Three Helpful Frameworks

To those of you who enjoyed Raising a Thief or Master, Minion, I am excited to announce my next book will be published in 2024 by Harriman House. Like Raising a Thief, this book is a non-fiction memoir, but about money instead of parenting.

Helpful Quotes:

“Right-wing populists and the advocates of the identify synthesis see each other as mortal enemies. In truth, each is the yin to the other’s yang. The best way to beat one is to oppose the other—and that’s why everyone who cares about the survival of free societies should vow to fight both.”

Yascha Mounk, The Identity Trap

“In this regard, the brain is a conservative organ. It does not like to be surprised. All unknown or unfamiliar environmental cues are judged to be ‘threatening’ until proven otherwise.”

Dr. Bruce Perry, The Amazing Human Brain

Today I want to share three frameworks. Having the right framework makes understanding what is going on much easier. While these frameworks may seem discrete, they are interrelated and help explain both what is going on in Israel, the markets, and our own emotions.

Framework #1 – Modern vs. Pre-modern

Given what is about to occur in Gaza, it is difficult to think about much else. We all understand why what is about to happen is going to happen. But internecine violence is terrifying. I remember walking past fresh graves in Ukraine this summer and being reminded of the consequences of such moments.

I also recall driving some years ago near the area in Israel that was attacked and staring anxiously at the GPS to make sure I didn’t get too near Gaza. This week, a friend directed me to this podcast, which is an excellent refresher on the region’s history. At the end, the host paraphrases a question Sam Harris asked. If the Israelis laid down their arms, what would Hamas do and if Hamas laid down their arms, what would Israelis do? The answer is that Hamas would murder Israelis and most Israelis would probably ignore Hamas. Therein lays the difference.

A useful framework to understand Russia vs Ukraine or Hamas vs Israel is pre-modern vs modern. In the pre-modern world, it is normal to slaughter the neighboring ethnic group. In the modern world, it is a war crime to do so. Hamas is pre-modern. Israel is (mostly) modern.

Modern belief systems produce wealth much better than pre-modern ones. That’s why they evolved. It’s not by chance that Israel’s per capita GDP is $58k and Gaza’s is $3.7k. Similarly, eastern European countries like Poland ($17k/person) that have modernized are wealthier than Russia ($12k/person).

Framework #2 – Principles Vs. Identities

Today’s podcast guest is Yasha Mounk, author of The Identity Trap, quoted above. You can hear the full conversation on Apple and Spotify (click the link).

Identity politics is a broad term and as with other abstract terms, like geopolitics, it’s helpful to anchor the meaning with specifics. “Geopolitics” means Russians stealing Ukraine’s land or Hamas murdering Israeli children. Identity politics, in a story Yascha shares, is a student with a Chinese mother attacked for “cultural appropriation” because she is deemed to be not sufficiently Chinese to create Chinese-influenced art.

Yascha’s point is that using race, gender, sexual orientation, or other identities as a way to make sense of the past is helpful, but this same rubric is counter-productive as a way to organize society. Broader, more universal goals, like liberty, happiness, prosperity or independent thought have far more power because they clarify the goal and productively organize our activity.

For instance, the goal of the military is to win battles. The goal of a company is to make money and create shareholder value. The goal of education is to foster critical thinking. Munging these goals with an insistence that, for instance, members of these institutions identify themselves first and foremost in terms of race or gender creates worse outcomes. That’s not in any way to weaken an insistence on knowing our history, like the appalling institution of slavery or violence against women or to be cognizant of the ways in which we might stereotype.

Framework #3 – Neocortex vs Limbic

The final framework relates to investing and ties to Dr. Perry’s quote above. One of the trickiest elements in investing is to take in an enormous amount of contradictory information and arrive at a coherent thesis. Inflation is coming down (bullish assets), but interest rates have been rising (bearish assets). What is the dominant force?

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