Good Enough

Meritocracy isn’t supposed to be a defence of privilege. It is the idea that capital and power get allocated on the basis of talent, effort, and achievement rather than wealth or social class. Similarly Capitalism was historically a push back against Mercantilism. Mercantilism looked at Nations as competitive containers designed to win. The aim, it was thought, was to maximise exports and minimise imports. Sell lots. Buy little. Win. The policies led to aggressive militaries and colonial expansion. Enter Adam Smith and the idea of Win-Win. Gunboat diplomacy was the use of conspicuous naval power to use the threat of war should the “negotiation” terms not be in line with what the stronger power wants. Smith made the convincing case that trade and reduced barriers to entry benefit everyone. Similarly, with Meritocracy, we only half heartedly want it. Limited, networked, job and client opportunities mean people are still suspicious of reducing barriers to entry. Meritocracy is now used as a defence of privilege as if conspicuous gunboat signals mean the advantages are deserved. The reason people don’t want real meritocracy is because they walk around thinking they are impostors. We all worry “I am not good enough”, if a great people sorting sees our flaws. 

"Seaport at Sunrise" Claude Lorrain (1639)

Always Connected

Different waves of European Colonization rose from the failure of the Crusades (and the expansion of the Ottoman Empire), and the successful Reconquista (end of eight-century long Islamic rule). Cut off from the Silk Roads and Indian Ocean Trade, the religious zeal of church-sponsored missions, and the promise of wealth spurred the commercial Christian adventure seekers. The same modern mixture of “higher purpose” and “a way to pay for it”. The Old World had deep and wide connections, but restricted movement for control seekers. The first wave from 1402 (Canary Islands) to the British annexation of Kandy in 1815 focused on Trade Posts and the New World. The American Revolution, collapse of the Spanish Empire, and defeat of Napoleonic France changed the game. The Great Powers of “New Imperialism” had the fire power of the Industrial Revolution, Trade, and “Civilising Missions”. Each believing in their better version. In 1885 around a table in Berlin, “effective occupation” made these powers insist on direct rule of indigenous people to recognise claims. Then they started punching themselves in the face in two world wars, which loosened their grip. We have always been connected. It is just who is in charge and the stories they tell that change.

Afro-Eurasian Land Mass

What is going on?

British East India Company

Before Capitalism, under Mercantilism, the lines were blurred between Companies and the State in the same way as they were blurred between the Church and the State. Given a Charter, a Company could raise an army and make laws. The British East India Company ruled India from 1757-1858. Things changed. Now there are concepts like Public Equity and Multi-National Companies. Public Equity democratises ownership. Shares of listed Companies are traded freely and can be bought and sold by people who aren’t Citizens of one competing tribe. Multi-National Companies have employees, customers, and owners, from all over the world. Stock Markets allow customers to own shares in the companies that make the products that they buy. You don’t “play” the market. You can invest in a real company, doing real things, for real people. The heart of Fundamental Investing is the question, “what is really going on?”.

Amsterdam Stock Exchange

All the Toys

Adults are really just big kids. If a small kid was hogging all the toys, the person looking after them may be inclined to a little deception. They could take a piece of paper and cover it in glitter as a "Toy Token". If they were very good at Kid Talk, they could convince the little bully to hand over the toys to other kids in exchange for tokens. Tokens that grow if the other kids enjoy themselves more.

This was the huge leap forward we took in the shift from Mercantilism to Adam Smith Capitalism. Instead of Nations being seen as competing schoolyard bullies, the people within those nations could exchange toys. Stock Markets are the tokens. The toys get handed over and grow *IF* they do or make things that the other kids want.

The wealthy today are massively incentivized to put their Capital to work rather than hoard it in pools of gold coins. Conspicuous Consumption is a stupidity tax, where the wealth gets transferred from someone who wants to spend $10,000 on a bottle of Champagne to someone who puts that $10,000 to work. Those who inherit massive amounts and just buy stuff with it, will slowly see that stuff become worth less if it isn't working.

It isn't perfect. Far from it. I believe a Universal Basic Income is necessary for pure play Adam Smith Capitalism. He argued that local markets were the best way of finding out what people wanted. Rather than a bunch of stiffs sitting in a board room "representing people". The act of buying something is direct empowerment. A form of voting. But you can't vote if you don't have any cash in hand to start.

The three richest men in the world no longer "hog their toys". Buffett owns share is Brick companies, Insurance companies, Media, Logistics, Capital Goods, Household Products, Food and Beverages. Even Bezos and Gates don't hold all their wealth in Amazon and Microsoft.

A big part of the magic trick of Capitalism is getting people to carry on working for those tokens. To see their number grow. That is dangerous. Like fat, salt, and sugar... numbers are a too easy proxy for the real things that matter. There are lots of holes that need working on. Lots of incentives that need discussing. Lots of self-evaluation and deciding what really matters.

But the answer isn't just taking the richest people in the world's toys and sharing them around. They don't actually have the toys they think they do. The numbers are just glitter-covered tokens.

Beyond Nations

Nationalism is a very young concept. As a way of organising ourselves, we have trialled and errored lots and lots. Nations came out of the enlightenment as a push back against Monarchs and 'the divine rule of Kings'. The appetite of Monarchs meant they were less likely to define their subjects too tightly. More was better. As we started to define ourselves by a 'The People', Racism and Prejudice reared its ugly head. Companies also started life like countries. The East India Company ruled India for 101 years. Companies had armies and flags. Eventually we realised that wasn't such a good idea. Mercantilism was when Countries treated themselves like Companies that competed in Win-Lose scenarios. The Kings and Queens were war-like CEOs. Gradually we realised that was stupid. Free Trade can be win-win. It is important to remember all these things (money, countries, religions, languages) are shared stories that help us cooperate. We can rewrite and update the stories as we learn. Carry on trialling. Carry on erroring. Carry on learning.

British East India Company

Comparative Advantage

The theory of Comparative Advantage provides the back bone to Free Trade. That win-win is possible, rather than thinking you need to be better than others in order to win. Ricardo used wine and cloth to explain this idea. Even if Portugal can produce both wine and cloth cheaper than England, it makes sense to focus on relative strength.  Portugal, in choosing to focus its time would choose the thing it is best at. In his example wine. It wouldn't make sense to produce cloth just because it is better than England at it. It can buy the cloth it needs from England with the increased bounty it makes from wine. Win-win. We might think in categories and stories. Money's greatest strength, and greatest weakness, is it doesn't. It simplifies everything to a comparable number. Our greatest strength is that our categories help us build communities through common ground. Our greatest weakness is the unnecessary divisions those categories create, through our inability to see the world except through our own eyes.

Jakarta

Jakarta

The greater metropolitan area of Jakarta is also known as Jabodetabek. This megacity is home to over 30 million people, and combines Jakarta, Bogor, Depok, Tangerang and Bekasi. The city was established in the fourth century. The Kingdom of Sunda (669 -1579) grew with the engine of this important trading port. Later it was the de facto capital of the Dutch East Indies. Like the British East India Company, European colonisation started out as a competitive, nationalistic, commercial endeavour (Mercantilism). Japan's World War II occupation (1942) dismantled much of the colonial state, and after Japan's defeat, Indonesian independence was declared in 1945. As an economic magnate, Jakarta attracts migrants with a 1961 census showing only 51% of the population born in the city. The Betawi people (native Jakartans) are a creole group formed by the various immigrant groups (Indonesian, Chinese, Arab, European) and make up just over a quarter of the population.

Dhaka

Dhaka

Dhaka is one of the world's most populated (17 million in Greater Dhaka area), and most densely populated (28,410 per square kilometre), cities. Once its nickname was the 'Venice of the East' because it was home to so many Eurasian merchant groups. The British East India Company took control of the city from the Nawab of Bengal. Under the system of Mercantilism trade was seen as a form of National warfare with winners and losers. Dhaka got plugged into Britain's imperial networks. The colonial tax, and restriction on trade in the interest of British manufacturers, led to the city's decline. By 1824, Dhaka was described as 'the city of magnificent ruins'. After the city mutinied in 1857, rule was passed from the company to the British government. In 1971, it became the capital of an independent Bangladesh.

Sights of Dhaka

Mercantilism

Merchants in Venice

Zero Sum games create nothing. A gain means another's loss. Wealth is captured rather than created. Mercantilism was the system in place as global trade really kicked off. At the same time as nations were starting to be created (16-18th century), there was a belief that trade was a way of getting powerful. One state does well at the expense of another. Nations wanted to maximise their exports (subsidies) and minimise their imports (tariffs). Forbidding colonies to trade. Forming monopolies. It took Adam Smith and others to show that this was silly. When wealth is created, both partners to a trade can benefit.

Win Win > Win Lose