaged with economics, not because it’s of great intrinsic interest as usually described — economics textbooks have got to be the most boring of all — but because it’s a more multi-hookable subject than any others I’m aware of. It can attach to a wide variety of other observations from history, anthropology, psychology, physics, even family vendettas as yesterday’s headline, and so forth.

Besides being hookable, written-down ideas are also more vulnerable than being merely ensconced in one’s head where they are safe, even if transient. This is why I write. It’s only by writing ideas down that one’s search becomes more productive and one can test one’s own ideas more thoroughly.

But I am wary of objects of popular fascination — whether they be religions, politicians, movie stars, cult leaders, popular movements, fads and fashion. I have never been one to judge anyone good merely because millions of people hold him or her in high regard. I am extremely suspicious of the “wisdom of the crowds.” Indeed, whenever I come across a highly regarded public figure, my default assumption is that all cannot be quite right with the person. I admit that I am a cynic.

So while I guessed that Rowling was extraordinarily talented, I did not have an opinion on whether she was good. I am delighted to conclude that she is a good person. The evidence? Her Harvard University commencement address. Here, for the record, are some excerpts:

I would like to make it clear, in parenthesis, that I do not blame my parents for their point of view. There is an expiry date on blaming your parents for steering you in the wrong direction; the moment you are old enough to take the wheel, responsibility lies with you. What is more, I cannot criticise my parents for hoping that I would never experience poverty. They had been poor themselves, and I have since been poor, and I quite agree with them that it is not an ennobling experience. Poverty entails fear, and stress, and sometimes depression; it means a thousand petty humiliations and hardships. Climbing out of poverty by your own efforts, that is indeed something on which to pride yourself, but poverty itself is romanticised only by fools.

What I feared most for myself at your age was not poverty, but failure.

. . .

Ultimately, we all have to decide for ourselves what constitutes failure, but the world is quite eager to give you a set of criteria if you let it. So I think it fair to say that by any conventional measure, a mere seven years after my graduation day, I had failed on an epic scale. An exceptionally short-lived marriage had imploded, and I was jobless, a lone parent, and as poor as it is possible to be in modern Britain, without being homeless. The fears my parents had had for me, and that I had had for myself, had both come to pass, and by every usual standard, I was the biggest failure I knew.

. . .

So why do I talk about the benefits of failure? Simply because failure meant a stripping away of the inessential. I stopped pretending to myself that I was anything other than what I was, and began to direct all my energy into finishing the only work that mattered to me. Had I really succeeded at anything else, I might never have found the determination to succeed in the one arena I believed I truly belonged. I was set free, because my greatest fear had already been realised, and I was still alive, and I still had a daughter whom I adored, and I had an old typewriter and a big idea. And so rock bottom became the solid foundation on which I rebuilt my life.

. . .

Given a time machine or a Time Turner, I would tell my 21-year-old self that personal happiness lies in knowing that life is not a check-list of acquisition or achievement. Your qualifications, your CV, are not your life, though you will meet many people of my age and older who confuse the two. Life is difficult, and complicated, and beyond anyone’s total control, and the humility to know that will enable you to survive its vicissitudes.

You might think that I chose my second theme, the importance of imagination, because of the part it played in rebuilding my life, but that is not wholly so. Though I will defend the value of bedtime stories to my last gasp, I have learned to value imagination in a much broader sense. Imagination is not only the uniquely human capacity to envision that which is not, and therefore the fount of all invention and innovation. In its arguably most transformative and revelatory capacity, it is the power that enables us to empathise with humans whose experiences we have never shared.

. . .

Every day, I saw more evidence about the evils humankind will inflict on their fellow humans, to gain or maintain power. I began to have nightmares, literal nightmares, about some of the things I saw, heard and read.

And yet I also learned more about human goodness at Amnesty International than I had ever known before.

Amnesty mobilises thousands of people who have never been tortured or imprisoned for their beliefs to act on behalf of those who have. The power of human empathy, leading to collective action, saves lives, and frees prisoners. Ordinary people, whose personal well-being and security are assured, join together in huge numbers to save people they do not know, and will never meet. My small participation in that process was one of the most humbling and inspiring experiences of my life.

Unlike any other creature on this planet, humans can learn and understand, without having experienced. They can think themselves into other people’s minds, imagine themselves into other people’s places.

Of course, this is a power, like my brand of fictional magic, that is morally neutral. One might use such an ability to manipulate, or control, just as much as to understand or sympathise.

And many prefer not to exercise their imaginations at all. They choose to remain comfortably within the bounds of their own experience, never troubling to wonder how it would feel to have been born other than they are. They can refuse to hear screams or to peer inside cages; they can close their minds and hearts to any suffering that does not touch them personally; they can refuse to know.

I might be tempted to envy people who can live that way, except that I do not think they have any fewer nightmares than I do. Choosing to live in narrow spaces can lead to a form of mental agoraphobia, and that brings its own terrors. I think the wilfully unimaginative see more monsters. They are often more afraid.

What is more, those who choose not to empathise may enable real monsters. For without ever committing an act of outright evil ourselves, we collude with it, through our own apathy.

Read the whole thing.

Go. Profit from exile. To see, listen, walk, pause beside wisemen; question savages and madmen; and listen to stories. It is always pleasant and, sometimes, improves you.

– Jean C. Carriere in his play based on the Indian epic The Mahabharata.

[Picture source.]

“The important thing is not to stop questioning. Curiosity has its own reason for existing. One cannot help but be in awe when one contemplates the mysteries of eternity… Never lose a holy curiosity.”

From “The World As I See It.” (Hat tip: Veer.)

My political ideal is democracy. Let every man be respected as an individual and no man idolized. It is an irony of fate that I myself have been the recipient of excessive admiration and reverence from my fellow-beings, through no fault, and no merit, of my own. The cause of this may well be the desire, unattainable for many, to understand the few ideas to which I have with my feeble powers attained through ceaseless struggle. I am quite aware that for any organization to reach its goals, one man must do the thinking and directing and generally bear the responsibility. But the led must not be coerced, they must be able to choose their leader. In my opinion, an autocratic system of coercion soon degenerates; force attracts men of low morality… The really valuable thing in the pageant of human life seems to me not the political state, but the creative, sentient individual, the personality; it alone creates the noble and the sublime, while the herd as such remains dull in thought and dull in feeling.

This topic brings me to that worst outcrop of herd life, the military system, which I abhor… This plague-spot of civilization ought to be abolished with all possible speed. Heroism on command, senseless violence, and all the loathsome nonsense that goes by the name of patriotism — how passionately I hate them!

The most beautiful experience we can have is the mysterious. It is the fundamental emotion that stands at the cradle of true art and true science. Whoever does not know it and can no longer wonder, no longer marvel, is as good as dead, and his eyes are dimmed. It was the experience of mystery — even if mixed with fear — that engendered religion. A knowledge of the existence of something we cannot penetrate, our perceptions of the profoundest reason and the most radiant beauty, which only in their most primitive forms are accessible to our minds: it is this knowledge and this emotion that constitute true religiosity. In this sense, and only this sense, I am a deeply religious man… I am satisfied with the mystery of life’s eternity and with a knowledge, a sense, of the marvelous structure of existence — as well as the humble attempt to understand even a tiny portion of the Reason that manifests itself in nature.

What we chiefly need is “the creative, sentient individual.” The individual is the principal, not the state. I think that to the extent that India has deviated from considering the individual at the top and instead put the state at the top, India is suffering. We have to make the state subservient to the individual, not the other way around.

The study of economics does not seem to require any specialized gifts of an unusually high order. Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy or pure science? An easy subject, at which very few excel! The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher–in some degree. he must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician.

You might say he was describing himself. But he was referring to another master economist: Alfred Marshall.

Elegant models are amazing things. That is why economists do it with models. The study of the real world would be too confusing if it were not stripped of all inessential details. The hard part lies in figuring out which bits to retain and which to discard while creating the model. Model building is an art and the product is often a thing of spectacular beauty and elegance. They illuminate and enlighten; they capture the imagination and make accessible features of the real world that would otherwise be lost in a haze of misapprehension. It seems to me that learning simple models has to be part of a well-rounded education. Children should be exposed to simple models and then taken through the logical deductions that the assumptions imply. But I will not digress into models and our education system for now. What I want to do is quote a passage from Paul Krugman, an economist whom I especially admire for his clarity of thinking and exposition, about how serious economics is done.

A real economist starts not with a policy view but with a story about how the world works. That story almost always takes the form of a model — a simplified representation of the world, which helps you cut through the complexities. Once you have a model, you can ask how well it fits the facts; if it fits them reasonably well, you can ask what sorts of magnitudes, what sort of tradeoffs, it implies. Your policy opinions then flow from the model, not the other way around. . .

. . . Anyone who has ever made the effort to understand a really useful economic model (like the simple models on which economists base their argument for free trade) learns something important: The model is often smarter than you are. What I mean by that is that the act of putting your thoughts together into a coherent model often forces you into conclusions you never intended, forces you to give up fondly held beliefs. The result is that people who have understood even the simplest, most trivial-sounding economic models are often far more sophisticated than people who know thousands of facts and hundreds of anecdotes, who can use plenty of big words, but have no coherent framework to organize their thoughts. If you really understood my story about the baby-sitting co-op, congratulations: You now know more about the nature of monetary policy and the business cycle than 99 percent of the attendees at Renaissance Weekend. If you have taken the time to understand the story about England trading cloth for Portuguese wine that we teach to every freshman in Econ 1, I guarantee you that you know more about the nature of the global economy than the current U.S. Trade Representative (or most of his predecessors).

That passage is from his essay “Four Percent Solution” in his book “The Accidental Theorist” (1998). The story — the model, that is — of the baby-sitting economy occurs earlier on in the essay. You can read a version of it on Slate. It is well worth the time. Reading that story (and I have re-read it numerous times) should persuade you of the value of getting one’s fundamentals right. Let’s go on with a bit more from Krugman’s essay.

One thing that usually happens when I try to talk about the difference between serious economics and the kind of glib rhetoric that passes for sophistication is that people accuse me of being arrogant, of thinking that I know everything. I can’t imagine why. No, seriously — think about it. What someone like Felix Rohatyn is in effect saying is “I don’t need to make an effort to understand where the conventional views of economics come from; I don’t need to understand the stuff that’s in every undergraduate textbook; I’m such a smart guy that I can make up my own version of macroeconomics off the top of my head, and it will be much better than anything they have come up with.” Then along comes this irritating economist who points out a few gaping holes in his argument, basic errors that anyone who had bothered to understand the stuff in the undergraduate textbooks would not have made. And people’s response is “That Krugman–he’s so arrogant.”

Well, what can we do about this kind of thing? Let me be the first to admit that economists have not made it easy for smart people who don’t want to get too deep into the technicalities to understand the basics. Mathematics is a wonderful tool, but there are far too few attempts to explain the fundamental models of economics with a minimum of math; we need to make a real effort to write in English, and skip the differential topology. I’m trying, but the profession has a long way to go.

But it’s also important for non-economists — people who want to be sophisticated about economic policy without getting Ph.D.s — to make an effort. As I have said earlier, it is not a matter of time, it’s a matter of attitude. The biggest problem with many businesspeople, political leaders, and others is that while they are willing to talk and read about economics ad nauseam, they are not willing to do anything that feels like going back to school. They would rather read five books by David Halberstam than one chapter in an undergraduate textbook; and they absolutely hate the idea that they need to work their way through whimsical stories about cloth and wine and baby-sitting rather than get right into pontificating about globalization and the new economy.

But there is no way around it. If you want to be truly well-informed about economics (or anything else), you must go back to school — and keep going back, again and again. You must be prepared to work through little models before you can use the big words — in fact, it is usually a good idea to try to avoid the big words altogether. If you balk at this task — if you think that you are too grown-up for this sort of thing — then you may sound impressive and sophisticated, but you will have no idea what you are talking about.

I read Krugman very very slowly. And go back to school again and again.

Really productive ideas, like internal combustion and the assembly line, are hard to find… But the techno-hype that surrounds us has some real costs. It causes businesses to waste money; it causes politicians to seek high-tech fixes (give every child a laptop!) when they should be getting back to the basics (teach every child to read). The slightly depressing truth is that technology has been letting us down lately. Let’s face up to that truth, and get on with our lives.

That is Paul Krugman writing in Dec 1996.

– Ralph Waldo Emerson

Herbert Spencer in “The Man versus the State” (1884)

My favorite lines from it: “You are a child of the universe, no less than the trees and the stars. You have a right to be there. And whether or not it is clear to you, the universe is unfolding as it should.”

That expresses the same thought as, “The world, Govinda, is perfect at every moment.”

Go read DESIDERATA.

–William Faulkner

Those words, from “The Declaration of Independence of the Thirteen Colonies” proclaimed in CONGRESS, July 4, 1776, are far too important to be forgotten, and should be read by all freedom loving people frequently. Long live the American Revolution. When will Indians become collectively smart enough to understand the meaning of those words?

“We succeeded in taking that picture [from deep space], and, if you look at it, you see a dot. That’s here. That’s home. That’s us. On it, everyone you ever heard of, every human being who ever lived, lived out their lives. The aggregate of all our joys and sufferings, thousands of confident religions, ideologies and economic doctrines, every hunter and forager, every hero and coward, every creator and destroyer of civilizations, every king and peasant, every young couple in love, every hopeful child, every mother and father, every inventor and explorer, every teacher of morals, every corrupt politician, every superstar, every supreme leader, every saint and sinner in the history of our species, lived there on a mote of dust, suspended in a sunbeam.

“The earth is a very small stage in a vast cosmic arena. Think of the rivers of blood spilled by all those generals and emperors so that in glory and in triumph they could become the momentary masters of a fraction of a dot. Think of the endless cruelties visited by the inhabitants of one corner of the dot on scarcely distinguishable inhabitants of some other corner of the dot. How frequent their misunderstandings, how eager they are to kill one another, how fervent their hatreds. Our posturings, our imagined self-importance, the delusion that we have some privileged position in the universe, are challenged by this point of pale light. Our planet is a lonely speck in the great enveloping cosmic dark. In our obscurity — in all this vastness — there is no hint that help will come from elsewhere to save us from ourselves. It is up to us. It’s been said that astronomy is a humbling, and I might add, a character-building experience. To my mind, there is perhaps no better demonstration of the folly of human conceits than this distant image of our tiny world. To me, it underscores our responsibility to deal more kindly and compassionately with one another and to preserve and cherish that pale blue dot, the only home we’ve ever known.”

Begin quote:

“No person should be above the law, but the laws should be rational, transparent, and open to debate by all experts who can shed light on the issues (not just lawyers), just like any other idea that supposedly holds the fabric of our society together. We need to apply all of our science, technology, and intuition to the ills we face collectively and come up with solutions that are creative, coherent, and empowering. Incarceration is simply wrong in many situations and hearkens back to previous historical periods when death and suffering were the only options. That is, we still point our fingers at individuals who ‘deviate’ without recognizing that we are participants in and complicit with the very system that creates them. In the past this was called the inquisition, or the witch hunts, or eugenics, etc. and in each case the people doing the labeling felt perfectly justified. What history has shown us is that making individuals suffer for what are actually our collective failings leads to a dissonance that can only be addressed by convincing yourself they ‘deserve’ it, a dehumanizing of the ‘other’. The law and its sanctions should not be about dehumanizing but about humanizing; coming to terms with what it means to be human and to face the problems that arise in a particular era.

Plato had the right idea, we should strive to order our soul with the heavens, whether that soul refer to one man or woman or one city or one country or one beautiful blue planet.”

End quote.

The comment appears in connection with this article at the Scientific American site.

The God of the Old Testament is arguably the most unpleasant character in all fiction: jealous and proud of it; a petty, unjust, unforgiving control-freak; a vindictive, bloodthirsty ethnic cleanser; a misogynistic, homophobic, racist, infanticidal, genocidal, filicidal, pestilential, megalomaniacal, sadomasochistic, capriciously malevolent bully.

But Richard, why don’t you stop beating about the bush and tell us what you really think of the Biblical god? He continues:

Those of us schooled from infancy in his ways can become desensitized to their horror. A naif blessed with the perspective of innocence has a clearer perception. Winston Churchill’s son Randolph somehow contrived to remain ignorant of scripture until Evelyn Waugh and a brother officer, in a vain attempt to keep Churchill quiet when they were posted together during the war, bet him he couldn’t read the entire Bible in a fortnight: ‘Unhappily it has not had the result we hoped. He has never read any of it before and is hideously excited; keeps reading quotations aloud “I say I bet you didn’t know this came in the Bible . . . ” or merely slapping his side & chortling “God, isn’t God a shit!”‘ Thomas Jefferson — better read — was of a similar opinion: ‘The Christian God is a being of terrific character – cruel, vindictive, capricious and unjust.’

Dawkins begins the section titled “Monotheism” (pg 37) with a quote from Gore Vidal’s essay on the evil of monotheism. He quotes Vidal:

The great unmentionable evil at the center of our culture is monotheism. From a barbaric Bronze Age text known as the Old Testament, three anti-human religions have evolved – Judaism, Christianity, and Islam. These are sky-god religions. They are, literally, patriarchal — God is the Omnipotent Father — hence the loathing of women for 2,000 years in those countries afflicted by the sky-god and his earthly male delegates.

Dawkins is mainly arguing against the conception of god as advanced by the monotheistic religions:

The oldest of the three Abrahamic religions, and the clear ancestor of the other two, is Judaism: originally a tribal cult of a single fiercely unpleasant God, morbidly obsessed with sexual restrictions, with the smell of charred flesh, with his own superiority over rival gods and with the exclusiveness of his chosen desert tribe. During the Roman occupation of Palestine, Christianity was founded by Paul of Tarsus as a less ruthlessly monotheistic sect of Judaism and a less exclusive one, which looked outwards from the Jews to the rest of the world. Several centuries later, Muhammad and his followers reverted to the uncompromising monotheism of the Jewish original, but not its exclusiveness, and founded Islam upon a new holy book, the Koran or Qur’an, adding a powerful ideology of military conquest to spread the faith. Christianity, too, was spread by the sword, wielded first by Roman hands after the Emperor Constantine raised it from eccentric cult to official religion, then by the Crusaders, and later by the conquistadors and other European invaders and colonists, with missionary accompaniment. For most of my purposes, all three Abrahamic religions can be treated as indistinguishable. Unless otherwise stated, I shall have Christianity mostly in mind, but only because it is the version with which I happen to be most familiar. For my purposes the differences matter less than the similarities. And I shall not be concerned at all with other religions such as Buddhism or Confucianism. Indeed, there is something to be said for treating these not as religions at all but as ethical systems or philosophies of life.

Richard Dawkins is devastating in his critique of the monotheistic faiths and his book will probably be banned in India. So if you wish to have a copy, write to me and I will send it across.

– John Kenneth Galbraith

– George Gordon Noel, Lord Byron

These days I going through his book “Cultural Materialism: The Struggle for a Science of Culture” [© Marvin Harris 1979 Random House.] It is a delight. Here are a couple of paragraphs that I would like to share with you.

Science is a unique and precious contribution of Western civilization. This is not to deny that many other civilizations have contributed to scientific knowledge by inventing weights and measures, classifying plants and animals, recording astronomical observations, developing mathematical theorems, voyaging to distant lands, experimenting with chemical and physical processes. But it was in western Europe that the distinctive rules of the scientific method were first codified, given conscious expression, and systematically applied to the entire range of inorganic, organic, and cultural phenomena.

It is both foolish and dangerous for intellectuals in any society to minimize the significance of this achievement. We must recognize that there are many ways of knowing, but we must also recognize that it is not mere ethnocentric puffery to assert that science is a way of knowing that has a uniquely transcendent value for all human beings. In the entire course of prehistory and history only one way of knowing has encouraged its own practitioners to doubt their own premises and to systematically expose their own conclusions to the hostile scrutiny of nonbelievers. Granted that discrepancies between science as an ideal and science as it is practiced substantially reduce the difference between science, religion, and other modes of looking for the truth. But it is precisely as an ideal that the uniqueness of science deserves to be defended. No other way of knowing is based on a set of rules explicitly designed to transcend the prior belief systems of mutually antagonistic tribes, nations, classes, and ethnic and religious communities in order to arrive at knowledge that is equally probably for any rational human mind. Those who doubt that science can do this must be able to show how some other tolerant and ecumenical alternative can do it better. Unless they can show how some other universalistic system of knowing leads to more acceptable criteria of truth, their attempts to subvert the universal credibility of science in the name of cultural relativism, however well-intentioned, is an intellectual crime against humanity. It is a crime against humanity because the real alternative to science is not anarchy, but ideology, not peaceful artists, philosophers, and anthropologists, but aggressive fanatics and messiahs eager to annihilate each other and the whole world if need be in order to prove their point. [pg 27]

The alternative to science is ideology. Jihad.

[Followup post: Science -- Part 2]

It would appear that the more perfect the democracy, the more its leaders reflect the inner soul of the people. India, I am told, is a great democracy. Looking at the leaders of India, one does wonder about the inner soul of Indians.

Subhas Reddy, a visitor to this blog, was kind enough to send me some excerpts from this site.

True reformer

“If you wish to be a true reformer, three things are necessary. The first is to feel. Do you really feel for your brothers? Do you really feel that there is so much misery in the world, so much ignorance and superstition? Do you really feel that men are your brothers? Does this idea come into your whole being? Does it run with your blood? Does it tingle in your veins? Does it course through every nerve and filament of your body? Are you full of that idea of sympathy? If you are, that is only the first step.

“You must think next if you have found any remedy. The old ideas may be all superstition, but in and round these masses of superstition are nuggets of gold and truth. Have you discovered means by which to keep that gold alone, without any of the dross? If you have done that, that is only the second step; one more thing is necessary.

“What is your motive? Are you sure that you are not actuated by greed of gold, by thirst for fame or power? Are you really sure that you can stand to your ideals and work on, even if the whole world wants to crush you down? Are you sure you know what you want and will perform your duty, and that alone, even if your life is at stake? Are you sure that you will persevere so long as life endures, so long as there is one pulsation left in the heart? Then you are a real reformer, you are a teacher, a Master, a blessing to mankind.”

Subhas wrote that the quote above apparently contradicts another bit from here.

Dispassionate work

“…..and the doctrine which stands out luminously in every page of the Gita is intense activity, but in the midst of it, eternal calmness. This is the secret of work, to attain which is the goal of the Vedanta. Inactivity, as we understand it in the sense of passivity, certainly cannot be the goal. Were it so, then the walls around us would be the most intelligent; they are inactive. Clods of earth, stumps of trees, would be the greatest sages in the world; they are inactive. Nor does inactivity become activity when it is combined with passion. Real activity, which is the goal of Vedanta, is combined with eternal calmness, the calmness which cannot be ruffled, the balance of mind which is never disturbed, whatever happens. And we all know from our experience in life that that is the best attitude for work.

“I have been asked many times how we can work if we do not have the passion which we generally feel for work. I also thought in that way years ago, but as I am growing older, getting more experience, I find it is not true. The less passion there is, the better we work. The calmer we are, the better for us, and the more the amount of work we can do. When we let loose our feelings, we waste so much energy, shatter our nerves, disturb our minds, and accomplish very little work. The energy which ought to have gone out as work is spent as mere feeling, which counts for nothing. It is only when the mind is very calm and collected that the whole of its energy is spent in doing good work. And if you read the lives of the great workers which the world has produced, you will find that they were wonderfully calm men. Nothing, as it were, could throw them off their balance. That is why the man who becomes angry never does a great amount of work, and the man whom nothing can make angry accomplishes so much. The man who gives way to anger, or hatred, or any other passion, cannot work; he only breaks himself to pieces, and does nothing practical. It is the calm, forgiving, equable, well-balanced mind that does the greatest amount of work.”

So what Swamiji is saying is that you have to have feelings but you have to work dispassionately with reason guiding your mission.

Those lines are John Donne’s From Devotions upon Emergent Occasions. Written around the 1620’s, they are faintly reflective of Advaita Vedanta. Donne’s philosophy encompasses all humanity into a whole but places God outside and above, as you can tell from the full meditation (included below.) Advaita Vedanta negates the distinction between the “me” and the “not me.”

Meditation 17 (1623-1624)
by John Donne

Nunc lento sonitu dicunt, morieris.

If a man carry treasure in bullion, or in a wedge of gold, and have none coined into current moneys, his treasure will not defray him as he travels. Tribulation is treasure in the nature of it, but it is not current money in the use of it, except we get nearer and nearer our home, heaven, by it. Another man may be sick too, and sick to death, and this affliction may lie in his bowels as gold in a mine and be of no use to him; but this bell that tells me of his affliction digs out and applies that gold to me, if by this consideration of another’s dangers I take mine own into contemplation and so secure myself by making my recourse to my God, who is our only security.

I believe that no discovery of fact, however trivial, can be wholly useless to the race, and that no trumpeting of falsehood, however virtuous in intent, can be anything but vicious.

I believe that all government is evil, in that all government must necessarily make war upon liberty, and that the democratic form is as bad as any of the other forms….

I believe in complete freedom of thought and speech – alike for the humblest man and the mightiest, and in the utmost freedom of conduct that is consistent with living in organized society.

I believe in the capacity of man to conquer his world, and to find out what it is made of, and how it is run. I believe in the reality of progress. I –

But the whole thing, after all, may be put very simply. I believe that it is better to tell the truth than to lie. I believe that it is better to be free than to be a slave. And I believe that it is better to know than to be ignorant.

Mencken quoted in H L Mencken: The Joyous Libertarian by Murray N Rothbard.

Stop all the clocks, cut off the telephone,
Prevent the dog from barking with a juicy bone,
Silence the pianos and with muffled drum,
Bring out the coffin, let the mourners come.

Let aeroplanes circle moaning overhead
Scribbling on the sky the message He is Dead,
Put crepe bows around the necks of the public doves,
Let the traffic policeman wear black cotton gloves.

He was my North, my South, my East and West,
My working week and my Sunday rest,
My noon, my midnight, my talk, my song;
I thought that love would last forever: I was wrong.

The stars are not wanted now; put out every one:
Pack up the moon and dismantle the sun;
Pour away the ocean and sweep up the woods:
For nothing now can ever come to any good.

What strikes me in the last verse is how an impotent human raging against the universe wants the whole show to be packed up. It is as if the world is a mere stage and now that the play is over, it is time to shut it down. The stars are lights that can be switched off, the moon just another prop to be put away, the sun a human construct that needs to be taken down, the oceans and the woods are just superficial scenery which can be removed.

Rapidly backwards and forwards: we call this
Easing the spring. And rapidly backwards and forwards
The early bees are assaulting and fumbling the flowers:
They call it easing the Spring.
They call it easing the Spring: it is perfectly easy
If you have any strength in your thumb: like the bolt,
And the breech, and the cocking-piece, and the point of balance,
Which in our case we have not got; and the almond-blossom
Silent in all of the gardens and the bees going backwards and forwards,
For today we have naming of parts.

The poem is by Henry Reed. I have italicized parts of the poem. The poem has two voices in it. Once you distinguish the two voices, you realize what is going on. The scene is a classroom where an instructor is naming the parts of a rifle. The second voice is that of a bored student whose mind is wandering and who takes bits and pieces of the lecture and overlays them on what he can see out the window. The words that echo most strongly with me appear in the last verse: … and the point of balance, Which in our case we have not got …

We humans seem to be very poor at maintaining balance. We pay to much attention to the artificial and not enough to the natural world which has balance built into it. The point of balance, which in our case we have not got.

I found a very interesting analysis of the poem by Michael Quieto which concludes with

Guns and gardens, soldiers and bees: the poem relates the unrelated in order to draw a clear dichotomy between the forces of life and the forces of death. However, the poem goes further than merely contrasting opposites. The structure and language of the poem combine to demonstrate how one should become the other. The eschatological hope expressed by the harmonious image of this Eden begs and demands a transformation or conversion into communion with the natural order. The poem demonstrates that war is contrary to nature.

You drift through the years
And life seems tame,
Till one dream appears,
And love is its name.

This dream is for you,
So pay the price.
Make one dream come true,
You only live twice.

Title song for the James Bond movie, sung by the inimitable Nancy Sinatra.

The last half of the last paragraph in John Maynard Keynes’s book General Theory of Employment Interest and Money. That quote has to be read and re-read slowly, reflectively, savoring the language, and the thoughts. Just read this: “Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” Pure delight, like a sip of very fine cognac.

The best of science doesn’t consist of mathematical models and experiments, as textbooks make it seem. Those come later. It springs fresh from a more primitive mode of though, wherein the hunter’s mind weaves ideas from old facts and fresh metaphors and the scrambled crazy images of things recently seen. To move forward is to concoct new patters of thought, which in turn dictate the design of the models and experiments. Easy to say, difficult to achieve.

I couldn’t agree with him more. I have seen too many economists who are too enchanted with the mathematics and models that they have lost sight of what is of the essence. Not enough consideration given to the bigger picture. Here is another quote:

… We have problems to solve, we have clear answers–too many clear answers. The difficult part is picking out the right answer. The isolated mind moves in slow circles and breakouts are rare. Solitude is better for weeding out ideas than for creating them. Genius is the summed production of the many with the names of the few attached for easy recall, unfairly so to other scientists…

The above is from the first chapter of the book and is called Storm over the Amazon in which he is introspecting and contemplating ideas while a storm approaches. Some fragments of his evocative writing:

The storm grew until sheet lightning spread across the western sky. The thunderhead reared up like a top-heavy monster in slow motion, tilted forward, blotting out the stars. The forest erupted in a simulation of violent life. Lightning bolts broke to the front and then closer, to the right and left, 10,000 volts dropping along an ionizing path at 800 kilometers an hour, kicking a counter-surge skyward ten times faster, back and forth in a split second, the whole perceived as a single flash and crack of sound. The wind freshened, and rain came stalking through the forest.

…

The unsolved mysteries of the rain forest are formless and seductive. They are like unnamed islands hidden in blank spaces of old maps, like dark shapes glimpsed descending the far wall of a reef into the abyss. They draw us forward and stir strange apprehensions. The unknown and prodigious are drugs to the scientific imagination, stirring insatiable hunger with a single taste. In our hearts we hope we will never discover everything. We pray there will be a world like this one at whose edge I sat in darkness. The rain forest in its richness is one of the last repositories of that timeless dream.

His writing is the sort that needs to be savored, not hurriedly read. Reading the above, I could see in my mind’s eye the approaching storm, the ‘rain stalking through the forest’.

What is urgently needed is knowledge and a practical ethic based on a time scale longer than we are accustomed to apply. An ideal ethic is a set of rules invented to address problems so complex or stretching so far into the future as to place their solution beyond ordinary discourse. Environmental problems are innately ethical. They require vision reaching simultaneously into the short and long reaches of time. What is good for individuals and societies at this moment might easily sour ten years hence, and what seems ideal over the next several decades could ruin future generations. To choose what is best for both the near and distant futures is a hard task, often seemingly contradictory and requiring knowledge and ethical codes which for the most part are still unwritten. (page 312)

The fundamental problem is that of the knowledge of how the components of the biosystem interact with each other. We can easily enough mess around with any bit of it. But our meddling is certain to have consequences that are not intended by us. And the longer the time horizon, the more uncertain our grasp of the consequences of any intervention becomes.

The web of life is a seriously intricate web. John Muir understood that really well. He said that he found it hard to write about nature. Because, he said, if he started to write about something, he realized that that something was connected to something else; so he would have to write about that also. Then he would find that the something else was itself connected to another something, and so on till he found that he could not write about something unless he wrote about everything. Since it was a hopeless task, why bother writing about nature.

Wilson’s call for the development of a practical ethic which will balance the near and the far time scales is timely. Humanity has little time to lose. For in the absense of such an ethic, given the harm that humanity is now capable of inflicting on nature, the web of life could well unravel.

{Continued at “Storm over the Amazon.”}

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess of the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s great civilizations has been 200 years. These nations have progressed through this sequence: from bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to complacency; from complacency to apathy; from apathy to dependency; from dependency back again to bondage.

Sir Alex Fraser Tytler (1742-1813), Scottish jurist and historian, professor of Universal History at Edinburgh University.

What I Have Lived For

Three passions, simple but overwhelmingly strong, have governed my life: the longing for love, the search for knowledge, and unbearable pity for the suffering of mankind. These passions, like great winds, have blown me hither and thither, in a wayward course, over a great ocean of anguish, reaching to the very verge of despair.

I have sought love, first, because it brings ecstasy – ecstasy so great that I would often have sacrificed all the rest of life for a few hours of this joy. I have sought it, next, because it relieves loneliness–that terrible loneliness in which one shivering consciousness looks over the rim of the world into the cold unfathomable lifeless abyss. I have sought it finally, because in the union of love I have seen, in a mystic miniature, the prefiguring vision of the heaven that saints and poets have imagined. This is what I sought, and though it might seem too good for human life, this is what–at last–I have found.

With equal passion I have sought knowledge. I have wished to understand the hearts of men. I have wished to know why the stars shine. And I have tried to apprehend the Pythagorean power by which number holds sway above the flux. A little of this, but not much, I have achieved.

Love and knowledge, so far as they were possible, led upward toward the heavens. But always pity brought me back to earth. Echoes of cries of pain reverberate in my heart. Children in famine, victims tortured by oppressors, helpless old people a burden to their sons, and the whole world of loneliness, poverty, and pain make a mockery of what human life should be. I long to alleviate this evil, but I cannot, and I too suffer.

This has been my life. I have found it worth living, and would gladly live it again if the chance were offered me.

[Sorry for not blogging for ten whole days. Be back in a bit as soon as I am done with my 'flu and other assorted troubles in life such as having to actually work . In the meanwhile, if you want to waste time around here this neck of the woods, the management suggests the archives.]

Here is Hardin within in his book Living within Limits:

… Professional publicists know there is always a good living to be made by catering to the public’s craving for optimistic reports. Such behaviour finds no justification in the attitude of the Buddha, expressed five centuries before Christ: “I teach only two things: the cause of human sorrow and the way to become free of it.” The present work, though written by a non-Buddhist, proceeds along the Buddhist path — first to reveal the causes of human sorrow in population matters and then to uncover promising ways to free ourselves of the sorrow.

Hearing the Buddha’s statement today many people think, “How depressing! Why accept such a pessimistic outlook on life?” But they are wrong: it is not a pessimistic view if we reword it in terms that are more familiar to our science-based society. Reworded: “Here is something that isn’t working right. I want to fix it, but before I can do that I have to know exactly why it doesn’t work right.” One who looks for causes before seeking remedies should not be condemned as a pessimist. In general, a great deal of looking for causes must precede the finding of remedies.

“Throughout the 20th century small groups of men seized control of great nations, built armies and arsenals, and set out to dominate the weak and intimidate the world.”

See the comments for the answer.

— T.H. White, The Once and Future King

[Source: How to Think, to Fast, and to Wait.]

Newly educated and semi-educated classes – social or intellectual – seek positions in government bureaucracies or social advocacy rather than in industry and commerce where competence is inarguably measured at the end of every business quarter. The growth of bureaucracies needed to absorb these swaggering imbeciles is precisely opposed to society’s growth and development both as direct philosophical enemy and as infinitely hungry sump to resources otherwise needed to support productive endeavors.

I like his expression swaggering imbeciles. Reminds me of the idiot politicians of India, especially the ruling dynasty.

The beautiful things we shall write if we have talent are inside us, indistinct, like the memory of a melody which delights us though we are unable to recapture its outline. Those who are obsessed by this blurred memory of truths they have never known are the men who are gifted… Talent is like a sort of memory which will enable them finally to bring this indistinct music closer to them, to hear it clearly, to note it down…

Marcel Proust in Against Sainte-Beuve

So long as authority inspires awe, confusion and absurdity enhance conservative tendencies in society. Firstly, because clear and logical thinking leads to a cumulation of knowledge (of which the progress of the natural sciences provides the best example) and the advance of knowledge sooner or later undermines the traditional order. Confused thinking, on the other hand, leads nowhere in particular and can be indulged indefinitely without producing any impact upon the world.

Economic change is a process, and in this book I shall describe the nature of that process. In contrast to Darwinian evolutionary theory, the key to human evolutionary change is the intentionality of the players. The selection mechanisms in Darwinian evolutionary theory are not informed by beliefs about the eventual consequences. In contrast, human evolution is guided by the perceptions of the players; choices — decisions — are made in the light of those perceptions with the intent of producing outcomes downstream that will reduce uncertainty of the organizations — political, economic, and social — in pursuit of their goals. Economic change, therefore, is for the most part a deliberate process shaped by the perceptions of the actors about the consequences of their actions. The perceptions comes from beliefs of the players — the theories they have about the consequences of their actions — beliefs that are typically blended with their preferences.

From Understanding the Process of Economic Change, Princeton University Press, 2005.

Make no little plans. They have no magic to stir men’s blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will never die, but long after we are gone will be a living thing, asserting itself with ever-growing insistency. Remember that our sons and grandsons are going to do things that would stagger us. Let your watchword be order and your beacon beauty. Think big.

Daniel Burnham, Chicago architect. (1864-1912)

Tomorrow, and tomorrow, and tomorrow,
Creeps in this petty pace from day to day
To the last syllable of recorded time,
And all our yesterdays have lighted fools
The way to dusty death. Out, out, brief candle!
Life’s but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more; it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.

Those lines from Shakespeare’s Macbeth are a sure-fire way of deflating any false sense of importance one might have while going about one’s business. Blogs, especially, are tales told by an idiot, and this one is no exception. All this strutting and fretting does not amount to a hill of beans. In equal measures I get hate-mail and praise-mail. To prevent the emotional swings between highs and lows in response, I try to recall Shakespeare’s lines above.

Equanimity is not something that is easy to achieve and I think I fail fairly miserably on that front. There is a story, a Zen story, which exemplifies equanimity to me better than any other.

Once upon a time, in a certain village, it so happened that a pretty young unmarried woman became pregnant. The parents were furious and upon questioning, the young woman confessed that the old Zen master in the village was responsible. This enraged the parents and they went to the Zen master and berated him without restraint. They told him that he has to take care of the woman and the child. The Zen master listened to all the abuse without a word and when they had exhausted themselves he simply said, “Is that so?”

He took the young woman into his home, looked after her, and when the child was born, took care of both mother and child. Then one day, the woman was overcome with remorse and went to her parents and confessed that she had lied and it was not the Zen master but a young man from another village who was the real father. The parents were absolutely horror stricken: they had falsely accused and then burdened an innocent man. So they went to the Zen master and fell to their knees and took a long time telling him how sorry they were for what they had done to him. The Zen master listened to them patiently and all he said was, “Is that so?”

I know that I would like to have that Is that so? attitude. But I also know that perhaps in this lifetime, I may not get there. The poem IF by Rudyard Kipling does have a bit where he talks about treating triumph and disaster as imposters.

A close friend of mine drew inspiration from the poem when he was struggling with his PhD thesis. You can see reflections of the lessons from the Bhagavat Gita in Kipling’s poem. For the record, here is the poem:

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you
But make allowance for their doubting too,
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream–and not make dreams your master,
If you can think–and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ‘em up with worn-out tools:

If you can make one heap of all your winnings
And risk it all on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: “Hold on!”

If you can talk with crowds and keep your virtue,
Or walk with kings–nor lose the common touch,
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much,
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And–which is more–you’ll be a Man, my son!

Glendower: I can call spirits from the vasty deep.

Hotspur: Why, so can I, or so can any man;
But will they come when you do call for them?

The “vasty deep” is so evocative. I see visions of deep dark oceans with strange creatures never seen on earth dwelling there. And spirits that are powerful and perhaps evil.

Anyway, what I like about that bit is that one can proclaim stuff but that does not mean that it becomes real. Much inflated rhetoric can be seen for what it is by recalling Hotspur’s question.

Yes, you can call the spirits from the vasty deep. But that doesn’t mean that they will oblige.

Note: The system is behaving strangely because there are changes going on in the background. Comments are iffy at best. So do email me if you cannot post. Thanks.

Yesterday at a meeting where we were discussing India’s development, someone mentioned Justice Louis D. Brandeis. That recalled to my mind something that Justice Brandeis had noted about the dangers of government which I find absolutely applicable in the Indian context.

Experience should teach us to be most on our guard to protect liberty
when the Government’s purposes are beneficent. Men born to freedom are
naturally alert to repel invasion of their liberty by evil-minded
rulers. The greatest dangers to liberty lurk in insidious encroachment
by men of zeal, well-meaning but without understanding.

Amen to that. Not just men but women as well.

Since you have wandered over here (by error, I presume), I offer you a bit of Shakespeare to make up for the time you lost on this blog. From King Lear:

This is the excellent foppery of the world, that when we are sick in fortune, often the surfeits of our own behavior, we make guilty of our disasters the sun, the moon, and stars; as if we were villains on necessity; fools by heavenly compulsion; knaves, thieves, and treachers by spherical predominance; drunkards, liars, and adulterers by an enforced obedience of planetary influence; and all that we are evil in, by a divine thrusting on. An admirable evasion of whoremaster man, to lay his goatish disposition on the charge of a star.

Need anything more be said about astrology?

It is morning in Africa and

As the sun rises over the plains

The gazelle awakens knowing that

If it cannot outrun the fastest lion

It will be dead.

It is morning in Africa and

The lion awakens knowing that

If it cannot outrun the slowest gazelle

It will die.

It is morning in Africa and you had
better start running.

{source: unknown}

Here, for the record, is a quote from JKG’s book Economics, Peace and Laughter:

In a well-to-do community we cannot be much concerned over what people are persuaded to buy. The marginal utility of money is low; were it otherwise, people would not be open to persuasion. The more serious conflict is with truth and aesthetics. There is little that can be said about most economic goods. A toothbrush does little but clean teeth. Alcohol is important mostly for making people more or less drunk. An automobile can take one reliably to a destination and back, and its further features are of small consequence as compared with the traffic encountered. There being so little to be said, much must be invented. Social distinction must be associated with a house or a swimming pool, sexual fulfillment with a particular shape of automobile, social acceptance with a hair oil or mouthwash, improved health with a hand lotion or, at best, a purgative. We live surrounded by a systematic appeal to a dream world which all mature, scientific reality would reject. We, quite literally, advertise our commitment to immaturity, mendacity and profound gullibility. It is the hallmark of the culture. And it is justified as being economically indispensable.

I recall a scene from the movie “Lawrence of Arabia” where Lawrence puts out a burning matchstick with his bare fingers. Someone tries to immitate him and burns his fingers and asks Lawrence what is the trick. Lawrence replies, “The trick is not to mind the pain.”

The disruption wrought by microbes have repeatedly changed the course of human history. It was probably pestilence as much as any other single factor that accounted for the European conquest of the Western Hemisphere in teh sixteenth century…

On the other hand, the Black Death may have fueled the burst of human creativity known as the Renaissance. At the time plague struck, medieval society had fallen into economic stasis, caused in large part by the “Malthusian deadlock” of dense population. The plague broke that deadlock by decimating the population, liberating land for diverse uses, creating the need for laborsaving devices, and unleashing the ingenuity of Renaissance society. The catastrophe of pestilence “gave to Europeans the chance to rebuild their society along much different lines … It assured that the Middle Ages would be the middle, not the final, phase in Western development. …

Even our success in besting microbes can bring untoward consequences. Chief among these is a distrubance of population balance. For example, elimination of malaria from Mauritius led to a doubling of the population within a decade, even though the birthrate remained constant. Stated more broadly, relief from pestilence is a major factor in the population explosion that has threatened human welfare and for which no satisfactory remedy has yet been established. For the moment, the global epidemic of AIDS may provide a macabre counterbalance: the population of Africa faces decimation; and still emerging, but vast and largely unchartered epidemics of the disease are threatening India and China. [Emphasis mine.]

For now I will pass on without any further comment on the population problem, and move on to the other big concern of mine: education. Again from Michael Bishop from the chapter Paradoxical Strife:

… our nation has allowed the means of primary and secondary education to deteriorate. In doing so, we have incurred great risk, described seventy years ago by the philosopher Alfred North Whitehead:

The art of education is never easy. To surmount its difficulties, especially those of elementary education, is a task worthy of the highest genius … [But] when one considers … the importance of this question of the education of a nation’s young, the broken lives, the defeated hopes, the national failures, which result from the frivolous inertia with which it is treated, it is difficult to restrain within oneself a savage rage. In the conditions of modern life the rule is absolute, … [a country] that does not value trained intelligence is doomed.”

We have not heeded Whitehead’s warning and it has retained all its original prescience. Our elementary and secondary teachers are reglected, disrespected, inadequately compensated, and improperly prepared. Many of our children attempt to study in the midst of physical squalor and personal decay. We can expect little improvement in how our youth learn until we have changed all of that. The change will require great resolve: we have allowed the deterioration to run very deep.

What is true for the US, holds with even greater force for India when it comes to primary and secondary education. When are the so-called leaders of this nation ever going to wake up to the fact that India is today what it is because it has “not valued trained intelligence”?

The elephant’s trunk is 6 feet long, 1 foot thick, and contains 60,000 muscles. Elephants can use their trunks to uproot trees, stack timber, or carefully place huge logs into position when recruited to build bridges. They can curl the trunk around a pencil and draw characters on letter-sized paper. With the two muscular extensions at the tip of the trunk, they can remove a thorn; pick up a pin or a dime; uncork a bottle; slide the bolt off a cage door and hide it on a ledge; or grip a cup, without breaking it, so firmly that only another elephant can pull it away. The tip is sensitive enough for a blindfolded elephant to ascertain the shape and texture of objects. In the wild, elephants use their trunks to pull up clumps of grass and tap them against their knees to knock off dirt, to shake coconuts out of palm trees, and to powder their bodies with dust. They use their trunks to probe the ground as they walk, avoiding pit-traps, and to dig wells and siphon water from them. Elephants can walk underwater on the beds of deep rivers or swim like submarines for miles, using their trunks as snorkels. They communicate through their trunks by trumpeting, humming, roaring, piping, purring, rumbling, and making a crumpling-metal sound by rapping the trunk against the ground. The trunk is lined with chemoreceptors that allow the elephant to smell a python hidden in the grass or food a mile away.

Elephants are the only living animals that possess this extraordinary organ.

If you like elephants, check out The Elephant Encyclopedia for a bunch of neat pictures. But you may ask why I am suddenly going on about elephants. This was prompted by a post on Rajesh Jain’s weblog on a dream device which combines the features of a Blackberry and iPod. To which Brian put a comment and asked whether we really need all-in-one devices. That got me to thinking about the elephant’s trunk and so this post.

To my mind, a device may have various functionalities as long as there is an underlying commonality to the supporting infrastructure that the device incorporates within itself. For instance, if the various functions require digital storage, retrieval, and decoding, then aggregating these functions on the same device that has at its core a huge amount of storage is logical. So you could combine digital diary functions with MP3 functions because they both share the same underlying hardware. Now add a communications function and you have a handheld PDA which plays MP3. Camera and picture viewer also logically follow since a PDA has to have a screen and so they are shared.

But then, an all-in-one device has the obvious disadvantage that Brian pointed out in his comment, namely, you lose the device and you are up the proverbial creek without the paddle. Well, in that case, the obvious evolution of the device is to use the device for retrival and communications alone and keep the storage function outside the device, say, on centralized servers that are unlikely to get stolen. Ultimately, if you have broadband connectivity, then you really don’t need to drag your own harddrive all over the bloody place. This has the other advantage of lower power requirements.

Indeed, most of computing could be moved to centalized servers and all you need is a retrieval device that is not complicated at all. Think about it.

Right now, a reasonable estimate of the number of malnourished underweight uneducated children in India would be of the order of about 50 million. They will not grow up to be productive members of society, if they grow up at all. Think about it: 50 million. To put that in perspective: there aren’t that many people in many countries today. Or think about it like this: around 1850, the population of the United States was 23 million. Add the population of England, Wales and Scotland of 1851 — 21 million — and you have a total of 44 million people. That is less than the population of undernourished children in India right now as you read it.

The entire world in 1850 had the same number of people as exist in India today — a little over a billion.

I hope that we will find the time to contemplate the problem that we face and think deeply about how to solve it. For now, we could do worse than to meditate on what the British philosopher John Stuart Mill wrote in his 1848 book Principles of Political Economy :

There is room in the world, no doubt, and even in old countries, for a great increase of population, supposing the arts of life to go on improving, and capital to increase. But even if innocuous, I confess I see very little reason for desiring it. The density of population necessary to enable mankind to obtain, in the greatest degree, all the advantages both of cooperation and of social intercourse, has, in all the most populous countries, been attained. A population may be too crowded, though all be amply supplied with food and raiment. It is not good for man to be kept perforce at all times in the presense of his species. A world from which solitude is extirpated, is a very poor ideal. Solitude, in the sense of being often alone, is essential to any depth of meditation or of character, and solitude in the presense of natural beauty and grandeur, is the cradle of thoughts and aspirations which are not only good for the individual, but which society could ill do without. Nor is there much satisfaction in contemplating the world with nothing left to the spontaneous activity of nature; with every rood of land brought into cultivation, which is capable of growing food for human beings; every flowery waste or natural pasture ploughed up, all quadrupeds or birds which are not domesticated for man’s use exterminated as his rivals for food, every hedgerow or superfluous tree rooted out, and scarcely a place left where a wild shrub or a flower could grow without being eradicated as a weed in the name of improved agriculture. If the earth must lose that great portion of its pleasantness which it owes to things that the unlimited increase of wealth and population would extirpate from it, for the mere purpose of enabling it to support a larger but not a better or happier population, I sincerely hope, for the sake of posterity, that they will content to be stationary, long before necessity compels them to it.

It is scarely necessary to remark that a stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress; as much room for improving the Art of Living, and much more likelihood of its being improved, when minds cease to be engrossed with the art of getting on. Even the industrial arts might be as earnestly and as successfully cultivated, with this sole difference, that instead of serving no purpose but the increase of wealth, industrial improvements would produce their legitimate effect, that of abridging labour. … Only when, in addition to just institutions, the increase of mankind shall be under the deliberate guidance of judicious foresight, can the conquests made from the powers of nature by the intellect and energy of scientific discoverers, become the common property of the species, and the means of improving and elevating the universal lot.

Hegemons, like civilizations, also arise, persist, and ultimately decline. The present US hegemony is clearly not an exception to that general observation. The British Empire declined in less then a century. How long the US hegemony will take to decline is open to debate but one can conjecture that under the stewardship of Mr Bush and his cronies, it will be fairly rapid and painful.

Marvin Harris, my favorite anthropologist, has a wonderful book called Our Kind: Who we are, Where we came from, and Where are we going. He discusses the evolution of human life and culture. I would like to quote from page 117 of that book, for the record.

Alfred Kroeber, founder of the Department of Anthropology at the University of California at Berkeley, succintly conveyed the irony of Rome’s collapse at the hands of despised barbarian races in these words:

Had Julius Ceasar or one of his contemporaries been asked whether by any sane stretch of fantasy he could imagine the Britons and the Germans as inherently the equals of Romans and Greeks, he would probably have replied that if these northerners possessed the ability of the Mediterraneans they would have long since have given vent to it, instead of continuing to live in disorganization, poverty, ignorance, rudeness, and without great men or products of spirit.

As for China’s racial hubris, nothing tells it better than Emperor Ch’ien-Lung’s 1791 rejection of a “red-faced barbarian” delegation’s request to open up trading relationships. England, the Emperor said, had nothing China wanted. “As your ambassador can see for himself, we possess all things.” There was a lot of truth in Ch’ien-Lung’s observation. Almost to the end of the eighteenth century, China’s technology was as advanced as England’s. The Chinese excelled at making porcelian (“chinaware”), silk cloth, and bronze castings. They had invented gunpowder, the first computer (the abacus), the canal lock gate, the iron-chain suspension bridge, the first true mechanical crank, the stern-post rudder, the man-lifting kite, and the escapement, a vital forerunner of European clockwork. In transport, agricultural productivity, and population, the tiny nations of Europe scarcely merited comparison. Ch’ien-Lung’s empire stretched from the Arctic Circle to the Indian Ocean and 3,000 miles inland. It had a population of 300 million, all under the control of a single, centralized bureaucracy. It was the biggest and most powerful empire the world had ever seen. Yet in fewer than fifty years after Ch’ien-Lung’s arrogant verdict, Chinese imperial power was destroyed, its armies humiliated by a handful of European troops, its seaports controlled by English, French, German, and American merchants, its peasant masses gripped by famine and pestilence.

Sic transit gloria mundi. Or as old Omar Khayyam said:

They say that the Lion and the Lizard keep
The courts where Jamshed gloried and drank deep.
And Behram — that great hunter! The wild ass stomps over his head
And he lies fast asleep.

It was to be one of the modern and more welcome triumphs of capitalist attitude and achievement to diminish this acquisitive need for more land. In the highly prosperous city-states of Singapore and Hong Kong, land has been shown to be wholly irrelevant. And in the larger world it came eventually to be realized that colonial territory was only marginally relevant to economic progress, if it was relevant at all. The dissidence and revolt of the colonial peoples and a more civilized attitude by the colonial powers are often credited with bringing the colonial era to end. More attention might well be accorded to the rather simple but persuasive fact that colonies had become no longer economically worthwhile. Territory was not the thing.
(Pg 13)

The next quote rings too awfully true to me in the context of India and its leadership, both past and present.

Ignorance, stupidity, in great affairs of state is not something that is commonly cited. A certain political and historical correctness requires us to assign some measure of purpose, of rationality even where, all too obviously, it does not exist. Nonetheless one cannot look with detachment on the Great War (and also its aftermath) without thought as to the mental insularity and defectiveness of those involved and responsible.

I note in passing that Galbraith was the US ambassador to India when Nehru was the Prime Minister.

{See also Happy Birthday JK.}

Every institution exists only in the mind. Each is a manifestation of a very old, very basic idea — the idea of community. They can be no more or less than the sum of the beliefs of the people drawn to them; of their character, judgments, acts, and efforts.

Dee Hock, founder of VISA.