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Imperialism: The Darwinian Justification

The Ascent of Money: A Financial History of the WorldThe Ascent of Money: A Financial History of the World by Niall Ferguson

My Rating: ★★★☆☆

Imperialism: The Darwinian Justification

Ferguson contends that today’s financial world is the result of four millennia of economic evolution. It is very important to the aims of this book that this metaphor is accepted. Ferguson looks at this evolution of money into the complicated financial ecosystem of today. He explores how money mutated into new tools/organisms and acquired characteristics that allowed it to meet the needs of its users/demands of its environment better. The tools that helped men make even more money or harness their own energies more efficiently were selected for as ‘fittest’ and soon took over the monetary environment.

This happened in fits and starts:

First came the invention of money itself, which is not given much attention to, probably because it is too shrouded in the mists of time (and also because the West has no unique claim on it, at any of its stages – even the more advanced forms). Then it started mutating into its various forms, conquering and occupying various niches according to functionality.

And according to Ferguson, the civilizations who had access to these new and more efficient tools were hugely benefitted and in many cases were at a decisive advantage, down to our day.

The Evolutionary Stages

1. Banks

Money, once it allowed quantification of the value of transactions soon led naturally to delayed payments and then to the institutions of lending and borrowing. These slowly grew to become banks, clearing houses for ever larger aggregations of borrowing and lending.

2. Bonds

The rulers and the lords were the biggest customers of the banks. In time governments that figured out how to utilize the credit market best thrived and their innovations led to government bonds and securitization of streams of interest payments. This matured into full-fledged bond markets by the 13th century. The rulers had great incentive to protect and regulate this amazing new source of funding! This led those governments most dependent on these markets to institute regulated public markets so as to maintain stability and security of transaction, which was in their own best interests. Transaction and discovery costs reduced drastically and areas with such markets proved extremely useful to their rulers, who could no raise money for wars much more effectively. Battles were now to be won and lost in the bond markets.

3. Stock Markets

By the seventeenth century, corporations started aping the states, a process that was not limited to only financial matters, and started to raise equity through share markets. This could only develop first in areas with already well developed bond markets and public markets and thus gave them a further advantage — the advantage derived from the financial tools now extended from wars to trade and industry. The West was rising buoyed by its financial innovations, in Ferguson’s view.

4. Insurance

With the institutions of bonds and shares prospering, the next step was to use the market to spread risk out. insurance funds and then pension funds exploited economies of scale and the laws of averages to provide financial protection against calculable risk. The corporations now had another decisive advantage in being able to have access to protection against risk and in a world where financial risk was the biggest danger any advantage there could prove world-conquering. The accumulation of financial innovations had already tipped the balance for the West and was now on its way to helping them conquer the world.

5. Real Estate

With the rise of more innovative instruments such as futures, options and other derivatives, it was now possible to increase leverage, not only for governments and corporations, but also for individual households. With government encouragement they soon increased their leverage and used that to invest more and more in real estate. This helped the western countries to have a larger and larger propertied class helping them to transition the into property-owning democracies, which, according to Ferguson, are the most robust sort.

6. Imperialism and Globalization: The Justified Culmination

Now we come to the crux of the narrative — Economies that combined all these institutional innovations – banks, bond markets, stock markets, insurance and property-owning democracy – performed better over the long run than those that did not, because financial intermediation generally permits a more efficient allocation of resources than, say, feudalism or central planning. The financial ecosystem evolved in the West was the best suited for governance and for human civilization in general. And it is for this reason that the Western financial model tended to spread around the world, first in the guise of imperialism, then in the guise of globalization, and has been vital for all sorts of progress achieved around the world — from the advance of science, the spread of law, mankind’s escape from the drudgery of subsistence agriculture and the misery of the Malthusian trap.

Ferguson has narrated the history of money as a financial evolution and thus given it the air of inevitable complexity and of progress. This makes it seem like the adoption of the ‘evolved’ financial system first by the West and them by the Rest is but a logical and inevitable choice that is for the best of the world at large.

It is noteworthy that Ferguson makes a point of using elaborate evolutionary metaphors to project the history of financial institutions in a Darwinian light.

Why?

According to this interpretation, financial history is essentially the result of institutional mutation and natural selection: Random ‘drift’ (innovations/ mutations that are not promoted by natural selection, but just happen) and ‘flow’ (innovations/mutations that are caused when, say, American practices are adopted by Chinese banks) play a part. There can also be ‘co-evolution’, when different financial species work and adapt together (like hedge funds and their prime brokers).

But market selection is the main driver. Financial organisms are in competition with one another for finite resources. At certain times and in certain places, certain species may become dominant. But innovations by competitor species, or the emergence of altogether new species, prevent any permanent hierarchy or monoculture from emerging. Broadly speaking, the law of the survival of the fittest applies. Institutions with a ‘selfish gene’ that is good at self-replication and self-perpetuation will tend to proliferate and endure.

As we can see there are certain key themes here:

a. That the survived institutions have to accepted as ‘fittest’ under Ferguson’s interpretation, and

b. That ‘selfishness’ of institutions/genes are rewarding for the species/humanity in the long run. So we should encourage the selfish imperialism of countries/the globalization of corporations today.

These are specious themes that are present in this book with a specific agenda, trying to escape notice by being presented in pseudoscientific light. And as we have seen from our discussion of how Ferguson uses the history of finance to show us how Imperialism was a good thing for the rest of the world, we can safely slot this book as another among Ferguson’s life-long attempts to come up with innovative apologetics for Empire.

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Posted by on June 7, 2015 in Book Reviews, Books, Economics, Thoughts

 

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The Economist Presents: Economics: Making Sense of the Modern Economy by Simon Cox

Economics: Making Sense of the Modern EconomyEconomics: Making Sense of the Modern Economy by Simon Cox

My Rating: 2 of 5 stars

It is easy to be stunned by the manifest foresight that a book like this can showcase. But the reader has to remember that in a magazine like The Economist, a number of contrasting ideas about the current world economy would always be sloshing around. To later make a selective compilation of those articles that proved to be ‘prophetic’ is an exercise in exclusion that is designed to present a false sense of confidence or analytical foresight. Just because a collection of articles from a magazine turned out to be quite close to the mark, there is no reason to believe that any random article you might pick up from this week’s Economist will be of equal predictive value.

I have nothing against the magazine or the book. I greatly enjoy the magazine and to a more moderate extent liked the book as well. But the blatantly triumphant endnotes trumpeting the date of each article and a further note on how the world actually played out was grating to say the least.

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Posted by on July 15, 2013 in Books

 

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Book Review: The Dilbert Principle: A Q&A

Dilbert Principle, The: A Cubicle's-Eye View of Bosses, Meetings, Management Fads & Other Workplace AfflictionsDilbert Principle, The: A Cubicle’s-Eye View of Bosses, Meetings, Management Fads & Other Workplace Afflictions by Scott Adams

My rating: 4 of 5 stars

This is not really a review. It is more of a collection of notes I made from the book while I got some respite from laughing my head off or scratching my head at the thought that some of this sarcasm is slung at me too.

To those of you who are unfortunate enough to be ‘bosses’, I would suggest that you give this book a miss: You might end up in chronic depression.

To get into the nuances of the book, here is a Q&A with my notes from the book and a few Dilbert illustrations (again from the book) representing Scott Adams:

The book opens with an instant classic: These days it seems like any idiot with a laptop computer can churn out a business book and make a few bucks. That’s certainly what I’m hoping. It would be a real letdown if the trend changed before this masterpiece goes to print.

The Dilbert Principle: A Q&A

Q: Why is Business So Absurd?

A: The Dilbert Principle

Q: And that is?

A: The basic concept of The Dilbert Principle is that the most ineffective workers are systematically moved to the place where they can do the least damage: management. This, Scott Adams says, has not proved to be the winning strategy that you might think. Then he spends the rest of the book detailing this out in hilarious fashion.

It seems as if we’ve turned nature’s rules upside down. We systematically identify and promote the people who have the least skills. The usual business rationalization for promoting idiots (the Dilbert Principle in a nutshell) is something along the lines of “Well, he can’t write code, he can’t design a network, and he doesn’t have any sales skill. But he has very good hair…”

The fundamental way to ensure that business runs smoothly is Humiliation. There are many ways to achieve this and almost all aspects of business to ensure the hierarchy. Most of what follows deals with different ways to achieve this end result.

Q: What is Business Communication?

A: Any business school professor will tell you that the objective of business communication is the clear transfer of information. That’s why professors rarely succeed in business. The real objective of business communication is to advance your career. That objective is generally at odds with the notion of “clear transfer of information.”

Some of the Common Uses of Business Communication is:

Q: What is a Mission Statement?

A: It is defined as “a long awkward sentence that demonstrates management’s inability to think clearly.” All good companies have one.

The formulation of Mission and Vision statement cannot proceed without learning Jargon.

Q: So what is “Jargon”?

A: Jargon Illustrated: For example, a manager would never say, “I used my fork to eat a potato.” A manager would say, “I utilized a multitined tool to process a starch resource.” The two sentences mean almost the same thing, but the second one is obviously from a smarter person.

Q: How useful is ‘Team Work’?

A: Stephen King writes very scary books. Shakespeare wrote several excellent plays. Unfortunately, they worked alone.* If only they had worked together there’s no telling how much better the results would have been. That’s the theory behind “group writing,” and it’s hard to find fault with the logic.

The next part of the book covers what is called “The Great Lies of Management

Q: What lies do management tell me?

A: All assurances are lies, especially if your manager says good things will happen to you:

Q: What is The Myth of the Industry Average Salary?

A: This lie is appreciated by the employees. Unfortunately only one company in each industry can have the best employees. And you might be suspicious about the fact that your company pays the lowest salaries.

Is it likely that the “best” employees would be drawn to your company despite the lower-than-average pay? Is it possible that there’s a strange mental condition that makes some people brilliant at their jobs, yet unable to compare two salary numbers and determine which one is higher? Let’s call these people “Occupational Savants.” If they exist, what are the odds that they all decided to work at your company?

Q: Once shrewd communication and lies are not enough, where do we turn to get ahead in the business world? 

A: Machiavellian methods!

Adams assures us that this chapter contains many surefire tips for gaining wealth and personal power at the expense of people who are studying how to be team players. Naturally I have withheld my most effective tips so that I can crush you later if it’s absolutely necessary, or if it just looks like fun. But what you find here should still be enough to brush aside the kindhearted dolts that litter your path to success.

PROVIDE BAD ADVICE & SHADE THE TRUTH is pretty much the essence. But, for the sake of clarity, a few more tips:

Q: How to appear smart?

A: Don’t waste your time actually reading the Wall Street Journal. Many people subscribe to it, but nobody actually reads it. It’s easier just to say, “Hey, did you see that article in the Journal yesterday?” and see what happens. If the other person says yes, he’s bluffing too, so you can both give a hearty laugh about the insights of the article and leave it at that. II the other person indicates he did not read the article, give a condescending look and mutter, “It figures” before changing the subject.

Q: How to give ‘constructive criticism’?

A: Don’t make the mistake of criticizing your co-workers to their faces. That will tip your hand and invite retaliation. The only constructive criticism is the kind you do behind people’s backs.

Q: Should I go for Form over Substance?

A: The earth is populated by shallow and ignorant people. That’s why form will always be more important than substance. You can waste your time complaining about how that should not be the case in a perfect world, or you can snap out of it and follow my advice.

Q: How to Look Busy at work?

A: Never walk down the hall without a document in your hands. People with documents in their hands look like hardworking employees heading for important meetings. People with nothing in their hands look like they’re heading for the cafeteria. People with the newspaper in their hands look like they’re heading for the bathroom. Above all, make sure you carry loads of stuff home with you at night, thus generating the false impression that you work longer hours than you do.

Q: How to choose your projects?

A: The worth of any project is based on how it will sound on your resume. Don’t get caught up in the propaganda about how important something is for the stockholders. The stockholders are people you’ll never meet. And since most projects fail or turn into something you never intended, the only lasting impact of your work is the impact on your resume. Keep your priorities straight.

Q: How to build a resume / praise myself?

A: Observe:

Q: What to do about Performance Reviews? 

A: Keep this in mind: (1) Your manager is probably too lazy to write your Performance Review without your “input”.

Q: How to get by in a workplace with minimum work?

A: Employee Strategies such as ‘Telecommuting’:

The office is designed for “work,” not productivity. Work can be defined as “anything you’d rather not be doing.” Productivity is a different matter. Telecommuting substitutes two hours of productivity for ten hours of work.

Now you can spend time at home, sitting around in your pajamas, listening to your stereo, and playing with your hand puppet. If you feel generous and slam out two hours of productivity, it’s more than you would have done in the office, so you can feel good about it.

Q: Should I be a constant Learner?

A: Consider this hypothetical situation: You’re having a conversation with Albert Einstein and he suddenly gets struck by lightning. This freak accident makes him instantly twice as smart. Could you tell the difference?

Once a person is smarter than you, it doesn’t matter if he’s one percent smarter or one thousand percent smarter. You can’t tell the difference. Don’t waste your time acquiring a bunch of knowledge that will do nothing to elevate your perceived value.

Q: How to get your way in Meetings?

A: The Final Suggestion Maneuver: Follow these simple steps”

1. Let everybody else make moronic suggestions.

2. Stay uninvolved while the participants shred each other’s suggestions like crisp cabbage in a Cuisinart. Watch as they develop intense personal dislikes that will last their entire careers.

3. Toward the end of the allotted meeting time, when patience is thin and bladders are full, offer your suggestion. Describe it as a logical result of the good thoughts you’ve heard at the meeting, no matter how ridiculous that might be.

Now Scott spends some time to dole out specific advice to people in different business functions:

Marketing

Scott: I can speak with some authority on the subject of marketing because I once took a marketing class. Moreover, I have purchased many items.

The Hidden Secret of Marketing:

The most important market segment is known as the “Stupid Rich,” so named because of their tendency to buy anything that’s new regardless of the cost or usefulness. If you can sell enough units to the Stupid Rich, your production costs per unit will decrease. Then you can lower your prices and sell to the Stupid Poor—that’s where the real volume is.

Q: Are Focus Groups useful?

A: Focus Groups are people who are selected on the basis of their inexplicable free time and their common love of free sandwiches. They are put in a room and led through a series of questions by a trained moderator. For many of these people it will be the first time they’ve ever been fed and listened to in the same day. This can cause some strange behavior. They will begin to complain vehemently about things that never really bothered them before. Then they will suggest product features that they would never buy.

Q: What is the deal with these MANAGEMENT CONSULTANTS?

A: Consultants will hold a seemingly endless series of meetings to test various hypotheses and assumptions. These exercises are a vital step toward tricking managers into revealing the recommendation that is most likely to generate repeat consulting business.

After the “correct” recommendation is discovered, it must be justified by a lengthy analysis. The consultants begin working like crazed beavers in a coffee lake. Reams of paper will disappear. You’ll actually be able to hear the screams of old-growth forests dying as the consultants churn out page after page of backup charts and assumptions. The analysis will be cleverly designed to be as confusing as possible, thus discouraging any second- guessing by sniping staff members who are afraid of appearing dense.

Consultants will ultimately recommend that you do whatever you’re not doing now. Centralize whatever is decentralized. Flatten whatever is vertical. Diversify whatever is concentrated and divest everything that is not “core” to the business. You’ll hardly ever find a consultant who recommends that you keep everything the same and stop wasting money on consultants. And consultants will rarely deal with the root cause of your company’s problems, since that’s probably the person who hired them. Instead, they’ll look for ways to improve the “strategy” and the “process.”

Q: How to write a good BUSINESS PLAN?

A: First, assume that any positive trends will continue forever and any negative trends will turn around soon. Then run the numbers through a computer spreadsheet. The result is the future. (Later, if you turn out to be wrong, blame it on the global economy.)

It is never a good idea to be constrained by reality when you craft your assumptions for the business case. Reality is very unpopular and it is not fun to read.

Q: What are ‘Engineers’?

Scott: “For the record, I’m not an engineer by training. But I spent ten years working with engineers and programmers in a variety of jobs. I learned their customs and mannerisms by observing them, much the way Jane Goodall learned about the great apes, but without the hassle of grooming.”

Q: Why are most projects ‘impossible’ for them?

A: The risk/reward calculation for engineers looks something like this:

RISK: Public humiliation and the death of thousands of innocent people

REWARD: A certificate of appreciation in a handsome plastic frame

Being practical people, engineers evaluate this balance of risks and rewards and decide that risk is not a good thing. The best way to avoid risk is by advising that any activity is technically impossible for reasons that are far too complicated to explain. If that approach is not sufficient to halt a project, then the engineer will fall back to a second line of defense: “It’s technically possible but it will cost too much.” The quickest way to make a project uneconomical is by doubling the resources needed and using the cover story that you need to prevent failures.

Personal Anecdote on the MAGIC of DOWNSIZING

When the downsizing began it didn’t hurt much. Instead of five non-value-added people we had four, then three, then eventually only me. I let everybody know that I was “doing the work of five people.” I got no sympathy because everybody was “doing the work of five people” if you believed what you heard.

Eventually I left the job. For the past thirteen years, zero people have been doing the work of five people but there were no complaints. This was a fairly clear indication that downsizing had a future.

Q: So after criticizing the current way of doing things left right and center, does Scott Adams have a better alternative or is the whole book just one wild RANT?

A: Turns out that he does!

He calls it:

THE OA5 COMPANY

Short for “Out At 5” – An OA5 company isn’t willing to settle for less productivity from the employees, just less time. The underlying assumptions for OA5 are:

– Happy employees are more productive and creative than unhappy ones.

– There’s a limit to how much happiness you can get while you’re at work. Big gains in happiness can only be made by spending more time away from work.

– The average person is only mentally productive a few hours a day no matter how many hours are “worked.”

– People know how to compress their activities to fit a reduced time. Doing so increases both their energy and their interest. The payoff is direct and personal—they go home early.

Q: So what makes such an environment tick?

A: A company can’t do much to stimulate happiness and creativity, but it can do a lot to kill them. The trick for the company is to stay out of the way. When companies try to encourage creativity it’s like a bear dancing with an ant. Sooner or later the ant will realize it’s a bad idea, although the bear might not.

Q: Do these little things matter?

A: Collectively all the little things create an environment that supports curiosity and learning. Imagine a job where after, you’ve screwed up your boss says “What did you learn?” instead of “What the hell were you thinking?”. Be efficient in the little things. For example, rather than have some Byzantine process for doling out office supplies, add $25 a month to each employees paycheck as a “supply stipend” and let employees buy whatever they need from their local store. If they spend less, they keep the difference.

Q: Any last statements?

A: “Creativity is allowing yourself to make mistakes. Art is knowing which ones to keep.”

If you are not improving the product or interacting with customers you are worthless.

Q: Where can I learn more?

A: The good thing about dolts is that they can be easily duped. I’ll address that issue in more detail in the sequel to this book, titled Hey, Why’d I Buy Another One of These Books?

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Posted by on February 26, 2012 in Book Reviews, Books

 

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Old laundry

I am that old collector
who collects every bauble,
every shining little verse
every idea worth its words,
to put them together
turn them over,
left and right
tweak that a bit?
To see what comes;
to see what births.
And I lay’em out
clean new laundry
washed and afresh
drying in the sun.
Are they mine?
Are they yours?

 
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Posted by on August 7, 2011 in Creative, Poetry, Thoughts

 

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