Sunday, January 6, 2019

Credit Bubble Stocks 2018 Book Review Compendium

The most important concept developed during the CBS reading program this year was that of the "high agency" person. This is a term which we first saw in this Ryan Holiday essay back in March, but originally came from the Eric Weinstein profile in Tools of Titans (review) - where Eric described The Martian as the "ultimate high agency film". The concept is this:

"When you're told that something is impossible, is that the end of the conversation, or does that start a second dialogue in your mind, how to get around whoever it is that's just told you that you can't do something?"
We saw the difference between high agency and non high agency people show up time and again this year. In two books, the difference was literally life and death. First, in The Outlaw Sea, a giant Baltic Sea motor ferry called the MS Estonia took on water through defective bow doors and began to capsize. Only those people that fled the interior of the ship immediately, before the heel became too extreme to escape, survived.

Then, in Surviving "Terminal" Cancer, Ben Williams was a professor at UCSD diagnosed with glioblastoma in 1995 at age 50. Once neurologists or neuro-oncologists make this diagnosis, efforts to actually cure the disease end. Ben came up with two big ideas to try to survive: using synergistic anti-tumor agents in parallel rather than in series (which ultimately results in a tumor cell population that is highly resistant to treatment), and doing his own research to find agents that were state of the art rather than just what his local MDs knew. He ended up driving to Tijuana to buy tamoxifen and Accutane as chemotherapy adjuvants. He also got one of his MDs to prescribe (off label) the calcium channel blocker verapamil, which is normally used for hypertension but is (still) thought to prevent tumor cells from using molecular pumps to remove chemotherapeutic agents.

Let's contrast with the nautical story that did not have a happy ending: Run the Storm, about the loss of the El Faro. This is a very American story: a ship carrying goods from Jacksonville to Puerto Rico for Wal-Mart (including fructose in tanks to give them diabetes). The ship was owned by MBA types in Seattle, by people who had never done the job of a ship captain. My theory on this is that people who have not done the job they are asking someone else to do are unable to tell if their employees are lying when they say they cannot do something. The way they deal with this is to just demand an outcome and then see what happens. The type of person who is an employee (not entrepreneur) does not understand this tactic and desperately tries to do the impossible. So, under pressure to meet the schedule, the master of the El Faro sailed this forty year old rustbucket right into a hurricane and killed everyone on board when it sank.

In the review of Exit 13A, we talked about John T Reed's writing, what organizations will ask people to do, and how they obtain the leverage to hurt their employees. In the context of the El Faro, the high agency person would lay down the law with the suits in Seattle and refuse to sail into a hurricane. (And also refuse to sail a rustbucket or work for shipowners who wouldn't think to cannibalize a sister ship for parts before it is scrapped.) But the real work of avoiding a situation like that happens long beforehand. Many people are not able to refuse an illegal or dangerous order because they can not live below their means and build up a surplus that would sustain them while being in between jobs or making a transition to entrepreneurship.

Another high agency idea is that if you are intelligent enough to do independent reading and thinking, you should expect much more of yourself than what the average American is achieving. From The Complete Guide to Fasting, there are Americans who don't realize that pita bread is "bread". Do not compare yourself to these people - compare yourself to success cases and see if you are measuring up or if you are leaving upside on the table. Look at PD Mangan, who is a high agency guy. Another general theme from the reading is that not only is no one looking out for you, but in fact most people are not even looking out for themselves competently.

The high agency concept carries over into business and investing. In How to Measure Anything and Guesstimation we saw that it is possible to get a pretty solid handle on physical quantities that most people would think are impossible to even estimate. Just bothering to make an effort can allow you to dramatically decrease the width of 90% confidence intervals around important decision-making variables.

As I have said, you can be a good investor without understanding Black-Scholes, but you need to understand dimensional analysis. You see people all the time who invest without doing dimensional analysis or reality checks of business model plausibility: the people who invested in uBeam, Theranos, Valeant, and Tesla.

In Bad Blood - the Theranos story - we saw that Elizabeth Holmes figured out that the "startup" ecosystem operates based on social proof, not scientific thinking, and played these billionaires and former cabinet secretaries like a fiddle. All an investor needed to do to vet Theranos was to conduct a simple experiment comparing Theranos results to those from a real blood lab. Even a sample size of one would have revealed the inaccuracy and prevented them from losing money on this!

The somewhat mediocre Lying For Money at least raised an interesting question: how can we explain the really easy to detect, but undetected, frauds that we have seen like Theranos and Madoff, either of which could have been detected with high agency guesstimation or dimensional analysis type checks. It also made the point that, "anything which is growing unusually quickly needs to be checked out, and it needs to be checked out in a way that it hasn't been checked before."

One last note from the Ryan Holiday article,
Thiel would say to tell me. "We tend to denounce 'conspiracy theories' because we are skeptical of privileged claims to knowledge and of strong claims of human agency. Many people think they are not possible, that they can't be pulled off." This is a self-fulfilling prophecy. People who don't believe in their own agency naturally find themselves with very little of it.
American elites are having an exceptionally easy time getting away with their conspiracies. Maybe it is because the population is so mentally and physically debilitated - by bad diet, television, and so forth - that it can not even imagine the type of person that could pull off a conspiracy?

Biology/Ecology/Science (n=8)
  • Sibley's Birding Basics: How to Identify Birds, Using the Clues in Feathers, Habitats, Behaviors, and Sounds (5/5) This was a great one. Author David Allen Sibley and (competitor Roger Peterson) are the kings of North American ornithological field identification guides. Look at their collections: Sibley and Peterson. Sibley says to train yourself to see details so you can make comparisons, and figure out what species of bird you are looking at. Form follows function, so many of the characteristics that differentiate are features that are specific to a certain lifestyle. He says the scientific names are less accessible but more valuable. And then once you are looking at the scientific names, think in terms of genera rather than just species. (Egrets and herons are both Ardea, for example.) Mentions the American Ornithological Society's Birds of North and Middle America Checklist - the official source on the taxonomy of birds. So you could see that there are many, many species of hummingbirds (and genera) all in the family Trochilinae.
  • The Fates of Nations: A Biological Theory of History (4.5/5) A deterministic theory of history based on ecology - Colinvaux examines wars, rises and falls of civilizations, and human history from ecological principles to give a predictive theory for the fates of civilizations. Reproductive effort makes no difference to the size of a population - which is set by niche size. Small young vs large young strategy. View: Malthus was right but technology has temporarily postponed. "The Earth is finite... we can defer the final poverty but not avoid it." So physicists and ecologists believe in Malthusian limits, but not economists. "When we gave up hunting for farming... we broke the primeval restraints on number and marched down a food chain to where the energy was." During the last ice Age there was more land in temperate latitudes than there is today due to retreat of seas into glaciers. Ecology's first social law: "all poverty is caused by the continued growth of population" after resources have stopped growing. Bill Gates is a lunatic who thinks poverty causes large families, rather than the ecological truth that large families cause poverty. Having the cause and effect backwards he is breeding a precarious population bubble. Social upheavals come from disaffected individuals of the middle and upper classes. (This agrees with Turchin's elite overproduction theory. Unprofitable startups made by Stanford students seem to be an indicator of this overproduction.) Social oppression is an inevitable consequence of the continued rise of population. 2nd law: "aggressive war is caused by the continued growth of population in a relatively rich society" that can steal niche space from its neighbors. Once an empire is crowded for the upper classes, collapse is near. At this point bureaucracy is more complex and bureaucrats more numerous. "Opportunity for betterment wanes and initiative must wane with it." 
  • Nature: An Economic History (5/5) By Geerat Vermeij, the blind Dutch evolutionary biologist. I mentioned this one all the way back seven years ago to talk about investor genotypes in an investing ecosystem. Decided to reread without any investing notions in mind. Plants make nitrogen or carbon toxins as defenses (depending on which is relatively more available in their environment), but never phosphate because it's so rare. So nothing was naturally resistant to our organophosphate pesticides. There are a million species of insects and 80% are parasitic. C4 photosynthesis has evolved 30+ times. Agriculture has evolved ten times and nine of the times are fungus farming insects! The equatorial zone is more extravagant in the number of species, their aggression, color, etc. Apparently the numbers on mass extinctions weren't truly compiled until 1984? The terminal Cretaceous extinction had a 96% species kill rate! No tetrapods weighing more than 25kg survived. The Chicxulub crater was identified in 1990 as the impact of the 10km asteroid. (A million times more explosive force than the biggest nuclear weapon.) 
  • The Nesting Season: Cuckoos, Cuckolds, and the Invention of Monogamy (4/5) By the great Bernd Heinrich. As with John McPhee, Peter Hessler, etc., one should have all of his books. I like the natural historian approach to birding: watching local species throughout their lives, over multiple seasons. As opposed to flying all over the planet just to see a bird for a few seconds to check it off a list. Bernd says that wherever he lives, he plants some trees and puts up some birdhouses. After reading about natural history and nest parasitism, it is amazing to see behavior like this in a species that has cognitive faculties and reasoning ability that birds lack. But actually, the human mind is extremely susceptible to (harmful) memes just as a sparrow is vulnerable to having cowbird eggs dumped in its nest for it to take care of.
  • The Best American Science and Nature Writing 2011 (3.5/5) Best pieces were: Fish Out of Water by Ian Frazier about the Asian-carp invasion; Lies, Damned Lies, and Medical Science by David H. Freedman about Dr. John Ioannidis; Letting Go by Atul Gawande; The Treatment by Malcolm Gladwell; Waste MGMT by Evan Schwartz; and The Killer in the Pool by Tim Zimmerman. It has been surprising how low the hit rate of really good essays are in these Best books. The pieces in our CBS weekly Links are of much higher average quality. 
  • The Geese of Beaver Bog (3/5) Continuation of the Bernd Heinrich natural historian approach to birding: watching local species throughout their lives, over multiple seasons - in this case geese. In this book he is living in the Vermont woods. Summary: "Geese do not, contrary to myth, mate for life. They are wedded to place, not to individual partners. Each year they return to the breeding area they know best, and a battle ensues for the right of parentage. Each large area that provides appropriate safety and food for the vulnerable three-week nesting period is permitted only one, or occasionally two, breeding pairs." Territory is life. He mentions Lorenz: "Given the specificity of adaptation, hybridization would break up genetic coherence and result in harm of the species."
  • Helium: The Disappearing Element (3/5) See full review.
  • World of Carbon (3/5) This is an old one by Issac Asimov, who actually wrote a fair amount of nonfiction. There are two halves of chemistry, organic and inorganic. Being the "world of carbon," this is about organic. Might be interesting to followup with his World of Nitrogen, which is about inorganic nitrogen-containing compounds.
Fiction (n=12)
  • The Shipping Man (5/5) Reread this, still great five years later. "Liquidity is nothing more than a function of finding a market clearing price. At the right price there is endless liquidity. And at an unattractive price there is no liquidity at all."
  • The Man Who Would be King (5/5) Rudyard Kipling's story is a rare case where the movie turned is as good as the book. 
  • The Dark Forest (4/5) Sequel to Three Body Problem by Cixin Liu, contains his axioms of cosmic sociology. "Survival is the primary need of civilization. Civilization continuously grows and expands, but the total matter in the universe remains constant." The result: "The universe is a dark forest. Every civilization is an armed hunter stalking through the trees like a ghost, gently pushing aside branches that block the path and trying to tread without sound. Even breathing is done with care. The hunter has to be careful because in the forest are stealthy hunters like him. If he finds other life - another hunter, an angel or a demon, a delicate infant or a tottering old man, a fairy or a demigod - there's only on thing he can do: open fire and eliminate them. In this forest, hell is other people. An eternal threat that any life that exposes its own existence will be swiftly wiped out. This is the picture of cosmic civilization. It's the explanation for the Fermi Paradox." It is scary how good Chinese science fiction is - while this guy is an award winning western science fiction author. Also, be aware that the Chinese have a grudge against the west. 
  • Exit 13A: A Control Tower Diary (4/5) A novel about bureaucratic organizational dysfunction, by a retired air traffic controller. Part of the story is the old-school USMC Irish protagonist's interactions with affirmative action hires in his Newark control tower, so it is shockingly (but hilariously) politically incorrect. The author's view was that the incompetent controllers (who don't measure up as "tin men") would cause catastrophes. This does not seem to have happened, even though there are occasional close calls. He seems to realize that police forces and newspapers are corrupt too, but does not form a generalized theory of corruption as agents responding to incentives. Exit 13A is the FAA equivalent of John T Reed's writing about being in the military. It isn't just the FAA, or the military, or government agencies that will expect employees to lie and cheat for them but then throw them under the bus for doing so when convenient. This would be true in any organization. I'm sure that many GE employees could commiserate with John T Reed or this tin man. Note - the way that John T Reed describes the workings of corrupt organizations is important and worth preserving here: "[W]hether it be Enron, the NY Police Department during the time that Frank Serpico was an officer, the Mafia, or the U.S. military, newcomers are tested before they are 'trusted'. As Al Pacino said over and over in The Recruit, 'Everything's a test.' Relatively new NYPD officers like Serpico, also played by Al Pacino, were invited to accept small bribes to show they were 'one of us' before they were permitted knowledge about bigger stuff. Mafia wannabes are required to commit crimes confirmed by Mafia guys before they are allowed into the inner circle. This has two purposes, to identify and screen out any 'boy scouts' or undercover agents who are squeamish about corruption, and to get something on everyone so no one can later change his mind and snitch. Signing false documents is a court martial offense. It violates the Uniform Code of Military Justice. If you sign a false document, you both gain entry to the 'club' and you put yourself in a position where you cannot get out because if you ever go over to the media or authorities, they can trot out the false documents they know you signed to discredit and court martial you." Also: "In his 2008 book The Logic of Life, Tim Harford uses a slightly different phrase describing the uncorrupt in corrupt organizations with a similar meaning: 'Your option to escape means you can't be relied upon.' I have seen this phenomenon in a number of different organizational situations that I and my family members have experienced throughout our lives. Organizations like employees who are dependent upon the organization. They fear independent employees." And also: "No man can be more honest than his boss. If your boss is dishonest and you are honest you will very quickly be forced to rat him out. If you can’t be more honest than your boss, your boss cannot be more honest than his boss, and so forth. So the comprehensive way to state it is that no one can be more honest than anyone above them in the chain of command in their organization." 
  • The Great Train Robbery (4/5) Michael Crichton was taller, smarter, and more successful than any of us. He was an ubermensch. This is one of his earlier novels, from 1975, a historical novel about the Great Gold Robbery of 1855. Thieves stole 200 pounds of gold off of a train from London to Folkestone, a payroll for the stupid Crimean War. It is not clear whether the real William Pierce (mastermind of the heist), got away with the money the way "Edward Pierce" does in the book. But stealing a military payroll is a time honored way to get rich.
  • The Analyst (4/5) Written by a Credit Bubble Stocks reader! This is potentially a new genre: investing science fiction. I won't give the plot away... You have never read anything like it. 
  • Enter Jeeves: 15 Early Stories (4/5) See Sailer on P.G. Wodehouse: "Wodehouse hit a long peak from his early 40s into his early 60s with six straight Jeeves novels rated above his career average". And Jeeves says: "If you have ever studied psychology, sir, you will know that respectable old gentlemen are by no means averse to having it advertised that they were extremely wild in their youth." 
  • Without Remorse (3/5) This was Tom Clancy's seventh novel. I would say his best are The Hunt for Red October and The Sum of All Fears. According to Wikipedia, Clancy started working on Without Remorse in 1971, abandoned it, and went back to the finish it in 1992. As with The Man Who Walked Through Time, it is a bit suspicious when a book sits on the writing table unfinished for a long time. Also amusing is that the book has been in film development limbo for the past 25 years, and Keanu Reeves was offered the role but turned it down. Imagine the timeline where Keanu made Without Remorse instead of Speed! 
  • Invisible Planets (3/5) Chinese science fiction anthology compiled by Ken Liu, the translator of Cixin Liu's Three Body Problem series which we read at the beginning of the quarter. We had mentioned that it is scary how good Chinese science fiction is, especially since the Cixin Liu books are advocating the survival of the fittest civilization rather than western transvaluation of values. (The Chinese would have gone extinct in the early 60s without western outgroup altruism.) The good news is that Cixin Liu and Ted Chiang are by far the best Chinese science fiction writers, none of the others come close, and they are the only ones whose thinking is superior to all current and most past western science fiction thinkers. The best story in this collection is "The Circle" by Cixin Liu.
  • Artemis (3/5) This is second book by the author of The Martian. Favorite idea was having "soft landed grams" be the unit of currency on the moon. Not as good as his first but wouldn't be surprised if it gets made into a movie too. Critics hate the book: "takes that same genial dad-joke personality and superimposes it onto a main character who’s supposed to be a take-no-shit brilliant young woman", "offers the same flat, sweary prose, fistfights and scientific mini-lectures - on the moon," "the author seems to be offering up this one as some sort of gift to the gods of political correctness". I think he still doesn't have a day job anymore though. See his conversation with MR. 
  • Airframe (2.5/5) Not my favorite Michael Crichton novel. His best was clearly Jurassic Park, and Andromeda Strain is up there too. "Airframe is unlike many of Crichton's other works in that the story has almost no outright science fiction elements." Having the airplane manufacturer conduct the investigation of an incident with one of its planes does not ring true. (In addition to reading all Delaware Chancery opinions, we like to read all NTSB reports.) Many of his novels were polemics, this one was against the media and television journalism. What a quaint concern.  
  • Based on a True Story: Not a Memoir (2/5) Norm Macdonald is only funny when he is not trying to be. Terrible standup and joke writer but very funny in casual conversation.
Politics (n=5)
  • The Philosophy of Friedrich Nietzsche (4.5/5) Never really understood Nietzsche until H.L. Mencken explained it here - consistent with our "old books are better books" program. "Germany is a great nation only because its people have so much Polish blood in their veins."
  • H. L. Mencken: Prejudices Vol. 2: Fourth, Fifth, and Sixth Series (4/5) This compilation of Mencken essays is full of gems, like "Who remembers that, during the Spanish War, the whole Atlantic Coast trembled in fear of the Spaniards' feeble fleet, that all New England had hysterics every time a strange coal-barge was sighted on the sky-line, that the safe-deposit boxes of Boston were emptied and their contents transferred to Worcester, and that the Navy had to organize a patrol to save the coast towns from depopulation?" (p 19). Other great essays are the anti-farmer one (p25), or his observations about the hopelessness of teaching the dull to write well (p295). Many of the cultural references and political concerns fall flat, though. (McPhee has an essay about how this happens). For example, it seems like every Mencken essay from the 20s has a reference to the Sinclair Lewis novel "Babbitt", which no one now has ever heard of. These essays are mostly from the 1920s, and at that time Mencken was irate about prohibition - for which he blamed Methodists. He was amusingly elitist and you realize that elitism has sadly gone totally out of fashion. Everyone now pretends to have common tastes - look at how our centimillionaires and billionaires like to claim that they are "middle class" and watch prole circuses like "professional" sports. 
  • Bad: Or, the Dumbing of America (3/5) Not as good as his Class, but some funny moments. "Washington, D.C. feels obliged to present itself as a locus of taste and sophistication... It likes to assert that the presence of all those embassies gives it an exciting international flavor, but it hopes we don't know that the occupants of embassies and consulates all over the world are very dull people, the sort you might find at, say, field-grade rank in the world's armed forces..." And this observation: "'Something of a psychiatrical clinic' is the way Thorstein Veblen described this country, and he regarded the whole place as 'a case'."
  • Ramp Hollow: The Ordeal of Appalachia (2/5) His summary: "How people get kicked off land and why we don't talk about them." Written by someone who describes himself as a "democratic socialist". His facts about the oppression of Scots-Irish Appalachians are interesting, but sadly he never read anything like Fates of Nations so his theories and conclusions are no good. Colinvaux mentions that conquered people are less often massacred than just forced to leave their territory. (But they leave fewer descendants, or none at all, like the birds each season who don't win a territory for a nest. This also happened to the Carthaginians.) This author's thesis is that Scots-Irish farmers in 1880 went through something like English peasants in 1650 enclosure movement. Unfortunately he's sympathetic to Marxist economics and also doesn't know his ecology. (p 146 Thinks that cattle raising households would allow predators like bears to feed on their lifestock at will so they could eat the predators if needed - this makes no sense as it would result in an energy deficit.) For example, he describes a population increase and says "the absolute number of cleared acres fell along with the relative area available to support each person. But why should this have cause a crisis?" The mistake is in thinking about the ecological forces effecting humans any differently than other animals or species. Also he talks about the plight of labor without talking about the market forces (supply and demand) that dictate how capital will treat labor. Interestingly he admits that "socialists hated Malthus, none more than Marx". Colinvaux explains the plight of Appalachia much better (FoN p122) "The poverty of people with compressed lives, which is always the result of letting populations rise to soak up the resources released by new technology or conquest."
  • Bronze Age Mindset (1/5) BAP is an amusing twitter account. I don't know how anyone was able to "review" his book (1,2,3) since it is incoherent gibberish.
Economics / Investing / Business (n=29)
  • When Genius Failed: The Rise and Fall of Long-Term Capital Management (5/5) They started the fund right after the 1994 rate surprise, when spreads widened, but then tightened again as bubble continued so they made money initially. Very high leverage on very small spreads. Betting on ~12 bps spread between on-the-run and off-the-run treasuries to narrow. Their trades were liquidity providing - they tended to buy the less liquid security every time. Always betting on spread convergence. Short vol: "The MIT types always want to short volatility". Ironically the August 1998 event that killed them was a great opportunity for their key strategies, which they had drifted from because those opportunities dried up!! They had plenty of money; if they had patiently waited in cash they could have taken advantage. Crazy huge and leveraged - $100 billion of assets on a few billion of equity. 
  • Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals (4.5/5) Written by a prop trader who used technical analysis and then got interested in philosophy of science. He differentiates between subjective and objective TA. Subjective means too vague to be implemented by a computer. (Artisanal TA.) Frailty of the mind - reminds me of Drawing on the Right Side... TA has great appeal to retail investors who are intimidated by financial statements and primary research. (Not as hard as it looks - Sleuthing and Oddball Stocks.) Also relevant is ever changing investment styles. In the past, the signal to noise ratio of these technical signals may have been stronger, and fewer people were looking. Meteorologists and horse bettors have an easier time with calibrating their predictive abilities because they make explicit predictions every day and get swift and precise feedback. He thinks EWT is worthless: "loosely defined rules and the ability to postulate a large number of nested waves of varying magnitude [gives] the Elliot analyst the same freedom and flexibility that allowed pre-Copernican astronomers the ability to explain all observed planetary movements." Also, confirmation bias creates a "vicious cycle of growing self deception" and "TA practitioners most experienced with a useless method [are] least able to recognize its flaws because of more lengthy exposure to the method's chance based successes".
  • The Deals of Warren Buffett: Volume 1, The First $100m (4.5/5) Mentioned this last year, but rereading a book still counts as one of the two books per week. One of the hardest things to get right in investing is position sizing. I have seen many people blow up by going too big (i.e. close to all-in) into an idea where they were wrong - although never in a Grahamian type investment. And Geoff Gannon takes big stakes in those types of investments. Buffett's famous investment Sanborn Maps had $7 million of securities and a business worth maybe $500k. He put 35% of his money in it at a $4.7 million market cap - that was a 1/3 discount to the sum of the parts value. Management was against him so he had to fight for his return. Later he put 20% of assets in Dempster Mill at half of net current asset value. Again, he had to get Harry Bottle in there to turn it around, but it was close to failure so it was not a matter of fighting management but of fixing the business. He put ~40% of assets in "quality" company American Express. When he put 25% of the partnership in Berkshire Hathaway it was a bad business and was trading at a discount to working capital but had debt. His rationale for these huge positions was that they are good investments but they are rare. In general I think that a company trading at a big discount to liquidation value always has some sort of glaring problem - like incompetent or misaligned management.  
  • Bad Blood: Secrets and Lies in a Silicon Valley Startup (4.5/5) Theranos is an incredible story of business fraud but also the credulity of venture capitalists and elites. Elizabeth Holmes somehow figured out that this ecosystem operates based on social proof, not scientific thinking, and played these billionaires and former cabinet secretaries like a fiddle. She did not get money from investors with medical and scientific experience but from the type of people who cannot do guesstimation, sleuthing, or dimensional analysis. Some lessons from this quarter's books: no one is looking out for you, and in fact most people are not even looking out for themselves very competently. An economic cycle consists of ~80% ebullience and 20% comeuppance. During the ebullience stage, people and firms with strategies that will not last long term look like geniuses. All an investor needed to do to vet Theranos was to conduct a simple experiment comparing Theranos results to a real blood lab. Even a sample size of one would have revealed the inaccuracy and prevented them from losing money on this!
  • Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street Reread. (4/5) Main characters: Claude Shannon, John Kelly, Ed Thorp. All three had good insights into markets at the beginning of the hedge fund era. John Kelly died very young. Claude Shannon was odd, although he ended up investing in and being on the board of Teledyne. The best positioned to take advantage was Thorp who got famous with Beat the Dealer, but realized that casino gambling was a big waste of time. He starts an investing partnership and evolves from warrants to convertible bonds to options. Then there is LTCM. Such low ROA multiplied by 30x leverage. Stay in the game!
  • Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, Second Edition (4/5) Now in its fourth edition. The 1990s had really bad accounting fraud. Ever wonder why you got so many AOL floppy disks in the mail in the mid 90s? They were capitalizing those costs as "deferred subscriber acquisition costs," and by June 1996 these were 61% of shareholder equity! Note that, like AOL, many of the companies that engaged in "aggressive accounting" did not fail. They got an edge with this type of behavior - and it worked. (Think of Larry Ellison.) A lot of these techniques were and are legal. The one thing that does not lie is a dividend or interest coupon check in the mail. Also, the more stupid investors in the market (who do not read financial statements), the bigger the advantage in cost of capital that crooks have over honest people. Perhaps this is why there is so much fraud at the top of economic cycles. Consider staying away from minority investments in businesses where the profitability is difficult to assess? Or at least be very careful of earnings quality (cash). A candy or soda company, or a book publisher, has fewer opportunities for creative accounting than an aerospace manufacturer or contractor.
  • No Exit: Struggling to Survive a Modern Gold Rush (4/5) About a hapless SF startup, written by Gideon Lewis-Kraus all the way back in 2014 - at the precise moment that the VC bubble seemingly peaked. Although somehow this has not (yet?) resulted in a crash. Three years later, the company he profiled in the story ended up being acquired.
  • The Bank Investor's Handbook (4/5) By Nate Tobik, see our update here about the Oddball Stocks Newsletter. One of Nate's very good points is that lenders get exposure to parts of the economy that are not otherwise investable, like very small businesses. And the interest coupon on a small business loan is often roughly the same as the return on equity of that business, so the lender gets a similar reward with less risk. Nate did very well investing in small banks post-crisis when they were trading at big discounts to tangible book value. They have three problems now though (not discussed in the book, but we are writing about in the Newsletter). First, they are trading at substantial premia to book. This does not make sense since they are levered credit funds run by idiots. Second, most of them have gotten massively long government debt even though the bond bull market is ending. And third, because the fixed costs of running the bank (including the cost of gathering deposits) are so high, the returns on equity of the banks are actually less than the coupons of the loan book! Bank investors do not seem to have noticed this, but we have been writing about it. (Catch up on back issues of the Newsletter, 19 and 20.)
  • Run the Storm: A Savage Hurricane, a Brave Crew, and the Wreck of the SS El Faro (4/5) In Japan, CEOs have often done the jobs of all of the people who work from them. But here they are MBAs and people who are bad at math, dimensional analysis, and reality checks. So, they are unable to tell if people are lying when they say they cannot do something. The way they deal with this is to just demand something and then see what happens. The type of person who is an employee (not entrepreneur) does not understand this tactic and desperately tries to do the impossible. The master of this rusting Jones Act ship, carrying goods for Wal-Mart to sell in Puerto Rico (including fructose in tanks to give them diabetes), faced that type of pressure from his employers who were lawyers and suits. He sailed a forty year old rustbucket right into a hurricane! When the suits had scrapped the El Faro's sister ship, it did not occur to them that it would be smart to cannibalize the decommissioned ship for parts. 
  • Fooled by Randomness (4/5) Reread this, see review.
  • The Forgotten Man: A New History of the Great Depression (3.5/5) "The Forgotten Man" is a concept from a brilliant William Graham Sumner essay which Roosevelt and his communist "brain trust" stole and turned on its head! (His words twisted by knaves to make a trap for fools.) See, the Forgotten Man is you and me, the Credit Bubble Stocks community of thrifty workers and investors. Sumner's point was that do-gooders steal money from the likes of us to give to other people. But FDR inverted it with the absurd notion that the millions of people on his dole were the forgotten. I would say that the Federal Reserve probably deliberately caused the initial crash, but FDR turned it into a decade-long economic train wreck by trying to impose socialism and settling for absurd micromanagement of the economy. Unemployment just would not get better while he was wrecking businesses big and small, and the desperate unemployed working classes (who should not be voting; they will only fall for charlatans like this) kept reelecting him in their ignorance. If only the polio had taken him in 1921. The type of person who becomes U.S. president is always a total misfit. Only someone deeply depraved psychologically would put up with the demands of the campaign itself, for example. You can't read two books a week as a politician. This goes to show you that the good guys always lose - that is the story of European civilization. 
  • Nature's Metropolis (3.5/5) This is an economic history of Chicago during the 19th Century. Chicago got its start by marketing midwestern grain, lumber, and meat. It beat St Louis because railroads beat barges. As an example, the changing seasonal height of the Mississippi River made it hard to site grain elevators along the riverfront in St Louis, which made Chicago the better city to site grain elevators. (Grain elevators came into being in Chicago. The first one was built in 1838 while St Louis didn't have one until after the Civil War.) From elevators you have the grain exchange (CBOT) and then financial and intellectual capital in place for deeper and wider marketplaces (Merc). See also our old dual review of Floored & The Futures books. Another way to put it: "In the mid-19th century, the railroads won out over the river boats in a bitter struggle for supremacy in transportation. This helped establish the mastery of the Great Lakes and East Coast ports, and strengthened the economy of the North." Suggested book to look at is a novel called The Pit.
  • Structural Holes (3.5/5) Know lots of people who know lots of people but who don't know each other. Then you can make money as a broker like Irving Lazar or Michael Ovitz. Summary of theory: "most social structures tend to be characterized by dense clusters of strong connections, also known as network closure. The theory relies on a fundamental idea that the homogeneity of information, new ideas, and behavior is generally higher within any group of people as compared to that in between two groups of people. An individual who acts as a mediator between two or more closely connected groups of people could gain important comparative advantages. In particular, the position of a bridge between distinct groups allows him or her to transfer or gatekeep valuable information from one group to another." 
  • Brokerage & Closure (3.5/5) This is the sequel to Burt's Structural Holes mentioned earlier this year. "Brokers do better." People who bridge groups are more likely to have creative ideas and be able to implement them. Creativity by brokerage is moving an idea mundane in one group to another where the idea is new and valued. Ways of thinking are more homogeneous within than between groups so people connected to otherwise segregated groups have more optionality from more ideas. Other ideas: Homophily in friendships [e.g.]. Paul Revere as a broker [Han paper]. (See also Using Metadata to Find Paul Revere.) Closed network ~ high trust society on macro scale. Schumpeter on heirs who have inherited his wealth without his ability (link).
  • Mr. Market Miscalculates: The Bubble Years and Beyond (3.5/5) We like James Grant. An excellent writer, he was way too early being bearish on bonds but he did not buy into the tech bubble or the housing bubble. He helps remind everyone that the central bank running our mixed economy is solely responsible for these ridiculous bubbles. "In the press release it issued to explain its last half-point easing, the FOMC sounded like a composite of the economic planning agencies of unredeemed socialist Britain and communist Poland." One good essay is from November 2006 about the ridiculous Freescale Semiconductor LBO (p336) which by April 2009 was in a "debt war with its noteholders". Another good one looks at Benjamin Graham's seven rule test for investing in companies (from Intelligent Investor) and finds that at the 1974 low 85 of the 500 S&P companies met the test; only 62 in August 1982; 6 in January 1991; and only 3 in March 2003. Market history is characterized by extremes that people psychologically don't really believe will ever reverse. But the lesson is the same as with Fooled by Randomness - things can change more than you think.
  • Compendium Compilation 2015 - Murray Stahl (3.5/5) Don't think this can be found online, I got it directly from Horizon Kinetics. But the new stuff they are publishing is available here. Murray points out: "Indexation in its current from has no future. The huge stimuli of the last 40 years - big national deficits, 30 years of falling interest rates, tax breaks, expansion possibilities in the formerly communist world have already occurred, and did so concurrently with the index revolution. The indexes are now composed of mature companies." Another thought, the consumer packaged goods industries used to have low profit margins, but now they are high. As we know, these earnings are being capitalized at high multiples because they are viewed as being steady, bond substitutes. As noted above in my review of 100 best stocks to buy, they sell middlebrow products that are vulnerable to competition from the bottom (generics) and top ends. 
  • Lying for Money (3/5) New this summer by British author Dan Davies. He divides white collar crime into four categories: the "long firm" (basically a bust-out), counterfeiting / forgery, control fraud (and distributed control fraud), and then "market crimes". His idea is that fraud is an "equilibrium phenomenon" - basically positing that people will substitute trust for precautions until the expected fraud loss begins to exceed the cost of precautions. The problem with this is that is does not explain the really easy to detect, but undetected, frauds that we have seen like Theranos and Madoff, either of which could have been detected with high agency guesstimation or dimensional analysis type checks. (See Q2 reviews for more on those important mental tools.) It actually seems to me that most people are only capable of believing some sort of average of what the people around them believe. (Maybe that saves the simulation a lot of processing power on the simulated non-player characters?) So to them, if Elizabeth Holmes is getting magazine covers it would be utterly unthinkable to actually try her testing device (even for n=1 sample) before sinking hundreds of millions of dollars into a business partnership with her. Davies has nothing useful to say about the social dynamics (or possible social mood causes) of these lapses in diligence. He also does not observe (as Glenn Chan or I have) that a lot of smart psychopaths are getting away with business fraud. See my review of Financial Shenanigans last quarter - "the more stupid investors in the market (who do not read financial statements), the bigger the advantage in cost of capital that crooks have over honest people. Perhaps this is why there is so much fraud at the top of economic cycles." The tales that Davies highlights are the comically incompetent frauds like Ponzi. He does point out that fraudsters try to "find a new and incredibly rich mug to defraud, and sell the control fraud's assets at a premium to the fraudulent valuation, making the original victims whole" which reminds me of Musk's plan to sell to the Saudis. Another good point is that "anything which is growing unusually quickly needs to be checked out, and it needs to be checked out in a way that it hasn't been checked before." "Nearly all of the frauds in this book could have been stopped a lot earlier if people had been a bit more cynical about growth." 
  • Permission Marketing: Turning Strangers into Friends and Friends into Customers (3/5) Interesting economic statistic is advertising expense per capita. Do we have the most impressionable rubes or what? Permission marketing (as opposed to interruption marketing) is "anticipated, personal, relevant". Newspapers and magazines developed as a vehicle to attract attention to advertisements for goods of the mass production age. Some of these new products were junk, like Crisco, produced by P&G and made out of the same thing (cottonseed oil) as ivory soap. This replaced lard and homemade soap from animal fats. Frequency is key in advertising but it is expensive and boring. The book is essentially saying you should have a mailing list. Same as Ryan Holiday links recently. He predicted (in 1999) that a car company would go direct to consumer with showrooms in shopping malls. Basically wrote the book to plug his company Yoyodyne which was bought by Yahoo. What's he doing now?
  • Capitalism without Capital: The Rise of the Intangible Economy (3/5) Intangible assets are a greater and greater share of the investment component of GDP. Intangible asset heavy companies change how to think about financial statements, e.g. price to book becomes much less meaningful because investments in the intangible assets are expensed not capitalized. Coca-Cola trades at 11x book value. (And over 400x tangible book value!) Mentions something interesting about this, The End of Accounting. (Of course, non-GAAP has already happened: "between 2003 and 2013, the proportion of public companies reporting non-GAAP (“pro forma”) earnings doubled from 20% to 40%.")
  • The Worst Poverty: A History of Debt and Debtors (3/5) Speaking of debtors' prisons - this is very informative on the history of how debtors were treated from the middle ages through present (but only in the U.K.). One reason for debtors' prisons was that English law "showed a mercy to house and land which they denied to flesh and blood": "If the English creditor has not taken his knife with Shylock or the old Roman usurer, he has wielded a scarcely less formidable machinery of bolts and bars. Engines of infliction he had in plenty, degradation and confinement for all, and starvation besides for the truly insolvent debtor. But the misfortune always was, he was yet without that for which all these instruments of evil were given him - a remedy." So realty was protected but debtors' persons were not - creditors could have debtors arrested and detained before even getting a judgment against them! Thus, "powers of vexation instead of powers of sale". Funny: "Among the creditors of the gentleman prisoner are always to be found a greater or less number of tailors. His tailor's bill is often indeed the largest individual claim against him." In 1793, Lord Kenyon had said, "Imprisonment for debt is virtually a part of the British Constitution, and without that, or some other strong mode to compel justice to be done to the creditor, our trade, commerce, and in short, the source of all our wealth, must soon be destroyed." But imprisonment for debt ended finally in 1869. Also: "It is the misfortune of many other gentlemen to turn out of the seats of their ancestors to make way for such new masters as have been more exact in their accounts than themselves." At the end of the 16th C, "moneylending was on the way to enjoy the legal security of recognised and reputable profession. Naturalistic political arithmetic was set in place of theology - part of a revolution that turned religion from the master interest of mankind into one department of life with boundaries which it was extravagant to overstep." Hilarious story about a noble who was three years behind on his wine merchant's bill. When the wine merchant threatened legal action, the noble's butler wrote to say that he was so dismayed by the amount due that he would need a case of the merchant's best brandy before he could recover.
  • Warren Buffett's Ground Rules: Words of Wisdom from the Partnership Letters of the World's Greatest Investor (3/5) This was a quick read. Not as interesting as the Deals of Warren Buffet book by Glen Arnold from last year. Remember that the partnership was from 1957 until 1969, when valuations were high and he "quit" - wound it down and focused on Berkshire. The S&P PE in 1969 was 17.7; by 1980 it was only 7.4. (The PE10 peaked in 1966 at 24 and troughed, as we know, in 1982 at 7.4.) He believed in concentrated bets: 40% in AmEx, 35% in Sanborn Map, upwards of 20% in Dempster Mill. The concentration was because screamingly cheap investments were and are hard to find. Note that in the control situations, Buffett was valuing the companies himself, not using market prices (!!). So by taking control of a profitable net-net, higher and higher marks on the position with no downside volatility were assured. Speaking of Dempster, whatever happened to Harry Bottle who turned the operations around? It mentions that he invested in the Buffett Partnership after they sold the company. 
  • Against the Gods (3/5) Peter Bernstein treatment of the big names and discoveries in probability, statistics, and then finance and behavioral finance. I actually confused him with William Bernstein, author of the Birth of Plenty and Splendid Exchange books. Anyway, did not know that Edmund Halley (of the comet) put together life tables which were maybe the first ones since Ulpian in 225 AD. Speaking of probability, I thought that this Bayesian Python book looked interesting.  
  • The Collected Works of Armen A. Alchian: Volume 2 (3/5) See full review. I have had Alchian on my list to read since writing about his paper three years ago.
  • Calvin Pardee, 1841-1923: His Family and His Enterprises (3/5) Calvin Pardee as in Pardee Resources. Copies of this are scarce and expensive because it was a small printing of a family history for a wealthy family. A certain number were given to outsiders and have ended up on the used book market. Mine was given to Manford O. Lee of VF Corp - a big deal apparel company both now and when the copy was sent in May 1981. Pardees have been mostly on the right side of things for almost 400 years. Their ancestor was a Parliamentarian who came to New Haven during the English Civil War. They had family members in the Union army during the U.S. civil war. During the 19th century a Pardee got interested in Lehigh Valley anthracite coal, and that is where the story of wealth starts. The one mistake they made, or the reason they did not become a household name like Carnegie, is that they did not follow the coal and steel industry west to Pittsburgh. (The reason for the westward shift was that steelmaking using bituminous coking coal made more sense in Pittsburgh, nearer to deposits of that type of coal. Plus the market for steel rails was in the expanding west, not the east.) Ultimately, though, Calvin Pardee did take the cash generated by the eastern PA mines and reinvested it towards the end of the 19th century in lands in Louisiana (timber, later oil and gas), West Virginia, Kentucky, and Virginia (the latter three all coal). The Louisiana lands that were bought based on timber value but proved to have oil were the big winner. That leaves PDER as a family owned resource company that has been mining coal, growing timber, and producing oil and gas for more than a century. I can't think of anything else quite like it. Texas Pacific Land Trust has been around since 1888 but is not actively managed.
  • Something from Nothing: Joe B. Foster and the People Who Built Newfield Exploration (3/5) Great quote: "a seismic dollar is the hardest dollar to find in the oil patch". Newfield was founded by Joe Foster after Tenneco sold off Tenneco Oil (where he had been working) in pieces. Foster raised money from employees, the UT endowment, and from an instant coffee company heir. Newfield started out in the Gulf of Mexico, competing by operating on a shoestring and using 3D seismic to find hydrocarbons that had been overlooked. Basically they were small and scrappy compared to the majors and big independents in the Gulf and looked at times while the competition cared more about dollars. Also it always helps to start a commodity company right before a big bull market in that commodity. One thing that occurred to me reading this is that oil exploration in the Gulf of Mexico started in 1954, and while there were oil bear markets before, this is the first time that the GoM hydrocarbons have occupied such an unfavorable position in the marginal cost curve. Thus, Conrad Industries is in pretty uncharted territory, with a demand crunch in its primary market due to a technological innovation.
  • Mutually Beneficial: The Guardian and Life Insurance in America (3/5) Life insurer founded by German-Americans in New York. Originally as "Germania" but had to change name during WWI. Inflation is bad for life insurers, so in 1896 and 1900 employees lined up for McKinley "Sound Money Parades" in New York. They are still a mutual while most others demutualized so their managers could make a mint. The insurance and banking businesses are both full of shaky, leveraged bets on the term structure of interest rates (asset liability mismatch). I wonder how many businesses run by Boomers with zero interest in epistemology are going to fail in the next decade?  
  • Am I Being Too Subtle (3/5) Sam Zell got in trouble recently, but this is the autobiography of his real estate and distressed investing career. He started investing in apartment buildings while in law school. Law firms were not that interested in hiring him because he talked about doing deals on his resume, and they figured he wouldn't be able to stick to legal work. He acknowledges that the real money he made early on in real estate came from having nonrecourse, fixed rate debt during a big inflation. He actually did not see the Great Recession coming, he is just value oriented enough that when he got an offer he couldn't refuse for Equity Office, he sold. Since he did not see the crash coming, right before the crash he bought the troubled Tribune Company newspaper business. (He sold EOP in February 2007 and bought Tribune later that year.) The problem with buying something crappy and "cheap" at the top of the market is that the problems with it become a huge distraction as the cycle turns.
  • The 100 Best Stocks to Buy in 2017 (2.5/5) Bought this to get inside the minds of boomer investors like Mr. UWS. Quite a hodgepodge of ideas and it was very Boomerist - lots of talk of what Millenials are going to be buying. I thought they would be writing about stalwart companies that will be around forever, but they put in Amazon and Macy's, of all things. Another goofy example was that they like CVS, but they also like Target, and they like that Target turned over its in-store pharmacy business to CVS. Sure, there are some companies that have moats and will be around for a long time. But how do you know which is which? Unless they are offered at very low P/Es where you can earn your money back very quickly, you can't afford to be wrong. Even the best wireless companies (VZ and T) went from looking wonderful to not so great. I was left thinking that this could be a list of great shorts. They had a lot of consumer packaged goods stocks, which sell pretty middlebrow products that are vulnerable to competition from the bottom (generics) and top ends. Their picks Nike and Columbia Sportswear have a ton of competition, and again are vulnerable from bottom and top. Starbucks - same thing. They had a lot of healthcare stocks - these are overearning because Uncle Sam will be forced by rising bond yields to crack down on the waste. Also their picks in major integrated oils are extremely overpriced. In general, I think boomers will wish they had been in T-bills rather than these stocks.
  • Building on Air: The International Industrial Gases Industry, 1886-2006 (2/5) More than you wanted to know about the history of industrial gas companies, as opposed to the technology or the economics of the industry. Mentions David Landes book The Unbound Prometheus about the "second industrial revolution" starting late 19th C that relied on theoretical understanding as a prerequisite for further technological development. Linde patented process for liquefying air in 1895. His company is still around. The French equivalent, Air Liquide, was founded simultaneously and is still around as well. By 2007 four firms accounted for 75% of world industrial gas market. Earliest pure oxygen was generated chemically (from barium oxide) instead of physically (separated through liquefaction) and used in lighting: limelight. The Union Carbide Co was created to produce calcium carbide using hydropower, which was then used to create acetylene. The Nobel Prize in physics in 1912 was given for acetylene lighthouse keeping technology. An observation: "Until the 1990s, Linde was an engineering company that sold gasses, whereas Air Liquide has been throughout its existence a gases company that also built specialist plant." Early demand for hydrogen was for lifting gas, input into Haber Bosch process, and for the hydrogenation of fats. German inventor Carl von Linde lost his ownership interests - without compensation - in UK industrial gas when WWI broke out. Air Products invented the idea of locating an air separation plant just over the fence from a major customer (eg steelmill). Two innovations in the 1980s: pressure swing adsorption and a membrane process for separation.
History (n=13)
  • White Gold: The Extraordinary Story of Thomas Pellow and Islam's One Million White Slaves (4/5) Islamic pirates from Morocco capturing Europeans from ships and coastal villages all over Europe (and even the American colonies) and bringing them to North Africa and Arabia as slaves. The British under Charles II were extremely naive at dealing with the Moroccans who were abducting and enslaving British citizens. They invited the pirates' "ambassador" to London and entertained him for six months, even made an honorary member of Royal Society. In 1702 Queen Anne was able to free the remaining English slaves by agreeing to help attack a Spanish outpost, and it was the first time in 150 years there had not been English slaves held in Morocco. Only a handful of English vessels ever attempted to defend themselves. Salé did a brisk business in European slaves for centuries. European powers would clumsily allow arms to fall into Moroccan hands, e.g. when the Spanish surrendered two different heavily armed forts there without a fight. (Reminds me of the British in Kabul.) Bet you have never heard of the Society of Knights Liberators of the White Slaves of Africa. The Bombardment of Algiers was a big deal that finally ended white slavery by north Africans. Celebrate with a 9,000 piece jigsaw puzzle.
  • The 10,000 Year Explosion: How Civilization Accelerated Human Evolution (4/5) By Gregory Cochran and Henry Harpending (who write the West Hunter blog). We know the size of the genetic difference between chimpanzees and humans and we know the approximate length of time since the species split, so we know the long term rate of genetic change. The rate of genetic change in humans over the past few thousand years (i.e. since agriculture) is ~100x greater! Populations that experienced different ecological histories had different evolutionary responses. Thus, the various human subpopulations are astoundingly different, which is one reason that multiethnic societies tend to collapse. (The other reason is that people who aren't related can't trust each other and high-productivity societies run on trust.) This was published in 2009 so it's probably a bit out of date now. Reading Cochran's recent posts, like his review of the David Reich book on human population genetics, might be a better way to go. Cochran says that "hobbies" exist because in Malthusian farming societies people were selected to want to work, even where there was no immediate necessity to do so! A study of skull shape in Europeans showing changes over just the past 700 years: "our medieval ancestors had more prominent faces and smaller cranial vaults than modern man". Santa Maria del Mar church in Barcelona is as old as those archaic skulls. Cochran and Harpending observed that elites "raise" peasants, culling the aggressive ones. Humans have been domesticated / tamed by agriculture, resulting in changes analogous to ones wild animals have when domesticated. Their theory is that the Indo-European expansion was driven by the lactose tolerance mutation. Dairying produces 5x as many calories/acre as raising cattle to slaughter. And when two similar populations use the same resources, the one with greater carrying capacity wins. Someday it would be good to read Narrow Roads of Gene Land: The Collected Papers of W. D. Hamilton. There's a great quote from a Jared Diamond book: "When I was living among Elopi tribespeople in west New Guinea and wanted to cross the territory of the neighboring Fayu tribe in order to reach a nearby mountain, the Elopis explained to me matter-of-factly that the Fayus would kill me if I tried. From a New Guinea perspective, it seemed so perfectly natural and self-explanatory. Of course the Fayus will kill any trespasser: you surely don't think they're so stupid that they'd admit strangers to their territory? Strangers would just hunt their game animals, molest their women, introduce diseases, and reconnoiter the terrain in order to stage a raid later." 
  • The Perfectionists: How Precision Engineers Created the Modern World (4/5) Newly released, by Simon Winchester. It's about an orders-of-magnitude journey from a tolerance of 10^-1 to 10^-28 over the last three centuries. The end really reminds me of (and repeats) Measuring America (from Q1), but the beginning had some good stuff I have never heard of before. For example, gauge blocks, which you can buy cheap or expensive. Another precise toy would be high precision screws with lots of turns (250) per inch. 
  • Retreat From Kabul (4/5) The current British NATO occupation of Afghanistan is their fourth. During the first time, in 1842, the British presence was led by Major General Sir William Elphinstone who was too timid to fight with the result that all of their fighting force of 4,500 (but one man) were killed trying to leave Kabul. 
  • Massacre at Montségur (4/5) A history of a forgotten episode from 13th Century France. During the 11th C in the Languedoc region of France, Christianity spun-off a sect called Catharism, a Gnostic revival named after a Greek word καθαροί for the "pure ones". Cathars eventually spread to Eastern Europe (Bulgaria) as well. Cathars thought that the Old Testament God (YWH) was the evil God, in addition to being sole creator of the physical world. (Why doesn't anybody realize that Christianity is polytheistic?) Catharism in France was also a reaction to corruption of the Church. In reaction to this threat, Pope Innocent III launched the Albigensian Crusade against these fellow Christians. Might makes right, so Cathars' goofy beliefs (like not reproducing themselves) resulted in martial weakness and a dead end as a Christian sect. The ethnic cleansing was brutal (burning the "heretics") and Dominican inquisitors created what may be the first modern-style police state. The phrase "Caedite eos. Novit enim Dominus qui sunt eius" ("Kill them all, the Lord will recognise His own") comes from one of the slaughters of Cathars in this crusade. Author's conclusion: "From the thirteenth century onwards we no longer find saint or doctor in the Catholic Church bold enough to assert that a man who errs in religious matters is still one of God's creatures."
  • The Passing of the Great Race (4/5) Written in 1916 - more than a century old. As with reading Mencken earlier this year, it is interesting how people just do not write like this anymore: "Every generation of human beings carries the blood of thousands of ancestors, stretching back through thousands of years, superimposed upon a prehuman inheritance of still greater antiquity and the face and body of every living man offer an intricate mass of hieroglyphs that science will some day learn to read and interpret." Along the lines of First Five Pages suggestion to read more poetry in order to write better, reading more books, and older books, could help as well.
  • Against the Grain: A Deep History of the Earliest States (3/5) The neolithic revolution as a "deskilling" of men. As Alexis de Tocqueville said regarding division of labor in The Wealth of Nations: "What can be expected of a man who has spent twenty years of his life putting heads on pins?" States appeared and disappeared for several thousand years before becoming a permanent fixture of human life. Citizens of early (or all?) states are somewhere on a slave-serf continuum. Why was not Yahweh anywhere to be seen prior to 1,000 B.C.?
  • The Radicalism of the American Revolution (3/5) An interesting story here is the decline of the "gentleman" as a man who could afford to live solely off of capital. John Adams: "Leisure for study must ever be the portion of a few." This was something that colonial Americans aspired to but which was only tenuously possible here. "From the beginning of the eighteenth century a number of thinkers had attempted to reconcile the astonishing growth of English commerce with traditional notions of gentility." Now the word "gentleman" is meaningless. Also, America was more liberal than Britain: "on the eve of the Revolution the crown instructed its governors to veto all colonial efforts to liberalize the divorce laws." Mentions that the term "waiter" was adopted in the late 18th century because white servants preferred that term. 
  • Silent Coup (3/5) "We are witnessing the classically American genus of the coup d'état, achieved by folly as well as cunning, by commercial calculus, and by public relations, by both the manipulation of institutions and their own craven abdication, by cold intention and no little inadvertence, and - perhaps most essentially - at no sacrifice of the popular mythology. (A distinguishing mark of the American coup is that it should remain concealed from its victims and history even after its successful execution.)" Gary North has raised two good questions about Watergate that are still unanswered: "Historians have never figured out why somebody on Nixon's staff ordered the break-in. What in the world did this person have in mind? What did he expect to discover in the Democratic Party National Committee's headquarters?" and also "How did the government know which sections of the infamous Watergate tapes to demand from Nixon and his lawyers?"
  • Measuring America: How the United States Was Shaped By the Greatest Land Sale in History (3/5) Agrees with Spoils of War - restrictions on interior land purchases helped provoke colonials like GW to rebel. This ban and the Boston harbor blockade were mistakes by George. The result is the ultimate historical disaster, the American Revolution, which led the colonies to mistakenly believe they had anything in common. The U.S. is a nation of land speculators (like GW was) and every political decision happens to maximize value of raw land. Unrelated but good quote: "When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind..."
  • Love in the Ruins: Modern Catholics in Search of the Ancient Faith (3/5) Catholicism was repealed and replaced in 1965. The same year that Hart-Celler Act opened immigration floodgates to the U.S.
  • The Chief Culprit: Stalin's Grand Design to Start World War II (3/5) Vladimir Bogdanovich Rezun aka Victor Suvorov defected from the USSR to UK in 1978 and then wrote a number of books about WWII. The Bolsheviks thought that more mass slaughters like WWI would serve their purpose (of global takeover), so they started by backing the Spanish Civil War and when that failed, Stalin backed Hitler's rise to power. Thus Stalin agreed to divide Poland but let Hitler be first to attack, starting the another world war. Suvorov says that Stalin was weeks away from attacking Germany when Hitler preempted him, catching the Soviet military in completely helpless pre-offensive formations. The German attack was suicidal, so it caught Stalin totally off guard. (For example, no preparations for winter. If they had ordered sheepskin jackets, Soviet agents would have noticed falling lamb prices. If they had cold weather gun lubricants, Soviet agents would have picked them up on the used gun cleaning rags that they shipped back for analysis.)
  • Hillbilly Elegy (2.5/5) I wonder why this became so popular? The message of the book is that Appalachian whites are totally hopeless. It is true that they behave very differently than Germanic or Scandinavian whites (e.g. Minnesota and Wisconsin, see Sailer): more violent and less future oriented. But rural whites would be doing much better if the country had not been deliberately deindustrialized. All the more reason for Trump's tariff program. The problem is that for reindustrialization to occur, tariffs would need to be perceived as permanent, and Trump will be gone after one term. (Also, Trump is not smart enough to win Oval Office debates about this against his globalist staffers.) So, the 2019 crash will be blamed on Trump (because he was desperate to claim credit for the final years of bubble), and therefore blamed on populism and nationalism.
Biography/Autobiography (n=9)
  • A Sense of Where You Are (4/5) One of McPhee's earlier profiles, on Bill Bradley as basketball player. From Wikipedia: "Bradley's basketball ability benefited from his height—5'9" in the 7th grade, 6'1" in the 8th grade, and his adult size of 6'5" by the age of 15 - and unusually wide peripheral vision." After Princeton basketball, he played in the NBA, then was a senator for New Jersey, and challenged Al Gore in the 2000 primary - from the left. Hasn't been seen since. Every McPhee piece of writing is an investment in a certain topic, and when the subject vanishes from the earth (like Thomas P. F. Hoving), it must hurt the back catalog sales.
  • Audubon, On The Wings Of The World (4/5) This is a graphic novel of Audubon's life. Very much abbreviated (and some creative license) compared with the Rhodes biography. Excellent drawings and a culturally conservative children's book. Audubon represents early American pioneers, settlers, and frontiersmen (words you never hear anymore, replaced by "immigrants").
  • The Soul of a Tree: A Master Woodworker's Reflections (4/5) Wonderful furniture by George Nakashima. His children are still producing at his workshop in Bucks County, PA. One of his pieces (like a coffee table) is worth high five figures today.
  • John James Audubon: The Making of an American (3.5/5) Visits family in France, smuggled out to avoid military service. Moves to Louisville (fall line of Ohio River). When Audubon moved there the majority of the American population was under 20! Hunting and eating of all birds even songbirds. He lost everything in the depression in 1819. Traveled incredibly widely for the pre-railroad era - thought nothing of walking 50 miles to get somewhere. Could be worth reading more of the prolific Richard Rhodes. Audubons had trouble holding on to money. The copper plates used to print his bird portraits were scrapped after he died. He traveled so much. 
  • Scalia Speaks: Reflections on Law, Faith, and Life Well Lived (3/5) This is a collection of Scalia's speeches on various topics (law, religion, etc) published after he died. Scalia thought that the new constitutional law system where the Supreme Court legislates its opinion on social and moral issues, came from the Warren Court (1950s and 1960s). However, the anti-Federalists (such as "Brutus") predicted that the Supreme Court would be a super-legislature and would have no check against its power, being superior to and not coequal of the other branches. (All of the defects in the goofy Constitution that the anti-Federalists pointed out quickly came to pass.) For some reason Scalia repeatedly recommends that listeners read the Federalist Papers but never once the Anti-Federalist Papers. Scalia is the classic conservative as principled loser. He was "dear friends" with RBG who would like nothing more than to confiscate guns from Scalia's people so they can be ethnically cleansed. Scalia is also recognizably un-Anglo Saxon in his attitudes, which was perfect for the unrepresentative Court. He also believed that the 4th amendment did not protect against government wiretapping. Overall, it is no wonder that the country is in such marked decline with a guy like this representing "our" interests. If I have to acknowledge one positive thing about him, it would be his dissents.
  • The Eames Lounge Chair: An Icon of Modern Design (3/5) It turns out Charles Eames was a Steve Jobsian character! Did Don Albinson really design one of the only good Eames designs? Pat Kirkham said Eames was "not very mechanical or scupltural"! People are not happy to hear about this. (Remember Henry Ford was like this as well. A new archetype.)
  • Khrushchev Remembers (2/5) This was billed as Soviet premier Khrushchev's frank memoir, supposedly dictated by him onto tapes after he was removed from power in 1964, and smuggled to the west for publication. But reading it, I started to notice that - as the New York Times said of the book in 1971 - "it would take a small book to list the omissions, distortions and plain mistakes". He deflects all blame for the crimes that he and the other Stalin minions had a hand in. A convincing theory is that this book - which is anti-Stalin from a "true" Communist perspective - was published at the behest of Brezhnev to deal with problematic Stalinists still in the party. And to give Brezhnev plausible deniability, it was published first in America after being "smuggled out" by Time Magazine Moscow correspondent and deep-stater Strobe Talbott. (Regarding the transition of power from Stalin to Khrushchev, make sure to see The Death of Stalin.) Read Khrushchev's 1956 "secret speech" about the Stalin cult of personality.
  • Levels of the Game (2/5) This is my new least favorite McPhee. It is a joint profile of Arthur Ashe and Clark Graebner, centered around the tennis match they played at Forest Hills in 1968. How to structure a story like that is a major interest of McPhee in the art of literary nonfiction. Ashe died young and Graebner retired more than 40 years ago. Both are well on their way to being entirely forgotten. 
  • The One Percenter Code (1/5) Saw this on the front table at a used bookstore in hipster Wicker Park Chicago, which I thought was amusing. Very disappointing though. Here is a negative review summarizing many of the problems. I would read the bullish case on being part of a group of outlaws that recklessly risk their lives on motorcycles written by an intelligent, philosophical person. Perhaps that intersection is an empty set? It would be funny if this guy were made aware that motorcycle enthusiasm comes from living too close to cats.
Travel (n=12)
  • Moon Barcelona Walks (4/5) A very walkable city! Avoid the most touristy places and the hideous Gaudí architecture. A cityscape of five and six story apartment buildings (with retail on the ground floors) and everything connected by moped, pedestrian friendly sidewalk, or mass transit is the way to live. Wear dark earth tones and a navy blue or black pea coat to fit in best. Drink Spanish vermut on the rocks (with standard orange & olive garnish). Brilliant of them to sit out both World Wars.
  • Road Fever (4/5) Tim Cahill was one of the best in Best American Travel Writing 2004 (earlier this quarter), so I picked up his story of driving the Pan-American Highway in 1987 to set a Guinness World Record of 24 days from Tierra del Fuego to Prudhoe Bay, Alaska. (You actually can't drive the whole way because of the Darién Gap between Panama and Colombia but the car is loaded on a ship for that short part of the journey.) "I am constantly reading between the lines of the most recent adventure or travel book: how did the author finance this saga? Do we have an airline ticket scam here, a generous book advance, an articles piggyback, a cigarette company advertising expedition? Some journeys are clearly self-financed and they often result in the best books. A tight budget is the mother of adventure." Going through the Andes: "a series of high plateaus surrounded by higher peaks (Aconcagua in Argentina rises to 22,834 feet, the highest peak in the Western Hemisphere), stretch 5,500 miles from the tip of South America to the continents northernmost coast on the Caribbean. The mountains run generally north and south. For most of its length, the Andean chain of mountains is visible from the Pacific Ocean. In some places, the continental divide is no more than fifty miles from the Pacific coast. The great rivers of South America, then, run east, almost all of them." Like all adventure travelers, he is a weepy liberal: "a diplomat we'd talked to was the first to point out what I began to see as a bitter irony. Right-wing countries, known for abusing human rights, were generally the safest." The dry Atacama desert in northern Chile with places that get an inch of rainfall a century. The mountains in south America cause scary bus rides. "Sooner or later the bus will justify everybody's worst fears by plunging (Latin American buses never crash, they plunge) into a deep gorge, ravine, gulch, coulee, or canyon..."
  • Eiger Dreams (4/5) I forgot that Jon Krakauer is a great writer. This is a collection of mountaineering essays for magazines from the 80s, a solid decade before he wrote Into the Wild and Into Thin Air. This is his golden age, and the problem is that after this he went off the rails with some really boring and then politically correct topics: a book about a suicidal GenX'r who dies in the Alaska wilderness, a book about Pat Tillman, a book about "a white college football team with rape scandals", a book about kooky Mormon Fundamentalist communities as though they are some big problem. So, only Eiger Dreams and Into Thin Air are worthwhile  - and they are the only ones that have been translated into German! Regarding mountaineering: you could climb 20,310' Mt. McKinley, but should you? The "Type A" variety of high agency people can fall into a trap where they do something simply because it is hard and unpleasant. So the highest peak in North America and third most topographically prominent on Earth hijacks the "success center" in their minds. Climbing McKinley costs ~$10k, takes three weeks, is crowded and dirty (Krakauer lamented in the 80s!), and runs serious risks like falling, avalanche, and altitude related injury. (It's also easy to fail to summit.) Climbing at extremely high altitude may as dumb as scuba diving. Here's an experienced climber whose friend died on Mt Shasta (only 14k'!) in California. While it would be fun to accomplish, an economist remembers that every human action competes with the universe of other potential actions. With $10k and three weeks, you could do some serious exploration of Japan, including an inn-to-inn hike between onsen with hot spring soaks and Japanese cuisine. You could live like a king for 10 days of skiing in Utah or Colorado.
  • The Wilder Shores of Marx: Journeys in a Vanishing World (4/5) Theodore Dalrymple's tour of 20th C communist dictatorships right as that style of communism was collapsing: Albania, North Korea, Romania, Cuba, and Vietnam. "In my study of communist societies, I came to the conclusion that the purpose of communist propaganda was not to persuade or convince, not to inform, but to humiliate; and therefore, the less it corresponded to reality the better." The PC dictatorship in the west today has the stifling feel that he described in these countries. I have heard that certain countries in eastern Europe are places where it is possible to speak openly and honestly today.
  • Moon San Juan Islands (3.5/5) Apparently Antonio Garcia Martinez, the author of the book about Facebook which we reviewed in August 2016, lives part of the year off the grid in a yurt on Orcas Island. He mentioned that he was "burning the first firewood from trees I cut down myself, split myself, and seasoned myself in a firewood shed I made. This fire possesses a warmth no Nest thermostat can beat."
  • Travels With Samantha (3.5/5) By Phil G who often appears in our Links. He drove a minivan from Boston to Anchorage and back in the summer of 1993. You can't see the full route he took in the cool fold-out map leaves (why Phil?!) but it was close to 12,000 miles. [My conclusion is that driving to Alaska was a mistake - people do it because they can't comprehend how far away it is.] On the trip, he mostly slept in tents or at people's houses (he was a grad student at the time). He thought schoolteachers were the happiest people he met on the road (they had the best balance of time and money for travel). [My observation is that most of the people at places like the Grand Canyon are either early 20s or late 50s/60s empty nesters. Few people in the prime of life are having any fun.] In MN: "St. Paul is Minneapolis's plain sister." He mentions that Saulk Center, MN celebrates Sinclair Lewis even though the Nobel Prizewinner's novel mocks the town. He said that Edmonton was "Houston without the charm". He thought that eastern Washington was more backward than Alaska. [Which reminds me, the Great Basin is a fascinating place.] He did the crazy Slickrock mountain biking in Moab and mentions an interesting sounding Black Canyon at Gunnison National Monument which drops four times as much per mile as the Grand Canyon. He suggests reading Arctic Dreams and Remains of the Day. When he gets back to MIT, his ending thoughts were to "be a tourist in your own city" and encountering a typical Cambridge type, said "If tolerance was good in her feminist-liberal worldview, why was she upset with me for not hating my fellow Americans?" My thinking on road trips is that if there's an area you want to explore, fly there and rent a car. 
  • Travels (3/5) Michael Crichton actually wrote four nonfiction books, including Travels. (The others were about medicine, the artist Jasper Johns, and personal computing in 1983.) I knew that he had children with two different women but I forgot that he was married five times. I wonder how expensive that was - did he get taken to the cleaners in California? If you have to split your wealth four times you're left with only 6.25% of what you started with! Goes to show you how long there has been soft polygamy in the U.S. among elite men. While he was working in Hollywood (movies and TV), he would take trips to exotic places - and this was before many of them were over-touristed. I was also surprised that he really fell for hippie stuff in the 60s: psychics, meditation retreats, etc. "[S]cholars do not know how this ancient temple-building civilization of the Mayas arose, why it flourished, or why it died. Such reminders would be unnerving. Nobody on vacation wants to walk through a great ruined city and be told, 'we know nothing about this place.'" In Baltistan: "Ten of the thirty highest mountains in the world are strung along the small Karakoram Range, which extends barely two hundred miles, little more than a tenth the length of the Himalaya. I imagined the Karakoram to be green and forested, like the American Rockies. I did not understand that the major Karakoram summits were an average of two miles higher than those of the Rockies, and that they were in essence desert peaks rising above a high desert floor."
  • Geek in Japan: Discovering the Land of Manga, Anime, Zen, and the Tea Ceremony (3/5) Worth studying a culture that produces (by far and away) the most reliable automobiles in the world. This author (who's a nerdy white guy) thinks it is partly a product of moving very slowly and deliberately in decision making. Half of the 130mm country lives in Tokyo-Yokohama-Chiba (with 38mm) or Kyoto-Osaka-Kobe (Keihanshin, 20mm). The greater Tokyo area has the population of California! Few movie theaters - they prefer comic books? The best selling Japanese musician is Ayumi Hamasaki. Not mentioned in the book but here is a great tweetstorm by Marcin Wichary "things that surprised/amazed me about Japan".
  • Dark Star Safari (3/5) Yet another Paul Theroux book - picked this up at a used bookstore before a long flight. Important to remember that he's a 76 year old former Peace Corps hippie; sometimes his books say more about him than the places he's visiting. "He resides in Hawaii and Cape Cod, Massachusetts" according to Wikipedia.
  • The Best American Travel Writing 2004 (3/5) The best pieces were The Accidental Explorer's Guide to Patagonia by Tim Cahill, Chasing the Wall by Peter Hessler, and A Fleet of One by John McPhee. Here is a Stanford travel writing syllabus that agrees with these picks. Also Tim Cahill explored Patagonia with EarthRiver which is still in business doing those types of trips. Looks like he's written eight travel books. 
  • Ghost Train to the Eastern Star: On the Tracks of the Great Railway Bazaar (3/5) In 2006 Paul Theroux repeated his journey from thirty years earlier of The Great Railway Bazaar. "Purgatorial as a national crisis is for a traveler, it is preferable to public holidays, which are hell: no one working, shops and schools closed, natives eating ice cream, public transport jammed, and the stranger's sense of being excluded from the merriment - from everything." He says about India: "'The Indian miracle was a boasting rant in every Western newspaper and magazine, but on the evidence of Amritsar this assertion was a crock, not just a joke in bad taste but the cruelest satire. It seemed to be that little had changed except the size of the population, an unfeedable, unhousable, uncontainable 1.3 billion people..." "The landscape and the lifestyle of rural Cambodia were, and still are, closer to Africa than China." "The remotest parts of Russia - the farthest from Moscow - are easily accessible from Japan."
  • Forever Nomad: The Ultimate Guide to World Travel, From a Weekend to a Lifetime (2/5) The forever-traveling Nomads have not found solutions to the problems of constant travel (relationships, living out of a tiny suitcase) - they just do not care about them the way normal people would. These guys are the ultimate in the openness to experience personality factor. One funny thing though: "If you want a real treat, take a trans-oceanic cruise that goes west rather than east. On these cruises, you move your clock back an hour on around half the days, giving you a bunch of 25 hour days, known as Martian days. Forget about spas and fine dining; 25 hour days are the ultimate luxury of life." His favorite places to visit are Japan and Budapest.
Self-help or How-to (n=11)
  • Guesstimation: Solving the World's Problems on the Back of a Cocktail Napkin (5/5) This book goes along with How to Measure Anything (above). A high agency approach to thinking about quantities. (See previously 1,2,3,4) Suppose you wondered how much rubber your tires leave on the road as you drive around. Would you need a test track and precise measuring equipment? No - you can come up with an order of magnitude guess based on the thickness of tire tread and the number of miles a tire lasts. (Leave your answer in the comments.) You see people all the time who invest without doing dimensional analysis and/or reality checks of business model plausibility: i.e. the people who invested in uBeam, Theranos, the Valeant rollup, and so forth. Perhaps Tesla as well?
  • Surviving "Terminal" Cancer: Clinical Trials, Drug Cocktails, and Other Treatments Your Oncologist Won't Tell You About (4.5/5) Ben Williams was a professor at UCSD diagnosed with glioblastoma in 1995 at age 50. When he realized that his neuro-oncologist had no plans to see him survive, he researched options on his own. He had surgery, radiation, and chemotherapy. To make the chemotherapy more effective, he went to Tijuana and bought tamoxifen and Accutane. He was also prescribed verapamil (off label) which is a calcium channel blocker used for blood pressure treatment. It is (still) thought to prevent tumor cells from using pumps to remove chemotherapeutic agents. He also took supplements like melatonin and gamma-linolenic acid. He's still alive and doing research on treatments. His big idea was using synergistic agents in parallel rather than in series (which ultimately results in a tumor cell population that is highly resistant to treatment), and choosing agents that were state of the art rather than just what his local MDs knew. We like "high agency" stories of survival, a similar example will be Craig Venter in his autobiography.  
  • Hand Tools: Their Ways and Workings (4.5/5) There was a time when everything made out of wood was built with hand tools: hand saws, planes, chisels, etc. "No matter how simple a thing of wood, it is scarcely possible to put two sticks together decently without using a plane. Wood must be smoothed, squared up, and made to fit - the three main jobs of a plane." The illustrations are excellent. Aldren A. Watson was born on May 10, 1917; his daughter is a children's book illustrator. Aldren did a similar blacksmithing book. "Whether practiced as a trade, an avocation, or simply as a practical adjunct to daily exercise, working wood with hand tools satisfies some elemental needs of the human animal - for manual work, development of innate skills, peace and quiet, and a sense of control over his temporal affairs." 
  • How to Measure Anything: Finding the Value of Intangibles in Business (4/5) Motto: anything can be measured. Another "high agency" approach to life, in this case gathering information to inform better decisions. Mentions a paper, "On the Theory of Scales of Measurement" (1946); scales of measurement can be nominal, ordinal, interval, or ratio. Also mentions a paper "The robust beauty of improper linear models in decision making" (1979); "improper linear models are superior to clinical intuition when predicting a numerical criterion from numerical predictors. In fact, unit (i.e., equal) weighting is quite robust for making such predictions." We have experimented with linear models in both net net investing and shortselling, so this is an interesting thought. This book suggests normalizing (z-score) the predictors. Overall, this approach to gathering data about the "immeasurable" in order to dramatically decrease the width of 90% CIs around important decision-making variables goes along with the Guesstimation book, ahead. 
  • Good Strategy, Bad Strategy (See review: 4/5)
  • The Complete Guide to Fasting: Heal Your Body Through Intermittent, Alternate-Day, and Extended Fasting (4/5) I would estimate that Americans need to lose about ten billion (10^9) pounds in order to look and feel healthy. It would mean destroying Buffett's Big Carb investments and it would be very bad for Big Diabetes. The country would be vastly richer overall. It is fun to imagine, but it will never happen. However, a small subset of high-agency individuals will discover fasting as a way to shed excess weight. Fat reserves are an energy battery - you are meant to be able to use them to last extended periods without food. Fasting may also be beneficial for people at a healthy weight, for example by promoting autophagy and increasing growth hormone. The author is a physician who says his patients don't realize that pita bread is "bread" (sad!- also remember "bread is poverty food" from DeVany). There is data from WWI and WWII showing that food rationing decreased mortality from Type II diabetes. If there is ever a major food supply interruption in the U.S. from EMP or something, the fattest people are not going to starve for over a year! 
  • Goodbye, Things: The New Japanese Minimalism (4/5) Even more extreme than Kondo! Minimalism is good for aesthetic reasons (see 1,2,3) but I have realized there is more too it than that: minimalism is also about focus. There are only so many things that you can do - time is extremely limited. (That's why spending three weeks camping in an ice field in order to try to climb a 20k foot mountain may not make sense.) Extraneous stuff crowds out what is important. These days I get rid of all books after I read them, unless I specifically want to read them again someday. If a book is worthwhile, share it with a friend. If it's not, sell it or throw it away. Minimalism is good practice for overcoming the sunk cost fallacy.
  • The 4 Hour Body: An Uncommon Guide to Rapid Fat Loss, Incredible Sex and Becoming Superhuman (3/5) We liked Tim Ferriss' Tools for Titans so we thought we might like this earlier book of his but... were not that impressed. Perhaps because this one is seven years old and a lot of the worthwhile ideas (low carb, lifting weights) have been picked up and carried further by guys like Mangan. One idea I did like from the end was that "your body is almost always within your control". He says you are a "Dow Joneser" if your self-worth is dependent on things largely outside your control (like watching the markets). But if you put your mind to it you can really improve your fitness and body composition and have satisfaction in that accomplishment. Hence deadlifting and impressive hiking feats.
  • Genius Foods: Become Smarter, Happier, and More Productive While Protecting Your Brain for Life (3/5) This is true stuff but no longer cutting edge: avoid industrial oils, eat low carb, fast, and so forth. Mentions a study I hadn't seen before: "Lower HbA1c and glucose levels were significantly associated with better scores in delayed recall, learning ability, and memory consolidation." Keeping insulin down is important. Another thought from an Alzheimer's researcher: "The inhibition of lipid metabolism by high carbohydrate diets may be the most detrimental aspect of modern diets" because in addition to being a fuel the ketones can be a signaling molecule in some circumstances. A reminder that anticholinergic drugs are associated with dementia. Also, another idea is that "once you are fat-adapted, periodic high-carb meals can be a potent way of promoting healthy leptin dynamics."
  • The First Five Pages: A Writer's Guide to Staying Out of the Rejection Pile (3/5) Things not to do: reasons that literary agents and publishers will immediately reject fiction manuscripts. But many of the principles apply to other types of writing. And good writing about investments tells a story. Maybe all good writing is storytelling? The problem with investment writing that limits its quality is that it needs to be done quickly. It can’t spend six months being polished like a John McPhee piece. He suggests reading poetry to improve writing by cultivation attention to language. What should I try - Kipling perhaps? He also suggests doing deliberate vocabulary building. 
  • Navy SEAL Mental Toughness: A Guide To Developing An Unbeatable Mind (1/5) This book is about how tough SEALs are not about how they get that way. What's the point of having mental toughness if you use it to be a neocon pawn? The real wisdom is knowing when to persist and surmount obstacles and when to try applying yourself to something else. 
Literary Nonfiction (n=7)
  • The Patch (5/5) John McPhee's latest: a collection of bits of his writing over the past 60 years, previously published in magazines but not in books - going all the way back to his Time magazine celebrity profiles from the 50s and 60s, where he got his start. The "patch" refers to a patch of lily pads where he would fish for chain pickerel and also to the patchwork quilt of the small excerpts. "Detonations of knowledge" as his profiler said. Some of these excerpts are so good you hate to imagine them not making it into print. He gives an explanation for his "congenital opacity to birds." The erosion of the granite rollers in the Hershey's chocolate conching machines. Bill Tierney leaving Princeton to coach lacrosse at Denver, "in every respect, including geography, a spectacular jump downscale." McPhee is going to be 88 in March.  
  • Looking for a Ship (4/5) More John McPhee: "Columbus sailed with fifty-two men on a square-rigger that was a hundred and seventeen feet long. Washburn is sailing with thirty-three on a merchant ship that is six hundred and sixty-five feet long. Washburn calls this undermanning. Steaming between the Scylla of automation and the Charybdis of bankruptcy, contemporary American shipping companies find ways to get along without crewmen." Remember the story of the El Faro?
  • The Outlaw Sea: A World of Freedom, Chaos, and Crime (3.5/5) We mentioned William Langewiesche (and his article about the El Faro) in a recent links post. He says that ocean shipping "is not exactly a criminal industry, but it is an amoral and stubbornly anarchic one." One of the stories is about a tanker carrying molasses called the Kristal, which coincidentally sank in a storm right off the coast of Galicia with a very unlucky Galician sailor on board. The rescue helicopter which saves much of the crew came from La Coruna - the same town as lives the author of Everything but the Squeal. Another story is about a terrible loss of a ferry, the MS Estonia in 1994, with the loss of many passengers. It was a giant Baltic Sea motor ferry that took on water through the bow doors and began to capsize. Only those high-agency people that fled immediately, before the heel became too extreme to escape, survived. 
  • Uniforms (3.5/5) By the great Paul Fussell, author of (not yet reviewed) 5/5 classic "Class". Points out that you see dark blue (naval inspired) uniforms everywhere.
  • Arctic Dreams (3/5) We've read McPhee on hyperborea, now it's time for Barry Lopez: "This is a land where airplanes track icebergs the size of Cleveland and polar bears fly down out of the stars. It is a region, like the desert, rich with metaphor, with adumbration. In a simple bow from the waist before the nest of the horned lark, you are able to stake your life, again, in what you dream." Trees in the Arctic: "A cross-section of the bole of a Richardson willow no thicker than your finger may reveal 200 annual growth rings... Much of the tundra appears to be treeless when, in many places, it is actually covered with trees - a thick matting of ancient willows and birches. You suddenly realize that you are wandering around on top of a forest." Niche space: "These Tununiarusirmut men... knew beyond a shadow of a doubt what made them happy, what gave them a sense of satisfaction, of wealth. An abundance of animals." He says that the Bering Strait is a paradise for bird watchers. Audubon: "all wildlife that live in the Chukchi and Beaufort Seas in the summer months funnel through the Bering Strait twice each year". Mentions the diary of an Arctic ship captain (from the age of sail) trying to navigate through a day of dangerous squeezing ice: "I did the heaviest smoking of my life. I smoked twenty-two cigars and numerous pipes, and I had coffee brought to me every hour. I don't know whether it was the tobacco or the coffee that brought us through, but we made it with no damage." The original nootropics! Mentions William Parry's drawings of solar arcs and halos. Also about niches: "The itineraries of arctic animals are not obvious. [...] The land in some places is truly empty; in other places it is only apparently empty. To those who had no interest in the movement of animals, the entire region seemed empty. They could not grasp a crucial fact - semi-nomadic people living here in such small numbers were an indication that the animals themselves moved around. Either the animals did not stay very long in one place, or there were not very many of them to begin with, or they were very hard to kill. Or there would be more people, living in more permanent dwellings. The land was not empty, but it teemed with animals that would sustain men only in a certain, very limited way." Only tiny portions of the Earth's surface are habitable, and these are now desperately crowded. 
  • A Burglar's Guide to the City (3/5) Written by Geoff Manaugh, who has appeared in the Links. This was not as good as Where the Money Is, about bank robberies and heists in Los Angeles during the 80s/90s bank robbery renaissance. Some of these heists and robberies are done by incredibly high agency, clever, intelligent people. (Remember The Great Train Robbery from the second quarter.) That type of person probably just goes where the opportunities are. In a bubble it is cryptocurrency startups, but in a recession it will be something dangerous or harmful like robbing banks or being a revolutionary. This is why elite overproduction is a threat to the ruling elite. It really seems as though the current globalist elites are desperately using bubbles to cope with that problem, which is why we have had three bubbles in twenty years. Other lesson: burglars don't go through doors! "[Doors] are a distraction and a trap. By comparison, the wall itself is often more like tissue paper, just drywall and some two-by-fours... Like clouds, apartment walls are mostly air; seen through a burglar's eyes, they aren't even there."
  • Inside the Sky: A Meditation on Flight (3/5) William Langewiesche is the son of the author of Stick and Rudder, and went into a career writing about transportation disasters. He gets called by Atlantic or Vanity Fair if a ship sinks or a plane crashes. In Q2 we read his book about the "stubbornly anarchic" world of ocean shipping. One part is the early history of instrument flying: "Those veterans [who] kept insisting they could fly by the seat of their pants, and they thought less of those who could not. Their self-deception now seems all the more profound because the solution - a gyroscope adapted to flying - was already widely available." "The sense of accelerating into a turn is the same as that of decelerating from the opposite turn. Here at last was the explanation for the persistence of so much confusion and death." The gyroscope for aviation was invented by Elmer A Sperry and it was "like cutting a porthole through the fog to look at the real horizon." The "gyro" in gyroscope and in gyros meat both refer to "turning" or "rotation"! Also, "William Ocker was giving birth to modern instrument flying. He had discovered the most disturbing limitation of human flight - that instinct is worse than useless in the clouds, that it can induce deadly spirals, and that as a result having gyroscopes is not enough, that pilots must learn against all contradictory sensations the difficult discipline of an absolute belief in their instruments." The dark ages of weather forecasting based on pattern recognition: "they called it the 'analog approach' but might more honestly have called it educated guesswork. The results were poor for the obvious reason that no two storms are ever the same. A weather pattern today that looks like one last year will become something quite different by tomorrow."
Geology (n=5)
  • In Suspect Terrain (4/5) More McPhee! Highlights: "The Pleistocene - the Ice Age - is all behind us. The Holocene appears to be nothing more than a relatively deglaciated interval. It will last until a glacier two miles thick plucks up Toronto and deposits it in Tennessee." "Rocks are the record of events that took place at the time they formed. They are books." When the book was written in 1982, a character mentions that "he would not go near Williamsburg, or for that matter a good many other places in Brooklyn" - what a time to buy! Less skilled geologists in the USGS were sent to "penal quadrangles" such as "the lesser bayous of Louisiana." "If they did not know strike from dip, they could go where they would encounter neither." If a Chinese geologist wanted to see exposed rock, "they don't depend on streambanks and roadcuts as we do... the peasants dig out a mountainside." "Figuring out the Appalachians was Problem 1 in American geology, and a difficult place to begin, for it was scarcely a matter of layer-cake legibility, like the time scale in the walls of the Grand Canyon." Check out these slabs of Martinsburg slate. "The mountains of Pennsylvania are far less known and visited than many of the American ranges at much greater distance, and even less than many of the European ranges, while they may be said to vie in beauty with any others upon Earth..." This is a good scientific history of two revolutions: acceptance of glaciation (Agassiz in the 19th century) and of plate tectonics, which was new and controversial when McPhee started writing about geology.
  • Rising from the Plains (4/5) McPhee follows a geologist born in Wyoming whose mother moved there to be a one room schoolteacher and whose father came from Scotland to be a rancher - both pioneers, not immigrants. There was a saying among homesteaders in Wyoming: "If summer falls on a weekend, let's have a picnic." Wyoming hematite made Rawlins Red paint. Geologists are influenced by rock where they grew up. Also, "in the contrast between erosion and orogeny, erosion never loses." The Union Pacific runs across the famous "gangplank". (This is where the Union Pacific crossed the mountains.) Interstate 80 runs through Wyoming and it can get closed by snow in every month but August. Geologist lived to be 90. McPhee could really use diagrams and maps in his books - wonder if he has ever read any of Tufte's thoughts on information density? 
  • The Map That Changed the World: William Smith and the Birth of Modern Geology (3.5/5) Simon Winchester's verbosity is almost unbearable at times, but he picks excellent subjects, which is half the battle of being a nonfiction writer. Unexpectedly, in addition to being a history of geology this is also partially a history of the decline in educated people's religious belief. For example, fossils were first thought to be lapides sui generis ("stones unto themselves"), created to "reinforce in humankind's collective mind the omnipotence and imaginative beneficence of God". However, this view ran into trouble when people started to notice that the fossils represented animals and plants that no longer existed. How could parts of Creation go extinct? Winchester's view is that "for the first time the earth had a provable history, a written record that paid no heed or obesiance to religious teaching and dogma..." Geologists as big walkers theme - "a trek of fifth miles seemed to Smith no more than a casual stroll". Great quote - "The Mearns Pit at High Littleton has a standing in the history of geology that is comparable to the one that Gregor Mendel's Moravian pea garden has in the science of genetics, the Galapagos Islands in evolutionary theory, and the University of Chicago football stadium in the story of nuclear fission." The protagonist and "first geologist" William Smith was a canal and mining engineer who invented stratigraphy based on the identification of fossils. Unfortunately he had immense difficulty shipping work (maps, papers) which reminds us of Audubon. So much difficulty that he ended up in debtor's prison briefly! Reminds us of this thought: "it's a very bad sign to have a lot of projects that are '90% complete'". Another interesting idea is the Earl of Leicester who took over farming when one tenant did not renew his lease. He has a lot of fun experimenting with new soils and fertilizers, crossbreeding sheep and pigs - all part of the beginning of the British Agricultural Revolution.
  • Grand Canyon: A Natural History Guide (3.5/5) A good overview of the geology and ecology of GC. Great part: "Grand Canyon is remarkable not for its bigness but for its smallness. The Grand Wash trough just below the GC is much bigger in terms of sheer volume removed by erosion, but it is nowhere near as impressive to look at because it's too big. And for real size, consider what the Mississippi River has done. It has eroded a volume of material that would fill the GC many times over. Yet no one stands in Denver and looks out to the east thinking what an amazing erosional feat has been performed between the Rockies and the Appalachians. [...] Canyons, as opposed to valleys or larger landforms, are created by a tension between erosion and the lack of erosion. They are features of arid regions, where a river or stream works at the bottom, but there isn't enough erosion to widen the sides. This is best illustrated by slot canyons, where walls actually overhang and in places block one's view of the sky." Also: "Rock type influences the shape of the GC. Softer rock forms slopes. Harder forms cliffs. The hardest of all, the Vishnu [at the bottom] forms a steep walled V. In combination, the varying hardness of rocks account for the canyon's distinctive starstep profile."
  • The Man Who Walked Through Time: The Story of the First Trip Afoot Through the Grand Canyon (3/5) Books can't describe what the canyon is like. Colin Fletcher did the first recorded through hike entire length of Grand Canyon national park as it was defined in 1963. Strangely, the book was not published until 1968. Reading it, it seems like he really struggled to come up with 230 pages of material about the two month experience. Maybe a good sign that spending more than a few days at a time in the canyon would have seriously diminishing returns? Lucky that the USBR was not able to dam the Grand Canyon. Another canyon through hiker is Kenton Grua who hiked the expanded national park and therefore the entire canyon in 1977.
Cooking (n=2)
  • The Great Chile Book (4/5) By Mark Miller who created the Coyote Cafe in Santa Fe. Two kinds of chiles: fresh and dried. A "chipotle" is a smoke-dried jalapeño, by the way. The eponymous restaurant uses them to flavor the meats and beans. If you are using store bought chili powder instead of making your own, you are missing out on a lot! I have never seen most of these chiles at a grocery store, but on the other hand most recipes call for ones that easier to find.
  • Everything but the Squeal: Eating the Whole Hog in Northern Spain (3/5) Emigration from Spain picked up beginning in 1853, to places like Cuba (a Spanish colony from 1492-1898), Mexico, Argentina, Uruguay, and Chile. Around two million Galicians emigrated over a period of a century - it was a poor province with surplus population. He says "Spanish breakfast, in case you didn't know, is coffee and cigarettes." Points out that Galicia has been conquered at least a dozen times over the past few thousand years. This book did not instill any desire to eat uncommon pig parts - he did it for the sake of checking them all off, which the Galicians found amusingly peculiar.


CrocodileChuck said...

To your query in the review of 'Silent Coup' above

Note the composition of the burglars & their provenance:

Five part series, worth a read.

CrocodileChuck said...

To your query in the review of 'Silent Coup' above

Note the composition of the burglars & their provenance:

Five part series, worth a read.

Anonymous said...

Chuck - can you share your thoughts on that for those readers who aren't going to make it through the five part series? Thank you.

Anonymous said...

I have been watching videos about airline crashes lately. It's as interesting as Barn Find Hunter.

So far, I can recommend not flying at night. Pilots have less context when they land or take off. They may choose a wrong runway. They cannot see runway obstructions--parked equipment, etc.--when landing or taking off.

Don't fly third-world airlines. The pilots may be poorly screened and the talent pool shallow. A Pakistani airliner in a recent disaster had a navigator with dyslexia. He could not read his manuals or his instruments. The first officer had earlier failed out of airline school. Also, he was scared to death of the pilot, maybe because his low skill gave him few alternatives. The pilot was addled someway. They flew into a hill because the pilot had a wrong idea.

Here is a Korean Boeing 747 air freighter that broke apart in midair because of a fire that apparently started in a pallet of lithium batteries.

Don't fly during bad weather. You are safest if pilots can see where they are. You are safest if pilots are well rested. Avoid flying in fog, icing conditions, or at night time. Do you really have to fly at this season of the year? Make your own decisions about weather. Pick airlines operated by high IQ countries.

The miserably incompetent air crew in this Air Kenya disaster probably were third world. It's striking that this video does not give the names or any other identifying information about this air crew. All their other videos give last name, first initials, and age of captain and first officer.

I'm used to this failing in newspaper articles about street murders.

Never go to any third world country.

More dopey third world airlines.

Analyses of airliner disasters probably is a low-payoff data mining and statistical analysis problem (and diversion) from high-payoff activities. Besides, I don't know where to get a comprehensive data set about air crashes.

What would anybody pay me for the knowledge that flying on Tuesday at 9 am, on a blue-sky day in August, on an airliner owned, and managed by Caucasians, and piloted by a Caucasian with an IQ of 125 or more, is the safest way to fly? Not so much.

But we can informally develop our own flying rules.

Things barely hold together. Generally, people are in the grip of little-understood forces that make them pilot ships into the middle of hurricanes, take off in airplanes into passing thunderstorms, or deprive soldiers of medical treatment.

Qantus -- first-world airline, heavy rain, night time, poor communications, poor training, domineering captain.

Choose flights that take off and land during daylight. Start early, in case of canceled flights.

This time, it's from a catastrophic illusion during a landing in the dark without visual cues.

League of Women Voters said...

From the BAP manifesto:

"Please remember that these small people like Bill Gates, Zuckerface, and Bezos are entirely dependent men. They can't really do with their wealth what you think they can... for example, they could never just kill a man and take his wife, but even the ruler of the smallest African country has this power, this true wealth. When your happiness and wealth depends on the force of arms of another, you're not really your own man... nor can you enjoy the greatest delights in life."

Anonymous said...

I enjoyed Zell's book but had a different take on his actions prior to the financial crisis. This is a guy who spent a whole book talking about how he saw major trends happening, invested heavily in them, and then cashed out before things went south.

From my reading, he clearly saw the financial crisis coming (is there anyone in real estate who didn't know what was happening? Especially a distressed real estate investor??) and wanted to sell out at the top, which he did quite successfully. Since he was probably bored and no one knows when the music is going to stop, he then put a small equity slice in a huge LBO of the Tribune assets, which went south.

Since he sold Equity Office Properties at an inflated valuation to people he knows and is friendly with, this book seemed like a bit of an apologist account, trying to make it seem like he didn't know the top was in, so that his counter-parties can save face and people won't be afraid to buy from him (and it won't carry a negative stigma) in the future.

Reminded me of reading Burt Reynolds biography once, which seemed to be a similar apologist account to explain how he didn't actually kill the husband of his lover at Merv Griffin's house out in the desert (which I believe remains unsolved and he was the obvious suspect).

wildcat said...

what's your problem with Scuba?

Anonymous said...

Allan Folz said...

I've been thinking a lot lately about high-agency persons.

My epiphany… politicians, the Fed, Fortune 500 CEO’s, successful media celebrities, especially, are NOT high-agency persons (at least beyond their own financial appetite). Each has their personal pseudo-scientific scam that they are making bank on, but not being high-agency people, they are not spending time thinking about if they are running a scam and got to where they did, odds are good the other guy is running a scam too.

If there is a unifying conspiracy it is that no one inquires about the other guy's grift. It's don't ask, don't tell... one hand washes the other.

I don't think that's obvious. I think we high-agency generalists see through our first couple scams and then surmise the odds that the next pseudo-scientifc idea is also a scam increase, not decrease. At some point one assumes everything is a scam until proven innocent.

Normals/low-agency people won’t see it that way. Even when they see one scam, maybe two if they're lucky, they will think it is just a coincidence.

In a way it is a coincidence. There isn't a group of conspiracy central planners. But there is a group of self-promotional grifters who have made it "big." The precise pseudo-science scams that have broken through to be "big” at any given time is where the coincidence is.

CP said...

Every day, an individual will conduct a few economic transactions with other people, but they will partake in a far larger number of transactions with their future self. The examples of these trades are infinite: deciding to save money rather than spend it; deciding to invest in acquiring skills for future employment rather than seeking immediate employment with low pay; buying a functional and affordable car rather than getting into debt for an expensive car; working overtime rather than going out to party with friends; or, my favorite example to use in class: deciding to study the course material every week of the semester rather than cramming the night before the final exam.

In each of these examples, there is nobody forcing the decision on the individual, and the prime beneficiary or loser from the consequences of these choices is the individual himself. The main factor determining a man's choices in life is his time preference. While people's time preference and self-control will vary from one situation to the other, in general, a strong correlation can be found across all aspects of decision making. The sobering reality to keep in mind is that a man's lot in life will be largely determined by these trades between him and his future self. As much as he'd like to blame others for his failures, or credit others with his success, the infinite trades he took with himself are likely to be more significant than any outside circumstances or conditions. No matter how circumstances conspire against the man with a low time preference, he will probably find a way to keep prioritizing his future self until he achieves his objective. And no matter how much fortune favors the man with a high time preference, he will find a way to continue sabatoging and shortchanging his future self.

The Bitcoin Standard: The Decentralized Alternative to Central Banking

Anonymous said...

Re "He also does not observe (as Glenn Chan or I have) that a lot of smart psychopaths are getting away with business fraud."

It goes much further with psychopaths. THIS is what needs to be observed and it can IF you pay attention...

The most vital urgent and DEEP understanding everyone needs to gain is that a network of manipulating psychopaths ARE governing big businesses (eg official medicine), nations and the world (the evidence is irrefutable as is MOST OBVIOUS with the Covid Scamdemic (see “The 2 Married Pink Elephants In The Historical Room –The Holocaustal Covid-19 Coronavirus Madness: A Sociological Perspective & Historical Assessment Of The Covid “Phenomenon”” at

By a DEEP understanding I mean that Hollywood flicks and the entertainment industry at large have presented a deliberately erroneous picture of psychopaths which keeps the public misinformed about what and who psychopaths really are (eg most psychopaths are not overtly violent) but they are ALWAYS exploiters, deceivers, liars, manipulators, and destroyers (the Highly Destructive Fake Covid "Pandemic" is ONE fitting example out of countless others) , and therefore they are NOT people to ever respect, listen to, admire, vote for, follow and obey BUT to ACTIVEL fight and jail for life (see linked source above).

But rulership by psychopaths is only ONE part of the equation that makes up the destructive human condition as the article explains...

CP said...

The mountains in south America cause scary bus rides. "Sooner or later the bus will justify everybody's worst fears by plunging (Latin American buses never crash, they plunge) into a deep gorge, ravine, gulch, coulee, or canyon..."

At least six passengers were killed after they were stung to death by bees when the bus they were traveling on crashed on a road in Nicaragua. Authorities said Santos Herrera, 22, was driving on El Caracol-La Rica route that covers the northern cities of Jinotega and San Sebastián de Yalí, when he encountered mechanical problems and lost control of the school bus in the municipality of San Sebastián de Yalí on Monday. The crash sent the bus crashing into a 160-foot-deep slope where the beehives was were located.