L: Doug, we've had a lot of requests from younger readers asking for advice on how they should tackle the world, starting out amidst a crisis. We've also had questions from older readers asking what you might do differently if you were 21 again – or if you were suddenly unemployed and had to start from scratch. What do you think? Can you stroke your long, white beard and give us some practical guru wisdom for today's world?
Doug: I keep telling people I have no crystal ball, but they don't listen. Nobody has a crystal ball. But, perhaps paradoxically, I also keep giving people advice because they ask; and like anyone, I'd like to help – but those people rarely listen either.
Giving advice is temporarily gratifying to the giver, because it makes him feel like he knows something – for that moment. But it's ultimately frustrating because few receivers ever use advice. People generally have to make their own mistakes. I believe it was Stalin who said that even those few people who learn from their own mistakes weren't all that smart; he preferred to learn from other people's mistakes… not that Stalin should be considered a generally sound source of advice. It's odd, actually – one of history's great sociopaths dispensing words of wisdom…
L: I wouldn't say people never listen: last time we were together here in Cafayate, I introduced you to one of my students who took your advice to leave Eastern Europe and travel the world gathering experiences. Another one just did the same thing and went to India. And another one quit his job and started his own business…
Doug: [Blinks] Okay, okay. For the few, then. Some who have ears do in fact not only hear but listen. But of course, there's never a guarantee that the advice you're going to get is worth anything. Some poor fool might ask economics Nobel Prize-winner Paul Krugman a question on economics and god forbid, take the answer seriously.
At any rate, like most of those I expect Krugman hears, most of the questions I get center on money. Well, I've been quite fortunate in that I've been able to accumulate a fair amount of capital. So, although I've written a lot about the airy, theoretical aspects of the stuff, I guess I've also shown a degree of practical expertise in dealing with it.
Let me start off by stating the obvious: It's definitely better to have more money, more assets, more capital, because it gives you more options, more flexibility, more control. Building that pile of capital can give you those things, and you're going to need them. Having capital is critical, and given where the global economy is headed, the faster you can get it, the better. Strive to create more value – something very few wage earners ever think of. Everybody understands, at least intuitively, that if you want to build capital you have to spend less and save more, but very few have the self-discipline to actually do it. And of course, once you have sufficient savings you have to invest wisely – but most people only invest conventionally.
The bottom line is that one of the things – and I emphasize it's just one – a young person should do is grub for money now, in order to avoid having to grub for roots and berries in the future.
L: Money is power. But – contrary to popular, sloppy thinking – not all power is necessarily bad. The coercive power of the state and other forms of power based on force are destructive in their essence, and the outcomes of their application tend to be negative. When you offer someone money for a service or good, you are motivating cooperation, and the transaction only closes if both sides feel they are getting more than they are giving. Win-win. That makes the power of money essentially constructive, and the outcomes of its application, absent the corrupting influence of force, tend to be creative.
Doug: Yes. And people are going to need all the power they can muster to survive the coming storm. Power also comes from having lots of good relations, connections, with worthwhile people. It comes – as the Boy Scouts at least used to know – from being physically fit, mentally awake, and morally straight. It comes from having lots of both intellectual knowledge and practical skills. These are the things that separate the wheat from the chaff among people.
That said, I want to stress that people should not get too attached to wealth and money – that's a huge mistake on all levels. Wealth is a normal consequence of excellence in other areas of life. But it's only a consequence, a significant side effect, or an aid. It's not an object in itself. You can only pity the fool who confuses what he is with what he has.
L: Yes, Mr. T.
Doug: [Chuckles.] I'm a happy man. Right here and now, I'm living in the lap of Argentine luxury, smoking a mellow Cuban cigar, building my own polo club, growing my own grapes for a great wine, driving high-performance cars, and so forth – things that require money. But that said, some of the times when I've been happiest in my life have been times when I had no money whatsoever.
I remember a trip I took from Bern to Istanbul with a couple of buddies, back when I was a penniless student in the '60s. None of us had any sense of financial planning, so, for the last three days, on our way back from Istanbul, we had absolutely no money. Zero. Not even small coins. We were riding third class, bumming cigarettes and morsels of food from gypsies on the train. I kid you not. But it was a great adventure, and we were very happy hippies.
More recently, I spent some time living as though I had no money. A friend and I hopped a train in Grand Junction, Colorado. It took us three days to get to Portland, sleeping in rail yards, eating in missions, living like bums – or, more accurately, hoboes. Another time we went to Sacramento, which also took three days. A measure of cheap thrills and chills and a tad of danger are good spices in life. Both times were a lot of fun, and I didn't really need, or use, any money at all. Doing things like that is salubrious and therapeutic. It puts you into a new reality.
Living the vanishing middle class American dream in ticky-tacky little boxes is an illusion of security. You don't need any of that stuff to be happy. Actually, it can make you unhappy, because it starts to own you, more than you own it. You get involved in the "rat race," and before you know it you're old, tired, and relying on Social Security or the kindness of others. Grubbing for roots and berries is only fun – at least once you've reached a certain age – when you don't really have to do it.
L: Well, I appreciate the wisdom of not getting too wedded to stuff… it's not just Eastern mysticism; it can greatly increase your enjoyment of life not to get all stressed about keeping up with the Joneses, taking on more debt to buy more toys, and such. When piling up money becomes the sole focus of life, it's easy to forget that life is the reason to accumulate money in the first place. But unless you do want to become a vagabond and exist to some degree on the charity of others, or a hermit eating grubs in the woods, you have to have money.
It's fine for you to play hobo on a train for a few days, but if you have children, they need to be fed, and that takes money. If you can't feed your kids properly, that is not a happy thing, and if they get sick and need to see a doctor, that is not a fun adventure.
Money is the power by which we acquire the things we need in life, not just a meaningless scorecard for competing with the Joneses.
Doug: Sure; and it's easy for me to say that money is no big deal when my biggest problem right now is that my Cohiba just went out. I'm not in the position of having no money. Look, money is like any other tool; it's better to have it and not need it, than need it and not have it. But I really don't worry about it too much.
L: So how do you get to where you don't have to worry about it?
Doug: Remember: everyone in the world – everyone – has an infinite capacity to desire goods and services. Everyone wants more – it's a survival trait for all species to gather while the gathering is good. This unlimited appetite means that there are unlimited opportunities to earn a living. On the most fundamental level, all you have to do is look around and figure out what people need and want, then put yourself in a position to provide it to them. There's wealth in the world, a lot of it – your task is to figure out what you can offer people that will persuade them to voluntarily give you some of what they have. When what you give them makes them better off, it's a creative, win-win process, just as you said before.
When I used to land in some Third-World country where I knew no one and had no connections, what would I do – sit in my hotel room and watch TV? No. I'd open up the Yellow Pages for that city – it'd be online today – and look at the different kinds of businesses listed and think of ways I could offer some value to those people in those businesses, such that they would be willing to give me money in exchange. I always started with the people who tend to be centers of power – lawyers, real estate agents, and the like. In most places, they either have the money or know the people who do. I'd call them up and arrange an interview.
L: They'd give time to a perfect stranger?
Doug: Here it's an advantage to be in a different town, preferably in a different country. They don't know who you are – for all they know, you're an eccentric billionaire, looking for opportunities. You're interesting, simply because you're from elsewhere. With some of them, you'll establish a rapport, and next thing you know, you're being invited home for dinner, you meet some of their friends, you keep your eyes and ears open, one thing leads to another, and you can find some great opportunities.
This technique works best for people who have a wide array of knowledge and other connections. If you've done nothing significant with your life previously it's a waste of time – why should these people want to talk to you after the first five minutes, when they're sizing you up? Hitting the ground in a strange, foreign country is doing something significant – an excellent start. It both allows you to see opportunities that most people don't (stuck as they are in their medieval serf mentality), and to bring some new intellectual capital to the party – a reason for those with the money to deal you in.
You never know what the opportunity might be, but it will present itself. Ted Turner was absolutely correct when, in response to a question about how to make a fortune, he answered that you should go to where the action is and throw yourself in the middle of it. The law of large numbers will work, and some of the wealth will start coming your way.
L: You make it sound easy, but most people are afraid to do this. They'd feel more secure getting a well-paid job wherever they went. Preferably before they went.
Doug: The worst thing to do is to look for a job. That means you're looking for someone to pay you for some of your time – usually in a time and place where there are others willing to trade theirs for less. That's totally the wrong mindset. Don't be a supplicant. You're then setting yourself up as the effect of someone else's cause. What you should do is work to put yourself at cause over the situation, which works best if you've spent the time preparing yourself in previous years. You want to look for people who will trade things you want for what you can give them… or help them get. Not wages, deals. That's the critical thing to get straight in your mind. It's so obvious, but most people completely overlook it. You shouldn't look for employment; you should look for business.
Part of it is how you relate to the universe. Personally, I only relate to other people as equals; I don't talk up nor talk down. I don't kowtow to the rich and famous – I treat them with respect and courtesy, but only the amount due to any decent human. And if I don't consider them decent, I give them only that much respect. On the other hand, I never talk down to "inferiors." For all you know, that Chinese houseboy is actually the head of a triad. For all you know, that skinny, nerdy kid is the next Steve Jobs. Of course, after enough time – anywhere from five seconds to five years – you will determine with adequate certainty who you're really dealing with. People should be treated with the respect they deserve, regardless of how high or low their station in life. The key is figuring out how much they deserve.
L: I hadn't really thought of it this way before, but there have been two times in my life thus far when I personally had major financial crises – total meltdowns, with heavy obligations and no way to meet them. Both times, the fastest and easiest way I could think of to get some cash flow going was to create a business, so that's what I did.
Doug: Absolutely right. In my situation, it's rarely been that urgent. I don't really have a family. I'm married but have no children. I'm independent and can walk away from just about everything with no obligations –
L: What about Roscoe Studmuffin and Moxy Crimefighter?
Doug: [Laughs] My poodles, the football star and the supermodel? Well, maybe I do have a family – I couldn't let them starve – although they wouldn't, because they're extremely competent gopher hunters. But apart from that, I've always looked at things as an individual and evaluated risk, effort, rewards, in terms of my own needs and happiness. It's different, I grant, if you have a family. I understand that.
But most of the inquiries about how to make the most of one's life seem to be from people who may be in college (which is a big mistake for most people, who turn themselves into indentured servants with student loans that can't be defaulted on, while cluttering their minds with useless or counterproductive thoughts). If I were 18 or 21 again, what I would do is get some money – borrowed from grandmother, saved from moving lawns, withdrawn from the college fund, raised selling possessions, whatever – and use that grubstake as seed money.
L: Or get a job if you really can't find any other source of funds short of stealing. But then, for cryin' out loud, don't spend all you make, so that you can accumulate start-up capital.
Doug: Yes, exactly. You have to start someplace. Most people could learn something from the average Chinese. As a culture, they've really been through the meat grinder over the last century, and know how important it is to save.
Anyway, I would take that grubstake and hit the road and go someplace new, as different as you can get from wherever you start. That way you're new, fresh, unique. If you're American and you stay in the US where there are masses of people just like you, no one has any special reason to hire you; you are – at least at first blush – just one of millions with similar backgrounds. Better to go to Honduras or Bolivia or Laos or Nigeria, where you'll stand out from the crowd and have something to contribute that others do not. Do like the students you mentioned at the beginning of this conversation – they are to be greatly admired for what they've done.
L: If nothing else, when you do that, you're interesting.
Doug: You're interesting – and that opens up opportunities. And how interesting you are is a function of how many books you've read, how much thought you've put into things, how widely you've traveled, how many skills you've mastered, how many people you know. It's completely up to you. But you've got to get out of your comfortable and safe-seeming hometown – otherwise you're no better than a medieval peasant, chained to the dirt his ancestors toiled over and were buried in, for generations. Your chances of getting anywhere that way are slim and none.
L: And Slim's out of town.
L: I've told you about my brother before. He was injured on the job and couldn't work at about the time the crisis hit, then just couldn't find new work. Month after month, then year after year. So I bought him an airplane ticket, and he came out here to where I live, and within a month got a job. I know we're not trying to encourage people to think in terms of jobs, but even on that level, it helps to escape what you call the "medieval peasant" trap of thinking only in terms of the place you happen to be. We have feet. If we can't find opportunities around us, we can go to where there are opportunities.
Doug: Sure; on whatever level you're able to, you've got to grab the bull by the horns.
This highlights the truly shameful results of US government policy and programs over the last few generations, especially since the New Deal. They've totally corrupted the average American, who used to ask for no more than an opportunity to work hard and benefit from the fruit of his own labor. Now the average American thinks that the US government not only should, but actually can serve as a magic cornucopia, assuring him of all the good things in life.
L: You mean we don't have a human right to cars, air conditioning, wide-screen TVs, and mocha lattes? Doesn't it say so in the Constitution?
Doug: [Chuckles.] This is why I see no way out for the US that doesn't send the whole society through the wringer.
I remember my friend Barry Reid, who started a company called the Eden Underground Press. Barry was in the marijuana business in the '60s. He got caught, did three years in jail, and returned to society a felon. Didn't stop him. He started his publishing company and became very successful. But he made a wrong move when he started printing "private identification documents" that looked almost exactly like state-issued drivers' licenses. The cards didn't say they were drivers' licenses, but you'd have to look carefully to see that. So he did another three years' time. Did that stop him? Absolutely not. Barry always said: "For every door that closes, there are two that open." That's the proper attitude.
L: That's interesting… Did I tell you that in 2009, before the impression of renewed growth spread through the US economy, I had three former students from the Republic of Belarus visit my family? At the time, "everyone knew" there were no jobs, and many Americans were sitting home, not even trying to find them. But my three friends got on the bikes I gave them and rode into town every day, going door to door, asking at every single business they came across, until they got jobs – two got jobs at a supermarket 10 miles away and rode their bikes there every day.
Doug: Never surrender; it's bad karma. Getting a job like that can help you save some money and put some rice on the table, but the real value is that it gets you out in society. You're active, meeting people, finding opportunities – and that's not going to happen if you sit at home, collecting your welfare check, cementing your bad habits in place, and degrading your psychology.
L: And I'm sure it helped that my students were not American – they were different. They were interesting – from a place most people have never heard of.
Doug: Sure. And it's not easy for Belarusians to travel to many places. Americans and Europeans have a huge advantage in being able to travel to many paces with no visas. They can go to places where their experiences and even simple language skills set them apart from billions of other human beings, all looking to get ahead.
I have two different friends who didn't know each other, but both with connections with The Discovery Channel. They both thought I should make a proposal to The Discovery Channel for a documentary in which I would drop in on some nothing-nowhere country and do exactly as I've described. Start with the phone book and see if I could be sitting down with the president by the end of the week, pitching him on some deal.
L: [Chuckles.] Casey Reality TV. Some readers may not know that this is actually a hobby of yours. I've seen you sit down with a president – now the former president of Panama – and pitch him on how rich he could get putting the country back on a gold standard.
Doug: [Laughs.] Yes. And if I could do it, so could anyone. You know, I've actually pitched nine other presidents or military dictators on various deals, usually trying to privatize most or all of the government. In many cases, I believe I could have made it happen, but I would have had to move to the country and make the project the center of my life. I was never willing to go that far. Why should I, given all that I have in my life? Entirely apart from the fact that, if I succeeded, no good deed goes unpunished… at least in the realm of politics.
BUT… If I were 21 and didn't have much money, I'd do the same thing and stick with it as far as I could take it.
Actually, I learned something very important when I was… maybe 23 – I met an Israeli guy named Yahuda ben Yahuda. After talking with him for a while, he said, "You know, Mr. Casey" – he was very kind to address the young punk I was as Mr. Casey – "if you go to the Gold Coast, and you stay there for five years, you'll have five percent of everything going in or out of the country." I've always remembered that, because he was right. It's what he did when he came to America.
L: Is that always the right thing to do, Doug? Take the path less traveled?
Doug: When you come to a fork in the road…
L:… take it.
Doug: Take it. Whether you go left or right, your whole life will be different, and you never know which will be best. It's part of why I'm a solipsist, and am also very sympathetic to Taoism. At least once a day, if you turn right instead of left, if you say yes instead of no, your whole life could change totally and unrecognizably. I, for one, am on a quest for Alice's rabbit hole… or her looking glass.
The most important thing is to have the right attitude, so you can see opportunities when they present themselves, and be willing and able to take advantage of them when they do. You can help prepare yourself for that by reading a lot, associating with other interesting people, and securing a real education for yourself, rather than relying on teachers to tell you what you should think.
L: Attitude is everything. That's something I teach my students.
Doug: Just so. It's why a determined little dog will beat an unmotivated big dog in a fight 90% of the time. It's why Joe Pesci could probably have been a mob boss in real life.
L: Okay. Well, this conversation doesn't lend itself to new investment insights, so I guess we'll just leave it as a Public Service Announcement.
Doug: Sure, though I might add that while getting a job may be a necessary first step toward accumulating capital, and while it's better to be a business owner, what you really want is to move up the food chain and become an investor as soon as you can. Put your money to work for you, instead of working for money. The creative peak of capital accumulation, of course, is to become a speculator.
L: I teach that too – or try to – to my readers as well as my students. Very well, thanks for your insights.
Doug: My pleasure, as always.
[For more specific investment advice and big-picture observations from Doug – as well as insightful analyses from other Casey Research experts, including Chief Economist Bud Conrad – give The Casey Report a test drive. It is absolutely risk-free for ninety days… and will give you a solid boost in becoming a rational speculator.]