Two More Votes

The Gist: How the awesome Margaret Thatcher lost power.

The third of a three-part review of Charles Moore’s three volume biography of Margaret Thatcher, ending with Herself Alone.

Click here to read part one: My Heroine, and here to read part two: Win Big or Go Home.


Margaret Thatcher was ultimately betrayed by the senior members of the party she had led to three consecutive electoral victories while remaking Britain according to its manifestos. After more than 15 years of her leading the party, 10 years leading the nation, they were restless, ambitious, and soon conspiratorial. Her biographer Charles Moore reveals how the misdeed was done.


Figure 1. You either die a hero or you live long enough to see yourself become a villain


The opportunity arose because, though Thatcher was popular with the party’s grassroots voters, she had lost touch with the backbenches who formed her voting constituency – in Britain, the Prime Minister is similar to the Speaker of the House, who is elected by legislators, not average citizens. Thatcher had become and remained leader of the Conservative Party by employing skilled politicians who knew how to count, calm, and charm the votes she needed. As time went on and Thatcher went from political success to policy success again and again, she became less attentive to showing love to the backbenches, believing she had so obviously demonstrated why she was worthy. Tragically, Thatcher had lost her warning system to a pair of Irish Republican Army assassinations, first of Airey Neave, who had so brilliantly managed her first campaign, later of Ian Gow, who very capably managed the back bench mood through sustained drinking sessions. She never found another able ambassador or spy.


In addition to general feelings of being left out, backbenchers were specifically aggravated by a new tax – taxes being the most reliable source of conservative angst. Thatcher had long been frustrated with increasingly leftist local government: her father had been ousted from Grantham’s city council, her very first bill in Parliament had been to open up local council meetings to the press, and her stint as Education Minister was partly undone by local governments. As Prime Minister, Thatcher decided to do something about the source of local government funding: property taxation. Within local government, Moore notes that “those who made the greatest use of local government services – social services, for instance – were the least likely to pay for them.” Thatcher was more pithy: “The people who benefit don’t pay. The people who pay don’t benefit.” With only about 25% of people paying property taxes, 75% of voters were perfectly happy to increase their burden and enjoy the benefits of other people’s money. Besides, she was deeply offended by the notion that property was taxed at all:  “Any property tax is essentially a tax on improving one’s own home,” she lamented.


Figure 2. Extensive testing has demonstrated that conservatives prefer practically any pain to new or increased taxes: the medieval rack, root canals, telemarketing pitches, tangled Christmas lights with that one broken bulb you need to find, wet socks, inconsistent wifi, grandchildren who never call


All of which, you might expect, would sound pretty reasonable for conservatives to embrace. But local governments still required some source of funding and so Thatcher, striving for the efficiency of what you vote for you pay for, proposed replacing the property tax with something new: a “community charge” paid by everyone, though perhaps not everyone would pay the exact same. This nod to progressive taxation proved hopelessly complicated to implement while the attempt to match revenue to spending meant that the average charge was much higher than expected, such that 90% of households saw their local tax bills rise by around 50%. Leftists rioted while conservatives loudly complained to their increasingly anxious members of Parliament. Disaster was predicted in upcoming local elections and the Conservative Party tried a desperate campaign of declaring “Conservative Councils Cost You Less” (because they spend less). Expected to lose 600 seats, they only lost 172 – which was great versus expectations, but not that good, and the bitterness over the whole affair lingered among the backbenches. 

And yet if the backbenches had started to feel a lack of love, the front bench of senior leaders had always felt disagreeable, excluded, and badgered. Startlingly, Thatcher never really recruited into her leadership a core of true believers. From the very beginning, of her 24 member leadership team, only 4 had actually voted for her. Thatcher chose her team of rivals to achieve political balance and give her internal critics shared responsibility. Despite not watching any television herself, she cared far more about how well someone presented on the BBC than if they were completely committed to her agenda.

bob the builder

Figure 3. Bob the Builder would probably have been the perfect Thatcher Cabinet member. Can we fix it? Yes, we can!


This arrangement inevitably sparked tension – but for most of her tenure, Thatcher was enormously aided by Willie Whitelaw, a politician far more moderate than she who had been Ted Heath’s preferred successor. Whitelaw could have made no end of trouble for her but instead chose to be her faithful deputy: “Never interested in policy, he knew that his power lay in his capacity to understand what she wanted and what others wanted, and reconciling the two.” When Whitelaw retired, she lost the bridge that her wet, moderate Cabinet members used to justify their presence.

At the same time, Thatcher was also paranoid that if she cultivated potential heirs, her personal leadership would be more vulnerable – if she was the primary hero of the grassroots, then her rivals would hesitate. Toward the end, the Conservative Party tried to introduce a slogan “The Right Team for Britain’s Future” at a conference to direct attention away from her – but when she appeared, to the dismay of the “right team,” the conference went wild, chanting “Ten More Years!” But the backbenches, not the grassroots, were the key battlefield – and there was always danger that her Cabinet contained some of her most vehement opposition. 

Because the Cabinet was filled with her internal political opponents, she excluded them from real power.  She privately claimed “I’d be able to run this Government much better if I didn’t have ministers, only permanent secretaries,” i.e. the deep state who was legally obligated to follow her directions. The two most powerful people in her government were her national security advisor Charles Powell and communications director Berard Ingham – both very capable civil servants who would have thrived without comment in the United States, but in the British system elected politicians are constitutionally responsible for running all aspects of government. Being Foreign Secretary is one of the most prestigious jobs in the United Kingdom – but Thatcher tried to neuter the role so she could run her own foreign policy. Worse for her domestic political future, Powell was so dominant that he overloaded her schedule with fascinating foreign intrigues: plotting grand strategy with historians, having heart to hearts with dissidents, reviewing the skullduggery of the intelligence services. Ingham daily briefed her on the moods of the nation and theoretically had a mandate closer to protecting her power – but he was statutorily prohibited from helping her in an internal party squabble. All together, among the people she most trusted, her politicians most in touch with the backbenches had been assassinated, her deputy who had smoothed over riffs with her leadership had retired, and the men through whom she ran her government were not looking out for her survival.

If genuine disagreements over ideas weren’t sufficient reason to be unhappy, Thatcher had an incredibly harsh management style. She was very considerate of her personal staff – and, as the world’s most powerful woman, still insisted on making breakfast for her husband every morning – but she constantly berated, bullied, and browbeat the big egos who were the most senior elected politicians in her party. For many years this produced the remarkable results we’ve already discussed – but perhaps it worked too well: as “Thatcher had achieved many of her successes by going against the grain of most of her senior ministers, she came to believe in her own invincibility.” Moore concludes: “This was not good for her character. She talked even more; she listened less. She lost some of her ability to catch the political wind and some of the caution which, until the late years, had strongly balanced her crusading zeal. Combat became not so much a useful weapon in her armoury as her default mode.”


Figure 4. A popular satire of the time depicted the following scene: “Mrs Thatcher was asked by a waiter serving the Cabinet what meat she wanted. She answered, ‘A raw steak, please.’ Then the waiter asked, ‘And the vegetables?’ Mrs Thatcher replied, ‘Oh, they’ll have the same as me.’”


Eventually, the slights built up to an unbearable burden, especially for Geoffrey Howe, her longest serving Cabinet minister. Thatcher treated him mercilessly for his temperamental lack of stridency but he had actually been a powerful advocate of her economic policies as Chancellor of the Exchequer. Moved over to the foreign ministry, where he was annoyed to be constantly upstaged by Powell, Howe pursued his greatest passion: the United Kingdom joining the European Community. In this, Howe was supported not only by the British civil service, but by many Conservative backbenchers: somewhat strangely in retrospect, the Conservatives had always had the most pro-European platforms in British politics. Howe romanticized that a united Europe, at peace at last, could be an economic powerhouse freed of the complications of each country’s individual trade barriers and regulations.

Thatcher was deeply skeptical, fearing that integration would mean not more freedom but more regulation – and, worse, regulation imposed by an organization in which the British voter would only have a minority, perhaps super-minority, say. The perk of wiping out unhelpful European laws had to be balanced against the fear of losing British national sovereignty, especially the loss of determining the right monetary and immigration policies. Thatcher was horrified when Jacques Delors, president of the European Commission, claimed that by 1998, 80% of “economic legislation, and perhaps even our fiscal and social legislation as well, will be of [European] Community origin.”  She conceded that Britain was part of Europe culturally, but that Europe was not defined by its bureaucracy – and indeed, “Had it not been for [the] willingness to fight and die” of British troops “Europe would have been united long before … but not in liberty, not in justice.” Thatcher proclaimed “We have not successfully rolled back the frontiers of the state in Britain only to see them re-imposed at a European level, with a European super-state exercising a new dominance from Brussels.”

jack daniels

Figure 5. “Charles Powell recalled that, when, at European summits, she began to tire, he would bring her a surreptitious whisky and soda: ‘sure enough, it revived her spirits wonderfully.’ When Helmut Kohl got wind of this he said to Powell: ‘I wish you would stop doing that, you’re just making her more difficult.’ ‘To be honest, Mr Chancellor,’ Powell replied, ‘that’s the whole point.’”


Howe thought she was paranoid but also believed the rational way to head off her fears was to fully embrace Europe and lead from the inside. Determined as ever, Howe recruited the other most senior Cabinet minister, Nigel Lawson, his replacement as Chancellor, into a conspiracy. Lawson was actually skeptical of European integration himself but he had begun to lose faith in monetarism and was especially attracted to something called the exchange rate mechanism (ERM). The ERM attempted to stabilize European currencies’ values in relation to each other in order to ease cross-national transactions. For Europeans, this was the first step to union. For Lawson, this was an opportunity to outsource the fight against inflation to the German central bank, which had long had an international reputation for being hypersensitive to it. Together, Howe and Lawson repeatedly attempted to confront Thatcher, ultimately issuing an ultimatum that they would simultaneously resign – a public relations disaster – if she did not join the ERM. Thatcher was appalled: she retained her faith in monetarism and her skepticism about Europe. But faced with the threat, Thatcher sidestepped it: she publicly announced that the UK would join the ERM if the European community met certain preconditions respecting economic freedom and once Britain had sufficiently brought down its own inflation. That stance seemed pretty reasonable to the public and so the pair balked at resigning, prompting Thatcher to lord over them at the next Cabinet meeting: “No resignations yet, I see!”


Figure 6. As you’d expect, the extremely exciting topic of ERM is often confused with the very similar EDM


And yet, for the first time, the Iron Lady was seen to bend and the wets sensed weakness. Because Thatcher had no domestic policy equivalent of Powell, she did not have as fine a grasp of its technicalities and, amazingly, Lawson managed to use his power to tie the pound to the Deutschmark without publicly announcing nor privately revealing the shift from monetarism. When Lawson quietly resigned, he was replaced by John Major, an expert in-fighter who demonstrated his power by marshalling the building political pressure to compel Thatcher to concede to the ERM without the preconditions she had previously insisted upon. The European bureaucracy celebrated this unconditional victory with Delors projecting that there would soon be a United States of Europe. Thatcher was outraged and gave her renowned reply: “No. No. No.” 

the more you know

Figure 7. … the faster you’ll go!


For Geoffrey Howe, this was the last straw. “For him, ERM entry was the first move towards the destination, whereas Mrs Thatcher hoped it would be the way of preventing the full journey.” Already demoted from his beloved position as Foreign Secretary whose luxurious housing he could no longer use, Howe publicly resigned, giving a damning speech before a Parliament that had just introduced television cameras, increasing its notoriety. “The time has come for others to consider their own response to the tragic conflict of loyalties, with which I myself have wrestled for perhaps too long,” he declared. But the most important aspect of the speech was its timing: Howe delivered his searing critique just before the one time a year that the leader of the Conservative Party is subject to a challenge.

Within a day, Michael Heseltine, who himself had dramatically resigned from Thatcher’s Cabinet a few years prior and had been agitating against her since, announced his challenge. Thatcher was terribly ill-prepared. Her replacement for her assassinated managers was wholly inadequate: Peter Morrison had at one time been closely in touch with the back benches but had spiraled into alcoholism and was loyal to the point of severe over-optimism. Morrison thoughtlessly announced a campaign leadership team without consulting any of its members, prompting them to be irritated and less than enthusiastic about securing votes. Dividing members into descriptions of “Sound,” “Dodgy,” and “Untouchable,” Morrison was so off-base that he had Howe as “Sound” right up until the latter’s blistering resignation speech. Earlier, Thatcher had inexplicably given the job of chief whip, a position described as the Prime Minister’s Praetorian Guard, to a romantic Europhile close to Geoffrey Howe, inexperienced in whipping votes, and who did not even support her. Her previous whip, upon hearing the news, commented “That’s crazy. That’s the end of Margaret.”

Thatcher was arrogant. She had won three elections! She was extremely popular with the grassroots! She had decisively beaten a wet stalking horse in a previous challenge! And so she repeated Ted Heath’s mistake that had allowed her to rise in the first place: she did not ask for votes herself. Even more bizarrely, and again a reflection of Powell’s power, Thatcher was out of the country for the election. Her record did count for something: she won the ballot by 204 to 152. But according to the complicated rules, her victory did not constitute a big enough margin to win outright: she needed just two more votes. 

Now blood was in the water. Thatcher disastrously decided to consult her Cabinet which, though technically her leadership team, probably had the most to gain from her departure: it was full of ambitious, belittled men who had had a hard ceiling on their ambition for 15 years. The most committed ideologue on her campaign team sensed danger and suggested Thatcher see them all at once and force them to commit to her publicly in the face of peer pressure. Instead, Thatcher listened to an old party hand brought into manage the crisis – but who secretly thought it was in the best interest of the party for her to gracefully leave. Thatcher saw her Cabinet one by one. Predictably, almost every one told her to resign.

And yet while a number of backbenchers were annoyed that she had not cultivated them nor asked for their votes, there were plenty of true believers who were appalled by the unfolding coup. She was the greatest leader the Conservatives had had in a generation – and she had, after all, won the first ballot! They tried to break in to see her but by the time they did, Thatcher had concluded that she could not go on with the majority of her Cabinet opposing her. Thatcher realized she had mismanaged the parliamentary party and decided to concede to try to choose her successor. And yet, because she hadn’t elevated enough true believers, the only viable option was the chameleon John Major. Thatcher would later describe the experience as “treachery – with a smile on its face.” 

In retrospect, we can easily see Thatcher’s crucial management mistakes – but let’s not forget that she is the longest serving Prime Minister since the 1800s and that her style produced big results. On the issues that she cared most about, Thatcher has been almost entirely vindicated. The biggest exception may be the community charge that had prompted backbench angst – it was quickly repealed – but so was the ERM which Major had staked his political reputation on. “The British economy, no longer fettered by an artificial exchange rate for sterling, recovered quickly. But the economic reputation and political standing of the Major government did not recover.” Major would lose in a landslide to Tony Blair, a politician akin to Bill Clinton who had refashioned the old socialist Labour Party beholden to unions into a suave, moderate coalition embracive of Thatcher’s success with markets. Thatcher would half-complain, half-brag in retirement: “The trouble is that we converted our opponents.” In this, she was wryly commenting on the ongoing conflict in the Conservative Party about her legacy. Upon her death, David Cameron, a moderate successor as Prime Minister, quietly lamented her argumentativeness but kindly conceded that “many of those arguments are no longer arguments at all” – Thatcher had transformed British politics from a consensus of socialist sclerosis to a cross-partisan embrace of market economics. 

The major remaining argument is the one that finally took her down: Britain’s role in Europe. With Brexit, British voters appear to have expressed their verdict – but we shall see if the United Kingdom follows the path suggested by Thatcher: model itself after its old colony of Singapore and strive always for ordered liberty. Here’s Moore with the last word:

If there was one uniting force in everything Mrs Thatcher did, it was her love for her country. All great political leaders have this in some form. Often, perhaps always, it is based on a heightened picture of the nation which they lead – a picture, of course, which puts them in the foreground and makes them embodiments of the nations they lead… What Mrs Thatcher loved in her country – its liberty, its lawfulness, its enterprise, its readiness to fight, its civilizing, English-speaking mission – was not always visible in the place she actually governed, nor was her love always requited. But great loves such as hers go beyond reason, which is why they stir others, as leaders must if they are to achieve anything out of the ordinary.

Thatcher 3

Figure 8. Click to buy Charles Moore’s three volume biography of Margaret Thatcher: Not for Turning (10/10); Everything She Wants (8/10); and Herself Alone (9/10). The first volume is the best. Once Thatcher becomes Prime Minister, Moore chooses to address her life by topic rather than chronology, which is probably best for understanding can be a bit jumpy. Charles Moore took over two decades and conducted hundreds of interviews to get this final product: altogether, the biography can be forgivably over-comprehensive, is sympathetic but frank, and hopefully leaves you inspired by her example.

Thanks for reading!  If you enjoyed this review, please sign up for my email in the box below and forward it to a friend:  Think – do you know any conservatives who might learn from one of the most successful conviction politicians of all time? How about any ambitious women? Or someone who appreciates modern history?

I read over 100 non-fiction books a year (history, business, self-management) and share a review (and terrible cartoons) every couple weeks with my friends. Really, it’s all about how to be a better American and how America can be better. Look forward to having you on board!

    Win Big Or Go Home

    The Gist: How the awesome Margaret Thatcher wielded power.

    The second of a three-part review of Charles Moore’s three volume biography of Margaret Thatcher, the middle book being Everything She Wants.

    Click here to read part one: My Heroine, and here to read part three: Two More Votes.


    Margaret Thatcher was a winner. She won three elections in a row for the Conservatives – her second victory not only made her “the first leader of any party” in the twentieth century “to serve a full term and then increase her majority” but that increase “was the greatest [for any government] in parliamentary history.” Her third victory marked her as the most winning British politician of the modern era – so much that her preferred memoir title was “Undefeated.” But Thatcher did more than gain and keep power: she used it. The secrets to her success were her convictions, her character, and her courage.

    DJ Khaled

    Figure 1. All she did was win. 


    Charles Moore, the author of a three volume biography we review here, relates that “she carried in her head a picture of her country derived from its past greatness and energetically projected on to its future. It was more restorationist than revolutionary, though the restoration would sometimes require revolutionary methods.” Whether Thatcher was a traditionalist or a radical remains a subject of debate, especially in her own party. “To her, the habits of ancient institutions were not mere outward show. She believed they represented something deep and proud in the history of her country.” Thatcher loved a Latin motto translated as “To stand on the ancient ways, To see which is the right and good way, And in that way to walk.” But at the same time, “She had the radical’s total lack of embarrassment about arguing from first principles. Above all, she had the radical’s permanent angry impatience for change.”

    That impatience fueled a legendary work ethic, in which she consumed and sharply commented upon reams of paper at all hours. “Mrs Thatcher’s chief method of exerting her will over the machine was not institutional but personal. She used every remark, every memo, every meeting as an opportunity to challenge existing habits, criticize any sign of ignorance, confusion or waste and preach incessantly the main aims of her administration.” The effect was galvanizing: When one of her junior ministers was dashing through the House of Commons, someone cried out “Slow down, slow down! Rome wasn’t built in a day.” “Well,” he replied, “Margaret Thatcher wasn’t the foreman on the job.”


    Figure 2. Thatcher was simply always working: turning down a coveted opportunity for a backstage tour of the Kremlin in favor of studying her briefing books, she complained “Do you think I’ve come here as a tourist?” 


    Thatcher’s first challenge was beating double-digit inflation – and I will try my best to render monetary policy as straightforward as possible but, if your eyes glaze over, you can skip ahead to fighting unions and Communists (sometimes one and the same). A major reason why the post-war consensus was subject to successful assault was that the Keynesian economists entrusted to run things were thoroughly bewildered by the simultaneous presence of both high unemployment and high inflation: according to Keynes, the two should be balanced against each other, each requiring opposite responses. Thatcher’s prescription was the tough medicine of monetarism, a theory popularized by Milton Friedman and simultaneously being put into place by Paul Volcker in the United States. Monetarism rejected central bank tinkering in response to different economic conditions – Friedman feared there were excessive, destabilizing lags between a problem like unemployment arising; central bankers discovering and interpreting the problem through statistic collection; and central bankers finally conjuring and applying unpredictable, bespoke, and heavy-handed responses. Instead, the central bank should apply predetermined rules controlling the supply of money to preserve price stability and give businesses the opportunity to confidently plan for the future. 

    The problem is that this takes time to work, sometimes more time than democratic leaders have before their next election. To confidently save, invest, or contract with their apparently decreasingly valuable currency, people have to truly believe that the government will not suddenly print and cheaply lend truckloads more. Thus, the immediate impact of Thatcher’s policies was to multiply unemployment without decreasing inflation. Ted Heath, the Conservative leader she ousted, pounced, publicly suggesting her failure, and demanding for a return to the post-war consensus. In response, Thatcher demonstrated her resolution, famously declaring before a roaring Conservative crowd, “You turn [back] if you want to. The lady’s not for turning.” She insisted that consensus was “the process of abandoning all beliefs, principles, values and policies in search of something in which no one believes, but to which no one objects.”  Thatcher’s vigilance would eventually be vindicated as inflation and unemployment both dropped over her tenure – but it did not happen before her first re-election. Until then she was barely able to keep in line her own party, filled with skeptical wets ready to return to consensus at any hint of failure. Thatcher herself was committed to monetarism but was always nervous about raising interest rates. She worried that “preventing people from borrowing was a sure way to crush the aspirations which she wished, for reasons of belief and of party politics, to foster” and “she hated the idea that young people on or approaching the housing ladder should be penalized by a Tory government.” But Thatcher kept administering the medicine to cure the bigger danger of inflation. When the election did come in 1982, her posters proclaimed “no Labour government had ever brought down the level of unemployment.” And Labour helped her enormously by publishing a far-left platform called “the longest suicide note in history.” But none of that might have saved her if it were not for the Argentine invasion of the Falkland Islands.

    Right turn only

    Figure 3. A sign worth hanging in political offices, judicial chambers, central bank lobbies. 


    The Falklands are an archipelago a little smaller than Connecticut about 300 miles from Argentina and 8,000 miles from Britain, then with a population of about 1,800. Though the islands had been continuously occupied by British settlers for over a century and claimed for much longer, Spain and its local successor Argentina also had an uneven presence on the islands until the 1830s. By the 1980s, the British, to the degree that anyone thought of the Falklands at all, considered them a nuisance: their maintenance cost money, they had practically no strategic value anymore, and the Argentines complained across Latin America about continued British colonialism. Indeed, the civil service had long been trying to figure out a diplomatic way to give them up. Calculating that the British wouldn’t bother defending a nuisance and hoping to patriotically distract their population from economic woes, the Argentine junta invaded the islands in 1982.

    They terribly misjudged Margaret Thatcher. Thatcher immediately understood she must retake the islands. If she were to allow British territory to be seized, she would be advertising that more significant territories like Hong Kong and Gibraltar were doormats to willing aggressors. To concede the Falklands diplomatically was one thing, but to surrender the islands would be a blight on British national prestige, confirming the descent of the Empire into a second-rate nation. But there was an additional element: the islands were filled with people who had been British citizens for generations and wished to remain so within their homes. An inexact analogy might be if a Philippine dictatorship invaded the Northern Marianas, which you might be indifferent to until realizing that the Northern Marianas are part of the United States and filled with proud Americans. 

    And yet even if the moral answer was clear, outside military experts considered the retaking a significant logistical challenge. Thatcher had been trying to cut government spending across the board and the ministry of Defense had easily found economies in the insignificant South Atlantic. The British Navy needed three weeks to sail from the UK to the Falklands and had to rely on what they brought with them, as opposed to the Argentines who were fighting just off their coast. Undeterred, Thatcher took the advice of her husband Denis, a veteran of World War II: “Get the Chiefs, give them clear objectives and then get out of the way.” This she did, and the British military proved up to the job.  In the subsequent election, a heckler shouted at future Labour leader Neil Kinnock that Thatcher had “guts.” Kinnock replied that it was “a pity that people had to leave theirs on the ground [in the Falklands] in order to prove it.” Labour, as we have relayed, badly lost.

    Darth Vader

    Figure 4. Argentina may have taken a lot of Germans after World War II but they failed to learn that the Empire strikes back.


    The Falklands would not be her only test of courage. In 1984, the Irish Republican Army bombed the hotel hosting the Conservative Party conference, killing five and injuring dozens. The IRA miscalculated where Thatcher was staying but if she had even been in a different part of her own room, she probably would have been badly injured. Immediately, she insisted the convention go on: “We must show that terrorism cannot defeat democracy.” This was not the first nor the last time she would be affected by IRA terrorism: her brilliant campaign manager Airey Neave had already been killed in a car bomb, her very capable backbench manager Ian Gow would die of the same fate. In church after the convention, she reflected “This is the day I was not meant to see. And Then I remembered my friends who cannot see it. I have never known such a blend of gratitude and sorrow.” Denis subsequently gave her a watch with the inscription, “Every minute is precious.”

    The bombing occurred amidst an entirely different confrontation for which Thatcher had long been preparing. The British coal-miners’ union had been a dominant force in British politics for years, all the more so since the oil embargo, because they provided, through a nationalized industry, Britain’s heat. The coal-miners were considered one part of an unstoppable insatiable union triumvirate that also included railroad men and dock workers: combined, they could and did halt the British economy at their pleasure. When Ted Heath had been Prime Minister, he had talked a good game but ultimately conceded to their demands, helping bring down his own government. Thatcher was determined to be different. She made some initial concessions while laying the legal groundwork for breaking a strike and ordering a surplus of coal to be stored and warehoused to withstand it.

    From 1984 into 1985, the Marxist union leader Arthur Scargill, determined to bring down Thatcher in the same manner as Heath, led two-thirds of Britain’s coal-miners out on strike in the largest labor action in decades. But his very extremity hurt his cause: having lost national ballots of workers in the past, Scargill refused to hold one, rendering the strike technically illegal. Previous governments had made martyrs out of illegally striking union leaders by arresting them; Thatcher instead used a new legal regime to take their money. Scargill then accepted funds from Libya and the Soviet Union, radioactive actions that highlighted how out of touch he was, while Thatcher had already won over many union members through her patriotic leadership. Above all, Scargill alienated the wets who wanted to compromise by refusing “to budge from his position that no pit should ever be closed for economic reasons, but only if its seams were exhausted (or unsafe).” Thatcher reframed the old battle: this was not a fight between her and Scargill, but an attempt by Scargill to coerce the British people. After a long year, the strike ended without a deal. Thatcher’s failure to flinch paved the way for labor reforms across society, even of the lawyers’ guild, that rejected extortion in favor of economics.


    Figure 5. Scargill was used to waiting for the perfect pitch but this time struck out. 


    Of course, one of the reasons why Thatcher had to deal so directly with the coal-miners was because the industry, along with telecommunications, oil, automobiles, steel, airlines, and too many others were all owned by the government. In fact, when Thatcher had taken over in 1979, “a seventh of the British workforce was employed by nationalized industries.” She was determined to restore market incentives to the British economy – and she started with what would become perhaps her most popular achievement: selling public housing to its current occupants. “By 1983, it would become commonplace for people, mainly from the upper working class, to declare ‘Maggie got me my house.” In real numbers, the share of British households in government housing would go from nearly a third to less than 10 percent. When she won again in 1982, her team put together “one of the most ambitious plans for legislation ever laid before a British Cabinet” – a series of specific dates for industries to be sold back into the private sector – and then they did it, netting the government billions of dollars, the economy a more efficient footing, and shareholders a fresh and growing stake in British prosperity. By the end of her tenure, Thatcher would deregulate financial markets making the City of London the financial capital of Europe and cut the tax burden. The only significant fiscal goal Thatcher fell short on – she herself acknowledged “I asked for too little, didn’t I?” – was in the overall spending of government, which increased every year but, significantly, decreased as a proportion of GDP. Ultimately, Thatcher’s most lasting domestic legacy was her dismantling of the post-war consensus and the prosperity that resulted.

    What Thatcher was most proud of, however, was her role in winning the Cold War. The Iron Lady was an especially articulate anti-communist, and that ended up credentialing her, somewhat ironically, in cultivating the leaders of both superpowers: Ronald Reagan and Mikhail Gorbachev. Reagan, of course, is less of a surprise: he described her as his “soulmate” and they shared similar views on politics domestic (market-oriented) and foreign (anticommunist). They did differ over nuclear weapons – Reagan wanted their abolition, Thatcher insisted that mutually assured destruction was the best route to peace (in this, a retired Richard Nixon encouraged her.) She was annoyed over the American invasion of Grenada, a former British colony, but Reagan charmingly apologized: “If I were there, Margaret, I’d throw my hat in the door before I came in.” But when she needed help with the retaking Falklands, Reagan countered some of his team: “Give Maggie everything she needs to get on with it.” When America needed help punishing the Libyans, Thatcher insisted, despite some unpopular politics,  “We have to support the Americans on this. That’s what allies are for.” Reagan would write her after leaving office, “I feel that the Lord brought us together for a profound purpose and that I have been richly blessed for having known you. I am proud to call you one of my dearest friends, Margaret; proud to have shared many of life’s significant moments with you; and thankful that God brought you into my life.” When asked who should give his eulogy, Reagan insisted on Margaret. All of this intense personal diplomacy translated into genuine worldwide influence and betterment for the interests of both Britain and freedom for the 8 years they shared power. But in the end, her influence frayed: she would not enjoy remotely the same relationship with the “wobbly” George Bush, who concluded that a united Germany was the future of a continent where America did not have “exclusive friends.” Luckily, by then, the stage was already set for the Cold War to be won.

    Unexpectedly, she enjoyed a better relationship with Gorbachev than Bush. Thatcher had always sung the virtues of freedom, challenging the world,  “what is there in the Soviet system to admire? Material prosperity? It does not produce it. Spiritual satisfaction? It denies it.” She warned “when the Soviet leaders jail a writer, or a priest, or a doctor or a worker, for the crime of speaking freely, it is not only for humanitarian reasons that we should be concerned. For these acts reveal a regime that is afraid of truth and liberty; it dare not allow its people to enjoy the freedom we take for granted, and a nation that denies those freedoms to its own people will have few scruples in denying them to others.” When she first met Gorbachev, she “deliberately and breathtakingly…set about serially cross-examining him about the inferiority of the Soviet centralised command system and the merits of free enterprise and competition.” Gorbachev proved an amused interlocutor and Thatcher recognized that he represented something different from anything the Soviet leadership had produced in the past: a genuine reformer. She, the ultimate anti-communist, publicly validated, especially to her dear friend Reagan who hadn’t yet met him, that Gorbachev was a man with whom the west could do business. Thatcher probably took her support for Gorbachev too far as she considered the balance of power at the end of the Cold War, but she deserves much credit for her searing moral clarity. In her own memoirs, she described a visit to Poland after the Iron Curtain fell:

    She attended Mass at the Church of the Holy Cross in Warsaw. As the priest rose to deliver his sermon, she realized, though she did not speak Polish, ‘that I had become the focus of attention’. The priest, she paraphrased, was telling his congregation that ‘during the dark years of communism’ the Poles had been sustained by many voices from the outside world ‘offering hope of a different and better life’. But they had come ‘to identify with one voice in particular – my own’. They had not fully felt the change until that day ‘when they finally saw me in their own church’. Lines of children presented Lady Thatcher with bouquets of flowers while their parents stood and applauded. Her chief of staff, Julian Seymour, who was present that day, remembers this as ‘the most electrifying moment of my two decades-plus involvement with her’. In the last paragraph of her book, Lady Thatcher declares her wish that the congregation of the Church of the Holy Cross should be her ‘character witnesses’ on Judgment Day

    Thatcher 2

    Figure 6. Click to buy Charles Moore’s three volume biography of Margaret Thatcher: Not for Turning (10/10); Everything She Wants (8/10); and Herself Alone (9/10). The first volume is the best, and from which much of this specific email is derived. Once Thatcher becomes Prime Minister, Moore chooses to address her life by topic rather than chronology, which is probably the right decision for understanding but is a little jumpy. Altogether, the biography can be forgivably over-comprehensive, is sympathetic but frank, and hopefully leaves you inspired by her example.

    Thanks for reading!  If you enjoyed this review, please sign up for my email in the box below and forward it to a friend:  Think – do you know any conservatives who might learn from one of the most successful conviction politicians of all time? How about any ambitious women? Or someone who appreciates modern history?

    I read over 100 non-fiction books a year (history, business, self-management) and share a review (and terrible cartoons) every couple weeks with my friends. Really, it’s all about how to be a better American and how America can be better. Look forward to having you on board!

      My Heroine

      The Gist: How the awesome Margaret Thatcher rose to power.

      The first of a three-part review of Charles Moore’s three volume biography of Margaret Thatcher, beginning with Not for Turning.

      Click here to read part two: Win Big or Go Home, and here to read part three: Two More Votes.


      I want to tell you about a personal hero – or more precisely – personal heroine.


      Figure 1. That final “e” is important


      Margaret Thatcher may be the modern world’s greatest national leader, the closest in my lifetime, perhaps even my father’s lifetime, to the awesome standard of James K. Polk. Nicknamed “The Iron Lady” by the Soviets for her hardline stance in helping win the Cold War, what makes her truly remarkable is her transformation of British politics from a consensus of socialist sclerosis to a cross-partisan embrace of market economics.


      Figure 2. The iron that won the Cold War, produced by free markets, could easily and appropriately have appeared on the set of Star Wars.


      Charles Moore, a journalist during her heyday, tells her story over three volumes – and nearly three thousand pages – of an authorized biography that took over two decades and hundreds of interviews to complete. In our correspondence, we will discuss how she developed her views, how she dealt with her biggest challenges, and how she was finally betrayed.

      Margaret adored her father, Alfred Roberts, a grocer active in the local politics of Grantham, an English town a hundred miles north of London then about 20,000 in population. Alfred had dropped out of school as a teenager to support his family but did not let a lack of formal education deter him from his interest in ideas: he was a voracious reader and active recruiter of interesting speakers for the local Rotary Club.  Most significantly, Alfred was a lay Methodist preacher who inspired within his daughter a “puritanical desire for self-improvement” that celebrated the classic Protestant work ethic (“There is no promise of ease for the faithful servant of the Cross”) as well as a stridency of purpose (“God wants no faint hearts for His ambassadors.”) 

      The most telling anecdote of her childhood came when she petitioned her dad that she be allowed, like so many of her peers, to enjoy Sundays doing whatever she liked (or perhaps even wear a ribbon from time to time!). Alfred responded, “Margaret, never do things just because other people do them. Make up your own mind what you are going to do and persuade people to go your way.” Many would have bristled under this austere regime. Margaret thrived – and all the more so because Alfred gave her an opportunity rare among girls at the time: he encouraged her to regularly speak publicly, especially about their faith. His advice was simple and profound: “Have something to say. Say it as clearly as you can. That is the only secret of style.”


      Figure 3. The best superheroes are advised by wise, older, British men named Alfred.


      Extraordinary work ethic and clarity of communication would be defining features of her life – and they would lead to her first big opportunity. When her high school principal told her she didn’t have what it took to go to Oxford, Margaret replied “You’re thwarting my ambition” and convinced someone at the boys’ school to help her get what she needed. She was one of the few women to study chemistry – and she would later prefer to be known as the first Prime Minister with a science degree rather than the popular reference that she was the first female premier. But what would help her become PM was her active leadership of the Oxford University Conservative Association, where she made crucial early connections.

      One of those connections recommended her, at age 24, to a local conservative party for nomination to Parliament. The British system and culture of politics is quite different from the United States, partially because Members of Parliament are actually expected to run the government departments whereas members of Congress only vote. As a result, candidates for Parliament are not necessarily from the places they stand to represent – nor even ever intend to live there. Indeed, at this time, Margaret was accepted by the local party because they were the hopeless minority and wanted an attractive, young, Conservative fighter to try to make a dent. If she performed well, she could expect to try to represent somewhere else where she might actually have a chance of winning. She ran well twice in Dartford, and cut Labour’s significant majority, but she did not come close to winning. The experience was good – she even was a youth speaker at a rally for Winston Churchill – but the most significant outcome was that she met her beloved husband Denis. Amusingly, Denis had been invited to a party meeting to meet “a very pretty girl” and was surprised to find “Good God, it’s the candidate!” Smitten, he volunteered to drive her around (she couldn’t afford a car) and soon gave her the surname she’s famous for: Thatcher.

      What is striking in retrospect is that Thatcher was not yet the maverick she would become. Yes, the core was there – “a romantic belief in the greatness, and a sad lament at the decline, of her country” but she had not yet defined the path forward. Thatcher was for the sound running of government and began saying what she often would: “The Government should do what any good housewife would do if money was short – look at their accounts and see what was wrong.” But what conservative wouldn’t agree? More interesting is her early complaint that “There is a whispering – in fact, a shouting campaign in operation – that if the Tories get back they will take off all the [price and regulatory] controls, but this is untrue. It was the Tories who introduced the finest food rationing system during the war.” This was meant mostly as a criticism of the then-Labour government’s rationing – but it hardly sounds conservative to say “We actually do rationing much better!” And yet that was the position of the Conservative Party at the time.

      The decades of “post-war consensus” had their origins in the coalition government of World War II – Churchill was satisfied to run the war and leave the details of domestic politics to his Labour partner Clement Atlee. After the war, both Labour and Conservatives accepted the welfare state and Keynesian economics as settled: the government should aspire to maintain full employment through high spending financed by high taxes, general regulation, and the occasional state seizure of entire sectors. The only difference may have been that Labour wanted to nationalize new industries while Conservatives were satisfied with the industries already nationalized.


      Figure 4. Churchill once visited the men’s room at the House of Commons and, discovering Atlee at the urinal, proceeded to the opposite end. Atlee inquired, “Feeling standoffish today, Winston?” “That’s right,” Churchill replied, “Every time you see something big you want to nationalize it.”


      Thatcher would soon be dissatisfied with such an arrangement. After over a decade of politicking, Thatcher had sufficiently shown her talents to be circulated on the Conservative Party’s official approved list of candidates they’d like to see in Parliament. A local party with a comfortable conservative majority gave her the nomination, though perhaps because the sympathetic chairman “lost” two of her opponent’s votes. In 1959, at age 34, she was finally a member of Parliament. Because the Conservatives were in power, she was soon given a job in government. Because she was so new, it was very junior. Because she was a woman, it was in the machinery of the welfare state, which the leadership thought relatively unimportant. 

      Thatcher initially wasn’t very happy with the assignment but the job “taught her how welfare worked, and did not work, and why government spent so much money.” And she started to make her mark. Moore observes that, “Combined with her lower-middle-class background, [being a woman] gave her a sense, which never left her, that she was living dangerously. To succeed, she knew she would have to do everything twice as well as the others, virtually all of whom were men. If she failed, no chums would save her.” When she objected to blindly signing off on paperwork, a civil servant objected “Bloody woman. Her job is to sign them, not read them.” Her boss would inquire, “She’s trouble. What can we do to keep her busy?” Eventually, as she rose to a point where she was considered for the Cabinet, the Conservative leader Ted Heath presciently lamented, “once she’s there we’ll never be able to get rid of her.”

      The Conservatives would be thrown out in 1964 and then return in 1970, with Thatcher as Minister of Education. Her goal was to save meritocracy in schools. She failed. The problem was threefold. First, her own party was divided while Labour was united in opposition. She was a product of what were called “grammar schools,” an equivalent of America’s public magnet schools, where gifted children at the age of 11 were selected to pursue a separate, more academically-rigorous program. Moore notes their compelling features: “They represented excellence, they benefited from the exercise of parental choice, and they were the best ladder of advancement ever devised for bright children from poor backgrounds.” But less than 20% of children attended these selective schools – and those tied to the 80%, an overwhelming number for a democracy and necessarily including lots of frustrated Conservative Party members, did not like the diversion of scarce resources nor the feeling of being left behind. Her second problem was that control over schools was proudly decentralized and her role was essentially confined to sending a check. Moore relates that “In parliamentary answers to Education Questions throughout her time in office, Mrs Thatcher’s most common reply begins with the words: ‘I have no direct control…” But the third problem would become the most famous. The Conservatives were trying to cut spending across government and demanded that Thatcher produce cuts in her own department. Desiring to minimize any cuts to classroom education, she agreed to extend a previous Labour government decision to withdraw free milk from high schoolers to younger children. This caused an uproar that led to her first nickname: Margaret Thatcher, Milksnatcher. She retreated from the limelight, became abnormally accommodating to preserve her position, and quietly prepared to fight another day.


      Figure 5. The opposition milked the controversy dry.


      Over these years, in and out of government, Thatcher honed her views. Working on the nuts and bolts of the welfare state, she would conclude that “she wanted the state to mobilize to help the unfortunate, and always believed that there was no full private substitute for this, but she always feared two things – that the ‘shirkers’ would tend to benefit at the expense of the workers, and that the cost, if not carefully controlled, would produce national ruin.” She was sympathetic to one particular part of the post-war consensus articulated by Churchill’s adviser Lord Beveridge, who argued that “when someone did have to be given National Assistance, the ‘provision of an income should be associated with treatment designed to bring the interruption of earnings to an end as soon as possible’.” On the campaign trail, Thatcher would make one of her most famous observations, that socialism has “always succeeded in running out of other people’s money.”

      And, really, public speeches were Thatcher’s tool to clarify her own thinking – at the end of her career, she would reflect “I have never knowingly made an uncontroversial speech in my life.” She would agree to speak on a topic of interest sometime in advance – and then she would “absorb almost any amount of detail” she could about the subject. And yet “Strong though she was on the detail, most of the time she articulated a purpose beyond it.” Building on her father’s lessons, Thatcher would learn “‘Every speech should tell a story or a fable’ and that ‘A speech is to be heard,’ a living performance which the speaker must enact with hands, eyes and voice as well as verbal content.” Thatcher was better at selecting and editing collaborators than writing speeches herself – but she was at heart the political equivalent of a method actor who obsessed about the meaning and presentation of her words. 

      In what may be described as her national party debut, Thatcher had been invited in 1968 to give a major speech outside the Conservative Party conference on the subject of women’s rights. She rejected that narrow subject – she was pleased by the opportunities offered a conservative woman but did not want to be confined. In another context, “in a sentence which summed up so much of her attitude to life, she declared, ‘Equity is a very much better principle than equality.’” She applied herself completely to the preparation of the speech, checking out over 30 books on conservative economics, philosophy, and history. She wound up presenting the moral case for markets: “The Good Samaritan had to have the money to help, otherwise he too would have had to pass by on the other side.” She would soon contrast this against the Labour position: “If you make it, I’ll take it”

      Thatcher had come to the conclusion that “politics is a question of alternatives” but, remarkably, she was a subtle rebel. Throughout her entire legislative career, Thatcher only voted against her party leadership’s official preference once: to restore corporal punishment to criminals (a position, like her desire to restore the death penalty, supported by the grassroots but opposed by the elites). Thatcher signalled to the right-wing of the party that she was sympathetic through her speeches and private communications – but she was not one of its leaders, like Enoch Powell or Keith Joseph. Powell had dramatically gotten himself fired from Cabinet for giving a vivid speech about the need to rethink immigration and continued to throw verbal bombs from the back benches. Joseph remained in prominent party leadership but also had set up a think tank to critically reconsider Conservative Party modern orthodoxy.

      In 1975, Ted Heath had been leader of the Conservatives for about a decade. He had lost an election in 1965, miraculously won another in 1970 in defiance of polls and expectations, then lost another in 1974 when he didn’t have a good answer to the heckler who cried “What can you do if you win that you can’t do now?” Heath was the epitome of the post-war consensus, even believing that the only way to deal with persistent industrial problems may be a grand coalition government with Labour. Moore observes that

      “Government spending had risen from a 44 per cent share of Gross Domestic Product in 1964 to 50 per cent in 1969. That drift, the Tories had argued, had to stop and be replaced by a downward pressure and by a political direction which would be maintained. The Conservatives who won in 1970 were committed to a smaller state, and a freer economy, and to the urgency of these matters. They failed, and their failure created the conditions for Margaret Thatcher to become their leader.

      But that outcome was not at all obvious. Thatcher, a footsoldier, was going to be campaign manager for the real star: Keith Joseph. But Joseph hesitated, partly because challenging a sitting leader is risky and partly because of the reaction to his recent controversial speech about broken families in Britain’s lower classes. Thatcher then entered the race herself – but she was widely considered a stalking horse for Joseph. The tactic, well-recognized in British politics, was that her challenge would show the strength of Heath: if he won decisively, her career might be badly damaged but the real rightwing leadership could live to fight another day. If Heath won with only a small majority against such an insignificant candidate, then he could gracefully exit while the real leadership contest proceeded. Given Heath’s weakness, the joke was that the race was between a gelding and a filly. No one actually thought she could win.

      Except, perhaps, her campaign manager, a brilliant Machiavellian named Airey Neave. Neave was a perfect example of the backbenches of the Conservative Party who had never gotten much love from Heath – and therefore knew exactly how to talk to many of his peers who shared the same disillusions. Neave kept Thatcher above the fray: he encouraged her to keep making smart speeches that demonstrated the courage of her convictions while arranging for her to spend time with key people. Meanwhile, Neave politicked: in a representative example, he flattered one disenchanted backbencher by saying “Margaret assumes you must have turned down a job offer from Ted.” “Why?” replied the backbencher. “Oh, because you so obviously should have one if you want it.” Even more effective than generating goodwill, however, Neave played on the hopes of all people skeptical of Heath for different reasons. Though he had a highly accurate list of where the votes were and he was aware that Thatcher was continuously gaining, Neave would tell people on the fence who really wanted someone else that she was short of what was needed to knock off Heath. When the vote happened, Thatcher beat Heath 130-119.

      “The oldest, grandest, in many people’s eyes the stuffiest political party in the world had chosen a leader whose combination of class, inexperience and sex would previously have ruled her out. And it was not obvious that it had really meant to do so, or that it was confident of its choice.” But Thatcher knew what she was doing, insisting to the media on the very day of her election as leader: “You don’t exist as a party unless you have a clear philosophy and a clear message.” To the dismay of her competition, she quickly won over the party’s grassroots voters, declaring in a speech before their convention: “It is often said that politics is the art of the possible. The danger of such a phrase is that we may deem impossible things which would be possible, indeed desirable, if only we had more courage, more insight.” When Labour politicians were aghast at her expressing criticism of the UK while in the United States, she defiantly proclaimed: “It’s no part of my job to be a propagandist for a socialist society.” From then on, Moore notes “Mrs Thatcher could still be slowed down by appeals to the political danger of what she was trying to do, but nothing could stand in the way of the general direction of travel.”

      British voters finally were offered a choice. Over three decades of the post-war consensus of socialist sclerosis culminated in the Winter of Discontent of 1978-1979. In just the last five years, the British pound had lost more than half of its value and inflation was still in the double digits. Labour was already embarrassed by having to apply for the largest loan in IMF history and now proposed to battle inflation by holding down public sector wages, including in many of the industries they had nationalized, hoping to inspire what remained of the private sector to do the same. But this angered the Labour Party’s extremely powerful union allies, who understood that if their wage increases did not match inflation, their purchasing power was being commensurately cut. Truckers, railroad workers, garbage men, manufacturers, and others went on strike, emboldened by the recent success of the almighty coal-miners, upon whom the nation depended, through a nationalized coal industry and amidst an international oil embargo, for heat. The post-war consensus had lost its shine. And the whole point of the Labour Party – created to give unions political power so as to achieve industrial harmony – seemed gone.

      Thatcher supplied the alternative, best encapsulated in a political poster of the time said to depict some of the 1.5 million Britons out of work under the headline “Labour Isn’t Working.” In the 1979 election, the Conservative Party won a comfortable majority in Parliament, making Margaret Thatcher, as she preferred to be known, the very first Prime Minister with a science degree.

      Thatcher 1

      Figure 6. Click to buy Charles Moore’s three volume biography of Margaret Thatcher: Not for Turning (10/10); Everything She Wants (8/10); and Herself Alone (9/10). The first volume is the best, and from which much of this specific email is derived. Once Thatcher becomes Prime Minister, Moore chooses to address her life by topic rather than chronology, which is probably the right decision for understanding but is a little jumpy. Altogether, the biography can be forgivably over-comprehensive, is sympathetic but frank, and hopefully leaves you inspired by her example.

      Thanks for reading!  If you enjoyed this review, please sign up for my email in the box below and forward it to a friend:  Think – do you know any conservatives who might learn from one of the most successful conviction politicians of all time? How about any ambitious women? Or someone who appreciates modern history?

      I read over 100 non-fiction books a year (history, business, self-management) and share a review (and terrible cartoons) every couple weeks with my friends. Really, it’s all about how to be a better American and how America can be better. Look forward to having you on board!

        Get Rich Slow

        The Gist: An exploration of an investor’s most important decision – how much to put where.

        A review of multiple books, most notably William Bernstein’s Four Pillars of Investing

        For a prerequisite tribute to index funds, check out my review Who Wants to Be a Millionaire?


        In our last correspondence, we explored the dismal and costly track record of both individual and professional investors compared to the lazier but more classically profitable strategy of slowly and continuously buying, holding, and balancing a diverse combination of low-cost index funds that return the historically generous market average. 

        So why doesn’t everyone just invest in indexes? The answer is an ironic combination of boredom and terror.

        little league

        Figure 1. It’s basically playing right field in Little League and somehow as a result getting more ice cream on average than your fellow players.


        When people normally put money toward investments, investing in a broad-based index just seems dull compared to the excitement of improbably picking a winner. Why buy small parts of 500 companies if your uncle was just telling you about a great article describing the sure-thing prospects of Whizbang Tectonics? William Bernstein playfully created “‘investment entertainment pricing theory’ (INEPT), which describes this phenomenon. For each bit of excitement you derive from an investment, you lose a compensatory amount of return. For example, a theater ticket may be thought of as a security with a high entertainment value and a zero investment return.” Of course, the theater can be pretty humdrum, too. Keep your asset allocation boringly profitable and get your excitement from swimming with sharks, joining a biker gang, and going over Niagara in a barrel to mimic the trajectory of your hand-chosen portfolio. 

        On the flipside, during a crisis, people lose their nerve as they watch their portfolio lose 20% of its value overnight. Why not sell before it gets worse and you’re wiped out? Historically, millions of investors who thought they could withstand risk sold at precisely the time that they should have been holding – if not buying. Still, if such a prospect freaks you out, the good news is that you can still structure your index investments to reduce risk – but understand that there is a fundamental relationship between risk and return. As Ben Graham intoned, “The investor’s chief problem – and even his worst enemy – is likely to be himself.” Bernstein relates a specific example:

        Myopic risk aversion—our tendency to focus on short-term losses—is one of the most corrosive psychological phenomena experienced by the investor. It is best demonstrated by this apocryphal story: An investor places $10,000 in a mutual fund in the mid-1970s and then forgets about it. Shocked by the October 19, 1987, market crash, she panics and calls the fund company to inquire about the state of her account. “I’m sorry madam, but the value of your fund holdings has fallen to $179,623.”

        william wallace

        Figure 2. To quote William Wallace: “Hoooooooold….. Hooooooold…. ”


        But what if we’re not talking a 20% loss, but 80%? Let’s look at 1929. Before getting to the misery, Bernstein notes that the stock market ‘bubble’ wasn’t entirely unreasonable: “Between 1920 and 1929, real GDP rose almost 50%… by today’s standards, stocks were positively cheap. Until 1928, they sold at approximately ten times earnings and yielded about 5% in dividends. Even at the peak, in the summer of 1929, stocks fetched just 20 times earnings, and dividends fell only to 3%. Again, tame by today’s standards.” Malkiel suggests that the principal problems were people borrowing to buy and the Fed’s ineptitude in first attempting to punish those borrowers, then in mishandling the consequences. Bernstein surveys the subsequent agony: “from the market peak in September 1929 to the bottom in July 1932, the market lost an astonishing 83% of its value. The loss was mitigated, however, by the approximate 20% fall in consumer prices that occurred during the period. The market recovered strongly after 1932, but in 1937, another drop of about 50% occurred.” Collins brutally notes that “should you have been unlucky enough to have invested at the peak, your portfolio wouldn’t have fully recovered until the mid-1950s, 26 years later.” 

        By now, your instinct for loss aversion is up and you’re ready to split your assets between cash and collectible knick knacks that you can at least enjoy looking at. But Collins points out that you would have had to have been incredibly unlucky to invest everything at the peak. If, instead, you had been investing steadily from your paycheck, your investments from 1926 and 1927 – midway up the stock market rise – would have been positive within 10 years. Indeed, the Bogleheads reveal that “Over the 85-year period from 1929 through 2013, we can clearly see that an investor who picked the worst one-year period to invest in large domestic stocks would have lost 43 percent. However, the same investment over any 10-year period would have lost only 1 percent.”

        10 years! Who has a decade to spare for a measly return? In some ways, riding out a crash is easier than long periods of slow growth. Bernstein reveals that “an examination of historical stock returns shows that the market can perform miserably for periods as long as 15 to 20 years. For example, during the 17 years from 1966 to 1982, stock returns just barely kept up with inflation.” Retirees with too much stock exposure certainly suffered. But this long era of malaise was absolutely stupendous for anyone working throughout, diligently investing a portion of their paycheck. Warren Buffett asks a couple of questions to get at the principle: “If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef?…  If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?” Malkiel analyzes: “Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the ‘hamburgers’ they will soon be buying. This reaction makes no sense.”

        bernie sanders

        Figure 3. Thus explains the youth appeal of Bernie Sanders?


        Continuously investing in a bear market takes a lot of grit – how certain can you be that the market eventually will recover? You can’t. That’s why so many people stop buying or sell. Again, there is a fundamental relationship between risk and return. As a historical matter, we can observe that this has been the right strategy in the United States again and again as the long term trajectory of our markets has been a glorious up. But this is subject to hindsight and survivor bias. Every great nation of history had a good run until they didn’t. Turn on a TV and you can start worrying that our screwing up our historic ingredients for success is unfortunately quite plausible. Bernstein worries: “Until World War I shut down the St. Petersburg exchange in 1914, the Russian stock and bond markets were among the world’s most respected and active. They never reopened. During the twentieth century alone, military and political upheaval rendered not just St. Petersburg’s bourse, but also many other once-vigorous securities markets, defunct, or at least moribund: Cairo, Bombay, Buenos Aires, and Shanghai, to name a few.” Malkiel lucidly talks through the incredible speculative run-up of the Japanese stock market, where “stock prices increased 100-fold from 1955 to 1990.” At one point, the grounds of the Tokyo Imperial Palace – sitting on only half of a square mile – were valued greater than all of the real estate in California. Japanese investors at the height of the bubble have still not recovered 30 years later. 

        All of which brings us to your single most important decision as an investor: how you will allocate your capital among different asset classes. To get a sense of how important this is, the Bogleheads point to a major study of 91 pension funds’ investing over a decade that found that the differences in what percentage they put into each asset class accounted for 93.6% of the difference in performance between them. The final 6.4% was split between the time they bought and sold, the individual securities they selected, and the costs they were charged. To reinforce an earlier point, the same study also found that attempts to actively manage the fund – as opposed to leaving things in relevant indexes – cost pensions 1.1% in performance. 

        As you make your decisions, keep in mind a few things. First, invest only in things you understand well enough to explain to a 12 year old. Your money is at stake and good returns don’t require complexity – in fact, they may be better correlated with simplicity. Second, make sure your asset allocation reflects your desired risk. In chasing better returns, realize you are inherently going to be in riskier investments that could have, at the very least, more volatility. If your blood pressure can’t handle big swings, go for a safer, simpler allocation. If ultimately this gets too complicated and you want to set it and forget it, you can invest in low cost funds that diversify for you, either based on your target retirement age or your target risk. Third, for proper diversification, the Bogleheads advise “You want some investments that zig while others zag.” To protect yourself at various times, you are going to want asset classes whose performance is not directly correlated with each other. That might mean that certain aspects of your portfolio lag for a long time – and that’s not really a bad thing if you’re confident in their fundamentals. Focus on total portfolio performance. Fourth, be hyper-vigilant about fees and taxes so that you can capture most of the benefit of your returns. The further you drift from a broad market index, the more certain fees you may end up paying for uncertain performance. At the same time, some asset classes or indexes are inherently more or less tax efficient than others. Your tax inefficient holdings are ideally placed in a 401(k) or Roth IRA. I don’t have space to get into all the details, but you absolutely should research your eligibility for them (and precisely what costs and fees are involved).


        Figure 4. For the typical 12 year old, you’ll have to properly analogize. Like Fortnite, the winner of investing is the one who manages to hold on while everyone is dropping out. Of course, given the preteen popularity of TikTok, you might have trouble explaining the riskiness of Emerging Market indexes.


        The biggest asset allocation question you have to answer is what percentage of your investments to own in bonds versus stocks. In case these terms require demystification: when you buy a bond, you are loaning money to a company or government that they promise to pay back with regular interest. It’s nice to be owed by these guys for a change – and, generally, bonds are considered safer than stocks, especially over a short term, but, predictably, they bring less return. When you buy a stock, you are literally buying a small percentage of a company. Congratulations – you are a business owner!

        Bonds tend to face three problems: first, inflation endangers the value of your return. Second, many bonds are callable, so that if interest rates decrease, the lendee will simply borrow somewhere else and pay off the expensive bond. Third, the lendee may default. An index of bonds broadens your exposure and thereby limits your risk – but you might consider buying U.S. Treasuries directly because you can do so online without a broker or ongoing expenses. Bernstein cites Jeremy Siegel’s Stocks for the Long Run: “stocks outperformed bonds in only 61% of the years after 1802, but that they bested bonds in 80% of ten-year periods and in 99% of 30-year periods” Further,  Malkiel shares that, most recently, “bonds have produced average returns of 7.1 percent versus stock returns of 11.4 percent over the 50-year period ending in 2016,” but importantly, they zig when stocks zag: “bonds proved to be excellent diversifiers with low or negative correlation with common stocks from 1980 through 2018” Ultimately, Bernstein says “we own stocks to hedge long-term risk and bonds to hedge short-term risk.”


        Figure 5. As you buy bonds, it’s fun to think of yourself as a corporate loan shark. “Nice car you got there, Tesla. Shame if something happened to it after you defaulted.”


        The classic rule of thumb is that the percentage of bonds in your portfolio should be your age – that way, your portfolio becomes less risky as you approach retirement. Several authors believe that this is too conservative for investors with full-time jobs and that their bond percentage should max out at 20% or 25% until they approach retirement. Bogle, bullish on stocks, had an approximately 80% stock/20% bond mix into his 90s, advised young investors to flirt with 100% stocks, and thought retirees would do fine with a 50-50 ratio. Bernstein, on the other hand, suggests that younger investors might want a larger percentage of bonds until they’ve lived through at least one crash and understand how they’ll react. While Bernstein believes a disciplined buy and hold of more stocks would be better over time, a bigger percentage of bonds that made investors feel safe in a crisis would be better than selling off stocks in a panic. Indeed, he notes, a stock crash would generally be a good time to sell bonds and buy stocks. And Bernstein is also skeptical of the size of the recent return premium stocks have had over bonds, so that at least 20% in bonds is always valuable. Similarly, the legendary Ben Graham suggested that you should never have more than 75% in either allocation, and the data over the last 100 years suggest that those are good upper/lower limits for risk/reward ratios. Ultimately, the perfect portfolio is only clear in retrospect – you need to decide this for yourself.

        Once you’ve settled on what percentage of bonds, you’ll have to determine what kind. For simplicity, the indexers tend to prefer a total bond market index for tax-protected accounts and a total municipal bond market index for taxed accounts (the latter is free of taxes, but has predictably lower returns). There’s a richer debate about the duration of your bonds. Longer-term bonds pay more because there’s less certainty about the distant future’s inflation and default rates. Bernstein warns “Long-duration bonds are generally a sucker’s bet – they are quite volatile, extremely vulnerable to the ravages of inflation, and have low long-term returns.” He suggests the average duration of your bond should be less than 5 years – after all, your bonds are the short-term hedge. The Bogleheads, on the other hand, recommend choosing a timeframe that matches your need: if you are going to need the cash in 2 years, go for short term. If you’re investing forever, buy the total index. Relatedly, Malkiel likes zero-coupon bonds – an instrument that you buy at a discount, pays zero interest, but gives you the full amount at a time you specify (i.e. for paying for college). Junk bonds promise high yields because the lendees are of questionable ability to pay – all the indexers avoid them because they prefer safety in bonds and risk in stocks. There’s also some appeal for a particular type of U.S. bond that explicitly promises to pay a return above inflation – that takes care of a significant concern – but this type of bond is considered so safe that it tends to have little return and, worse, it’s taxable.


        Figure 6. Your new nickname for your brother-in-law can be “Junk Bond”


        Once you’ve settled on your allocation within bonds, you’ll move to stocks. Here, you’ll want to determine whether you want a simple portfolio that covers the total market in proportion to individual companies’ size – or whether you want to flavor your portfolio with exposure to different elements of the global marketplace, usually at greater cost and risk for certainly more diversification and complication, possibly more return.

        A major question is how much you should invest in the United States versus overseas. Bogle was essentially an investing nationalist: when you invest internationally, you are being exposed to multiple additional risks beyond company performance, including different accounting standards, political trouble, and currency differences. If you simply invest in the S&P 500, those American-based companies already get half their revenue from abroad which could be enough international exposure for you. Finally, investing globally can involve more fees than investing at home. On the other hand, Malkiel reminds us that the United States represents less than half of the global investing economy and Bernstein suggests that the number of differences between the United States and elsewhere mean that international stocks zig while domestic stocks zag – exactly what you may be looking for in a diversified portfolio. And, returning to our Japanese or Russian examples, Bernstein insists the takeaway is not that international markets are scarier, but that markets anywhere, including here in the United States, are subject to unexpected risk, so avoid excess concentration.

        If you do decide to invest internationally, you can simply buy an index that covers the world, as the Bogleheads simply advise, or you can break it down into indexes of particular regions or economic development. There’s always a danger the more specifically you index the closer you are approaching historically-fraught stock-picking. But there are reasons to consider breaking it down: first, owning the equivalent of the S&P 500 for Europe is relatively low cost and tax-efficient and so may be more appropriate for a taxable account. You still get the zig: Malkiel notes that from 1970 to 2017, an index of international developed economies’ stocks has done equivalent to the S&P but have only had a 0.5 correlation. Second, if you own the whole international market, you may be over-exposed to regional bubbles, such as with Japan in the late 1980s dominating the international index. Third, you may want to manage your exposure to faster-growing emerging markets. Malkiel is intrigued by their growth and notes their better performance than developed economies from 2000-2010. Bernstein thinks that there are substantial gains to be made in the very long transition from a riskier, emerging economy to a developed economy – but that those don’t always translate into immediate stock market returns – “China has had one of the world’s highest economic growth rates—at times exceeding 10% per year—yet between 1993 and 2008, its stock market lost 3.31% per year. The same is true, to a lesser extent, for markets in the Asian ‘tigers’ (Korea, Singapore, Malaysia, Indonesia, Taiwan, and Thailand), which since 1988 have all had lower returns than those in the low-growth United States.” Again, ultimately, you’ll need to decide for yourself. Within the books reviewed here, the range of recommendations for how much international stock to own is 0 – 30% of your total portfolio.


        Figure 7. Sadly, you’ll have to forgo the most promising foreign investments in emails from Nigerian princes.


        Of course, the core of your stocks should be within the United States, where you can easily invest in an index that covers most of the stock market. For simplicity’s sake, once you’ve settled the bond and international questions, you could stop right there. Bogle’s personal portfolio had the beauty of simplicity: 80% S&P 500, 20% total bond market index. And, indeed, all of the indexers covered here tend to recommend putting at least a plurality of your stocks into the S&P 500 or the total US market. As mentioned before, there’s always a danger the more specifically you index the closer you are approaching historically-fraught stock-picking. But if you want to get creative, there are advocates for indexes of two sectors in particular (real estate and precious metals), the smaller companies in the market (small-cap), and companies that are trading at a relatively smaller multiple of their earnings or net worth (value) – but note that practically everything is going to have higher costs than a broad market index.

        Most indexers believe that real estate is a good investment because it has had similar returns to the generous stock market over time while not being exactly correlated. The principal vehicle that people use to invest in real estate is a real estate investment trust (REIT) – and they have some peculiarities, chief among them that they have to distribute 90% of their profits in dividends, which are not ideal in a taxable account. That distribution feature also means that they heavily rely on debt for expansion, which creates its own risk. Publicly traded REITs also, for better or worse, own only a single digit percentage of the total U.S. investable real estate market, so they are not as broad an investment as desirable. There are other opportunities to invest in real estate outside indexes, but whatever you do, do not consider your personal home an investment. The authors reviewed here are otherwise skeptical of sector indexes because they feel too close to stock-picking and they fear being that rational investor in 1900 who, looking for an evergreen industry, invests in a blacksmith index. But at least Bernstein likes a very small exposure to precious metal stocks as one industry that persistently zags. While uncorrelated, the precious metals sector may primarily be an inflation hedge, and there may be better alternatives over a long time.


        Figure 8. If you’re seeking to design a post-apocalyptic portfolio, conventional securities aren’t going to be that useful – Mad Max isn’t likely to value the printout of your Charles Schwab holdings in gold mining companies. Instead, carefully allocate to bullets, alcohol, and cigarettes – the latter two being all the more valuable if you’re not a personal consumer!


        The theoretical appeal of small companies in the bottom 10% or so of the market is that, by their very size, they may have an easier route to greater returns. They also, of course, are closer to going out of business. Bernstein points out that “the small stock advantage is extremely tenuous—it’s less than a percent-and-a-half per year, and there have been periods of more than 30 years when large stocks have bested small stocks.” An index of small cap companies spreads your risk – but anytime a company is too successful, they get bigger, prompting the index to sell the shares in a taxable event. And, naturally, keeping track of these smaller companies means more fees than a broad based index. Malkiel also cautions that small cap companies may now have become too popular (and therefore overpriced) even while there’s relatively little analyst attention to this small part of the market. Malkiel further points to data that “single factor funds have either produced returns that are roughly equivalent to broad-based index funds or their returns have been inferior” – but that may again go to the question of correlation. 

        The theoretical appeal of value companies trading at about the lower third of multiple of book value is that you can buy them cheap and they are less subject to speculative bubbles. In any given decade, investors will get enthusiastic about a particular industry or country or whatever and they’ll feverishly bid up prices to be a gigantic multiple of the earnings and value of a company in anticipation that “some greater fool” will pay them more for it. There may, of course, be a good reason why a company is trading at a lower multiple. Yet Bernstein reports: “There have been a large number of studies of the growth-versus-value question in many nations over long periods of time. They all show the same thing: unglamorous, unsafe value stocks with poor earnings have higher returns than glamorous growth stocks with good earnings.” Nevertheless, like a small cap index, if a company does start to trade at a higher multiple, it will get sold – and create another taxable event. Targeted value indexes have more expensive fees than the broad market index – and they can underperform that broad market index for over a decade. I’ll repeat Malkiel’s warning about single factor funds – but I’ll also note that he’s more intrigued by multiple factor funds, like combining the two we just discussed for a small cap value index (and more fees and taxes!). For what it’s worth, Richard Ferri reports that “According to researchers Gene Fama and Ken French, 95 percent of the return on a widely diversified U.S. stock portfolio can be explained by that portfolio’s market risk (beta), percentage in small stocks (size risk), and percentage in high book-to-market stocks (value risk). Over the long term, U.S. small-cap stocks have achieved a return premium over large-cap stocks, and value stocks have achieved a return premium over growth stocks.”


        Figure 9. Value stocks help you miss getting hosed in the financial bubble bath


        Once you’ve determined your ideal allocation, you have one final decision to make: whether, when, and how to balance your account. The different aspects of your portfolio will be growing at different rates and so the perfect allocation you originally conjured will eventually be out of whack, such that your 60% stocks is now 80% due to a bull market. Bogle believed that the unbalanced portfolio was “likely to provide higher long-term returns” because you let your winners ride and just adding more money without selling anything means you will be less likely to dangerously tinker. Bernstein cites lots of academic evidence to argue the opposite, that rebalancing will generally lead to higher returns, though “usually no greater than 1 percent per year.” Bernstein’s argument is premised on reversion to the mean – you want to sell winners because they are probably overperforming relative to their base rate and, relatedly, the losers are cheap underperformers. In this vein, Bernstein insists: “Do not allow the inevitable small pockets of disaster in your portfolio to upset you. In order to obtain the full market return of any asset class, you must be willing to keep it after its price has dramatically fallen. If you cannot hold onto the asset class mutts in your portfolio, you will fail. The portfolio’s the thing; ignore the performance of its components as much as you can.” Of course, if all your investments are in a taxable account, then selling winners will lead to capital events whose taxes will overwhelm the real but limited gains. Nevertheless, Bernstein argues that you would still want to rebalance occasionally in a taxable account to reflect your risk tolerance, either because you are getting older and want more security or, as in the example above, stocks have run up in a big bull market and you want to preserve some of your gains.

        If you decide to rebalance, you need to decide when and how. For when, Bernstein suggests that the best answer may be every few years and, additionally, if there’s a big swing (20%?) in market prices. The Bogleheads, appropriately sensitive to taxes, recommend selling losers before year’s end and winners in the new year to take advantage of something called “tax loss harvesting.” For other tax reasons, they cite a Morningstar study that suggests rebalancing should not be done more frequently than every 18 months. I’ll also remind you that there are low cost funds that rebalance for you, either based on your target retirement age or your target risk. For how, you can obviously sell the over-performers and buy the under-performers. But in an ideal world, you’re putting money in the market every month or quarter and you can use that to try to bring things back into your preferred percentages, such that if stocks are out of whack, your monthly contribution may only go toward bonds. The key here is putting in about the same every time as opposed to waiting for when prices are low: time in the market beats timing the market. Malkiel cites a University of Michigan study that found that “95 percent of the significant market gains over a thirty-year period came on 90 of the roughly 7,500 trading days. If you happened to miss those 90 days, just over 1 percent of the total, the generous long-run stock-market returns of the period would have been wiped out.” And Malkiel piles on by citing Laszlo Birinyi: “a buy-and-hold investor would have seen one dollar invested in the Dow Jones Industrial Average in 1900 grow to $290 by the start of 2013. Had that investor missed the best five days each year, however, that dollar investment would have been worth less than a penny in 2013.”

        If you’ve gotten this far, that’s about it. Invest regularly, and only in things you truly understand. Make sure your asset allocation reflects your desired risk – and remember chasing more returns means risking bigger losses. Diversify within assets with indexes and across assets through allocation and rebalancing. Be hyper-vigilant about fees and taxes so you can capture most of the benefits of your returns. And, as Malkiel advises, be patient and disciplined: “You can only get poor quickly. To get rich, you will have to do it slowly, and you have to start now.”

        Four pillars of investing

        Figure 10. Click here to buy William Bernstein’s Four Pillars of Investing, 9/10. As a reminder, the four pillars that you must understand are the theory of investing, the history of markets, your own psychology, and the adverse interests of the investing business – which includes financial journalism! Bernstein recommends that you avoid the media, filled with English-major journalists currying favor with those they cover, and instead read books like the ones reviewed here. Bernstein best articulates the real risk that comes with investing and why it’s important to diversify. For better or worse, he is an asset-class junkie who suggests an ideal portfolio that is more complicated than others covered here (and he gives more specific advice about investors in different situations). But despite his worries, he still sees a longer trend up for stocks:

        A superb metaphor for the long-term/short-term dichotomy in stock returns comes from Ralph Wanger, the witty and incisive principal of the Acorn Funds. He likens the market to an excitable dog on a very long leash in New York City, darting randomly in every direction. The dog’s owner is walking from Columbus Circle, through Central Park, to the Metropolitan Museum. At any one moment, there is no predicting which way the pooch will lurch. But in the long run, you know he’s heading northeast at an average speed of three miles per hour. What is astonishing is that almost all of the market players, big and small, seem to have their eye on the dog, and not the owner.

        A random walk down wall street

        Figure 11. Click here to buy Burton Malkiel’s classic A Random Walk Down Wall Street, 8/10. Though first published decades ago, Malkiel has continuously and freshly updated it to reflect the latest data and events. Malkiel explicitly addresses one major recent concern about index funds: that they’ve gotten too big and that there will soon not be enough actors in the market to price things correctly. Malkiel essentially responds that the temptation of inefficiency will be too great for some not to take advantage of it. Appreciated his quoting J Kenfield Morley: “In investing money, the amount of interest you want should depend on whether you want to eat well or sleep well”

        bogleheads guide to investing

        Figure 12. Click here to buy the Bogleheads’ Guide to Investing, 9/10. A very practical and simple overview that goes deep into what it means to follow the path laid down by John Bogle. Amusing citation of Gene Brown: “Foolproof systems don’t take into account the ingenuity of fools”

        little book of common sense investing

        Figure 13. Click here to buy American investing hero John Bogle’s Little Book of Common Sense Investing, which lives up to its title and is a stirring call to arms, based on law of averages, for investors to humble themselves by picking the cheap indexes that outperform all the hard work of expensive active managers.  8/10. Has a great quote from Buffett: “The greatest Enemies of the Equity investor are Expenses and Emotions”

        Simple Path to wealth

        Figure 14. Click here to buy JL Collins’ The Simple Path to Wealth, 7/10. The premise of this book was investing advice that the author wanted to pass along to his daughter and it’s an easy read, but probably should be read in conjunction with the Four Pillars to ensure you have a proper sense of risk. Collins does a great job illustrating how the Great Depression was bad, but not as bad as you might think – but overall is perhaps more optimistic than warranted about stocks. Perhaps a better case is made by Jeremy Siegel in Stocks for the Long Run who argues that peak investors before the Great Depression actually recovered faster than Collins suggests (15 years v. 26) and, what’s more, “since World War II, the recovery period for stocks has been even better. Even including the recent financial crisis, which saw the worst bear market since the 1930s, the longest it has ever taken an investor to recover an original investment in the stock market (including reinvested dividends) was the five-year, eight-month period from August 2000 through April 2006.”

        Thanks for reading!  If you enjoyed this review, please sign up for my email in the box below and forward it to a friend: Know anyone who wants to know more about investing? How about anybody who wants to be rich? Or anyone who would like to avoid becoming poor?

        I read over 100 non-fiction books a year (history, business, self-management) and share a review (and terrible cartoons) every couple weeks with my friends. Really, it’s all about how to be a better American and how America can be better. Look forward to having you on board!

          Who Wants To Be a Millionaire?

          The Gist: A tribute to the boring, brilliant, passive, and profitable index fund.

          A review of multiple books, most notably index pioneer John Bogle’s The Little Book of Common Sense Investing.

          For more specific commentary on capital allocation, check out my review Get Rich Slow.

          I’ve come across a hot stock tip that could make you rich. I am writing now so you can take advantage of it ASAP.

          It probably comes as close to easy money as you’ll ever come across. But you are going to need courage to see it through. 

          Billionaire Chuck Schwab has already apparently put most of his wealth into it. Legendary investors like Ben Graham and Warren Buffett have strongly endorsed it. Nobel Prize winning economist Paul Samuelson has called its creation the equivalent to the invention of the wheel! And JL Collins, author of the Simple Path to Wealth, even insists that acting on this means that “it is possible for every middle class wage earner to retire a millionaire.”This secret to beating the market? Don’t try. Which is not to say you should put all your money in cash (or even krugerrands) under your mattress. Instead, slowly, continuously buy, hold, and balance a diverse combination of low-cost index funds that return you the market average.


          Figure 1. You’re aspiring to the type of investing that can be done from a hammock. Besides, those krugerrands can make your mattress lumpy.

          But who could be satisfied with merely “average”? We’ll get into why “average” is a misleading term in a moment but let’s first consider how good a return this truly has been. Jack Bogle created the first true index in the 1970s through his firm Vanguard – I’ll be mentioning his excellent Little Book of Common Sense Investing as well as his devoted and grateful followers’ Bogleheads’ Guide to Investing throughout this review. The latter tells the story of Bogle receiving a letter in 2005 from a man who had been investing in Bogle’s first index since the disco era and was enjoying his portfolio of over $1,250,000. But what was truly remarkable was that, in his entire life, the investor had never earned more than $25,000 a year. Still, diligently, every month, he had put $600 – a third of his income – into an index and now reaped the benefit. And just so the comparison is clear: if he had simply saved that $600 a month in cash, he would only have had $216,000, one fifth of his actual total. If he had gone with gold, he might very well have lost money!


          Figure 2. Despite the renewed popularity of “vintage” clothing, other “investments” of the 1970s have not turned out as well.

          The true result was a virtuous combination of American capitalism’s long-term success, the investor’s discipline, and what Albert Einstein called the greatest mathematical discovery of all time: compound interest. Over the long run, the American stock market return – captured via index – has delivered generously, an average of over 8% a year from 1975 to 2020. This particular investor had the discipline to buy amidst stagflation and warnings of the death of stocks in the Carter years, and to keep buying (and holding) through recessions, stock market crashes, domestic financial crises, international financial crises, and bubbles bursting. And throughout that entire time, especially if he reinvested the dividends that stocks paid him, his original investment benefitted from the growth on growth – such that his original, first check of $600 gained, say, 10%, and then was $660, earning another 10% on the new total, so that over 30 years of repeating the phenomenon, that original $600 alone was worth over $10,000.

          Apple Pie

          Figure 3. A close second for greatest mathematical discovery would have to be apple pi.


          Of course, compound interest works for any return. Why invest in a passive index of nearly everything instead of carefully, studiously picking winners and avoiding losers? Surely, you think, you can do better than the average schmuck. The truth is you can. By investing in an index. The problem is that “average,” as it relates to the index’ returns, is misunderstood. One might think that half of investors do better than the index average. In fact, Collins cites a University of California study that “only about 1% of active traders” – not 50% – “outperform the market and that the more frequently they trade, the worse they do.”  Amusingly, the Bogleheads even report on the investing outcomes of the Mensa Investment Club – “the exclusive society whose membership is restricted to persons scoring in the top 2 percent on IQ tests. During a 15-year period when the S&P 500 had average annual returns of 15.3 percent, the Mensa Investment Club’s performance averaged returns of only 2.5 percent.”


          Figure 4. The eggheads have egg on their faces.


          You probably also have a full time job, such that your day trading might better be characterized as night trading. And that job probably does not involve constant analysis of securities. (For context, Warren Buffett reads 500 pages a day). When you think you’ve found an under-valued stock, realize that you’re buying from someone who disagrees – and that someone is less likely to be another rando in his pajamas than a major investment group with gobs of money to spend trying to get an angle with the smartest analysts spending all their time using the fastest computers. Or as William Bernstein, author of the Four Pillars of Investing, puts it: you are “going up against the Sixth Fleet in a rowboat.” Bernstein suggests instead: “When you buy the market, you are hiring the aggregate judgement of the most brilliant and well-informed minds in finance.”

          Perhaps you are humble enough to realize that you don’t have the Midas touch and that you as an individual can’t compete with the big guns – but if you can’t beat them, why not join them? Put your money in the Sixth Fleet – hire those best and smartest people to manage your money for you. Alas, the premise is flawed: you can beat them. With an index fund. Bogle cites the SPIVA study that found from 2001 to 2016 “an astonishing 90 percent of actively managed mutual funds underperformed their benchmark indexes.” Better than the record of individual active traders – but still abysmal! Is the secret, though, to just stick with those rare talents – that top 10% – that can beat the market?

          Unfortunately, the top 10% of actively-managed funds are not the same over time. Bernstein reports that “literally dozens of studies” have verified that “past superior performance has almost no predictive value” over more than a year. For just a flavor, we can look at the ratings of Morningstar, the premier evaluator of mutual funds. Funds in the top 10% of performance get a five star rating. Mark Hulbert found in 2004 that “Over the past decade, Morningstar’s five-star equity funds have earned an average 5.7 percent against a 10.3 percent return for the Wilshire 5000.” Somewhat interestingly, since 1987 Morningstar itself has looked at the three most popular and least popular funds from a given year and followed them over the next three years: “Eight out of nine times, the unpopular funds beat the popular funds, and seven out of nine times the unpopular funds beat the average equity fund. Most tellingly, the popular fund categories also lagged the average equity fund seven of nine times.” Bogle reports, “According to a 2014 study by the Wall Street Journal, only 14 percent of five-star funds in 2004 still held that rating a decade later. Approximately 36 percent of those original five-star funds dropped one star, and the remaining 50 percent dropped to three or fewer stars.” The real results are actually even worse: young funds inherently get inflated ratings because they don’t have a long track record of comparison while older funds that failed have disappeared from lists. Bogle summarized the landscape in 2017:

          281 of the equity funds that existed in 1970 are gone, mostly the poor performers. Another 29 remain despite having significantly underperformed the S&P 500 by more than one percentage point per year. Together, then, 310 funds—87 percent of the funds among those original 355—have, one way or another, failed to distinguish themselves. Another 35 funds provided returns within one percentage point, plus or minus, of the return of the S&P 500—market matchers, as it were. That leaves just 10 mutual funds—only one fund out of every 35—that outpaced the market by more than one percentage point per year.

          Ultimately, Burton Malkiel, the author of the classic Random Walk Down Wall Street, observes “The few examples of consistently superior performance occur no more frequently than can be expected by chance.” Are you prepared to buy a lottery ticket that your choice of fund will be run by the next Warren Buffett? Or would you rather, as Bogle folksily advises, stop looking for the needle and buy the haystack?


          Figure 5. Though perhaps that analogy is too tempting: Lottery tickets may be America’s most popular investment security. Time to start a Powerball index!


          And yet, as if superior performance was not enough reason to invest in an index, there’s another significant appeal: costs. You cannot control how your investments will perform but you can be certain of what you pay intermediaries in expenses. As in the typical gold rush, the real winners all too often are not the miners but the suppliers. A typical actively-managed fund may have an expense ratio of 1 or 2% to pay for all those eggheads, corporate jets, computers, and pinstripe suits. The management fee may even slowly grow over time – between 1981 and 1997, as the market gained, the average fee jumped 50%.  A total stock market index fund at a place like Vanguard, whose ownership structure is designed to keep fees low, has an expense ratio of 0.04%. So, for you to make money with an actively managed fund, they not only need to beat the market, a difficult enough task as it is, but they have to beat the market plus their fees. The Bogleheads helpfully explain:

          “If you don’t think those miniscule costs matter, consider this: Let’s assume someone puts $10,000 in a mutual fund, leaves it there 20 years, and gets an average annual return of 10 percent. If the fund had an expense ratio of 1.5 percent, the fund is worth $49,725 at the end of 20 years. However if the fund had an expense ratio of 0.5 percent, it would be worth $60,858 at the end of 20 years. Just a 1 percent difference in expenses makes an 18 percent difference in returns when compounded over 20 years.”

          Bogle offers more folksy advice: “In investing, you get what you don’t pay for.” Bernstein more clinically observes “The average investor receives a net return equal to the market’s minus expenses.” Bernstein goes further, however, in noting that the explicitly identified expense ratio does not capture the full costs of an actively managed fund. Because actively-managed funds are looking for vulnerabilities and more frequently trading in the market, they are paying commissions on transactions to brokers and they are paying more than someone sold it for because of spreads that go to market makers. You, as an individual day trader, would experience the same phenomenon. If an actively managed fund gets so popular that they are managing lots and lots of money, they also incur impact costs, where they can’t any longer buy discounted stocks on the cheap because they are so big and the opportunities are relatively small that they move the cost themselves. In contrast, a large index fund has very little turnover. Bogle continues his folksy streak: “Adding a fourth law to Sir Isaac Newton’s three laws of motion, the inimitable Warren Buffett puts the moral of his story this way: For investors as a whole, returns decrease as motion increases.”

          We haven’t mentioned perhaps the biggest cost to your trading activity: Uncle Sam. To get back to Einstein, “Compound interest is the 8th wonder of the world.  He who understands it, earns it; he who doesn’t, pays it.” The Bogleheads note that  “Every time an active fund sells a profitable stock, it creates a taxable event that’s passed on to the investor.” The effect can be dramatic, as retold by Malkiel:

          Taxes are a crucially important financial consideration, as two Stanford University economists, Joel Dickson and John Shoven, have shown. Utilizing a sample of sixty-two mutual funds with long-term records, they found that, pre-tax, $1 invested in 1962 would have grown to $21.89 in 1992. After paying taxes on income dividends and capital gains distributions, however, that same $1 invested in mutual funds by a high-income investor would have grown to only $9.87. 

          But there’s good news. Broad-based index funds are fairly tax efficient. What’s more, you can organize your investments in such a way to reduce the tax burden by funding vehicles like a 401(k) or Roth IRA. Yet that’s not the only organizing that will be useful to you. Hopefully by now you’re convinced of the benefits of index funds – but you are still going to need to make your most important decision: how much of your capital to allocate in which index funds. We’ll discuss your options in our next email.

          little book of common sense investing

          Figure 6. Click here to buy American investing hero John Bogle’s Little Book of Common Sense Investing, which lives up to its title and is a stirring call to arms for investors to humble themselves by picking the indexes that outperform all the hard work of active managers.  8/10. 

          Four pillars of investing

          Figure 7. Click here to buy William Bernstein’s Four Pillars of Investing, 9/10. Incidentally, the four pillars that you must understand are the theory of investing, the history of markets, your own psychology, and the adverse interests of the investing business, which often charges you too much, among other dangers. Interestingly, Bernstein concedes “some evidence that the best securities analysts are able to successfully pick stocks” – but, alas – “in the aggregate, the benefits of stock research do not pay for its cost.” He recommends an annual meditation: “How do you avoid overconfidence? By telling yourself at least a few times per year, ‘The market is much smarter than I will ever be. There are millions of other investors who are much better equipped than I, all searching for the financial Fountain of Youth. My chances of being the first to find it are not that good. If I can’t beat the market, then the very best I can hope to do is to join it as cheaply and efficiently as possible.’”

          bogleheads guide to investing

          Figure 8. Click here to buy the Bogleheads’ Guide to Investing, 9/10. A very practical and simple overview that goes deep into what it means to follow the path laid down by John Bogle.

          A random walk down wall street

          Figure 9. Click here to buy Burton Malkiel’s classic A Random Walk Down Wall Street, 8/10. Though first published decades ago, Malkiel has continuously and freshly updated it to reflect the latest data and events

          Thanks for reading!  If you enjoyed this review, please sign up for my email in the box below and forward it to a friend:  Think – do you know anyone with a 401K or Roth IRA? Anyone who likes money? Anyone who plans to retire?

          I read over 100 non-fiction books a year (history, business, self-management) and share a review (and terrible cartoons) every couple weeks with my friends. Really, it’s all about how to be a better American and how America can be better. Look forward to having you on board!


            The Gist: Tech is designed to distract you from your priorities.

            The first of a two-part review of multiple books, most notably Stand Out of Out Light by James Williams.

            Access the second part here: Say No To The Glow.


            As you self-quarantine amidst corona, beware the dangers of digital life! For me, there is a particular app that I may very well be addicted to. In those small moments of boredom – in line, in an Uber, wherever – I’m drawn to its delights. It’s practically endless as people from around the world constantly post, with the opportunity to see what’s popular but, even better, searchability for interesting tidbits about things I care about – not to mention the beautiful pictures! I refer, of course, to Wikipedia.

            Motorized Bike

            Figure 1. You try to resist reading about inventors killed by their own inventionssexually active Popesthe Russian attempt to seize Hawaiiforest kindergarten, Spanish participation in the Eastern Frontthe Packers sweepthe War of Jenkins’ Earexecution by elephant, or covert operations by Scientologists against the US government.


            I have deleted most everything else endless (to the degree I ever had it) and have tried to ensure that my phone is not my constant companion (to the occasional frustration of some friends, perhaps you, trying to get a hold of me). Instead, I prefer my single purpose Kindle. Lately I’ve been reading warnings encouraging digital restraint, often enough from big tech defectors.

            James Williams was a Google advertising strategist who one day looked at his job’s metrics – “Number of Views, Time on Site, Number of Clicks, Total Conversions” – and realized that far too much of his personal life might be boiled down to these “petty and perverse” goals. In his stirring, polemical diagnosis Stand Out of Our Light, he quotes Facebook’s first research scientist: “The best minds of my generation are thinking about how to make people click ads … and it sucks.” 


            Figure 2. In a near parallel universe, Albert Einstein made billions by demonstrating that energy equals man multiplied by Coca-Cola (or as he preferred: E = mc2)


            A book also written by Google defectors but of entirely opposite tone – breezy, cheery, practical – ends up making the same case. In Make Time, Jake Knapp and John Zeratsky insist “willpower alone is not enough to protect your focus. We’re not saying this because we don’t have confidence in you or to justify our own weaknesses. We’re saying this because we know exactly what you’re up against. Remember, we helped build two of the stickiest Infinity Pools out there” – for them, years developing YouTube and Gma

            Infinity Pool

            Figure 3. The thing about infinity pools is that you only think they go on forever and then you swim straight into a wall and it hurts.


            Yet another Google dissident, Tristan Harris, has not written a book but has argued across media that we are so scared of some sort of robot apocalypse overwhelming human capabilities that we are ignoring the app armageddon already overwhelming human vulnerabilities. He quotes the biologist E.O. Wilson about “the real problem of humanity[:] We have Paleolithic emotions, medieval institutions and godlike technology.” And that was a decade ago, when Facebook had merely a couple hundred million daily users rather than approaching two billion.

            Perhaps the best response comes from Andy Crouch, a Christian thinker and entrepreneur who wrote the Tech-Wise Family, a meditation as much on family as tech: “In countless ways our lives are easier than our grandparents’. But in what really matters—for example, wisdom and courage—it seems very hard to argue that our lives are overall better.” Expanding on the point: “Without a doubt, compared to human beings just one century ago, we are more globally connected, better informed about many aspects of the world, in certain respects more productive, and—thanks to GPS and Google Maps—certainly less lost. But are we more patient, kind, forgiving, fearless, committed, creative than they were? And if we are, how much credit should technology receive?”


            Figure 4. Then again, our grandfathers were addicted to the sweet sweet sounds of radio!


            We will discuss potential solutions but let’s first nail down the diagnosis. Along with its wonders, digital technology has brought several interconnected problems. Williams observes that “information abundance produces attention scarcity” and “digital technologies privilege our impulses over our intentions, creating new challenges of self regulation.” And, as Cal Newport has persuasively argueddistractions destroy depth. Unfortunately, our world is full of dizzying distractions – genuinely addictive digital slot machines that can end up replacing real, valuable human interaction with poor quality substitutes, envy, resentment, withdrawal, and generally lesser feelings of self-worth.

            Technology, “rather than supporting our intentions, [has] largely sought to grab and keep our attention.” Williams simply asks you to do what he did: compare your big, important goals for how you want to spend your time to the big, profitable goals that your technology has for how you spend your time. Technology’s goals typically include “maximizing the amount of time you spend with their product, keeping you clicking or tapping or scrolling as much as possible, or showing you as many pages or ads as they can.” As Knapp straightforwardly argues: “Tech companies make money when you use their products. They won’t offer you small doses voluntarily; they’ll offer you a fire hose.” The question is: in your ideal world, would you spend more of your finite attention and time with Facebook or your family, with Twitter or books, with Netflix or sleep?

            If you prefer family, books, sleep, or any alternative to the digital, you have to recognize that your goals are in tension with some of the richest companies on earth who are spending and facilitating billions of dollars to acquire more and more of your attention. This isn’t merely theoretical: Netflix’ CEO has identified his principal competition not as other forms of entertainment, but sleep. And, to be clear, sleep is losing: “A systematic review and meta-analysis (of 20 studies) showed strong, consistent evidence of an association between bedtime access to or use of devices and reduced sleep quantity and quality, as well as increased daytime sleepiness.”

            But digital offerings – that latest season of Narcos or the Crown, those provocative insights from Reddit, those beautiful design ideas from Pinterest – are so attractive and some seem like they can be genuinely helpful. Why can’t we just dip in for a moment to get the best, rather than staying until we are idly scrolling, hours into our use, fatigued rather than renewed? As Williams illustrates, why isn’t most tech more like GPS? We plug in a destination and go there – Waze even purports to save you minutes. Instead, most tech you open up with perhaps a single intention, only to find yourself on a much longer journey, miles and hours away from where you wanted to be.

            Nir Eyal tells a revealing story in his book about building successful digital products: ““Are you building a vitamin or painkiller?” is a common, almost clichéd question many investors ask founders eager to cash their first venture capital check. The correct answer, from the perspective of most investors, is the latter: a painkiller.” Furthermore, Eyal notes that “the more effort we put into something, the more likely we are to value it” and rationalize its value “in which we change our attitudes and beliefs to adapt psychologically. Rationalization helps us give reasons for our behaviors, even when those reasons might have been designed by others.”  Building on the implication, Newport notes a simple definition: “Addiction is a condition in which a person engages in use of a substance or in a behavior for which the rewarding effects provide a compelling incentive to repeatedly pursue the behavior despite detrimental consequences.” When “fully one-third of Americans say they would rather give up sex than lose their cell phones,” it seems safe to say that lots of us are addicted to our phones. Are you?


            Figure 5. You start on painkillers and end up on heroin. You start on Google Maps and end up on Snapchat. You can stop anytime you want to – but you just need to keep the streak alive!


            A common thread in this literature is that these wireless mobile devices (WMDs) and the apps they contain are intentionally designed by the smartest people with the most resources to take advantage of your psychological and cognitive weaknesses. Newport believes that the success of social media is built on two of our brain’s biggest cravings: positive reinforcement and social approval. As Caroline Webb vividly relates, “Whenever our brain’s reward system spots something potentially appealing, it sends us chasing after it like a Labrador retriever after a tennis ball, by releasing neurochemicals (including dopamine and endorphins) that trigger feelings of desire and pleasure in us.” So we’ll gamble with every social media post to see how many likes we can get or we’ll gamble with the reloading of email or a newsfeed to see if anything interesting comes up. The problem is that dopamine is about anticipation, not the reward itself. And endless apps don’t deliver. Perhaps Harris’ most interesting work is reviewing apps based on how a sample of over 200,000 iPhone users feel after they’ve used them. Practically everyone feels good about using MyFitnessPal, Kindle, Spotify. Majorities – sometimes super-majorities – feel worse after using Facebook, Tinder, Candy Crush. Harris notes “In controlled experiments, people who were instructed to use Facebook passively (i.e., scrolling without commenting or posting) for just ten minutes felt 9% worse at the end of the day.”


            Figure 6. Thanks to America, now everyone in Iraq can have a WMD!


            There are perhaps deeper reasons for this. Newport warns that social media slowly retrains your brain to fill its need for social interaction with low-quality clicks of a like button rather than calling a friend or sitting down to dinner with full attention on your family – the sort of high-quality social interactions that really make you happier (In this respect, social media has already been putting into practice the CDC’s recommendations about social distancing…)

            Furthermore, social media detaches you from reality: you see only the curated, very best parts of the lives of your friends (or worse, people you don’t even know), and you succumb to envy of superficial lives that don’t really exist. Meanwhile, you are deeply impacted by the tone of what you consume and social media tends to amplify anger. Williams cites a study that “reduced the number of either positive or negative posts that a sample of around 700,000 Facebook users saw in their News Feed. They found that when users saw fewer negative posts, their own posts had a lower percentage of words that were negative. The same was true for positive posts and positive words.” As Williams darkly puts it, do you really want to be part of a “digital Salem”?

            Of course, digital technology can be bad enough if you set aside a specific time for it, but the bigger problem is that it is always around – probably right now in your hands, if not in your pocket. And it doesn’t typically wait for you. The default for your phone is to provide an observable and tactile cacophony as an enticing invitation to check out the latest whatever.  And it works: the average person touches his phone 2,617 times per day. For that matter, even the most theoretically productive aspects of digital technology – things like email – if used constantly are a means of being on top of other people’s priorities, not necessarily yours. Over 90% of texts are read within three minutes and replied to within 15. But isn’t a text from a friend a nice little break?

            Not if you want to focus and do well whatever you’re doing. Distractions destroy depth. A person takes, on average, 23 minutes to regain their focus after they are distracted. Newport writes about research that shows “when you switch from some Task A to another Task B, your attention doesn’t immediately follow—a residue of your attention remains stuck thinking about the original task. This residue gets especially thick if your work on Task A was unbounded and of low intensity before you switched, but even if you finish Task A before moving on, your attention remains divided for a while.” Williams notes that “researchers at the University of Texas found that the mere presence of one’s smartphone can adversely affect available working memory capacity and functional fluid intelligence.” And he cites a Hewlett-Packard study that found that distractions decreased IQ by double digits – twice the decline of smoking marijuana!

            Safari cannot open

            Figure 7. Just say no to the glow and say yes to life. 


            “Distractibility might be regarded as the mental equivalent of obesity” says Matthew Crawford. Williams suggests that  “From this perspective, individual functional distractions can be viewed as akin to individual potato chips.” Betcha can’t eat just one. You compose that tweet, check in on how it’s doing multiple times, spot other things in the newsfeed, etc. etc.

            And you’ll notice that none of this gets into the serious questions about your privacy – just the very hard work of fighting your cognitive biases that have been effectively triggered by rich tech companies.

            But there’s hope. And I’ll let Andy Crouch set the path for our next email, which will discuss potential solutions:

            Technology is in its proper place when it helps us bond with the real people we have been given to love. It’s out of its proper place when we end up bonding with people at a distance, like celebrities, whom we will never meet. Technology is in its proper place when it starts great conversations. It’s out of its proper place when it prevents us from talking with and listening to one another. Technology is in its proper place when it helps us take care of the fragile bodies we inhabit. It’s out of its proper place when it promises to help us escape the limits and vulnerabilities of those bodies altogether. Technology is in its proper place when it helps us acquire skill and mastery of domains that are the glory of human culture (sports, music, the arts, cooking, writing, accounting; the list could go on and on). When we let technology replace the development of skill with passive consumption, something has gone wrong. Technology is in its proper place when it helps us cultivate awe for the created world we are part of and responsible for stewarding… It’s out of its proper place when it keeps us from engaging the wild and wonderful natural world with all our senses. Technology is in its proper place only when we use it with intention and care. If there’s one thing I’ve discovered about technology, it’s that it doesn’t stay in its proper place on its own; much like my children’s toys and stuffed creatures and minor treasures, it finds its way underfoot all over the house and all over our lives. If we aren’t intentional and careful, we’ll end up with a quite extraordinary mess.

            stand out of our light

            Figure 8. Click here to buy Stand Out of Our Light, 9/10. A stirring polemical diagnosis that is perhaps overwrought (“the liberation of human attention may be the defining moral and political struggle of our time”) but still worthwhile. Notably assigned for all incoming Princeton students to read. One interesting thing not discussed above, but building on the idea that information abundance produces attention scarcity: the Chinese government has begun strategic distraction, where they  “drown out the offending information with a torrent of other social media content that directs people’s attention away from the objectionable material. The Harvard researchers who carried out a study analyzing these efforts estimate that the Chinese government creates 448 million posts on social media per year as part of this.” Williams quotes the researcher, “the point isn’t to get people to believe or care about the propaganda; it’s to get them to pay less attention to stories the government wants to suppress.”

            Figure 9. Click here to buy Deep Work, 10/10 or Digital Minimalism, 7/10. Deep Work is the better book, but Digital Minimalism is a little more on point. Of all those mentioned, Newport tries to wrestle with both sides of the debate, looking at studies promoted by Facebook that celebrate its use. Like others, he also holds up the Amish as an example that we need to pay more attention to. Though they may not have cars, they’ll have disposable diapers, roller blades, or high-tech farming equipment – “The Amish, it turns out, do something that’s both shockingly radical and simple in our age of impulsive and complicated consumerism: they start with the things they value most, then work backward to ask whether a given new technology performs more harm than good with respect to these values.”

            Tech wise family

            Figure 10. Click here to buy the Tech-Wise Family, 9/10, as much of a meditation on family as tech. 

            Make Time

            Figure 11. Click here to buy Make Time, 7/10. A breezy, cheery, practical book with some interesting ideas about how to get things done, especially with respect to digital distraction.

            Thanks for reading!  If you enjoyed this review, please sign up for my email in the box below and forward it to a friend:  know anyone who you’d like to spend more time with you than their devices? How about any parents? Or anyone who owns a wireless mobile device?

            I read over 100 non-fiction books a year (history, business, self-management) and share a review (and terrible cartoons) every couple weeks with my friends. Really, it’s all about how to be a better American and how America can be better. Look forward to having you on board!

              When Are We Ever Going to Use This?

              The Gist: Conventional school teaches disturbingly little worthwhile.

              A review of Bryan Caplan’s the Case Against Education.

              When was the last time you used geometry? 

              Was it important for you to have spent a year studying the subject? Was it vital that the rest of us were forced to study it for a year?

              Most likely the first time people use geometry after leaving school is incompetently helping with their kids’ homework, perpetuating the cycle of uselessness.


              Figure 1. Solve for x. Was that worth a year of your life?


              Economist Bryan Caplan makes the Case Against Education in a provocative book that takes on the question of the class clown: What does any of this have to do with life? And why are we making everyone spend 12+ years studying it?

              I hope my obituary includes the following sentence: “He helped end the teaching of French in Tennessee public schools.” French is a language spoken by less than 2% of Earth’s population, a large portion of whom also speak English, and practically none of whom the average American student is likely to encounter. If he does, his high school education is unlikely to be as useful as Google Translate. It’s not difficult to guess that just about the only job in America that requires learning French is teaching French, again perpetuating the cycle of uselessness.


              Figure 2. While the class did turn him onto berets, Claude was shocked that learning French did not help him in his career as a mime artist.

              People are welcome to spend their own time and resources learning whatever they desire — but why do we spend a single tax dollar teaching French? More importantly, why do we waste an average of two years of classroom time teaching French when our kids can barely write in English, much less master math?

              But hey, French is easy to denigrate. What about Spanish? Set aside for a moment whether the usefulness of Spanish represents American failure to integrate immigrants. If we assume its utility, we still have to reckon with the statistics of success: less than 3% of students report learning a foreign language “well.” You might as well go to the Five Minute University: “in five minutes you learn what the average college graduate remembers five years after he or she is out of school.”

              Taco Bell

              Figure 3. Frequent customers of Taco Bell know as much Spanish as the average person taught for years.


              Disturbingly, even the “useful” subjects are often useless. All those mandatory hours on science? Less than 5% of Americans will use them in their career. There are certainly advantages to math, but we toil through calculus without learning to balance a checkbook. We study great works of literature (when they’re not eliminated by the PC police) without learning how to write a business report.


              Figure 4. Dr. Frankenstein credited his success to misunderstanding high school biology.


              But isn’t education about the soul? About becoming a good citizen? If true, no one cares: two thirds of high school students report being bored in class EVERY DAY. There is scant evidence that Shakespeare systematically makes better humans – but even if he did, he’s bound to soon be excluded from the curriculum as representing the cisheteropatriarchy. Whatever your values, can you trust the state to teach them?

              Yet it does not stop in high school. College is a vacation from responsibility. No parents, no boss. Caplan reports: “Fifty years ago, college was a full-time job. The typical student spent 40 hours a week in class or studying. Since the early 1960s, effort collapsed across the board. ‘Full-time’ college students average 27 hours of academic work per week.” College is a product that people pay a huge amount only to consume as little as possible. Instead of the quality of education, the biggest draw for a particular college is the quality of its amenities: how nice are the dorms?

              Gym Membership

              Figure 5. College is like a really expensive gym where you still don’t actually work out but you get all the benefits because you can brag about your membership.


              Even the classes that kids do attend are often in useless subjects — and not just absurdities like puppetry. Psychology is the most popular major in Tennessee colleges. Across the country, 94,000 students graduate with that major – but there are only 174,000 psychologists in the entire United States. History has 34,000 graduates a year – but there are only 3,500 historians. STEM majors are hard and can involve a practical education yet three quarters of STEM majors wind up in jobs that don’t use their specialized training.


              Figure 6. “Tell us first about your childhood” “No, no, tell us about your dreams” “Forget that bunk, tell us about your sexual inadequacies.”


              College is a game where students ask “Who is the easiest teacher?” not “Who is the best teacher?”; “What do I need to graduate?” not “What can I learn?”; “Will this be on the test?” not “Will this help me on the job?” And they’ve been rewarded over time with grade inflation, where B is now average (A- at Harvard). Despite that, most fail to finish: “About 25% of high school students fail to finish in four years. About 60% of full-time college students fail to finish in four years.” Publicly available debt finances the whole questionable enterprise, all the more a burden for those who don’t finish.

              And what do college graduates do? They’re more likely to be cashiers or waiters than mechanical engineers. More likely to work as security guards or janitors than computer systems administrators. More likely to be cooks or bartenders than librarians.


              Figure 7. “Yes, madame, here at Pierre’s we pride ourselves on hiring only the college-educated. Where else would we learn to pronounce ‘quinoa’?”


              So why do people go? Social expectation… that leads to individual payoff. Because going to college does pay off for lots of graduates. Interestingly, Caplan reveals that one of the biggest payoffs to going to college is finding a high-earning spouse. But even the college-educated waiter commands a bigger salary than the waiter without. This can be taken too far, of course: Bill Gates would not likely have earned 73% more if he had not dropped out of Harvard – and because the most ambitious do go to college, you don’t know if it’s the person or the college that is producing the result. 

              Caplan explains by compellingly arguing that our formal education system doesn’t actually teach all that much – but it signals to employers three key qualities: intelligence, conscientiousness (i.e. the ability to complete tasks), and conformity. Importantly, education does not TEACH those qualities, it reveals them. By completing college, you show an employer you can handle and complete tasks that society expects of you, even if they’re irrelevant to your specific job. Seems like the Army would be just as good a signal – and much cheaper – if society would get aboard. Strikingly Caplan asks: “Does education have any effect on genuine intelligence? Despite decades of research, we really don’t know.” 

              One of the most compelling statistics Caplan offers for signaling over actual teaching is the earning power of dropouts. If actual teaching was the key reason college graduates earned more, then we’d expect that someone who completed 99% of college but failed to earn a degree would earn practically the same. Instead, the differences are stark. Get a diploma and you will earn more than the expected bump in income from completing freshman, sophomore, and junior years combined. And, if you recall senioritis, that is not because senior year involves some massive education gain. If you had to choose between receiving a diploma without having attended a minute of class or attending four years of class while missing a diploma, the choice is obvious. And many of us came much closer to the first in real life.

              So what’s the implication? Caplan suggests that “subsidizing everyone’s schooling to improve our jobs is like urging everyone to stand up at a concert to improve our views. Both are ‘smart for one, dumb for all.’” His controversial preference is for a separation of school and state – for markets to effectively decide the proper role for education. Though it takes some math you might have forgotten from school, Caplan argues that more and more people going to college actually impoverishes society at large (do we really need to subsidize college-educated waiters?). 

              More modestly, Caplan suggests that the curricula at state schools from kindergarten through graduate school needs to be reorganized to get an actual return and government loans should not be available for a host of majors. In high schools, Caplan says we need a lot more vocational training: “Most education experts remain leery of vocational ed. Chief objection: it’s shortsighted. The vocational track teaches students specific skills they need for their first job. The academic track teaches students general skills they need for every job. The wise approach is to set everyone on the academic track. Let kids max out their general skills before targeting any particular vocation. This objection is confused. While literacy and numeracy are genuinely general skills, most academic classes amount to vocational training for ultrarare vocations. Think about classic college prep in literature, history, social science, and foreign language.” The vast majority of students will not wind up authors, historians, academics, linguists — or even mathematicians or scientists.

              But what about that which is actually within your control: the education of yourself or your kids? Caplan actually has an extensive section about what your expected payoff might be as an individual based on your early school performance – if you are a good student, college is going to be a very good financial bet, especially if you study STEM, even if you don’t use any of it. But if you are a struggling student, college is far more questionable. 

              Caplan himself went to Berkeley and got a PhD at Princeton. I took five years of Latin, studied history at Stanford, and went onto Vanderbilt law school — all to develop real estate and write book reviews. I think his self-label is correct: he reports as a whistleblower — someone who has thrived in the education system but is prepared to tell all its flaws. He does not succumb to the bias to just say nice things like “all education is good all the time.” But even if you do go through the faulty American way, don’t forget the immortal words of Mark Twain: never let schooling get in the way of your education.

              Case Against Education

              Figure 8. Click here to buy the Case against Education. 8/10. Very provocative arguments but gets bogged down by math in the middle. Feel free to skip ahead. 

              Thanks for reading!  If you enjoyed this review, please sign up for my email in the box below and forward it to a friend: Know anyone with kids in school? How about anyone who cares about education?

              I read over 100 non-fiction books a year (history, business, self-management) and share a review (and terrible cartoons) every couple weeks with my friends. Really, it’s all about how to be a better American and how America can be better. Look forward to having you on board!