Such a great title for an article in Slate by the uber smart Charlie Munger . The juicy ending:
Basicland’s investment and commercial bankers were hostile to change. Like the objecting economists, the bankers wanted change exactly opposite to change wanted by the Good Father. Such bankers provided constructive services to Basicland. But they had only moderate earnings, which they deeply resented because Basicland’s casinos—which provided no such constructive services—reported immoderate earnings from their bucket-shop systems. Moreover, foreign investment bankers had also reported immoderate earnings after building their own bucket-shop systems—and carefully obscuring this fact with ingenious twaddle, including claims that rational risk-management systems were in place, supervised by perfect regulators. Naturally, the ambitious Basicland bankers desired to prosper like the foreign bankers. And so they came to believe that the Good Father lacked any understanding of important and eternal causes of human progress that the bankers were trying to serve by creating more bucket shops in Basicland.
Of course, the most effective political opposition to change came from the gambling casinos themselves. This was not surprising, as at least one casino was located in each legislative district. The casinos resented being compared with cancer when they saw themselves as part of a long-established industry that provided harmless pleasure while improving the thinking skills of its customers.
As it worked out, the politicians ignored the Good Father one more time, and the Basicland banks were allowed to open bucket shops and to finance the purchase and carry of real securities with extreme financial leverage. A couple of economic messes followed, during which every constituency tried to avoid hardship by deflecting it to others. Much counterproductive governmental action was taken, and the country’s credit was reduced to tatters. Basicland is now under new management, using a new governmental system. It also has a new nickname: Sorrowland.
Unfortunately, it won’t be widely read and understood.
My pal Cole from Blackstar Funds , a grumpy optimist, who passed me the link had this to say to my reply ‘Maybe, but we have baseball’:
True, but the process of a cancerous death is painful and ugly. It’s a warning story about the choices and priorities of today and how they will effect us going forward. Unleash the human capital and innovation of America to solve the energy problem and fix the massive inefficiency of the government and you can buy us another 200 years, keep the status quo and we croak in 50. The country was badly in need of a bitch slap to get our priorities back in line and stop with the casino sector (finance) nonsense , it’s back to basics, hard work, innovation, production of useful things and lowered expectations.
He is way too young to be that grumpy and mostly right.
Please chime in politely….
The bitch is beyond slapping. You just gotta ignore her now. Her youthhful vigor is gone and now she just wants to quarrel. It’s time to quietly prepare for a divorce. Hide your assets as best you can, smile and expatriate.
“..Unleash the human capital and innovation of America to solve the energy problem and fix the massive inefficiency of the government..” Love the optimism.
The bitch is beyond slapping. You just gotta ignore her now. Her youthhful vigor is gone and now she just wants to quarrel. It's time to quietly prepare for a divorce. Hide your assets as best you can, smile and expatriate.
“..Unleash the human capital and innovation of America to solve the energy problem and fix the massive inefficiency of the government..” Love the optimism.
think it might take a couple of slaps..
think it might take a couple of slaps..
Respectfully curious, how does a piece like this effect your thinking around FOREX bullishness?
more bullish. i cant stop people from going to the casino. i can help
educate them on leverage, spreads, commissions, and transparency and
hopefully help people discover the right people to follwo and the new voices
that should be heard.
Respectfully curious, how does a piece like this effect your thinking around FOREX bullishness?
The off balance sheet, unfunded liabilities argument (social security, pensions, etc.) is troubling. Do you see a greater than 50% probability that if it’s even close to ‘over’ IRAs, 401Ks, etc. will be absconded by the US government and placed into a fixed annuity like pool backed by, well, whatever ‘Sorrowland’s’ new credit/currency instruments are?
Because if you buy into the ‘it’s over’ like terminal cancer mentality (which gives one time to put affairs in order), it strikes me that this is a likely scenario. And if so, cashing these accounts out now, and paying penalties and taxes under the current tax code, may not be as crazy as it sounds. I for one am not there yet, but I would enjoy hearing other’s thoughts on this scenario. Thanks.
good stuff thx phil
I’d say that anyone who has a choice between traditional and Roth ought to opt for traditional, and take the bird-in-the-hand of the tax deduction now. I doubt IRAs and 401(k)s will be confiscated, but I think it’s entirely likely that Roth versions of them will see their withdrawals taxed.
The off balance sheet, unfunded liabilities argument (social security, pensions, etc.) is troubling. Do you see a greater than 50% probability that if it's even close to 'over' IRAs, 401Ks, etc. will be absconded by the US government and placed into a fixed annuity like pool backed by, well, whatever 'Sorrowland's' new credit/currency instruments are?
Because if you buy into the 'it's over' like terminal cancer mentality (which gives one time to put affairs in order), it strikes me that this is a likely scenario. And if so, cashing these accounts out now, and paying penalties and taxes under the current tax code, may not be as crazy as it sounds. I for one am not there yet, but I would enjoy hearing other's thoughts on this scenario. Thanks.
Can’t believe I missed this… thanks so much for sharing, Howard – I recently finished “the snowball” (amazing bio btw, if you haven’t read it yet) and poor charlie’s almanack is one of my most favorite books ever.
Yeah, our country is badly in need of a few slaps and punches here and there… but it’s way too late in the game to think we’re going to be able to suddenly spring back from this and learn overnight. You know how momentum always works over time throughout history.
America didn’t surpass its European friends overnight in a brisk sprint. It came from 150 years of disciplined ass-kicking, as Munger mentions. The same goes for downward momentum too unfortunately. Trends and bad habits get stronger over time and by the time you notice the outward symptoms, it’s already too late to nip it in the bud and hope for a quick turn-around.
I’m optimistic about growth areas that will add real value like tech/internet and America’s leading the world in forming nearly all of this global infrastructure, so I hope it will provide us w/ enough leeway to continue having a leading part in the future.
Either way, I think this piece by Munger should also be balanced w/ Buffett’s big long-term bet on $BNI.
agreed. fun to read nd sacred to believe its possible but it is
inevitable.
I’m not as pessimistic. I think there is a huge opportunity for a politics of common sense today, if any major candidate has the stones to run on it. Most Americans know that free lunches are unsustainable, but they’ve been pandered to for so long, by both major parties. I think a critical mass of American voters are ready to vote for a candidate who treats them like adults. But that candidate needs to offer some policy solutions to the economic insecurities of the American middle class. That’s a point I’ve made on Fred Wilson’s blog a few times.
For starters, we need a smarter immigration policy. By all means, welcome entrepreneurs who will create jobs for Americans, but stop importing unskilled immigrants who consume more in government resources than they pay in taxes. And stop importing any non-job creators when unemployment is high, like it is now.
We also need to increase our manufacturing jobs as a percentage of our workforce. We need to look at how Germany and Japan manage to have higher percentages of their workforces employed in high-paying manufacturing jobs than we do. We’re still the world’s leading manufacturer, in absolute terms, but we probably need to double our manufacturing workforce to maintain a healthy middle class. Policy makers need to think of this from the perspective of the CEO of a foreign multinational manufacturer: What can we do to make it more attractive to set up shop here? Lower corporate taxes? More emphasis on quality vocational ed instead of shoehorning every kid into a college prep track? More nuclear power plants to ensure a plentiful supply of low-cost energy? Less vexatious litigation? Etc.
good stuff thx phil
more bullish. i cant stop people from going to the casino. i can help
educate them on leverage, spreads, commissions, and transparency and
hopefully help people discover the right people to follwo and the new voices
that should be heard.
Can't believe I missed this… thanks so much for sharing, Howard – I recently finished “the snowball” (amazing bio btw, if you haven't read it yet) and poor charlie's almanack is one of my most favorite books ever.
Yeah, our country is badly in need of a few slaps and punches here and there… but it's way too late in the game to think we're going to be able to suddenly spring back from this and learn overnight. You know how momentum always works over time throughout history.
America didn't surpass its European friends overnight in a brisk sprint. It came from 150 years of disciplined ass-kicking, as Munger mentions. The same goes for downward momentum too unfortunately. Trends and bad habits get stronger over time and by the time you notice the outward symptoms, it's already too late to nip it in the bud and hope for a quick turn-around.
I'm optimistic about growth areas that will add real value like tech/internet and America's leading the world in forming nearly all of this global infrastructure, so I hope it will provide us w/ enough leeway to continue having a leading part in the future.
Either way, I think this piece by Munger should also be balanced w/ Buffett's big long-term bet on $BNF.
agreed. fun to read nd sacred to believe its possible but it is
inevitable.
I'd say that anyone who has a choice between traditional and Roth ought to opt for traditional, and take the bird-in-the-hand of the tax deduction now. I doubt IRAs and 401(k)s will be confiscated, but I think it's entirely likely that Roth versions of them will see their withdrawals taxed.
I'm not as pessimistic. I think there is a huge opportunity for a politics of common sense today, if any major candidate has the stones to run on it. Most Americans know that free lunches are unsustainable, but they've been pandered to for so long, by both major parties. I think a critical mass of American voters are ready to vote for a candidate who treats them like adults. But that candidate needs to offer some policy solutions to the economic insecurities of the American middle class. That's a point I've made on Fred Wilson's blog a few times.
For starters, we need a smarter immigration policy. By all means, welcome entrepreneurs who will create jobs for Americans, but stop importing unskilled immigrants who consume more in government resources than they pay in taxes. And stop importing any non-job creators when unemployment is high, like it is now.
We also need to increase our manufacturing jobs as a percentage of our workforce. We need to look at how Germany and Japan manage to have higher percentages of their workforces employed in high-paying manufacturing jobs than we do. We're still the world's leading manufacturer, in absolute terms, but we probably need to double our manufacturing workforce to maintain a healthy middle class. Policy makers need to think of this from the perspective of the CEO of a foreign multinational manufacturer: What can we do to make it more attractive to set up shop here? Lower corporate taxes? More emphasis on quality vocational ed instead of shoehorning every kid into a college prep track? More nuclear power plants to ensure a plentiful supply of low-cost energy? Less vexatious litigation? Etc.
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