Next door to history

Now in 3 cities in the world, I have seen the remarkable achievement of modern, dynamic people who sit comfortably with history that is many centuries old.

Walking through the streets of Athens many years ago, I remember being struck by the completely incongruous way in which a 6-month-old cafe would sit next door to a 2000-year-old statue. Every road, every plaza and every corner in the city had at least one relic of Greek history on it. The Greeks are very proud of their history, and I remember making friends with a young Greek man who was a bit of a philosopher, who felt that modern Greece had lost a lot of culture from ancient times – even the Greek language had shrunk since two thousand years ago. But I digress – Athens sits on history, in the midst of history, very comfortably.

London, too. Strolling through the streets of London, you see everywhere the ubiquitous ‘blue circle’ which marks that a person of importance, or an epochal event, happened there. The interesting thing is that though London is full of houses and buildings that have these blue plaques, that does not seem to deter the buildings from being fully functional, and (fairly) well maintained by the people who currently live there. And moreover, these old buildings – history oozing out, almost – sit comfortably side-by-side with modern architecture.

Now in Copenhagen, the same thing: in the center of the city, history – in the form of statues, churches, buildings centuries-old – is everywhere. Walking through the cobbled stones through plazas that seem to have existed forever, one gets the sense of ‘walking through history’ – of being, as it were, in complete harmony with the many generations that lived here many years ago.

And every time I look at these, I regret the shoddy way in which we have treated history in India.

It’s true that many of India’s big cities are new – Madras, for example, is only a couple of hundred years old, and so is Calcutta – both created by the British. That does not mean they have no heritage. But compare, for instance, Delhi – a thousand years of history in one city, no less than the Londns and Romes of the world. Or Madurai. Or Mysore. These are cities that are steeped in history, and you can still see evidence of their historical importance.

And yet, the Heritage movements in India are primitive compared to the rest of the world. Many different people have tried to bring a sense of historicity to the country, but the progress is slow. Every week there are items in the news about old buildings pulled down to build new and characterless structures, train stations, office blocks and hotels. There are even proposals to demolish the stately bungalows in Lutyens’ Delhi and replace them with offices that ‘utilize space more efficiently’. 

We cannot deny the need for space. However, the sadness is that in India there is no thought given to preservation of beauty. It takes very little more money and time to build a beautiful building instead of an ugly one. Why do we never err on the side of beauty? Is it because our architects are completely unequipped to build beautifully? I don’t think so. Perhaps it is because we grow up in the midst of so much ugliness that we have become inured to it, and are completely desensitized to how much a beautiful city to live and work in can improve our appreciation of life and our levels of inspiration. And we penny-pinch; we choose to save a few lakhs of rupees because we do not see the value that beauty has. It takes a trip to beautiful places – even within India – to gain perspective; to understand how helpful it can be; and to give it the priority that it deserves.

Airplane travel

A couple of exciting ‘firsts’ for me in a flight I took earlier today. My first long distance business class trip, and my first near-miss airline crash :) .

The only thing I have to say about the business class experience is that for the first time in my life, I was able to sleep for 8 hours on a flight, and I think that alone is worth the ridiculous premium that you pay.

The near-crash was very cool. We took off about an hour late because apparently the pilot could not get one of the brakes on the wheels disengaged, and a mechanic had to come in and disengage them manually.

The flight itself was uneventful but when we landed at Frankfurt, the plane had a brief taxi – perhaps a few hundred meters before coming to a very rapid stop. The pilot came online and told us the problem with the brakes had recurred – one of them had engaged automatically, wasn’t disengaging, and what is more, during the short taxiing run, had overheated so much that it was almost on fire. Two huge fire engines rushed to the tarmac and started spraying water on the wheels.

The pilot was very cool throughout, and eventually they found the brakes completely unworkable, so the plane had to be towed to the terminal.

I was reminded of Flanders and Swann’s classic piece about flying, in their second album, ‘At the drop of another hat’. Flanders makes one joke after another about the perils of flying – about airport buses whizzing around London, he says ‘They must have had instructions to keep the statistics favorable’ – and finally ends with ‘As the old woman once said, if God had intended to fly, he wouldn’t have given us the railways’. And then launches into a song about the Railways, called ‘Slow Train’ (one of my favorites).

Traveling alone

A long chat with Hari on the phone yesterday. He is an intrepid traveler, with whom I made my most memorable trip ever – the one to Bhutan – and also a worthy model to emulate in the sphere of travel writing. His expeditions are chronicled here.

I’m one day away from making my first jaunt abroad, truly alone. Yes, there have been several occasions when I have flown alone to a different country, but there’s always someone there whom I know and with whom I work the tourist trappings or trek or cycle or explore. This time I fly in alone, fly out alone, and stay all by myself in Denmark. I was wondering what the experience would be like, and I asked Hari what he thought.

Hari was emphatic that traveling alone was the best way to travel – the only way to travel. Traveling in twos, he said, was grudgingly acceptable. But the real traveler traveled alone.

The biggest advantage, he said, was that you can completely do your own thing when you travel. Each place that you visit is already imbued by something in your head that you know about it, and there is already a romantic ideal of the place you are going to before you so much as set foot on it. No need to share this with anyone else when you travel alone, and no need to share in anyone else’s, either. You are free to make your destination the place of your dreams, to reinforce stereotypes, to come back with a sense that the trip was everything you dreamed it would be, only more real.

So you plan your itinerary with fierce selfishness: going only to the places that catch your fancy, and feeling completely free to discard all of the “Patel-snap” places from your itinerary.

The second advantage, in Hari’s opinion, is that it is simply a lot more efficient to travel alone. Food, especially, is a much more speedy affair when you don’t have to gather in groups of 6 and reach consensus on the place to go to and what to order. Hari told me that when he travels by himself, almost all his meals are typically street food. I’ve never tried that before: I certainly should.

That said, I must admit that my own efficiency is often highest when I am in the company of others. So perhaps what applied to him may not necessarily be true for me. Perhaps jet lag will help me wake up early enough to catch enough of Copenhagen by morning light!

And the third advantage, he said, and this, he emphasized, is possibly the most memorable, is that when you travel alone, perforce, you make a lot more local friends. Sitting by yourself in a train or a bus, you strike up a conversation, and head where it leads you. Going to a bar, you chat up the people having a good time, and more often than not, you’re part of the good time yourself.

Making new friends, savoring new experiences, living the dream: that’s what we travel for. And I’m looking forward to see whether solo traveling appeals to me as much as it does to my footloose cousin.

The anti-job rant

I read an interesting article today. It’s really old (about 6 months) and was originally in Hungarian but has been translated into English. It was a huge hit in Hungary, went viral, trended like crazy. Here is the link to the English version: http://andorjakab.blog.hu/2012/01/06/this_is_why_i_don_t_give_you_a_job

It starts with the bold statement: I could hire 12 people with €760 net salary, but I don’t.

This is an entrepreneur writing. His name is Andor Jakab. He talks about how it is frustrating to run a company, how difficult it is to have employees, to have them do productive work, to take responsibility for their social obligations (for example giving maternity leave for up to 3 years) and how the huge level of taxation makes his business completely uncompetitive.

Interestingly, he runs the numbers and ‘proves’ that he has to work incredibly hard (if he stays within the law) just to make a very, very modest profit.

Here is a summary of his various claims, with my commentary:

1. “I wouldn’t hire a woman, …because she is entitled to take up to 6 years off on maternity leave.”

He starts off on the wrong foot because he’s not trying to be sexist here. You wouldn’t realize that unless you read the rest of the article, though, and most of the replies he got were actually responses only to this paragraph. His point is that he is willing to go with a socially responsible policy (which is mandated by the Government) only if it doesn’t hurt his competitiveness. And he finds that hiring women does hurt his competitiveness.

2. “For similar reasons, I wouldn’t hire anyone over 50.”

Same as above. The Government tries to protect certain sections of society that it considers ‘vulnerable’, such as women and people close to retirement. He finds it unacceptable that the burden of this protection is shifted to the small entrepreneur.

3. “Even other people, the taxes I have to pay means that you only get 50% of what I spend on you.”

In fact, he shows, for people who earn more, he ends up paying a greater percentage to the Government. But if he pays too low, though his efficiency his higher, his employee morale plummets. And since there is an entitlement in Hungary for up to 1 month’s vacation, he has to hire 1 extra person for every 12, just to account for vacation.

4. “If I sold my flat for euro. 90,000, start a company, and employ 13 people, I would end up spending euro. 25,627 each month.”

This is a pretty scary calculation. So for the money he would get selling his house, he could only run his company for three and a half months! And this is just fixed costs.

5. “To break even, make a profit of 20%, and pay VAT of 25%, I would have to charge at least euro. 37 per hour for our service. At this rate, I will be able to pay myself a salary with take-home of euro. 1521 per month, and the company would have euro. 507 per month in savings. It would take me 9 years to buy back my house.”

9 years – that’s a lot! He calculates this by saying he pays rent each month, calculates how much he would have left to save, and does the math. His assumptions are reasonable. 20% profit is not bad. But 37 euro is incredibly high. In India, I could run a company offering euro. 10 per hour for low-end work, and maybe euro. 20 per hour for high-end work. Much less than him.

6. “If I did all this, I am still competing with people who don’t pay tax and therefore can charge as low as euro. 9 per hour.”

This is the bit where the epiphany sets in. All his employees need to do in order to earn a 25% higher salary than he is giving them, is to work for euro 9 per hour for 5 hours a day, but not declare taxes.

 

I like this article. It is angry and passionate, but more than anything else, it takes the wind from the sails of the liberal left-winger, who likes maternity leave and employee empowerment. Both of which are good, but if a Government has to provide them, the person left disproportionately holding the can is not the taxpayer but the entrepreneur.

If I had to respond to Andor Jakab, I’d tell him, services is a mug’s game in the kind of economy that you are in. You just can’t compete! What you need is scale, that dirty word that entrepreneurs hear repeated to them ad nauseum by the business folks. You can get scale in two ways: run a 100-member team instead of a 13-member team (and deal with the management problems that would cause). Or build products.

You need incredibly large profit margins to run a successful services company in most parts of the world that have high taxation. It’s only in countries like India that it makes sense. And that too, maybe, not for too long.

Gates, Jobs

I have been re-reading Hard Drive – the very old and rather rare biography of Bill Gates. the book was published in 1992, so it doesn’t cover most of ‘modern’ Microsoft products. Rather, it’s a story of the foundations, because by ’92, Microsoft had already become a little behemoth, and Gates was still a very young man then.

Nowadays it is very fashionable to like Steve Jobs. It’s almost as though just invoking his name makes you ‘cool’. I know a wannabe entrepreneur who told me, ‘I treat my employees like shit and I am impatient with my developers… I am like Steve Jobs.’ Yeah right.

I haven’t read Steve Jobs’ biography (yes, the famous one) and I intend to read it sometime in the near future, but I doubt that it will change my mind about Gates being the real hero of the computer revolution. In fifty years, both Jobs and Gates will probably be forgotten by the unwashed masses; but for computer scientists and computer historians, Gates will be the revolutionary, the visionary. Jobs will be one of the multitude of fads and trends that will go in and out of fashion between now and then.

I like Gates a lot more than Jobs (this is, I hasten to add, purely judged by entrepreneurship and engineering) because Gates focused on problems; Jobs focused on solutions. In other words, Gates seems to me to be the kind of guy who went out into the world and looked at what people wanted, and used that as a starting point. Jobs went into himself and tried to discover what he could do well, what would make him happy, and used that as a starting point.

I do not see anything wrong with Jobs’ approach and certainly he deserves a lot of adulation for his ‘internal courage’ and consistency of expression. But let’s face it. Jobs’ career was about making pretty white boxes and selling a lot of them. Did the iPod revolutionize the world? No, it didn’t. True, it opened up a new industry of digital music. But today, downloadable music exists, the iPod hardly does. Even the industry has faded out – who buys MP3 players any more? Jobs was possibly motivated by the fact that he knew that he could make an MP3 player better than everyone else out there. And he went ahead and did it.

On the other hand, Gates made his career by building permanent stuff: languages. compilers. operating systems. office applications. He did not do it because he knew how to make a perfect operating system – in fact, he didn’t. A lot of early Microsoft software was buggy, and it took till the 3rd or 4th iteration before it became world-class. But Gates deserves respect for identifying a problem and providing a solution – not just out of the need to scratch an intellectual itch, but out of a vision to make computing ‘fuller’, to solve all the unsolved problems, to create (however imperfectly) a brave new world, this world today, where computers and software are ubiquitous. When he made his billions, he started looking at bigger problems: water. disease. education. And there, too, he isn’t perfect — but he is the man in the arena, he isn’t afraid of trying, and he is driven not by the elegance of the solution but by the importance of the problem.

Real engineer, real entrepreneur.

Cooking blind

An interesting article today on the BBC about blind people who cook: http://www.bbc.co.uk/news/magazine-18491533

I found it fascinating. Cooking is inherently a bit frightening, especially when playing with steam and hot oil, and the thought of doing it blind (or blindfold) is almost terrifying.

But people with visual impairments do it, and some of them are remarkably good at it. The BBC article talks about a lady called Christine Ha who made it to the finals of MasterChef despite being unable to see.

I thought about it a bit more and realized it wasn’t quite as surprising as I originally thought. As with all activities performed by people with disabilities, all that is needed is the right adaptation. So the article talks about talking thermometers, bigger oven mitts, and tactile temperature dials. The article also highlights process-tweaking for making activities disability-friendly; for example, always place things in the same place and place things back as soon as you use them; cut vegetables in a particular way; and rely on time, smell and taste to replace sight.

I remember as a student I had a sudden urge to learn to drive my cycle from hostel to department blind-fold. I was quite sure I could pull it off. I practiced for a few days at night, with a person biking behind me and giving me directions to prevent me from breaking some bones, running into a tree or falling into a pond or something. However, I did not appear to be making progress, and eventually I called it off. I wish I had stuck on – it would have been quite a superpower :-) .

A truly eye-opening experience for me was a visit to a place called the Sambhav Resource Center in AADI, New Delhi. I go there as part of my work most times that I am in Delhi but the first time I went there, the staff gave me a full guided tour. Sambhav is an ‘inclusion museum’ in some sense. It recreates an entire house – the study, bathrooms, kitchen, everything – with a bunch of adaptations and aids that help make everything more accessible for someone with a disability. It is a fantastic place that will give you a completely new perspective on many things. For example, every room has flooring of a different color so that people with low vision can distinguish entering into a different room. All stairs are marked in contrasting colors to prevent accidental falls. Spoons, knives, tables, everything is designed so that people with motor disabilities can access them. The great part is that they set the bar really high – even people with cerebral palsy (which leaves someone with really poor muscle coordination) can use most of the equipment at Sambhav.

On a very tangentially related note, I am also reminded of a wife of a friend who, apparently, cannot smell. At first I thought this disability was almost amusing. But then I realized it is something that we should take as seriously as vision impairment. And it’s probably as dangerous. Imagine not being able to smell a gas leak!

Annie Hall

Saw Annie Hall today for the first time. Both P and Cue have been recommending that I watch it for a while now. It was a fantastic movie, I really liked it. A lot of people say it is a comedy and it was a very witty movie but a sad story overall.

I don’t understand Annie Hall, but it makes for some deep thought. The frustrating thing is that the entire story is told from Alvie’s point of view which makes it very difficult to fathom the difficult decisions that Annie makes. Did she do the right thing, you wonder, in deciding to call off the relationship? You wonder. The big questions unanswered are: why did they call it off? Was it a good decision? And what did each of them gain or lose from it?

Annie made the first move, that much is fairly clear. And Alvie was flattered by the attention, and drawn to Annie’s eccentric character. Alvie falls for Annie more than the other way round – when he asks her whether she loves him, her answer is non-committal, ‘yes, maybe, yes, I guess I do’ — his answer to the reciprocal question is that love is too small a word to convey what he feels for her – he ‘luuurves’ her.

That is one of the guiding principles by which we should deconstruct the relationship between the two of them. The second clue is the relative ages of Annie and Alvie. I don’t think either of their ages is made explicit in the movie but it seems obvious that Alvie is at least 10 years older than Annie – I would say Alvie is about 40, and Annie is perhaps in her late 20′s. Annie is in a very different stage in her life compared to Alvie, who has already achieved fame and success as a comedian by this time. She is still a budding singer, and has her share of insecurity about whether she will achieve success in her profession. At some level, Annie wants encouragement to experience all of the things that she hasn’t, yet. Alvie is twice divorced and comfortably established – being psychoanalyzed for 15 years – and what he looks for from Annie is a fresh perspective on a life that is beginning to already fade. In the end, Annie says Alvie is ‘like New York’ – dying, world-weary – and feels LA is the place that better reflects her own attitudes towards life. That is a big clue about the incompatibilities of their relationship – Annie is looking for experiences, Alvie (ironically, given his behavior in the earlier half of the movie) is looking for a stable excitement and happiness.

The mystery is that Annie eventually does come back to New York. Why, we wonder. Is it because she missed Alvie? I doubt it – the more realistic possibility seems to be that after her successes in LA (having, we assume, recorded her album) and at some level having figured out her career, she is now where Alvie started out from at the beginning of their relationship. She has ‘discovered herself’, in some sense, and is now comfortable moving back to New York, where she started her journey.

We wonder also about Alvie’s and Annie’s contrasting and inconsistent views to marriage. Alvie is initially reluctant to talk about marriage, and we get the impression that Annie is waiting for a marriage proposal from him. When he realizes how much he has lost when he loses Annie, Alvie is ready to make the commitment – but Annie has gone past the point where she could possibly accept him. People desire companionship in their lives and Alvie, in the beginning, enjoys Annie’s companionship, and feels he can take it for granted (in some sense); at the end, when he realizes that he cannot and wants to formalize it in terms of a marriage, Annie sees less of a need for Alvie’s companionship. Perhaps the fact that she has met other interesting people in California (and perhaps later in NY) means that she has realized she can now get companionship without giving commitment – and she no longer thinks of Alvie as a ‘soulmate’ – just as one of several potential ‘mates’.

It is undeniable at the end of the movie that Annie has gotten more out of the relationship than Alvie has. She has had a cheerleader for her singing career, someone who has made her upwardly revise her expectations of her own intellectualism, and someone who has helped her discover herself. Alvie, ready to give up the quest for companionship and ready to settle down, has met someone who could be a potential wife, and in that, he discovers a certain amount of passion and excitement; but not much else. In the opening monologue, he seems to have started down another path of self-discovery; but the ambiguous nature of the relationship between the two of them makes it unlikely that his journey will end in self-discovery – more possibly it will end in self-confusion, making him even more unhappy.

My favorite scene in the movie is also the saddest – maybe one of the saddest scenes I have ever seen – the scene where, after the relationship is over, Alvie brings back a girl to his flat and tries to recreate the scene with the lobsters, and the girl just doesn’t get it. You can almost touch Alvie’s sense of loss at that point – it’s so tangible. Relationships are always so complicated, and I love Annie Hall because it doesn’t simplify anything at all.

On limerence

I learned the word ‘limerence’ when I was younger, less experienced and in love for the first time. After it all ended, I was left with the mother of all hangovers and a desire to analyze the hell out of how I was feeling. So I started reading, and, sooner or later, came upon a word that I had not seen before: limerence.

Love: if ever there is a word that poets, song-writers and movie-makers overuse, it’s that one. Judging by the number of songs and movies that have been made about boy-meets-girl (and, more frequently nowadays, boy-meets-boy etc.), one would imagine that it is love, love that makes the world go ’round.

As Scrooge would say, Bah, humbug. Limerence plays at least a major supporting cast.

The word was invented by Dorothy Tennov, a psychologist who went around distributing questionnaires to people who were ‘in love’. Her research led her to discover the subspecies of love called limerence, which psychologists nowadays are trying very hard to get included into the “Diagnostic and Statistical Manual of Mental Disorders”. You know the term ‘madly in love’? – suffice it to say that psychologists take that quite literally.

Anyway, back to limerence – limerence is the difference between being in love and falling in love. When you are limerent for someone, you expect nothing from the other person (known amongst propoents of Attachment Theory as the LO, or limerent object) except to reciprocate your feelings. Reciprocation – as opposed to consummation – is the goal of the person experiencing limerence. It is very common, apparently, to not primarily feel the desire for sexual relations – or even stable relationship (such as marriage) – with the LO. Instead, you spend all your time day-dreaming about him/her, and many of your dreams take on the quality of ‘being at the other person’s deathbed’ or similar fantasies. Fantasy, in fact, seems to be a great component of limerence – the continuous regurgitation of selective memories to weave together implausible stories starring you and your LO.

According to Wikipedia, limerence has a number of components that distinguish it from ‘love’. Apart from fantasy (also called ‘intrusive thinking’), there is fear of rejection, hope, palpitations, dizziness, flushing and interpreting every small gesture in the light of the other person’s reciprocation of one’s feelings.

The interesting thing about limerence is its long shelf-life. Tennov, in her original paper based on her questionnaires, estimated that it takes, on an average, 3 years for a person to get over a spell of limerence. Imagine! That’s three years of yearning and day-dreaming and longing and fear of rejection. 3 years in which your mood is primarily affected by the little things someone else carelessly says and does! Whew.

One imagines how many of all the great ‘love stories’ in human history were actually limerence stories. I imagine many of the ‘love in adversity’ relationships were. Romeo and Juliet definitely. They would certainly have grown sick of each other and parted ways shortly thereafter if they had not ended up dead together.

Also interesting are the three ways by which limerence ceases: cessation is caused by consummation, starvation and transference. So either you end up in the blissful state of reciprocation of your limerence by your LO; or spend three years (or more) in a one-sided romance before finally getting over it; or fall for the next pretty face in the same hard way.

Goes to show, doesn’t it. If there’s anything crazier than love, it’s limerence.

Two vignettes

Nothing very profound that I thought about today, so here are two little vignettes. They are both about religion but only the most profane commentator would see anything more in common with them :-) .

I go for Bhagvat Gita lectures and my teacher is this most incredible guy called Swami Paramarthananda, who is a direct disciple of Dayanand Saraswati. He goes through the Gita one verse at a time, and in a weekly, 1-hour class, he usually finishes about 3 or 4 verses. So it will take several years for us to get through the entire book.

I was reminded today of a crazy beautiful simile that he once shared with us to describe our attitude towards life. The Swami is a cricket fan, and punctuates his sermons with anecdotes from the cricket world. This was one such. Consider, he said, that the Indian team is touring Australia on a 5-match one-day series. India wins the first match.

Then India wins the second match. And the third, taking the series.

Now the Indian team is ready to enter the fourth match, and consider the mood they are in. They want to win, of course, and as professional cricketers, they are going to give it their best. But at the same time, the stakes are not high; if they lose, it is not the end of the world.

They will play very well, but without insecurity and without the fear of defeat. And perhaps that will make them even stronger in the field – an even better team.

Life, said Swami Paramarthananda, is the fourth match. And the secret of the Gita is to know that by being born, you have already arrived – you have already won the first three matches. All that you need to worry about is to give it your best – not victory, not defeat – you have taken the series already.

Comedian Praveen keeps coming back to me at the most inappropriate moments: for example, now.

Apparently, Aamir Khan visited BITS when Praveen was a student there, and gave a talk. After his talk, Praveen went up to him and asked him a question: why are there so few Indian movies that win awards internationally? Why has no Indian actor ever won an Oscar.

Aamir Khan tells Praveen: to be a really great actor, to be a transcendental one, you have to act as though the movie is your real life. You must forget the presence of the camera, the crew, the audience, and give it your best performance. Is there any actor in India today who can claim to be like that?

And Praveen says: YES, SIR! Yes, there is one such person in India, who can forget the camera, crew and audience and give his best performance.

Aamir Khan asks: who is that?

And Praveen: Swami Nithyananda!

 

That’s all for today, folks.

The economies of war

Of the various things that I have little knowledge of, such as law and biology, the subject I most wish I knew more of is economics.

I was reading The Ascent of Money by Niall Ferguson today. It isn’t a very great book but I did find some parts that were very interesting. Particularly the analysis of how economics drives war, more than anything else.

Ferguson talks about money and war in the context of his discussion of Nathan Meyer Rothschild, the patriarch, really, of the Rothschild family. During his time, Napoleon was the terror of the rest of Europe, and as one country after another fell to his armies, the British tried desperately to bring him under control – first sending expeditionary forces to Portugal, and then finally defeating him at Waterloo. These stories are fairly well known to those of us who have a historical bent of mind, but what is less well-known is the monetary angle.

Wars cost money. And the British and the French had two completely different ways of raising money for their battles. The French way was through taxation. They taxed the people whom they conquered – from Egypt to Portugal – and that paid for Napoleon’s army.

The British raised money through debt – specifically the sale of Government bonds. Anyone could buy them, and the Government would pay a certain coupon rate on them. And the money raised from the sale of the bonds was used to fund the army. And Rothschild was the man who arranged for the issue of the bonds, sometimes backing them the way today’s investment banks back IPOs.

After the spectacular success of British bonds, Rothschild helped the Germans (Prussians, more precisely) raise bonds for their wars. He introduced a very cool innovation, though: the German bonds would be sold in pounds sterling, but the interest could be collected, not just in London, but anywhere in Europe. He was able to do this because his far-flung family ran centers of business in Austria, Italy, France – everywhere worth mentioning in 18th-century Europe. One successful bond sale followed another, and Rothschild made millions off the commissions.

More importantly, Rothschild could influence wars. If he wanted to discourage a country from going to war, all he had to do was to refuse to issue bonds to fund the war of that country. This he did to devastating effect in the US Civil War. The Confederates needed money to build their army; Rothschild decided they were too risky to bet on. The Confederates went ahead and issued bonds in Europe anyway, backed, not by interest, but by cotton (which had enormous demand). Rothschild’s prudence served to ensure that the bonds had a lukewarm response, and in any case it proved to be a good decision – when New Orleans was captured by the Union Army, none of the Confederates’ creditors could ship their cotton out of the South. And when the North won, they promptly repudiated all Southern debt – so the holders of the Confederate bonds were left with a total write-off.

The chapter on bonds is fantastic. Similar stories about Germany’s efforts at raising bonds after World War 1 (leading to hyper-inflation) and about Latin American debt defaults, and how defaulting actually helped save the Argentine economy in the 1980′s.

 

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