How An Economy Grows, and Why it Crashes

My friend Kalyan liked the book "How an Economy Grows, and Why It Crashes" so much that he bought 4 copies, and gifted one to us. That's how I came to know about and read the book.

If someone had told me that any author could explain the differences between "Keynesian ideas" and the "Austrian school" to any lay person, I'd have been highly doubtful. But the Schiff brothers do it, in the first 3 chapters of this highly readable book.

Peter D Schiff is an investor with a great understanding of economics. Let's assume that 1 in 50 people work as teachers. But only 1 among these 50 teachers is a master teacher. Only they have grasped the subject to such an extent that they can explain it to others with lucidity and simplicity. Peter Schiff is one such teacher.

This book has much going for it. It is a book presented as one ongoing allegory. If you have read "The Richest Man in Babylon" or "The Wealthy Barber" you know the kind. This book follows that storytelling tradition.

The story starts with 3 guys (Able, Baker and Charlie) stranded in an island where they have to catch fish by hand daily to survive. Each and every concept of trade and economics is built as these three become sophisticated in their economic dealings.

The authors build seamlessly from microeconomics concepts to grander topics in macroeconomics. Using examples of two larges countries (US and China, very thinly disguised) the authors play out several dire scenarios. In its criticisms, the book is hard-hitting and opinionated, and doesn't hold back.

The authors come down very strongly against holding on to US dollars. In a way, this book serves a personal wake-up call to me, because I don't own any tangible assets at all, and all savings are in paper US dollars, which Schiff feels has to fall prey to eventual inflation.

In each chapter, boxed "Reality Checks" are sprinkled on the side margins for extra clarity. "Takeaways" are given at the end of each chapter to reinforce the economics concepts introduced.

The book is a very easy read, and can be finished in one to two sittings. Everyone who is 15 or older should read this book. I can't think of any exceptions

Skills for the survival of the civilization

Back when I was in grad school and a teaching assistant, my students would demand why they had to study "useless things which they'd never use anyway." I used to wonder about this myself sometimes and so I never had a good response.

Recently, in an welcome address by a professor, I heard something that I wish I had heard years back. It would have certainly given me a perspective I didn't have when in college. Let me explain.

As a student in engineering college, I had several courses where I had to learn esoteric things that I knew I would never ever even remotely use in my professional life. So why were they insisting that these things be included in the syllabus?

The best explanation that I could come up with was that in an attempt to make better engineers out of us, our engineering college was teaching us "problem solving." I told myself that even though we wouldn’t use the exact thing being taught, we were becoming better problem solvers. But that explanation always rang false and was never quite satisfactory.

Prof. M S Ananth of IIT Madras was giving a welcome address to a group of professors who were attending a workshop on NPTEL, the program I volunteer at.

He said that people should realize that there are two types of skills. One set is the skills needed for the survival of the individual. Vocational training institutions do a very good job of teaching these, and we can all readily see the value in these skills, because they help us earn a living.

The other set, he said, are skills for the survival of the civilization. These are equally important and shouldn’t be neglected. He felt that institutions of higher learning shouldn’t waver from teaching these skills. And those of us who are learners or researchers, no matter what our field is, should have faith that we are adding to this skill set in incremental amounts and continue our work.

Skills that are needed for the survival of the civilization – I had never heard it phrased quite that way. Wish I had heard this 20 years earlier.

"Free" Real Estate Seminars

Call it journalism, or call it joblessness or just plain curiosity, but in the past two weeks, I went to two free "workshops" on Real Estate investing – one by the Rich Dad, Poor Dad author Robert Kiyosaki’s team, and one by Donald Trump’s team. Having time in the middle of the day means that I can attend programs that I wouldn’t be able to, if I was busy at work.

I claim it was journalistic purposes because I have no interest in being a real estate investor whatsoever. I don’t even own a primary residence. But I went because I was very curious about the people who attend these seminars (in the middle of weekdays) and I wanted to study the presenters and hey, it was free.

These were both 90 minute sessions, and as I learned the main intent of these workshops was to get people to sign up for 2 and 3 day advanced seminars, where they teach you lots of Real Estate techniques in great detail.

Here are some of my impressions and notes from the free pre-class:

• Behold the power of Branding. Thanks to the popularity of TV shows (The Apprentice) and books, people like Donald Trump and Robert Kiyosaki have become household names. They are able to capitalize on that by essentially franchising themselves. Trump’s is called Trump U., and Kiyosaki markets it as “Rich Dad Education."

• Though it is not the intent, you can learn a lot about good presentation techniques by studying these presenters. Their task is to take disbelievers (who are most likely not economically well off and quite possibly unemployed) and try to sell them expensive course packages. The presenters were without exception great sales people.

• One clever technique I saw was to ask everyone to hold all the questions till the end. This is because they don’t want disbelievers disrupting the sales pitch, casting doubts.

• They will repeatedly make fun of anyone who has any doubts whatsoever.

• These folks must have all gone to the same NLP techniques class, because they all use it. Programming the audience first and then repeatedly making them shout out the same words and phrases over and over again. “Because I am going to help you make what?” and the real estate market has been really going where? and so on. (Correct responses: “Lots of money” and “Down”)

• They will pretend to get very angry when the audience doesn’t respond to moronic questions. “So does working for only 4 hours a week sound good to you?” “Would you like to make $20,000 on your very first deal?” (Hint: You are supposed to scream your Yes very loudly.)

• They make fun of books and CD’s that you see on late-night TV infomericals, and yet they try to tempt you with books that you absolutely must own and will get only if you attend the 3 day seminar.

I am really not knocking these multi-day seminars. They might be just the thing for people who have the willingness, but not the know-how. I approve of a lot of what they say – yes Knowledge is very important, and yes everyone has to take action if they are serious about improving their lot in life. I know that these Real Estate techniques (pre-foreclosure, short sales etc.) do work for some, and that the fees for these 2 and 3 day classes will pay for themselves for some people.

I just don’t approve of how easy they make it sound.