Appomattox at 150

As an historian, I’ve been continuously surprised by the lack of attention to the series of 150th anniversaries of the events of the American Civil War, including yesterday’s sesquicentennial of Lee’s surrender at Appomattox. Perhaps this is because we no longer do real history in our colleges and universities. The past has become something we access, not for perspective or instruction, but as a source of raw material, to be shaped as needed to fit a contemporary narrative, in service to present-day political purposes. (Google ‘Michael Bellesiles’ for just one example.) The History Department at my alma mater is the center of unruly activism in pursuit of a radical anti-fossil fuel agenda. How those particular dots connect is a puzzlement to me.

I believe history matters. One of the most significant events in American history happened 150 years ago, at a farmhouse in the small Virginia town of Appomattox Courthouse, named after the nearby river itself named for a Powhatan Indian tribe. On Palm Sunday, April 9 1865, Robert E. Lee surrendered the Army of Northern Virginia to Ulysses S. Grant, General in charge of all the Union armies, including the Army of the Potomac and the Army of the James, to end our nation’s bloodiest war.

Lee, even in his late 50s and after four years of war, was a magnificent figure. At a time when the average man stood just over five and a half feet, Lee was six feet tall, but his trunk was long and his legs unusually short. With massive shoulders and huge hands, Robert E. Lee on a horse was an impressive sight. He was related by blood to five of Virginia’s seven signers of the Declaration of Independence. He owned two houses with names. He arrived at the McLean farmhouse before Grant, wearing an immaculate uniform with gilt buttons, armed with a ceremonial sword with a jeweled hilt.

Grant arrived late after a hard ride. His boots and trousers were spattered with mud. He was unarmed. With his mouse-brown hair and short beard, he looked, as one of his aides commented, “like a fly on a shoulder of beef.” But Grant was the victor. The shopkeeper-general beat the grand-nephew of two of the Founders. More, the system of which Grant was a representative was the victor. Free men prevailed over the slave masters. Capitalist productivity prevailed over agrarian virtue. Immigrants and the children of immigrants swelled the ranks of the Union armies.

The South lost a war whose essential purpose was to keep human beings in bondage. Lee’s skill and courage, and that of the under-fed, under-equipped army he led, excite our admiration to this day. Yet if the Army of Northern Virginia surely fought bravely and well, the cause for which they fought was just as surely, to borrow Grant’s words, “one of the worst for which a people ever fought.”

What is the duty we owe to the past? If nothing else, perhaps simply the memory and understanding of just how large a price we paid to expiate our nation’s original sin of slavery — over 620,000 dead in a nation of thirty millions, equivalent to an unfathomable 6.2 million deaths as a similar proportion of our current population. As Abraham Lincoln said in his Second Inaugural: “If God wills that [the war] continue until all the wealth piled by the bondsman’s two hundred and fifty years of unrequited toil shall be sunk, and until every drop of blood drawn with the lash shall be paid by another drawn with the sword, as was said three thousand years ago, so still it must be said ‘the judgments of the Lord are true and righteous altogether.’ “

Grexit at Last?

On Monday the European Central Bank’s deadline for Greece to submit a realistic reform plan expired. On Tuesday Greece submitted a plan long on assumptions and short on details, one that included higher spending on pensions and an increase in the minimum wage. What comes next?

I find myself in pretty substantial disagreement with many of the comments I’ve read about a possible Greek exit from the European Union. Here is my read on three common beliefs:

1) When push comes to shove, Germany will do whatever is necessary to keep Greece in the EU. I disagree. When push comes to shove, Germany will do what is necessary to keep from being the perpetual banker for the improvident weak sisters of the EU. Merkel believes she can avoid being the deep pockets while keeping the Eurozone substantially intact. In the short run (Greece only), I think she is right.

2) Greece leaving will set a dangerous precedent, leading other nations to abandon the Euro. Really doubtful. Greece out of the Euro will be an absolute economic basket case. Far from encouraging other EU countries to exit the common currency, observing Greece spiraling into dissolution, while hitched to the falling star of bankrupt, brutal Russia, will be an object lesson for other nations with structural deficit issues. Even the Greeks understand this. As a Greek economics professor observed last year, “Outside of the EU, Greece is Africa.”

3) The bold Socialists of Syriza will be able to negotiate a better deal. You can’t make a better bargain if you hold no bargaining chips. In reality, Greece has no negotiating room. Greece’s only card to play is leaving the Euro. But every time Greece threatens a default (which amounts to an exit), it triggers a further run on Greek banks, already close to insolvent. There are two rules about bank runs: 1) Avoid a bank run at all costs. In a panic, everyone loses.  2) If there is a run, make sure you panic first. Only then will you get your money. Greeks will panic and withdraw their money. They have to.

So here is my uncharacteristically bold prediction. Greece will fail to extract any meaningful concessions from Germany and the ECB. Their flirtation with Putin’s Russia will harden sentiment against them. Due to poor message discipline, they will trigger larger bank runs, and Greek banks will become insolvent. Whether they choose to leave the EU or are pitched out does not matter. They are gone. Outside the EU, Greece will find itself in immediate economic freefall.

Here’s a further contrarian prediction. Greece’s exit will be a relative non-event for Europe as a whole, and for its banks. Against expectations, European markets will rally within weeks, and possibly within days. (For compliance reasons, I hasten to add that this is my personal prediction, that it in no way represents a promise or a guarantee, and should not form the basis for buying or selling any investment.)

Once in a Century Opportunity

It is nice to know, in a world where social institutions crumble, families fragment and move to the far corners of the earth, and the settled verities are called ever more into question, that we can still rely on certain constants.

Today, we celebrate one of those constants, if only in the United States. And this is truly a case where American exceptionalism cannot be seriously questioned. This is a celebration in which European nations cannot plausibly participate. Only in the United States can this particular event happen.

In case my meaning is unclear, I’m talking about pi. Yes, tonight at we will all have the unique, once-in-a-century opportunity to celebrate one of the Universe’s enduring constants, that irrational quantity without which we cannot even begin to calculate the circumference of a circle or its area — never mind the volume of a cylinder!

piToday is March 14, 2015. Or as we in the United States would notate it, 3-14-15. So at 9:26:53 tonight, we will experience 3.141592653. (Pi actually continues indefinitely. Since I was a teenager, I’ve known it by heart to seven decimal places. This is nothing to brag about. My old friend Clifford can recite it to 50 decimal places, and does so at every opportunity. Which are few and far between.)

The way to celebrate is recognized as being the consumption of pie. Cherry, pumpkin, Boston creme, plain ordinary apple, any will work. My kids are planning to make an Oreo ice cream cookie pie.

It is not entirely clear whether the proper procedure is to pre-cut the pie into slices and serve it out, with each participant attacking their own slice at 53 seconds after 9:26, or whether that is when the unblemished pastry should be put to the knife.

Why can’t Europeans pitch in? Because in the rest of the world, the convention is to abbreviate dates day-month-year. So today is 14-3-15. No kind of mathematical constant to celebrate there. When will Europeans get their pie? Never. There will be no 3rd of the nonexistent fourteenth month this year, or in any other.

Let’s hoist our forks together this evening. This is a chance to unite our families around something we can all believe in, something as American as apple…pi?

Whose High Horse?

The sin of doing nothing is the deadliest of all the seven sins. It has been said that for evil men to accomplish their purpose it is only necessary that good men should do nothing.”

Reverend Charles F. Aked[1]

“God always rides a lame horse and carves on rotten wood.”     

                                  Martin Luther

His comments at the National Prayer Breakfast offered two elements at which Obama excels – first, some statements of general principle, designed to demonstrate his generosity and reasonableness, followed by a brief but shocking aside to signal his true feelings to his base. In the aftermath, critics on the right have been predictably outraged at the peek behind the curtain, while useful idiots on the left have defended President Obama’s historical perspective.

The President’s request to Congress for an Authorization of Military Force resolution was also vintage Obama, beginning with a strongly-stated case of the dangers posed by ISIL, followed by a specific non-authorization of “enduring offensive ground combat operations,” proceeding to a three-year hard deadline, and ending by repealing the 2002 authorization of force against Iraq, thus in effect more constraining the actions of this and future Presidents than enabling them. Unclear ends to be achieved by limited and probably insufficient means, with an exit timetable in place regardless of the future facts on the ground.

Think for a moment about what Obama would have said had he been President at the time of Pearl Harbor. I imagine it might have been something like this:

‘Yesterday, December 7, 1941, a date that should serve as a prompt to reflect upon our own past offences against persons of color at home and abroad, naval and air forces associated with the Greater East Asia Co-Prosperity Sphere made an unscheduled visit to our installations at Pearl Harbor, Oahu, facilities that must remind us of our own shameful history of neo-colonial aggression. Lest we get up on our high horse, it will be recorded that the distance from the administrative center of the Co-Prosperity Sphere to the Hawaiian Islands is actually less than that to the center of our own capital of Washington, DC. This makes it obvious that we must ask the question, whose interests stop where? Let’s not confuse our own narrow self interest with some sort of moral crusade, especially against a nation with which we have such a special history of positive engagement, going back to an earlier act of outreach by a great leader of the other party. If Teddy Roosevelt could so generously reach out to Japan in 1908, sending our brave sailors on a mission of peace, not conquest, surely we can find common ground in 1941, especially when we ourselves have, perhaps unwisely, contributed greatly to tensions by imposing a needless embargo on the steel and oil that our neighbors across the Pacific need to grow their own economy and provide opportunities for their own young people. We are better that that.’

Fighting a war requires clarity of purpose, determination and mobilization of popular sentiment, all on display in President Franklin Roosevelt’s actual Pearl Harbor address to Congress. It does not require prior moral perfection or a national history free of blemish. Indeed, if those were required prior to any exertion of military force, we would never have fought the Civil War or intervened in Europe during the Great War, and we must surely have allowed the Nazi and Japanese military expansionist regimes to run unchecked, and surrendered the rest of the world to Communism instead of fighting the Cold War.

[1] The classic statement of this principle, “All that is necessary for the triumph of evil is that good men should do nothing,” is attributed to the great Irish parliamentarian Edmund Burke. It is impossible to exaggerate Burke’s contribution to Western thought and modern conservatism. Unfortunately, there is no evidence he ever said or wrote this precise construction of this sentiment.

Je Suis…Qui?

After last week’s brutal attack in Paris on the satirical newspaper Charlie Hebdo, over a million Parisians took to the streets, many of them holding signs reading “Je suis Charlie.” (I am Charlie.) It was at once a defense of the free speech that is a central value of Western civilization, and an act of defiance against the the violent strain of Islam that killed twelve journalists, three policemen, and four shoppers, and which threatens to kill others who “insult the Prophet.”

A day or two after the #JeSuisCharlie hashtag appeared, a second began to make the rounds: #JeSuisAhmed. Ahmed Merabet was the brave Parisian police officer who was murdered by one of the terrorists outside Charlie Hebdo’s offices, shot in the head at close range during their escape. He was Muslim. Ahmed’s brother, also Muslim, made an eloquent plea for calm and tolerance at his funeral service.

At its best, the #JeSuisAhmed meme is a reminder of the tens of millions of decent, kind, hard-working Muslims around the world, including those living in every Western democracy, who behave in ways consistent with democratic (small d) values and do not support terror in any form. May God bless them all.

But many of those copying the #JeSuisAhmed hashtag, and others tweeting #JeNeSuisPasCharlie, do so from an entirely different viewpoint. They aren’t offering Ahmed as another victim of the Paris killers, but as the real victim. The implication of many is that the Charlie Hebdo cartoonists were asking for it. They should have been more prudent. They should have been more culturally sensitive, more respectful of other people’s religious beliefs. They are not the real victims here; the dead policeman who defended such jerks and paid with his life is the only one who deserves our sympathies. He was the tragic collateral damage of an understandable act of religious self-defense.

Ironically, the friend who sent me the #JeSuisAhmed link is an in-your-face atheist, who once referred to my Christian faith as “a science fiction story.” No apparent need for cultural respect there. But then, 21st century American Christians who live in wealthy suburbs do not generally behead, shoot, or blow up their critics.

That Muslim policemen was doing his job. So were the two other police officers who died, whose faith if any is unknown, at least to me. But there is no spontaneous tweeting of #JeSuisFranck or #JeSuisClarissa. Martyred police officers, and others who put themselves in harm’s way in defense of our physical safety and our way of life, are heroes all. The families of the three murdered cops in France are as deserving of our memory, prayers and support as those of Officer Daniel Faulkner of Philadelphia, or such military heroes as CPO Chris Kyle, or Navy diver Robert Stethem.

Yet support for police who are doing their jobs, and opposition to their murder, is not a set of Western values that is at risk. (Well, at least not in Paris. In New York City and Oakland California, maybe, but not in Paris.)

The value that is very much at risk in France and throughout Europe is the right of free expression, unconstrained by threat of violence. So is the ability of French Jews to live in the land of their birth without rational fear of murder. In defense of those values, I echo, “Je suis Charlie.”


Over the next few weeks, I will begin posting again to this blog. I’ve been quiet for two reasons. First, we’ve had lots going on in our business, including an updated edition of one of our two books. Second, and more important, our compliance attorney informed us that we cannot accept comments for this blog or on our other online forums.

Saying I’m unhappy about this is an understatement. While the comments section has never been as active as I might wish, I have found the energetic back-and-forth in the comment threads among the most valuable aspects of writing the blog.

The reason I have to shut down comments is simple. We are concerned about full compliance with regulatory policy. An open discussion carries the possibility that a reader comment might constitute a violation of the SEC’s evolving communications standards.

In simple terms, we need to pre-sanitize the blog to avoid possible trouble with regulators. For those clients who have commented in the past, please know that I value your feedback very much, and I really want to know your thoughts. Please continue to share them with me by email, or just pick up the phone.

More to follow.

Buffett vs. the Technologists, Round II

“The historical track record of old white men crapping on new technology they don’t understand is at, I think, 100%.”

                                         Marc Andreessen, Venture capitalist and Bitcoin investor

Andreessen made his dismissive comment this summer at a forum discussing the future of Bitcoin, a crypto-currency I mentioned in a prior blog. The old white guy he was dissing was Warren Buffett, who had made some comments skeptical of the intrinsic value of Bitcoins.

Andreeseen was technically correct about Buffett’s predictive track record. He just had the value sign wrong. Buffett’s track record of forecasting the value of new technologies is indeed 100%, but the Sage of Omaha has been correct, not incorrect. Back in the late 1990s, Buffett published a comprehensive takedown of the technology bubble in Fortune magazine. At that time, tech enthusiasts dismissed him, indeed often ridiculed him for being old and out of touch. But Buffett was right. Investors in high-flying tech stocks lost most of their money as the tech-heavy NASDAQ index fell by almost 80% between March of 2000 and October of 2002.

Paying respectful attention to Warren Buffett is an intelligence test for any investor. So in trashing Buffett, was Andreesen ignorant, arrogant, or both?

The answer, I suspect, is neither. He was simply, as the tech world puts it, “talking his book.” (Thanks for that phrase, Mike.) Andreessen is a smart guy. He was one of the inventors of Mosaic, the first web browser, and a founder of Netscape. He reaped billions from his early tech career. Now a venture capitalist, he’s recently invested millions in the Bitcoin ecosystem — the range of companies working to provide support services to facilitate the deposit, spending, and transacting of Bitcoins and/or other crypto-currencies.

Most of what is happening around crypto-currencies is absolute nonsense, entirely reminiscent of past bubbles from the tech bubble to the original South Sea bubble in the early 1700s. (A new crypto-currency named after the tooth fairy? Really?) Will any part of the Bitcoin phenomena persist? Hard to say.

What is easier to understand is the overall track record of venture capital since the collapse of the tech bubble. Over the last decade and more, the return on venture capital as an asset class has been roughly zero. (As Jayne Cobb said, “Ten percent of nothing is, let me do the math here, nothing into nothing, carry the nothin’. Nothing.”) That does not mean there have no profitable new technologies. In fact, Andreesen was an early investor in Twitter, Facebook and other key tech plays. But it does suggest that, across the span of new business initiatives, the universe of venture capitalists have been unable to discriminate between promising and dead-end technologies, or perhaps between good and bad business plans. (Some successful first-generation venture capitalists, like Bill Janeway formerly of Warburg Pincus, refer to the approach of many current VCs as “spray and pray.”)

Back in 1997, the last time tech stocks were flying high, I went on a bike trip in France. One of the other cyclists was a famous venture capitalist, whose firm had bankrolled some of the most successful tech breakthroughs of the prior decades. At that time, he was contemplating leaving his firm and starting over, because his partners were not aggressive enough. He wanted to go into the freshman dorms at MIT to fund new Internet startups. Understand that he did not really think those freshmen were likely to have any genuinely valuable business ideas. He simply saw them as a source of new merchandise to peddle to the eager suckers.

This is a capital markets model, not a business model. I suspect part of the reason for the lousy returns may be that venture capitalists have gone from trying to invest in a broad range of technologies that solve actual human problems to trying to manufacture product for credulous investors.

Perhaps I am over-complicating the issue. It may be as simple as too much money chasing too few genuine economic opportunities. In any case, here at TGS we remain entirely comfortable have exactly zero direct exposure to venture capital as an asset class. Or as Jayne would say, “Nothing, carry the nothing. Still nothing.”