“Just finished reading the book “Mobs, Messiahs, and Markets“. It is a great read and I’ll definitely have to read it again not just because there is so much material to digest but because the writing is deliciously beautiful and brimming with wit….”
Now, that’s a nice way to start the week…
Many thanks to the blogger, Ianonthereddot.
Where you get your words from doesn’t matter. That was the verdict of pundits and newsmen last week on the charges of plagiarism flung back and forth between the candidates.
Maybe.
But. in a time when words are increasingly going astray, a man or woman who makes his living with them can’t afford to fool around. He’d better stick with the ones he picks. And they’d better be his.
Four years ago, the country went to war for words later proved false. Word provided by politicians, pundits and newsmen… who should have known better. Who had a duty to their words – to keep them honest, unadulterated, and organic.
Because we swallow what they tell us.
We live or die by their words.
When words don’t anchor themselves in reality, then they’re only slogans…memes. The stuff of PR. We are dying by PR in this country.
It’s a major theme of Mobs, Messiahs and Markets.
The slogans that drive the mob crazy and pollute the conversation in our country.
If the point of words is to get what you want, then you can pitch them anyway you want. That’s the bottom -line.
But bottom-line thinking isn’t really what a conversation among citizens is about.
That’s what corporations do.
If our country is a business – even a not-for-profit business – run to achieve a social goal, however noble, or meet a production quota, however magnificent, then it doesn’t really matter whether anyone plagiarizes. It doesn’t matter how words are treated. It only matters that they do what we want them to do and take us where we want to go.
But if your country is not a corporation but an association of individuals, then words have to mean something more than slogans to move your listeners this way or that. They have to be more than tools to get your way.
You have to treat them with respect, like the people who speak them With care.
Like fine cutlery at a dinner. You don’t bend them or break them and you don’t pinch them, even from friends.
Real words are an exploration of the changing truths of the heart. They express what we are. They take us to places we did not know existed and let us become what we never dreamed to be.
They make up a conversation between individuals.
Not a script crafted by PR flacks.
Continuing my impressions of Kuala Lumpur. It’s rained on and off nearly every day, so my chakkars have been limited to the Bukit Bintang area and Chinatown (below). But that’s a lot just there, this being the heart of the city.
Food. There are restaurants everywhere you turn – Indonesian, Indian, Thai, Italian, Chinese. And so far, they’ve been very good.
The architecture is fascinating, a mixture of tiled Malay buildings and Chinese shop fronts, terraced housing (this is the most common residential style since land is limited in the city), glass and chromium high-rises, with every so often the domes and minarets of the city’s spectacular mosques.
The Indian restaurant below is where a group of us, some backpackers, others professionals traveling on business, meet to compare notes every night.
K, a Muslim cook from London, of mixed Berber and Libyan heritage looks like Bob Marley and identifies with Africa. He divides his time between anti-Arab and anti-European invective that sounds good-natured to me but seems to rub the Swedish student the wrong way. The Swede is quiet mostly, but throws in a question now and again. The questions become quite pointed after K arrives chattily at his conclusion — which is that the quotas against non-Malays in Malaysia make sense. The Malays (the Bhumiputra) ought to be protected in their own home.
The Malay girl, who runs a guest house on the side and deals with travelers from around the world, agrees. Fortunately, the Saudis are too dumb to take advantage of the Malays, she says. But the Chinese? Why do they need help? After all, they’re from some place else….and the Indians too. Malaysia should belong to the Malaysians.
The Swede’s head turns evenly between the two, who are unaware that their views won’t fly in Europe, at least not under current European law. K’s anger against the Arabs for effacing Berber culture is deep-seated. It’s why he insists on calling himself African. They wiped out our culture, he says. They want to pretend we don’t have thousands of years behind us. How dare they call us barbarians?
What he said reminded me almost comically of the complaints of an Arab friend in DC, who often says – just as bitterly – that the Iraq war was a war waged by a modern culture envious of the ancient history of Iraq that was bent on wiping it out and replacing it with McDonalds and Starbucks.
(Actually, I believe Ann Coulter, the right-wing’s human daisy-cutter, did say something like that about ancient Mesopotamian culture: AC: “Now the biggest mishap liberals can seize on is that some figurines from an Iraqi museum were broken ? a relief to college students everywhere who have ever been forced to gaze upon Mesopotamian pottery.” )
If I had a daughter, says K, I would never let her marry one of those Arabs. If they spoke to me I would ignore them. I wouldn’t let them get away with their injustice. I wouldn’t let them forget it.
So, says the Swede, do you think because you were oppressed by them it would be fine for you to oppress them now? Are you waiting for that?
The Swede asks it levelly but there’s an edge to his voice. K feels it and squirms. But he decides to stand his ground, anyway. Yes, why not? If they did it first?
But don’t you see, the Swede persists, then you become like them.
K looks at me helplessly. I accept the challenge.
Well, yes….and no. Of course, you have bitterness over the injustice. The bitterness is an appropriate feeling. It’s deserved. There’s nothing wrong with the anger at all. But practically, where does it get you? If you stew in it and let it poison you then you’ve added your own self-injury – a laceration – to the original harm.
In Europe, we believe there should be no discrimination under the law, says the Swede firmly. All races should be the same. He pets his chubby Malay girl friend who’s paying no attention at all but chatting over wifi about why the US won’t let her into the country as a tourist because of her religion. Most Malays are Muslim.
But there’s plenty of discrimination in Europe, insists K excitedly. Plenty. They hate immigrants there.
Still, the law says they should be treated equally, says the Swede.
K is upset now.
So what? Why does the law matter? It’s all hypocrisy.
It was interesting to hear arguments about race and quotas on the other side of the world no longer defined in terms of European and African, or European and Hispanic, First World and Third World.
My Malay acquaintances openly call the Tamils and Bangladeshis here “stupid” and “retarded.” So does the Swede, though much more gently and without the visceral feeling. Some of the Tamil workers I’ve seen here (and my experience is extremely limited) do indeed act and sound unfocused, even disoriented. But having worked with retarded and disturbed children, slow learners (as well as with the gifted) and seen a somewhat similar deportment among children who don’t make the cut in the regular classroom but aren’t really intellectually inferior in any serious way, I wonder if the problem isn’t mainly cultural. The Tamil workers, being dark-skinned and culturally quite different from the westernized Chinese and Malays, could be retreating into a kind of passive indifference. It doesn’t look like stupidity so much as the aftermath of cultural shock and anxiety. Many workers here are the descendants of indentured labor sent to Malaysia by the British from India. They have the disoriented air of people who aren’t conscious of having their own will… who wait for something to be done to them…or for them. And yes, there may also be a genetic component to differentials in intellectual performance.
But the harsh rhetoric from the Malays, themselves brown-skinned, was unsettling. Especially since foreigners in this country have always had to pay for their own education, whereas even under the British, the Malays had it for free……and were still out performed (as libertarian economist, Thomas Sowell has noted).
This is not the First or Second or Third World. And the whites (here they are the Chinese) and the browns (the Malays) and the blacks (the Indians, the darkest- skinned) may be all Asian – but they come from different races.
Europeans and most Middle Easterners (and a large number of Indians), on the other hand, are not racially different, but different in color only. They are Caucasians, only of different colors.
Back to the blog after quite a hiatus.
What have I learned from it, dear reader, that would be of any use to me and you this new year?
Two for you, first:
1. Resting from work that you love is stressful and boring. Working at what you love is restful.
2. Talking to like-minded strangers (readers on the web) is usually more civilized and productive than talking to flesh- and- blood colleagues who are out of step with you.
Two for me:
1. My old posts still get hits even when I don’t update the blog. I get as many hits now from not blogging as I got from blogging when I first began. That’s a big improvement. It means what I write has some value beyond the moment.
2. I am now a confirmed bloggerette (a female married to her website). Living without blogging seems pale. The life unblogged doesn’t seem quite worth it. What’s an experience unless you can get a post out of it?
Bottom Line:
Those four points add up to one. The virtual world is as “true” and human as the real world. Maybe more.
Actionable Item:
The Internet is a mental and emotional world first, a physical one only second. On the other hand, the real world out there works in reverse of that. On the net, ideas move people. In the physical world, people move ideas.
Just a thought.
Here in Kuala Lumpur my thoughts about liberty are turning in a different direction….
But first, my impressions of the city so far:
KL airport is huge — but you don’t feel it. Everthing feels leisurely and spacious, no where as full as it really is. But that’s only because it’s laid out intelligently. KLIA is said to be rapidly overtaking Singapore as the best airport round here and a major hub for Asia.
The girls at the desk…sorry, young women…are dressed in a charming Muslim way – heads covered, long skirts and blouses — not in depressing black, but in pastel colors and soft textures. I can see potential for a Islamic high style — fitted, with graceful lines, not bulky and shapeless ..more definition. With droves of rich Saudis moving here, I imagine there will be a market. A Malay shop girl laughed scornfully and told me they were dumb and easy to fleece, and then returned to pouring contempt on the Chinese for taking advantage of the Bumiputra.
The train into town is first class (I wanted to say first world, but I don’t like the term. It says more than I want to say – turning economic development into a high school report, complete with A, B and C students). The landscape is green with palms, lots of thick green foliage, well-paved roads wetted down with a faint drizzle. The roads are narrower than I remember in Buenos Aires, but there’s a faint resemblance to the Argentine city because of the vegetation and the tiled roofs of the houses. In both cities even the modern houses have a charm entirely missing from one of those prefab McHouses that blight the suburbs in the US.
A light drizzle on and off, but the air is muggy and hot. It’s December and it feels like a late summer day in Baltimore. According to the papers, we didn’t go above 30 C, but to me it feels much higher. We’re near the equator after all. Maybe the number and size of the buildings contributes. The Petronas Towers, which is close to where I am staying in Bukit Bintang, are the world’s tallest twin towers.
I’m living above an Indian restaurant and round the corner from restaurants from every Asian country. There’s also that ubiquitous sign of expats – Starbucks (who would want Starbucks in Asia, home to the most interesting concoctions of tea and coffee around?) and a McDonalds. But what really got me was the hotel that I used as a landmark to find my way round to my place — Agora. Quite odd to see a Greek name that’s also the name of the company of my co-author Bill Bonner, who by the way, is in India right now, working on opening an office there. He’s very India positive, unlike investors like Jim Rogers. More on that at another time.
I’m off the blog for a couple of days. Be back at the end of the week, from Kuala Lumpur, Malaysia.
I’m looking at houses with an eye to buy for myself but also to take the pulse of the ASEAN market and see if it might survive a possible global recession. I’m betting yes.
And just as a tip — do you think that costs a fortune? No. My RT fare came to 1150….
Not chump change but no more than many middle class families spend on a weekend trip to some banal beach resort.
A strong print review by Araminta Wordsworth from The National Post.
MOBS, MESSIAHS AND MARKETS: SURVIVING THE PUBLIC SPECTACLE IN FINANCE AND POLITICS
William Bonner and Lila Rajiva, John Wiley 424 pages, $33.99
It has been more than 25 years since gold hit the kind of highs we have been seeing recently and widows and orphans lined up round the block to get their hands on an ingot. Now, the yellow metal is building for another run-up and gold bugs, who’ve been holding on for just such a day, are saying, “I told you so.”
But canny investors with money burning a hole in their pockets are looking elsewhere — to ethanol stocks, say, or farmland in Argentina. Or, if they insist on having a piece of this action, gold mining stocks, even though Mark Twain described a gold mine as “a hole in the ground owned by a liar.”
Yet gold will still find buyers at these prices, though logic and commonsense should quickly show the foolhardiness of the “investment.”
Why does this happen again and again, with those least able to bear the losses throwing away their money?
William Bonner and Lila Rajiva provide the answers in this exhilarating — if somewhat depressing — book. Although their insights will often make readers laugh out loud, they will also find themselves wriggling uncomfortably at the manifold idiocies of human behaviour.
The authors’ hope is that some of their advice will stick, enabling us to stand aside as the herd thunders by — and prosper.
Which is tough, as they admit humans are engineered to want to be part of a group. We are more comfortable when “everybody else” seems to be thinking along the same lines, whether it is investors stampeding into a sure-fire money earner or mobs of 17th-century New Englanders being convinced that harmless old ladies who lived by themselves were witches. Or Americans believing the world is being made safe against terror by invading Iraq.
As the Japanese proverb notes, “The nail that sticks up gets hammered down.”
Take real estate. In the past decade, as housing prices have risen like a cake baking in the oven, pushing many properties into the unreal category, buyers have been encouraged to purchase ever-larger and more expensive houses, taking out equally large mortgages. The belief is that you can always sell a house for more than you paid for it.
But as the subprime mess south of the border is showing in spades, this is just not true. Although Canadians have been protected to a large extent by tougher lending rules here — insistence on a down-payment in almost all cases, for example — we should not imagine we are insulated from any aftershocks.
It is clearly a global concern. For the first time in several years, house prices in England have stopped their meteoric rise. Many British house owners will be vulnerable to any fall in value as they have been able to borrow 100% of the purchase price. Canadian banks are also among those caught up in the disaster, thanks to their purchase of mortgage-backed securities, sliced and diced portfolios of mortgages often of doubtful quality. Massive write downs are already the order of the day south of the border.
As historians, the authors also provide some valuable alternatives to accepted accounts of past events. Among many examples is the first invasion of Kabul in 1842. This is usually portrayed in British history books as a valiant expedition that ended in unforeseen tragedy. In their hands it becomes a study in bungling ineptitude, with the tragedy being all too easily predictable.
Government types are also high on the Bonner/Rajiya list of betes noires. These range from the usual suspects, such as Hitler and Mao, to less obvious targets like the World Bank and Alan Greenspan, the former Federal Reserve chairman. New York Times columnist Thomas Friedman also attracts their ire for suggesting that U.S. gasoline consumption would be cut by giving the owners of hybrid vehicles free parking.
Read this book and laugh. But I guarantee it will also provide much food for thought.
I just found that Business Wire had run a piece earlier this month on the book, using our promotional material.
November 15, 2007 12:00 PM Eastern Time
DUBLIN, Ireland–(BUSINESS WIRE)–Research and Markets (http://www.researchandmarkets.com/reports/c74288) has announced the addition of “Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics” to their offering.
Rob May at the hugely popular business blog, Business Pundit, wrote this great review of “Mobs, Messiahs, and Markets” that I just came across:
“Where do I begin with a book that takes a shot at pretty much anybody and everybody, including the authors themselves? To say that this book is skeptical or contrarian is like saying Warren Buffett has money. This book could set the standard for skeptical writing. That said, it’s part of the reason I enjoyed the book so much.”
But in the end, however, he doesn’t really recommend it to everyone:
“Francis Scott wrote that “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.” I do not think most people have this capacity, but if you do, I highly recommend this book. For everyone else, it will just be offensive.”
(sigh). Read the rest of the review here.
This is one of the nicest reviews we got. My other favorites include one by Daniel Ryan at the libertarian site, Enter Stage Right.
Here’s an excerpt:
“If you’re the alpha type, you’ll undergo something rarely experienced in this day and age, despite the number of Mencken imitators currently around: you’ll actually feel the same way that a good, worthy, successful U.S. burgher felt in the 1920s when reading one of Mencken’s works when it was hot off the presses. The two authors are that good at being intellectually detached from all parts of the popularity-and-leadership game.
Some may find it roundly offensive, but it would be tragic if the reader, through umbrage, expels him- or herself from the Bonner/Rajiva School for Creative Cynics. After reading this book, you will re-evaluate some of your more cherished ideas. Some will find grist for self-reflection in its material.”
And Dr. Jonathan Dolhenty of the popular philosophy site, Radical Academy also gave us a big thumbs up. Here’s a part:
“Mobs, Messiahs, and Markets by William Bonner and Lila Rajiva is a fascinating work which considers how people think and behave, privately and collectively, and the effects these different modes have within the public sphere. I haven’t quite decided which specific literary genre this book falls into; maybe that is inconsequential anyway. There’s a lot of history, much economics and politics and, well, almost every other recognized social science comes into play….Fortunately for the casual reader, this book is not the least bit “dry” or dull, as all too many book dealing with this or similar topics seem to be. In fact, there are many times in this work where the authors relate or allude to something that is downright hilarious. Be that as it may, this is a serious look at an important phenomenon in the human condition.”
Then there was this review by Mark Lamendola, which smacked us for lurching into lala land at the end with our gold recommendation (well, it was right so far, wasn’t it?), but was still pretty favorable :
“Mobs, Messiahs, and Markets provides insights that run counter to the propaganda spewed by the mainstream media. Thought-provoking and myth-challenging, it will delight those who value liberty. People who believe the government is “here to help you” or that the tooth fairy really does leave coins under your pillow won’t like Mobs, Messiahs, and Markets. That’s their problem.
Mobs, Messiahs, and Markets looks at how and why people do stupid things en masse. Understanding how mass manipulation works can help you avoid trotting off the cliff in a herd of lemmings, so this stuff is good to know. One of the tools of mass manipulation is the really big lie. Quite adroitly, Mobs, Messiahs, and Markets looks at specific lies and gives them a sound thrashing.”
Read the rest at the Mind Connection
So, let’s see. That’s
1. An electrical engineer/systems designer/business prof and major blogger (Business Pundit)
2. A widely- published philosopher of the natural law tradition (Radical Academy)
3. A time management/business self-help expert who’s written 6000 articles (Mind Connection).
Systems analysis, philosophy, and business management.
That was roughly where we hoped to be. I think if we had eliminated the antiwar stuff and toned down most of the language, we might have been mentioned in more mainstream reviews in print newspapers. But since one of the main targets of the book is the mainstream news business, I guess that would be missing the point….
But underground fav isn’t too bad…..
My interview with D. Murali and Goutam Ghosh, editors of the Business section of The Hindu, is now available.
I’m posting it below. It should go into the print edition shortly. The Hindu is one of India’s largest and most influential news outlets.
I thought the questions they asked about the book were the most insightful and penetrating that I’ve so far encountered.
Of course, they also exercized their editorial judgment (sigh) and removed my plug for Ron Paul, my take- down of Naomi Klein’s “Shock Doctrine” – which is simply not up to the standard of her admirable antiwar journalism. She’s a great reporter — but a dishonest theorist.
And they also – I really didn’t expect them NOT to – took out my slam of Rubin and Co. – shockers-in-chief.
Ah well. I tried. That’s all anyone can do.
Still, it was very fair- minded of the editors to let me make the controversial connection between financialization and propaganda – though adding the torture part would have made it stronger. I am actually amazed how open-minded business journalists – who have some professional vulnerability in the matter – are about politics, compared to the close-mindedness of many political journalists about business and economics. Maybe, it’s because they’re dealing with the real world. Politics, although capable of overturning the real world, is founded mostly on delusion and humbug.
This is yet another important business journal where Austrian economics has gone mainstream. With the The Economic Times, the Hindu Business section is the most widely- read and prestigious business outlet in India.
So many thanks to both editors. I’m honored.
Steer clear of ‘mass market investing’
D. Murali and Goutam Ghosh
Chennai: Though there is nothing inherently antisocial about genuinely free markets, you should look at the language of politics and the markets with suspicion and examine things for yourself, cautions Lila Rajiva, co-author of ‘Mobs, Messiahs, and Markets’ (Wiley, 2007).
“If ethical and productive individuals produce ethical and productive societies, then we all have much more power than we think,” she adds, on a reassuring note, during the course of a recent e-mail interaction with Business Line.
Excerpts from the interview.
Your book seems to show a more than healthy disrespect for conventional wisdom.
I don’t think the book says anything terribly revolutionary. If it sounds as if it does, it’s only because the public debate is so restricted. Even differences between the right and left are sometimes no more than variations on the same one-note samba. Most popular experts have backgrounds and training that are very similar, and they tend to feed us the same warmed-over ideas.
So, although I support free markets and individualism, I realise that labels can be deceptive and conventional wisdom often plain wrong.
What we really have in the US, for instance, isn’t so much a capitalist as a managed economy, in which the managerial class controls the creation and dissemination of money and also the creation and dissemination of public opinion.
Money and opinion?
The financialisation of the economy and information control go hand in hand. That was actually the gist of my first book, a study of mass thinking in the Abu Ghraib prison scandal.
In ‘Mob’, the new book, I look at the same issue from a different angle and in a very different vein, in collaboration with contrarian financial writer, Bill Bonner, who has behind him a lifetime of observing mob behaviour in the money business.
Is there an overdose of politics in ‘Mobs’?
Some people have suggested that we should have steered clear of politics. I disagree. The financial and business world actually has a pretty serious civic duty, since it has a ringside view of politics.
And while writers should consider reviewers’ sensibilities, they should consider their own integrity even more. The need for aesthetic distance doesn’t excuse them from ethical action in the real world. To be a libertarian always presupposes ethics. Otherwise, what you end up with is licence and criminality.
Recommending fiscal prudence, limited government, and humility to the political class – a revolutionary proposition?
But so it is. Today, even major economics departments endorse extensive state intervention and cultural Marxism and call that the free market and liberalism. Naturally, when you bring up the real thing, people act as if they’d found a hand grenade in their lunch bag.
Look, academics can cultivate whatever school of thought they want, but the more limited the information they work with, the more out of touch with reality they become, and the more inaccurate their reading of the world. That’s the problem with the intellectual caste system that presumes that unless economic theories come out of the Ivy League, they have nothing to offer.
The book might sound outrageous, also, because our positions weren’t partisan. Of course we wrote it – with important reservations – from an Austrian perspective on economics. But we criticised Republicans as well as Democrats. We poked fun at communists and imperialists.
Government programs are styled like off-the-rack maternity dresses — big enough to cover any act of nature, with room to expand. Political debate is a Mafia hit job. Its goal is not to open conversation but to terminate opponents. You simply bludgeon them to death with whatever comes to hand.
Do you see parallels between wartime messages and market cant?
A great deal. In-group bonding requires self-deception. The obvious example is wartime propaganda, but there’s also the way we manipulate memory in our personal recollections and collective histories.
It’s the manipulation of memory that allows propaganda to work and messianic leaders to hustle their way into office, whether through democratic elections or the barrel of a gun. And it’s what blows up hot-air balloons in the market that we take for genuine booms.
We’re not, obviously, equating the president of a constitutional republic, like Bush, with a despot like Mao. We’re simply showing how delusion surrounds statesmen of all types, even those spouting the highest sounding motives. Once you strip them of the rhetoric, they’re all neck-deep in bamboozles and blunders that bring nothing but disaster for ordinary people.
The Iraq war might have been about strategic and oil interests, but the propaganda about it was all about thwarting tyranny. That was what the public believed. And it’s public opinion that makes people go to war, buy houses they can’t afford, invest in mortgage-backed securities they know nothing about, and jump into the market because a stock tout on TV tells them to.
People who sell you a war are using the same methods of manipulation as the people who urge you to buy tech stocks at the top of a market or sell them at the bottom.
And the investment advice we offer is geared to make you understand this and steer clear of what my co-author likes to call mass market investing. Our varied excursions into politics, history, economics, socio-biology and finance are all meant to reinforce that piece of common sense.
How would your suggestions and findings serve those who prefer to be active in the investment market?
We’re not suggesting that Rip Van Winkle is our ideal for a portfolio manager. In fact, we argue that relatively passive investments like mutual funds are rarely as safe as they’re advertised to be, since high fees can offset any expertise you get from the managers.
Beyond that, we differ in our approaches. Bill advises the classic strategy of pursuing assets with grossly undervalued fundamentals and holding them for the long-term. My research into market history over the last few decades convinces me otherwise.
Long-term investing now often poses risks as great as or greater then mid-term trading because the investment world has become several orders of magnitude more volatile and fragile.
Sell and buy orders that go off at pre-programmed levels in stampedes, ever more complex derivatives, risk and reward so intricately repackaged that buyers no longer know what they are playing with, a global flood of credit, massive leveraging and trans-national financial flows have made the market a kaleidoscope.
One shake, and a stable pattern breaks up, slides all over the place and reshapes itself into something stunningly unexpected, all in no time at all.
So, being able to rethink your strategy in a heartbeat is far more vital to your financial health than holding onto things until rigor mortis sets in.
Briefly, we recommend the following: study your investments close up; tune out most of the “white noise” of day-to-day market commentary; get a plan and stick with it. And know yourself – why you invest, what your goals are, and what risks you can tolerate.
Your views on some of the recent developments in Indian finance world: such as the race for mergers, the Sensex leaping, rupee appreciation, bulging forex reserves, and the participatory note issue.
The race for mergers in India seems to follow a general trend in the market. In the past few years, the major banks have been more and more involved in M& A activity – and have made quite a high proportion of their profits from it.
Rupee appreciation is only to be expected, as the dollar is relatively overvalued against Asian currencies. The next major leg down in the dollar index should be against them, since the other major currencies have already made sizable gains.
The Sensex? The general feeling is that there is less of a bubble here than in the Chinese market, although here too valuations are probably full. But since the Indian market is probably not as intertwined with US consumption as the Chinese seems to be, it might have more strength long-term. On the negative side, however, social unrest, mass migration of labour, environmental damage, infrastructure failure, and security risks could all become serious obstacles.
As for the participatory note issue, I think it is an excellent thing to keep out big speculative players like hedge funds, as they are largely unregulated. The quick in and outflow of speculative capital is what caused the series of financial collapses around the world in the nineties.
Now it looks like those might have been only preliminary shocks at the periphery and that tremors might have worked their way to the epicentre of the financial system in the US. When even institutional investors like pension funds and university endowments are tied up in risky securities that no one wants to touch, emerging markets should be extremely wary.
On the trigger for the book. Also, how you went about writing it.
When Bill got the idea for the book, he was looking for someone with a background in mass psychology and globalisation, who could also write humorously. Although I was worried that we wouldn’t agree on enough for the writing to work, he was more sanguine. He was right.
We managed to write the book long-distance, without a mishap, in little under a year, while we were both mostly on opposite sides of the globe, en route to some other place. That’s entirely to his credit, I’m sure.
On the other hand, I take the blame for all our crimes. I confess to parts of chapters 3, 9, and 17, most of the material on propaganda and panics (4-5), on globalisation (10-11), as well as on Friedman’s methodology, the CIA, and the British Empire in India. And, of course, any errors in research are mine.
I point this out not only because of the controversial nature of our positions in those sections, but because putting our writing together in a viable form was a challenge, intellectually and stylistically. I had to preserve — and for long stretches imitate — the colourful style of Bill’s very popular daily column, in such a way as to reach out to a general readership without alienating his financial audience.
Would we be wrong to say that the nearly 400-page book could have been condensed to 150 pages and still retained the essence of your prescriptions?
If the book really could be cut in half and stay the same, we will have failed, since one of our central points is that humans must understood themselves through felt experience, not through theory and abstraction.
We wanted the book to read like a novel, not an investment manual. Pared down, it seemed to lose its flavour, so I left some meat on the bones. I may be biased, though, since I grew up on sprawling nineteenth century novelists like Hardy, Bennett, and Sholokhov. If it’s any consolation, the original thing was a thousand pages.
Take one cut we mulled over – the section on the abortive British raid on Kabul in 1842. For one thing, it’s hilarious and for another, how do you write about the atrocities of communism and pretend that imperialism hasn’t any? If you cared the slightest bit for the integrity of your argument, you couldn’t. Besides, the Kabul story parallels what’s happened in Iraq in some ways.
Similar parallels crop up throughout. There are several images of rivers, for instance: The bloody river of history, the River Liffey in Ireland, the rising Nile of credit under Greenspan, and many others. The images occurred spontaneously as we wrote, but they also prefigure our concluding discussion about the tides of history.
Another example. In Chapter 7, we talk about Calpurnia’s warning dream before the Ides of March in Julius Caesar. A few pages later, when a comet shoots over Bill’s castle in Ouzilly, a guest wonders what it could foreshadow. Later on, we use the crash of the space-shuttle to describe the collapse of a hedge fund, and the explosion of the Hindenburg as an omen of World War II.
What meaning you want to read into all that is entirely up to you, of course, but the images form a subtext – sometimes unconscious, sometimes deliberate – to our discussions of ‘chance’ and ‘randomness.’ So our arguments might fly off in many directions, but they’re held together by the narrative texture.
We agree with David Hume’s premise on the Black Swan. (The same idea was captured beautifully in a book by V. S. Ramachandran and Sandra Blakeslee “The Phantoms in the Brain”). What has that got to do with the gravitational pull (or the centripetal force) of arguments in your book?
Hume’s bird illustrates the limitations of naive empiricism. Any number of observations of white swans is itself not enough to rule out the existence of black swans. But observing just one black swan is sufficient to prove the opposite.
What that amounts to is that humans consistently overrate their rationality. We may assume we’re naive scientists dissecting the world with the finesse of brain surgeons, but there’s more butcher than brain surgeon in most of us. We’re far more beholden to biology than we think. And to language; to rusty concepts and clumsy logic that drag us along from demented premises to disastrous conclusions.
A lot of logic, in fact, is no more than bad theory, and a lot of empirical observation simply wishful thinking smothered with emotion.
I do have strong interests in mind-body research of the sort pursued by neuroscientists like Ramachandran. But raw observation alone will tell you something similar.
Investors who are long a certain stock may think they’re impartially observing the fluctuations in its price, but they’re usually far more hopeful of its prospects than they would be if they didn’t hold it.
The existence of black swans also means we need to give more significance to risks that might seem remote statistically. In fact, I’d say that using mathematical assessments of risk to get a handle on it in the real world is probably about as smart as practising on a rocking-horse for a rodeo.
The universe isn’t plodding along in a narrow rut waiting for you to saddle up and ride it. It’s a far more intractable thing. Its complex patterns may appear chaotic to the naive eye, but they follow laws of their own that are liable to kick you in the shin if you ignore them.
“Events that experts rate as impossible or near impossible happen as often as 15 percent of the time, and certainties or near-certainties fail to happen 27 percent of the time,” you write, citing Philip Tetlock’s ‘Expert Political Judgment’. Does that imply you are suggesting the Golden Mean?
No. That would be too clumsy a model. The things that are rated impossible and the things that are rated certainties are specific kinds of things that can’t be directly compared, let alone averaged, most of the time.
It’s one of our central arguments in the chapter called “The Number Game” that we need to pay more attention to the specificity of different things.
The colour and texture of our world has been washed out because we rely far too much on generalising and abstracting from spurious statistical data, data that the governments in most countries, including the US, heavily massage.
It makes no sense, most of the time, to talk about an average man. He’s a statistical fiction. We have to account for the real actions of real human beings.
Type 2 error is stated to be when a guilty person is let free (Jan Kmenta, “Econometrics”). What is the import of this to markets?
In “Mobs” we suggest that inaction is often as underrated a course of action in politics as it is in connubial relations. We even offer – tongue in cheek – a Hippocratic oath for social engineers and regulators: first, do no harm.
Our argument is that for any action to be worthwhile the costs imposed by crimes and errors would have to be more than the costs of detecting, rectifying, and punishing them. How often would that be the case? And how would you guarantee that the regulators themselves wouldn’t add to the crimes and errors? History shows that regulators often end up colluding with the people they’re meant to regulate.
There’s another angle to this. For example, the US Food and Drug Administration (FDA) can let something bad happen (by approving a harmful product), and they can also prevent something good from happening (by not approving a helpful product). The public suffers both times, but the regulators only get attacked by the media and public in the first case, since the second is a non-event. Then the attacks lead to more defensive regulation that holds up even more useful products.
This is a shibboleth of anti-regulatory rhetoric, but our book suggests that things aren’t so simple. If there is asymmetry between public responses to Type I and Type II errors, there is also asymmetry between what it takes to prove that something might have use and what it takes to prove it might do harm.
And who is doing the testing? The same companies who profit from selling the product and who often influence the regulators. There’s simply too much complexity involved to take sweeping positions about the effects of regulation in all cases.
Take the Glass-Steagall Act, which kept apart the commercial and investment banks in the US. That probably prevented the development of some complex financial strategies that might have helped some sectors of the economy. But was repealing the Act in 1999 a good idea? Banking consolidation simply accelerated the financialising of the economy with the fallout on the credit market that is now shaking the US.
That said, a few simple, well-understood laws that are strictly enforced across the board are probably more effective than a swarm of “gotcha” rules that no one follows and that only serve to increase lawlessness. Problems of culture can’t be addressed simply by regulation.
Do you think women have enriched economic thinking sufficiently? What are some of the obstacles in their way?
Women have so far constituted less than 10 per cent of all tenured full professors in economics at PhD-granting departments in the US. In this respect, economics is more like mathematics than other social sciences.
Libertarian women economists like Sudha Shenoy are an even smaller group. And attitudes say as much as numbers. Everyone knows Jagdish Bhagwati’s name, for example, but how many know the name of his wife, the equally distinguished economist, Padma Desai?
I remember seeing Desai, who advocated a gradualist approach, debating Jeffrey Sachs about the shock therapy he proposed for Russia. I was struck even then by the excessive deference journalists showed Sachs and their dismissive attitude toward Desai, although she was proved right, ultimately.
It seems that being influential in public takes a level of combativeness (cockiness, even) that many women are uncomfortable with. I suppose that’s why opinion pages tend to be dominated by men.
There also aren’t as many networks for women in economics as there are for men. That means the field is likely to be socially uncomfortable for many of them. First, they’re patronised. Then – when their skills become threatening – they meet with denigration and overt hostility.
But is all this peculiar to women? I don’t know. With some qualifications, it’s probably what happens any time less powerful outsiders deal with powerful insiders. Anyway, looking at economics departments only gives you a part of the picture, since many women probably make a considered choice to go into business or into financial journalism rather than into academics. And many of them also make useful contributions to economics through their work in other disciplines, like history and sociology, where women are better represented.
Ultimately, as a libertarian, I don’t have expectations about how much women should be represented in any particular field. I’m more concerned that when women – or men – choose to enter a field they’re treated fairly as individuals.
What next? Your current research…
My next book deals with consumerism and its impact on the middle class in America in the last two decades. It will include my most recent investigative work on the banks’ culpability for the credit crisis. I also look at what used to be called the republican (small R) virtues – self-reliance, honesty, foresight, industry, and thrift as essential components of the free markets. I don’t like to say any more than that for now.
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Bio:
“I grew up in South India and completed my education there. Although I live primarily in the Washington, DC, area now, I still spend several months every other year visiting my family in India,” says Rajiva. “Over the last decade, I’ve had a chance to observe the huge changes there first-hand and have commented on subjects as far apart as water and waste problems in Chennai and investment in the transportation sector. From next year on, I will be based nearer, somewhere in South Asia.”
Rajiva holds an MA in English (Bangalore University) and an MA in politics (Johns Hopkins University) and has contributed over a hundred articles to web magazines (such as Dissident Voice, Counterpunch and Lew Rockwell), print publications like Himal South Asian and Forbes, and academic journals. She is the author of “The Language of Empire,” (Monthly Review Press, 2005), a groundbreaking study of public opinion in the Abu Ghraib prison scandal. She has worked as a musician, college lecturer, and journalist, and blogs at www.mindbodypolitic.com.
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http://InterviewsInsights.blogspot.com
And here’s what got cut out:
” Political debate is a Mafia hit job. Its goal is not to open conversation but to terminate opponents. You simply bludgeon them to death with whatever comes to hand. Take Naomi Klein, in that very provocative but disingenuous new book of hers, Shock Doctrine. Klein argues that free market economics are invariably linked with terror and torture. Well, two years ago, when I pointed out how the presence of financial incentives in the intelligence services exacerbated the torture of prisoners, I diagnosed the problem more accurately as a symptom not of the free market per se, but of the pursuit of total power. You can, after all, pursue power under all sorts of regimes, capitalist or communist, authoritarian or democratic. And as Klein should know, many CIA techniques were developed in response to the Cold War techniques of the Russians and the North Koreans – neither notable for their free markets. Going back in history, Indians, too, have had torture under both Muslims and Hindus, the Moghuls as well as the Guptas. And both, I’m sure, were quite unfamiliar with the Chicago boys.
So Klein’s thesis is spurious. Especially since she omits the fact that the privatization of intelligence (and the financialization of the economy that helped it) actually began under President Clinton. And that it was his Treasury Secretary Robert Rubin, along with Larry Summers and Jeffrey Sachs, not Milton Friedman, who administered economic “shock” therapy to Russia. If bias of this sort is not only accepted but applauded, it shouldn’t be a surprise if genuinely non-partisan writing makes people unsettled.”
AND
“I hope, most of all, it introduces people, especially in Asia, to the ideas behind the presidential campaign of Dr. Ron Paul. Laboring steadfastly and mostly in obscurity, Dr. Paul, a doctor in private life and a genuine free market conservative, has for many years been taking on the manipulation of the financial markets, interventionist foreign policies, and the erosion of civil liberties in the US. His public service is so honest he’s even turned down his government pension. That’s the kind of personal integrity needed for real freedom and individualism to survive. If this book draws even a little attention to his candidacy and to the ideas he stands for, it will have done something. “