Injustice in the Oldest Sport in America:

“Systemic Breedism” Exposed in the Westminster Dog Show 

“From the equality of rights springs identity of our highest interests; you cannot subvert your neighbor’s rights without striking a dangerous blow at your own.” – Carl Shurz

Longtime readers will not be surprised to hear that the longest continuously sponsored sport in the US is the Westminster Dog Show. It was established in 1877. Before the invention of the light bulb, the automobile, and the zipper. Before the building of the Brooklyn Bridge and the Washington Monument and the establishment of the World Series.

But what is not generally known is that since 1907, when Westminster held its first competition, 30% of the winners of Best in Show have been White Fox Terriers. And there has never been a single win for a Golden Retriever.

“This is a scandal that has been kept under the kennel floor for too long,” argued an editorial in The New York Pravda earlier this year. “Looking at the numbers over the years it’s impossible to deny that dog competition in America has been plagued by a history of egregious classism and breedism – with White Fox terriers winning 12 times and the Golden Retriever never winning a single time!”

For those readers unfamiliar with the lexicon of Breed Justice Theory, a new degree-granting major at Harvard’s Department of Canine Studies, here are some definitions:

Breedism: The belief that different breeds possess distinct characteristics, abilities, or qualities, especially so as to distinguish them as inferior or superior to one another.

Institutional/Systemic Breedism:  Policies, practices, or judicial judgments, whether intentional or not, that result in unrepresentative awards in dog shows, from local events to regional events and up to and including the supreme court of justice in canine recognition: the Westminster Dog Show.

There is also a third kind of breedism that is more hotly debated: unconscious breedism. This idea was popularized by The New York Pravda bestseller Terrier Fragility, which asserts that the only possible explanation for the exclusion of Golden Retrievers over the years is “an unrecognized prejudice against the Golden by judges and owners.”

Executives at the AMA and Westminster have argued that they are “breed-blind” when it comes to judging dogs. Their criterion is merit, and it is the breeders and handlers of the Golden Retriever over the years that are responsible for their poor performance in competition.

But as has been pointed out in the recent New York Pravda bestseller How to Be Anti-Breedist:

If you believe that all breeds are equal, then Golden Retrievers should be winning Best of Breed at least 30% of the time. But they haven’t. They haven’t even won once!  And don’t tell me it has anything to do with merit. First of all, the Golden Retriever is clearly one of the most beautiful, intelligent, and best-tempered breeds among the Canis lupus familiaris.”

We checked the facts. The author is correct:

For at least the last 33 years, Golden Retrievers have been the third most popular purebred dog in the US, after Labrador Retrievers and German Shepherds. Exact figures don’t exist, but experts calculate the total number of Golden Retrievers in the US at 500,000 to 750,000.

But according to the expert BJWs (breed justice warriors) that we consulted, the concept of merit is in itself a form of breedism. “Merit-based award systems are inherently breedist,” they say, “because they have historically lead to inequality of outcome in dog judging.”

They also assert that the problem began at the beginning, at the first Westminster show in 1907:

“The framers of the Westminster constitution were not the egalitarian dog lovers they represented themselves to be,” said Justice Seeker, founder of the Union for Breed Equality, based in San Diego, California.

“They were clearly biased in favor of terriers. In fact, they didn’t even consider Golden Retrievers as purebreds back then. Who won in 1907? It was a terrier bitch named Champion Warren Remedy that took Best of Show!”

I have to agree. These wonderful dogs of color (there are three shades of Golden) should have had their place on the podium after Labrador Retrievers and German Shepherds (numbers one and two in terms of population in the US). And White Fox Terriers should be lucky if they place tenth.

I have to acknowledge that this is a personal issue for me. I once owned a Golden Retriever. And I can tell you: Every time one of those privileged White Fox Terriers won Best of Show, it hurt me and Jefe – our Golden Retriever – to the bone.

Speaking of bones, last year a Golden Retriever did place second at Westminster. But that was clearly a bone thrown to the BJWs. This should not fool us. We cannot accept this sort of chicanery. We need to do something serious to end the inequality now. And the solution can’t be a matter of raising awareness (which this essay, I hope, has done). Nor can it be achieved by firing a few judges. No. We must go all the way to the rotten core of systematic and unconscious breedism. We must reimagine a new kind of dog show, a single dog show like Westminster, but with freedom and equality for all.

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Hydroxychloroquine and the Politics of the Corona Crisis 

“Just trust yourself, then you will know how to live.” – Johann Wolfgang von Goethe

In his earliest speeches about COVID-19, Trump downplayed the threat and up-played the hope that a vaccine or therapeutic drug would soon be available. On March 19, he mentioned one such drug specifically: hydroxychloroquine (HCQ). It’s a medication that has been used to treat malaria, rheumatoid arthritis, and lupus for nearly 70 years.

In his usual bombastic style, Trump talked about the drug as a miracle cure. That struck left-leaning politicians and media (LLP&M) as odd. “Why single out this one drug?” you could almost hear them thinking. “We know he’s an amoral narcissist who knows nothing about science or medicine. Something nefarious is going on.”

They launched an investigation and discovered that one of the stocks in the Trump family portfolio was none other than the company that makes hydroxychloroquine.

“Trump Touting Drug for Personal Gain!” the headlines read. But before the ink dried, pro-Trump politicians and media were doing their own research. They found that the shares held by the family had a value of just a few hundred dollars. The charge that Trump was pumping the stock was absurd.

With that salvo missing the mark so widely, the LLP&M fired a more targeted shot: “Trump is not a doctor!” they pointed out. “He’s an arrogant, ignorant businessman. How dare he promote an unproven medication!”

How dare he, indeed?

There could be only one answer. The RLP&M had to find evidence that HCQ is effective – i.e., that Trump was right.

And thus began a soap opera of misinformation that has continued non-stop.

Let’s look at some of the highlights:

On March 19, Trump announced that he was going to “fast-track” FDA approval of HCQ. He said that the drug had shown promise and that “it has been around for a long time, so… it’s not going to kill anybody.”

Two days later, he tweeted about HCQ again. This time, he cited a study conducted by France’s Aix-Marseilles University.

The study,  published in the International Journal of Antimicrobial Agents, looked at 42 patients that had tested positive for COVID-19. Initially, 26 took daily doses of 600 milligrams of HCQ, six took 600 milligrams of HCQ plus azithromycin, and the rest acted as a control group, getting a placebo only. Of the 26, one died and five others dropped out. So the completed study consisted of 20 on HCQ only, 6 on HCQ plus azithromycin, and 10 in the control group.

The results were encouraging. All of the patients treated with HCQ and azithromycin were free of the virus after five days. The 20 that took HCQ only recovered, but more slowly. The control group experienced more symptoms and even slower recoveries.

The researchers concluded: “Despite its small sample size, our survey shows that hydroxychloroquine treatment is significantly associated with viral load reduction [or] disappearance in COVID-19 patients and its effect is reinforced by azithromycin.”

Their conclusion was challenged almost immediately for being too small and too quick. One critic quoted by the LLP&M, Elisabeth Bik, questioned the peer review process, noting that it took only a few days, rather than months, which is typical.

On March 24, the major media published a story about a man in Arizona that died after ingesting a non-medication form of chloroquine phosphate in an attempt to avoid contracting COVID-19. Ignoring the fact that chloroquine phosphate is not HCQ and was never approved by the FDA, as HCQ was, the LLP&M jumped all over it, accusing Trump of promoting a deadly poison.

Nevertheless, on March 28, the FDA issued an emergency authorization allowing hospitals to treat COVID-19 patients with HCQ.

On April 10, a group of physicians published a statement expressing concern that using HCQ “might do more harm than good.” Three days later, a small study in Brazil noted that some patients taking high doses of HCQ had developed an irregular heartbeat. And then, on April 22, a retrospective study of 368 patients conducted by the Veterans Health Administration and published in the New England Journal of Medicine concluded that HCQ “showed no benefit for patients hospitalized with COVID-19.”

Again, this was widely reported by the LLP&M.

On May 11, HCQ and azithromycin were back in the news. JAMA (the Journal of the American Medical Association) published a retrospective cohort study of 1438 patients hospitalized in metropolitan New York from March 15 to March 28. The study measured mortality rates among four groups: one that was treated with HCQ only, another that was treated with azithromycin only, a third that was treated with both, and a control group that received no drug therapies at all.

The study found a lower mortality rate with the three groups that were treated with one or both of the drugs, but noted that the differences were statistically insignificant.

It was enough for the FDA to reverse its emergency use authorization and declare: “In light of ongoing serious cardiac adverse events and other potential serious side effects, the known and potential benefits of HCQ no longer outweigh the known and potential risks.”

This was widely reported in the LL media as proof that HCQ was not effective. It also gave Joe Biden the chance to put his presidential opponent in an ethical checkmate. Trump, he said, is pushing “dangerous drugs. Our country is now stuck with a massive stockpile of HCQ, a drug Trump repeatedly hailed.”

Well, the RLP&M wasn’t going to turn on their king so easily. They had their scientists look into the JAMA study and noted that it was neither peer reviewed nor scientifically sound. “They didn’t adjust results for variables such as disease severity, drug dosage, or when the patient started treatment,” Allysia Finley noted in a recent WSJ opinion piece.

In late May, the Lancet medical journal published a large-scale international study claiming that hospitalized COVID-19 patients treated with HCQ were 30% more likely to die than those not treated with the drug.

Again, this made headlines. But on June 4, a review of the study by 120 doctors and scientists said that it had “significant flaws in the data and methodology.” They pointed out that, in their conclusion, the researchers did not disclose that the patients had been given HCQ, on average, four days after symptoms had appeared. (Which, by the way, should not have been surprising since the protocol for HCQ called for using it before or immediately after symptoms appeared.) “It stands to reason,” the reviewers said, “that taking HCQ in the fourth day would be unlikely to work very well.” They also pointed out that the conclusion neglected to note that the same data showed that people that took HCQ within two days of exposure were 38% less likely to develop symptoms.

Shortly thereafter, the Lancet retracted its publication of the study, stating that not only was the conclusion questionable, but the researchers had refused to provide their raw data for inspection.

On June 5, the day after the Lancet’s publication of the study had been challenged, the University of Oxford announced that a midpoint review of their HCQ trial had found no clinical benefit. “This report should change medical practice worldwide,” the leader of the review proudly said at a press conference.

On July 15, Oxford released more information on the trial. It turned out that the patients had been treated with HCQ nine days after symptoms appeared – again, much later than the suggested protocol.

On June 30, the Journal of General Internal Medicine published a study which found that patients treated with HCQ at New York’s Mount Sinai Health System hospitals were “47% less likely to die after adjusting for confounding variables such as underlying health conditions and disease severity.” The patients had been treated, on average, one day after the onset of symptoms, and with a dosage that was three times smaller than the dosage used in the Oxford trial.

Another report, published July 1 in the International Journal of Infectious Diseases, found that patients treated with HCQ at Henry Ford Health System hospitals in Detroit were “50% to 66% less likely to die after adjusting for confounding variables including other treatments.”

And finally, an FDA safety review published July 1 reported 5 adverse side effects from HCQ among the tens of millions of doses that were distributed to hospitals as a result of their emergency use authorization.” In other words, HCQ wasn’t harmful to the vast majority of the patients that were treated with it.

So as of right now, the RLP&M are winning the chess game. The latest data suggests that HCQ may be an effective treatment in reducing symptoms if given early and according to FDA guidelines.

But the game isn’t over. In fact, the pace has accelerated. By the time you read this, there will almost surely be a report in the LLP&M on some new study that concludes that, no, HCQ is not effective and that Trump was and is a dangerous fool.

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The Pareto Principle, Part III:

Entropy and the Impossibility of Equality 

“If you don’t like something change it. If you can’t change it, change your attitude.” – Maya Angelou

Let’s talk about the Second Law of Thermodynamics…

The Second Law of Thermodynamics states that “the entropy of a system never decreases over time. Instead, systems evolve towards thermodynamic equilibrium, which is the state of maximum entropy.”

In layman’s terms, this means that everything in the universe has a natural tendency to fall apart. To become less structured and more chaotic.

And by ”everything,” I mean everything: the galaxies, the solar system, and the Earth. The Earth’s oceans and mountains, its countries and cultures, its denizens, molecules, atoms, and subatomic particles.

In our day-to-day lives, entropy is the reason that absolute order – in anything – can never be maintained. As James Clear, author of Atomic Habits, explains, there are simply so many more ways that things can go wrong than right:

“Imagine that you take a box of puzzle pieces and dump them out on a table. In theory, it is possible for the pieces to fall perfectly into place and create a completed puzzle when you dump them out of the box. But in reality, that never happens. Mathematically speaking, an orderly outcome is incredibly unlikely to happen at random.”

Entropy and Equality 

Let’s switch topics for a moment and get back to an idea that we looked at in Part I of this series. [LINK 7/13] I’m talking about the idea of equality and the current global movement to achieve equality in economics, governance, education, and even health.

When I was young, the campaign for equality was about the protection of equal rights under the law. The law was based on the Constitutional thesis that all men are created equal and are thus endowed with the unalienable rights of life, liberty, and the pursuit of happiness.

Today, the call for equality is very different. It is a call for equality in terms of outcomes. The logic is that inequalities in desirable circumstances – e.g., income or social standing – are inherently bad.

(Please notice that I am not addressing the “why” argument advanced by post-modern leftists: that the cause of inequality of outcomes is “systemic” racism and gender bias. We don’t need to address that for the purposes of this discussion.)

Question: How does this idea of equality – this ideal of equal outcomes – work in the real world? How does it fare in a discussion that accepts the validity of one of the most important laws of physics?

Answer: Not very well.

Let’s start with this…

Equality is about order. It’s about balance, aesthetic preferences, and, for many people, ethics: how things should be.

But from the perspective of the Second Law of Thermodynamics, it’s easy to see that it is an impossibility. Actual equality – in any form whatsoever – is a state that is contrary to that law. Nature is designed to destroy it. Its chances of existing in any system (anything, anywhere) are one in a trillion. And if, by chance, some state of equality occurred, it would be dissolved in a nanosecond because of entropy.

As applied to wealth, equality is an idea that we may find appealing. We can, if we want, make it an ideal towards which to strive. But the effort, however great and sustained, will be futile. Because the universe, as I said, will not tolerate it.

Imagine wealth equality as an acre of landscaping – a patch of perfection that you create in a tropical jungle. If you worked 24 hours a day trimming, fertilizing, watering, and otherwise tending to every blade of grass, you might be able to maintain its perfection for a while. But the moment you took a nap, the jungle would reclaim its rightful domain.

Consider the many historical revolutions that occurred to (at least partly) establish economic equality. What happened with them?

In every single case, it was the same. The revolutionary leaders (who were mostly upper- or upper-middle class) replaced the former rulers (also mostly upper- or upper-middle class). Most of the wealth of the ejected class was claimed for “the people,” but stayed in control of the new rulers. A sprinkling of that wealth was dusted on the poor. (Which did them no economic good at all, as their numbers, as a percentage of the population, did not diminish.) The laboring class continued on as the laboring class. The big losers were usually the merchant class – the entrepreneurs that were responsible for the wealth that existed. They paid the bill. (No need to believe me now. I will prove it to you in a future essay.)

My big point is this: Attempts to equalize wealth have never worked. The inequality that was so unbalanced before the revolution was always – after a year or so – equally unbalanced after the revolution. The only difference was that some of the faces at the top changed.

Once again, the Pareto Principle :

This, of course, gets us back to where we started: the 80/20 Rule, a.k.a. the Pareto Principle.

We have established that in virtually every free market economy (and even most controlled economies), there is an inequality of wealth ownership/control that is roughly 80/20. And we have wondered why that is.

My idea is this: Pareto’s Principle “works” because it is aligned with the Second Law of Thermodynamics, one of the most universal principles of physics. The Pareto Principle is, in fact, a mathematical ratio that roughly describes the natural state of entropy.

Put differently, the Pareto Principle tells us that with respect to wealth, the universe wants there to be an imbalance that is roughly 80/20. And that, however much we try to equalize wealth through legislation and economic incentives, nature will do everything it can to achieve this preferred equilibrium.

So what? 

You may find my little proposition repugnant. The notion that inequality is nature’s preference rubs against the grain. It argues with your better instincts. You want to dismiss it out of hand. You find it absurd.

I get it. But I think the evidence is on my side.

Two questions I’ve been trying to answer since I got on this train of thought:

1. Why would nature want entropy to be the standard? Why would the universe be designed to move from order to disorder? It seems like the wrong direction.
2. If the universe is programmed to move towards disorder, why do people keep trying to create order? Why do we continue to try to improve our lives? Why are we always trying to make everything better?

For the moment, I have only two weak answers to these questions.

Why is the universe falling apart? It’s not really falling apart. It’s expanding. Falling apart is how it feels when you are a tiny part of it. For you, things are always out of order. But for the universe, things are moving as they should – outward.

Why do we keep trying to create order out of chaos? Why not just give up and go with the flow? Because it’s just the way we are. Homo sapiens is a peculiar animal. It is 99% the same as all other animals, but 1% different. And that 1% has to do with our undeniable and unstoppable instinct to change and improve things.

Whether it’s a question of how we find shelter or feed ourselves or protect ourselves, the history of Homo sapiens is the history of one of 100 million animals trying to create change.

And that, to me, explains the current ideal of equality in the US. Since the old standard of equality under the law has been largely attained, social justice warriors now are clamoring for a new standard: equality in outcomes. Today, if you are some version of a thinking ape and equality is your subject matter, you are being pressured to advocate for this change… regardless of whether it makes any sense in terms of the Second Law of Thermodynamics or the Pareto Principle.

It’s not going to work. But you can try. And if you do, you will likely feel virtuous – righteous and morally superior.

If you try very hard, you may be able to change the wealth inequality ratio from 80/20 to 70/30 or even 60/40. But remember this: The new equilibrium will last only for a brief moment in time. Because the very second you achieve that bit of change, everything in nature, including the people you are “trying to help,” will begin the relentless move back to nature’s comfort zone. Which, thanks to Vilfredo Pareto, we understand.

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“The way is long if one follows precepts, but short… if one follows patterns.” – Lucius Annaeus Seneca

The Pareto Principle, Part II:

A Universal Law That Even Applies to Business 

The Pareto Principle would be a significant contribution to learning if it applied only to economics. But as I said in Part I of this series, it applies to just about everything. Whenever and wherever you measure resources or the relationship between cause and effect, you’ll find this lopsided distribution.

A few examples:

* 80% of taxes are collected from 20% of taxpayers.

* 80% of government spending goes to 20% of its expenditures.

* 80% of new technology is patented by 20% of technology companies.

* 80% of the drugs approved each year are made by 20% of the research labs.

* 20% of criminals commit 80% of all crimes.

* 20% of drivers cause 80% of all traffic accidents.

* 20% of factories produce 80% of the pollution.

* Through the 2015-2016 NBA season, 20% of franchises won 75.3% of the championships.

I could go on, but you get the point. Economics. Science. Human behavior. Sports. In playing with his pea plants, Vilfredo Pareto seems to have discovered some sort of universal pattern.

We’ll look into the philosophical implications of this on Friday in Part III. Today, let’s take a look at how the Pareto Principle applies to something very practical. Let’s talk about business.

Understanding business through the 80/20 lens 

I don’t remember exactly when I first read about the Pareto Principle, but I’m certain I did not grok it early in my career. It wasn’t until I was running a multimillion-dollar company in which I had secured a profit share… and there’s a good reason for that. There’s something about aligning one’s interests with those of the business that makes such insights invaluable. It is immensely helpful in analyzing problems, understanding challenges, and making important decisions.

Since then, I’ve written about the 80/20 rule many times. And now that I think about it, I can say that the Pareto perspective was responsible for all of my bestselling business books, including Automatic Wealth and Ready, Fire, Aim.

There are so many examples of how the Pareto Principle applies to business:

* 20% of a company’s salesmen produce about 80% of its sales.

* 20% of a company’s customers/clients account for 80% of the purchases made.

* 80% of all customer complaints come from 20% of the customer base.

* 80% of customer complaints are related to 20% of the company’s products.

I could list hundreds.

But there are three categories that stand out:

1. The 80/20 rule in product development 

If you look at almost any business, you will find that about 80% of its revenues come from only 20% of the products sold.

This seems obvious to me now. It’s almost a bromide. But it was a revelation when I first figured it out.

At the time, we had about 20 product lines and were doing about $20 million in revenues, with average revenues of $1 million per product. I was well aware that some products performed much better than others. But until I looked at our sales from the Pareto perspective, I didn’t realize how lopsided the distribution was.

Sixteen of our products generated sales of $5 million. They averaged just $312,500 each. The rest of our sales – $15 million worth – came from just 4 products. An average of just under $4 million each.

The imbalance was much more extreme than I would have guessed. But it allowed me to understand, instantly, that my habit of giving equal attention to all of our products was a big mistake.

The cost of producing and marketing each product was about the same, but the revenues were so terribly uneven. It was easy to see that we were basically losing money on 80% of our products and making huge profits on just 20% of them.

If profits were the lifeblood of a business (and they are), why was I not giving 80% of my time and attention to the 20% that would yield 80% of our profits?

We had ben dividing our marketing resources equally among the products we were selling. After understanding the Pareto Principle, we directed 80% of those resources to the top three or four. That resulted in a much faster-growing customer base, and, subsequently, higher revenues and profits.

2. The 80/20 rule in customer spending 

After learning that lesson, I began to apply it to every other aspect of our business. One challenge had been the issue of customer lifetime value.

In our industry (information publishing), we measured our long-term success by renewals. The average first-year renewal rate was about 20%. It was generally accepted that if you could raise it by increments – to about 50% in the second year and 60% thereafter – you could grow the business.

Then one day I met a man named Jay Abraham who had a crazy idea he was peddling about what he called “the back end.” The idea was that instead of trying to boost our renewal rate by increments, we could do much better by immediately selling existing customers more expensive versions of what they had already bought. If, for example, they had spent $39 for a newsletter on executive productivity, we could sell them a special report “on the backend” written by an expert on the same topic for, say, $79.

I got it instantly, because I was thinking in terms of 80/20. I was pretty sure that 80% of our existing subscribers would never buy a more expensive back-end product, but that 20% of them would. And the first test we did – selling an information product for hundreds of dollars – more than verified that. It blew us away! (Today, the same sorts of back-end information products often sell for thousands.)

3. The 80/20 rule and the people you depend on to make your business grow 

Those two applications of the Pareto Principle made me a better at developing products and marketing them. But I’m most excited about a realization that came late in my career.

I was thinking about the writers, editors, publishers, copywriters, and marketers I had worked with, and it occurred to me that Pareto’s Principle applied to them as well: A relatively small percentage – maybe 20% – had been responsible for the great majority of the business success I had witnessed.

I should qualify that. Building a business is a collaborative effort. Dozens or hundreds of people are involved in getting the work done.

But it would be naïve to pretend that everyone is equally responsible for its success. There is always a small number that stand out clearly. They work harder. They think harder. They never run away from a problem. They never hide a mistake. They treat your business as if they owned it. In the skyscape of any company’s employees, they shine where the best of the others only glow.

Although money matters to them, these superstars are not motivated by it. Nor are they motivated by the desire for approval. They are unique. They are rare. And they are worth their weight in gold.

Based on my observations, if you are very lucky, 20% of your employees will be superstars.

Something to seriously consider.

I’ve heard it said that the Pareto Principle is the best-kept secret in business. That’s difficult to believe if you are familiar with business literature. There are literally thousands of articles, essays, and manuals written about it every year.

So, no, it’s not the best-kept secret in business. But it is routinely ignored. I’m not sure why that is, but I do know this: If you pay attention to the Pareto Principle in your business, you will be glad you did.

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Pareto Principle, Part I: The Secret of the 1%

“Give me the fruitful error anytime, full of seeds, bursting with its own corrections.” – Vilfredo Pareto

It may be the most important idea in economics – but it also applies to science, to sports, and to human behavior. It explains not only why things are the way they are, but also why, no matter how you try, it’s almost impossible to change them.

Welcome to a series of essays on the Pareto Principle!

As you can surmise from that introduction, I have a lot to say on this subject. And lest you think it’s going to be episode after episode of longueur, I promise to focus on ideas you haven’t heard before.

Today, I’m going to tell you how the Pareto Principle relates to economics generally and wealth inequality specifically. I’m going to show you why every modern economy in the world is subject to it. And I’m going to present a new principle derived from it – the Masterson Mandate – that explains the phenomenon of “the 1%.”

In Part II of this series, I’m going to talk about how it applies not just to economics but to virtually every aspect of life. I’ll explain, in particular, how helpful it was for me to understand its business implications.

In Part III ,I’m going to try to connect the Pareto Principle to the second law of thermodynamics. I’m going to argue that it is a layman’s explanation of how entropy works – and how every form of human achievement is a sort of futile attempt to defy the universal and inevitable drift towards chaos.

How’s that sound?

A bit of history… 

Just before the turn of the last century, an Italian economist named Vilfredo Pareto published an essay in which he observed that 80% of the land in Italy (the primary form of wealth back then) was owned by 20% of the population. This ratio, he asserted, was not unique to Italy. It was roughly the same for all the European countries.

And it was true not only of wealth but of income. In researching English tax records, for example, he found that there was a similar (though not quite as severe) imbalance: About 30% of the population made about 70% of the national income.

Looking at other economic factors, Pareto found the range of ratios: 70/30, 80/20, and 90/10, with the average being about 80/20. He pointed this out in his first essay, published in a French economic review, and in several later publications.

It is hard to imagine that he was the first to make this observation, but he gained worldwide fame for it, and his name has been associated with the phenomenon ever since.

When you consider the diversity of cultural and economic conditions in Europe during Pareto’s time, you wouldn’t expect wealth and income to be distributed so similarly. It was surprising when he wrote about it, and it’s still true today. According to a 1992 United Nations Development Program report, 20% of the world’s population controls 82.7% of the world’s wealth.

What’s happening here?

How is it possible that for more than 100 years economists have seen this grossly uneven distribution of wealth in every industrialized economy?

There have been several hypotheses, but the one that has the most support is something that academics call the “Accumulative Advantage.”

It goes like this: In any random population, some percentage of that population has an economic advantage. It might be inherited wealth. It might be family connections. It can be luck – being in the right place at the right time. Most commonly, though, it is education.

Of those that have such an advantage, a percentage of them put it to work. Even if the advantage is relatively small – say, having a master’s degree rather than a bachelor’s degree – it is enough to move those that have it forward.

By continuously applying that advantage over time, the advancements become larger. Eventually, they become exponentially larger. After a generation, the difference can be enormous.

A new look at a very old problem 

It’s hard to find an economic topic that has been hotter in the past 10 years than “wealth and income inequality.” Everyone seems to agree that it is a grave problem that in some places, such as the US, is getting worse.

In these discussions of economic inequality, however, the Pareto Principle is rarely invoked. Instead, the discussion focuses on the concern that so much of the wealth is owned or controlled by a mere 1% of the population.

It’s a legitimate concern. The top 1% own a vast amount of wealth compared to the 99%, and the gap between them is getting larger.

But when we look at wealth inequality through the perspective of the 1% versus the 99%, we are making a serious mistake. The fact is, the widening wealth gap is not just between the 1% and the 99%. It’s between the 20% and the 80%. In other words, the wealth gap is a Pareto problem – the same problem we’ve had for at least 130+ years, and quite possibly forever.

How to explain? 

Let’s assume for the moment that the 80/20 ratio is a universal economic law – that, no matter what you do, economies will reconstitute themselves to put 80% of the wealth in the hands of 20% of the population.

If that is the natural order of things, what is the percentage of wealth that the 1% would “naturally” own?

This seems, at first, to be an easy bit of arithmetic. One percent is 5% of 20%. So if the 20% own 80% of the wealth in any given economy, the 1% should own 5% of that 80% – or 4%.

Right?

Maybe. But what if the Pareto Principle worked within the 20%? What if the top 20% of the 20% owned 80% of what the 20% own?

In that case, we would look first at the 4%, not the 1%, because 4% is 20% of 20%. So the calculation would be that the top 4% of the general population should own 80% of the 80% or 64% of the national wealth.

Do you follow?

I’ll do it again…

Let’s call this new theory – that the Pareto Principle is regressive – the “Masterson Mandate.” The Masterson Mandate suggests that 20% of the 20% (or 4%) should own 64% of the wealth of the general economy.

Twenty percent of 20% is 4%. If 80% of the world’s wealth is owned by 20% of the population, then 20% of that 20% – or 4% – should own 80% of the 80%, which is 64%.

Okay. One more time: 20% of 4% is 0.8%, and 20% of 64% is about 12.8%.

Now to the 1%… 

What is 1% compared to 4%? It’s 25%. That’s not 20% – but since the Pareto Principle is not an exact ratio, we are going to accept the 25% as consistent.

We said that the Masterson Mandate would suggest that 4% of the population would own 64% of the wealth of the larger economy. It would also suggest that 25% of the 4% (or 1%) would own about (a bit more than) 80% of that 64%. Eighty percent of 64% is about 50%.

Holy cow!

The Masterson Mandate suggests that the natural state of things is that the top 1% of any economy should own 50% of the economy’s wealth.

In the US, the top 1% owns 40%. Does that mean they haven’t yet acquired their “natural” share? Does it mean that the wealth gap should continue to increase?

Alas, I cannot answer these questions right now. I only this moment came up with the Masterson Mandate. It will require further study.

More coming…

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“I’m not sure this business is for me,” he said.

“Why is that?” I asked.

I’d been mentoring TJ, the son of one of my partners, for about a year. I was helping him develop a small business that I’d started the year before. His initial motivation had flagged a bit in recent weeks. I wanted to know what was bothering him.

“I just don’t see any way it can make me a billionaire.”

“A billionaire? Why do you want to become a billionaire?”

He proffered a few unconvincing answers. Finally, he told me the truth: If he was going to go into the business, he said, he felt he needed to surpass his father’s success. At the time, his dad was worth hundreds of millions of dollars.

“Man,” I said. “That’s a heavy burden.”

Wealthy Is Not a Number 

Self-improvement books and magazines are replete with the same advice: When it comes to setting any goal – especially a “get rich” goal – make it big and make it specific.

When I first began thinking about building wealth, that idea didn’t occur to me. Today, looking back, I’m glad it didn’t. As I see it now, there is only one minor benefit to that kind of goal setting and many major downsides.

First: Really big goals, like “becoming a billionaire,” are statistically as realistic as deciding to become an NBA MVP. If you are amazingly talented, extraordinarily hardworking, and incredibly diligent, you might be able to bring your chances of success up to one in ten thousand.

Second: Since your chances are so infinitesimally small, the likely result is that you will be seen by virtually everyone you share it with – whether it be your family, your friends, your potential partners, or your employees – as a nutter.

Third: You are defining a career of failure. From the moment you set the goal to the moment you give up on it (or die), you will be living as a wannabe. That is not good for the ego.

But it’s not just the bigness of a billion dollars that was wrong with TJ’s goal. Again, I know that most self-improvement pundits say the opposite. But specific numerical goals will give you only the briefest satisfaction if you achieve them, followed by another long, frustrating period of chasing some new, more ambitious number.

Numerical objectives can be very helpful in trying to achieve (or motivating others to achieve) specific short-term objectives. But for the big things – like life satisfaction – they are useless and even counterproductive.

The moment you achieve them, you experience about 24 hours of exhilaration. After that, the good feeling is replaced by an anxiety-ridden ambition to reach a new goal.

When I started to make “decent” money, I set my first specific financial goal: to pay off my mortgage, which was about $150,000. I did that fairly quickly – within 18 months. As soon as it was taken care of, I set another goal: to put aside a million bucks in savings. I achieved that goal the following year. But by that time, I was thinking about selling the house I finally owned free and clear and buying another one that was five times more expensive and would require me to get another mortgage.

Something similar happened every time I set a specific financial goal. Two days of fun – the first day and the day I hit my goal. And in between, months or years of angst and obsession.

Then, sometime before my 50th birthday, I had a conversation with a friend that helped me jump off this vertiginous mental merry-go-round. It led me to a simple idea that changed my life. Maybe it will have the same effect on you.

The idea is this: Don’t strive to attain a certain amount of wealth. Strive, instead, for the feeling of being wealthy. 

It’s a bit trickier than it sounds.

When I say the “feeling” of being wealthy,” I don’t mean the way you might feel when you picture yourself owning the things that are usually associated with being rich – the houses, the cars, the yachts, etc. I mean the way certain experiences make you feel.

For me, the feeling that I had always associated with being rich was having a sense of ease and independence and possibility. And the experiences that gave me that feeling were such simple things as having a drink in the lobby of a beautiful hotel… reading a book on a comfortable chair in a library… or smoking a cigar on a walk on the beach.

Having identified the feelings that I associated with being rich, it was easier to give up the desire to keep hitting higher financial targets.

I realized that I didn’t have to pay off my mortgage to be happy, I just had to be on the way. I didn’t have to have a million or a hundred million in the bank. As long as I had enough to pay the bills, I could have all the relatively inexpensive “rich” moments I wanted.

I wrote a book about this, called (unimaginatively) Living Rich. The premise was that if you pursue the feelings of being rich rather than some specific financial goal, you will find that you will be able to feel rich while you become rich.

As I said, this was an idea that changed my life. It did not change me immediately and 100%, but it gave me a way to think about my life that put everything into focus. Decisions were easier to make. Mistakes were easier to admit to. Urges and impulses were easier to resist – especially those tied to the ambition of making more money.

If you have specific financial goals that are stressing you out, this is something you might want to think about.

Start with the best moments of your life – the times when you felt like “This is what it’s all about.” If, like me, they were about simple experiences, you will probably also associate those experiences with the sorts of feelings I have described. And if that’s so, welcome to the don’t-worry-be-happy club.

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“The most reliable way to forecast the future is to try to understand the present.” – John Naisbitt

Investment Real Estate Outlook for the Rest of 2020 and Beyond 

On Sunday, I briefly answered a question sent in by P.J., who asked: “What do you think about real estate, given what seems like an inevitable recession and possibly worse?”

I explained that I am concerned – very concerned – for two reasons:

1. The economy – the real economy, not Wall Street – is in serious trouble. We have huge unemployment and record levels of small businesses shutting down for good. That’s bad for a good swath of real estate: all the buildings that cater to smaller businesses.

2. The extended shutdown has given tens of millions of American workers and thousands of companies the opportunity to experience business with an office-less office. We’ve learned that so much of what was being done in the office can be done just as well remotely. We’ve also learned how convenient it is to have everything we consume – food, clothing, toys, entertainment, etc. – delivered to our homes. This has already had a huge impact on the way we work and live. I’m expecting to see more employees working from home and less office space leased per dollar earned.

These two realities are definitely going to affect the real estate market. So today, I’m going to give you my off-the-cuff thoughts on what those effects will be.

The Real Estate I’m Worried About 

 High-End Shopping Centers 

Three of my book club friends have made their fortunes developing large-scale, luxury shopping centers and strip malls. They are partly retired now, so I suspect their current positions in these properties are limited. But I’m going to ask for their thoughts at our next meeting. If I owned a lot of that kind of real estate now, I’d be worried.

Class-A Office Buildings 

 During an extended recession, many businesses are forced to cut down on all non-vital expenses. Given this, and considering what I said about so many people working remotely, I would not like to own a lot of such buildings right now. I am not predicting a collapse of this kind of property. But if the economy stays sluggish and GDP stays low, we will likely see steeply dropping ROIs as tenants do not renew their leases.

Luxury Single-Family Homes

I have another friend that’s been doing quite well building and selling million-dollar homes for the last 10 years. This has been a side business for him, but it’s netted him a profit of about $500,000 per home. At breakfast recently, I asked him how he was doing. “I was between houses when this thing started,” he told me. “I’m not going to do anything until the economy starts moving again.”

High-End Residential Developments

From about 1990 to 2004, I was a regular investor in a friend’s residential real estate developments. He built and sold 100- to 400-unit developments at $400,00 to $600,000 a door. And even though those units are worth more than a million each now, I wouldn’t invest a dollar in a new project like that today.

Other Luxury Properties

I just spoke to a guy that wants to build a $32 million, super-duper sports complex here in Delray Beach. He sent me the brochure. It looks amazing. He’s going to ask me if I want to invest. I’m going to say no.

Middle-Level Commercial Properties

If Class-A commercial isn’t appealing, Class-B commercial is even less attractive today. My experience with that kind of income property is that it is much less resilient than residential properties during a recession. You can keep your houses and apartments rented during economic slumps by simply lowering the rent. You can’t do that with middle-level commercial properties. They can sit unoccupied for years.

The tenant in a commercial building that I own in Delray Beach has been asking me to sell him the building for more than five years. I was getting a great return on this investment, so I wasn’t interested. Yesterday, I signed it away.

Hotels (and Motels)

What have I forgotten? Oh, yes, hotels! That’s an easy one. If I were invested in hotels, I’d definitely be worried today… Hey, wait! I just remembered. I am invested in hotels – at least a half-dozen of them through my brother. So I am worried! But for him, not me. Since I’m a limited partner in these properties, my potential losses are limited to my original investments. But as the general partner, he’s on the hook. Big time. Right now, he’s jumping through hoops to keep the doors open. He’s doing a great job of that, but if occupancy drops by, say, 50% for the next several years, things could be bad.

REITs? 

 I don’t own REITs (I don’t think), because I own so much property directly. But if I had a significant position in REITs, I would want to check the sort of property they were holding and measure it against the concerns I’ve mentioned above.

The Real Estate I’m Not Worried About 

Working-Class Apartment Buildings

I’m not worried about the apartments I own in working-class and middle-class neighborhoods. The rent rolls would probably go down in an extended recession, but not hugely, because new construction would come to a halt. Since my total debt load on those properties is less than 5%, I’m confident I’ll be able to maintain them even at a rent reduction of 50% or more. Plus, the asset value should return when the economy returns.

Company-Occupied Office Buildings

I’m not at all worried about my investments in the dozen or two office buildings whose tenants are companies I own or control. These have always been my favorite properties because my partners and I can control the rents and mandate payments. Plus, most of these companies are in the digital-information business, which has not been badly affected by the Corona Crisis and will probably do okay going forward, even if we enter into a period of economic doldrums like we did after 2008.

That said, I just put a $14 million project on hold in Delray Beach because my partners and I want to see what happens with the economy and our local businesses before moving to the next step (construction).

Land Banking

And finally, I’m not worried about the properties I’ve bought over the years for “land banking” purposes. These are well-situated lots and acreages that provide no income but cost very little to maintain. Since they were always long-term plays – and by that I mean 20 to 50 years – I’m not sweating about them now.

What All This Amounts To

I believe that many parts of the real estate market are going to be hurting over the next few years – principally, the high end.

I believe there is a good possibility that the shift towards working at home will continue, and that will temporarily drive down income from office buildings and reduce the size of that market over the longer term.

I have the same long-term concerns for high-end and even middle-level retail real estate.

But even though my partners and I have had some rent deferrals and vacancies in our residential properties, I’m not worried about those investments because of the safety margins we operate with.

When it comes to investment real estate, I’ve always been very conservative. I invest primarily for income (not growth) in income-producing properties for which there will always be a demand. And I use leverage (mortgages) on a temporary and limited basis.

My formula is not optimal for increasing wealth in an up market. But it is good for reducing my exposure to a long down market.

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 “Gratitude is merely the secret hope of further favors.” – François de la Rochefoucauld

The Unpleasant Truth About Asking for Favors

I recently intercepted a memo from a partner of mine. It appeared to be a nothing-much memo regarding a not-all-that-important request for a favor from a business associate – but I intervened because I thought it could ultimately be damaging.

Mutual back scratching, as I’ve often said, is a big part of good business. All the successful business relationships I know of – at least the ones that last – involve a lot of back and forth. I do such and such for John, and sometime in the future he will reciprocate. If he doesn’t, I cross him off my list. Unless I’ve done him a foolishly big favor in the first place, losing my good will costs him more than he gained from my initial service.

It’s All About Give and Take

Smart businesspeople (those who think long-term) don’t demand an immediate quid pro quo. They are happy to let the credits add up by helping out where they can. But unless they are saint-like, they do keep a running tab in their heads. And when the time comes to ask for service in return, they expect it.

That’s the way it should be. And when businesspeople act that way, they prosper. Just as important, the products and services they offer tend to improve because of the exchange of information and technology. And this benefits their customers.

But not every businessperson is that smart. Many fall short when it comes to cooperation in general and favors in particular. If you randomly selected a dozen business owners and lined them up against a wall, you’d find a considerable range of enlightenment as far as cooperation is concerned.

And that’s why you have to be careful when you ask for favors. Because the person from whom you are requesting the service may not think of it the same way as you do. Such was the case with the favor my partner was about to ask in the memo I intercepted.

The favor was for the other company to do some printing and mailing for her – things she would have been happy to do for them. What I think she failed to understand was the reaction her request was likely to cause. I happen to know the people who run that business. I’ve worked with them for years. And though they are good people, they have a tendency (in my view) to overvalue their work and undervalue that of others.

There was another factor, too, that she failed to take into consideration. My partner’s view of the favor she was asking was somewhat distorted. Because she runs a smaller business, it would have been fairly easy for her to personally manage the printing of a job for them. But since their operation is larger, a similar task would have involved several people… and required checks and double-checks… with no organized way to account for the work done.

Between my partner’s honest misunderstanding of what she was asking and the tendency of those she asked to overvalue their contribution, trouble was brewing. They would have done what she asked, but my partner would have incurred a big “You owe me.” A debt she wouldn’t recognize. Which would have made matters worse.

My advice to her? “Take care of the printing yourself, even if it costs a little more. If you are going to ask for a favor from these folks, make it a good one – because in their eyes, any favor will be a big one.”

It’s too bad it sometimes has to be that way, but that’s life. You can’t expect everyone to see things the way you do, especially when it comes to valuing personal efforts.

My own policy is to help others as much as possible. Mostly what people want from me is knowledge or access. How to do something or an introduction to someone. When I’m asked, I generally give. But I almost never ask for favors in return. And I don’t keep a close count. I simply notice when someone is always asking, when the relationship has become a one-way street.

When that happens, I don’t drop them. I sometimes – rarely – refuse their request and explain why: that I think they are abusing our relationship. But most of the time, I take a softer approach and gradually become less and less responsive till the relationship dies out. I do that, I think, because I realize that people that are myopic in that way will never be able to admit the truth to themselves. They will, instead, consider my telling them the truth to be an insult they will not forgive.

There’s no advantage to causing hard feelings in those that you don’t plan to have anything else to do with.

The way I look at it, finding out the character of a person is worth something. And I’ll pay that price in advance. But I won’t overpay.

A greedy, self-centered person believes he can live a better life by taking advantage of others. What he fails to realize is that the people he dupes have memories. And influence. Eventually, his world gets smaller. He has very few friends. Fewer business colleagues he can count on. Little credit. And the high-pressure climate of the bad feelings he’s stirred up. He may have a considerable store of material things, but he doesn’t have the faintest idea how to enjoy them.

So do favors. Keep a rough count. And always keep in mind that the size of the favor is a matter of perception.

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Passion is a popular emotion these days. We are encouraged to be passionate about our careers, our hobbies, and even our ideas. Like most popular ideas, this one is mostly wrong. On the risk/reward scale, it ranges between dumb and dangerous. But there are some noteworthy exceptions.

One of them is art. Let’s talk about that.

Why It’s Okay to Fall in Love With Your Investible Art* 

“They say you cannot argue taste. Of course you can. It is one of the most rewarding conversations two people can have.”– Michael Masterson

When investing in real estate, it’s generally a bad idea to become emotionally attached to what you are buying. When considering the purchase of a rental property, for example, you should determine what to pay for it by studying market rates for “comparable” properties in the area, not by some subjective feeling about how “cute” the place is.

The same is true for stocks or precious metals or digital currency. Buying and selling decisions should be based on market metrics. Innumerable studies have shown that when investors fall in love with individual assets or asset classes, they tend to do poorly in terms of long-term gains.

It also makes sense for art investors – especially new and amateur investors. If you want to give yourself the best chance of getting optimum, long-term returns, you should make your buying decisions based on verifiable data, not on how much you love the piece.

That goes against the most common advice art brokers and dealers give their clients: Buy what you love.

They do this for two reasons:

When a buyer loves a work of art, he is much less likely to be critical of its value. It goes like this:

“I love that!” he exclaims.

“You have great taste,” the broker assures him.

“How much is it?”

“It costs $X. But it’s a great piece and a good value.”

So that’s reason number one. When the buyer loves a piece of art, it’s easier to sell it to him.

The second reason is that when an investor loves a piece of art, he’ll be more likely to keep it. His attraction to it was validated by the broker. (“You have good taste.”) And his decision to buy it creates what psychologists call confirmation bias. (He wants to believe he made the right decision.) So if, in the future, the investor discovers that the piece is worth less than he paid for it, he’ll be more likely to believe that the lower valuation is wrong than to question the integrity of the broker that sold it to him.

Does this mean that the art investor should never fall in love with the art he buys?

My answer is yes and no. Or, rather, no and yes.

You should not allow your love for a particular piece to influence the price you are willing to pay for it. You should, as I said, make that decision based purely on verifiable market data. But after you have bought a piece at the right price, you can fall in love with it. Because forming an emotional attachment to a well-priced piece of investment-grade art will work in your favor.

Let me explain.

When I buy investment-grade art, I am looking primarily for value. I’m looking to buy a piece that is priced at or below its current value – as determined by current auction prices for similar works by the same artist. It doesn’t matter whether I like it or not. My decision is based on the numbers, not on my feelings.

After the buy is made, I put my investment mind aside and allow myself to fall in love with the piece. And interestingly, most of the time, I find that I do.

Falling in love with well-bought, investment-grade art makes it more difficult to sell it when an offer is made. This creates a bias towards holding the art for a long time. And that is definitely the way to optimize your ROI as an art investor.

When I bought my first piece of investment-grade art, an oil painting titled Invierno (Winter) by José Clemente Orozco, I had a reasonable expectation that it would increase in value. I knew that Orozco was one of the three most important muralists of the 20th century, that his production of small oils was limited, and that the market for Mexican art was heating up.

But I also liked the image. The three figures, standing outside in the cold as if they were waiting for something, intrigued me. I liked the way the artist used quick, strong brushstrokes. I liked the somber hues.

I bought this painting in 1991 for $18,000. It’s been appraised by two of the major auction houses at between $125,000 and $150,000. That’s an average annual appreciation of 7% to 8%. But I wouldn’t sell it for twice that price because (a) it’s a rare piece (an oil painting by a modern Mexican master), and (b) it still makes love to me every time I look at it.

Let me give you another example…

I have an oil painting in my office by a Pakistani artist. I bought it almost 30 years ago from a neighbor who was in financial straits. He sold it to me for $3,000. He told me it was worth more than that. But since I didn’t know the artist, $3,000 was as high as I was willing to go.

I liked it immediately. It was a large, abstracted image of a woman seated under the outstretched hand of a man. The bodies were aqua green. The background was black. The way one figure curled around the other appealed to some tender part of me. And yet, the impression was almost stark. More like an etching than an oil on canvas. The artist’s technique – drawing into wet paint with the hard end of the brush – was new to me. I was smitten.

I didn’t know who the artist was when I bought it. And perhaps the man who sold it to me didn’t know either. Or perhaps he did but didn’t realize that he was a rising star. Several years later, he tracked me down and offered to buy it back for $5,000. I demurred. A year later, he called me back and offered me $10,000. This continued on and off until I turned down $50,000.

By that time, we both had done our research and knew its market value.

I could probably sell it today for $60,000 wholesale. Or retail it and try to get $90,000. But I haven’t the slightest desire to do so for the same reasons I’m holding on to the Orozco.

Had I invested $3,000 in a stock index fund back then, it would have been worth about $50,000 today. In this case, my emotional attachment to this wonderful piece of art has given me a profit of between $10,000 and $40,000.

One last example:

In 2008, I bought a large painting by the CoBrA artist Jacques Doucet from a dealer in Amsterdam. (See “Did You Know,” below.) I didn’t particularly like this piece at the time. Its gloominess was more than even my usually gloomy temperament could connect with. But it was a strong painting, and I felt that the price I had negotiated – $20,000 – was a good one. I bought it and installed it in our “entertainment” room, a largish room we use for parties.

In 2016, someone called my partner at Ford Fine Art and offered to buy it for $40,000, doubling my money in 8 years. That was a nice 9% annualized return. In fact, the offered price was at a  premium because the buyer “loved” the image.

Meanwhile,  I had fallen in love with that painting. I couldn’t bring myself to sell it. So I turned down the offer, and I’m glad I did. I’m happy to have that painting in my collection so I can enjoy it now. And I expect that it will continue to appreciate at 8% to 10% annually.

The point is this: When it comes to holding for the long-term, it is easy to do with investment-grade art because you do fall in love with it. But with stocks and bonds, it’s not possible to have the same attachment. Instead, you get emotionally attached to its pricing.

And that makes you a bad investor.

The financial industry understands this. That’s why brokers and the investment media bombard investors with the real-time value of their stock holdings. The moment a stock drops, the investor knows it. He sees that big red loss on his account statement. For most investors, this creates anxiety. And frequently, they rid themselves of that anxiety by selling.

But investment-grade art is less reported upon. Therefore, the value is less subject to the emotional whipsaws of investors (and computer-based investment programs). Prices change from year to year, not day to day. This reduces the ups and downs in valuations. More important than that is the fact that most art investors, like me, are reluctant to sell their art for decades.

I believe this is the main reason I’ve done as well as I have with the better part of my collection. And it’s the reason I recommend investment-grade art to anyone interested in investing in art.

Falling in love with it is not a bad thing.

You get to have your cake and eat it too.

* This series of essays gives you an advance look at a new book that I’m working on, based on my experiences over the past 40+ years as a collector and investor in fine art. 

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“Tradition has it that whenever a group of people has tasted the lovely fruits of wealth, security, and prestige, it begins to find it more comfortable to believe in the obvious lie   and accept that it alone is entitled to privilege.” –Steven Biko

Are You “Privileged”? Yes? No? So What?

“Privilege” is a hot topic today – around the dining room table as well as in the mainstream media. One thing that I’ve noticed is that the people that have the strongest feelings about it seem to have the most trouble defining it.

Merriam-Webster defines privilege as “a right granted as a peculiar benefit, advantage, or favor.” As in, “Driving, my reckless son, is a privilege, not a right.”

This, of course, is not what privilege means to those in academia and the media that have made it an integral concept in social commentary. Privilege in that sense is the idea that in America there are certain groups (i.e., white men and to a lesser degree white women) that are entitled to social, economic, academic, and health advantages that (a) they did not earn and (b) are denied to other groups (people of color, women, and the LGBTQ community).

If you listen exclusively to Fox News, you might think this is a novel form of radical lunacy. It may have become wacky in recent years, but it’s hardly a new idea.

In The Souls of Black Folk (1903), W.E.B. Du Bois wrote that while African-Americans were very aware of white Americans and conscious of racial discrimination, white Americans hardly thought of African-Americans at all. Nor did they think much about the effects of racial discrimination. The social privileges white Americans enjoyed, he contended, included courtesy and deference, unimpeded admittance to all public functions, lenient treatment in court, and access to the best schools.

There is no question that white Americans did indeed enjoy all sorts of privileges denied to black Americans at the turn of the 20^th century, when Du Bois published his famous book. The wackiness emerged in 1988, when Peggy McIntosh published an essay titled “White Privilege and Male Privilege.” In the essay, she listed 46 privileges that she believed she enjoyed as a white woman in the US. Among them: “If I need legal or medical help, my race will not work against me,” and “I do not have to educate my children to be aware of systemic racism.”

Her essay has since been credited with getting academics interested in the study of “privilege theory,” which includes the concept of intersectionality – i.e., that every individual has a mix of privileges and disadvantages depending on his gender, color, and sexual preference. Thus, a black woman has less privilege than a black man, and a black homosexual man has less privilege than a black heterosexual man.  And a white man… well, he sits on top of a stack of every social privilege there is.

One of the criticisms of intersectionality (advanced by the moral philosopher Lawrence Blum) is that its categories are too broad. It does not distinguish between Chinese, Japanese, Indians, and Vietnamese, for example. They are all grouped together as Asian-Americans, even though their relative economic, social, and academic success in America varies widely by group. (The same case is made with respect to black Americans by social philosopher Coleman Hughes, who notes the differences in advantages – i.e., achievement – by Caribbean blacks compared to African-Americans.)

Another criticism of intersectionality is that it is too narrowly focused. It does not include the obvious advantages of being good looking, for example, despite overwhelming evidence that physical beauty plays a major role in social, economic, and even academic achievement. Proponents of privilege theory also give a surprisingly low intersectionality “rating” to personal wealth, arguing that a wealthy black man or woman has less privilege than a poor white man or woman.

Also rarely discussed is being able-bodied and healthy – which anyone that lives a life so compromised recognizes as a huge privilege. And nowhere in the discussion is the recognition of perhaps the greatest privilege of all: having extraordinary intelligence.

It’s a messy area of inquiry, to be sure. And although it’s an easy concept to sell to college students, it’s much harder to get those on the higher end of the privilege scale to accept. (Especially if they are not particularly smart and well spoken, or if they are not, or were not, wealthy.)

Privilege theorists dislike having conversations about these sorts of privilege. They often argue that the mere mention of other privileges or disadvantages is invalid as it comes from people that are in some ways privileged themselves.

What they prefer to talk about is their views on a solution for social inequality – a solution that is usually a demand for advantages that are above and beyond what the privileged enjoy (e.g., preferential treatment in education, job placement, and social welfare assistance).

These are difficult conversations because there are all sorts of social inequities. And despite decades of legislation and trillions of dollars in funding, programs designed to fix the problem have failed to achieve their goals. In fact, the result has been greater inequality.

Still, one wants to believe that we can move towards a social environment where there is more equity in terms of such privileges. Or at least eliminate any actual institutional hindrances to people based on color, gender, or sexual preference.

So what can be done?

In a future essay, I’ll attempt to answer that question on a larger scale.

But on an individual basis, I think it’s fairly obvious that progress can be made, because it has been made. Virtually every proponent of privilege theory that is not a white man is proof of that.

What can you do? What can I do?

I think it starts with making an honest effort to recognize whatever privileges we have, as well as the ways – consciously and unconsciously – that we take advantage of them.

Here are 14 questions that might give you some insight into your own sense of privilege, regardless of your gender, race, sexual preference, income, etc.

1. What goes through your head when you see a police car behind you?
2. Do you feel underpaid and underappreciated at work – even though you are doing as well as your peers?
3. If you’re a Liberal, do you believe that your views on political issues are morally superior to those of Conservatives?
4. If you’re a Conservative, do you believe that your views on political issues are morally superior to those of Liberals?
5. Do you think a really interesting book could be written about the stories your grandparents/ great grandparents told about coming to this country and pursuing the “American Dream”?
6. Do you feel slighted when someone doesn’t remember your name?
7. Do you think it’s okay to cut in line because you are in a rush… as long as you smile and apologize?
8. Are you insulted when someone cuts in front of you… even if they smile and apologize?
9. In terms of your lifestyle, would you describe the coronavirus shutdown as (a) annoying, (b) devastating, (c) Shutdown? What shutdown?
10. In terms of your finances, would you describe the coronavirus shutdown as (a) annoying, (b) devastating, (c) Shutdown? What shutdown?
11. Do you believe that your children are gifted?
12. When someone who makes more money than you is paying the bill, do you feel justified in ordering a more expensive meal than you normally would?
13. Do you believe that your lack of success in life has been caused by circumstances beyond your control?
14. Do you believe that only a smugly privileged white male could have come up with these questions?

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