New Berstein Book - The Birth of Plenty

[Telly]

"The Birth of Plenty"

Subtitled "How the prosperity of the modern world was created". By William J. Bernstein, copyright 2004.

An interesting book, though I find reading it slow going with all the info. That is not a criticism, just best read in multiple sittings.

A few snippets:

"Since 1850, the pace of technological progress has been slowing, not accelerating. The average inhabitant of the Western world alive in 1950 would have no trouble grasping the technology of the year 2000. On the other hand, a citizen from 1800 would have been completely disoriented by everyday life fifty years later"

"... the Renaissance and the early Enlightenment only minimally elevated the lot of the average person."

"When we look at the numbers, it becomes crystal clear that something happened at some point in the early nineteenth century. Before then, the rate of improvement in the lot of mankind was small and stuttering, and after, substantial and steady."

What that something was, the identification of important building blocks required to create it, and how it came about through history is what this book is all about. And why previous civilizations couldn't pull it all together.

I also learned more about the Magna Carta, it's real purpose, and it's centuries later impact on our founding fathers, than I ever learned in school!

[wabmester]

Ah yes, another reason to expect lower returns from stocks going forward. The chance that we'll get a repeat performance of past productivity gains is very slim. We're deep into the land of diminishing returns.

I think if your retirement plan passes the FIRECalc test for retiring in 1928 and your portfolio survives for 54 years until 1982, it would cover some fairly grim periods of U.S. Stock market history. Also this scenario leaves out the biggest bull market in history with current stock valuations much less than they were in 1928!

Is this the worst case scenario? - No! , but I think if we have a repeat of the great depression, we will have greater problems than our portfolios.

I think it's a reasonable bet that your portfolio will fare better over the next 52 years than it did from 1928-1982.

[wabmester]

I think it's a reasonable bet that your portfolio will fare better over the next 52 years than it did from 1928-1982.

I'll buy that. During that period, transistors, computers, and the internet were invented. And as we now know, all turned out to be tremendous anti-productivity tools. So unless we invent something in the next 50 years that allows us to waste more time, it's reasonable to expect the 8% or so from stocks that we got during that period as baseline. And then subtract 2% for slower economic growth due to the retiring boomers, and I think that's a reasonable worst case.

[Michael]

I also learned more about the Magna Carta, it's real purpose, and it's centuries later impact on our founding fathers, than I ever learned in school!

I thought it was an interesting book. If William's thesis that politics kept creative people in check for centuries is correct, our future may depend upon the course of future politics. Oh my.

[sgeeeee]

. . ."Since 1850, the pace of technological progress has been slowing, not accelerating. The average inhabitant of the Western world alive in 1950 would have no trouble grasping the technology of the year 2000. On the other hand, a citizen from 1800 would have been completely disoriented by everyday life fifty years later"

. . .

Hi Telly,

Bernstein's previous work often included a lot of quantifiable data. He sometimes took the data beyond what was actually indicated, but he usually started with detailed data.

I'm curious how he came to these conclusions. What measure of technical progress did he use? This conclusion seems at odds with most of the data I've seen presented in scientific journals over the years. Scientists and engineers typically conclude that technological progress has been accelerating nearly monotonically over time. This conclusion seems reasonable since each year, there are more people working on technology than the year before and current techonologists have a greater wealth of knowledge to build off of than the generation before.

I guess I may have to read this as soon as it gets into the library, but an early book report would be appreciated.

[unclemick]

Page 18. figure 1-4 sums it up - the growth in world per capita GDP.

He postulates and tries to explain it.

In terms of property rights, scientific method, capital markets, and communication/transportation.

A good read - even if you think he is wrong on some points.

I read it in July (for my birthday) and will probably reread parts again this winter.

[notTwain]

I've finally finished off Berstein's FPOI and appreciate his critical thinking - I really enjoyed his brief discourse of the impulse rate of technological advancement around 1850's - primarily communication and transportation. He did a good job putting things in perspective in our times that blind sight the shoulders we are all standing on. Glad to hear he's got a book out continuing this research/discussion. He seems to be a busy guy ... still practicing medicine, a financial advisor and apparently a very discerning historic researcher.

However, prior to reading Bernstein, I have always been impressed with the technological advancements that seemed to take that next leap forward from the necessities to the era proclaimed as 'workfree' - around the 1950's (When popular mechanics and electronics magazines were filled with promises of the easy life). Sure, in hindsight, these advancements did not hold up to their promises - but I think that was due to the easy life is never attained if you have to have to work 5 days a week at a minimum. I was always waiting for those promises to fulfill themselves - since I grew up in the 60's - but it seemed as though the more time things saved, all things remained the same - the extra time did not come through. Except finally now, that FI is around the corner.

I was planning to do my own little research on that promised life from that era - and the fulfillment of it (as soon as I get there).


notTwain

Hello notTwain. Nice you enjoyed FPOI. Truly.
I will not be reading it (I already know it all ).
But, if I had been so inclined "discourse on the impulse
rate of technological advancement around 1850s"
would have killed any desire. (Picture loud snoring )

John Galt

[Michael]

Those who enjoyed the Birth of Plenty might also enjoy Guns, Germs, and Steel by Jared Diamond. He approaches the subject of the reasons for modern western prosperity from a different perspective, and won a Pulitzer prize for his effort.

Love the title...................

John Galt

[yakers]

Guns, Germs & Steel is really a great read. I am not sure I agree with a lot of its conclusions but it is one of the most thought provolking books around. I would love to hear from anyone who has read it.

[Whakamole]

I read Guns, Germs and Steel (actually listened to it, hooray for audiobooks) and found it fascinating. By the end I was a bit bored since he had already made most of his points.

I thought the chapter on the "Anna Karenina Principle" summed everything up quite nicely. Just apply it to civilizations rather than animals.

[Nords]

Rather than start a new thread I decided to revive this nearly-four-years-old thread.

Bernstein's new book "A Splendid Exchange" is out, and that reminded me of his earlier book "The Birth of Plenty". Nearly four years ago I added it to my list and, hey, I finally got there. The library copy has been beaten to death, so it seems pretty popular with Hawaii's relatively small audience.

To add to this thread's earlier commentary, TBOP is one of the best of a category that I describe as "Where the hell was this in high school history classes?!?" Bernstein puts history in an economic perspective that makes the subject much more interesting than anything I was memorizing back in the 1970s. Our teen just finished a world history class and would immediately enjoy reading it.

It's a detailed slog through all 386 pages, but here's the summary: around 1820, technology started to take off and mankind's standard of living suddenly got a lot better for a bunch of Western civilization-- especially Britain & America. Bernstein claims that four things had to happen, in any order but all present at the same time, to facilitate advances:
1. Property rights-- inventors & entrepreneurs had an incentive to pursue patents.
2. Scientific rationalism-- theories could be researched with rigor, teamwork, and less fear of religious persecution.
3. Capital markets-- entrepreneurs could get funding.
4. Transportation/communication-- research could be disseminated and products could be distributed.

Once those four concepts were present, prosperity followed. A country's citizens also began to influence their culture's way of life and its decision-making process, which tended to move governments toward democracy.

Bernstein traces the four factors through a few of the "winning" countries, but what I found even more interesting was the "losers". Japan's history is particularly fascinating, as was Spain's colonialism. Spain could've learned from Rome, and Greece didn't have all four in place either.

Bernstein feels that the GDP growth of developed countries (like America and some European nations) has peaked and will either slow or stagnate. He also draws some interesting conclusions about imperialism and "Pax Americana". He claims that war is a lot more "affordable" when it's kept below a fraction of the GDP, and that technology & communications have actually made it easier to be an imperial nation. He's not very encouraging about religious fundamentalism (of any creed) or about any country that practices centralized economic planning. Heck, he's not even a particular fan of democracy, pointing out that many countries assembled the four factors and enjoyed rising prosperity long before democracy (of any sort) flourished.

The book doesn't give investment advice or make specific predictions about the future of the world's largest countries. It does give a framework for assessing emerging markets (I'll let someone else run to the bleeding edge!) and it encourages a very long-term view.

I enjoyed having my historical perspective reframed by economics, and I'm not going to wait so long to read "Splendid Exchange".

[Khan]

2. Scientific rationalism-- theories could be researched with rigor, teamwork, and less fear of religious persecution.

This one seems to be under assault.