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Welcome to Your First Mega-Monthly Issue!

As I said in the Sept. 6 issue, for the foreseeable future, I won’t be publishing twice a week, but just once a month. This will allow me the time I need for the almost-finished and half-finished books I’ve been working on for the last 10 years.

This issue is something of a transition. I’m still working on some changes I want to make. But as you can see if you scroll down, the monthly issues are going to be considerably longer than the weekly issues. Mostly because I’ll be including more than a single book and movie review and because I’ll be including one or two chapters from the books I’m trying to finish.

This month, I’m including the recently revised first chapter of The Challenge of Charity, a book that compares the social impact of the non-profit community center my family and I established on the Pacific coast of Nicaragua to the for-profit residential resort and hotel complex that my partners and I built nearby.

I’m also including a chapter from a book based on a presentation I made to 1,700 Japanese investors in Tokyo recently. Working title: The 7 Natural Laws of Wealth Acquisition. This chapter is about what I think is one of the most important laws that govern not only wealth building but every other aspect of human achievement.

I’ve placed these two chapters towards the end of the issue because they are a bit long and I didn’t want to distract you from the shorter pieces, including:

* A look back at the big debate

* Yet another thing the Japanese do better!

* The wealth of wisdom in The Wealth of Shadows

* Everything you would expect in a movie titled Small Town Crime

* The many pleasures of The Decameron

* Your Monthly Quiz: safe cities and firearm ownership… cholesterol levels and statin drugs… the Capitol riot and Hunter Biden’s plea deal… and more

And finally, in the Readers Write department, I try to answer a question I’ve asked myself more than once over the years: “Why hasn’t the long-predicted financial Armageddon happened yet?”

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Humble Bragging 

I recently spoke at a meeting in Miami of about 40 entrepreneurs, most of whom had businesses with revenues in the $1 million to $10 million range. Since they were in a range I had written extensively about in Ready, Fire, Aim, my book on “the four stages of entrepreneurial growth,” I thought I’d organize my comments around that.

The book was published in 2007, so I went back to it to remind myself of some of the details. I was half expecting to find statements I had made then that I no longer agree with. But to my delight, I found none. On the contrary, my feeling in reading it was, “Boy, this is really good!”

That assessment was validated at the meeting, as no fewer than half a dozen people stated in the Q&A session and told me privately afterwards that they had used the book in starting and developing their own successful businesses.

Two weeks later, a friend of a friend who “wanted to meet me” came to my office. I was a bit concerned that I was going to be sold something – but it turned out that he, too, had built a successful business by following the book. He had then sold the business for a price large enough for him to retire and begin a second career as a venture capitalist.

He was a young man: 34. He got rich and retired at 34! My first retirement (one of four that I have failed at) was when I was 39.

I’d like to tell you how happy I was for his success. And I was. But I was also mildly irritated by how early in life he had achieved it. I wondered if he had a net worth now that was larger than mine was at his age. He never told me.

 

She Listened. He Didn’t!

I’m writing this the day after the Harris/Trump debate. If you are reading it now, that’s because what I have to say is still relevant.

In the Aug. 23 issue, I said that the election is not about the Trump Haters or the Trump Lovers or even the Trump Haters-Haters, but about undecideds in the swing states. The advice I gave to Harris and Trump was about how to change the minds of those voters, not about pandering to the already decided.

Harris listened to me. She kept on script and didn’t wander. And she cleverly charged Trump with misleading questions and outright falsehoods (e.g., the “good people on both sides” lie) that she knew the moderators wouldn’t fact-check.

Trump didn’t listen to me. He did his usual bantering and hyperbole, which his base loves. But that isn’t likely to have worked on the undecided voters in the swing states.

Trump did point out, as I told him he should, the insanity of allowing 8 million to 10 million foreigners to enter the country since 2020, without vetting, without medical testing, and without legal grounds for them to be here. But he did not emphasize the angle on that which might have worked with the undecideds – i.e., the fact that the states and cities where these millions were shipped could not afford to house and feed them.

Nor did he make it clear that 90% of them were shipped around the country not by the governors of the border states but by the Biden administration itself – mostly on planes landing secretly in airports around the country at night, under cover of darkness. Had he listened to me, he would have come to the debate with data on the billions of dollars that have been spent to accommodate the migrants and the trillion+ the US will have to spend on them in the next several years.

He mentioned, as I had advised, the fact that the Mexican cartels have been making millions by transporting these people, the majority of which are young men and women who were put at the front of the lines because they had promised to pay their fees by working for the cartel strongholds in the destinations they eventually reached. He mentioned the fentanyl problem, but he should have drilled down on it with specifics on the enormity of that business in terms of dollars and deaths.

Had he stuck to my script, he would have come out of that debate a clear winner. But he couldn’t find it in himself to do the preparation he needed to learn some of the basic facts. Instead, he chose to back up his seemingly outrageous statements with one example: the pet-eating story.

Some of the facts he could have and should have brought up…

* According to NBC News, authorities are currently investigating more than 100 serious crimes that have been committed by an ultra-violent gang of migrants from Venezuela known as Tren de Aragua.

* Two alleged members of the Tren de Aragua gang – Julio César Hernández Montero, 27 years old, and Yurwin Salazar Maita, 23 – are facing the death penalty for the 2023 kidnapping and murder of 43-year-old José Luis Sánchez Valera in Miami-Dade County.

* In New York, Bernardo Raul Castro-Mata, a 19-year-old from Venezuela with tattoos associated with Tren de Aragua, shot two police officers. Castro-Mata entered the country illegally last July, a member of Immigration and Customs Enforcement told CNN.

* Members of Tren de Aragua have reportedly established a significant presence in parts of Colorado, Fox News reported, having taken over at least two apartment buildings in Aurora. Gang members were not just living in the buildings, they were using some of the apartments for child prostitution.

* Officials arrested two gang members suspected of being involved in “stash houses” used for human trafficking in Louisiana, Texas, Virginia, New Jersey, and Florida, according to a criminal complaint reviewed by CNN.

Trump could have talked about all of that in detail. But he didn’t.

It’s impossible to know if Trump’s debate performance doomed his chances for reelection. Debates, the experts say, don’t usually cause major shifts. But I do think that Harris deserves an A for sticking to my plan, and Trump deserves, at best, a C-.

I doubt they will have another debate. Trump is smart enough to know that he will never be able to follow a script. And his advisors are no doubt telling him to put his time and energy into his rallies. If they don’t have another debate, I think we are looking at a very close election, with the party that loses almost certainly calling it stolen.

 

Another Thing the Japanese Do Better

Throughout the developed world, people are getting fatter. The British. The Germans. The Poles. Even, to a lesser extent, the Italians and the French. There are exceptions. One of those I’ve written about before: the Japanese.

I’ve been to Japan four or five times in the past 30 years. And each time I got there, I was once again shocked to see how rare it is to see a fat Japanese person. (During my most recent trip a few months ago, I saw only two – and they were both Sumo wrestlers!)

In the Sept. 11 issue of The Rosen Report, Eric Rosen confirms this. Citing data from the World Economic Forum, he notes that only 7.6% of Japanese adults living in Japan are “obese” as compared to 41.6% of Americans. Likewise, only 3.3% of Japanese children fall into this category as compared to more than 20% of American children.

A significant reason for this, Rosen says, is attributable to school lunches. “By law, every school [in Japan] employs a professional nutritionist who has undergone rigorous training, including three years of study beyond becoming a teacher. These nutritionists design meals that are entirely free of processed foods, with each meal prepared from scratch daily.”

Another reason: Japanese children walk to school.

Here’s a short video about this.

Here’s a summary of the data published by the World Economic Forum.

And here is a link to Eric Rosen’s excellent e-letter.

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The Wealth of Shadows

By Graham Moore
384 pages
Published: May 21, 2024

One of two books selected for the September meeting of The Mules, The Wealth of Shadows was a terrific read from start to finish.

Briefly, it’s the story of an ordinary man who joins a secret mission to bring down the Nazi war machine by crashing their economy. It is billed, correctly, as a novel, but is a largely factual account of the largely secret economic battle that took place between Maynard Keynes, the British economist who was credited with saving England from financial ruin in the resolution of WWI, and Harry Dexter White, a lower-level American economist and possible Russian spy, over which currency would dominate the world after WWII.

There are many reasons to recommend this book.

Firstly, it’s a thriller, a page-turner about brilliant and ruthless economists whose understanding of the role of economics in war was as different as it was profound.

Second, it is a fundamentally accurate accounting of what went on behind the scenes in the US, America, Germany, and Russia that made WWII inevitable.

Third, it is an accessible treatise on the difference between Keynesian economic theory and that of Milton Friedman – still the two most influential philosophies of how government should and shouldn’t involve itself with free enterprise.

And finally – and this was a bonus for me – it is an in-depth account of the origins and tactics of the Cold War.

I read The Wealth of Shadows just after watching The Octopus Murders, a documentary about the shenanigans behind the 1985-87 Iran-Contra scandal, which was also, at one level, an account of the economics of war. And towards the end of my reading, I was invited to join a clandestine discussion group comprised of Austrian economists, free market advocates, Libertarian philosophers, and what sounds to me like spies and secret operatives that meet virtually every month to explore the people and policies that have been responsible for most of the military and economic conflicts that have plagued the US since the end of WWI.

Had I not watched that documentary and read The Wealth of Shadows, I would not have been prepared to grasp the pace and depth of the conversations in the two meetings I have attended so far.

Click here to watch a video of Graham Moore talking about his book.

A Walk in the Woods 

By Bill Bryson
274 pages
Published: 1998

Bill Bryson is a writer custom-made for busy readers with ADD – like me.

You can pick up one of his books and spend an hour or so learning about history or geography or science, have a completely pleasant time doing so, and then put the book aside and come back to it later.

I began A Walk in the Woods at least 10 years ago. I’ve dipped into it a half-dozen times, and I’m not done yet. Because Bryson writes in vignettes, I’ve always been satisfied with however many pages I could consume in a sitting, without feeling an urgency to finish.

A Walk in the Woods chronicles his attempt to thru-hike the Appalachian Trail during the spring and summer of 1996. On a thematic level, it’s an exploration into the contrasts and connections between the wilderness and civilization. And although it’s rich in details and descriptions, it is much more a smart and funny personal journal than a travel guide.

The Myths of Happiness 

By Sonja Lyubomirsky
320 pages 
Published: Jan. 1, 2012

I found nothing in this book that seemed new. Nor anything that surprised me.

But for a book – and especially a self-help book – to be worth reading, the content doesn’t need to be new and different. It is enough sometimes to provide a better and/or deeper understanding of the problems analyzed and the solutions suggested. And even when that isn’t done, the book can still merit a read (a quick but purposeful read) if the advice itself is something you know but need to be reminded of.

The weakness of The Myths of Happiness was clear to me after the first several pages. I might have put it down, but, always interested in the subject of happiness, I did what I always do with a book like this: I read it quickly, at a speed of about 500 words a minute. Which means that I was able to go through the entire thing (at 250 words per page) in about three hours.

Given that modest investment of time, the book delivered. I found half a dozen suggestions in it that seemed promising. For example: Rather than recommending the common pop-psychology bromide of “Imagine you have just one week to live and you won’t see these people again…” Lyubomirsky recommends imagining that you are about to leave them for a long and indefinite span of time – a good twist, because it obviates the morbidity issue and is thus easier to imagine.

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Safe cities and firearm ownership… cholesterol levels and statin drugs… the Capitol riot and Hunter Biden’s plea deal… and more 

Test yourself on ten questions, some of whose answers I hope will surprise you.

The Questions 

1. What is the safest large city in the world?

A: Zurich
B: Toronto
C: Tokyo
D: Paris
E: Osaka

 

2. According to MSNBC, the assassination attempts on Donald Trump were…

A: Provoked by Leftist rhetoric equating him with Hitler and claiming he will destroy democracy.
B: Provoked by Trump himself with his “hateful, racist, and misogynist” rhetoric.
C: Were the actions of a madmen and not provoked by any rhetoric at all.

 

3. The “two-state solution” to the Arab/Palestinian war is decades old. The reason for that is because…

A: The Palestinians don’t want it.
B: Israel doesn’t want it.
C: The US doesn’t want it.

 

4. Douglas Murray believes that academia has lost its courage because…

A: It is under attack from the left.
B: It is under attack from the right.
C: It is not under attack but should be.

 

5. According to ABC, was the moderation of the Harris/Trump debate fair?

A: Yes
B: No
C: They didn’t say.

 

6. How many people were killed during the Jan. 6 “insurrection”?

A: Eight
B: Six
C: One
D: None

 

7. The science behind cholesterol and statin drugs suggests that…

A: Statins are safe but not effective.
B: Statins are effective but not safe.
C: Statins are safe and effective.
D: Statins are not safe and not effective.

 

8. It’s commonly known that the US has the highest rate of gun ownership per person, with approximately 1.2 per person. The next four countries are Yemen, Montenegro, Serbia, and Croatia. Which of the following are in the next five – i.e., among the top 10?

A: Germany
B: Iraq
C: Finland
D: Pakistan

 

9. What country has the most billionaires per capita?

A: The United States
B: China
C: England
D: Sweden

 

10. On Sept. 5, after having pled innocent to charges that he failed to pay at least $1.4 million in taxes he owed for the years 2016 through 2019, Hunter Biden changed his plea to guilty. What was his motive?

A: To avoid “a potentially embarrassing trial weeks before the US presidential election.”
B: To “move on with his life” and get back to his career as an artist.
C: To “protect those he loves from unnecessary hurt.”
D: To protect his family from further investigations into how he made tens of millions of dollars in consulting fees from Ukraine, Russia, and China while his father was vice   president.

 

The Answers

1. C: Tokyo. Read this.

2. B: Trump brought it on himself. Watch this.

3. A: The Palestinians don’t want it. Watch this.

4. C: It is not under attack but should be. Watch this.

5. B: No. Watch this. 

6. C: One. Read this.

7. D: Statins are not safe and not effective. Watch this.

8. C: Finland. Read this.

9. D: Sweden. Read this. 

10. A, B, C, and D. Read this and this and this and this.

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How Wikipedia Became a Propaganda Site

In the Sept. 6 issue, I mentioned that over the past year or two, I’ve noticed a disturbing trend in Wikipedia. When it was founded in 2001, its mission was “to provide all the world’s information for free – gathered, updated, and fact-checked democratically by the people.” But it’s become increasingly difficult to find any content that might support conservative views. What’s worse, factual content that had been on Wikipedia is being deleted or altered to be more compatible with Woke thinking.

Click here for a look at what’s been happening from Ashley Rindsberg, writing for The Free Press.

 

YouTube, not Disney or Amazon, Is Netflix’s Real Competition 

I try to read one book and watch one movie per week. Reading four books a month is not difficult if three of them are nonfiction. Watching a movie a week is easy, too. But these days, I rarely finish a film in one sitting. I’m shutting them off after 20 to 30 minutes, and then coming back to them the following day.

I know what’s going on. The time I spend on streaming platforms like YouTube has reduced my attention span. And apparently, I’m not the only one. Look at how YouTube is increasingly taking away the attention from not just Netflix but Disney and Hulu and Amazon Prime.

Click here.

 

Is This the Twilight of Justin Trudeau? 

I’ve always had the impression that Canadians are just like US denizens, except more measured in their thinking and more polite in their expression. I think that’s still true.

Something they do in Canada that’s not done in the US is requiring the prime minister, as head of his party, to regularly and publicly debate representatives from the opposing party.

Watching Justin Trudeau debate conservative leader Pierre Poilievre these past several years has been a delight. When Trudeau became PM in 2015, he displayed that measured thinking and politeness in his policy proposals. In recent years, his politeness has remained, but his thinking has radicalized, much like other left-leaning leaders around the world. This has put him in a difficult position politically, since many of his policies are viewed by many Canadians as having caused a slew of economic difficulties, including inflation, just as is happening in the US.

Click here.

 

Net Zero Budget 

Javier Milei, the recently inaugurated president of perennially troubled Argentina, came to office as a champion of fiscal restraint and small government. And so far, it looks like he intends to keep his promises.

In mid-September, he put forward a national budget that he promised “will change the history of [Argentina] forever.”

The budget, says Joel Bowman, writing in Notes from the End of the World, “represents a 180 reversal in the way of thinking about the role of The State vis-à-vis The Citizen, away from the collectivist notions enacted by 75 years of Peronism and toward an increasingly free market model.”

Click here to read more.

 

How Paper Money Fails 

“We’ve been writing, for more than a decade, that our paper-money system would continue to enrich asset owners (and people with extensive access to credit) at the expense of wage earners,” says Porter Stansberry in the Sept. 24 issue of his Daily Journal. “One sure sign of this is soaring home prices around the world, in every economy that relies on the US dollar-backed, global financial system. Today, the median US home price is 7.2 x the US median household income. That’s an all-time high. Houses are now more expensive in the US (and in places like Canada) than they were at the peak of the 2008 housing bubble. If you’re looking to understand the transmission mechanism between monetary inflation and the collapse of social order, this is where you should start: People who can’t afford a house have a much harder time building a nuclear family or identifying with traditional American values.”

Click here.

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The Decameron

An 8-part series on Netflix
First episode: July 25, 2024
Watch Time: approx. 1 hr. per episode

I am completely enjoying Netflix’s production of The Decameron, which I clicked on out of curiosity. Was it going to have anything to do with The Decameron I read in graduate school – the stories, written in the 14th century by Boccaccio, about a small collection of royals, merchants, and servants that flee the plague consuming Florence for what they hoped was the safety and luxury of a magnificent castle in the countryside?

Yes, it was. But not as a remake meant to stay close to the original. I would have been interested to see that, but what the creators of this series did was better. The stories here are also part Chaucer (with the sort of gentle social satire you get from The Canterbury Tales), part Shakespeare (with the intricate plot twists of his comedies), and part the contemporary British combination of dryness and silliness you get from the Monty Python movies of the 1980s and 1990s. With, as a bonus, the bawdiness and naughtiness of all three.

I thought the first episode was brilliant, but I had several ounces of tequila in my bloodstream at the time, so I was prepared to be disappointed with episode two. Happily, Number Three Son Michael and family were at the beach house with me, so he joined me in watching it and confirmed my initial impression.

The Decameron is an ensemble production. And every one of the main characters is beautifully imagined and wonderfully acted. As a comedic series, I’d give it 4.7 out of 5. But if you never liked Shakespeare and/or Chaucer, you should watch it with caution. And if you never liked Monty Python, don’t even bother.

You can watch the trailer here.

And if you are interested:

You can bone up on the original Decameron here.

On Chaucer’s Canterbury Tales here.

On Shakespeare’s comedies here.

And on the Monty Python movies here.

Benjamin Franklin: A Film by Ken Burns 

A four-part documentary on PBS
Produced and directed by Ken Burns
Narrated by Peter Coyote and Mandy Patinkin
Initial release date: April 4, 2022
Watch Time: 1 hr. per episode

I’ve just started this series and I’m loving it.

I’m eternally interested in the life of Benjamin Franklin. Not just because he played such an important role in the founding of America but because he was a both a genius and a polymath and he led a wildly rich and diverse life.

This series looks to be another Ken Burns gem, with a great balance between facts and stories, history and myth, macro-perspectives and minor fascinations.

I’m only a few episodes into it at this point. But if it holds up, I’d give it 4.6 out of 5.

You can watch the trailer here.

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Small Town Crime 

Written and Directed by Eshom & Ian Nelms
Starring John Hawkes, Anthony Anderson, Robert Forster, and Octavia Spencer
Released in the US: Jan. 19, 2018
Watch Time: 91 min.

I was in a mood. I liked the title: Small Town Crime. And it delivered exactly what I was hoping for – a contemporary noirish story about a derelict, alcoholic ex-cop who happens upon the bloody body of a young woman, and, against the better judgement of everyone who knows him, decides he’s going to solve the crime.

John Hawkes in the lead. Lean and scruffy and always ready with a quick, wry smirk, he lights up every scene and enlists the viewer’s sympathy without demonstrating a single socially redeeming quality. Also very good, Robert Forster, with limited screen time, playing the wealthy grandfather of the murdered girl.

You can’t approach a noir cop film directed by a pair of brothers without making associations with the great Coen brothers, and there is ample evidence in Small Town Crime that they were part of the Nelms’ education. (Particularly in their invention of the gruesome character of the murderous Orthopedic, played chillingly by Jeremy Ratchford.) There is also lots of blood and guts à la Quentin Tarantino and a superb Tarantino-like character in Mood, played by Clifton Collins.

As a noir cop movie, I’d give it 4.5 out of 5.

You can watch the trailer here.

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I Went There to Exploit the Property Values 

Chapter One of The Challenge of Charity 

In 1996, six years after the end of the US-backed Contra war, the overthrow of Anastasio Somoza by the Sandinista Party (led by Daniel Ortego), and the democratic election of President Violeta Chamorro, I flew down to Nicaragua.

At that time, Nicaragua had a per capita GDP of $908, the lowest in Central America. It ranked among the three poorest countries in the Western Hemisphere, shoulder to shoulder with Haiti.
Nicaragua was in desperate need of financial aid, but I wasn’t there on a humanitarian mission. I was there to buy a large parcel of beachfront property cheaply, divide it into lots, and sell them to our customers at a tremendous profit.

The Opportunity 

My mission was funded by a business I was partnering with, a Baltimore-based publisher of newsletters and magazines. Several years earlier, I had been recruited from an easy but unchallenging retirement to help grow the company’s profits. At the time, the business had annual revenues of only $8 million. (I was retired from partnering in a similar business whose revenues I had helped grow from $1 million to more than a $100 million in seven years.)

The company was publishing about half a dozen investment newsletters and a magazine-styled monthly publication called International Living, which provided information and advice to Americans interested in retiring or owning second homes overseas.

For years, International Living had been featuring stories and sponsoring tours of Mexico, Panama, Costa Rica, Belize, Mexico, and the Caribbean. These were all countries that its readers felt good about traveling to.

Nicaragua had not been featured for a long time. Not only because of its bellicose past but also because it had tumbled from being one of the richest Central American countries to the poorest.

A benefit of Nicaragua’s dire economic status was that the government at the time was a free market, pro-growth administration. And despite the political violence that had been front page news in the US, it had quickly returned to being a low-crime, peaceful, and even welcoming nation.

But it was that shocking level of poverty that made buying property there incredibly cheap. So, it came as no surprise to me that the editors of International Living ranked it that year as their “best buy.” They reported that its climate was tropical, its people were friendly, its geography was beautiful, and everything was very, very inexpensive.

To supplement subscription revenues, International Living had been sponsoring “get acquainted” tours for subscribers who were intrigued by the arresting photos of the country and tempted by the low prices. They wanted to see for themselves if the magazine’s praise was merited.

The idea of selling tours to International Living subscribers seemed sensible to me. But when I looked at the P&Ls, I could see that we had underestimated the costs involved in transporting and housing them in a style that was even remotely up to US standards.

And there was another problem. When members of the tours expressed an interest in moving to Nicaragua, their International Living hosts introduced them to local real estate brokers, some of whom were selling them properties with problematic titles and leaving our subscribers, quite understandably, upset.

The answer, it seemed to me, was to do our own real estate brokering, which we could properly vet with local lawyers. My partners agreed and the strategy worked. As the months passed, we became more confident with conducting business down there and began talking about a potentially bigger opportunity.

The idea we had was to find large tracts of land on the scenic Pacific coast, divide those tracts into lots, and then sell them at prices that would look dirt cheap to US and Canadian buyers and still provide us with sizeable profit margins.

A Mission and an Adventure 

So that’s why I was in Nicaragua. Not to save the country, but to exploit it.

Because US business and investment in Nicaragua had dried up after the revolution and had not yet recovered (most Americans believed the country was still in turmoil), our interest was welcomed both by the country’s department of tourism and the US State Department, which was looking to promote US business there.

As a result, I spent my first night in Managua, not in a hotel, but at the home of Lino Gutiérrez, the US Ambassador to Nicaragua. The only time before then that I’d been to the home of an ambassador was when I was teaching English Literature at the University of Chad as a Peace Corps volunteer and, along with the other American volunteers and our wives, was invited to dinner at the US Ambassador’s residence. And now, 20 years later, I felt, once again, flattered to have been invited and excited to think that I might be doing something that merited the invitation.

The next day, I was picked up by AG, a local businessman who had oceanfront property for sale. On our three-hour drive down the Pacific Coast Highway, he filled me in on what he thought I should know about the local area.

He told me that Nicaragua was a beautiful country, which – although I was seeing only a sliver of it – was already obvious. He told me that the Nicaraguan culture was complex. It wasn’t just fighting and farming. And although the revolution had fostered its share of violence, the very fact that peace and democracy had been restored after 10 years was evidence of the generally compliant and agreeable nature of its people. He told me that Nicaragua was rich in gold and other minerals, and that before the revolution – even with the worst of Somoza’s tyrannies – it had, compared to its neighbors, a relatively stable and growing economy. “People were poor,” he said. “But nobody was starving.”

An Amazing Grace

The property he showed me was owned by his family – acres upon acres of rolling hills, intersected by a small river and including five coral-colored beaches, one more beautiful than the other. The first beach he showed me would have been enough to seal my interest in the property, but there were four more to be seen.

I spent the rest of the day with AG, exploring it on horseback as he led me up and down the cow paths that crisscrossed the property, moving through dark forests (home to howler monkeys) and sunlit glades, past cliffs and ridges and lush green valleys.

Looking out over the landscape, it was easy for me to imagine estate homes perched upon the hillsides with glorious views of the sea.

This was the Eden my partners and I had been looking for.

The entire property consisted of 1,700 acres. A similar property in the US at the time, in California, say, which it resembled, would have gone for at least $300 million.

We bought the first 1,000 acres immediately and the remaining 700 acres a year later, after we had proven to ourselves that we could sell our concept for the property to our subscribers. And what did we pay for it? I’ll say this: When AG mentioned the price to me, I didn’t even try to bargain. It was less than I had recently paid for a one-story bungalow on a quarter-acre lot across the road from the beach in Delray Beach, Florida.

The decision was, as they say, a no-brainer.

A Business Lesson

As publishers, my partners and I knew next to nothing about real estate development and absolutely nothing about selling property in Nicaragua to Americans.

In the months that followed, we discovered that just the cost of infrastructure (carving out roads, bringing in water, electricity, etc.) was going to be about five times the cost of the land.

But we didn’t know that when we signed the purchase agreement. We made the deal. And as part of it, AG wanted in, so he became our sixth partner.

We were excited. We felt smart. And lucky. But, as I said, we had no idea what we were getting ourselves into.

Lesson #1: When you begin a business that is new to you, know that some of the most important truths about succeeding in that business are hidden from you at the start – even if you have “studied the market” in advance. Success often depends on discovering those secrets before you run out of money, patience, and time.

(Look for Chapter 2 in next month’s issue…)

 

An Astronomical Threat to Your Wealth! 

From The 7 Natural Laws of Wealth Acquisition 

About 20-something years ago, BB and I were in Europe meeting with several entrepreneurs with whom we hoped to jointly launch European offices for the publications we were selling in the United States.

Since BB and I had teamed up 10 years earlier, the business had grown substantially. We were feeling good about that and positive about the future. So positive, in fact, that BB decided, almost impulsively, that the company should buy a chateau in France that we could use when we were there.

The next thing I knew, we were in the countryside of the Dordogne region, shopping for chateaux. It was enthralling to think that I, having grown up in a working-class neighborhood on Long Island, New York, was here on a business trip in France buying a castle.

It was a beautiful day when we set out with a local broker, which probably made us feel that much better about what we were doing and diminished any second thoughts we might have had about its financial sense.

By the end of the day, we had seen half a dozen properties. And that night, at dinner, we talked about our preferences. I had fallen in love with a newly refurbished chateau that looked like a miniature Versailles. He had fallen in love with a gothic castle that had been neglected for decades.

The benefit of “my” chateau, I argued, was that it was ready to furnish and use. BB, a weekend handyman, saw its condition as a deficit. He didn’t say so directly, but I’m pretty sure he was already daydreaming about how he could fix up “his” castle. The deciding factor turned out to be the price. We could acquire the castle for about a million dollars, while the chateau cost four times that much.

So, we went with the castle. And soon thereafter, BB was working on notes and drawings that he could use to oversee its reconstruction.

He soon discovered that the repairs and improvements he wanted to make had to be approved by the local historical preservation board. And that is when he recognized that the job was going to be more complicated and perhaps more expensive than we had imagined. So, he did the right thing and bought the place from the company.

Over the next 10 years, he improved all of the buildings on the property to the point where his family could live comfortably in them or, when they weren’t there, rent them out.

But the cost of the renovation, in terms of time, was enormous. And the cost in terms of total dollars spent on it ended up being as much as or greater than “my” chateau would have been.

BB’s struggle to overcome the erosion of that property illustrates one of the most important concepts in business, investment, and wealth building.

Understanding Entropy Is Understanding Everything 

In physics, entropy is associated with randomness or uncertainty. In the natural world, it manifests as the inevitability of a decline into disorder. Or, as Paul Simon said in one of his songs, “Everything put together sooner or later falls apart.”

Monuments are built and crumble. Empires are won and lost. Cultural fads surge and then taper off. Human beings grow strong and then weaken and die.

The entire universe and everything in it is subject to entropy. And that includes business ventures and everything we human beings do to become successful in life and leave the world with something of value after we die.

You book a room in a hotel that looks brand-new. You arrive and are unpleasantly surprised to discover that the rugs are worn and the bathroom fixtures are old.

You want to learn how to play the guitar. You buy one and enroll in an online course. For the next several weeks, you spend all your spare time on this new and exciting hobby. Then, several months later, something happens. Something work-related or family-related or financial or purely accidental. It could be anything. But it takes all your attention. And then, almost without noticing, a year passes and you realize that you haven’t picked up your guitar once.

Or something else happens. Something seemingly inconsequential but disturbing. You get a flat tire. Your pen runs out of ink. You pour yourself a glass of milk, take a gulp, and spit it out because it’s sour.

Things go bad. Things wear down. Things fall apart.

There is a term in business that parallels entropy. It’s called “incremental degradation.”

Incremental degradation is what often happens when, for example, the leadership team tries to increase the bottom line by indiscriminately cutting costs.

The most common story told to illustrate this point is about an imagined food product containing, say, 27 ingredients. To reduce the cost of producing this product, the team decides to eliminate three of them and see if customers notice.

It turns out that they don’t notice. So, the team eliminates another three ingredients. Once again, they don’t seem to notice. But the third time the team tries to boost the bottom line by reducing the number of ingredients in the product, customers do notice.

Almost overnight, sales drop dramatically. Not by a small fraction but by 50% or more.

Because of how gradually the ingredients were withdrawn, the steepness of the drop doesn’t seem logical. But studies done on this phenomenon have proven that is exactly what happens. What’s more, they’ve proven that once customers have abandoned a once-favorite food product, the chances of getting them back – even if an attempt is made to add back all the original ingredients – is very small.

Understand Negentropy – the Opposite of Entropy – and Harness a Universal Force for Repair & Growth 

Scientists and mathematicians use the term “negentropy” (a portmanteau of “negative” and “entropy”) to refer to the difference between the energy and the potential energy in a system – which translates to efforts that can be made to keep things from falling apart.

When I consult with senior executives, incremental degradation is one of the first “laws” I teach them. I explain why the popular aphorism “If it ain’t broken don’t fix it” is a recipe for eventual failure. I then encourage them to employ a contrary practice – what I call “incremental augmentation.” Which is, very simply, the continual improvement of the quality of their product or service.

I look for examples of incremental augmentation wherever I go.

When I’m staying at a particularly nice hotel and they give me a welcome gift when I check in… or I’m impressed by a creative flower arrangement in my room… or by a clever design for a menu at the hotel restaurant… I make note of it and take a photo of it and send it to the director of Rancho Santana, our five-star resort in Nicaragua.

When I visit a botanical garden, I’m always on the lookout for something, anything, that I like and that we don’t have in our garden, Paradise Palms, in Delray Beach. When I see it, I make note of it and take a photo of it and send it to our property manager.

There are very few days that have passed since I started working in the direct-response publishing industry 40+ years ago that I’m not scanning my competitors’ publications and advertisements, looking for something that I can send along to people that can somehow make good use of it.

And in that time, I’ve discovered a few things worth mentioning.

1. Incremental augmentation applies to every sort of business and every sort of institution and organization – public, private, or non-profit – that I’ve tried it with. And it applies to every sort of product or service I’ve used it for.

2. When I first began employing this tactic – and it was years before I had heard of incremental degradation or had given incremental augmentation a name – I assumed that sooner or later I would exhaust all possible ideas for small improvements and enhancements. What I discovered was quite the opposite. The more ideas I found, the more new ideas I noticed or, in some cases, invented by putting two disparate ones together in some novel way.

3. Incremental augmentation is not only a limitless resource for negating the thousands of detrimental forces pushing against your success (many of which may be invisible to you), its power grows exponentially… just as the negative power of incremental degradation does. In other words, it has the power to suddenly grow your business by leaps and bounds when the market comes to understand how much better your products and services are than those of the competition.

Negentropy and Personal Wealth Building 

When I began to make more money than I needed to support my family, I also began to explore passive and semi-passive opportunities to increase my wealth.

These began with investments in stocks and bonds, then moved into rental real estate, then into extending mortgages and other private lending businesses, then into taking partial ownership of certain kinds of start-up companies (those that I understood and could control), and then finally into fun wealth-building activities such as collecting investment-grade art.

I’ve given you a brief account of how incremental augmentation helped me extend the lifespan of the businesses I’ve owned and run, while also expanding their value for my customers and shareholders. But I’ve learned that the same concept, applied creatively, works with the more general objective of building personal wealth.

One example: When, in or about 2010, I developed (with some expert guidance) a stock investing strategy based on some of Warren Buffett’s experience, I recognized that to equal what Buffett had done in the past, I had to tweak his strategy to reflect the current realities of the stock market. I did it by including a tranche of fast-growing social media businesses in my portfolio – but I selected them, with the help of my advisors, to reflect Buffett’s core concepts of market domination and “moats.” I also tweaked my strategy by replacing dividend reinvestment plans (DRIPs) with a reinvestment strategy based on value investing, which I discovered by simply understanding DRIPs better and more deeply than I had before.

These incremental augmentations of a strategy that had already been proven to work resulted in the Legacy Portfolio, which is now almost 15 years old and has outperformed the market, both in terms of higher ROIs and considerably less volatility.

I used the same approach in my real estate investing. When I began buying small, single-family houses, I followed the rules of that industry. But I was always looking for ways to earn better ROIs by improving the deals I made, the properties themselves, and the quality of service provided to renters – which paved the way for gradually higher rent increases and fewer maintenance and repair costs. I did the same thing when I began investing in larger commercial and residential and resort properties.

On another level, I put this idea to work in my general approach to wealth building by consciously developing multiple streams of income through half a dozen market sectors, with the goal of eventually generating in each one of those sectors enough to cover all my future financial needs even if all the others failed for reasons I could not control or understand.

That, too, I’m happy to tell you, worked. Not with every one of them. And some worked better than others. But three hit the mark, and the others are still sound and profitable.

I see this concept of developing multiple income streams as a conscious exercise in negentropy. It is grounded in the very real fact that entropy affects every business and investment asset class. And if you try to pretend otherwise – that your one core source of income will always be there for you – you may very well wake up one day and discover that you are getting poorer instead of richer!

For someone beginning their wealth-building journey, success can seem monumental and impossible. But really, it just needs to be built by one incremental augmentation at a time. Not by comparing how far you are from where you want to be but by focusing on the next small thing you can do.

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From SC: “I have a question for you…What’s holding up the collapse?” 

“For a long time now, I’ve been reading very cogent, lucid, and compelling warnings about the IMMINENT economic disaster ahead because of our massive national debt. Not only from essays by you, Bill Bonner, Doug Casey, et al, but from mainstream and not so mainstream media as well.

“I need no convincing. The arguments make every bit of sense to me. But I’ve been reading about this ‘imminent’ disaster since Reagan almost tripled the national debt. We’ve also heard the same warnings after debt increases by every president since then!

“So, here’s my question. WHAT’S HOLDING IT UP? This is not a wisecrack question. I really don’t understand why it hasn’t happened already. Is it the economic activity and growth that arises from all the borrowing? Is it possible that the debt is nothing more than red ink on a piece of paper? What and when, exactly, is the ‘breaking point?’”

My Response: I’ve been hearing predictions of another financial Armageddon since 1983, when I first got into the financial newsletter business. But just because something has or has not happened in the past does not mean it won’t or will happen in the future. The SEC reminds investors of that by making registered brokers and investment advisors state somewhere in every prediction or recommendation: “Past performance is no guarantee of future results.”

Let’s assume that I don’t contend that the Great Recession was a financial disaster of that magnitude. (Even though it resulted in a transfer of about $10 trillion from US middle-class and working-class households to the financial industrial complex and those that profit from it – the top 1%.)

Then, I’d agree with you: The case for the big reckoning – on the level of the Great Depression – has not materialized, despite the undeniably frightening facts and persuasive rhetoric.

What has happened in the past 50 years is a gradual but steady devaluation of the dollar’s buying power. Since the Nixon administration abandoned the gold standard in 1972, the dollar has lost 96% of its purchasing power.

That’s like two Great Depressions!

And that, according to economists (including the likes of Milton Friedman), is the primary reason why, in the past 50 years, the working and middle classes have become poorer while Wall Street and the top 1% have become exponentially richer.

All that said, and admitting that my knowledge of monetary theory and macroeconomics is very basic, I have two answers for you.

1. Since 1972, the Treasury Department and the Federal Reserve have had a responsibility they didn’t have when the dollar was backed by gold: to try to manipulate market prices to avoid hyperinflations and recessions by adjusting the Fed’s lending rate up or down (quantitative tightening and easing). Every country that has a fiat currency (i.e., a currency not backed by gold or, say, Bitcoin) has had to do the same thing. So, when it looks like the economy is slowing and heading towards a possible recession, the Fed lowers the interest rate, which makes it more attractive for businesses to borrow money and thus “stimulate” the economy. And when it looks like the economy is “heating up” and inflation (even hyperinflation) is a risk, they raise the rate to bring inflation under control.

The problem with this approach is that the government is required to balance its books every year. And when it spends more money than it has (the money it has comes almost entirely from taxation), it must borrow money from whoever wants to buy dollars. For decades after WWII, it was Japan and Germany. Then China became the US’s principal lender. Then hedge funds. This is why federal debt went from $400 billion in 1972 to $36 trillion today.

The US is the most indebted country (and economy) in the world, by a longshot. In a free-market environment (the environment in which Americans do business, earn a living, and buy things), the credit rating of potential borrowers determines whether money will be lent to them. Before you or I can borrow money from a bank or any lending institution to buy a car or a house or get a business loan, we must first prove that we are creditworthy. If we are not, we will not get the loan. (This rule was cleverly abandoned by unethical mortgage lenders and the government’s Fannie Mae and Freddie Mac in the years prior to the real estate debacle of 2008. It was that – lending billions upon billions of dollars to borrowers that were not credit “worthy” – that was the cause of the crash.)

If, then, increasing the debt by a factor of nearly 100 ($400 billion to $36 trillion) is a bad thing for the US economy – if it has turned us into the nation with the greatest debt in human history, even greater in relative terms than the Roman Empire’s before it collapsed in 476 – why haven’t we seen the predicted big collapse?

That brings me to my second answer…

2. Until very recently, countries that, for whatever reason, had a budget surplus and wanted to safeguard their money against economic risks such as inflation, had to buy dollars. The US government may have been sinking further into debt, but what choice did they have? After WWII, in the Breton Woods agreement, the US managed to contrive after-war policies, including the invention of the World Bank and the International Monetary Fund, to make the US dollar the default global security. (There is a great book – The Wealth of Shadows – that does a fantastic job of detailing this. See my review of it, above.)

And so, in 1978, when China changed its economy from a totally centrally controlled one to one that allowed for a substantial free market within it, and went from being the world’s poorest large country to the second-richest, it safeguarded all the trillions of dollars it was acquiring by buying US Treasuries. The same with Germany and Japan and a hundred other smaller countries that were producing budget surpluses. By 1972, the leaders of these countries had figured out the game. If they wanted to continue to grow their wealth by selling their cheap labor to the US, they had to buy the materials needed for that great economic expansion in dollars. And that continued until just recently.

What is different now is that half a dozen superpowers whose combined GDPs are larger than those of the US and England, France, and Germany decided that it was time to replace the dollar as the world’s global currency. China began the process by buying up gold. The second thing China has done was desist, as much as possible, from borrowing US dollars, and to pay for its needs using its gold stores (which further debases the strength of the dollar). The third thing China has done, along with oil-rich Arab nations like Saudi Arabia and with Russia, is move towards trade agreements that will allow them, as a group, to trade with one another using a new currency of their devising – probably a dollar-backed currency.

If they do that, the dollar will collapse. Big time. And the doomsayers will finally be right.

Here’s more info on why the dollar’s days are numbered.

As I said, I don’t consider myself to be an expert on macroeconomics or monetary theory. What I laid out above is what I came to after asking myself the same questions you asked me.

I’m publishing it here so I can be fact-checked by my readers who still believe that Maynard Keynes had it right. If they correct me, I’ll make adjustments. But for the moment, this is the only explanation that makes sense to me.

From PL re my recommended list of “how-to-succeed-in-business” books in the Sept. 3  issue: 

“Several of the books on your list definitely had a profound effect on my life. For instance, Think and Grow Rich and How to Win Friends and Influence People.

“Another one that dramatically changed my life but didn’t make your list was The Magic of Thinking Big by David Schwartz. It is the one that made me realize that what I needed to do was find something that I truly enjoy doing and have the courage to believe that I could get my slice of the pie. So, if you do happen to make an updated list, I thought I would bring this one to your attention for consideration.”

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"Were it not for hypocrisy I’d have no advice to give."
"Were it not for sciolism I’d have no ideas to share."
"Were it not for arrogance, I’d have no ambition."
"Were it not for forgetfulness, I would have no new ideas to write about."