I have been indulging in your book, Education of a Speculator. I have not been able to finish it but have perused certain chapters and am pretty certain I have uncovered four errors.

The portions of the book I have read I have found immensely entertaining and edifying. I realize you did point out that you expected some errors.

Please accept that I am not trying to nitpick and am merely trying to ensure that one can move slightly closer to truth in the spirit of scientific method.

George Soros and Karl Popper always maintain that one must be ruthless in ascertaining truth. This is easier done in theory, than achieved in practice.

Popper according to his biographer, Bryan Magee in Confessions of a Philosopher would get terribly upset when one pointed out to him his errors.

I hope I am the first to bring these to your attention in spite of the fact the book was published in 1997.

Firstly, the Drakenburg mountains in which you on page 223 said the Chacma baboons were studied are not in Northern Africa, but are in South Africa.

According to Wikipedia these are the highest mountains in Southern Africa.

Secondly on page 297 you mention Jacob Bronoski. His surname is actually spelt Bronowski.

Thirdly on page 253 the sympathetic English bubble you mention did not take place in 1711 but around 1720.

According to Wikipedia the South Sea company was actually formed in 1711. The share price of the South Sea Company actually crashed in 1720.

According to Wikipedia the South Sea companies stock traded at 128 pound in January 1720 and 550 pounds in May 1720. In early June 1720 it was 890 pounds. 1000 pounds in early August 1720 before the end of 1720 it had crashed back to 100 pounds.

Fourthly on page 253 you mention that John Law promoted the Mississippi bubble in 1716.

According to Wikipedia John Law bought the Banque Generale a private bank which pioneered the use of paper money in 1716.

In 1717 he bought the Mississippi company which traded in the French colony in Louisiana. He then floated the Mississippi as a joint stock company in 1717. This company absorbed other rival trading companies. Wild speculation started in the Mississippi company in 1719.

The Mississippi shares traded at 500 Livres in 1719 and to a high of around 15000 Livres in the first half of 1720. The crash in the stock happened before the end of 1720 and by 1721 the Mississippi companies stock had declined from the high by 97%.

The interesting point is that both the South Sea Company in England and the Mississippi company in France, both crashed in 1720. This illustrates how even in 1720 one had an instance of a stock market crash happening in more than one country in the same year.

In the ‘87 crash, markets were affected all around the world.

The Palindrome spoke about a global wrecking ball affecting Asia in the 90s when the emerging markets all crashed in unison.

The other interesting point to make is that the 1720 crash in England was followed by the Bubble act of 1720. This act was meant to forestall further crashes and required that English joint stock trading companies have a Royal Charter from Government.

An interesting parallel was the formation of the Securities and Exchange Commission and the second Glass Steagall act set up in the U.S.A after the Wall Street Crash in 1929. This act ensured that investment banking and stock promotion were separated and this would ensure that stock promotion abuses perpetrated against commercial bank’s clients were forestalled.

These instances of regulation following on speculative excesses are what the Palindrome in the Alchemy of Finance talks about as the Regulatory cycle. Soros said regulators are like Generals, always fighting the last war.

I share your passion for interconnections and interrelationships. I am particularly interested in the history of ideas and have spent the last four years studying historical people and the ideas they propounded. I find when one studies history with a personalized bias it seems to remain far fresher.

I particularly liked your point in Education of Speculator whereby you said that when one reads a book one links up with all the other people in the world who read the book.

I was quite intrigued when Soros mentioned to Byron Wien in Soros on Soros that a book that typified his psyche was Adventure of Ideas by Alfred North Whitehead.

Whitehead is one of my favorite writers and he is a good historian of ideas. Richard Dawkin’s meme is probably just an elaboration of Whitehead explication of the propagation of ideas.

Interestingly enough a book that had quite an influence on Popper’s biographer Magee and which also had an influence on Soros while a student was Suzanne Langer’s Philosophy in a new key. Whitehead was Langer’s mentor.

Langer helped me overcome my musical handicap by describing rhythm as a flow. In her book Feeling and Form she said if the music is not flowing there is no rhythm. It is funny one might say, that this is so obvious. I find Whitehead’s advice reassuring in that he says we achieve greatness in analyzing the obvious.

I would like to take the liberty to show how from a single person like Jacob Bronowski one can weave an intricate mosaic of ideas.

Bronowski was similar to yourself in that he was a scientist with a passion for art. Bronowski was sent by the U.S. military as an observer of, the aftermath of Nagasaki. As he witnessed the carnage he heard the music from a U.S. naval ship play ‘ is you or is you ain’t my baby’ This had a shocking affect on him and it led to the birth of his book, Science and Human values in which he questions the responsibility of the scientist to his society.

In this book Bronowski dispels the popular myth that the scientist search for order is different from the artist’s search for artistic perfection.

I particularly like Bronowski’s definition of Science ‘ the organization of our knowledge in such a way that it commands more of the hidden potential of nature’.

Apparently according to Wikipedia, Bronowski’s BBC series, The Ascent of Man inspired Carl Sagan’s Cosmos series.

Bronowski has actually taught me more about economics than some of my economic lecturers. He describes a machine as something that taps the hidden power of nature. He talks about the surplus that is hidden in nature.

This is the essence of investment. The entrepreneur uses the machine to tap nature and retrieve the surplus.

Science is the means whereby man is able to develop these wonderful machines.

Consequently one can see why a productive society does well. Gross National Product is equal to Gross National Income.

The more we can tap the hidden power of nature the more we can produce and hence the more income we can have.

The more we tap nature, the more productive the nation. Interest rates are determined by productivity and thrift. The more we tap nature the more surplus a nation achieves and the higher the interest rate the nation can sustain.

The surplus must exceed the interest rate. Knut Wicksell introduced the natural rate of interest. The demand for capital was determined by the marginal productivity of capital i.e. how much surplus in nature can one tap? The supply of capital is determined by thrift.

Supply and demand for capital are equal at the natural rate of interest. Wickell was a pioneer of monetary theory and he would show that if the bank’s rate of interest was less than this natural rate, than banks would led, entrepreneurs would borrow and prices would move upward.

Keynes would build on Wickell’s ideas and hence in his General Theory he would rephrase Wicksell’s natural rate of interest and call it the marginal efficiency of capital. Keynes’s contribution was to show the importance of expectations with regard to future achievements in marginal productivity. These expectations were intermingled with psychological baggage he called ‘animal spirits’.

It is this growth in surplus, from the first time man postponed consumption to fashion stones into tools till now that has seen the world economy grow.

Growth in surplus = growth in output=wages + profit + interest.

Stock prices are a claim against the profit portion of the growing material wealth of society, which increases as technology evolves.

Hence growth in profit portion of surplus leads to upward drift in stock prices.

This has been a hard lesson for me to swallow. I now understand as you have pointed out why it is so hard to short. When we short we are going against the human development of mankind from the stone age with its concomitant optimism, which got humanity to its present point.

Getting back to art, Bronowski was also a biographer of William Blake. Blake was a romantic poet and artist who hated rationalism. He abhorred Newton and has painted a disparaging picture of him. As an aside, Newton lost most of his wealth in the South Sea Bubble and claimed that he could understand physical phenomenon but could not fathom human nature.

Blake supported the Luddites, those people who at the advent of the industrial revolution sought to destroy machines as they thought they were taking away their livelihood.

Interesting I think Lord Byron only made one speech in Parliament and this was in praise of the Luddites.

Blake was a mystic and was a strong influence on Aldous Huxley.

The Title of Aldous Huxley’s book the Doors of perception comes from Blake’s Poem the Marriage of Heaven and Hell. Huxley’s book opens with the quote from Blake ‘ If the doors of perception were cleansed, everything will appear to man as it is, infinite.’

The book was written while Huxley was undergoing a trip on Mescaline. It was this book that would lead to Jim Morrison calling his band ‘the Doors’.

We could embark on to other tangents like Huxley’s grandfather T. H. Huxley who was referred to as Darwin’s bulldog. Darwin influenced German Biologist Ernst Haeckel who influenced Nietzsche. Aldous’s brother was the noted biologist Julian Huxley.

Blake was influenced by Swedenborg who had an influence on Henry and William James’s father.

Geoffrey Keynes the brother of John Maynard Keynes was also an authority on William Blake and married Charles Darwin’s granddaughter.

Aldous Huxley lived in Lady Ottoline Morrell’s house during WW1. She was one of Bertrand Russell’s lovers and it was here that Aldous Huxley met Maynard Keynes and was exposed to the Bloomsbury circle.

I hope I cannot be accused of undue name dropping, appeals to authority and other forms of pedantry.

I would very much like to join your circle of natural philosophers and will draft you a mail telling you more about my life.


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