Benjamin Graham

1894 -1976, a British born American. He was a teacher, lecturer, investor and economist. His major contribution was the theory of security analysis. He wrote a book title "An intelligent Investor", coauthor with David Dodd, suggesting rationality over impulsive purchase of stocks is essential to profit. He was an iconic to many who practice stock investing such as the most prominent figure warren buffet. "Safety Margin" was invented by him, advocating to purchase stock at price below intrinsic value of the business. For him, stock was not merely a trading instrument , but a channel to own wonderful business. He believe in buying a great business and maintain the ownership of it. He believe in profit by the cashflow generated by the business, rather than speculating for other buyer to bit a higher price to buy the stock. Many who practice such basic concept fair relatively better than those technical investor in stock market throughout the century. The idea of safety margin then turn into a more potent phrase - value investing. Price is what we pay, value is what we get. As long as the value is justify to be above the price paid, it is consider to be a good buy. However, value has a more elusive definition relative to price. There was no "units" for value. The most practical to quantify value is by return of investment. It mean that, the collective cash flow generated now plus cash flow potentially generated in future date will outpace the price we buy the stock today that put into the risk free security *such as government bond, with taking consideration of inflation. That is the most simplified version of value investing.

While the theory and concept might not be the perfect get rich quick formula, but it is a very useful principle to keep by investor. The scope of variable in reality is much more wider than we discussed previously in order to complete the formula. Some of it are much more complicated and qualitative such as investors sentiment, political event, social factors, technological cycle and so on. And many of those are required long experience which only can be harvest by mistake and times. It a rather a keep you continuously learning formula than a simple answer to rich answers. It is how he do it, and it is how his disciple did it. Warren buffet, one of his most prominent disciple has proved his theory is very powerful. Powerful enough to make him the most successful investor in the world. At least in term of money amount he able to profit from.

The Rich Make The Rules

Throughout human history, we perceived the authorities body i.e. government, the kings, the queens make the rule. Society had very little or nothing to control over the rules made upon them. The Ancient china civilization, Egypt Civilization and Medieval European empire had depicted the scenario. The people are living under merciful of their kings or queens. The kings and queens had since be able to rules his or her countries in the favor of his or her own.

On 1215, a historical moment took place. The signed of Magna Carta under King John - England. The incident was a revolted against the kings by the barons (The Riches During the time). The riches gathered and compel the Kings to signed the agreement for the power of kings now is shared with the riches in democratic manner. The riches now be able to vote on the decision made for the nations. The rule since then, are made by the riches.

The origin of democracy was from Greek Civilization. It was a notion that developed for people, by people and to people. It was a revolutionary ideal for many who eager of freedom. People love it, and endorsed it, but the truth is, it was never been implemented as it was intended. It sadly become a tools for the barons and riches to manipulate. It become corrupted and nothing more than a ponzi scheme of free will. Tony Benn, a former british politician once said, people are easy to be controlled in 2 ways, when they are fears and poor. The most difficult way to control people is when people are rich and educated. Until then, a truth democracy can never be formed. As the world is 90 percent of poor with 10 percent extreme riches, the riches can simply pay the "price" to the poor for the "votes" in favor of them. Why the riches are getting richer, and the poor stay poor? It is a random event? The riches understand the real golden rules. "he who made the rules keep the gold."

Underestimating the Malthusian Catastrophe

Parson Malthus, a English Scholar during 17th century once pointed out the limitation of natural resources will be the Achilles's Heel of human civilization. Such warning had been undermined by many both mainstream politician and academia. The history throughout modern age had proven we human have the capability, by science and technology to compensate any downfall of natural resources. Optimist believe we are living in the abundance where everything exist in the world are more than enough to support all life for eternity. One downsize of natural resource can be replaced by the new one with the effort to discover. We had live through many crisis since 17 century due to the risk of pitfall of natural resource, particularly energy. And today, we still survived with a living standard consider to be unimaginable even for the Kings and Queens during middle age. from lumber (woods) to coal. From Coal to fossil oil. From fossil oils and gradually hybrid with natural gases. The cheap natural resources are been exploited since world war II by human. And now, with the raise of oil price at all time high (98USD per barrel), we have to realize that natural resource does have its limitation. From the point of survival, all we have on earth should be sufficient. However, the natural was never created to sustain excessive energy consumption, greed and selfishness of exponential growth homosapiens. More than comfortable, most of us are pursuing life of luxury. 3 SUV per family, 6 air-cons on a mansion by a size of family with 2 kids and ever continuously expansion of indulgence industry. As merely 20% of every life on earth, we now consuming almost 90% of all resources like there is no tomorrow. Not to be pessimistic, rather realistic, if we still live in a dream utopia world with abundance of cheap energy ; Robert Thomas Malthus might be able to see his theory right in near future. Let alone the aftermath disastrous to environment of current fossil oil exploration, we human shall be more responsible for the long term survival of our civilization to change, at least for our next generation. If nothing is done to make correction before it is too late (when current dependence natural resources running out), our civilization will collapse. I do not want to see my grandson going back living in the cave, despite our achievement in technology are at the peak ever since the modern world is born.

The History of Money

Money was and still is today, people perceived to be very important in life. Money can buy you food, shelter, cloths, cars and many indulgences in life. Without money, it is very difficult to survive in the modern complex society we living in. But, the truth is money is nothing more than a temporary representative value to serve as a medium of exchange. By tomorrow, the value can be gone to nothing. How is that? First we need to understand what is money.

Come to understand the money, history serve us well. It goes back to the stone ages when system barter were prevalence. As human are born to have an intelligent minds, our great great great ancestor come to understand it is so difficult to trade by commodities to commodities. Then one day, precious and rare shell, stone and metal are being introduced to replace the system barter. Precious metal such as silver and gold became the currency or money during the time, and it does improve the trading efficiency. Then come along economy growth; villages become towns;towns become cities; cities become nations. The society become complex and population is growing. The leaders and thinkers during that time started to perceive the lacking of previous metal (god made's money) to accommodate the trade that are growing exponentially. Additional of that, there been many incident for inter continent traders who always afraid to be robbed by carrying the precious metal around. Government then introduced paper money which representing the gold and silver in storage. With such system, the people can store their gold and silver in a safer place said Egypt or Italy; and by bringing the piece of paper that representing storage to trade across countries. Then he who get the paper can anytime, by means to collect the gold and silver with such piece of paper. So, then paper money is introduced. Then years goes by, civilization become even more complex, with government and financial institution are being so innovative to stimulate economy growth; paper money that backing by hard previous metal are being abused. It is always difficult to resist if you can create wealth out of nothing. There were more paper money being introduced than the actual gold and silver in storage. As speculation goes on and panic set in, government then do something. The milestone is on 1971, under president Nixon; United state proclaimed to abandon gold standard and therefore paper money are no longer exchangeable to gold nor silver. The paper currency are now being backed by government itself. If the government is strong, politically stable, the currency is strong vice versa. It is what we known today fiat currency system. In fiat currency system, the government will dictate the value of paper money you holding or perhaps including electronic booked figure you having in your bank account. The system is adopted globally as it make all government to be able to print as much money as they wish as long as people are believe in the government. Therefore, the money we come to perceived as very valuable today is nothing but a imagination value that government make us to believe. It is a vehicle that enable the authorities to steal of us without really need to take it from us. How? They simply print more... Wiemar republic of Germany during 1910s is the well depicted anecdote to explain it.

So, having a lot of money does not mean you are rich nor safe. Instead, knowing how to use the money, and how it will create real value in life is more important. By turning the other side of coins, we not really want the money, we want the house that money can buy or the car that money can buy. Money is just nothing but a piece of paper. There is no intrinsic value in it. Therefore, if we could understand the truth of money, we will be unattached to money, which enable us to be more daring in life to create what really matter to us. Unattached to money make us do not afraid of losing it. Unattached to money make us be able to pursue our dream.

Society Learning Curve - Evolution of Economy System

Economy had been existed since the stone age or ice age. Ever since human start to shift their life from hunting animal and living in cave to erecting simple shelter along the river side, and finally able to grow crops; economy system is there. The first economy system is system barter. People trading to each other from their surplus commodities to other commodities. Fisherman trade fish to farmer who raise chicken for instance. Unfortunately, the system are not robust to maintain the stability of market. Inefficiency of trade, fairness of trade, and lack of regulation of trade, making the market into chaos. Then, people start to choose a leader to lead them, regulated them. A chief become mayor. Mayor become governor. Governor become king and emperor. Then, kingdom and empire is born. The market system evolved from a simple trade of surplus commodities to a more complex system - feudalism. Assets, labor and commodities today was called as soil, human and tools. Emperor and Kings hold absolution in regulate and shaping the marking economy system in according to his or her wish to be. Hierarchy is formed. People living in tradition, with no free will to choose their place in society. Bloodline and family will dictate your destiny. Then, 16-century, revolution come, and invention of steam machine. Industrialization set in. Productivity raise, and standard of living become better. Then, scholar started to officially started to use the word "economy" as a representative subject of social market study. He who study the economy then called economist. Many economist raise to question the existing market system, and eventually daring to challenge and introduce doctrine and idea of market system which could making the economy more stable and prosper. Adam Smith the most profound economist introduce a free liberal market system which eventually evolve into what we call today capitalism system - laissez faire market. Others like Karl Max, John Stuart Mill introduce utopia communism and utilitarianism. Some idea is accepted by certain society and nation, some otherwise. Then about 500 years after industrialization age, human civilization come across a test by time with events and challenges; new economy as technology evolved - the information age (World wide Web & Computer). By old wisdom and continuously evolution throughout century, today we are able to enjoy a very much efficient market - social capitalism. Yet, the system still have flaws, perhaps more insidious problems on it as ever before, since the complexity are much more complex. As we speak, we shall not be complacent or too proud of what we have achieved and created, as evolution is not a destination, but a journey of progressiveness improvement. It is just part of our learning curve.

Christopher Columbus - Breakthrough Come with Discovery and Adventures

Christopher Columbus (c. 31 October 1451 – 20 May 1506) was an explorer, colonizer, and navigator, born in the Genoa Republic, in northwestern Italy. Under the auspices of the Catholic Monarch of Spain, he completed four voyages across the Atlantic Ocean that led to general European awareness of the America Continent, a once said to be the "New World" on 1492.

In history, Christopher Columbus often depicted to be an explorer who set out by the Empire of Spain to look for a new lands. It was not entirely true. Columbus set out to west is actually to find a new trade route to prosper with. He was to prove that the earth is round, contradict to belief of what was to be flat. He actually trying to find a new trade route to east. But, accidentally, he pump up to a new continent to be called America as we known today. And ever since, for the 500 years and so, the world change dramatically. America had since growth to become the strongest nation after war world 2 and still today.

The story behind the great explorer, lie a great lesson about how world economy will only can change and affect by new discovery in venture and adventure. In every effort on pursuing a new innovation, often it might not be turn out to be as planned, but during the processes of making the changes, incidentally, human able to discover new way, new light, new answers beyond what they originally perceived. Economy cannot have any significant breakthrough, rely only to existing resources and achievements. A short term frenzy of stock market surge, are nothing more than a merely speculation and following the herd, such a the tulip mania in dutch during 1637. During Columbus time, Empire Spain, the European continent hold their belief of having being at the peak plateau of their empire colonization. They believe they had conquered the world, not only until, a new land is discovered; from then, new evolution started - the industrialization age begin. Breakthrough can only come with endowment of Discovery and Adventures!

Milton Friedman - Modern Monetary Policies

Milton Friedman (1912-2006), a noble price laureate in economic, an American economist, an advocate of monetarism. His famous theory against the Keynesian, that the government should focusing on monetary policy rather than fiscal policy to archive equilibrium and stability of economy. He critic the government should not react instantaneously to market condition. The Keynesian system does not consider of the lag time and ripple effect of government stimulate packages. Simply providing cheap credit by lowering the interest rate or printing money, is an unhealthy manner toward the economy in long term. As the old saying, "someone has to pay the bill, soon or later", the Keynesian system simply pushing the economy problem to the future rather than solving it. The money we printed today is future bill, which mean the future generation need to pay it off. This will cause a dramatic ripple effect to future economy - the perfect storm of economy collapse. Instead of react instantaneously according to spot market condition, a well-programed monetary policy should be adopted. Money should be injected to the market by pre-plan program at pre-designated rate regardless the condition of the market. This will able to:

1. Provide adequate additional currency to market to continue growth at adequate rate without having risk of hyperinflation.
2. Avoid excessive speculation and bubble to economy
3. Provide additional fund to stimulate the market appropriately without severe depression during economy downturn.
4. To counter the lagging effect of private business could not borrow as fast as the new currency is injected to the market.

Yet, the monetarism theory does not fully adopted in new economy. The controversy - "to err is human, but to really screw things up, its take a computer!"

John Maynard Keynes - Government's Roles in Economy Stability

John Maynard Keynes, 1883-1946, was a British Economist whose ideas have been central influence on modern macroeconomic. He theory about the government role in the macroeconomic is as a prime mover to jump start the economy during recession and depression. By increase government spending during the down time, the negative impact of recession to macroeconomic can be mitigated before the economy hit the ground. The manipulation of fiscal policy of government is the key point in his theory - Keynesian Economic. His new profound economy theory have become new adoption in modern economy since world war II.

Simply put it, in Keynesian economic, government should spend when the economy is up trending, and spend more when it is down to compensate the private spending. It is like a supplementary to the free market to keep it stay healthy & Intact. Yet, his ideal theory has come to a lot of controversy since often the government is a "lousy" driver in economy. The Supplementary has becoming more likely to a Main Course.

Thorstein Veblen - The Pride of Spending

Thorstein Veblen 1857-1926, a Norwegian American, a socialist and economist during his time famous with his theory about the consumer goods are not simply priced according to Alfred Marshall - Marginalism. His theory about hedonistic human behaviour will greatly influence the price of goods. Simply put, people are willing to pay higher price for other intangible fictitious value for the sake of hedonism, hence called the Veblen price. Veblen price has been widely used for goods such as Gucci, Loius Vuitton and usch other luxury brand. The goods itself for such brand will not sale, if the price is not quote at high price. It a theory of justify yet critic the lavish spending behaviour of the riches.

Alfred Marshall - Margin is what Drive Business On Going

Alfred Marshall (1842-1924), a most influential English economist during his time. His famous theory of "marginalism" has a profound direct influence in new capitalist system. The marginalism goes with "the factory will continue to produce its product until its cost break even with the revenue, consumer will continue to purchase until his/her purchase pleasure value break even with the purchase cost". Simply said, the marginalism is a new idea of looking at the new capitalist economy system whereby, the demand and supply of market is relative to its margin. The "margin" is not just refer to fiduciary alone, but the value including perceived pleasure value.

For example, when an ice cream is sold at $2, but to produce $3 of pleasure to the consumer, it would sale.

But, the value of pleasure always going down for the subsequent purchase. Which for instance in this case, the first ice cream purchased will produce $3 pleasure, the second ice cream will only provide $1, the consumer will likely only purchase 1 ice cream at 1 time. If the second ice cream can produce $2.50 pleasure, the chances for each consumer will buy 2 will highly increase.

The concept has believe to be the fundamental to the new perceived idea of "elasticity of price (the ratio of demand to supply relative to its price)"

John A. Hobson - Imperialism is Unfathomable

John A. Hobson (1853-1940), English economist, famous in criticise the economy system heading to imperialism during his time. He critic that the capitalism will lead to imperialism, whereby a tendency that necessarily involved foreign commercial conquest and that thereby inescapably involved a constant risk of war. There are and were no more profound moral indictment of capitalism had ever been posed in such matter.

The criticism even emphasize the system will destroy the world, since the thrust and desire of human himself cannot consume enough goods. In his quote :" Paradoxically, neither the rich nor the poor could consume enough, all products produced were not be consumed, simply because the rich can't consume enough as the physical limitation, and the poor cannot consume enough as of wealth limitation, yet both rich and poor will continue to reap resource from own nation and perhaps other nation, and the world."

"what our industries lack...is more and more markets"

The sequence of capitalism will follow by its capstone and pinnacle, to conquest (imperialism) end by war!

Henry George - Economy is Common Sense

Henry George (1839-1897), an American writer, underworld political economist with his famous quote of " for studying economy, you need no special skill, knowledge, no extensive library, no costly laboratory, you don't even need a text books nor teacher, if you will but think of yourself."

He advocate that the name of political economy has been constantly invoked against every effort of the working class to increase their wages. It is the extortion of landlord system is the cancer of the economy system. His ultimate vision - the ultimate panacea to cure the current unbalance economy system with heavy taxes levy on those landlords.

But the question is what will happen to the economy health, if there will be no meaning for capitalist to invest in the real estate? And who then possess the land, the building, the factory? The government? The King? That will be socialism or imperialism. Obviously, the idea for Henry George himself is very ironic, to whom he dedicate himself to create a better economy system.

Karl Max - Pursue Totalitarian & Egalitarian

Karl Marx (1818-1883), a historian, philosopher, politic economist graduated from Marxism, socialism and communism stream. Oven, he has become a reference to communism that most of us has known. However, he basically not really a supporter for communism, but instead, he simply try to battle against the force of capitalism. In his time, he once said: "The Capitalism system is simply a planless economy system which continuously repeat in boom and bust cycle." He desperate seeking the key solution to the nature of capitalism system - boom and bust. Thus, advocate to redistribute the wealth of society buy taking from the rich and giving to the poor. He ideal illustration of such economy model, has taking assumption of the economy boom and bust is caused by the materialism of human nature. Until, when everyone has enough, the cycle can be broken, and therefore, people can concentrate on civilization, ethic, science and knowledge. However, he could never realize that, socialism will only bring out "laziness" in the people.

Our current world of 21 century has proven country that embrace capitalism and liberal market has outperform those country which embrace egalitarian distribution. The best exemplar is China - Evolution Starting from Teng Xiao Ping From Mao Zhe Dong time.

John Stuart Mill - Utilitarianism Market

John Stuart Mill (1806-1873), a utopia economist during his time, who first elucidate the "normative" and "romantical" ideas of social economy. The idea is a derivative from "Apollonian" & "Dionysian".

Apollonian - Thinking, Logic, Facts and Order

Dionysian - Emotion, Passionate, Feeling

John Stuart Mill: "advocate the ideal society whereby the rewards is base on Utilitarianism. He emphasize the society will not collapse if there are lost of 1000 of Baron, Lord, Royal families, or Bureaucrat. Instead, if the society will diminish in term of civilization if 100 top scientist, physicist, chemist or biologist suddenly disappear. "

Principle of Political Economy:

"Stationary plateau, where self-regulated population, form a worker union, preventing the landlord to continuous reaping the unearned profit by impose or levy taxes. Worker union will replace Enterprise in which men were subordinate to masters, thus, capitalism will gradually disappear."

Thomas Robert Malthus - General Glut Theory

Thomas Robert Malthus (1766-1834), British Scholar, influence in economy and demography during his time. He is best friend to David Ricardo, while both of them has different stand on the economic view. Ironically, being a populace (Middle class), he support the idea of landlord to have the privilege to enjoy the profit from the capitalism market system. However, he pointed out a flaw of the liberal profit oriented system during his time which he believed will lead the market system to collapse.

Parson Malthus (Thomas Robert Malthus): " General Glut Theory - the exponential growth of human population relative to limited natural resources with its arithmetically growth of agriculture will lead society to the brink of precipice."

David Ricardo - Protectionism is Flaw of Liberal Market

David Ricardo (19 April 1772 - 11 September 1823), an English Political economist, often credit with systematizing the subject of economic, and was one of the most influential of classical economists. He was a member of Parliament, Businessman, Capitalist who critic how the landlord rip off the profit from the growth of economy without actually contributing to the growth. It has been a very controvesy and ironic that the subject debate about the right of landlord, protectionism in leberal market which claimed to be flaws of the free market system since then with his friend (rival) during his time - Parson Malthus who in fact from the middle class, supporting the facts that righteous of landlord to enjoy the big chuck of profit from the rent.

David Ricardo - "The protectionism policy which hinder the potential growth of the macro level of economy beneciary only the landowner, but jeapordize the capitalist."

Adam Smith - Father of Laissez-faire Market Theory

The economy basically is a study of human civilization history. It been more than 300 years ago since the first person who dedicate himself in this subject - Adam Smith (born 1723). "The wealth of Nation", his first book published at 1759, advocating the "self regulated market system by the individual self interested behaviour".

The simple idea from this book has well explained the nature of our current economic system is always going through the boom and burst.

Adam Smith (1723) - "The market system is self regulated by individual human self interested behaviour in the system. It is the invisible hand governing the liberal market going through the boom and burst cycle. The invisible hand will ensure the private interest and passion of men to be most agreeable to the interest of the society as a whole."