The Daily Reckoning January 22nd


The Uses and Abuses of Social Media

That headline probably seems strange coming from me. I’ve been a champion of social media, and my book A Beautiful Anarchy has a chapter on each of the most popular social media outlets: Facebook, Twitter, LinkedIn, Skype, Google+, and so on.

These tools have connected people as never before, and given people the power to manage their own lives and careers in ways that were not possible in the past. These sites have made us less dependent on institutions like government and workplace bosses and liberated millions to be in a better position to build their own private civilizations.


Yet this article has one message: Shut them down. Not entirely down. Everything I’ve written still applies. But there are uses and there are abuses. The trick is to tell the difference and act on it.

The point came to me this weekend when I was speaking at Duquesne University in Pittsburgh. Antony Davies of the economics department worked with the Institute for Humane Studies to set up this lecture. It was gratifying that on a freezing cold Friday night, in the science building in the middle of campus, 150 or so people came to hear about the relationship between ethics and the market economy. I spoke for fully 90 minutes and there was more to say.

Mostly, I was happy to have the chance to visit with so many young students and professionals about trends in the market today. Many of them wanted detailed reading lists and specific references to the books about which I spoke, most of which we’ve made available in the Laissez Faire Club.

Again and again, they complained of a problem. They don’t have time to read. They don’t know what to read to give them the best information given their limited time. There is no shortage of material, but what should they be reading that is going to give them the fastest track to wisdom that will truly improve their lives.

This is a gigantic problem in our time. In the Middle Ages, books were only for the tiny few. They took years and whole teams of scribes to make. When they were finished, they were the most valuable possession a person could have. Actually, very few individuals owned them at all. They were the possessions of large institutions that could create and guard them, institutions like governments and monasteries. They were more valuable than buildings and even people.

The world craved more books. When Gutenberg created the first copy machine for books, the company couldn’t keep up with the demand. It was total frenzy on the streets, and the dawn of a new age of learning.

Today it’s all different. We are flooded with information, most of it available at zero unit price. But the time and attention it requires of us carries a high opportunity cost. After talking with so many people about this problem — a nice problem to have — I’m struck by the real possibility that despite the access and the information flood, people are actually reading less than they ever have. A main problem is the flood and the confusion about what to read.

This is a major reason we established the Laissez Faire Club in the first place. Our job is to carefully curate resources and provide every possible tool to help you make the decision about whether investing your time in a particular book is worth it for you. We’ve put together a growing package of only the best gems from the best body of work that stand the chance of making the biggest possible difference in your life.

As time has gone on, I’ve come to realize that this is the most valuable service we offer. The comment I receive more than any other: “The Club has inspired me to do what I should have been doing for years.”

As I spoke to these students and professionals, I would inquire further on how they tend to spend their time. The same answer kept coming back at me. They spend their time on Facebook, Pinterest, and Twitter. They try to direct their attention to longer-run pursuits, but these venues keep pulling them back in.

  • “Oh, someone just commented on something I said”
  • “Someone just retweeted my tweet!”
  • “Someone is liking my meme that I just liked”
  • “Someone just commented on a post that I commented on.”

This is a bottomless pit. Add it all up and what you have is endless hours of wheeling, spinning, and largely pointless blather. All these interruptions and comments and quick reads take a serious toll on the overall quality of your life. This habit takes something that is truly wonderful and turns in into a massive time suck that, over the long run, contributes very little to your life compared with the things you are being prevented from doing.

Am I saying that what I used to say was valuable is actually not valuable? Not in any way. And let me explain this by reference to an amazing book that I happened to be reading over the last four days. The book is The Common Sense of Political Economy by Philip Wicksteed. It is a mighty economic treatise, and the Laissez Faire Club releases the first-ever e-book edition this Friday. It is the longest, most elaborate, and most interesting book on the theory of marginal utility ever written.

The core point of marginal utility is that there is a strong and decisive difference between the total value of a good or service and the marginal value of a good or service. To look at marginal value means to look at the value of the individual unit that you are in a position to consume. This is the relevant value for understanding economics.


Something can be hugely valuable for life (water, clothing, food) yet have a very small marginal value at the point of decision making. Also, the marginal value of anything falls the more it is consumed. When you are dying of thirst, the first drink is priceless. When you are bloating from drinking gallons, someone might have to pay you to drink more. This is because we all make decisions not on the total, but based on the marginal, unit.

Reading The Common Sense of Political Economy brings the point home. It explains why I am willing to pay $3 for a cup of coffee when I could be paying 10 cents by brewing my own. It explains why plumbers make more than baby sitters even though the job of the baby sitter is seemingly more important. It explains why rap stars make more than professors even though professors are dealing in big ideas whereas rap stars are only entertaining us. It explains why banks close on holidays and restaurants stay open.

Wicksteed’s book opens up a new way of looking at the world, which is why it has been chosen to be part of the Laissez Faire Club’s e-book library.

Here is how social media is affected by marginal utility. Getting on there and getting your name out is gigantically valuable. Assembling a network of contacts is crucial. Having this network be portable, attached to your person, can make the difference between success and failure.

The problem is that the marginal value of each additional contact and interaction falls over time. After the 1,000th status update or comment or interruption, the value becomes zero or negative. Of course, what we call “value” is ultimately subjective, but the enterprises behind these tools are very anxious to find ways to affect your subjective sense of the value of their service. They want to convince you that the marginal value of each interaction is higher than you might otherwise think. If you go along with it, you could turn around and see your whole life sucked into a pointless endeavor.

The point of learning about the theory of marginal utility is to become more aware of the opportunity costs you are paying for all of your choices. To be sucked into the social-media vortex could ruin your ability to be productive in other ways. In particular, it takes valuable time away from serious thinking and serious reading.

In general, you will notice that young people are far more involved in social media than professionals of an older age. The usual explanation is that younger people are more hip to the digital scene and know how to navigate it better than old people. Actually, there’s a better explanation that comes from the theory of marginal utility. The opportunity costs for young people’s time on social media is far lower than those of older people who are actually being compensated for their time. As the young get older, if they are smart, they will spend much less time on these platforms.

So my advice to those who want to get smart, become wise, become erudite: Sign up for social media, cultivate the network, and then discipline yourself and limit your level of engagement. Think seriously about how it is affecting your life. You might find that shutting it down and allowing only limited contact is the best choice you have ever made.

A friend of mine who is an economist who truly understands marginal utility has his wife change his Facebook password every few weeks, just to help him become more disciplined and remind him of the high cost of spending his day doing seemingly interesting things that are actually completely worthless on the margin. He is thinking in terms of the marginal unit of his time and mental energy. He knows that the platforms have huge total utility but very small utility on the incremental unit. He knows this because he is an economist.

A book like Wicksteed’s helps everyone think the same way. In this way, economic theory can help you use your time better, stop being buffeted about by the latest digital frenzy, and live a smarter life.

Jeffrey Tucker

The Uses and Abuses of Social Media appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

The Morality of Money, Part II

L: So you’re saying that money is a positive moral good in society because the pursuit of it motivates the creation of value. It’s the bridge between selfishness and social good, and it’s the basis for voluntary cooperation, rather than coerced interaction. Anything else?

Doug: Yes, but first, let me say one more thing about the issue of selfishness — the virtue of selfishness — and the vice of altruism. Ayn Rand might never forgive me for saying this, but if you take the two concepts — ethical self-interest and concern for others — to their logical conclusions, they are actually the same.

It’s in your selfish best interest to provide the maximum amount of value to the maximum number of people — that’s how Apple became the giant company it is. Conversely, it is not altruistic to help other people. I want all the people around me to be strong and successful. It makes life better and easier for me if they’re all doing well. So it’s selfish, not altruistic, when I help them.

To weaken others, to degrade them by making them dependent upon generosity, is not doing those people any good. If you really care about others, the best thing you can do for them is to push for totally freeing all markets. That makes it both necessary and rewarding for them to learn valuable skills and to become creators of value and not burdens on society. It’s a win-win all around.

L: That’ll bend some people’s minds… So, what was the other thing?

Doug: Well the accumulation of wealth is in and of itself an important social, as well as personal, good. The good to individuals of accumulating wealth is obvious, but the social good often goes unrecognized. Put simply, progress requires capital. Major new undertakings, from hydropower dams to spaceships, to new medical devices and treatments, require huge amounts of capital. If you’re not willing to extract that capital from the population via the coercion of taxes, i.e., steal it, you need wealth to accumulate in private hands to pay for these things. In other words, if the world is going to improve, we need huge pools of capital, intelligently invested. We need as many “obscenely” rich people as possible.


L: Right then… so, money is all good — nothing bad about it at all?

Doug: Unfortunately, many of the rich people in the world today didn’t get their money by real production. They got it by using political connections and slopping at the trough of the state. That’s bad. When I look at how some people have gotten their money — Clinton, Pelosi, and all the politically connected bankers and brokers, just for a start — I can understand why the poor want to eat the rich.

But money itself isn’t the problem. Money is just a store of value and a means of exchange. What is bad about that? Gold, as we’ve discussed many times, happens to be the best form of money the market has ever produced: It’s convenient, consistent, durable, divisible, has intrinsic value (it’s the second-most reflective and conductive metal, the most nonreactive, the most ductile, and the most malleable of all metals), and can’t be created out of thin air.

Those are gold’s attributes. People attribute all sorts of other silly things to gold, and poetic critics talk about the evils of the lust for gold. But it’s not the gold itself that’s evil — it’s the psychological aberrations and weaknesses of unethical people that are the problem. The critics are fixating on what is merely a tool, rather than the ethical merits or failures of the people who use the tool and are responsible for the consequences of their actions.

L: OK, so even if you cared only for money, that could be seen as a good thing. But you do care for more — like what?

Doug: Well, money is a tool — the means to achieve various goals. For me, those goals include fine art, wine, cars, homes, horses, cigars, and many other physical things. But it also gives me the ability to do things I enjoy or value — like spend time with friends, go to the gym, lie in the sun, read books, and do pretty much what I want when I want. Let’s just call it as philosophers do: “the good life.” It’s why my partners and I built La Estancia de Cafayate [in Argentina]. We have regular events down there I welcome readers to attend.

But I don’t take money too seriously. It’s just something you have. It’s much less important than what you do, and trivial in comparison to what you are. I could be happy being a hobo. There have been times when I felt my life was just as good and I was just as happy without much money at all. That said, you can’t be too rich or too thin.

L: Very good. Investment implications?

Doug: This may all seem rather philosophical, but it’s actually extremely important to investors. What is the purpose of investing or speculating? To make money. How can anyone hope to do that well if they feel that there is something immoral or distasteful about making money?

Someone who pinches his or her nose and tries anyway because making money is a necessary evil will never do as well as those who throw themselves into the fray with gusto and delight in doing something valuable — and doing it well.

L: The law of attraction.

Doug: Yes, but I don’t view the law of attraction as a metaphysical force — rather as a psychological reality. If you have a negative attitude about something, you’re unlikely to attract it… even if you try to talk yourself into thinking the opposite. If you think money is evil, don’t bother trying to accumulate wealth. On the other hand, if you want to become wealthy, you’d better think long and hard about your attitudes about money… Cultivate a positive attitude about money, which is right up there with language as one of the most valuable tools man has ever invented. Think about it, and give yourself permission to become rich. It’s a good thing.


Doug Casey and Louis James
for The Daily Reckoning

The Morality of Money, Part II appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

The Real Story Behind Germany’s Gold Recall

Did you hear the news? Germany, the world’s second largest gold-holding nation, is recalling some of its gold. The Germans are bringing the physical metal – once on hold outside its borders – back in country.

This is a huge development in the world gold market. But more importantly may portend a life-changing trend that gold buyers like you and I can take to the bank.

Today let’s connect a few more dots, and talk gold…

Germany, Russia, Ronald Reagan, Clausewitz, this story has it all. Let’s start by covering a distant memory, the Cold War.

Indeed, the Cold War is not just over, it’s REALLY over. Get over it. The world is REALLY changing, and I mean in ways that you can scarcely begin to comprehend.

Yes, I know. The Soviet Union fell apart in 1991. Germany reunified – expensive as that was – and the Red Army went home to Mother Russia in the mid-1990s. (I was in Berlin, in 1991, right after I did my thing in Operation Desert Storm. Wow, I could tell you some stories about the Group of Soviet Forces in Germany, headquartered at Potsdam. Another time, perhaps.)

But now? In 2013? What’s happening? There’s big news, which the mainstream media evidently fails to comprehend, while they fixate on the wrong sorts of shiny stuff – “gun control,” for instance, and what Hollywood celebrities think about it.

Here’s the real news. Long-term, this will change your life. You paying attention?

Germany is recalling some of its central bank-owned gold from the Federal Reserve Bank in New York, as well as all “German” gold on deposit in France. It’s back to der Heimat.

Let’s back up. Why was German gold not in Germany? It’s a monetary relic of the Cold War. Back in the 1950s-1980s, the “Federal Republic of Germany” (the Bundes Republik Deutschland, or BRD – “West” Germany) was basically a potential nuclear battlefield. So part of the monetary preparation for fighting World War III in Europe was to keep West Germany’s gold away from the Russian tanks and nuclear fallout.

There was also something of a “conqueror’s legacy” about it. Post-World War II, the immediate challenge to U.S.-British-French policymakers was to keep Germany tame, considering the horrible memories of the late unpleasantness of 1939-1945. As Nobel laureate Francois Mauriac once quipped, “I love Germany so dearly that I hope there will always be two of them.”

One way for the U.S., Britain and France to keep a leash on Germany was to keep “German” gold under control outside of that country’s borders. The West German “mark” — the national currency that predated today’s euro — was thus, to a significant extent, at the mercy of people in Washington, London and Paris.

Indeed, the German gold in New York, London and Paris was a form of conquerors’ deference to maintaining “gold backing” for the mark. It’s a much longer story than this, but the point is that the policy lasted three generations.

Now, however, that issue of outside control over the German currency has come to a new turn of events. The Germans are burying the last of their grandparents who lived through World War II. And they are revisiting the rationale for storing their gold under the jurisdiction of conquering powers of World War II. There are all manner of policy implications — immediate and long term.


What will Germany do with its gold after it is back inside the traditional national boundaries? Well, we’re going to find out, aren’t we?

Germany is removing all of its gold from France. The publicly-stated reasoning is that there’s no further reason for the French to store German gold, in that both nations are part of the “euro” monetary union. Of course, just a glance at the past 200 years of history tells you that there’s likely much more to the underlying rationale.

Germany will still keep some gold in New York and London, but only after conducting a complete inventory of every bar – by weight and assay, for each serial number. (Remember what Ronald Reagan said? “Trust, but verify.”)

The monetary rationale, here, is that – despite what some banker-types want you to believe — gold plays a role in balancing terms of trade between Germany and the U.S. and Britain. In other words, the dollar-euro and pound-euro exchange system works better with gold in the gearbox.

It’s accurate to say that as history shows, gold goes to where it’s respected. As I see things, just the idea that Germany is assaying its gold, and wants some of it back, speaks volumes. The gold will boost the credibility of the German government and its central bank, and generally strengthen the German economy for all manner of reasons.

Here’s a future scenario on which to chew. Perhaps Germany might look at its gold, smile and then back out of the euro as we know it. The effect will be to ditch the southern countries — certainly Greece, Spain and Portugal — from a “European” currency.

Then Germany will do what we all know it wants to do anyhow — that is, form a “new” euro including the economies of northern European countries. Think in terms of an expanded version of the old Hanseatic League, perhaps, with Germany as the center of gravity. Very Clausewitz, no? And there’s the possibility of offering membership to Italy (or perhaps just “northern” Italy).

Oh, and don’t dismiss the possibility of a German-Russian monetary alliance. They already have a strong, and growing energy alliance. Why not start coordinating things in terms of currency as well. We’ll see, right?

Best wishes…

Byron W. King

Original article posted on Daily Resource Hunter 

The Real Story Behind Germany’s Gold Recall appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

avatarThe Daily Reckoning - The Daily Reckoning posted Tuesday, January 22nd, 2013.

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