GaveKal Special (192 pages): Too Different For Comfort
Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More
When Lord Salisbury, the first British prime minister of the 20th century, was asked by Queen Victoria to consider a reform, he famously replied: “Change? Your majesty, aren’t things bad enough as they are?”
Of course, it is in the nature of conservatives to look askance at change. But sometimes, change is thrust upon us; and in that regard, turn of the century periods tend to be particularly traumatic. Think of a man who fell asleep for 30 years in 1790. Our sloth would have woken up to a very different world in 1820 (France was no longer the dominant European power, Britain was rapidly expanding her global reach, Spain had become a has-been, the United States was experimenting with a new form of government…).
The same is even truer for the man who fell asleep in 1890 and arose in 1920 to witness the end of the Austro- Hungarian, Chinese, Russian and Ottoman empires, the establishment of the USSR, the rise of Japan, the dominance of the United States. And the same is true today: someone who fell asleep in 1990 would likely be surprised to hear that Pentagon officials are now more worried about China (an economic and political basket case in 1990) than about the Soviet Union (which of course no longer exists); that Europe is going cap in hand to ask for loans from China, India and Brazil; that Iran may, after all, end up exercising ultimate political control over Iraq (remember that in 1990, Iran was left on its knees by the Iran-Iraq war).
In short, beginning of centuries tend to be ‘revolutionary periods’, with societies, political systems, and established values all undergoing deep and profound changes.
Now contrary to what Lord Salisbury implied, not all change needs to be negative; after all, life is a whole lot more comfortable and less gruesome today than it was one century ago for almost anyone, bar perhaps a few British aristocrats or Russian landlords. However, change that is misdiagnosed, misunderstood or miscommunicated can be highly destructive. The entire History of the 20th century, with the rise of fascism, communism, large-scale genocides, unprecedented loss of human life in large-scale wars, etc… testifies to this unfortunate truth.
And this is where the study of economics comes in.
Full PDF from GaveKal here http://ify.valuewalk.com/wp-content/uploads/2014/01/196179060-Too-Different-for-Comfort.pdf