In 1987, Levon Helm, a former cotton farmer from Arkansas, sat brooding in his yard, trying to describe why his apparent success had turned to near-bankruptcy:
“Well, it’s hard to put your finger on. You get behind financially and once you get behind financially, you seem to get behind spiritually. And your luck turns against you.”
Levon’s perception of his situation is a common one. He had become quite successful, but had never learned to understand more about economics than, “If you got it, spend it.” As a result, throughout his life, he repeatedly found himself in monetary difficulties. He habitually lived in the moment and didn’t invest much time analysing what his actions would need to be to assure a sound economic future. Unfortunately, his approach to his future is, to a great extent, the approach of the vast majority of people.
Let’s take his comments one sentence at a time:
“Well, it’s hard to put your finger on.”
In this comment, Levon begins by stating that he doesn’t really understand what’s happened to him. As someone who hasn’t given much thought into the subject of economic study, his personal outcome is a mystery to him—impossible to fathom.
“You get behind financially and once you get behind financially, you seem to get behind spiritually.”
He then relates a basic truth—that a by-product of financial decline is a spiritual decline. Morals are often compromised in order to survive the financial debacle and, frequently, a sense of emptiness and failure takes over.
“Your luck turns against you.”
In this last statement, he disavows any personal responsibility for either his monetary problems or any human action that he might have taken that could have corrected the situation, since the elusive and incomprehensible “bad luck” has taken control—a force that he believed he could not have overcome.
And so, Levon led a life of repeated success and loss, never learning that, from the outset, the course of his economic life was of his own making. Had he chosen to understand and anticipate economic events and adjust for them, he could have taken charge of his financial life. Instead, he became a casualty of those events.
Unfortunately, his entire problem could be defined as a lack of human action.
Recently, I was asked the question, “Once we know history, do we have any power to change it?” My answer is that, in a vast economic world, with hundreds of millions of players, some of whom hold exceedingly high levels of power, the odds of changing that history in any meaningful way is very slight. It can be likened to a man standing in the ocean, watching the waves grow in height, then come crashing over him. He might wish that he could control the wave action, but the odds of him achieving this are so slight that it’s a non-starter.
What he can do, however, is learn to surf.
When we observe waves, we’re most fascinated by the ones that grow to great heights, then come crashing down. And, in economics, we demonstrate the same excitement. We’re drawn to the prospect of a great economic build-up. However, just as in nature, economic waves always end and, the bigger the wave, the bigger the crash. Many people choose to stand back from the economic shore, where they’ll be safe, but will be unlikely to prosper. Others hope that they can somehow control the economic waves and cash in on them. In most cases, this leads to a repeating boom and bust pattern.
However, those who learn to surf have figured out that they, as individuals, cannot control the economic waves, but they can learn to ride a wave, watch it carefully to anticipate when it will crest, then back out before it breaks. They’re usually laughed at by their peers, as they’re the ones who sell just as the market is reaching its final, dizzying vertical ascent. However, by getting out early, they secure their wealth and will be ready and able to catch the next wave.
But this form of success can be taken further. The world is made up of some 200 jurisdictions. At any given time, some are advancing economically, whilst others have already crested and will soon come crashing down. The average investor will look around his immediate vicinity for a wave that’s on the rise and hope that he can benefit from it. However, those who think internationally have a tendency to examine many jurisdictions at the same time, seeking opportunities. Each jurisdiction will be different, with its own parameters. There will be multiple concerns: geographical location and accessibility, the level of stability of governmental leadership (even a very poor leadership, if it’s predictable enough, can offer opportunity), its laws (some countries being more restrictive than others), and the local economic climate. Each country has a unique combination of conditions and may therefore be advantageous to some types of investment, but no one jurisdiction will be the best for all types of investment. Some jurisdictions will be easier to profit in than others and each will have a different set of opportunities.
Those who internationalise are therefore the equivalent of a surfer who is surfing several beaches at the same time, picking the best waves to try to ride, then backing out of each prior to its inevitable crash. This diversification offers considerably greater opportunity for the investor than he could ever achieve in any one jurisdiction.
Of particular interest is the fact that each jurisdiction undergoes periodic change. For example, the rise of the Nazis in Germany would have suggested the removal of all investments there, to be transferred to, say, Uruguay, where greater economic and political stability existed at that time. Similarly, there might be some investments in the US today that could have a promising future, but increased socialism, increased warfare, unpayable debt, and the rise of a police state assure us that, in the near future, virtually all investment in the US stands to take a major hit. Therefore, the likelihood of success is limited. An investment in one of the countries that stand to become a net recipient when the US crashes take place would therefore be a more promising bet.
Those with foresight will generate speculation as to the prospects of Venezuela—currently nearing meltdown, but still retaining great natural resources that could provide great opportunity for those who plan in advance, and time their investments to take place after the dust has settled on the meltdown.
Any forward-thinking investor who has spent time in Cuba will say that there is immense opportunity there, but that any investment today would be very risky. The task at present is to continue watching Cuba so that when conditions become favourable for investment, we’re poised to act.
This is the opposite extreme of our friend Levon. He firmly believes that he doesn’t really direct his life. Life happens to him. He, in essence, is just along for the ride.
The choice for each of us is whether we wish to climb on the bus with him, avoiding taking responsibility for our lives, but also being collateral damage if that bus goes off the road, or whether we choose to employ human action. If we have the courage to choose the latter, we might also have the wisdom to learn to surf, and, beyond that, have the imagination to surf internationally.