When Help Hurts

The Gist: Federal entitlements have routinely punished work and marriage while displacing community help.

A review of The High Cost of Good Intentions by John Cogan.

The second of three parts. Click here for part one, and here for part three.

In 1974, Linda Taylor was arrested in a Cadillac “on suspicion of defrauding the state of $154,000 in welfare benefits. She allegedly used twenty-seven aliases, thirty-one addresses, twenty-five phone numbers, and three Social Security numbers.” She was the original “welfare queen” and became “a national symbol of welfare fraud and abuse.”

Car

Figure 1. To be fair, this was just keeping up with the Standard of the World. Her mistake was being a U.S. citizen. 

 

Taylor was just one notorious example of fraud and abuse that continue to this day. But there are deeper moral problems at the heart of our welfare state. Yes, entitlements are the biggest drivers of our growing debt that is leading toward national catastrophe. As Ronald Reagan observed, “Many of these programs may have come from a good heart, but not all have come from a clear head—and the costs have been staggering. We can be compassionate about human needs without being complacent about budget extravagance.”

Stadium

Figure 2. Ronald Reagan would have been a good coach on Friday Night Lights. Especially if he asked them to win one for the Gipper

 

But perhaps more significantly, the High Cost of Good Intentions includes robbing Americans of the sources of dignity in their life: federal entitlements have routinely punished work, punished marriage, and displaced community help – all at the cost to those we were trying to help.

 

Until well into the 20th century, local governments were the primary providers of aid – and they did so only to those who had been members of their community for a long time. State governments stepped in to help the roving poor that locals did not want to attract with generosity.

The prevailing Constitutional interpretation was that the Founding Fathers had specified a finite, precise number of things that the federal government could do – and aid to citizens who had not served their country was not one of them. Of course, that didn’t stop people from trying to adjust that arrangement: There was a multiple decade effort to involve the federal government in the care for the mentally ill. The closest the movement came to success was Congress voting to sell federal land to states for the construction of asylums. President Franklin Pierce vetoed it as noble but unconstitutional.

Capitol

Figure 3. That was not the whole story regarding the federal government’s responsibility. The American people have long considered Congress the proper venue for housing the crazy.

 

There is one exception where the federal government did play a role: helping freed slaves after the Civil War. But the creators of the Freedmen’s Bureau always thought it was a temporary postwar measure and as soon as Southern states re-entered the union (and regained federal legislators), the Bureau was defunded and abolished. Still, over seven years, the Bureau taught and provided healthcare for hundreds of thousands while giving millions food rations. Yet, in the story of American entitlements, it appears to have had no impact on the debate.

Local governments were still the lead, and they attempted to be very careful in dispensing aid:

Throughout colonial times and well into the late nineteenth century, welfare administrators and social reformers distinguished between two groups. The first consisted of poor people who through no fault of their own were unable to provide for themselves and were viewed as worthy of help: the frail elderly, the disabled, and children of single mothers unable to care for them. The second group consisted of able-bodied adults who could work but were nevertheless destitute. Welfare administrators and social reformers believed that poverty among the latter group resulted from human frailties: idleness, intemperance, and immorality. Great care, therefore, was taken in providing government aid for fear that it would encourage greater dependency.

At first local governments pursued institutions: “almshouses for the elderly poor and disabled, orphanages for children, mental asylums for the insane, and workhouses for the able-bodied poor.” The thought was that they would help the needy and deter the able-bodied. But the institutions were chronically underfunded and conditions became scandalous.

Seinfeld

Figure 4. There was a missed opportunity to turn close-talkers into bubble boys but who knows where it would have ended before we had to double dip into reserves? Amplifiers for low-talkers? Sponge subsidies? Puffy shirts for the homeless? What we need is federal government shrinkage to achieve serenity now. Giddyup.

 

By 1900, reformers were keen to provide direct assistance to the poor, relying on local knowledge to determine the worthy, but they were desperate to avoid incentivizing moral misbehavior – and larger welfare rolls. As a result, states for decades extended direct assistance almost only to widows. Though they gradually softened their position, “in the early 1930s, 82 percent of families receiving assistance were headed by a widowed mother… By 1934, only three states specifically granted eligibility to children of unmarried mothers, and fewer than half the states granted eligibility to children of divorced parents.”

FDR changed things. “The New Deal broke new ground by extending entitlements to people in the general population who had performed no particular service to the federal government” – and, indeed, curtailed entitlements to those who had performed service. Our courts caved to intense political pressure, allowing new programs and regulations that were never thought legal.

Along the way, the New Deal “permanently altered the balance in the federalist system that the founding fathers had carefully constructed by profoundly changing the relationship between the federal government and the individual… Today, it is hard to think of a single traditional state government activity that has not also been undertaken by the federal government.” Still, it’s noteworthy that the bulk of the New Deal was designed to supplement states rather than replace them, providing federal matching dollars to locals for helping the poor and the elderly while relying on locals to determine worthiness.

Tennessee

Figure 5. One Tennessee activity I wish the federal government would copy is not taxing my income

 

But with the Great Depression happening and free money from the federal government, states went on a spending spree and liberalized their aid. From 1934 to 1948, the share of welfare going to households headed by widows dropped from over 80% to around 25%. And aid started playing a dramatic role in rearranging relationships: “By 1948, the U.S. divorce rate was 35 percent higher than its prewar level in 1940; the out-of-wedlock birth rate was 44 percent higher…  Welfare’s incentives made it too easy for fathers to avoid their parental responsibility and for poor mothers to rely on government aid rather than their own resources to meet their living expenses… By 1961, only 8 percent of… families were on the rolls because the mother was widowed.”

But not only family stability was affected: for every dollar a woman worked, a dollar was reduced in aid, meaning that recipients were taxed 100% on earnings until they made more money than they received from the government. But why bother? By the 1960s, only 20% of the unmarried women on the government dole worked.  Another program for the poor had a “sudden death” provision that immediately cut off all aid once someone hit a certain income threshold – if someone hit the minimum, they’d lose the equivalent of four months of pay! Unfortunately these kinds of disincentives are only a couple of the more dramatic of the past – the problem still exists!

States realized they had been too generous as their budgets busted and scandalous stories started appearing: One woman was “the recipient of $50,000 in public aid over thirty-four years on welfare (over $400,000 in today’s dollars). She had given birth to twenty-two children fathered by seven different men, none of whom had ever been married to her.” So provisions were variously introduced (or started to be enforced) prohibiting aid recipients from living or carrying on with an unrelated man, banning welfare if an additional illegitimate child was born, limiting welfare to no more than 3 months a year, requiring a job, or providing aid only to those who had been residents for years. In fact, 2/3 of states required recipients of old age assistance to have lived in the state for 15 years or more. Arizona required 35!

But instead of reform, the federal government – through both political parties and all three branches of government – declared total war on poverty. While it’s been joked before that poverty won, significant collateral damage included states’ rights and the federal budget.

First, the legal maneuvering: this was not the result of private actors coming forward to advance their case with their own dollars. LBJ financed an army of attorneys to sue his own government (and the states): “The initial legal services’ $42 million budget in 1965 was nearly ten times the total amount spent by all civil legal aid offices in the United States in 1959.” By the beginning of the next decade, the Supreme Court found that states’ “suitable home” provisions were illegal. And struck down state residence requirements for welfare as a violation of an individual’s unspecified constitutional right to travel (but said in-state tuition and state occupational licenses were ok).

College

Figure 6. Out-of-state college students suddenly discovered a passion for the Constitution as they heard about the right to travel, only to discover that particular penumbra excluded them. 

 

Most significantly, the court discovered a right to government benefits, “fundamentally transforming welfare from an act of legislative charity—a government-granted gratuity—into an entitlement that ensured all eligible people a legal right to benefits. This radical change, occurring without any accompanying legislation, overturned nearly two hundred years of established welfare policy.” Later, courts would find that disability benefits could extend to “virtually all noncitizens whom the Immigration and Naturalization Service was not aggressively seeking to deport” and “loosened eligibility requirements to allow alcoholics and drug addicts to qualify …regardless of whether recipients made any attempt at rehabilitation. By 1994… Only 10 percent of addicts and alcoholics receiving [disability from supplemental security income] were in treatment and only 1 percent of substance abusers on SSI ever recovered sufficiently to get a job. In some instances, SSI had become an enabler of continued substance abuse rather than being a gateway to rehabilitation.”

Second, the joint efforts of Congress and the President. From 1950-1975, “every president proposed to expand at least one existing entitlement or create additional ones” and, simultaneously, every two years Congress “enacted at least one such expansion.” But LBJ, Richard Nixon, and the Great Society hypercharged things. The federal government asserted its role as supreme and “state governments were reduced to acting mainly as administrative agents for these federal programs.” More people were covered than ever – new social workers, food stamps, even coal miners got a piece of the pie. In a cruel irony, the federal government thought that central control might actually curb costs. They failed spectacularly. Some half hearted efforts were tried – they introduced a work requirement in 1969 but the exceptions were massive, including stating that women would only have to work if states provided nonexistent daycare programs. It was still considered too much and was repealed. Another time Congress tried to control future growth of programs. And then repealed the caps two years later.

Unicorn

Figure 7. Millions of little girls were excited by legislation that only placed work requirements on owners of unicorns but they and fiscal conservatives were ultimately disappointed by the results.

 

From 1964 to 1980, entitlement spending grew 13% a year. The budget was balanced once despite an annual 10% growth in federal revenue: Revenue came in fast but Congress spent it faster. As a result, in 1980, “entitlement spending accounted for over half of all federal government expenditures. So rapid was the growth that the federal government was spending more on entitlements in 1980 than it had on all government activities combined just six years earlier.” And whom were we serving? “By 1981, one-quarter of all recipients of means-tested entitlements lived in nonpoor households, including 40 percent of all food stamp recipients… Half of all U.S. federally subsidized meals were served to students in families with incomes near or above the median family income in the United States.”

Ronald Reagan came in with a new agenda. He tried a lot, failed a lot, and in the end saved Social Security, held spending to a fraction of its former growth, and repealed a few programs along the way. 

One of the biggest projects the Reagan Administration took on was weeding out abuse in disability benefits. In the first term, “over 1 million disability benefits were reevaluated and benefits for over 400,000 were terminated.” Nothing like it had occurred since the Roosevelt Administration’s tackling World War I veterans’ benefits half a century earlier. But unlike with FDR, the backlash was immense. The press highlighted recipients whose disability had been revoked, Congress was outraged, and by 1984, “about half of the states were refusing to conduct disability reviews. Disability cases swamped the federal courts. An astonishing 20 percent of all cases pending before all U.S. federal district courts” were from folks removed from disability. “Under siege, the Social Security Administration announced a moratorium on all reviews… by the late 1980s, the program was larger and more generous than it had been when the disability reviews started.”

But that was the only spectacular failure. “Ronald Reagan’s success in reining in entitlements, though modest, is unmatched by any other presidential administration in U.S. history. Legislative actions reduced benefit levels or tightened eligibility rules in all but three entitlement programs.” Two entitlements were eliminated altogether (a program to share money with states, a special Medicare program that the recipients themselves hated) and another (trade adjustment) was reduced by 96%. “Although entitlement spending continued to increase throughout the president’s two terms in office, its growth slowed dramatically.” Compared to the 13 percent annual growth from 1964 to 1980, the Reagan administration saw only 1.4%. “During Reagan’s presidency, the percentage of U.S. households that received assistance from at least one federal entitlement program actually declined.”

Goat

Figure 8. Forget Tom Brady or Jerry Rice. Defeating the Evil Empire and making Americans more prosperous and less reliant on government makes Reagan a serious contender for GOAT. But better than Washington, Lincoln, or Polk? Maybe not, but it’s noteworthy that his nearest competition is separated by a century.

 

Reagan’s approach was restarted by Republicans who took over Congress in 1994 through welfare reform: “The law reversed decades of federal welfare policy by eliminating an individual’s entitlement to Aid to Families with Dependent Children (AFDC) benefits and transferring program policymaking authority to the states. The reform measure was motivated not so much by fiscal concerns but by a bipartisan realization that the AFDC program was encouraging recipients to act in ways that were harmful to the long-run interests of themselves and their families.” They further tackled abuses brought on by the courts by disallowing disability benefits for drug addiction and alcoholism and “denied eligibility for all three welfare programs to almost all legal immigrants.”

The impact was significant: the number of AFDC households plummeted over 50% in five years and nearly another 50% in the next ten. “This remarkable reduction is unprecedented among major entitlement programs in U.S. history.” What’s more: over 60% of adults who left the program became employed and the poverty rate among both children and families headed by women dropped by 20% in 10 years. “Among African American single heads of households, the results have been even more striking. Prior to 1994, their poverty rate had never fallen below 50 percent. By 2001, their poverty rate had declined to 41 percent and has remained below 50 percent every year since, including during the Great Recession.”

And yet the 1996 welfare reform was the exception rather than the rule, even among Republicans. Since then, Republicans and Democrats, Congress and Presidents have continued to expand government commitments, making existing programs more generous to more people and even creating new ones like ObamaCare. Within two years of welfare reform, a Republican Congress had reversed itself and made immigrants eligible for Medicaid benefits, AFDC, social security disability, and food stamps. Food stamps once required recipients to actually pay something for them but became free in the Carter Administration. Since the 1990s, food stamp eligibility expanded and expanded, where “liberalizations increased the amount of personal expenses applicants were permitted to deduct from their countable income, allowed certain types of income to be excluded from countable income, and increased the value of allowable assets.” In other words, Congress kept increasing the value of the cars, housing, retirement accounts, and education accounts recipients could own while still qualifying – and allowed states further ability to waive asset requirements. By 2009, “Congress suspended restrictions on the amount of time an able-bodied person could spend on the food stamp rolls without working” and “waived the food stamp work search requirement.” Welfare reform was a shadow of what it once was.

In my final email (for now) on entitlements, I’ll talk about broad lessons – and how politicians have abused and lied about Social Security.

High cost of good intentions

Figure 9. Click here to buy The High Cost of Good Intentions 10/10, perhaps the most important history book you can read to understand America’s current and future problems.

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 interested in America’s entitlement programs? How about history generally?

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!

    Pensions Made Fun

    The Gist: 2 of 3 of your federal tax-dollars are spent on entitlements. It all started in 1776…

    A review of The High Cost of Good Intentions by John Cogan.

    The first of three parts. Click here for part two, and here for part three.

    The American Civil War was fought between 1861 and 1865. Take a moment and consider: when do you think the U.S. government paid out its last related pension?

    < cue Jeopardy theme >

    As of 2017, over 150 years after the war ended, the U.S. government was still paying a Civil War pension.

    Snake Oil

    Figure 1. Turns out those snake-oil cure-alls did dramatically extend life.

     

    How the hell does that happen? John Cogan’s The High Cost of Good Intentions recounts the history of American federal entitlement programs. Now you may be thinking that this is a boring topic and that you’d rather be reading about pirates or willpower or even sleep. But make no mistake: this may be the most important history book you can read to understand America’s current and future problems.

    Alien

    Figure 2. Unless aliens invade. Then they can handle all of our fiscal problems.

     

    Why is this so important? Because the federal government spends over 2 out of every 3 dollars on entitlements and will only spend more going forward. 

    Since World War II ended, spending on entitlements grew an average annual rate 33% faster than the economy, a jump from $500 being spent per American in 1947 to over $7,500 in 2015. And that’s adjusting for inflation! In fact, “entitlements have accounted for all of the growth in federal spending as a percent of” our national economy. “The chronic deficits produced by these excesses have caused the outstanding public debt to rise to about $40,000 per U.S. resident in 2015” – more than 4x the debt per citizen in 1965 in today’s dollars.

     

    How did this happen? John Cogan relays the pattern:

    “When first enacted, entitlement laws, for policy or fiscal reasons, confine benefits to a group of individuals who are deemed to be particularly worthy of assistance. As time passes, groups of excluded individuals come forth claiming that they are no less deserving of aid. Pressure is brought by, or on behalf of, excluded groups to relax eligibility rules. The ever-present pressure is magnified during periods of budget surpluses and by public officials’ imperative to be elected and reelected. Eventually the government acquiesces and additional claimants deemed worthy are allowed to join the benefit rolls. That very broadening of eligibility rules inevitably brings another group of claimants closer to the eligibility boundary line, and the pressure to relax qualifying rules begins again. The process of liberalization repeats itself until benefits are extended to a point where the program’s purposes bear only a faint resemblance to its original noble intentions.”

    It started at the very beginning, in 1776. The Continental Congress promised that those soldiers and sailors of the Continental Army and Navy injured in the Revolutionary War could expect a pension in tribute to their service.

    hundred dollar bill

    Figure 3. If only the Founding Fathers had been funding fathers.

     

    Things quickly grew from there. Over the coming years, Congress expanded the program to include “members of state militias, then to disabled wartime veterans regardless of whether their disability was related to wartime service,” then to practically everyone who fought, regardless of whether they had any disability. And then to their widows – first, only those married during the war, then married before 1800, then ever-married. Then to survivors. And, frequently along the way, the pensions got bigger.

    Turtle

    Figure 4. The federal government eventually drew the line at pets.

     

    In 1819, when the program was still confined to veterans, “the number of applicants exceeded the entire number of Continental Army veterans who were thought to be still alive.” This prompted John Quincy Adams to comment “Uriah Tracy, thirty years ago, used to say that the soldiers of the Revolution never died—that they were immortal. Had he lived to this time, he would have seen that they multiply with the lapse of time.”

    Zombie Soldier

    Figure 5. The demands for payment in brains prompted the discovery of the Zombie Crisis of the early 19th century.

     

    Feeling somewhat guilty, Congress proposed a means test but did not want to insult veterans by requiring proof. So the law simply stated that the pensions were for those “in need of assistance from [their] country for support.” The only time the program was curtailed was in 1820 when budget cuts compelled Congress to require recipients to swear an oath of poverty. The vast majority of pensioners did so – and any that did not had all their benefits restored two years later when Congress had a surplus. 50 years after the war ended, at a time when adults could expect to live to 60, the costs were still growing. But hey, maybe the vigorous exercise of soldiering extended life.

    One other foreboding note: Army pensions were paid from general taxes collected by the federal government but the Navy pensions were supposed to come from the sale of goods seized from pirates and enemy ships. The original idea was that the money would be in a protected account and that the pensions would slowly draw from it. But in especially good raiding years, Congress got excited and generously voted to give surpluses away – including retroactively. One Navy widow received the equivalent of $600,000 in today’s currency. Simultaneously, Congress opted to invest half of the Navy pension in a supposedly high-yield fund controlled by political cronies. While promising 3x returns, the fund went bankrupt. Too generous in awarding benefits, too corrupt in investing the principal, Congress was forced to bail out the fund with general tax revenue – all the while claiming that the program was in good shape.

    Yacht

    Figure 6. Pirates proved the financial model for at least workman’s comp. Maybe the secret to solving our budget woes is declaring war on Carnival Cruise Line.

     

    By the time the Revolutionary War pensions were (mostly) off the government books, the Civil War was on – and the pension escalation, despite the benefit of hindsight, followed a similar path. As is the case with practically every government program, and especially those covered in this book, Congress vastly underestimated the cost – in one expansion, its prediction was off by more than 10x in the first two years. By 1896, Civil War pensions were 40% of the federal budget – despite excluding Confederates. You might say “Well, to the victor go the pensions” but Confederate widows were eventually included – in the late 1950s! We still had a 2017 payout due to a 78 year old Civil War veteran marrying a 28 year old in 1924. Their daughter, born in 1929, was the recipient of promised survivor benefits.

    Importantly, Civil War pensions were the first to become politically charged. “Vote as you shot” was the slogan of a dominating Republican Party that won 10 out of 12 presidential elections between 1860 and 1912 – and expanded Civil War pensions the whole merry way. The Grand Army of the Republic was America’s first real lobbying organization, consisting of Civil War veterans across the country ready to clamor for benefits. And the government allowed claim agents to help veterans secure their pensions – agents who themselves quickly became a powerful (and corrupting) lobby for new and more distributions they could profit from.

    Vote

    Figure 7. The massive success of that campaign slogan inspired others. Among free traders, “Vote as you bought.” In Baltimore, “Vote as you squat.” In Chicago, “Vote as you rot.” 

     

    The two presidential elections the GOP lost were in large part due to public anger about pension abuse. A report in the late 1870s suggested over 25% of the claims were fraudulent. In one election, Republicans expedited claim approvals in the swing state of Ohio, sometimes in exchange for a vote promise. When the general program was not sufficiently generous, veterans turned to their legislators to get what they wanted in individual pieces of legislation: in one two year period in the 1880s, 40% of all House bills and a majority of all Senate bills were designed to help individual Civil War veterans.

    Grover Cleveland was fed up with pension abuse, campaigned against it, and, fighting a pension-happy Congress, ended up being the President with the most vetoes ever. He explained every one in detail: One pension supposed to help a disabled war veteran was vetoed after Cleveland discovered the veteran was injured falling off a swing well after the war. But after only one term, the GOP came roaring back — and restored all the benefits Cleveland had denied while controversially promising even more. Cleveland then became the first and only president ever to lose office and then come back to win a second term. But, learning his political lesson, his second term ended with more pensioners than when he entered. The first executive to fight back ultimately lost.

    Swing Set

    Figure 8. The swing voters turned against Grover. 

     

    With World War I, Congress admirably attempted to learn from past experience and implemented two programs designed to curb future costs. First, as usual, Congress guaranteed a pension for those injured in the war but, differently this time, provided the opportunity for all soldiers to sign up for insurance if they became disabled for any reason after their service was up. Second, Congress gave a certificate to soldiers entitling them to money in 1945, when they might require old-age assistance (though the average soldier would only be in his fifties – and they couldn’t predict what costs 1945 might bring).

    The insurance program was popular – until soldiers left service and the government no longer could automatically deduct premium payments. “Ultimately only 10 percent of soldiers who had made regular premium payments during the war continued to do so afterward.” Instead, per usual, Congress expanded the pensions to include veterans with disabilities unrelated to war efforts (and then, predictably, to relatives who had not served themselves).

    The old-age assistance program proved to be one of the most controversial programs of the Great Depression. As money continued to grow in the account designed to pay out the benefits, there was immense pressure to spend it. Even in the roaring 1920s, Congress tried to give it away multiple times only to face President Calvin Coolidge’s vetoes. But Congress did manage to slip in the opportunity for veterans to borrow against the value of the certificate.  As the Great Depression took off, over half took advantage.

    Meanwhile, a “Bonus Army” of veterans engulfed DC and demanded that, in light of economic conditions, they should receive their 1945 payment early – never mind that the money wasn’t there. President Herbert Hoover reasonably refused, but then violently broke up the protest in a publicity nightmare.

    Through this, an unlikely budget cutter emerged: Franklin Delano Roosevelt. Despite being helped in his election by outrage over Hoover’s handling of the Bonus Army, FDR wanted not only to ensure that no early payouts occurred but also to reform the disability pension program which was costing over a quarter of the federal budget. Controversially, “He shared the founding fathers’ belief that all citizens had an obligation to serve their country in wartime and therefore did not represent a special class of individuals entitled to government benefits merely because they had served during wartime.” Immediately upon taking office, FDR proposed Congress grant him significant power to curb the pensions. This was a heavy political lift which he managed to get past the House but the Senate looked sure to filibuster. Determined to get what he wanted, FDR pushed through the House repeal of Prohibition, a piece of popular legislation the Senate could only pass once they dealt with the veterans’ pension. 

    Cogan summarizes the extraordinary legislation the Senate then passed:

    “President Roosevelt signed the most consequential legislation in pension history… The law repealed all entitlements to pensions that had been granted to veterans of World War I, the Spanish-American War, the Boxer Rebellion, and the Philippine Insurrection. The entitlement repeal applied with equal force to pension entitlements for veterans who had suffered disabilities in wartime service and to those with disabilities unrelated to wartime service. It applied equally to entitlements for widows and orphans of veterans killed in battle. It also applied to entitlements for veterans currently on the rolls and new applicants. The new law gave the president discretionary authority to set new eligibility rules. He could continue pensions for some or all of the affected veterans if he so chose, but he was under no legal obligation to provide pensions to all veterans who met statutorily prescribed eligibility rules. The Economy Act abolished all of them. Monthly benefits for veterans of all wars prior to the Spanish-American War were reduced across the board by 10 percent. The president could also set new monthly pension levels for all other veterans within the broad guidelines established by the law. The Economy Act prohibited the executive branch’s new rules and monthly benefit levels from being challenged in federal court and specified that the delegation of authority to the president would last two years. Regulations then in effect could be changed only by an act of Congress. For the first time in U.S. history, a large-scale entitlement had been repealed.”

    FDR went on to use his power to cut the number of recipients in half and reduced the monthly benefit:

    “His principal policy goal was to eliminate pensions for veterans with disabilities unrelated to their wartime service. He largely achieved this goal, at least for World War I veterans. On June 30, 1933, 412,482 veterans with nonservice-connected disabilities were on the pension rolls; a year later, there were only 29,903, all of whom were permanently and totally disabled. The pension entitlement for World War I veterans with disabilities unrelated to war had been all but terminated. These veterans were no longer a special class of people to whom the government was obliged to assist. Overall, the Economy Act’s reduction in the veterans’ pensions program is the largest ever taken in any entitlement program in U.S. history.”

    Amazingly, it stuck. Over the coming years, FDR vigorously used his veto power to protect his reforms, going so far as to become the only President in history to deliver a veto message in person at the U.S. Congress, insisting that the nearly $8 billion that had already been spent and $450 million ongoing annual expenditure was more than enough.

    And yet, despite all of FDR’s efforts, a hurricane hit Florida in 1936 and killed over a hundred World War I veterans who were working on a government project. Congress immediately passed legislation to distribute the bonus that had sparked all the initial controversy and then overrode FDR’s veto. The veterans would get their bonus nearly a decade early – but the pension reform limiting payments to those originally intended still stood, almost entirely due to the President’s determination.

    FDR’s fiscal prudence extended only so far. For the one entitlement he reformed, the rest of his New Deal set America up for significant fiscal and constitutional challenges I’ll explore in my next email.

    High cost of good intentions

    Figure 9. Click here to buy The High Cost of Good Intentions 10/10, perhaps the most important history book you can read to understand America’s current and future problems.

    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 interested in America’s entitlement programs? How about history generally?

    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!

      Just My Luck

      The Gist:  Success may be more random than we’d like to think.

      A review of Fooled By Randomness by Nicholas Taleb.

      The ambitious are always trying to figure out how to win in life. 

      Often that search means looking at winners and copying their practices – or investing in their future success. You can read articles by the dozen about how the President won his election with a master communications strategy while his opponent neglected critical voters. You can watch TV after the Super Bowl to find out the diet, exercise regimen, even the sex life that might have contributed to the quarterback throwing the game-winning Hail Mary. You can dial into an earnings call to listen to a CEO diligently explain his strategy for building upon the company’s record-breaking profits from the previous quarter.

      But what if a secret to success is randomness? As the old saying goes: better to be lucky than good.

      Crossed Fingers

      Figure 1. For maximum performance, knock on wood while crossing your fingers and grasping a rabbit’s foot underneath a horseshoe. 

       

      This is the question that haunts Fooled by Randomness, the first in a series of books by Nassim Nicholas Taleb, an options trader, about the role of uncertainty in our life. We humans are emotional beings, poorly equipped to evaluate odds, and naturally inclined to construct reasons for events that may not be knowable, much less actually true.

      Phone

      Figure 2. If he hasn’t called, it must be that he joined the French Foreign Legion! 

       

      To begin to understand performance, you need to know the size of the sample (how many people tried) and the randomness content of his profession (how significant a factor is luck). How much success could luck alone produce?

      If someone accurately predicts 10 presidential elections, the media hail him as a predictive genius, report with big headlines his latest prophecy, delve into his particular analysis of the electorate or the economy or whatever his formula. But you have to seriously consider whether he is better than someone who accurately predicted 10 coin flips. If a million people try to predict something with (almost always) only two outcomes, some will be right by chance alone, whether they base their predictions on deep analysis, gut feeling, or the weather. To extend the example: If a million people try to predict 10 die tosses, there are more opportunities to be wrong so fewer should be right by only luck — but some still will because there are a million participants!

      Nate Silver

      Figure 3. Or, in the case of Nate Silver, you only have to predict one election for the media to rave about you. The next election didn’t quite go as predicted.

       

      In more complicated professions, just because the odds can’t easily be defined doesn’t mean they don’t exist. Talent is relevant but we often overestimate it. If you are identifying the ingredients to success, you have to constantly assess the role of luck. Taleb controversially argues: “I am not saying that Warren Buffett is not skilled; only that a large population of random investors will almost necessarily produce someone with his track records just by luck.” 

      The role of randomness is far easier to understand from the loser’s perspective. You win and you credit your creativity, genius, and industry. You lose and you blame the odds.

      Of course, there could be very good reasons why you or someone else lost. Losers don’t get biographies. But the reason behind winning or losing may really be luck. And that fact doesn’t satisfy our minds that hunger for a story. Yet winning is worthwhile so we study the winners.

      Forbes

      Figure 4. Apparently the secret to winning the Powerball is using a combination of the birthday of your first ex-mother-in-law, the number of Budweisers you had last night, your number of unreplaced teeth, and the amount of spots on your coonhound divided by 25.

       

      Isolating performance quickly complicates things. The best wide receiver on the planet has real limits that come with the guy throwing to him, and vice versa. Taleb observes that the performance of a cook in the company cafeteria is far easier to evaluate than that of the company CEO. At a certain point, one can only so often confuse salt and sugar, but at the pinnacle of leadership there are a lot more factors that go into success or failure. And the more factors, the more randomness plays a role.

      Chef

      Figure 5. Yes, it may be said that a cook can better master the ingredients of success than a CEO.

       

      If top performers are identified, analysts will discover commonalities and make the leap: if you share these traits, then you, too, may become a top performer. But the commonalities are rarely put under study. High tolerance for risk is an entirely believable shared trait among billionaires and bankrupt.  Taleb again: “I never said that every rich man is an idiot and every unsuccessful person unlucky, only that in absence of much additional information it is preferable to reserve one’s judgment.”

      You may also stumble upon something completely unrelated but randomly correlated. Taleb himself is “convinced that there exists a tradable security in the Western world that would be 100% correlated with the changes in temperature in Ulan Bator, Mongolia.”  This is called a spurious correlation, itself an amusing website. The examples are silly, of course, but they point to the possibility that a plausible explanation is actually completely wrong.  

      Even when true statistics are captured, they are prone to misinterpretation. Just because a majority of American presidents were born before 1900 does not mean that the next President is likely to be over a century old. If a surgery with a 99% survival rate has been performed 99 times and you’re next, you still have a 1%, not 100%, chance of death. Insurance is not necessarily a waste just because you have not had to take advantage of it. Our mind does not easily grasp these ideas.

      Taleb ends up dividing the world: “I thus view people distributed across two polar categories: On one extreme, those who never accept the notion of randomness; on the other, those who are tortured by it.” 

      For those who take the red pill: “Probability is not a mere computation of odds on the dice or more complicated variants; it is the acceptance of the lack of certainty in our knowledge and the development of methods for dealing with our ignorance.”

      What are some of those methods?

      First, be happy you’re already lucky to live in the greatest country in the world. Psychologists have found that people are happier when they make $70,000 a year when everyone around them makes less than to make $80,000 a year when everyone around them makes more. Whatever your circumstances, if you are reading this newsletter, there are people worse off – and yes, perhaps, because of random bad luck. Inform your envy that its objects may merely be beneficiaries of the odds. And take into account just how lucky you are – and how grateful you should be.

      House

      Figure 6. Classic financial advice is to own the cheapest home on the block. New happiness advice: own the most expensive home on the block.

       

      Second, be skeptical of the explanations behind success and failure – including the ones you conjure for your own – that don’t factor in luck. News is especially bad: Every day every media outlet screams for attention even when the news does not merit it. Analysts offer immediate speculation without subsequent confirmation. On television, anchors are hired based on their charisma and looks, not their crucial insights. Taleb continues the indictment: “To be competent, a journalist should view matters like a historian, and play down the value of the information he is providing, such as by saying: ‘Today the market went up, but this information is not too relevant as it emanates mostly from noise.’ He would certainly lose his job by trivializing the value of the information in his hands.” To attain distance, I personally gather news and read it altogether at the end of the week. I can read the whole story, rather than each daily update, or decide the story isn’t even that relevant. I have other friends who have unplugged from the news altogether. Another reason to read books instead! But even taking a historical view, “Past events will always look less random than they were… Humans are not wired to understand the impact of randomness in our lives, and so we must be constantly vigilant as to not assign greater significance to things that largely happened by chance.”

      Breaking

      Figure 7. Sources confirm that the dog DID NOT chase the cat today. Will this signal a new era in feline-canine relations? Let’s go to our panel. 

       

      Third, remember: Winning does not mean the risk should have been taken. Losing does not mean the decision was bad. Never confuse the quality of a decision with the desirability of the outcome. By all means, try to figure out what happened. But judge decisions based on what was known at the time, not whether the gamble paid off. Taleb even gets philosophical: “Heroes are heroes because they are heroic in behavior, not because they won or lost.” Just because randomness plays a role doesn’t mean you shouldn’t work hard and give yourself opportunities to score.

      Ultimately, as Robert Heinlein observed, “Certainly the game is rigged. Don’t let that stop you; if you don’t bet you can’t win.” Who knows? Maybe the game is rigged for you.

      Fooled by randomness

      Figure 8. Click here to buy Fooled by Randomness. 8/10. Taleb’s writing is best characterized as wanderlust, as it does not fit neatly together and he has a unique voice that not everyone will appreciate. But there are outstanding insights scattered throughout, complemented by vivid thought experiments and playful language. He is more famous for Black Swan, but I consider this a better book. His work resists summary and I’ve done my best above – though he argues that book reviews tell you more about the reviewer than the book, so take that as you will. For a review of more of his work, click here.

      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 bad luck? or good? how about anyone who needs to understand risk?

      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!

        An Argument With My Father

        The Gist: How the British Empire wrestled with decline.

        A review of The Weary Titan by Aaron Friedberg.

        I occasionally get into an argument with my father. He insists that America has always solved our problems and we always will. I hope so, but I point out that a citizen of Britain (or Rome) might have said the same thing a couple centuries (or millennia) ago and things didn’t exactly work out.

        Minute Man

        Figure 1. Ironically, one of the problems Britain couldn’t solve is America.

         

        “Supremacy is seldom conducive to hard thinking.”

        That is the warning of Aaron Friedberg in The Weary Titan, his study of the decline of the British Empire. Former Speaker of the House Paul Ryan recommended the book to me and it has become one of my favorite histories. Ultimately, the book is a meditation on how leaders come to grips with decline (or don’t.)

        Alabama

        Figure 2. The apparent exception to this warning is Nick Saban.

         

        “The sun never sets on the British Empire.” Never was that more true after World War I, when London controlled nearly a quarter of the world’s population spread out over 13 million square miles. For comparison, the United States today has about 4 percent of the world’s population concentrated in less than 4 million square miles.

        And yet by then the Empire was in significant decline. The Empire had lost over a million men in World War I, including over 1.5% of the population of the home islands (the equivalent of America losing 5 million men today). Within four decades, the Empire was over.

        Europe

        Figure 3. Now there are days when the sun never even penetrates the English fog. 

         

        How did they get there? The real height of the British Empire may have been in the 19th century. Fresh off defeating Napoleon, the British were practically unchallenged across the globe. They expanded their reach further and further – but failed to realize they were losing their grip. 

        Friedberg’s book focuses on the years leading up to World War I and examines how British Imperial leaders tackled government budgeting, economic power, Naval reach, and Army strategy.

        Let’s start with the easiest place they went amiss. Incredibly, between 1820 and 1850, British government spending went down! For comparison, the U.S. government spent double the real dollars in 2018 that we did in 1988. And that 1988 budget was more than double what we spent in 1958. (Another lesson from 19th century Britain: keeping inflation to a minimum. The facial budget number of 2018 is more than 40x 1958). The typical, prudent British fiscal management was not to spend more than revenue and pay down debt so that they could easily get loans in any war. It didn’t last.

        Tombstone

        Figure 4. You get what you pay for! Americans must live 400% longer than they did in 1958.

         

        After 1850, government services increased, partially as a result of the expanding number of people voting, and spending jumped every year. By the 1890s, spending had exploded but revenue managed to cover expenses from the increased prosperity of the nation. Interestingly, their estate (death) tax was as important to their revenue as their income tax. But there was no political constituency calling for reduced spending – just disagreement about whether to spend it on defense or more domestic services.

        Then the Boer War started in South Africa and it quickly exceeded costs by a multiple of the original estimate. The old guard was terrified because they believed that a low tax burden had enabled British success and that this was a pretty small conflict to be going into debt over. But new thinking was that Britain was economically strong and not spending as much as its peers (nor as much as it did during the Napoleonic existential crisis). They tried to spread naval costs to the far reaches of the empire (“weary titan” is a phrase from a speech suggesting this), but because their explicit strategy was to control the sea, not protect colonial coasts, the colonies only coughed up half of what London wanted. Britain resorted to more taxes on the home islands to pay for the war, only to face a new crisis in World War I – and with ever-increasing war debt as well as bigger and bigger promises of domestic services, the Empire was soon gone. 

        The second prism Friedberg considers is economic power: 1872 was the high water mark of Britain’s comparative economic strength. Then, only puny Belgium was similarly highly industrialized.

        Waffle

        Figure 5. And Belgium used their head start to… gain an advantage in waffle production. Laugh all you want but Britain never developed a tasty food export.

         

        Britain kept practically no economic statistics except exports and imports. And as the years went on, the numbers were bigger than ever. The British people felt more prosperous than ever. And they were! But by 1900, Germany, the United States, France, and Japan had done a lot of catching up, with the first two far outpacing British growth.

        Few realized that Britain was in relative economic decline – that is to say, still ahead but less and less so. Because exports and imports were the only data available, all economic arguments in politics centered around them. And the Conservative coalition that led Britain at the end of the 19th century was extremely divided on trade. 

        Incredibly to modern eyes, free trade absolutists were not confined to university economics departments but were the base of the Conservative Party. Maintaining that British wealth was built on zero tariffs and that free trade meant cheaper goods for consumers, they refused to consider any alternative.

        Milton Freidman

        Figure 6. Late 19th century Britain was Milton Friedman’s dream polity.   

         

        And yet the thirty years ending the 19th century were collectively known as the “Great Depression” in Britain because of uneven economic conditions, often sparked by tariffs imposed by other countries. Joseph Chamberlain, father of future Prime Minister and German-appeaser Neville, was the Colonial minister who feared that British gospel on free trade was wrong. Chamberlain barnstormed the nation and insisted that British trade was essentially stagnant and that the only exports that had really increased were coal, machines, and ships – all things that helped competitors gain against Britain. Britain was alone in the world in embracing unilateral free trade – could everyone else be wrong? Attempting to unnerve the population, Chamberlain pointed out that Spain was more prosperous than ever before – and yet it was now a second (or third) tier power. Most compellingly to a doctrinaire free trader, he argued that free trade may increase global wealth, but did not guarantee a single nation atop the heap.

        But Chamberlain’s solution was unproven, theoretically lacking, and never embraced. He proposed a new trade arrangement that involved free trade within the empire and tariffs outside it. Amazingly, despite Britain’s ferocious free trade stance, there was not free trade within the Empire, with colonies imposing tariffs on British goods. This and the colonies’ refusal to give London revenue are instructive as to how decentralized the Empire was – so much so that Prime Minister Arthur Balfour acknowledged that isolated economic units put the British Empire at disadvantage versus say, the US. Some Conservative leadership tended toward the aristocratic, and they worried that the prosperity of trade empowered the lower classes in politics. Yet Chamberlain was only able to push through tariffs in emergencies, as his opponents only agreed to them because of the need for revenue and dropped them as soon as revenue was secure.

        Prime Minister Balfour ultimately resolved the debate by purging his cabinet of both extremes and tried to forge ahead with his own policy: free trade, but retaliatory tariffs available to goad others into dropping their tariffs. This proposal satisfied neither extreme, and led to a huge electoral defeat that put the Conservatives in the political wilderness for years. Ultimately, what Britain could have done to extend its economic advantage is unclear; nevertheless, the leadership relied too much on its historic strength and lost its innovative edge.

        The third prism Friedberg considers is a point of historic pride for the British: when they ruled the waves. Most naval strategy came down to an aspiration to “control the seas” and exceed the naval power of the next two most powerful nations. But what did either of those aspirations really mean? They ended up sort of combining together to mean a greater number of battleships than Russia and France, Britain’s most feared alliance of enemies, even though friendly Italy had more ships than Russia. As time went on, and other powers grew their navies, the Admiralty realized the two power rule was inadequate to control the seas of the entire world, and they did not have the money to meet the challenge.

        Swiss

        Figure 7. Britain eventually ambitiously shifted its target to ensure it had more ships than Switzerland.

         

        Realizing their weakness, the Navy did what every business school teaches: delegation. In the 1880s, the United States began a naval build up that led the Admiralty to concede the western hemisphere to a friendly power. One of my favorite anecdotes in the book features the British Army requesting from the Navy the plan to defend Canada against a hostile America. After much prodding and delay, the Navy finally revealed there was no plan – and the Army, proud of a global British Empire, is befuddled and outraged. If only McKinley had known, we could have liberated the 14th colony!

        The Navy was less successful in their choice of delegate in Asia: Japan. Until 1900, most of the Japanese Navy’s ships were built in the United Kingdom. Japan had already proved significant military capability against China but was forced to give up their gains by European powers. This humiliation prompted massive investments that ended up paying off in their defeat of Russia in the Russo-Japanese War. Britain saw an opportunity and signed an alliance with Japan where each promised to fight if the other was attacked by two or more powers. The Japanese hoped to make the alliance the dominant power in East Asia, but the British used it as an excuse to militarily leave Asia nearly altogether.

        project

        Figure 8. It’s sort of like when you were excited to work with a partner on a school project and then he left you to do all the work. 

         

        At the end of the day, the British managed their changing strategic Navy environment fairly well. They ultimately decided to focus their finite resources on what they considered the five keys to the world: Dover (where they controlled the English Channel), Gibraltar (the Mediterranean), Alexandria (the Suez Canal), Singapore (the Straits of Malacca), and the Cape of Good Hope (around Africa). Although delegating to the Japanese did not work (and ultimately resulted in one of the biggest disasters in British military history at Singapore in World War II), the British were not prepared to commit to East Asia and did not have the resources to stay there. What really paid off, especially in saving the home islands, was cementing the relationship with the United States. Unfortunately for us, there’s not a big friendly naval power that can take on our responsibilities.

        Finally, Friedberg looks at Britain’s approach to its army.  The British army had traditionally been small – conscription had been adopted by every European competitor but was considered against the British spirit. And the Army itself was considered a bad career by civilians. The Boer War required virtually all of British ground forces in the world.

        Ewok

        Figure 9. Notably the British Empire never had to face the ultimate imperial threat

         

        From 1900-1905, the British thought the most likely next major conflict was with Russia in Afghanistan. Whereas they felt that the Russians could strike at Britain’s “crown jewel” in India at any time through Afghanistan, Russia was considered hard to get at and difficult to blockade. Allies were required, and couldn’t be relied upon, to attack Russia, especially where Britain considered Russia most vulnerable (Crimea, requiring the Ottomans). The 1857 Sepoy mutiny gravely concerned the British, who relied on Indian troops but insisted on a particular white/brown ratio. The Indian troops were financed locally and did participate in British global conflicts, but a certain number were demanded at home to keep the peace. British military for years felt they needed to fight Russia in Afghanistan itself so as to stave off Indian insurrection pouncing on British weakness, but they worried Afghanistan was a logistical nightmare in which the locals would not be too keen to help. Years of arguments occurred between Indian and British planners about how many reinforcements and how much military financial capital could be expected from Britain. Eventually, someone helpfully pointed out that surely the Russians would have as many logistical problems in Afghanistan as the British had. And Russia’s defeat by Japan eased concerns, even prompting consideration of strengthening the alliance with Japan so that Britain would provide ships and Japan troops in case of a war. Even though the coming world wars ultimately were not fought over India, Britain’s concerns were not unreasonable – still, planning for all possibilities, including the unthinkable, tends to pay dividends.

        2001

        Figure 10. Good thing we eventually figured out that Afghanistan thing. 

         

        The Weary Titan was originally written in 1988 but a 2010 afterword reveals that the author did think explicitly of the US-UK comparison, especially in light of the 1970s malaise in the US. While we have plenty of shared problems, including an ever-increasing budget and a decline in economic comparative advantage, Friedberg believes America does have one significant advantage: he thinks we overestimate our peers and underestimate ourselves, prompting us to work harder. As with so many things, insecurity can be the secret to greatness – and hopefully mine justifies my father’s optimism!

        Weary titan

        Figure 11. Click here to purchase A Weary Titan, 10/10, and one of my favorite history books.

        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 interested in failing dynasties? How about history generally?

        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!

          Nothing Matters So Have More Kids

          The Gist: Why having kids is better for YOU.

          A review of Selfish Reasons To Have More Kids by Bryan Caplan.

          Our last correspondence discussed why having more kids is good for America.

          This article discusses why having more kids is good for you. 

          In Selfish Reasons to Have More Kids, Bryan Caplan argues we underestimate kids’ benefits and overestimate their costs.

          Even if kids have high startup costs, the investment matures better than practically any other. To confirm, ask any grandparent. Caplan relates: “Unfortunately, when a couple of toddlers are running around, you lose sight of the big picture. Namely: Your kids will grow up. Your workload will lighten. By the time you have teens, you’ll wish your kids had more time for you. Once they move out, even three of them won’t seem like enough. You’ll want more phone calls and more visits—and some grandchildren while you’re still young enough to enjoy them… If you were good at being self-interested, ‘How many kids will I want when I’m sixty?’ would interest you as much as ‘How many kids do I want right now?’” The solution? Think ahead, master the marshmallow test, and get that delayed gratification!

          Star Trek

          Figure 1. “Hey! I’m you from the future! I’ve come back to tell you to have more kids! Is it too late to tell you not to invest in Theranos? I also need to find some humpback whales.

           

          Like any advisable investment portfolio, having more kids spreads your risk. More kids means more possible grandchildren, more possible caretakers, more possible people to thank you on national television after winning the Super Bowl. But will it be fair to your kids to spread your resources? Caplan suggests asking, “How bad would your life have to be before you’d wish you’d never been born?”

          Kids playing

          Figure 2A. “Listen, Ted, I don’t think my kid is going professional. But yours has a chance. What’s it going to take for me to option your son?”

           

          Very few regret having kids: In “the highest-quality survey ever conducted on the subject… 91 percent of parents said they would have children all over again. Only 7 percent said they wouldn’t.” Compare that to the results of a survey of childless adults over 40, where over 2/3 confessed regret.

          Teds Wife

          Figure 2B. Ted’s wife was less than pleased to discover that he was part of the 7 percent.

           

          But why more kids? Because if you’ve already had one, you’ve bitten the bullet: “The main hit to parental happiness comes from child number one. Otherwise identical people who have one child instead of none are 5.6 percentage points less likely to be very happy. But once you’ve got a child, enlarging your family is practically painless. Whenever parents install another child seat in the family car, their chance of being very happy falls by a barely perceptible 0.6 percentage points. Intuitively, people sharply rearrange their lives with the arrival of their first child. They lose privacy and stop going out Saturday nights. When more children come along, however, parents’ lifestyle stays about the same.”

          Swing Set

          Figure 3. The swinging lifestyle has dramatically different meanings before and after kids.

           

          More kids means you can benefit from economies of scale. The marginal cost of each additional child is lower than the previous one. One analysis of government data suggests “‘if you have two kids, ages 13 and 16, your costs as a middle-income family will be $23,000 per year’ to feed, house and clothe them. ‘However, if you have three kids, ages 11, 13, and 16, your costs will be $25,880 — in other words, the third kid is costing just $2,880 extra.’” You only need so much more house (or toys) for each additional kid, who himself can be babysat cheaper by an older sibling.

          Dealer

          Figure 4. “If this trend continues and my calculations are correct, by our 9th kid we should be making money!”

           

          We are having fewer kids even though having more kids is easier than ever. Americans are 3x richer than we were in 1950. “You can see our mounting riches in our homes. Compared to the tiny dwellings of the Fifties, modern families live in castles, with air conditioning.” And, what’s more, the technology of raising kids has dramatically improved: welcome to “the modern world of disposable diapers, washer dryers, microwaves, dishwashers, WalMart, and Amazon.” 

          Forget resources. What about time? Jonathan Last sets the stage: In 1965, 60% of kids had a stay-at-home mom married to a working dad. That average mom spent 10.6 hours per week with her kids; that dad spent 2.6. Today, the average working mother spends almost 10 hours per week with her kids and the average working father spends over 6.5! Stay-at-home moms today spend over 17 hours with their kids. And Caplan points out that “when parents get full credit for multitasking, measured child care shoots up about 50 percent.”

          But do kids require that much time?

          When surveyors ask parents what one wish their kids would want from them, they usually said more time. When surveyors asked kids what they wanted from their parents, “they rarely wished for extra face time with their parents. They were much more likely to wish their parents would be less tired and stressed. The parents were completely out of touch. Virtually none guessed that kids would use their one wish to give their parents a better attitude.” 

          Caplan suggests that parents’ best guide to being better parents is to take more time for themselves. Indeed, “Kid time has crowded out couple time: Parents in 2000 spent about 25 percent fewer hours with each other than they did in 1975.” Caplan argues that “before you do something for your child, try asking yourself three questions. 1. Do I enjoy it? 2. Does my child enjoy it? 3. Are there any long-run benefits?” In other words, do you like taking your kid to piano? Does your kid enjoy piano? Is your kid actually going to benefit from piano in the workforce and life? (And to drive the point home: “How would you like it if an authority figure enrolled you in a weekly piano lesson?”)

          Piano

          Figure 5. Strongly believing that his employees needed to be well-rounded, Stephenson’s boss forced all company workers to spend time after work everyday practicing piano, attending cotillion, writing the corporate newspaper, playing on the company softball team, and rehearsing skits for the company retreat.

           

          All that is almost common sense (even if uncommonly practiced). But the bulk of Caplan’s book actually rests on a super-controversial premise: your biggest contribution as a parent is conception. In the nature versus nurture debate, Caplan comes down almost entirely on the side of nature. The implication is that so long as you meet some minimum standards as a parent, you can have as many kids as you’d like without worrying about affecting their outcomes.

          woohoo tv

          Figure 6. Convinced he had now done his part, new father Humphrey was excited to spend his children’s adolescence mining the depths of Netflix’ library. 

           

          How does he come to this conclusion? Caplan digs deep into research surrounding adopted kids and finds that kids consistently bear much stronger resemblance to their genetic family than their adopted family.

          Caplan summarizes: “A small army of researchers has compared adoptees to their relatives—biological and adopted. They find that when adopted children are young, they resemble both the adopted relatives they see every day and the biological relatives they’ve never met. However, as adopted children grow up, the story has a shocking twist: Resemblance to biological relatives remains, but resemblance to adopted relatives mostly fades away… Instead of thinking of children as lumps of clay for parents to mold, we should think of them as plastic that flexes in response to pressure—and pops back to its original shape once the pressure is released.”

          Or put another way: “Think about all the times in your childhood when you got in big trouble and vowed, ‘I’ll be good from now on.’ How long did your change of heart last? A month? A week? Five minutes?”

          And here’s a more mathematical explanation you can skip if you just want the results:

          “It’s easy to understand what it means for nature or nurture to have zero effect. What does it mean, though, for nature or nurture effects to be ‘small’ or ‘large’? The clearest measures come from a thought experiment I call ‘Switched at Birth’: Imagine you have an identical twin, but there’s a mix-up at the hospital: A nurse accidentally switches your twin with another family’s baby. You and the strangers’ baby grow up with your biological parents. Your twin grows up with the strangers. Decades later, the hospital discovers its mistake and arranges a meeting between you, your identical twin, and your accidentally adopted sibling. To measure the effect of nature, just answer this question: Suppose you’re higher on some trait—height, intelligence, income, conservatism, you name it—than 80 percent of your peers. How high on this trait should you expect your TWIN from Switched at Birth to be? To measure the effect of nurture, just answer this question: Suppose you’re higher on some trait—height, intelligence, income, conservatism, you name it—than 80 percent of your peers. How high on this trait should you expect your ADOPTED SIBLING from Switched at Birth to be? …Intuitively, if nature didn’t matter at all, you would expect your separated twin to be average—in the 50th percentile. If nature were destiny, you would expect your separated twin to match you in the 80th percentile; Similarly, if nurture didn’t matter at all, you would expect your adopted sibling to be average; if nurture were destiny, you would expect your adopted sibling to be in the 80th percentile, just like you.”

          So, what are the results? Parenting – that is to say non-genetic contribution – has little to no effect on kids’ measured intelligence, grades earned in school, the amount of school kids will complete, adult sexual behavior, divorce rate, happiness, income, criminality, number of hospital visits, and life expectancy. Studies are mixed on whether parenting affects kids’ smoking, drinking, and drug use. Parenting has a moderate effect on when daughters start having sex – but much smaller on sons. The only places where Caplan finds parenting has a strong effect are religious and political identity – but not how often kids ultimately attend services or vote.

          In other words, studies suggest that if you never met your identical twin, you’d wind up having closer IQ, grades, degrees, happiness, income, criminal records, and health than those genetically unrelated people you spent all your time with growing up. You may have different religious identities – but you’d attend services on a similar schedule. 

          These results are not intuitive – and certainly you’d like to think you have a much bigger impact as a parent. But what if they’re true? Read the book and closely examine the studies yourself. Caplan’s exhaustive presentation is scary in its scale.

          To give you a taste, one study looked at 1,600 Korean kids adopted by a variety of American families in 1955. The result? “Neither family income nor neighborhood income increased adoptees’ academic success. If you ever thought it unfair for rich parents to buy their children’s way through school, be at peace; apparently they don’t get what they pay for.” Another study looked at 1,700 high school students across America: “If you’re in the 80th percentile of your class, expect the identical twin you’ve never met to be in the 71st. Parental effects, in contrast, were literally invisible. The GPAs of unrelated kids raised together were no more similar than strangers.’”

          Or looking to Scandinavia: “Swedes have almost no financial privacy; researchers can collect your complete lifetime earnings history from tax records. One study of over 5,000 Swedish twins was therefore able to confirm that the effect of nurture on men’s income changes with age. Family has a moderate effect in your early twenties. Suppose you earn more than 80 percent of your peers. You should expect your adopted brother to make more money than 58 percent of his peers when he is twenty to twenty-two years old, and 55 percent when he is twenty-three to twenty-five years old. By the time your adopted brother reaches his late twenties, however, the effect of upbringing on income completely fades out—and remains invisible for the rest of his career. When children first become adults, their parents might find them a good job, or support them so they don’t have to work. Within a few years, however, young adults get on their own two feet, and stay there.”

          Bear in mind that Caplan is an indifferent libertarian when reading this next one: “Every major twin study finds that identical twins are more alike in their sexual orientation than fraternal twins. Yet genes are far from the whole story—if you’re gay, your identical twin is usually still straight. Upbringing might make a difference, too. In surveys, adopted brothers of gay men and adopted sisters of gay women are about six times as likely to be gay as the general population. This would normally be a smoking gun, but sexual orientation remains a touchy issue. The adoption results might merely show that gays with gay adopted siblings were six times as likely to mail in their surveys.”

          Ultimately, Caplan concludes “the most effective way to get the kind of kids you want is to pick a spouse who has the traits you want your kids to have.” And before you decide to spend all your time on vacation, read his citation from Judith Harris: “People sometimes ask me, ‘So you mean it doesn’t matter how I treat my child?’ They never ask, ‘So you mean it doesn’t matter how I treat my husband or wife?’ and yet the situation is similar. I don’t expect that the way I act toward my husband is going to determine what kind of person he will be ten or twenty years from now. I do expect, however, that it will affect how happy he is to live with me and whether we will still be good friends in ten or twenty years.”

          Selfish reasons to have more kids

          Figure 7. Click here to buy Selfish Reasons to Have More Kids. 7/10. I did not expect that the bulk of the book would be dedicated to proving that nature triumphs over nurture but it certainly has implications for parenting and the studies are worth reading. Regardless of whether you buy that specific argument, there are other selfish reasons to have more kids (spread your risk!) and the costs are overstated (economies of scale!). There is also some good data about how kids are safer than ever (only about 1 in a million chance per year your kid will be kidnapped) and happiness (“If you’re married with children, you’re [18% more] likely to be happy than if you’re single and childless. Taken too literally, the statistics imply that married couples require over a dozen kids to feel worse than childless singles.”). If you’re still not convinced, remember America!

           

          Thanks for reading! If you enjoyed this, forward it to a friend: know anyone with kids? How about anyone who is thinking about having them? How about anyone who was once a kid?

          For more, check out my archive of writings, including my review of the Tech-Wise Family, which includes 7 specific and escalating steps to spend less time with your favorite screen. 

            More Kids = More America

            The Gist: Schedule date nights with your spouse as soon and as often as possible.

            A review of What to Expect When No Ones Expecting by Jonathan Last.

             

            You haven’t had enough kids.

             

            At least, not enough to save America.

            Family flag

            Figure 1. Who will wave the flag when you’re gone?

             

            Even if you beat replacement – that is, you had more than 2 kids to account for you and your spouse eventually departing – there are still too many people like my parents who failed to spread their risk and only had one. And too many people like me, past 30 and childless (Average for postgraduate modernity, an embarrassment in every prior century).

            King

            Figure 2. “30! You should be a grandfather by now. Who will inherit the Duchy?”

             

            Jonathan Last’s What to Expect When No One’s Expecting is a book about the frightening demography of depopulation.

            Who cares? Couldn’t fewer people mean shorter lines, less traffic, lower pollution, and more stuff for the people left over? 

            If you believe that, move to Detroit.

            Robberies

            Figure 3. No waits for robberies. Only police.

             

            There are three big reasons why we need to continuously grow our population.

            First, our reckoning is fast approaching from entitlement economics: in the coming years, we will have fewer taxpayers and more demands on government services. If we somehow manage to reform entitlements, there’s still…

            Second, places with smaller proportions of young people tend to be significantly less entrepreneurial and innovative. There is an absolute lower number of creators willing to challenge conventional ideas and able to take risks. Because of their relative population, there are fewer young people in positions of authority. And there is a smaller pool of customers who will instantly adopt new technology, therefore limiting the capital for innovators. 

            Relatedly, Adam Smith observed “the most decisive mark of the prosperity of any country is the increase of the number of its inhabitants.” Nobel prize winning economist Simon Smith Kuznets explains: “More population means more creators and producers, both of goods along established production patterns and of new knowledge and inventions.” This can be taken too far – you’d rather be dealing with Hong Kong’s problems than Pakistan’s. But Hong Kong’s potential is inherently limited by its small size.

            Third and finally, there’s the prospect of war: The Pentagon now spends 84 cents on pensions for every dollar it spends on basic pay. And whatever form our future military does take, families with just one child will be less willing to accept military casualties.” The good news? “The Chinese entitlement scheme is even worse than America is: it covers only 365 million Chinese citizens and it is already unfunded to the tune of 150% of the country’s GDP.” Then again, no data exists on whether ISIS’ pension is fully funded.

            General

            Figure 4. “Our most devious strategy yet: encouraging reservists to retire in Shanghai”

             

            We are not quite as doomed as most of the industrialized world. Japan and Italy’s “fertility rates (now around 1.4) are within a range demographers call ‘lowest-low.’ This is a mathematical tipping point at which a country’s population could decline by 50 percent within 45 years. It is a death spiral from which, demographers believe, it might be impossible to escape. Then again, that’s just theory. Modern history has never seen fertility rates so low.”

            Our total fertility rate (TFR) is 1.93 children per woman but demographers believe we really need to be above 2. 

            Immigration is the primary reason our population is expanding: Immigrants add to our population when they enter but they also have more children than natives over the course of their lifetimes. “Between 2000 and 2010, the total population of the United States increased by 27.3 million, yet more than half of the entire increase came just from Hispanics. Most of that increase was due to fertility. Between 2000 and 2010, a net of 7.02 million people immigrated to the United States from south of the border.  Which means that, over [that] decade, 30 percent of America’s total population growth was the result of the labors of a group that makes up only 16 percent of the country.” Interestingly, “immigrants to America tended to have higher fertility rates than the country women they left behind.” And yet immigrants bring their own challenges. But for context, “When you break it out by demographic group, you see that black women have a healthy TFR of 1.96. White women, on the other hand, have a TFR of 1.79. Our national average is only boosted because Hispanic women are doing most of the heavy lifting, having an average of 2.35 babies.”

            History offers important context for our fertility decline: “In 1800, the fertility rate for white Americans was 7.04… By 1890, the fertility rate for whites had fallen to 3.87 [before] settling at 2.22 in 1940.” Then the Baby Boom exploded and collapsed. “For 20 years, the fertility rate spiked, reaching a height in 1960 of 3.53 for whites and 4.52 for blacks… From a combined TFR of 3.7 in 1960 (the end of the Baby Boom), the fertility rate in the United States dropped to 1.8 in 1980, a 50 percent decline in a single generation.” We’ve had a decent uptick since 1980 but, again, primarily due to immigrants. 

            So why haven’t we yet seen a population decline? The answer has to do with demographic momentum – and the fact that the Baby Boomers are mostly still alive.

            Population

            Figure 5. An attempt at an actually useful though very simplified cartoon. Demographic momentum means that until the last big generation dies off, our population will appear to be growing. Here’s an example that starts with two Baby Boomer couples but ends with their passing.

             

            So, how did our fertility rate get so low?

            First, parents have fewer kids because children survive longer in America than elsewhere or in the past. The reason the official replacement number has to be above 2 is because kids die. In Third World countries, replacement actually has to be much higher. In America, “in 1850, 2 out of every 10 white babies and 3.4 out of every 10 black babies died during infancy.” Much more died before adulthood. With more children surviving, intentional parents can reasonably plan the number of family members.

            Second, children have evolved from economic assets to family costs. Not so long ago, kids served two extremely practical purposes for parents: they were able to produce additional income for the family while they were young and take care of their elderly parents down the line. Whereas in the past parents were heavily economically incentivized to have more kids, now they’re fiscally punished.

            Kids were once considered useful farmhands; now they’re expensive dependents. “It is commonly said that buying a house is the biggest purchase most Americans will ever make. Well, having a baby is like buying six houses, all at once. Except you can’t sell your children, they never appreciate in value, and there’s a good chance that, somewhere around age 16, they’ll announce: ‘I hate you.’” Apparently as concerned with raising kids as crops, the U.S. Department of Agriculture projects that the cost to raise an American child born in 2015 will be on average the suspiciously precise $233,610 – a more than 20% increase from their 1960 projection in real dollars. And yet Last notes this is a significant undercount because it does not fully consider “three big-ticket items”: “childcare, college tuition, and mothers’ foregone salaries.”

            Psychology

            Figure 6. “You need to start pulling your weight around here. If you can’t explain to me how we can make money off Bitcoin, I guess we’ll just have to think through other ways you can contribute. Are you good enough at Fortnight for endorsements? I’m investing over $200,000 in you and I expect at least an 18% return. Otherwise, I should have just put it all into an index!”

             

            Government has made having kids even more expensive. Consider the example of requiring children to sit in special car seats, first enacted in 1977 by Tennessee. “If you had five small children in 1977—a situation not at all rare back then—few vehicles could accommodate enough car seats to transport the entire brood at the same time…  In 1976, when car seat laws were sweeping from sea to shining sea, 16 percent of women had four children and 20 percent had five or more. Today, the percentage of women who have five or more children is 1.8 percent… (As a side note, they didn’t radically transform auto safety, either. The most optimistic estimate is that between 1975 and 2005, car seats saved a grand total of 7,896 lives. Every one of them is a miracle for which we should be thankful. But saving 263 lives a year isn’t exactly conquering polio.)”

            Family

            Figure 7. Fertility really plummeted when the safety advocates convinced the government to require that each child be under the supervision of three adults at all times.

             

            But there’s another fascinating story about entitlements. To quote Last at length:

            Since the 1970s, young white men have seen a 40 percent decline in income relative to their fathers (young black men have seen a relative decline of 60 percent), largely because of taxes. So Social Security and Medicare have placed a serious and increasing burden on families, making it more difficult to afford the—also increasing—cost of children… There were two larger consequences of establishing government-funded programs for care of the elderly. The first was that children were no longer needed to look after their retired parents. Where people’s offspring had for centuries seen to the financial needs of their parents, retired people with no offspring now had access to a set of comparable benefits. They could free-ride on the system. This new system undermined the ancient rationale for childbearing. In a world in which childbearing has no practical benefit—the government will care for you if you don’t have children to do so—parenthood becomes a simple act of consumption. People have babies because they want to, seeing it as either an act of self-fulfillment or as some kind of moral imperative… You can spend your $ 1.1 million raising a child to become a productive worker, but an increasing share of his labor will go to the government. And the government hands out equal shares of retirement benefits from his labor both to those who spent the money raising children and those who didn’t.”

            Demographers guess this decreases the total fertility rate by 0.5 points – the difference between replacement and disaster!

            Third and finally, a constellation of social changes has limited the window in which women have children. Because of workforce participation, time in school, debt, and new norms, women are delaying childbearing toward the close of their biological viability. The invention of contraceptives has given women more control over when they get pregnant. The legalization of abortion has given women control over whether they deliver their kids. Sex outside marriage has led to more kids born out of wedlock, less likely to be joined by others in the same family unit. And “the routinization of divorce allowed married couples to split before they finished having children”

            From the late 1930s until the late 1960s, Gallup asked Americans how many children they’d ideally like to have and nearly two-thirds consistently said three or more. Today, only one third of Americans want three or more kids. Last reminds us: “with easy access to birth control and abortion, increased educational demands, and the rising cost of raising children, the ‘desired fertility’ metric is an upward limit on ‘actual fertility.’ In practice, actual fertility is often much lower than desired.” In 2011, 58% of women wanted two or fewer children – but 72% wound up there.

            The decline in desire can be traced to the new opportunities in the workforce – but also just looking around and seeing what other people were doing. Interestingly, “from 1879 to 1930, American men and women graduated from college at roughly the same rate.” The GI Bill dramatically altered the equation. “By 1947, 2.3 men graduated from college for every woman.” Women started going to college in greater numbers over the coming decades to the point where today more women graduate than men. Simultaneously, until about 1965, the percentage of women working outside the home was about 44%. Today, it’s about 70%. The desires to get educated before having kids, to pay off some debt before having kids, to advance in career before having kids all contribute to delays.

            But “delaying children is not as simple as it sounds, because while our social institutions are often malleable, biology is not. Between the ages of 24 and 34, a woman’s chance of becoming infertile increases from 3 percent to 8 percent. By 35, half of women trying to get pregnant over the course of 8 months will not succeed. After 35 it gets even dicier. By age 39, a woman has a 15 percent chance of being unable to conceive at all. And by a woman’s 43rd birthday, her chances of getting pregnant are nearly zero. All of which is why today, 1 out of every 100 babies born in the United States is created via in vitro fertilization. You can only push off pregnancy for so long… In 2009, fully 37 percent of all births were to women over the age of 30.”

            Ironically, “Margaret Sanger willed the Pill into existence so that the educated classes would not be ‘shouldering the burden of the unthinking fecundity of others.’ Instead, it has been the educated middle class—Sanger’s people—who have used the Pill to tamp down their fertility.” Surprising to me, only 17% of women aged 15-44 use the Pill; less surprising, that percentage is concentrated in the educated. As a result, the total fertility rate of women who have graduated from college is 1.78. For women with a graduate degree, it’s 1.61. For context, during the period in which China aggressively enforced a one-child policy, forcing women to get abortions or sterilization, their birthrate was 1.54.

            Only so many people use birth control effectively (or at all), and so accessible abortion also prevents childbirth. “In 2000 the RAND corporation tried to estimate the numerical effect of abortion on the TFR. It concluded that for white America, abortion on demand lowered the fertility rate by about 0.08—or 4 percent. Among black Americans the effect was much stronger: the Roe regime pushed fertility down by 0.34—or 13 percent.”

            And finally the instability of relationships has taken its toll on our fertility rate. “There’s a 64 percent chance that a first marriage will last at least 10 years. Fifty percent of cohabitations break down after just the first year…The chance that a person in 1910 who was married would someday be divorced was around 15 percent; by 1960 the odds rose to around 32 percent; and by 2000 to around 45 percent.” Married couples can just have more kids. Finding another partner, especially as a single mom, has big costs that results in fewer children, regardless of desire.

            So what can be done? Last concludes: “The government cannot get people to have children they do not want. However, it can help people have the children they do want.”

            Examples abound from throughout history around the globe of countries trying to spur their populations to have more kids. Almost nothing works. “Comrade Stalin announced the creation of the motherhood medal, given to any woman who bore at least six children… In ancient Sparta, fathers who sired three sons were exempted from Garrison duty and those with the four lads to their name paid no taxes at all. Caesar Augustus levied a ‘bachelor tax’ on unmarried aristocratic men.” Singapore, which waged an incredibly successful campaign to reduce their birth rate, reversed course and attempted to increase it by offering subsidies, preferred entry to good schools, relocating grandparents nearby — and nothing has worked. Just about the only thing that HAS worked is in the country of Georgia, where the local religious leader, Patriarch Ilia II promised that “he would personally baptize any child born to parents who already had two or more children.” The birth rate jumped an astounding 20%. America’s only hope may be Beyoncé agreeing to only perform concerts for mothers of three or more kids.

            A significant challenge is that state tax breaks, subsidies, and encouragements tend to influence the timing of kids’ births, rather than the number. If you are delaying having kids because you don’t think you can afford them, a government grant may cause you to have them earlier, but not many more than you already wanted. “The consensus is that subsidies produce returns mostly at the margins: Studies of European countries show that for every 25 percent increase in benefits, fertility increases by 0.6 percent in the short term and 4 percent in the long term.” 

            One interesting suggestion about Social Security which may help alleviate demographic problems but would exacerbate financial ones: “Phillip Longman proposes a ‘Parental Dividend’ system by which a couple’s FICA taxes would be reduced by one-third with the birth of their first child, by two-thirds with the birth of a second, and then eliminated completely with the third (until the children turn 18).”

            Ultimately, Last has “three golden rules for natalism.” First, “Below a certain point, there’s no turning back.” Once you drop below 1.5 kids per woman, it’s practically impossible to get back on track. 

            Second, “any efforts to stoke fertility must be sustained over several generational cohorts… A four-year tax credit is useless. So is a long, but feckless, string of hopscotch initiatives, like Japan’s. What you need is a serious, decades-long commitment to family growth.”And those efforts need to be concentrated on making life easier for parents, as opposed to specifically orienting toward having more kids because…

            Third, “people cannot be bribed into having babies.” Because kids are a lot of work! (I know my parents had their hands full with just one. But that may be a special case.)

            What to expect

            Figure 8. Click here to buy What to Expect When No One is Expecting. 7/10. An amusing guide to a scary subject. The book touches on but does not fully address some big questions: should we be indifferent about who is having kids as we strive to exceed replacement? Is a larger fertility number inherently good or is there a sweet spot above replacement? There are also some interesting insights tangentially related to fertility, like the fact that premarital cohabitation started among the poor in the Depression, not among hippies in the Sixties. The book ultimately makes a subversive argument: society needs to empower women to have the number of children they want, a number higher than they currently have. Of course, the book fails to note the truly correct answer to its title.

             

            PS. If you really want a blast from the political past, read Teddy Roosevelt addressing the National Congress of Mothers: “There are many good people who are denied the supreme blessing of children, and for these we have the respect and sympathy always due to these who, from no fault of their own, are denied any of the other great blessings of life. But the man or woman who deliberately foregoes these blessings, whether from viciousness, coldness, shallow-heartedness, self-indulgence, or mere failure to appreciate aright the difference between the all-important and the unimportant – why, such a creature merits contempt as hearty as any visited upon the soldier who runs away in battle, or upon the man who refuses to work for the support of those dependent upon him, and who though able-bodied is yet content to eat in idleness the bread which others provide.”

            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? How about anyone without? Know anyone who is concerned with the downfall of America?

            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.

              Geometry

              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.

              Mime

              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.

              Frankenstein

              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.

              Shrink

              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.

              Waiter

              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!

                Some Terrible Cartoons About Terrible Pirates

                The Gist: The scourge of piracy was ultimately defeated by punishment swift, certain, and severe.

                The first of a three part  review of The Invisible Hook by Peter Leeson and

                Under the Black Flag by David Cordingly.

                For part one about piracy’s awesome benefits, check out Why You’d Want To Be A Pirate. For part two’s ode to pirate law, check out Republic of Pirates.

                Ahoy me hearties! This email concludes the pirate trilogy. So far we’ve grasped that pirates were preferred employers and constitutional republicans. So why did everyone want to kill them? Did they just hate freedom?

                King

                Figure 1. “Everyone in my kingdom is free to follow my orders.”

                 

                They did hate freedom, but that wasn’t the principal reason. Pirates were not especially nice people. Pirates were thieves who committed larceny at the grandest scale. To achieve that end, they assaulted, tortured, and murdered victims who had the gall to resist.

                Plank

                Figure 2. Sadly, pirates did not actually make people walk the plank. Instead they did things much worse. If you are squeamish, skip the next two paragraphs. 

                 

                A gruesome standard was keelhauling, which involved tying you to a rope that circled under the ship and dragging you underneath to the other side, catching cuts from barnacles along the way. Or “woolding,” which described a favorite pirate technique that tied a rope around your head tighter and tighter until you talked or your eyes popped out. Montbars the Exterminator was a vicious original who preferred to “cut open the stomach of his victim, extract one end of his guts, nail it to a post and then force the wretched man to dance to his death by beating his backside with a burning log.”

                Under the Black Flag describes the array of options (which were also available to tyrannical merchantmen): “It is usual nowadays to regard a sailing ship as a thing of beauty, but it could be turned into a torture chamber by a sadistic captain. There were boat hooks and brooms and iron bars to beat men with. There were axes and hammers and cutlasses to cause grievous wounds. There were ropes of all sizes which could be used to whip, strangle, and stretch bodies and limbs. The shrouds and rigging were ideal places for hanging up a stubborn man by his arms for a few hours. And after a man had been flogged till his skin was flayed off, there were barrels of brine to throw over the wounds and plenty of salt to add to the brine to increase the pain.”

                So you can imagine the fear you’d feel standing in the crow’s nest at the top of your ship and spotting a Skull and Crossbones. That was precisely the point. The infamous flag was actually an invitation to surrender. The vast majority of pirate encounters left no one harmed precisely because they cultivated a reputation for inflicting horrors only upon resisters. Generally sadistic pirates had short and unprofitable careers. The successful pirate preferred not to fight because fighting meant his crew might suffer casualties, his ship might suffer damage, his treasure might not be captured. One Blackbeard biographer believes the man was an amazing marketer who never personally killed a man!

                Before after

                Figure 3. Going to that marketing seminar changed the course of Ed Teach’s career!

                 

                But even in the “best” of circumstances, pirates still were stealing literally tons of goods that did not belong to them. Black Bart Roberts, perhaps the most successful pirate, captured over 400 ships in three years – while maintaining the Sabbath!

                weekly calendar

                Figure 4. Bart was the cafeteria Christian of his day. 

                 

                So how was piracy finally scuttled? Britain gets the credit, but it took a really long time.

                Fighting piracy was a logistical nightmare. The Caribbean alone is over a million square miles – and piracy occurred up and down the East Coast of the United States as well as all around Africa (Madagascar was an infamous pirate hideout). To catch a pirate, the Navy had to rely on gossip, intuition, and pirates continuing to ply their trade along sea routes. But the Navy didn’t choose to make it easy. As late as the 1700s, there were only four ships patrolling the East Coast and only three patrolling the Caribbean, all with mixed capabilities. To save costs, ships were for a long time undermanned and not allowed to resupply in the West Indies. They were also not allowed to careen, a process that grounded a ship for repairs and removal of barnacles below the waterline – something vital for speed. There was also apparently a practice of Navy captains using their ships for personal trading ventures rather than hunting pirates. Worst of all, for centuries, all pirates had to be taken back to England for trial.

                Pirate globe

                Figure 5. “Well, we have 10 ships. Where do you figure the pirates will be?”

                 

                Until 1536, a conviction for piracy in English courts required either a full confession or two eyewitnesses, neither of whom could be an accomplice. That was an incredibly high bar, especially as the witnesses were most likely sailors spread across the globe. Bizarrely, England allowed indicted pirates to plead not guilty but if they refused to plead at all, they would be tied to the floor and have heavier and heavier rocks placed on their chest until they pled or were crushed to death. Interestingly, to demonstrate that the Admiralty had jurisdiction, convicted pirates were hanged just off the shore, close enough for crowds to witness justice, but far enough out that their bodies would be submerged by the sea at high tide. 1536 provided only a marginal improvement by allowing accomplices to testify against each other. 

                The most effective punishment is swift, certain, and severe. England only initially succeeded with the last. No wonder pirates operated with impunity (and were all the more preferred as employers!). Pirates were so little worried about being captured that they could take two days after confronting a ship to survey its cargo. If the Navy was truly on their trail, they had tens of thousands of places to hide until the Navy was forced to return to England. The most fearsome pirates had faster ships with more men and more guns than the standard Navy patrol. And even if against all odds they were captured, they still had to be transported thousands of miles to England during a journey where a lot could happen. And then multiple witnesses would have to be produced who had been at the scenes of the crimes those thousands of miles away. And after all that, a pirate on trial might present evidence in the form of a classified newspaper ad that he or someone else paid for advertising that he had been conscripted by a pirate crew. The pirate might beg for mercy and insist that he participated in piracy only to save his own life.

                In the 1700s, Great Britain finally got serious. Pirates were an occasionally useful tool in harassing the Spanish and other European rivals, but they went too far when they threatened the British commercial empire. The British experimented with offering amnesty in hopes that pirates would give up their careers but it only had a limited effect: Woodes Rogers estimated that of 600 pardons he issued, 100 of the recipients were back pirating within 3 months.

                Amnesty

                Figure 6. “Are you still offering amnesty? I accidentally stole another few ships since my last one.” 

                 

                What really won the fight was financing the fleet and changing the law. Starting in 1700, merchantmen sailors who successfully defended their ships and cargo received financial bonuses. This principle was expanded in 1721 when the law provided that merchantmen sailors who failed to defend their ships and cargo forfeited their wages and suffered 6 months imprisonment. Captains of naval vessels who pursued personal profit over duty were finally punished. Anyone who traded with pirates would be treated as an accomplice. And most importantly, pirates could be tried and executed at sea or in the colonies. Suddenly, a pirate might be executed within days of capture. American Puritans had no tolerance for the traditional defense. The great preacher Cotton Mather ministered to captured pirates and violently reacted to their claims of conscription: “Forced! No; there is no man who can say he is forced unto any sin against the glorious God. Forced! No; You had better have suffered any thing than to have sinned as you have done. Better have died a martyr by the cruel hands of your brethren than have become one of their brethren.”

                The Golden Age of piracy produced an attractive republican society. They were only able to do so because they operated outside the law, but it’s fascinating that they chose the structure they did. Unfortunately, it was built on a campaign of larceny and murder that governments allowed for too long. Ultimately, only the swift, certain, and severe delivery of justice brought their mayhem to an end. Thankfully a great republic arrived within a century to deliver on the promise of meritocracy and democracy.

                Under the black flag

                Figure 7. Under the Black Flag. Score 7/10. Some great stories about pirates, but a bit scattered.

                Invisible hook

                Figure 8. The Invisible Hook: 7/10. Fun premise worth reading, some arguments more interesting than others.

                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 who loves history or the law? How about someone worried about crime? Or is there perhaps a person somewhere out there that isn’t yet fascinated by pirates?

                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!

                  Republic of Pirates

                  The Gist: Pirates self-governed through – surprise! – constitutional democracy

                  The second of a three part  review of The Invisible Hook by Peter Leeson and

                  Under the Black Flag by David Cordingly.

                  For part one about piracy’s awesome benefits, check out Why You’d Want To Be A Pirate. For part three about how piracy ended, check out Some Terrible Cartoons About Terrible Pirates.

                  Avast ye landlubbers! In my last email, you learned that pirates were preferred employers who offered workers lucrative stock options, generous health benefits, and equal opportunity employment. 

                   

                  Now discover that these swashbucklers intuited the same ideas as the Founding Fathers — except decades earlier and without having to read Montesquieu.

                  Reading pirate

                  Figure 1. “Sorry, lads, ‘twas only my other eye that could read. Should’ve finished school and learned letters with both.”

                   

                  Often conscripted into the merchant marine, sailors suffered under the very real tyranny of captains at sea. By becoming pirates, they quite literally were taking up the proposition: “Give me liberty or give me death!”

                  And what device did pirates choose to keep their captains in line? Democracy.

                  Campaign signs

                  Figure 2. Campaign signs were harder to post without lawns.

                   

                  Bear in mind that no country at the time extended the vote to the typical sailor. Even in the comparatively restrained constitutional monarchy of the United Kingdom, the Magna Carta did more for aristocrats than it did for commoners. An unpropertied British sailor probably did not get to vote until the 20th century. America wasn’t available, and yet pirates were even more radical than America: each crew member, regardless of age, nationality, race, or gender, got a single vote. After all, each pirate was an owner.

                  parrot pirate

                  Figure 3. “Just because my parrot always votes like me doesn’t mean he should lose the franchise!”

                   

                  Captains were thus elected at the formation of the pirate crew but their term was not guaranteed to last. The crew could at any time oust the captain through a recall vote and, if the captain was as terrible as their previous merchantman leadership, he might very well be marooned. Interestingly, here was another example where the pirates’ very criminality served as a check on leadership: on a merchantman ship, mutiny was a crime; on a pirate ship, it was a formalized right.

                  Palm tree

                  Figure 4. Recalls resulted in lonely retirements. As you’d expect, the votes typically all came down to turnout in crucial Waukesha County.

                   

                  Pirates also understood something crucial: men, perhaps especially pirates, could not be trusted. So they also instituted separation of powers. The crew comprised a legislature, the captain the executive, and a separately elected quartermaster a quasi-judiciary with special executive functions

                  The legislature elected the captain and quartermaster, held them accountable through recalls, determined ship destinations, and settled ambiguous controversies.

                  Pirate committee

                  Figure 5. “Thank you for that report from the Rt. Dishonorable member from the Plundering Destination Committee. I think we can all agree to avoid North America. We are stick figures, after all, and there are too many beavers.”

                   

                  The captain directed the operations of the ship but received special deference and extraordinary powers when the crew faced battle (not too crazily different from our own President’s war powers!). In the heat of conflict, pirates recognized the advantage of strong and decisive leadership. For that, the captain received a small multiple – up to 5x – of the typical crewman’s share, but received not many additional accommodations: he was expected to share his sleeping space and get the same provisions as the rest of the crew.

                  Trump pirate

                  Figure 6. “This is going to be the most fabulous voyage of all time! We are going to build a big beautiful ship and the Spanish are going to pay for it! Put me in the Sea Suite!” – Orangemane

                   

                  The quartermaster was considered the crew’s representative and was given powers that were generally abused by merchantman captains: He was responsible for allocating provisions, distributing loot, adjudicating conflicts, and administering discipline. Because quartermasters were often a natural alternative to failed captains, both competed for the crews’ affections and served as checks on each other. 

                  But pirates did not simply rely on tradition or some version of criminal common law, they also insisted on another crucial restraint familiar to Americans: a written constitution or, in their parlance, a pirate code. With the election of a new captain, articles were drawn up that would specifically describe the rules of the ship: how plunder was to be distributed, what workman’s comp could be expected, how performance bonuses were to be rewarded, what activities were to be punished. Adoption of the code required unanimity so that pirates could hold each other accountable to what they all agreed. And when new crew members were recruited, they were specifically educated about the code’s provisions and made to sign their mark as a condition of employment.

                  Pirate preamble

                  Figure 7. An ordinary preamble. Later amendments protected the rights to violently assemble, keep and bear arms, give no quarter to soldiers of the crown, make unreasonable searches and seizures, inflict cruel and unusual punishment, etc.

                   

                  Interestingly, pirate codes tended to regulate (at least onboard) some of the very activities that pirates are famous for. In one, gambling was banned, women were prohibited, drinking was curtailed, and even bedtime was established. One of the main arguments of the Invisible Hook is that pirates achieved governance without government rather successfully.

                  Were America’s Founding Fathers inspired by pirates? As far as I know, no. At the very least, there is no constitutional bedtime. Later Senators may have been inspired because “filibuster” is another name for pirate. But the Founders did consider piracy in one crucial respect: Article I, Section 8, Clause 11 of the Constitution specifies that “The Congress shall have Power” to do a specific number of things, including “To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water.”

                  What the heck is a Letter of Marque? Only the best part of pirating. A genuine pirate was an enemy of everyone and raided whatever ships appeared lucrative in his telescope. But if a pirate accepted a letter of marque, he instantly became legal – more specifically, a privateer. A privateer is a free agent authorized by a country to go attack its enemies and take prizes as compensation. While privateers were often financed by outside investors that substantially limited on-board democracy, the fact that you could go home safe after all your raids suggests a significant benefit. 

                  Notably, this power remains available to Congress. So if you are in for an adventure, lobby your Congressman today! We could use the help in the War on Terror.

                  In my final email (for now) on pirates, you can learn the darker side of pirates and how government continuously bumbled handling piracy until it eventually got its act together.

                  Under the black flag

                  Figure 8. Under the Black Flag: 7/10. Some great stories about pirates, but a bit scattered.

                  Invisible hook

                  Figure 9. The Invisible Hook: 7/10. Fun premise worth reading, some arguments more interesting than others.

                  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 who loves history or economics? How about your favorite lawyer or lover of liberty? Or is there perhaps a person somewhere out there that isn’t yet fascinated by pirates?

                  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!

                    Why You’d Want To Be a Pirate

                    The Gist: Ninjas don’t get company stock, health insurance, or even a fraction of the pirate benefit package.

                    The first of a three part  review of The Invisible Hook by Peter Leeson and

                    Under the Black Flag by David Cordingly.

                    For part two’s ode to pirate law, check out Republic of Pirates. For part three about how piracy ended, check out Some Terrible Cartoons About Terrible Pirates.

                    Imagine you are in a boring yet stressful job where you are overworked for poor pay, no benefits, bad promotion prospects, no stock, and little vacation while a tyrannical boss subjects you to his greedy whims and degrading discrimination. 

                    Now consider an offer from a group of entrepreneurs where you will immediately receive stock options, have a decent chance of earning 40x what you could in a year (and a smaller chance of 1000x), receive health insurance, and help select your boss (or become the boss!). The only small catch is that it’s highly illegal and if you are caught you could be executed.

                    That’s the choice that faced sailors in the 17th century: remain in the merchant marine or become a pirate.

                    pro con

                    Figure 1. Honestly a tough choice.

                     

                    The Invisible Hook explores this and other questions about the economics of pirates. The title is amusingly inspired by the originator of free market theory, Adam Smith: “We can achieve very few of our self-interested goals, from securing our next meal to acquiring our next pair of shoes, in isolation. Just think about how many skills you’d need to master and how much time you’d require if you had to produce your own milk or fashion your own coat, let alone manufacture your own car. Because of this, Smith observed, in seeking to satisfy our own interests, we’re led, ‘as if by an invisible hand,’ to serve others’ interests too. Serving others’ interests gets them to cooperate with us, serving our own.” Crucially, Smith argued that no government is necessary in order to coordinate economic activities. The Invisible Hook claims that a similar force guided infamous maritime criminals into organizing themselves in particularly useful ways – all the more impressive because they operated completely outside (and indeed against) government authority. Under the Black Flag constitutes additional tales of piracy if you’re so inclined. 

                    The typical sailor led a hard life. If you were lucky, you intentionally took the job but you could also be “pressed,” a euphemism for being kidnapped. On a typical voyage, you leave home for months, perhaps years. Mercantilist competitors and unfriendly natives await with violence. Tropical diseases ravage you – one white man in three died in his first four months in Africa. Half the crew might die of scurvy, a terrible disease derived from lack of Vitamin C. You’ve got plenty of opportunity for workplace injury and contemporary medicine insists on taking lots of your blood while doctors consider washing their hands inconvenient. Sounds worse than receiving the Black Spot!

                    Orange juice

                    Figure 2. Who knew OJ could save your life? If the carton don’t fit…

                     

                    Ship management is unsympathetic and there is no HR to whom to complain. Absentee investors finance your expedition and are very concerned about your “negligence in caring for the ship, carelessness that damaged cargo, liberality with provisions, embezzlement of freight or advances required to finance the vessel’s voyage, and outright theft of the vessel itself.” So they’ve empowered a captain, perhaps with a small share to align incentives, to load and offload as many goods as possible as fast as possible as cheaply as possible. According to the law, the captain can dock your already small wages and physically beat you. Outside the law, he might attempt sexual harassment. But even under the most benevolent of captains, you’ll have endless work: the average 200 ton merchantman carried fewer than 18 men. Once your trek is over, you don’t even have a guarantee that you’ll get to continue your miserable work.

                    But perhaps you choose a different route. Pirates have boarded your ship, taken any valuables, and have an exploding offer to any able-bodied seaman to go on the account and join their motley crew. What exactly are they offering?

                    As a pirate, you work a lot less! The average pirate crew has 80 members but could be a lot more – Blackbeard had 300! Pirates were looking to numerically overwhelm any of their targets and that has the wonderful benefit for you that the day-to-day seafaring work is spread around where four or even sixteen men are doing the work that one might do on a merchantman.

                    Sleeping pirate

                    Figure 3. Rest your weary sea leg by taking a caulk every once in a while. Just don’t fall over and feed the fishes!

                     

                    You graduate from wage labor to ownership! No longer are you a poor sailor stuck on the bottom rung no matter your talents, no matter the profitability of the voyage. As a pirate, you get a share in the expedition and instantly become part owner of the ship. “As historian Patrick Pringle described it, in this sense a pirate ship was like a “sea-going stock company.”

                    Corporate pirate

                    Figure 4. Brings new meaning to “corporate raider”

                     

                    You have a shot at vast treasure! Whereas as a merchant sailor you might earn $5,000 a year, your share in pirate plunder could yield over $330,000 – and $5,000,000 is not unheard of. Because you can’t sail into simply any harbor, you are still going to have to raid for provisions and supplies, but booty is out there: In just four short years between 1596 and 1600, Spain imported precious materials from the Americas equivalent to about $840 million.

                    Bear in mind: no prey, no pay. Pirates structured their profit sharing to limit crew discord but also to vest in each member an incentive to plunder. While the captain and skilled crew members (like surgeons) might get a small multiple, the distributions were fairly flat to ensure that all pirates had their heart in the taking of the prizes until all were satisfied.

                    treasure map

                    Figure 5. Sadly, burying treasure is more common among fictional pirates than real ones. Here X marks the spot of the finest bar in Tortuga, where most treasure wound up anyhow.  

                     

                    You might want to hire a financial manager.  Much like professional athletes and lottery winners, pirates were not exactly great at managing their sudden acquisitions of vast wealth. After one voyage led by the French pirate Francis L’Ollonais dispersed $6,500,000, the crew spent it all in just three weeks, on gambling, rum, and wenches.

                    Treasure chest

                    Figure 6. You are going to need the right asset allocation. Burying your treasure doesn’t put your money to work for you! I primarily recommend a Royal Exchange index fund so you can focus on what you’re good at – you’re a pirate, not a stock-picker! Bank of England bonds should be reliable or you can invest in Dutch tulips if you have a high risk tolerance. My big recommendation is real estate: a fabulous island on the Hudson River just went for $24!

                     

                    You get health insurance! Although you may be really bad at spending money, pirates wanted to make sure you exerted maximum effort, so they try to de-risk violence for you a little bit. Specified in advance upon joining the crew, the awards ranged from $2,500 for loss of a finger to $15,000 for loss of a right arm.

                    BCBS

                    Figure 7. The offerings of Black Cannon Black Ship, the preferred pirate insurer. 

                     

                    You may work for an equal opportunity employer! An African on a legitimate ship invariably was a slave but some pirates were happy to consider highly motivated additional manpower. Pirate ships certainly had a larger portion of black crew members than their legitimate counterparts – up to 30%! A century before emancipation, pirates were prepared to not only recognize talent but to equally empower blacks in crew decisions. Of course, they were less enthusiastic about accepting women, who were considered a distraction to the crew, though famously two women, Anne Bonny and Mary Read, originally dressed as men, served on the crew of Calico Jack Rackham. When they were caught, they managed to avoid punishment by revealing that they were both pregnant.

                    No wonder pirates had such an easy time recruiting! In my next email, learn how pirates were constitutional republicans. Savvy?

                    Invisible hook

                    Figure 8. The Invisible Hook. Score 7/10. Fun premise worth reading, some arguments more interesting than others.

                    Under the black flag

                    Figure 9. Under the Black Flag. Score 7/10. Some great stories about pirates, but a bit scattered.

                    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 who loves history or economics? How about someone who hates his job and dreams of a better life? Or is there perhaps a person somewhere out there that isn’t yet fascinated by pirates?

                    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!