Chatting with Bernard Baruch on investments

I no longer remember what gave me the idea to contact Mr. Baruch, but it makes interesting reading nine years later.

Thursday May 4, 2006
8:30 a.m.
F: All right, for what it’s worth – that is, assuming this is real and not only imaginings, regardless if it is real within imaginative trappings – I should like to talk to Bernard Baruch about our times. Mr. Baruch, is that agreeable to you?

B: It is, and the fact that you know so little about me may help you to overlay less and hear more.

F: Well, that would be good. Certainly it is what I prefer. Tell me what is going on politically and economically. I have a view of it – how much of that view is inexperience, overgeneralization and group-think?

B: Most of it. You are ready to be a trader!

That’s a joke, and yet it isn’t.

The scale of the problem – seen as an intellectual problem first, then as a practical problem – is such that no one can be better than comparatively informed, comparatively thoughtful, comparatively insightful. This is good news and bad. It means you succeed merely by being not quite so dismal as your competitors, and that isn’t so difficult! But it means there is precious little wisdom to be had.

Now in your particular case, you have a specialized expertise – at least, it may be looked at this way – which is an absorption in history which produces a sort of “feel” for the larger currents of your time. You have not been maximizing the advantage of this because you have not until recently been keeping abreast of the day’s news – the news other people are seeing, and so your rhythm is far out of sync with theirs without your realizing it. In other words you are exchanging your one-eyed vision for their one-eyed vision rather than enjoy the advantages of binocular or even of alternating vision.

Other successful investors have their own area of expertise, you have yours. It only takes one to give you an edge, a separate place to stand so that you don’t get blown with the wind.

Now those who have two areas of expertise, or even three, have their vision enhanced so much the more. Note that I am not discussing vocations there – although that is usually where one gets such expertise.

Mostly it involves understanding men and understanding at least the broad outlines of the way things are going – which in turn involves at least some knowledge of how things really as opposed to theoretically work. Your conspiracy theorists may go as far wrong as your uninformed patriots here, or perhaps more, or less.

I presume you did not ask me to be your personal financial advisor. What I would do is very different from what you would accept, because you like to invest in things you approve of, only, and I liked to invest in things that increased my personal freedom to do as I wished.

Here is one way to make your investment decisions in the context of the larger currents of whatever times you find yourself in. These decisions, you understand, are themselves within the context of a larger vision of what life you lead. Thus – without belaboring the point –

[lost the connection. I can feel my mind wandering this morning, working on other tracks at the same time, wondering if I have any email, replaying a phone conversation that interrupted this a few minutes ago, haring off in various directions as usual. Not because I am not interested! Was it the interruption, disturbing my stillness? Yet I don’t see why that should be much of a problem. Well, try again.]

F: Sorry, I wandered.

B: That’s all right. I was saying that your investment decisions are made – everyone’s are – in the context of a greater understanding of life. If you think the world is coming to an end soon you don’t go long!

All right, let me trace this out for you as I see it, and you can pass it to your friends, and for some it will have meaning and for some it will not. “I” am of course being translated through your mind, your mental habits, your linguistic habits, your accustomed channels of association. That is what makes all of your contacts sound more similar to each other, and to you, than they would on their own. So – caveat emptor, except the advice is free.

Where are you now? You have the imminent data – the urgent, the latest, the “breaking news” – and you have the overwhelming volume of so many sources of information and misinformation and disinformation – TV, radio, internet, magazines, newspapers, private-subscription advice of various kinds, inter-personal resource-sharing and a new source of information entirely (in that it allows so much access to quickly and so easily; its power sets it apart from its early incarnations as library and reference desk) which is the historical, geographic, and cultural context provided by relatively instant relatively unlimited access to information that is the web’s search facility.

With all that information pouring in, it is harder and easier to see what is really important and for that matter what is real.

Harder – because the noise overwhelms the signal. Just because “everyone” is concerned about a problem doesn’t mean anything, necessarily. It may be a set-up for someone’s agenda, it may be sincere but mistaken, it may be real and urgent but actually trivial, it may be real and important but entirely misperceived because of the context of the times, as the Shah’s overthrow was misperceived in the context of the Cold War.

Easier – because when you do get on the scent, you have so many resources to check your intuition and logic – resources undreamed of in my day, and immensely powerful. The very existence of these new resources fundamentally change the dynamics of even the most established games. (Think for a moment of the role of the telephone in the stock market of the 1920s. The telephone, the radio, the newsreels, the gossip columns – none of them may seem to have anything to do with massive stock speculation but I assure you that they did.)

So – to get the advantages of the new factors and dampen or compensate for the disadvantages, again you need an independent place to stand. For you personally, it will be history, plus your inner guidance, plus your sense that the old ways are coming to an end in a fundamental, not a superficial, way. For others it might be, say, a profound technical or social understanding of the impact of certain new technologies; for others, intuitive accord with fads, so that they naturally know what other people would be attracted to – provided they stayed aloof from that knowing, rather than merely being led by it!

So, to sketch where you are. A broad, oversimplified sketch. Any sketch of whatever detail is going to be oversimplified: that is what a map is!

You are at the end of the second industrial revolution and at the beginning of the third. First came the mechanical revolution, and it came infinitely slowly by your standards. Perhaps you should define its beginnings in the 1200s with the water mills. Certainly following windmills, then the systematic pursuit of mechanical advantage; a great spurt with the harnessing of steam power, culminating in the mid to late 19th century. Second came the electrical revolution, redefining all this mechanical advantage in ways unforeseen but now coming to their culmination; having passed it slightly, in fact. Electricity took the mechanical advantage and performed the same tasks more efficiently and more smoothly – hence more powerfully; and this improvement became a transformation in kind. It is a long way from the telegraph to the cell phone, and the electric motor, and the computer, and it took less than 200 years. Now you are in the third revolution and because it is qualitatively different from its predecessors, and in its infant stages, and scattered in what seem to you different fields, you recognize it not.

F: I need to stop. Back after a while. (9:30)

(10:05) Okay, the third revolution?

B: Your third industrial revolution – or your third phase of the one revolution – looks at first glance to be a fusion of the mechanical and the electrical revolutions: the world of electronics speeds and makes more powerful all interactions; the onset of nanotechnology and robotics makes the process of manufacturing even more different from what it once was even 50 years ago, or 100, let alone 500 or 1000.

But this is not the key to the third phase. The third phase moves away from separation and mechanization and moves toward magic.

Startling?

F: Well, not so much startling as sort of impenetrable, so far. I know that Arthur C. Clarke famously said that any sufficiently advanced technology is indistinguishable from magic.

B: Yes, but I’m talking about real magic, not merely the appearance of magic. If you define magic as the use of consciousness to shape reality in conformance with desire – magic is the third phase of the revolution, and you will find eventually that it restores humanity to relation to the world around it, after the long separation imposed by the first two phases.

F: Can you make that a little clearer? With examples, perhaps?

B: If you can turn on a light bulb by thinking, or if you can nourish your body by a certain attitude, let us say, or if you can assist your plants or purify your water by directed desire, what is this but magic? Yet this is but the merest child’s play, the thinnest edge of the wedge.

The mechanical revolution began a process of seeing the world differently. Rather than beings with their own rights and rightful place, everything around mankind came to be seen as potential tools to be used; as potential riches to be won. It started with minerals and sources of energy; it expanded to animals; it did not cease at the boundaries of the human, and so people came to be seen as factors rather than as children of God. And as to any existence that could not be fitted into a scheme of utility, it was disregarded in practice; given lip service or treated as an inconvenience.

(These things don’t to be consistent to be true. You could and did have devout Christians running vast enterprises that silently assumed the irrelevance of spiritual forces to everyday life. Perhaps it was easier for me as a Jew to see the inconsistency of the Christian position – but my life was not significantly different. In my time, it could not be. Yet I was different enough to have a place to stand.)

The electrical revolution proceeded from where the mechanical phase stood, but although its executors did not intend anything different from the executors of the mechanical phase, these things have their own logic, and so electrics brought the world into closer communication – which speeded up the strife that speeded up the change – and in due course electrics were superseded, unnoticed, by electronics, which are now so much a part of your day as to be scarcely noticed. That electronic revolution found itself founded, theoretically, not in Newton’s world but in Einstein’s. and although practitioners may or may not be aware of it, increasingly the theoretical end of electronics has gone through the rabbit hole, and the conventional view of the world exists for it no more. The reasons why will never penetrate the public mind to any extent but the effects will not be delayed or reduced by a jot or a tittle because of that.

Once you realize – that is, once the practical men of business and industry realize – that consciousness is central, rather than matter or energy – you are into your third phase of the revolution, and everything changes once again. So perhaps we may call the third phase the reintegration phase.

Mechanical – brute force, more intelligently applied.
Electrical – power reduced to convenient personal size.
Reintegration – consciousness as the lever that multiplies.

This third phase begins as the other two began – it is seen as an acceleration and multiplier of forces for the same ends that began it. But in fact just as with the first two, so in the third phase the use of the new force – or the newly harnessed force, we should say – changes the ends for which the means are used.

Now to bring this inadequate overview sketch back to its context – how does this help you to invest? How does it help you to understand your times (which is or ought to be the basis for investing, of course)?

It gives you one more place to stand, and you – anyone – can never have too many.

Keep this simple sketch in mind as you read each day’s noisy signals in whatever form you keep up with the news. Test each bit of information by fitting it into the model. The Chinese are building the Three Gorges Dam? The South Americans are forming a common market? The Europeans are inching toward an armed force separate from American-dominated NATO? Information technology jobs are flowing out of the United States? Oil is now moving from abundance to relative scarcity over time? The educational system is broken? The political parties dissatisfy, and offer no meaningful cooperation or vision? Pollution of various kinds threaten life? Species are going out of existence? The climate seems to be changing? The dollar is depreciating? Religious fanaticism is growing and tolerance may be decreasing?

It all looks different from whatever viewing point you stand at. So – I just gave you a new place to stand. For that matter, this experiment that you are conducting – in the open, live on stage as you might say – needs to be factored in as well, from that same perspective.

Investors – and anyone attempting to make sense of the times – always have and always will face the problem of distinguishing signal from noise. Nothing does that so well as context. And nothing potentially misleads so drastically as the very same process! So – don’t get stuck in one point of view if you can help it. Look at the data from a point of view – see what it seems to mean – then change points of view (as many times as you are able to) and see what it seems to mean from each new point of view as if it were your only point of view. Not half-heartedly, in other words. What if fundamentalist Christians are right? What if materialists are right? What if ideology is key? What if hidden agendas drive events? What if history is the result of the chance collision of forces? What if military might determines? What if economic, or technological, or social cohesion?

That’s enough for you to be going on with.

F: It sure is. Thank you. (10:50)