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(Interviewed by Louis James, Editor, International Speculator)
L: Doug, every
time we have a conversation I ask you about the investment implications of
your ideas, and we consider ways to turn the trends you see into profits. The
assumption is that's what people want to hear from you, since you're the guru
of financial speculation. But this, your known status as a wealthy man, the
fact that you have no children, and other things may
lead some people to form an incorrect conclusion about you – that
"all you care about is money." So let's talk about money. Is it all
you care about?
Doug: I think
anyone who has read our conversation giving advice to people just starting out in life (or re-starting) knows
that the answer is no. Or the conversation we had in which we discussed Scrooge
McDuck, one of the great heroes of literature.
However, I have to stop before we start and push back: If money were all I
cared about, so what? Would that really make me a bad person?
L: I've grokked Ayn
Rand's "money speech," so you know I won't say yes,
but maybe you should expand on that for readers who haven't absorbed Rand's
ideas…
Doug: I'm a huge
fan of Rand; she was an original and a genius. But just because someone like
her, or me, sees the high moral value of money, that doesn't mean that it's
all that important to them. In fact, I find money less and less important as
time goes by, the older I get. Perhaps that's a function of Maslow's
hierarchy: If you're hungry, food is all you really care about; if you're
freezing, then it's warmth, and so forth. If you
have enough money, these basics aren't likely to be problems.
My most enjoyable times have had absolutely nothing to
do with money. Like a couple times in the past when I hopped freight trains
with a friend, once to Portland and once to Sacramento. Each trip took three
days and nights, each was full of adventure and weird experiences, and each
cost about zero. It was liberating to be out of the money world for a few
days. But it was an illusion. Somebody had to get the money to buy the food
we ate at missions. Still, it's nice to live in a dream world for a while.
Sure, I'd like more money, if only for the same genetic
reason a squirrel wants more nuts to store for the winter. The one common
denominator of all living creatures is one word: Survive! And, as a medium of
exchange and store of value, money represents survival… it's much more
practical than nuts [laughs].
L: Some people
might say that if money was your highest value, you might become a thief or
murderer to get it.
Doug: Not likely.
I have personal ethics, and there are things I won't do.
Besides, crime – real crime, taking from or
harming others, not law-breaking, which is an entirely different thing
– is for the lazy, short-sighted, and incompetent. In point of fact, I
believe crime doesn't pay, notwithstanding the fact that Jon Corzine of MF
Global is still at large. Criminals are self-destructive. It's a subject I'm
writing an essay about – evil, stupidity, sociopaths, and the fate of
America – for this month's Casey Report.
Anyway, what's the most someone could take, robbing
their local bank? Perhaps $10,000? That's only enough to make a wager with
Mitt Romney.
But that leads me to think about the subject. In the
old days, when Jesse James or other thieves robbed a bank, all the citizens
would turn out to engage them in a gun battle in the streets. Why? Because it
was actually their money, not the bankers'. It was just being stored in the
bank; a robbed bank had immense personal consequences for everyone in a town.
Today, nobody gives a damn if a bank is robbed – they'll get their
money back from a US government agency. The bank has become impersonal; most
aren't locally owned. And your deposit has been packaged up into some
unfathomable security nobody is responsible for. The whole system has become
corrupt. It degrades the very concept of money. This relates to why kids
don't save coins in piggy banks any more – it's because they're no
longer coins with value, they're just tokens, essentially worthless. All of
US society is about as sound as the dollar now.
Actually, it can be argued that robbing a bank isn't
nearly as serious a crime today as robbing a candy store of $5. Why? Nobody
in particular loses in the robbery of today's socialized banks. But the candy
merchant has to absorb the $5 loss personally. Anyway, if you want to rob a
bank today, you don't use a gun. You become part of management and loot the
shareholders through outrageous salaries, stock options, and bonuses, among
other things. I truly dislike the empty suits that fill most boardrooms
today.
But most people are mostly honest – it's the
80/20 rule again. So, no; I think this argument is a straw man. The best way
to make money is to create value. If I personally owned Apple as a private
company, I'd be making more money – completely honestly – than
many governments… and they are the biggest thieves in the world.
L: No
argument.
Doug: Notice one more
thing: making money honestly means creating something other people
value, not yourself. The more money I want, the more I have to think about
what other people want, and find better, faster, cheaper ways of delivering
it to them. The reason someone is poor – and, yes, I know all the
excuses for poverty – is that the poor do not produce more than they
consume. Or if they do, they don't save the surplus.
L: The
productive make things other people want: Adam Smith's invisible hand.
Doug: Exactly.
Selfishness, in the form of the profit motive, guides people to serve the
needs of others far more reliably, effectively, and efficiently than any
amount of haranguing from priests, poets, or politicians. They tend to be
profoundly anti-human, actually.
L: People say
money makes the world go around, and they are right. Or, as I tell my
students, there are two basic ways to motivate and coordinate human behavior
on a large scale: coercion and persuasion. Government is the human
institution that is based on coercion. The market is the one based on
persuasion. Individuals can sometimes persuade others to do things for love,
charity, or other reasons, but to coordinate voluntary cooperation
society-wide, you need the price system of a profit-driven market economy. That's
how money makes the world go around.
Doug: And that's
why it doesn't matter how smart or well-intended politicians may be.
Political solutions are always detrimental to society over the long run,
because they are based in coercion.
If governments lacked the power to compel obedience,
they would cease to be governments. No matter how liberal, there's always a
point at which it comes down to force – especially if anyone tries to
opt out and live by their own rules. Even if people try that in the most peaceful
and harmonious way with regard to their neighbors, the state cannot allow
separatists to secede. The moment it grants that right, every different
religious, political, social, or even artistic group might move to form its
own enclave, and the state disintegrates. I'd say that’s wonderful
– for everybody but the parasites who rely on the state – which
is why secession movements always become violent.
I'm actually mystified at why most people not only just
tolerate the state, but seem to love it. They're enthusiastic about it.
Sometimes that makes me pessimistic about the future…
L: Reminds me
of the conversation we just had on Europe disintegrating. But
let's stay on topic. So you're saying that money is a positive moral good in
society because the pursuit of it motivates the creation of value, because
it's the bridge between selfishness and social good and because it's the
basis for voluntary cooperation, rather than coerced interaction. Anything
else?
Doug: Yes, but
first, let me say one more thing about the issue of selfishness – the
virtue of selfishness – and the vice of altruism. Ayn
Rand might never forgive me for saying this, but if you take the two concepts
– ethical self-interest and concern for others – to their logical
conclusions, they actually are the same. It's in your selfish best interest
to provide the maximum amount of value to the maximum number of people
– that's how Apple became the giant company it is. Conversely, it is not
altruistic to help other people. I want all the people around me to be strong
and successful. It makes life better and easier for me if they're all doing
well. So it's selfish, not altruistic, when I help them.
To weaken others, to degrade them by making them
dependent upon generosity, as we discussed in our conversation
on charity, is not doing those people any good. If you really care about
others, the best thing you can do for them is to push for totally freeing all
markets. That makes it both necessary and rewarding for them to learn
valuable skills and to become creators of value, and not burdens on society.
It's a win-win all around.
L: That'll
bend some people's minds… So, what was the other thing?
Doug: Well,
referring again to our conversation on charity, the accumulation of wealth is
in and of itself an important social as well as a personal good.
L: Remind us.
Doug: The good to
individuals of accumulating wealth is obvious, but the social good often goes
unrecognized. Put simply, progress requires capital. Major new undertakings,
from hydropower dams to spaceships to new medical devices and treatments,
require huge amounts of capital. If you're not willing to extract that
capital from the population via the coercion of taxes, i.e., steal it, you
need wealth to accumulate in private hands to pay for these things.
In other words, if the world is going to improve, we
need huge pools of capital, intelligently invested. We need as many obscenely
rich people as possible.
L: Right
then… so, money is all good – nothing bad about it at all?
Doug:
Unfortunately, many of the rich people in the world today didn't get their
money by real production. They got it by using political connections and
slopping at the trough of the state. That's bad. When I look at how some
people have gotten their money – Clinton, Pelosi, and all the
politically connected bankers and brokers, just for a start – I can
understand why the poor want to eat the rich.
But money itself isn't the problem. Money is just a
store of value and a means of exchange. What is bad about that? Gold,
as we've discussed many times, happens to be the best form of money the
market has ever produced: It's convenient, consistent, durable, divisible,
has intrinsic value (it's the second-most reflective and conductive metal,
the most nonreactive, the most ductile, and the most malleable of all
metals), and can't be created out of thin air. Those are gold's attributes.
People attribute all sorts of other silly things to gold, and poetic critics
talk about the evils of the lust for gold. But it's not the gold itself
that's evil – it's the psychological aberrations and weaknesses of
unethical people that are the problem. The critics are fixating on what is
merely a tool, rather than the ethical merits or failures of the people who
use the tool and are responsible for the consequences of their actions.
L: Sort of
like the people who repeat foolish slogans like "guns kill" –
as though guns sprout little feet when no one is looking and run around
shooting people all by themselves.
Doug: Exactly.
They're the same personality type – busybodies who want to enforce
their opinions on everyone else. They're dangerous and despicable. Yet they
somehow posture as if they had the high moral ground.
L: Okay, so
even if you cared only for money, that could be seen as a good thing. But you
do care for more – like what?
Doug: Well, money
is a tool – the means to achieve various goals. For me, those goals
include fine art, wine, cars, homes, horses, cigars, and many other physical
things. But it also gives me the ability to do things I enjoy or value
– like spend time with friends, go to the gym, lie in the sun, read
books, and do pretty much what I want when I want. Let's just call it as
philosophers do: "the good life." It's why my partners and I built La
Estancia de Cafayate. We're having several
events down there in March that I'd like to welcome readers to.
But I don't take money too seriously. It's just
something you have. It's much less important than what you do,
and trivial in comparison to what you are. I could be happy
being a hobo. As I said on that in the conversation on fresh starts, there have been times when I felt my life
was just as good and I was just as happy without much money at all. That
said, you can't be too rich or too thin.
L: Very good.
Investment implications?
Doug: This may all
seem rather philosophical, but it's actually extremely important to
investors. What is the purpose of investing or speculating? To make money.
How can anyone hope to do that well if they feel that there is something
immoral or distasteful about making money?
Someone who pinches his or her nose and tries anyway
because making money is a necessary evil will never do as well as those who
throw themselves into the fray with gusto and delight in doing something
valuable – and doing it well.
L: The law of
attraction.
Doug: Yes, but I
don't view the law of attraction as a metaphysical force – rather as a
psychological reality. If you have a negative attitude about something,
you're unlikely to attract it… even if you try to talk yourself into
thinking the opposite.
L: Okay, but
that's not a stock pick…
Doug: Sure. We're
talking basics here. No stock picks today, just a PSA: If you think money is
evil, don't bother trying to accumulate wealth. On the other hand, if you
want to become wealthy, you'd better think long and hard about your attitudes
about money, work through the thoughts above and those you can find in the
rest of our conversations via the links we provide. Cultivate a positive
attitude about money, which is right up there with language as one of the
most valuable tools man has ever invented. Think about it, and give yourself
permission to become rich. It's a good thing.
L: Very well.
Thanks for what I hope will prove to be a very thought-provoking
conversation!
Doug: My
pleasure. Talk to you next week.
[Natural resource exploration is one of the few sectors
where companies can create amazing wealth – but only the best players
succeed. Here's how to profit from these brilliant money-makers.]
[Editor's Note: We endorsed GoldMoney.com last
week as a convenient and reliable way to own, trade, and transfer gold. Our
information was out of date: GoldMoney.com suspended operation of its
interpersonal payment system last December while reviewing new regulations.
The company hopes this is temporary. We apologize for the error.]
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