P.J.'s Economics 101
October 29, 1998
P. J. ORourke
Introductory Remarks by David Theroux
Good evening, ladies and gentlemen. My name is David Theroux, and Im the president of The Independent Institute. I am delighted to welcome you to our Open House today with P. J. ORourke and launch our new program of lectures, seminars, debates, panel discussions here in our new offices. If you want to receive notices of upcoming events, and have not given us your current address, please do so and we will be happy to keep you appraised.
We are delighted to have such a good audience. I suspect that in part because P.J.s book, Eat the Rich, has just hit the New York Times bestseller list, we have had so many last-minute people show up today. As a contingency for such a development, we have arranged to have P.J.s talk also viewed in our library room next door, which might be more comfortable for many of you without seats here in the conference center. There should also be food in there for those interested.
As many of you know, The Independent Institute regularly sponsors events featuring outstanding authors, scholars and policy experts to address major social and economic issues, especially as they may relate to important new books. And, today is certainly no exception. The difference now is that we will be holding far more and a greater variety of events here, utilizing our new conference facilities.
For those of you new to the Institute, you will find background information on our program in the packet you received when you registered. The Independent Institute is the non-profit, non-politicized, scholarly, public-policy research organization that sponsors comprehensive studies of major social and economic issues. The Institutes program adheres to the highest standards of independent inquiry, and the resulting studies are widely distributed as books, our quarterly journal, The Independent Review, and other publications, and are publicly debated through numerous conference and media programs.
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P.J. was just on Politically Incorrect with Bill Maher. Was that last night? In introducing someone like P. J. ORourke, there are so many really funny and crazy things happening every day in our world. Its really a treat to have him here to comment, even on just a few of them.
For example, I dont know about you, but this season, each year, I wonder why it is that elections are held right after Halloween. It seems like a curious thing. Lets seewitchcraft, politics, extortionI dont know. Even trick-or-treat, which is really a harmless form of childhood extortion, I guess, to get candy.
Politicianswe have to listen to their rants and their promises, but of course, in a far more serious vein, because if you dont pay your taxes or comply with the bureaucracy, you might lose your home or your car, maybe even more.
In any event, our guest of honor tonight is a very funny guy. His writings have been widely published in many of the top magazines. I would say that the wisdom of P. J.s work is more extensive than the combined writings of most members of the American Economics Association and other groups. And this, indeed, is the topic of his new book, Eat the Rich, which has as its subtitle, as you may have noticed, A Treatise on Economics.
P. J. is the best-selling author of nine books. He is a graduate of Miami University in Ohio and received his M.A. in English from Johns Hopkins University. In 1975, he was named national editor of the National Lampoon, where he stayed as editor-in-chief until 1981.
He considers himself to be brave, trustworthy and a big fibber. His bad habits are drinking and smoking, and I suppose being a member of our Board of Advisors. Many consider him to be a gem, as the combination of H. L. Mencken and Lenny Bruce. So it gives me great pleasure to introduce P. J. ORourke.
P. J. ORourke
I think David had it half-right about the reason for the proximity of elections to Halloween. Its all trick, no treat. You get your windows soaped no matter what.
I am actually going to talk a bit about my book tonight, because its kind of whats on my mind. Ive been out on book tours since the day after Labor Day, the Bataan Death March of book tours. Its sort of living proof of the interesting piece of economic evidence that any given writer is cheaper and more expendable than a single page of advertising in the New York Times, which would reach essentially the same number of people.
Anyway, I wrote this book about economics because this question had been nagging me for a long time, a very fundamental question about economics, which was why do some places prosper and thrive while other just suck? And I didnt know.
It clearly was not a matter of brains. There is no place dumber than Beverly Hills, and yet the residents of Beverly Hills are wading in gravy. Meanwhile, you go to Russia, where chess is a spectator sportso you know theyre not stupidbut theyre boiling stones for soup over there.
It cant be education. This is a very prosperous country. America is the most prosperous country in the world. Our fourth graders know what a condom is, but arent sure about nine times seven.
Natural resources are not the answer, impoverished Africa has diamonds, gold, uranium, oil, you name it, while prosperous Scandinavia has got nothing and even that is frozen. Maybe culture is the key, but wealthy regions such as the local shopping mall are famous for lacking culture, so thats not it.
Perhaps the good life secret lies in civilization. But the Chinese had an ancient and sophisticated civilization when my relatives were hunkering naked in trees. Admittedly, that was last week, but theyd been drinking. In 1000 BC, when Europeans were barely using metal to hit each other over the head, the Chinese were casting ornate bronze wine vessels big enough to take a bath in, something else no contemporary European had done. Any yet, today, China stinks.
Government does not cause affluence. I dont think Ill get many arguments out of this crowd about that. Citizens of totalitarian countries, for instance, have plenty of government, nothing of anything else. But unfortunately, absence of government doesnt work either. Because for a million years, mankind had no government whatsoever and everybodys relatives were hunkering naked in trees.
Plain hard work is not the source of plenty. The poorer people are the plainer and harder is the work that they do. We play golf. And technology provides no guarantee of creature comforts: the most wretched locales in the world are fully supplied with complex and up-to-date technology... in the form of weapons.
Why are some places wealthy and other places poor? I thought about this for a long time, and it finally occurred to me that it might have something to do with money. But I didnt know anything about money. I didnt know anything about money as a practical matter. Did I have enough money to make the mortgage payment? And I didnt know anything about money in a broader abstract sense. And I certainly didnt know anything about economic theory. I felt that I probably wasnt alone in this.
I couldnt answer the central question in my book because I was an economic idiot. And I got to be an economic idiot by the simple and natural method of being a human. Humans have trouble with economics. You may have noticed this around your house towards the end of the month. But its not just because economic circumstances sometimes cause humans to starve that humans have problems with economics. Humans seem to have an innate inability to pay attention to economic principles.
Love, death and money. These are the three main human concerns. Were all keen students of love. We are fascinated by every aspect of the matter in theory and in practice, from precise observations of X- and R-rated this and that to all the ethereal sentimentalities marketed in miles and miles of isles of Hallmark stores. No variety of love is too trivial for Jesus or Ken Starr. No aspect of love is so ridiculous that it hasnt been exhaustedly reviewed by the great thinkers, the great artists, the great hosts of daytime television talk shows.
And as for death, the public appetite for investigation of this subject is such that the highest-rated television program in America is about an emergency room. The most hardheaded and unspeculative of persons has his notions of eschatology. The dullest mind can reason extensively about what causes kicking the bucket.
Dying sparks our intellectual curiosity. Loving sparks our intellectual curiosity. Money does not. All we care about is the thing itself, preferably in large amounts. Now, we care a very great deal about that, but here, our brainwork stops. We dont seem to mind where our money comes from. In an affluent society, we dont even seem to mind where our money goes. And as for larger questions about money, we shrug our shoulders and say, I wish I had more.
So why is that we are earnest scholars of loving and dying, but turn as vague and fidgety as a high school study hall in June when the topic is economics? I have several hypothesesnone of them, Im afraid, very good. Love and death are limited and personal.
Even when free love was in vogue, only a certain number of people would allow me to practice that freedom upon them. I seem to remember the number was none. A pious man in the throws of Christian agape may love every creature in the world, but he is unlikely to have to meet them all.
And death, too, is limited and personal. Death is as personal as it gets and as limited as it gets. Death, as we say nowadays, is closure. Plus the death ratio is low; only one to one in occurrences per person.
Economics is unlimited and its impersonal. Economics happens constantly. It happens all the time. It involves multitudes of people and uncountable goods and services. Economics is too complicated. It makes our heads ache. So when anything economic goes awry, we respond in our limited and personal way by searching our suit coat pockets to see if there are any wadded up fives inside. We either pray, or vote for Democrats, depending upon our personal convictions of faith.
Or maybe economics is so ever present, so pervasive in every aspect of our lives, that we really dont perceive it. We fail to identify economics as a separate entity. Just as we can watch a man slip and fall and almost never hear him sayGoddamn gravity! And we can watch a man fall 10 times and not see him become interested in how gravity works. Almost never does he arise from the 11th tumble saying, I went down at a rate of 32 feet per second squared, the force being directly proportional to the product of the earths mass times my weight, and inversely proportional to the square of the distance between that patch of ice on the front steps and my butt.
And so it is with us and economics. No amount of losing our jobs or our nest eggs sends us to the library for a copy of John Maynard Keynes The General Theory of Employment, Interest and Money. This very pervasiveness of economics keeps us from getting intellectual distance on the subject. We can view death from afar for 70 odd years, and although love is notorious for fuddling the brain, there is matrimony to cool the passions. Or failing that, sexual climax will work in the short term. Unless youre the President.
But there is no such thing as a dollargasm. Money is always with us. What am I going to do to take my mind off money? Go shopping? Drink and drugs are going to cost me. I suppose I can play with the kids. They need new shoes. Constant money worries have a bad affect on human psychology. I would argue that there is more unbalanced thinking about finance than there is about anything else. Death and sex may be the mainstays of psychoanalysis, but note how few shrinks ask to be paid in marriages or in murders.
People will do some odd things for political or religious reasons, but thats nothing compared to what people will do for a buck. And if you consider how people spend their dough, insane hardly covers it. Our reactions to cash are nutty. Even when that cash is half a world away and belongs to perfect strangers. We dont ridicule people for dying or, in our heart of hearts, do we despise them for fooling around, unless were in a very tight Congressional race. But let a man get rich, especially if it happens quickly and we dont understand how he did it, and we can work ourselves into fits of psychotic rage. We arent rational and intelligent about economics, basically, because thinking about money has driven us crazy.
I admit, Im as much of a mooncalf about this kind of stuff as anybody. I had no interest in economics as a kid. As kids dont. Childrenlucky children at leastlive in that ideal state postulated by Karl Marx where the rule is from each according to his abilities to each according to his needs. Getting grounded equals being sent to a gulag and angry dad is confused with Joseph Stalin. And then we wonder why so many young people are left-wingers.
I had no interest in economics in college either. I belonged to that great tradition of academic bohemia, which stretches from the 15th century riots of Franciose Villon to the Phish tour of the present day. For university hipsters, nothing is more patheticIm sure Villon mentioned this somewhere in his poetrynothing is more pathetic than taking business courses. My friends and I were above that. In our classes, we studied literature, anthropology, ceramics. We were seeking, questing, growing. Specifically, we were growing side burns and leg hair according to gender.
It did not occur to us that the frat pack dolts and the tri-Delt tweeties hurrying to get to Econ 101 on time in their square fashion were the real intellectuals. We never realized that the grappling with the concept of aggregate supply and demand was more challenging than writing a paper about the affects of cool jazz on the poetry on Edgar Allen Poe. What the L7s were being quizzed on was not only harder to understand than, say, Margaret Meads theories about petting in Samoait was also more important.
The engine of existence is fueled by just a few things. Unglazed pottery is not among them. If the rah-rah Bobs and pin me Sallies had been taking love or death courses, we would have been right there with them, but money was a different matter. We werent interested in money.
Actually, what we werent interested in was work. And maybe we guessed that it would be a lot of work to BS our way out of memorizing such formulas as: price elasticity equals percentage change in supply divided by percentage change in price. And, of course, we were interested in money. I remember we got excited whenever we had any of it. Its just that we were determined not to earn it. We would never go in search of money. Money was something that would come looking for us, after we choreographed our world-shattering modern dance recitals or mounted our famous empty gallery show of pre-conceptual post-Objectivist paintings, or when our folk-rock group, Exiles of Dayton, learned to play Kumbaya.
And we werent going to sell out no matter how much money was lavished upon us. The business majors
.they intended to, and it was a loaded phrase in my day, they intended to MAKE money. And they were going to do this even if it involved some activity that wasnt a bit artistic, such as running IBM.
Now, we artsy types would have been shocked if anybody told usand no one had the nervethat making money was creative. And we would have been truly shocked to learn that a fundamental principal of making money, the fundamental principal of economics, is that wealth is created when assets are moved from lower value to higher valued uses. Its the root of all creativity, be it artsy, IBM, or whatever.
To us, putting money first was crass. It was if we had gone to a party with dozens of wild swinging chicks, and instead of drinking matuse and making subtle small talk about Jean-Paul Sartre, we had just done something like the President of the United States might do. Except, we would have thought that was a blast. But go into business? Never. Never.
If you dont count selling drugs, which we were all doing. We knew everything about price elasticity when it came to pot, not to mention aggregate supply and demand. In point of fact, we hairy weirdoes probably had more real business experience than any business major on campus. And another thing, my friends and Iwe all fancied ourselves to be Marxists of one kind or another. As a philosophic recipe, Marxism is a cannelloni of the economical, stuffed with economics and cooked in economic sauce. And still, we were not interested in economics ideas.
And to be fair, the business majors werent either. Econ was not something they took because they were fascinated by the elegant complexities of economic relationships or because mankind cannot survive without economic activity. They took Econ and forgot everything in the textbook in order to get a job from somebody who took Econ and forget everything in the textbook.
Now I turned into a square myself, of course, as everybody who lives long enough does. I got a job as a journalist. But without ever considering that journalism was a business, although I would have been unpleasantly surprised to get a hug instead of a paycheck at the end of the week. And I continued to ignore economic issues, even though I had a press pass to the most spectacular extravaganza of economics in this century. It was the 1970s.
Now the Great Depression may have been more dramatic economically than the 1970s, but it was a one-trick pony. Everybody got poor. That was it. In the seventies, everything was happening. In the seventies, globalization suddenly included the other three-quarters of the globe. The places that used to make our wind-up toys were making our automobiles. Everything was being imported, except oil, which had hitherto been given away free with a windshield wash and a set of highball glasses at most brand name gas stations. Then, one day, you couldnt buy oil for money.
Not that there wasnt plenty of money around in the 1970s; it just didnt happen to be worth anything. We had this previously unimaginable combination of fever inflation and hypothermia business slump. You could make more money in the 1970s by buying treasury bills than you could make by breaking into the treasury. The gold standard disappeared from the sea. Maybe it joined a cult. I dont know. International currency exchange rates were determined with mood rings. The most powerful nations in the world had at their helms an amazing collection of economic nincompoops: Nixon, Carter, Mao, Howard Wilson, George Pompadeau, and Leonid Brezhnev. And the computer and economic media revolution was just beginning back then, so the bad ideas about economics were suddenly spreading around the world at neuron speed.
I dozed through it. And I was covering politics, too. Even I realized that money is to the politician as the eucalyptus tree is to the koala bear. Its food, water, shelter and something to crap on. It wasnt until the 1990s, when I had been a foreign correspondent for more than 10 years, that I had finally noticed economics. I noticed that in a lot of places I went, there wasnt anything youd call an economy, and I didnt know why. Many of these countries seemed to have everythingexcept food, water, shelter and something to crap on.
I decided what I would do is I would go back to the econ texts that I had finessed in college, and figure things out. When I did this, my beatnik loathing returned full-blown, except this time, it wasnt the business majors I despised. It was their professors, the people that had written the econ textbooks that they had to study. Because looking into a college textbookI mean as an adultits a shock. Its a shock and its a vivid reminder of why we were so glad to get out of school. The prose style is at once juvenile and impenetrable, like Good Night Moon, rewritten by Henry James.
The professorial wit is duller than the professorial dicta and the professorial dicta are dulled to nearly unbearable numbness by the need to exhibit professorial self-importance. No idea, however simple, can be communicated. When theres more of stuff, that stuff costs less. It can be expressed without rendering it into a madras sport coat of a graph and translating it into a rebus puzzle full of peculiar size and notations, but then the science of economics is not going to look as important to the outside world as the science of organic chemistry or particle physics.
And then, speaking of matters economical, theres the price of these things. $40.95 it cost me for a 15th edition of Economics by Paul Samuelson. That book, as its edition number indicates, has been used as an econ text forever. That is, since 1948, which, if youre in the baby boom, counts as forever.
Now, Samulesons Economics is considered a fossil by most modern economists, but that textbook has been translated into 40 some languages or so. All the current leaders of business and industry, and most of the current leaders of governmentnot just here but all around the worldthat is the textbook that they were afflicted with when they were in college. So I felt I had to read this, and when I did, here was another shock. Professor Samuelson turns out to be at least as much of a goof as my friends and I in the 60s were.
Samuelson says: Marx was wrong about many things, but that does not diminish his stature as an important economist. Well, what would? If Marx was wrong about many things, and groped the babysitter? Samulesons forward to the 15th edition says, In the reactionary days of Sen. Joseph McCarthy, my book got its share of condemnation and Im going, I hope so. You dont want all that McCarthyism to go to waste.
Economics is full of passages indicating that Samuelson disagrees with various reactionary ideas, such as freedom, just for instance. The chapter titled Applications of Supply and Demand states, Crop restrictions not only raise the price of corn and other crops, but also tend to raise farmers total revenues and earnings. Increase your corn profit by not growing corn. Now, here is a business that I think we would all like to get in on, where everybody can get really rich if we would just do more nothing.
In the chapter in Economics with the title Supply and Allocation in Competitive Markets, Samuelson seems to be confused about the very nature of what a market is. A marketplace is someplace where things get exchanged, and he says, Is society satisfied with outcomes where the maximal amount of bread is produced, or will modern democracies take loaves from the wealthy and pass them out to the poor? But why would rich people produce the maximal amount of bread just to have it sit around? They got to do something with that bread. What, are they starting a mold farm?
Are the rich people stupid? What is this? Or is Samuelson trying to talk about charity here? If he is, let me note that Jesus did not perform the miracle of the loaves and taxes. That wasnt what he did. We all know how modern democracies take loaves away from the wealthy. Thats not so complicated. Its the slip-ups in the pass them out to the poor department that inspire a study of econ.
Believe me, it was not reassuring to learn that the men who run the companies where my 401k is invested have minds filled with junk from the attic of Samuelsons Economics. Now, of course there were newer textbooks on economics for me to look at, and I did. And what they said was not so obviously wrong, but then again what they said was not so obvious.
Here are the first three sentences of the textbook, Macroeconomics, by David Collander: When an artist looks at the world, he sees color, but when a musician looks at the world, she hears music (note the PC pronoun shift). When an economist looks at the world, she sees a symphony of costs and benefits.
So the textbooks werent any good. This sent me back to the original source material, the classics of economic thought, but here, what I have to admit isI was tacitly admitting 30 years ago that I dont have the brains to be a tri-Delt. Wealth of Nations, Das Kapital, The General Theory of Whatchmajigger, theyre impressive works. They look swell on my bookshelf and they put me right to sleep.
Then, of course, there were popular books on economics, but the really popular books were about extraordinary people doing extraordinary things and getting fabulously wealthy or going to jail, preferably both. And I wasnt interested in that. I was interested in ordinary people doing ordinary things and getting by, and the less popular, but more worthwhile books on economics all seem to presume that I had made it through something like the Samuleson textbook without blowing a fuse, and I had not.
So, I gave up trying to be smart about economics and I decided that if I wanted to know why some places were rich and other places were poor, I should go to those places. I would visit different economic systemsfree markets, socialists, systems nobody could figure out. Id investigate economically successful societies -the U.S., Sweden, Hong Kong, economically unsuccessfully societiesAlbania, Cuba, Tanzania, and Id investigate societies that hadnt decided yet whether to be successful or not, such as Mainland China or Russia, although that was two years ago, and since then, Russia seems to have decided.
And I would just poke around. I would look things over and I would simply ask people how come youre so broke? Or why are you shitting in high cotton? Anyway, thats the starting point, sort of. In some ways, not only is it the starting pointin some ways, its also sort as far as I got. Thats kind of everything I know, but if anyone has got questions, I will make up some other stuff if you like.
Audience Member #1
Ill ask my question first. For a long time, I have to tell you I had you confused with Dave Barry, and I realize youre both . . .
Thats okay actually, because I had David Theroux mixed up with Paul Theroux. Paul Theroux travels more, and hes a lot smarter than Paul. Thats the simple way to tell them apart. But Im sorry
Audience Member #1
Do either of them have a cabin at Walden Pond?
No, no. Thats yet another Thoreau. Thats the dead one.
Audience Member #1
I think Im going to leave the humor to you. I finally got it resolved, the difference between you guys. Youre both very popular humorists. Youre both free-market type orientation, and I just got my latest copy of the LibertyTree catalog, and Ive got under Humor/Satire, Ive got P. J. ORourke with a picture, and below that, Ive got Dave Barry with a picture, and I looked very closely at the two pictures and the faces are identical. Will you finally admit that you and Dave Barry are the same person?
We were separated at birth. Dave got the booger joke franchise. Kind of closed me out of the weekly newspaper columns syndication business, but were pretty close friends. We both suffer from what is known as Dave Barry hair, which is hair that if you dont spend a lot of time fiddling with, and put junk in, makes you look like Herman and the Hermits about circa 1954. Its a terrible, tragic thing. Ken Burns has it too. A number of people are afflicted with it.
Audience Member #2
My question, you discussed the fact of paying farmers to not grow their wheat. Do you adhere to the theory, its called the FICA program here in the U.S. . . .could this theory be moved ahead to paying politicians not to go to Washington, not to go to Sacramento, no new laws, no raises themselves? Could that be feasible?
You might be on to something there. You might be on to something there. I was thinking, there are usually economic answers to any problem you want to pose. Theyre not always the answers you want to hear, but there usually are economic answers. Now we all know that price fixing, if you fix the level of price above the natural price of a thing, that you get way too much of it. So Im not sure we want to pay politicians to do anything. But if you fix the price of something below its market pricethe way they did with rent controls in New York Citythe items about which the prices are fixed disappears. Now, we have to figure out a way to fix the price of politicians below market level. That is
below zero. Its tough. Mathematically, it presents certain difficulties. Randomly shooting one from every Congress? Being selected by lottery would certainly keep a lot of people out of Congress, but I dont know. There is an answer in there and I think you are onto something important.
Audience Member #3
On the subject of why some cultures make it and some dont, have you read Thomas Sowells new book, Conquest and Cultures, where he describes geography with having a lot to do with that? And if you havent read that book,talk to us about being a baby boomer.
Well, lets leave the baby boomer thing. Actually, Dave got that
when Dave Barry and I got divorced, he got that in the settlement. Baby Boom and the booger jokes, he got.
I havent read Sowells book, but there are a number of other books that talk about that kind of thing extensively and the authors name is eluding me. There is a guy who wrote about why, in the New World, there are such rich and stable countries as the United States and Canada, and a whole bunch of other countries that are
.the tendencies are to say they are hot-blooded Latinos down there, which is a bunch of crap, you know, because Costa Rica is there acting pretty much like a normal European country.
And what it is, this guys theory is that there are two kinds of colonists: those that come to stay and those that come to get rich and go back and blow the money in Madrid or Paris or Rome or wherever it is that they come from. Well, America, Canada and Costa Rica and a few places elsewhere in Latin America and the Caribbean were settled by people who came to stay. They couldnt go back. They didnt want to go back. They were scared to go back. They would starve if they went back. Whatever their reasons, they came to stay. When people come to stay, they build institutions. Theyre looking at it as a place, not just for them, but for their children and their grandchildren.
When people come with an eye that theyre going to make it big in the next 5 or 8 years, and then go back and be a rich person, theyre not building institutions. They have kids too, but they have them with the local women and theyre going to leave them there. Theyre not really too worried whats gong to happen to those kids. I think that has a major influence. As for geography itself, I dont know.
The lesson to all of us always is Hong Kong. Hong Kong was a basket case. In 1949, it went from a half million person fishing village to, like, the swamped rock with no natural resources. It doesnt even have enough water. It has to import water from the mainland. And it is one of the richeston a per capita basisone of the four richest societies in the world. Why is that? Well, no taxes. No restrictions on trade. No restrictions on trade whatsoever. Very modest taxes. No restrictions on the movement of capital. A solid currency. All that basic stuff that any economist would tell you that a society needs to have. Hong Kong happens to have all of those things. Plus, no social benefit programs, so you had better be serious about working and saving and stuff like that.
Audience Member #4
I saw something in your book about equating that when you own stock,you own an opinion. In your attempt to try and systematize or put some order to economies here, have you said that you were at a loss, in part, because trying to create a system for opinions was a losing battle?
Impossible task. One of the reasons that economics and investing have so little to do with each other. And if you quiz peopleI did, as a matter of fact, quiz a bunch of people in the stock market about what their economic point of view was. Are you free marketers? Are you Keynesians? Are you monetarists? They didnt give a shit. Some of them didnt know. Some knew, but didnt care. What they cared about was the investing, the number of variables.
While the number of variables in economics is large, we are dealing with big blocky theories, so we can all sort of fudge on that. But the number of variables in investing is almost infinite, and you cant fudge the theory because you get it right in the wallet. Investing is a much more complex thing than, certainly than macroeconomics, or even really, the microeconomics.
And I had this secret hope as I was writing this book that I would not only write this bookand I hope to make some money from the bookbut I would also learn how to get really rich, because I would talk to all these rich people and stuff. And so, about a year ago now, I had dinner with John Merton, Myron Shoals and John Merriwhetherthree of the principles in Long-Term Capital Management. Guys who, at that time, were doing very, very well. And Im sitting with them and I get Merton and Scholes, and I buy them a drink afterward and I say, Im writing this book about economics. What should I be telling my readers? Well, what should I do with my money? Ill tell the readers later.
They both had the same information. They both had the same opinion. They said the same thing to me. They said: Trade on asymmetrical information. I said, That clears that right up. Go home and trade on some asymmetrical information. Theyre basically saying, trade on something that you know that other people dont know. It turns out that they didnt know anything. I almost lost $3.6 million.
Audience Member #4
One quick follow-up. Based on what you just said, whats your view on the term fair market value?
My view of the term fair market value is what somebody will pay you for the stock that you just paid too much to somebody else for. Fair market value only has a meaning in terms of the clock. Its all right now.
P. J. is going to have to leave pretty soon, so some of you who still want to get your books autographed can come up right here.
One last point. The open house with P. J. ORourke is actually the beginning of a series of programs we are going to be holding here to base lectures, seminars and so on and we hope that youll join with us in the future. Thanks for coming.