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Trading  | August 21, 2017

Authored by Robert Gore via Straight Line Logic blog,

Leave fools’ paradise to the fools.

If you are offered a choice between having your tuition and expenses paid at a top of the line business school, or buying with your own money Mario Puzo’s The Godfather (the book and the movies, Parts One and Two) choose the latter. You’ll find them far more useful than the MBA.

Americans are frequently condemned for obliviousness to the lies and depredations of the people who rule them. Much of the condemnation is merited, but the obliviousness is also a vestige of a better time. The best gauge of a society is truth: its prevalence and how it’s treated.

You go to a store and buy a product. Your transaction rests on implicit assumptions that everyone in the supply chain is telling the truth and acting honorably. The product was manufactured to the manufacturer’s advertised standard. It was delivered by a transportation company in good order, and marketed by the store in good faith. Every step of the way you could have been ripped off and not known it. The product could be a counterfeit. The delivery truck could have been hijacked and the product resold to the vendor at a cut-rate price. The product might be defective, but the manufacturer and vendor continue to sell it. A paranoid could drive himself crazy imagining all the possibilities, most of which cannot be dismissed out of hand.

When exchange is voluntary, a producer’s reputation for integrity is an invaluable asset and an consumer’s trust is both rational and productive. A producer’s reputation rests on millions or billions of transactions in which consumers receive the value they expect, with any problems quickly addressed and remedied to the consumer’s satisfaction. One reason John D. Rockefeller’s Standard Oil did as well as it did was because its refining and distribution processes delivered oil that was of a uniformly high standard. Many of the company’s competitors did not. One batch might be acceptable, but other batches had impurities or varying chemical compositions. Those who think it’s easy to manufacturer millions of items or refine millions of barrels of oil to a uniform standard over a span of years or decades only betray their ignorance of manufacturing and refining.

The companies that reach the top of the heap in a voluntary exchange system save their customers immeasurable time and effort. Imagine if you had to inspect and test every item you bought before you used it. That would be a dump truck full of sand in the gears of your life; you’d get nothing else done.

Voluntary exchange rewards both integrity and trust. That was once the American milieu, and is still a significant part of it. We trust Apple to deliver great phones, ExxonMobil to deliver top grade gasoline, Whole Foods to deliver quality food, and so on. Unfortunately, another class of interactions has overshadowed the realm of voluntary exchange, interactions based on fear, force, fraud and theft. Nefarious means to nefarious ends are the province of governments.

Expanding government power and domination are the deadly enemies of integrity and trust. As a government uses violence to subjugate, the subjugated quickly learn that honesty and honorable behavior are persecuted; to survive they must resort to deception and covert resistance. The subjugators invariably regard the subjugated as an inferior class and disparage their tactics as dishonorable.

History is replete with such instances. Sicily has been ruled by a long line of outside powers. Starting in the late 1800s, the Mafia became the embodiment of the inverted morality that takes hold among tyrannized and brutalized peoples. That morality does nothing to advance the general welfare; it doesn’t promote prosperity or progress. It only allows the subjugated to survive.

In this antique garden, Michael Corleone learned about the roots from which his father grew. That the word “mafia” had originally meant place of refuge. Then it became the name for the secret organization that sprang up to fight against the rulers who had crushed the country and its people for centuries. Sicily was a land that had been more cruelly raped than any other in history. The Inquisition had tortured rich and poor alike. The landowning barons and the prices of the Catholic Church exercised absolute power over the shepherds and farmers. The police were the instruments of their power and so identified with them that to be called a policeman is the foulest insult one Sicilian can hurl at another.

 

Faced with the savagery of this absolute power, the suffering people learned never to betray their anger and their hatred for fear of being crushed. They learned never to make themselves vulnerable by uttering any sort of threat since giving such a warning insured a quick reprisal. They learned that society was their enemy and so when they sought redress they went to the rebel underground, the Mafia. And the Mafia cemented its power by originating the law of silence, the omerta. In the countryside of Sicily a stranger asking directions to the nearest town will not even receive the courtesy of an answer. And the greatest crime any member of the Mafia could commit would be to tell the police the name of the man who had just shot him or done him any kind of injury. Omerta became the religion of the people. A woman whose husband has been murdered would not tell the police the name of her husband’s murderer, not even of her child’s murderer, her daughter’s raper.

The Godfather, Mario Puzo

Probably 20 percent of Americans will tell you their life stories in a grocery store checkout line, and 50 percent over a cup of coffee. Many trade information about themselves as freely as they trade their money for groceries or coffee. Ask those who have escaped life in a totalitarian regime about it and they will marvel at the foolishness.

The oppressed learn to trust no one other than those who have demonstrated they deserve to be trusted, usually family or long-time friends. In response to disclosures that the government is monitoring them 24/7 and knows virtually everything they do and say, many Americans breezily assert that they’re not worried; they have nothing to hide. Behind omerta was the Sicilian peasant’s reality that any information, no matter how trivial or innocuous, was a weapon that could be used against him by the hostile and corrupt regime. American openness and trusting insouciance is quaintly naive—anachronisms from a better time—and pitiably foolish.

If you think the government, its friends, and those who pull its strings have your best interests at heart, that they tell the truth, that they can be trusted, you are living in a fool’s paradise and deserve whatever you get from your “benevolent” masters. For the rest of us, it’s time to go Sicilian, to start thinking like a Corleone. The dangers will intensify as things get much worse, before collapse offers the prospect of rebuilding something better.

The times demand caution, skepticism, less talking, more listening, alertness, wariness, hiding one’s strengths, remedying one’s weaknesses, self-sufficiency, cunning, and drawing closer to those few people in your life you know you can trust. Your survival is at stake and there are no guarantees. All you can do is better your odds. Indiscriminate trust and hoping for the best—without thinking about and preparing for the worse—will dramatically lower those odds.


A revolutionary initiative is helping average Americans find quick and lasting stock market success.

275% in one week on XLF - an index fund for the financial sector. Even 583%, in 7 days on XHB… an ETF of homebuilding companies in the S&P 500. 


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