Learning Value Investing

For the last six months I’ve been learning value investing from Tony Kynaston, who I think of as “Australia’s Warren Buffett”, on our QAV Podcast. If you’re unfamiliar with the term “value investing”, it’s the style of sharemarket investing made famous by Warren Buffett. It’s basically a discipline of identifying cheap stocks in companies that are actually performing quite well, but for some reason their shareprice has been beaten down by the market. This can happen for a number of reasons, sometimes involving emotion or just that the company isn’t sexy right now. The idea behind value investing is that you pick up those stocks while they are undervalued and figure that eventually the market will catch up. Tony has spent decades developing his own methodology for doing this analysis and that’s what we talk about on the podcast. We’ve had some pretty impressive folks on the show, including Alan Kohler and Roger Montgomery.

Last week I wrote a post about what I’ve learned about value investing during our first six months. It’s actually going through a phase of being unpopular at the moment, as low interest rates are helping to drive tech stocks through the roof, which leads to claims that value investing is dead. However, far smarter people than I, including Tony, Buffett, Charlie Munger and Roger Montgomery still think value investing is the best long-term strategy, so I’m sticking with it. Investing like Buffett, one of the most successful investors of all time, sounds like a good idea to me.

Plastic Sociopaths

Straws are a distraction: how the plastics industry successfully got you to blame yourself for pollution https://boingboing.net/2019/10/03/recycling-isnt-enough.html

“40 years of Reaganomic sociopathy has managed to convince hundreds of millions of otherwise sensible people that big, social problems are caused by their personal choices, and not (say) by rapacious corporations that corrupt the regulatory process in order to get away with literal and figurative murder.”

Copernicus, Free Will and You

Whenever I get into a conversation with someone about free will for the first time, they will usually end up saying something like this: “But I experience the world as if I have free will.”

They are, of course, wrong. They experience the world exactly the same as someone who doesn’t believe in free will (like, for example, me).

We both experience the same thing. What is different is the way we interpret what we experience.

Here’s a good analogy.

One thousand years ago, if you asked most people about the relationship between the Earth and the Sun, they would have told you that it was obvious: the Sun revolves around the Earth. If you tried to tell them that, in fact, the opposite was true, they would have laughed in your face.

“But I experience the Sun revolving around the Earth! It’s obvious that the Earth isn’t moving because we can’t feel it moving. We don’t experience it moving. But we look up into the sky and we can experience the Sun moving around the Earth. You dumbass.”

Of course, what they were actually experiencing was the Earth revolving around the Sun. They had the exact same experience as Copernicus when he published “On the Revolutions of the Celestial Spheres” in 1543. What was different was how they interpreted that experience.

So it is with free will. We all experience the same thing. We walk around, decisions are made; actions are taken.

The difference is that some of us interpret those things as “the laws of physics”. And some of us interpret those things as “free will”. Same experience – incorrect interpretation.

The same is true with our relationship to the universe. Most people imagine themselves as being somehow separate from the rest of the world – in it but not of it, independent from it. Again – same experience, incorrect interpretation.

There is only the universe. It’s just one thing. One construct. We are not in the universe – we are the universe.

The atoms that you’re made of are the universe. The universe isn’t some kind of blank canvas that you’ve been painted on. The universe is both the canvas and the paint. The universe is the sum total of all of the matter and the energy and the anti-matter and everything else. It cannot be divided into universe and non-universe.

Most of the atoms that make up your body today were something else 20 years ago. And they will be something else 20 years from now. They continue. The universe continues. You are those atoms. There is nothing else.

You can only be the universe. Nothing else makes sense.

Don’t Trust Facebook With Your Business

I’ve always been paranoid about allowing other people to have any level of control over my business and today I got another lesson in why that’s a good policy.

For about 7 years I’ve run a Facebook group called “Cigars Australia Forum”. It was originally a standalone forum that I ran back when I was in the cigar business. Then, when the software behind the forum became too clumsy, I moved it over to Facebook. Just a bunch of 1000 (mostly) guys harmlessly comparing notes on cigars. Occasionally it got a little rowdy and I had to tell them to be nice. One a rare occasion I had to block a couple of people who were outright rude and nasty.

Yesterday, I got a message from Facebook that something about the group contravened their “community standards” – no details, just “your group has been disabled until you bring it into line with our standards”. This, of course, is coming from the company that let people like Cambridge Analytica have access to the personal data of millions of people. But I digress.

So I looked through their “community standards” page, couldn’t see anything that would my group would contravene, so I asked them to review the group and their decision.

Today I got a second notification from Facebook that the group, which had over 1000 members, has been permanently deleted. No explanation apart from “community standards”. Nobody to talk to. No way to protest or get clarification.

Now, luckily, I don’t care. This group had nothing to do with any business of mine or revenue source. I maintained it just as a service to Australia’s diminishing cigar appreciation community. But imagine if it was something important to my business or my brand and Facebook just decided to delete it? It could be devastating.

So that is why you should never trust Facebook, or Instagram (also part of Facebook) or Google or eBay or PayPal or Patreon or any other service provider with running the delivery platform for your business. If you can run it yourself, do it. If you can’t, make sure you have a backup plan if the service provider decides to pull the pin on you.

Capitalism Unleashed The Psychopaths

While psychopaths have probably always been around us, in feudalist societies it would have been much harder for them to rise to positions of wealth and power. Unless you were born into the nobility, it was pretty tough to get out of your class circumstances and engineer yourself into a place where you could rise above.

Think about it this way – if, as guys like Robert Hale suggest, about one percent of the population rank highly on the psychopath test – and, if this has always been true – then up until the Industrial Revolution, if you were born a psychopath but were not a member of the aristocracy or nobility, let’s say you were the son of a blacksmith, then what could you do? You didn’t have much chance of putting together an army or rising above your stations in terms of wealth creation opportunities. 

If you were a plebeian in the Roman Republic, your chances of rising to power were kept in check by the tools of the aristocracy – the Senate, the army and paid mobs. During the Roman Empire, a few plebs made it to become generals and even Emperors, but they were few and far between. A number of centurions of plebeian extraction were rewarded by Augustus after his civil war with Antony with property and suddenly found themselves as the nouveau riche and a seat in the Senate – but again, these stories were rare. 

Oh sure – if you were a Hun in the 5th century, you could brawl it out with some other guys to see who would be the king of the tribe, and go from there. But in the Middle Ages, these opportunities were scarce. You might be someone like Francesco Sforza who, in the early 1400s, managed to turn his father’s private army of mercantile soldiers into becoming the Duke of Milan by winning some battles and marrying his illegitimate daughter – but again, those stories are quite rare in the annals of history. 

For most of history, if you were born poor, for the most part, you stayed poor. 

So if 1% of the population were psychopaths, and 99% of the population were poor, that means 99% of the psychopaths were poor and, while they probably caused trouble for their immediate family and village, they never went further than that. 

However – then the Industrial Revolution came along and we entered the rise of capitalism. Now those 99% have a much better shot at unleashing their psychopathy on the world. They could get an education, get a job, and use their inherent psychopathy to climb the ladder of power inside an organisation – business, political, religious, academia or military. Suddenly, after 1000 years of being kept down in their villages, the psychopaths had a ladder to wealth and power unlike anything before. 

Studies show that most people who are born poor continue to stay poor, it’s true. But we live in a world where the psychopaths who are born poor, and have no qualms about fucking other people over in their march towards power – who care as much about committing an unethical act as you or I do about what we ate for breakfast a week ago – have an open playing field.
Capitalism has unleashed the psychopaths on the world.

Now our job is to figure out how to ring fence them and keep them in check before they destroy the planet and all of us on it. 

Psychopaths and Testosterone

This article on the neuroscience of trust raises some interesting questions regarding testosterone and psychopathic behaviour. One of the key characteristics of psychopaths is their lack of empathy which, as it turns out, is also a side-effect of high testosterone:

High testosterone convinces the brain that others find you desirable and socially powerful. It also inhibits the brain’s release of oxytocin, reducing empathy and the desire to collaborate. What’s more, testosterone’s aggression is contagious, inhibiting oxytocin and trust in team members. 

In my book “The Psychopath Economy”, I don’t get much into what makes people psychopaths, I just assume they do, and will always, exist. But this article made me do some further reading on the link between psychopaths and testosterone. At least one study in the last decade concluded that “psychopathy scores were associated with an increased ratio of testosterone (baseline) to cortisol responsivity to a stressor. Psychopathy was not associated with either of these measures independently, or with baseline cortisol levels. These findings suggest that these highly interconnected hormone systems may work in concert to predispose to psychopathy.”

Both testosterone and cortisol play a role in our appetites for risk, which tend to be high in psychopaths.

Another recent study looking at emotional control found that “people with psychopathy, and especially in patients with high endogenous testosterone levels” demonstrated “significantly less activity in the prefrontal brain regions and less communication between the prefrontal brain and the amygdala was observed”.

I wonder if, in addition to making organisation leaders sit the PCL-R (the standard psychiatric psychopathy test), we could also have them sit for testosterone and cortisol tests?

Psychopaths and Modern Slavery

Four Corners has a story about slavery in our supply chain. Do Western manufacturers know (or care) about the practices of their supply chain? Should Western governments do something about it? According to Four Corners the Australian government recently passed something called The Modern Slavery Act 2018, which “requires businesses of a certain size to report their efforts to keep their supply chains slavery-free”. Unfortunately, the government “has the power to publicly name those that fail to comply, but not to fine or penalise them in other ways. It is hoped fear of shaming will be enough incentive to avoid the reputational, financial and other risks that might arise from public scrutiny.” The problem with shaming is that psychopaths (and, by extension, the companies they run), are pretty impervious to shame. All they care about is winning. They don’t give a shit what you think about them.

Why would the government not put throw-the-book-at-them penalties in place for slavery in the supply chain?

According to antislavery.org “an estimated 25 million people around the world are in forced labour” and it generates US$150 billion in profits for the private economy every year.

That’s Capitalism in action, folks.

Boiling The Frog

I was just thinking this morning that Donald Trump has been POTUS for 2 years and 172 days (6 hours, 42 minutes and 40 seconds but who’s counting?). I remember when people said he would be impeached within his first year. Some said six months. I personally thought he would quit when he realised there was work involved. We were all wrong.

So roughly two-and-a-half years. I was wondering what Germany looked like two-and-a-half years into Hitler’s regime? Say, around 1936? The Nuremberg Laws had been passed in 1935 but weren’t implemented until after the the 1936 Summer Olympics were held in Berlin. While there was some debate around the world about boycotting it, the only countries not to attend were Spain and the Soviet Union.

It feels like Trump has slowly become normalised. I stopped paying much attention a long time ago. My wife, an American, stopped paying attention almost as soon as he was elected. She was just too disgusted to get sucked up into it.

Trump is probably a narcissistic psychopath. But are fascists psychopaths? Jon Ronson doesn’t seem to think so but I disagree. Ronson says psychopaths don’t tend to believe in anything except themselves, and I agree. But I think they also look for organisation and institutions that will help them to get access to the power they crave. They don’t truly believe in any creed or philosophy. But they are willing to commit acts of violence to get what they want – and fascism is inherently pro-violence, which makes it the perfect landing place for psychopaths.

As Stanley Payne writes in his history of fascism:

“The only unique feature of the fascist relationship to violence was the theoretical evaluation by many fascist movements that violence possessed a certain positive and therapeutic value in and of itself, that a certain amount of continuing violent struggle, along the lines of Sorelianism and extreme Social Darwinism, was necessary for the health of national society.”

There hasn’t yet been a dramatic rise of state-sanctioned violence in the US (and crime itself is at historic lows, as it is in most developed countries) but hate groups are on the rise and at an all-time high (although they were nearly as high a few years into Obama’s first term), according to some sources. There’s no official paramilitary support for his rule, although he does claim to have “the support of the police, the support of the military, the support of the Bikers for Trump – I have the tough people”. And over the last couple of years, a number of GOP organisations have invited white supremacist groups to provide “security” at their events, and of course there was the infamous Unite The Right rally. The combination of authoritarian leaders and armed militias has never been healthy for a democracy.

However, around the world, including here in Australia, we’ve been seeing the gradual normalisation of cruelty, usually focused on the poorest and weakest people, immigrants fleeing failed states, and usually carried out by people who claim to be Christian.

The increasing cruelty and violence should worry us, but like the old ‘boiling the frog’ story, we will probably just normalise it.

As Fintan O’Toole pointed out, fascism usually grows slowly over time, using “test marketing” to see how much they can get away with:

Fascism doesn’t arise suddenly in an existing democracy. It is not easy to get people to give up their ideas of freedom and civility. You have to do trial runs that, if they are done well, serve two purposes. They get people used to something they may initially recoil from; and they allow you to refine and calibrate. This is what is happening now and we would be fools not to see it.