Nightmares, Delicate Machines & Strange Zoos; Of Keynes, Darwin & Cato

Our new issue comes out next week with exclusive sit-downs with iconic

inventor Dean Kamen, ex-McKinsey veteran and innovation luminary Dick

Foster and Lux Research President Matthew Nordan. Their words are

breadcrumbs. Follow the clues...

Today, we'll follow the rational clues of Keynes, Darwin and Cato. And

then next week stay tuned for I will-unable to resist railing against

the foolhardy futility of prioritizing global warming as direr than

cancer, heart disease, AIDS or alzheimers-share two of the most elegant

and persuasive arguments I've heard yet on why curbing carbon isn't

worth the cost.

First some thoughts on time. The more time until a hoped-for-event

occurs, the more chance it won't happen. Or inversely the more chance

the undesired event does. When a target is in your sight, do everything

you can to seize it, for it can quickly flee your scope. Time is the

marshall of Murphy's Law; it paves detours to the undesired; it's a

bedfellow of uncertainty; an inept shepherd of the sought; an agent of

entropy and an enemy of the anxious.

Now for some soothsaying sages who are unusually un-anxious. Following

Warren Buffett's style, Bill Gates released his first annual letter this

week. Buffett passed Gates a quote from John Maynard Keynes on the

current environment. It said this:

"This is a nightmare, which will pass away with the morning. For the

resources of nature and men's devices are just as fertile and productive

as they were. The rate of our progress towards solving the material

problems of life is not less rapid. We are as capable as before of

affording for everyone a high standard of life-high, I mean, compared

with, say, twenty years ago-and will soon learn to afford a standard

higher still. We were not previously deceived. But today we have

involved ourselves in a colossal muddle, having blundered in the control

of a delicate machine, the working of which we do not understand. The

result is that our possibilities of wealth may run to waste for a

time-perhaps for a long time."

Meanwhile, on a similarly delicate machine-the human mind-and the animal

spirits swirling in us social primates which caused the current crisis,

professor Paul Seabright, says "If Darwin had been around to reflect on

the financial crisis, he might have reminded us, in his diffident way,

to think of human beings not as inadequate calculating machines, but as

remarkably well-adapted apes. As group living primates, they are

intensely competitive, alert to the narcissism of tiny differences in

status, navigating their social life through coalition formation.

The way to get ahead is to join powerful groups. The key to social life

is not unfettered competition, nor universal cooperation, but a subtle

mix of the two: competing fiercely to join up with the most attractive

cooperators. And the cognitive capacities they deploy involve a capacity

for strategic reasoning of the second, third, even the fourth degree.

You have to be impressed how well they have adapted to life in the wild.

The problem is that many primates do not adapt well to life in zoos, and

Wall Street is the biggest and strangest zoo of them all. It presents

our large primate brain with vast challenges, of which the greatest has

been solving strategic reasoning of the thousandth degree.

Faced with evidence that a housing boom can't continue forever, we do

not unravel it back to the beginning but try to ride the boom till the

very end, to do just a little better than the very best of the others.

Those differences in status, you see.....Though Darwin's name is often

wrongly associated with admiration for the outcomes of natural

selection, the man who wrote "what a book a devil's chaplain might write

on the clumsy, wasteful, blundering, low, and horribly cruel work of

nature!" would doubtless have been less than surprised at the kinds of

terrible games Homo sapiens gets up to when he spends too much of his

time in the zoo."

One advocate of avoiding the zoo as much as possible has been Vanguard

fund founder and advocate of indexing, John Bogle. John recently said,

"We can't say that we haven't been warned about the perils of ignoring

the past. More than 2,000 years ago, the Roman orator Cato noted that,

'there must be a vast fund of stupidity in human nature, or else men

would not be caught as they are, a thousand times over, by the same

snares . . . while they yet remember their past misfortunes, they go on

to court and encourage the causes to what they were owing, and which

will again produce them.'"

Have a great weekend and enjoy the Super Bowl.