The main idea of this book is pretty simple: to use actual raw historical documentation to understand real condition of slavery in American South. Instead of emotional fiction written by people who really did not know what they are writing about, as was the case with majority northern abolitionists, the sources of the book are emotionless church records of births and deaths, accounting books of profits and losses from cotton or selling and buying slaves or doing any other activities. Important sources of information also were diaries of multiple individuals of what was a pretty literate society of South. These records where not created to convince anybody in anything or to create positive narrative for future historians. These were everyday records used to run business and trace events of live and therefore they are the best source to recreate what this society was really like.
While authors go out of their way to stress again and again that they are completely detest slavery and racism, the documents create much more complicated picture than one taught in American colleges and schools.
Prologue. Slavery and the Cliometric Revolution
The prolog is a short description of Cliometric method and its application to the history of South.
One. The International Context of U.S. Slavery
The review of slave trade brings some not exactly expected facts. One of the most interesting is that slave trade in America was very unevenly distributed along the continent. The number of slaves imported to US was just 6% of total, while Brazil had 36% and Caribbean 17%. However survival rate was so different that black population of United States continued to grow even after all slave trade stopped while population in Latin America was barely supported by continuing import. The share of foreign-born slaves in US went below 50% sometime in 1710s and by 1860s it was close to 0. The process of emancipation of slaves started in England when in 1772 Lord Chief Justice ruled slavery not supported by English law. It started nearly immediately in USA with Society of Friends in Philadelphia banning it for its members in 1772 and completely abolishing in 1865. The last country to abolish slavery in America was Brazil in 1888.
Two. Occupations and Markets
Unexpected data came from comparative analysis of professional activities of slaves versus total adult population. While majority of all adults were manual laborers as expected, % of artisans and semiskilled workers was pretty much the same between all adults and slaves. Even more unexpectedly was to find out that about 7 to 8% of slaves worked in managerial and professional positions. Obviously it was within constrains of plantation, but nevertheless it puts and interesting twist on racial attitude variation between white individuals who were familiar with individual slaves and whose who were not. The southerner exploiters of slave labor often knew and appreciated real capabilities of individuals and used their ability in the most effective way they could come up with, while northern abolitionists fought slavery on moral grounds while firmly believing in inhering inferiority of black people.
Another interesting fact is that slave trade did not play significant role in business amounting to less then 2% of slave population in any given time. According to documents it also contained disproportional number of young individuals and seldom included families either whole or broken. Studies of Maryland slave trade show that about a half of all sales was due to bankruptcy or from estate of deceased planters. I guess humans are not a very profitable if used as merchandise.
Also an analysis of migration patterns shows that slave migration usually occurred as part of planter’s movement to new land, rather then slaves movement via trade.
Three. Profits and Prospects
The analysis shows that slavery was profitable, but only in very complicated way related to human life cycles. Based on age/price variation the pick returns from slave labor was in the age 25-40 years, but in order to achieve it the investment in childbearing and upbringing was necessary before labor extracted from a slave would allow breakeven between cost of slave maintenance and returns on slave labor. Interestingly enough prices for old slaves did not fall to 0 until age of 70+ signifying that even at this age return from slave labor was profitable. The data also reject notion of slave breeding for sale. Analysis of prices for cotton and other products of plantation show that slavery was economically viable system. Moreover analysis of slave employed in cities as artisans often on their own making money and paying taxes to owner demonstrates that cities did not kill slavery, but rather provided additional venue for its use.
Four. The Anatomy of Exploitation
This is detailed review of documented information about live of slaves and level of satisfaction of their needs. It reviews food, shelter, medical services, family live, and also exploitation with punishment and rewards used to extract maximum returns. Not surprisingly it confirms notion of tangible advantages over hired unskilled hands in all these areas. More strikingly is to find out that life expectancy of slaves in USA was only slightly lower then free whites and at the same level as for population of France.
Five. The Origins of the Economic Indictment of Slavery
This chapter is not about slavery, but rather about slavery related writings and how attitude to the slavery created familiar narrative about slavery being economically inefficient system regardless of real facts on the ground.
Six. Paradoxes of Forced Labor
After review of myth creation, the detailed review of actual economic performance paints quite a different picture. This picture includes a set of data supporting a number of notions that authors considers as paradoxes:
1. Slavery based agriculture was more efficient then fee labor based agriculture
2. Quality of slave labor was much higher then it is commonly perceived
3. The black low level managers (drivers) and middle managers (overseers) were quite competent in their job, often more competent then white overseers hired from outside.
This chapter also provides an interesting discussion about economic significance of property rights in man. The proposed notion of difference between slave owning and free society as difference in who has title to human capital rather then who controls it. In free society the title on human being is not separated from this human being, while title on slave belongs to slave owner. Paradoxically it could mean that free man would rent out himself at a market price, which depends on supply and demand for labor that could lead to extremely low price at the level of minimal subsistence. Slave owner on other hand owns this particular individual slave as capital good with significant investment and therefore amount of resources allocated to slave’s subsistence could be significantly less depended on market fluctuations. Net result is higher level of subsistence available to a slave comparatively to free laborer.
Epilogue. Implications for Our Time
The epilog provides a short review of what happened next after emancipation. The picture was not a pretty one. The South economy significantly deteriorated for all population, but it was especially bad for former slaves. While getting title on themselves they did not get main source of subsistence – land. Without land they had to sell their labor and price for this labor went as low as it gets. Overall statistical information shows a drastic decrease in all measures of well being such as life expectancy for former slaves.
My Take on It:
Free man curries his own cost so his market price could be marginally lower then slave’s because slave owner carries cost of raising slave and has to include this investment costs in his calculation. Based on statistics collected and analyzed in this book the slave’s life was not significantly worse then life of free laborer in terms of food, shelter, housing, and, consequently, qualitative parameters such as life expectancy. However humans are not machines and they tend to put a very high value on self-control and self-direction. This value could not possibly be matched by improvement in material wellbeing because these are incomparable apples and oranges.
Too bad that vast majority of Americans especially young does not know details of slavery history provided in this book and mistakenly believes that slavery means materials deprivation. It makes them blind to real nature of promoters of big democratically elected government and welfare state. They fail to notice that such welfare state is slavery under other name because it would deny them options of self-control and self-direction the same options that slave owner denied to well fed and sheltered slave.
However I am very optimistic about future because we have overwhelming prove of inability of centralized welfare state to produce goods and services that people want and therefore being inferior to laissez-faire capitalist society.
Southern slaveholding capitalism was economically effective and therefore stable. Welfare state is not economically ineffective and therefore is unstable. In its most murderous communistic form it could last for a few generations by killing all opposing individuals. In its relatively benign social-democratic form it would not last beyond running of other people’s money.
The main idea of this book is simple: widely distributed property is necessary for existence of democratic state. The authors make case that moving from more or less equalized distribution of land as main productive asset at the time to highly unequal distribution of wealth and financial assets now jeopardizes continuing existence of democratic form of government and so the property should be democratized and redistributed much more equally then it is done now. The tool for such democratization of property is property sharing when employees own a significant share of company and get corresponding returns.
1. An American Vision
This chapter reviews founding father’s vision of America as land of property owning farmers self-sufficient in application of mainly their own labor to the land they own. In addition to founding father’s writing authors review Homestead Act as attempt to maintain this ideal of independent farmer. In the last part of this chapter they argue that substitution of land by corporation as main source of production make corporations a new land, subject to more equal distribution of property rights in this new land.
This is a set of examples of corporations that more or less widely distribute shares or profits to their employees. Examples include: Google, Procter & Gamble, Southwest Airlines and a bunch of smaller enterprises.
3. Citizen Shares in the United States
This is a review of current status of employees’ stock ownership with results of survey showing that 47% of American workers have some capital stake in their companies and/or profit sharing plan. The conclusion is that broad-based capitalism is pretty common in USA.
4. How it Evolved
This is a historical review of how such wide participation in corporate ownership developed. It starts with artisan small businesses as propertied class versus wage earners as propertyless class; goes through history of railroad ownership and than through the list of individual entrepreneurs and then corporate organizations that promoted broad-based capitalism as counter measure against class war between labor and capital.
In this chapter authors report results of several studies of companies that use various forms of profit and property sharing. Overall results are positive in term of higher loyalty, higher level of involvement and effort, and better working conditions. Significant attention in studies was allocated to the problem of free riders – workers who, while receiving equal share, tend to minimize their input. As it could be expected, in such situations profit sharing increased social pressure on free riders making them to increase level of efforts.
6. The Road to Increasing Citizen’s Share
Authors see road to expansion of broad based capitalism in very typical for academician’s way – top down political pressure with National Goals and Objectives, government incentives and progressive taxation on capital gains. It also includes wide government supported program to educate population and businessmen in advantages of broad-based capitalism.
Here author restate their vision of Citizen’s Share and Broad-based capitalism as the way to assure political and economic success of United States.
My Take on It:
I agree with necessity of Broad-Based capitalism, as the only reliable way to achieve economic and political prosperity and even survival of American Society. However I have a problem with profit sharing and distributed ownership as main tools to achieve results. The problem of both these method is an absence of control over property for participating individuals except for top-level managers. These methods allow workers to get some share of return, but do not make them real owners of anything. By real owners I mean individuals who have both parts of ownership – title and control. Besides these methods leave outside everybody not employed in some business that would be more and more common even with advance of automated production of goods and services
My solution – to separate title (rights) to natural resources and actual control (decision-making) with rights being equal and marketable when users of more then average buying rights from users of less then average would make everybody equal owner of nature with owners of companies and capital being sole owners of their property. This way natural resources and related property rights are equally distributed, while human created resources belong to individuals who created them and / or to the most capable to combine human created and natural resources to produce goods and services in the most effective and efficient way as defined by market where such individual would be able pay more for use of natural resources then less efficient users.
This is basically affirmation of week form of efficient market theory. In strong form theory states that all existing information is immediately incorporated into pricing of securities and therefore it is not possible to beat market. Based on empirical evidence collected over last couple centuries it does not sound as correct statement. The week form of the theory does not claim market perfection; it rather limits itself to claiming market unpredictability. Again based on empirical evidence and unaccountable numbers of individuals who lost money trying to predict market movements, it sounds like a pretty correct statement.
In addition to review of different approaches to securities market: castles in the air and bubbles; technicians and fundamentalists; risk / reward ratios; this books provide quite commonsensical advice on investment in securities market correlative with individual’s life cycle and objectives.
Part One: STOCKS AND THEIR VALUE
1. FIRM FOUNDATIONS AND CASTLES IN THE AIR
Investing is a necessary part of life for everybody who does not want to lose wealth to inflation at minimum or is capable to increase wealth at maximum. A very nice table is provided to illustrate this thesis by comparing prices in 1962 to prices in 2010 (average increase 10-15 times). Two types of investment theory reviewed – firm foundation which states that securities have intrinsic value based on fundamentals of underplaying businesses; and The Castle in the Air theory which states that all depends on perception of investors and securities prices moved by passions and human psychology.
2. THE MADNESS OF CROWDS
This chapter dedicated to review of long history of investment bubbles confirming validity of the castle in the air approach. It starts with famous Tulip bubble 1633 – 1637 and ends with stock market bubble preceding great depression of 1922-1929
3. SPECULATIVE BUBBLES FROM THE SIXTIES INTO THE NINETIES
The bubbles review continues with review of New Issue / Growth stock craze of 1960s when in 3 years 1959-1962 more new issues were created then ever before. The next was Conglomerate boom of mid 60s when conglomeration of various companies allowed increase shares price / earnings evaluation by bringing up lower priced parts of conglomeration to the level of higher priced. After crash of conglomerates the next magic was created by “performance” this time representing mutual-fund investment into “concept” companies, which really did not produce anything real, but represented a great idea of something. The pick of this phase was achieved in 1968. The next was psychologically well-motivated return to “sound” investment in Nifty-Fifty big specialized companies such as IBM or McDonalds. As usual even with if these companies did produced real goods and services it was quite possible to pump enough money into them to go through High up / Low down bubble cycle. For example McDonalds P/E was 83 in 1972 and 9 in 1980.
From 1983 it were High-tech stocks going through IPOs especially in Biotechnology in the mod 80s and Internet in mid 90s. In between in was boom/bust cycle in Japanese Yen and Land.
4. THE EXPLOSIVE BUBBLES OF THE EARLY 2000s
This chapter starts with Internet crash that wiped out $8 trillions in market value quickly substituted by housing bubble that duly crashed in late 2000s. All this history of bubbles makes a great illustration of irrationality of market in the short run, while its efficiency on the long run. But the core lesson is that it is unpredictable at any given moment so if an investor reasonably shorts a crazy growing stock of company that is bound to crash, he still stands a good chance to loose money because it did not crash fast enough.
PART Two: HOW THE PROS PLAY THE BIGGEST GAME IN TOWN
This part reviews more in details how professionals divided into two main groups –technicians and fundamentalists play the game.
5. TECHNICAL AND FUNDAMENTAL ANALYSIS
Definitions and examples provided for technical analysts who do not care about companies’ business, but mainly about their securities movements trying to find pattern to predict future movements; and fundamentalists who are not that much concerned with charts of previous movements and patters, but trying to predict future movements based on parameters of company business and markets it is in. The experience shows that both methods do not work reliably so author comes up with quite reasonable rules:
1. Buy only companies that expected to have 5+ years of more then average growth.
2. Never pay more for the stock then its firm foundation of value
3. Looks for the stock with good stories so investors would build castle in the air for them.
6. TECHNICAL ANALYSIS AND THE RANDOM-WALK THEORY
It is the review of technical analysis that leads to conclusion that it basically useless.
7. HOW GOOD IS FUNDAMENTAL ANALYSIS?
The functional analysis fares a bit better but not that much. There are 5 different reasons why fundamental analysis mostly fails.
Overall conclusion for Part Two is that the best way is the middle of the road – analyze market trying to find the bigger fool, the guy who buy your stock when market going to crash and you getting out and sell you stock when market is at the bottom and about to go up. One does not need to know when exactly top a bottom going to happen. It is good enough to figure it out before the other guy.
Part Three: THE NEW ~ TECHNOLOGY
8. A NEW WALKING SHOE: MODERN PORTFOLIO THEORY
This theory mathematically links risk level / direction and price of securities in such manner as to achieve optimum combination of risk and returns with stress on diversification.
9. REAPING REWARD BY INCREASING RISK
This is a similar exercise with stress on risk control. Represented by Capital Assets Pricing Model (CAPM). This thing produce some Nobel prizes, but pretty much failed in reality.
10. BEHAVIORAL FINANCE
This one is not really theory, but rather result of research of human behavior of identifying and formalizing all irrationalities that human action prone to. This chapter provides quite good list of specific behaviors to avoid.
11. POTSHOTS AT THE EFFICIENT-MARKET THEORY AND WHY MISS
This is a list of critics of efficient market theory. Funny, but can be easily refuted by stress of weakness of efficient market and real life data of professional investors dismal results.
Part Four: A PRACTICAL GUIDE FOR RANDOM WALKERS AND OTHER INVESTORS
12. A FITNESS MANUAL FOR RANDOM WALKERS
13. HANDICAPPING THE FINANCIAL RACE: A PRIMER IN UNDERSTANDING AND PROJECTING RETURNS FROM STOCKS AND BONDS
14. A LIFE-CYCLE GUIDE TO INVESTING
15. THREE GIANT STEPS DOWN WALL STREET
The whole Part Four is detailed investment advice that could be very useful for novices.
MY TAKE ON IT:
I am pretty much in agreement with very weak form of efficient market. I would only add a lot more of behavior analysis and I definitely do not trust all mathematical models because of my education and lifetime experience in computer science. This experience tells me that level of simplification unavoidable in models could not possibly represent reality with enough precision necessary for effective investment.
The freedom and democracy both, as ideas and as contemporary structure of government was developed by English speaking people of British Islands. From there it was brought out to the world through military and trade expansion. The freedom had deep roots in Anglo sphere, but has difficult time in other places including even continental Europe. This freedom, rule of law, and notion of private property created contemporary capitalism and consequently tremendous growth of prosperity. However this freedom had destroyed the existing equality of misery at the bottom of society. It also destroyed believes in god given and protected superiority of the top of society. Consequently equality before the law and property rights created huge inequality of results due to obvious inequality of abilities and luck. The resulting wave of envy and resentment against prosperous led to successful attacks against original culture of Anglosphere elsewhere in the world which currently is succeeding in undermining this culture even in the place of its origin.
Introduction: The Anglosphere Miracle
This is initial description of idea of Anglo sphere as cradle of freedom starting with comparison with culture in Peru where author come from originally.
1 The Same Language, the Same Hymns, the Same Idols 2 Anglo-Saxon Liberties
Review of common features of Anglo sphere: language, religion, and ideals with stress on origination from England.
2 Anglo-Saxon Liberties
History tour of where England came from starting with Romans, Anglo-Saxons, and up until Norman Conquest.
3 Rediscovering England
Story of Norman Conquest and interplay between Norman (French) aristocracy and original population resulting in development of parliament.
4 Liberty and Property
Unusual and highly interesting discovery that exceptional among people English did not have period of common ownership of land by community and extended families, but at least since earliest known sources had individual ownership of land. This exceptional way of live was enforced by primogeniture which maintained numbers of aristocracy limited and pushed second sons down into lower classes where they brought higher levels of literacy and culture, leaving first sons at the top to run undivided and therefore more powerful estates.
5 The First Anglosphere Civil War
This is the story of long war between kings and parliament with special attention to movement of levelers who are presented as first libertarians. Lots of details about the struggle which ended with creation of “Crowned Republic” contrary to outcome of similar war in Europe from France to Russia which mainly ended with defeat of parliaments and establishment of absolutism.
6 The Second Anglosphere Civil War
The American Revolution and war for independence are treated as the second Anglosphere civil war. The history of the war, as it is described, presents it not only as civil war between American Tories and Patriots, but actually as 100% British civil war with division between supporters and opponents of American cause going all the way across Atlantic with significant number if not majority of people in Britain supporting Americans up until France’s entry into the war turned it from British civil war into World war giving birth to the new political entity – United States of America.
This is review if British colonial history with stress on mostly privately driven colonial expansion of Englishmen in search of wealth with a lot more trade deals and political alliances with local elites, than purely military conquests. The case is made that expansion was only supported, but not directed by government’s power. Another thesis is that this expansion was much more cultural and technological than human movement. Except for America there were no mass movement of people from England to India or other colonies around the world. The typical process was a minuscular colonial administration setting up governing structure with majority of officials coming from local population transplanting cultural and technological mores and making country part of Empire.
8 From Empire to Anglosphere
This describes the next step – conversion of from Empire to Anglosphere with colonies one after acquiring independence mainly without any significant military struggles.
9 Consider What Nation It Is Whereof Ye Are
This is an interesting take on contest between English tradition of territorial localization when, while possessing the same cultural background, people move power to as low local level as possible; and European, Asian, and all other imperial tradition of concentration of power at the top. It is very interesting and contemporary discussion concentrating on the staff the author knows best – EU versus independent European countries.
Conclusion: Anglo sphere Twilight?
There is clear concern here that tremendous improvement in human lives brought in by democratic culture and capitalism developed in Anglosphere is being destroyed by people like Barak Obama who rejected the cultural values and democracy of self-reliant, property owning, and independent people. Such people as Obama use freedom and democracy to undermine both. Their vision is the same mix of great leaders moving compliant masses to prosperous future using coercion and violence to any individual who fall out of step. They seem to be succeeding bringing down Anglosphere and its cultural values.
My Take on It:
I pretty much agree with historical review of development of contemporary democracy from English culture. I also share concern about its retreat before forces of demagoguery and big government. However I am much more optimistic due to the simple fact that these forces have one unavoidable feature which shows again and again in its full force as soon as they start winning. This feature is complete inability of big government and demagoguery to provide good life for anybody except thin layer of functionaries at the top. Unfortunately for them the ideas of god given ruler ran out of steam about 2 centuries ago while ideas of great all knowing supreme leader able to bring prosperity via coercion and violence that where tried extensively in XX century proved to be a spectacular failure. Therefore I believe that a current bunch of seemingly winning demagogues and clowns from Russia to America are nothing more than a small hiccup on the way to complete switch of humanity to the way of live developed in Anglosphere and based on property freedom, and limited democratic government.
1. The Anatomy of Attention. The baseline here is that attention is a limited resource and should be used sparely. This follows by analysis of bottom up and top down mind closely following Kahneman’s ideas about thinking fast and slow. Quite a bit of attention assigned to a centipede’s problem: if one starts thinking how he does something, he could not do it efficiently anymore. Very interesting and something unusual is deviation to appreciate value of the mind adrift. It seems to suggest that daydreaming has significant value producing unexpected solutions. Overall as everything else the balance is required to achieve success.
2. Self-Awareness. This step about awareness of one’s body, mind, and attempts to learn how to see self through the eyes of others. An interesting discussion about self-deception and groupthink. The recipe for self-control provided: control over attention will allow control over mind.
3. Reading others. This one goes back to part of EQ that emphasized empathy.
4. Attention in context of systems. This is pretty much about looking at the world as a system, including as much as possible of small pieces of information to create an adequate picture. An interesting example is Mau sailor capable to find way in the ocean using small patterns of environment. Here is a wonderful idea, which as trivial as impossible to implement – focus on the big system and future consequences. I guess it is an inherent failure of liberal intellectual’s mind – a weird believe that it is possible to understand big system in primitive terms. It comes with lack of real world experience of getting things done. Such experience teaches humility and understanding that we are lucky to get correctly a small part of the big system and achieve a baby step positive results. Academic experience of dealing with other human beings either teachers or students teaches arrogance of believing that one can easily understand big system either healthcare in USA or climate of earth and improve this big system with some crude and primitive tool like ObamaCare or forced decrease in using fossils.
5. 10000 hours and games as training for the brain. Here is an attempt to deny veracity of achieving perfection after 10k hours of deliberate exercise. I think that idea is true, but the problem is with deliberate part. It is not always possible to implement while just repetitive exercise would not do much good.
6. Use of control over attention as tool for control over people (leadership). Same as above – liberal minds need leaders, self-reliant individuals don’t.
7. Big picture of the last chapter turns out to be a primitive environmentalist’s rap about stupid people not understanding that good life today inevitably leaves future generations without resources. It seems to be does not matter that year after year and, actually century after century human ingenuity overcomes predictions of doomsayers and provides more and more resources to consume. The most disgusting however is this search for great leaders who would force stupid people to cut down on their consumption.