Bogleheads® on Investing Podcast 021 – Larry Siegel, host Rick Ferri (audio only)

00:00:00.000 | [music]

00:00:10.000 | Welcome to Bogleheads on Investing podcast number 21.

00:00:14.000 | Today our special guest is Larry Siegel,

00:00:17.000 | the director of research at the CFA Research Foundation,

00:00:21.000 | an independent consultant, writer, and speaker.

00:00:24.000 | Today we're talking with Larry about his new book,

00:00:26.000 | Fewer, Richer, Greener.

00:00:29.000 | [music]

00:00:39.000 | Hi everyone, my name is Rick Ferry,

00:00:41.000 | and I'm the host of Bogleheads on Investing.

00:00:44.000 | This episode, as with all episodes,

00:00:46.000 | is brought to you by the John C. Bogle Center for Financial Literacy,

00:00:50.000 | a 501(c)(3) corporation.

00:00:53.000 | Today my special guest is Larry Siegel.

00:00:56.000 | Larry is well known and widely respected among institutional investors

00:01:00.000 | and those of us who hold a CFA charter.

00:01:04.000 | Larry is the director of research at the CFA Institute Research Foundation.

00:01:09.000 | He's a senior advisor to OCP Capital LLC.

00:01:13.000 | He's an independent consultant, writer, and speaker.

00:01:17.000 | Today we're talking with Larry about his new book, Fewer, Richer, Greener.

00:01:22.000 | This is an important book for our time because it reminds readers

00:01:27.000 | how good things are, even in the middle of this pandemic.

00:01:31.000 | Larry meticulously documents the advances we've made in medicine,

00:01:36.000 | how efficient energy has become,

00:01:38.000 | and how we take for granted just turning on a light,

00:01:41.000 | how much wealth has been created all over the world,

00:01:44.000 | how much better education is, how open more societies are.

00:01:49.000 | And so even in the middle of this pandemic when everything looks bad,

00:01:54.000 | to step back and take a broader view, a historic view,

00:01:58.000 | of how we got to where we are today and where do we go from here.

00:02:01.000 | So with no further ado, let me introduce Larry Siegel.

00:02:05.000 | Welcome to Bogle Heads on Investing, Larry.

00:02:07.000 | Thank you.

00:02:08.000 | Larry, I'm pleased to have you on the show today.

00:02:10.000 | I've been following you for more than 25 years.

00:02:13.000 | I started reading your work when you were the managing director of Ibbotson & Associates,

00:02:17.000 | and then you went over to the Ford Foundation

00:02:20.000 | and you became the director of research there,

00:02:22.000 | and at the same time you picked up director of research

00:02:25.000 | for the CFA Institute Research Foundation.

00:02:27.000 | You've been doing that for 15 years, and now you have a new book out.

00:02:31.000 | You're a busy person.

00:02:32.000 | Can you tell us a little bit more about yourself,

00:02:34.000 | maybe some of your history, some of your past?

00:02:37.000 | Well, I'm going to start with a very brief anecdote from college.

00:02:42.000 | I went to the University of Chicago in the early '70s,

00:02:45.000 | and most of the people there wanted to either get their Ph.D.

00:02:50.000 | or become backpackers and travel around the world

00:02:53.000 | or do something that was intended to make the world a better place.

00:02:59.000 | There was one fellow, Gary Hoover, who wanted to be a big businessman.

00:03:04.000 | He admired the great founders of our industrial and retail corporations

00:03:11.000 | and in particular wanted to go into the retailing field,

00:03:15.000 | and he eventually wound up founding the company

00:03:19.000 | that became Barnes & Noble Superstores.

00:03:21.000 | He made it cool to want to study economics and business,

00:03:27.000 | and he and I, almost 50 years later, are still doing some work together

00:03:32.000 | and are great friends.

00:03:34.000 | So I have him to thank for steering me to the University of Chicago

00:03:37.000 | Graduate School of Business, which is now called Booth,

00:03:41.000 | and I eventually, after a year or two of study there,

00:03:45.000 | got a job with a fellow named Roger Ibbotson,

00:03:47.000 | who was my finance professor, and he needed some research done,

00:03:51.000 | and he gave me a stack of papers to look over one day and said,

00:03:56.000 | "Well, I am testifying in a rate-of-return hearing

00:03:59.000 | for a utility tomorrow morning, and I'd like you to look at this tonight

00:04:03.000 | and leave me some notes telling me what it says because I haven't read it."

00:04:07.000 | I'm a night owl, and he's an early bird,

00:04:09.000 | so I got to take over his desk after about 2 o'clock.

00:04:13.000 | I stayed up, and I wrote that summary,

00:04:16.000 | and that was the beginning of Ibbotson Associates,

00:04:19.000 | which I spent 15 years with in various capacities.

00:04:24.000 | And the Ford Foundation, where I spent my mid-career years,

00:04:29.000 | recruited me out of Ibbotson Associates to be their head of research,

00:04:32.000 | and I retired from there in 2009.

00:04:37.000 | I started my own consulting practice

00:04:39.000 | and also became the head of research for the CFA Institute Research Foundation.

00:04:45.000 | But I've also decided to do something new with my life,

00:04:48.000 | which is to become a writer.

00:04:52.000 | I've always written, but I never wrote a commercial book

00:04:55.000 | until I wrote "Fewer, Richer, Greener,"

00:04:58.000 | which is a look back on economic progress in the last 5,000 years or so,

00:05:06.000 | and then a look forward.

00:05:08.000 | There was a book by the Northwestern University professor Robert Gordon

00:05:12.000 | which said that the United States has basically cooked its goose

00:05:17.000 | and that future technological progress will be little improvements

00:05:22.000 | in existing technologies, not revolutionary innovations.

00:05:29.000 | But there are so many.

00:05:30.000 | I mean, I've been on a discussion group

00:05:33.000 | with University of Chicago graduates of my generation

00:05:36.000 | who have now had 45 or 50 years of real-world experience,

00:05:41.000 | and they're obviously very bright,

00:05:42.000 | or they wouldn't have gotten into the university in the first place,

00:05:45.000 | and they're talking just like the other doom and gloomsters

00:05:49.000 | with a handful of exceptions.

00:05:51.000 | So this needs a strong antidote.

00:05:53.000 | It needs somebody who, like me, has an interdisciplinary focus

00:05:57.000 | and can look at demography, history, history, economic history,

00:06:02.000 | the environment, literature, philosophy, and so forth

00:06:06.000 | with at least a little bit of knowledge of each of them

00:06:09.000 | and put together the case that we're in the middle

00:06:12.000 | of the greatest improvement in standards of living

00:06:14.000 | that the world has ever known and not at the end of it.

00:06:18.000 | The basic premise is that the standard of living of the world,

00:06:21.000 | not just in the United States, but all over the world,

00:06:24.000 | has increased significantly.

00:06:26.000 | And that's not going to end, correct?

00:06:29.000 | I'm looking at a chart right now from my book

00:06:33.000 | which shows that world income per capita

00:06:36.000 | expressed in today's money and in American dollars

00:06:40.000 | has reached about $16,000 to $18,000 a year.

00:06:44.000 | Now, that doesn't sound like a lot.

00:06:46.000 | If you're an American, it's hard to live on if you're not an American.

00:06:50.000 | But the amazing thing about this fact

00:06:52.000 | is that that's what the United States' average income was

00:06:56.000 | in the late 1940s,

00:06:58.000 | when we were a first-world country by any standard,

00:07:01.000 | when we were the sole remaining great power--

00:07:05.000 | that's when the word "superpower" was coined--

00:07:08.000 | and when we had recovered completely from the Great Depression

00:07:11.000 | and got to move forward into a new era of growth in the '50s and '60s.

00:07:16.000 | So that's the world standard now.

00:07:18.000 | And, of course, there are many people below it,

00:07:21.000 | but there are many people above it.

00:07:24.000 | And that is the sort of exhibit one, in my case,

00:07:28.000 | that improvement has been not only huge but very widespread.

00:07:33.000 | Larry, I like the way you broke the book out

00:07:36.000 | into three basic categories--

00:07:39.000 | "fewer," "richer," and "greener."

00:07:42.000 | Could you explain, starting with "fewer,"

00:07:45.000 | what do you mean by that?

00:07:47.000 | Well, we're not actually getting fewer people,

00:07:50.000 | but we're having a tremendous slowdown in the population growth rate,

00:07:54.000 | and eventually we will have fewer people.

00:07:56.000 | The peak will probably be late in this century

00:07:59.000 | and will be around 10.5 to 11 billion people,

00:08:03.000 | which is 50% more than there are now.

00:08:06.000 | In the late 1960s and early 1970s,

00:08:10.000 | Paul Ehrlich, an entomologist and self-styled futurist,

00:08:15.000 | wrote a book which began,

00:08:17.000 | "The battle to feed humanity is over, and we've lost."

00:08:22.000 | He said that we would experience worldwide

00:08:25.000 | or at least widespread famine by 1975,

00:08:29.000 | that the world would be getting dramatically poorer,

00:08:33.000 | and that the reason was population growth was completely out of control.

00:08:38.000 | In fact, at the time that he wrote that, it was a legitimate worry.

00:08:42.000 | Population of the world had roughly doubled between 1950 and 1970.

00:08:48.000 | At a growth rate like that, you will run out of resources pretty quickly.

00:08:52.000 | But what he didn't take into account was the demographic transition,

00:08:57.000 | and that is the phenomenon where people start having fewer and fewer children

00:09:01.000 | as they get wealthier.

00:09:03.000 | So as they begin to get wealthier,

00:09:05.000 | they spend more money on health care and on good food and so forth,

00:09:10.000 | and the population does grow.

00:09:13.000 | But as they become more comfortably middle class,

00:09:17.000 | they invest not in having a lot of children,

00:09:20.000 | so someone will work on the farm and take care of them when they're old,

00:09:25.000 | but in having fewer children of higher quality.

00:09:29.000 | Now, what do I mean by quality?

00:09:31.000 | I mean more education, tennis lessons, guitar lessons,

00:09:36.000 | room for each of the children in the house,

00:09:39.000 | and college education,

00:09:41.000 | which has now become almost mind-numbingly expensive.

00:09:46.000 | And the population growth rates slow down to zero

00:09:50.000 | and in some cases turn negative.

00:09:52.000 | If you look at Singapore or South Korea, Taiwan, parts of Eastern China,

00:09:56.000 | most of Europe, there are parts of the world

00:09:59.000 | which have already started to decrease in population.

00:10:02.000 | I just named them.

00:10:04.000 | But what's more remarkable is that the population explosion

00:10:08.000 | is visibly coming to an end in countries like India, Mexico,

00:10:12.000 | Turkey, Brazil, Iran, Thailand.

00:10:15.000 | Those growth rates have not turned negative,

00:10:17.000 | but they're getting to where they're almost zero.

00:10:21.000 | So the main growth in future population will be in Africa,

00:10:26.000 | and they're slowing down too,

00:10:28.000 | but a generation to two generations behind those other countries.

00:10:33.000 | Is it your thesis that as countries get richer,

00:10:37.000 | that the population growth slows?

00:10:40.000 | Is that the basic premise?

00:10:42.000 | Yes.

00:10:44.000 | That's the shortest answer you'll ever get out of me.

00:10:46.000 | Okay.

00:10:48.000 | Roy, just here in the United States,

00:10:50.000 | what does our demographic growth look like?

00:10:53.000 | We're growing at a very slow rate.

00:10:56.000 | We have a total fertility rate,

00:10:58.000 | which is the number of children per woman in her whole lifetime,

00:11:03.000 | just under two.

00:11:05.000 | Two is the replacement rate.

00:11:07.000 | 2.1 because some people don't live long enough to reproduce,

00:11:10.000 | but let's just call it two.

00:11:12.000 | We're just under that, 1.7 or 1.8.

00:11:15.000 | If there were no immigration,

00:11:17.000 | our population would be shrinking very slowly.

00:11:21.000 | With immigration, which I favor, it's growing slowly,

00:11:25.000 | which I think is a good thing.

00:11:27.000 | So this theory you have actually flies in the face of what we hear in the media

00:11:32.000 | and where crime is up, drug abuse is up.

00:11:38.000 | This is a terrible place to raise children.

00:11:41.000 | It's a terrible world to bring children into.

00:11:44.000 | Who would want to do that?

00:11:46.000 | One could make the case now that due to health care concerns,

00:11:49.000 | there's no reason to bring children into the world now either.

00:11:53.000 | These are the reasons why birth rate is lower.

00:11:56.000 | But, in fact, you say it's actually the opposite.

00:11:58.000 | Birth rates are lower because things are getting better.

00:12:02.000 | There is a grain of truth to the crime statistics.

00:12:07.000 | Between about 1960 and 1990, crime in the United States rose to levels

00:12:15.000 | that had not been seen since the 1930s and have not been seen since.

00:12:20.000 | This was a period of social stress for various reasons.

00:12:25.000 | But we got much wealthier during that period.

00:12:30.000 | The technological progress enabled us to live longer, healthier lives,

00:12:37.000 | and the rest of the world got richer much more quickly than we did.

00:12:43.000 | So it was a very good period.

00:12:46.000 | We're still in a very good period overall.

00:12:49.000 | We're just suffering from a short-term disruption that's very disruptive.

00:12:55.000 | We've never in our lifetimes experienced a pandemic.

00:13:00.000 | Although 1957 and 1958 was pretty bad, we just didn't do anything about it

00:13:05.000 | and let people die of the flu at younger ages than they would have otherwise died.

00:13:12.000 | It didn't particularly attack the young the way the 1917-1918 flu did.

00:13:18.000 | So it's hard to even remember that it happened, but it did.

00:13:22.000 | This one seems to be deadlier, but not by an order of magnitude.

00:13:27.000 | It's just a slightly different virus which remains asymptomatic for longer

00:13:35.000 | so you infect more people instead of going to bed and staying there until it's over.

00:13:41.000 | So this is a trying time.

00:13:43.000 | It's socially very upsetting to go outside and see nobody,

00:13:49.000 | to realize that our economy is shrinking temporarily faster than it ever has before.

00:13:56.000 | But when this is over, it will grow faster than it ever has before

00:13:59.000 | because people are going to do whatever it takes to get back what they had.

00:14:05.000 | The work that they were doing still needs to be done.

00:14:08.000 | The companies that they worked for will still need to be staffed,

00:14:12.000 | although some of them may be under new ownership because of the bankruptcy code.

00:14:17.000 | And the government is doing a lot to provide relief and economic stimulus,

00:14:26.000 | and we're going to get through this.

00:14:29.000 | But we used to have pandemics all the time that killed large fractions of the population.

00:14:34.000 | This isn't going to do anything like that.

00:14:36.000 | And that's because of medical progress, which is a form of technological progress.

00:14:44.000 | We have a hundred companies now developing tests for COVID-19.

00:14:51.000 | We have respirators that can be manufactured on a huge scale

00:14:56.000 | by companies that were previously making cars or dishwashers or something like that.

00:15:01.000 | But we have the tools to get through it, and we're getting through it, but it's painful.

00:15:07.000 | This gets into the second part of your book, which is richer.

00:15:12.000 | In other words, you're really talking about how good things are and how good things have become.

00:15:19.000 | We're healthier. We have higher productivity.

00:15:23.000 | We have less pollution, actually, higher education, more collaboration.

00:15:29.000 | We're a richer country and a richer world.

00:15:34.000 | Let's dig into how good things actually are.

00:15:38.000 | Well, we take for granted the standard of living that even our parents,

00:15:43.000 | speaking from someone my age, I'm 65, my parents would be about 100 if they were living,

00:15:50.000 | that they would have had a very difficult time understanding the way that we make decisions.

00:15:55.000 | I'm not a rich man, but I've done okay, and if I want something, I just go out and buy it

00:16:00.000 | unless it's a new car or a new house, and then I have to think pretty carefully.

00:16:04.000 | A lot of our parents lived through the Great Depression, where they had to think twice before buying an egg.

00:16:10.000 | And for most of history, not the last two centuries, which have included the Industrial Revolution,

00:16:19.000 | which a lot of people have gotten much better off, but most of history,

00:16:24.000 | you were poor if you didn't know where your next three meals were coming from, and you were rich if you did.

00:16:30.000 | So if you had reserves for not just today, but tomorrow, you were pretty well off.

00:16:36.000 | Now, there were always people who were much richer than that, but they were landowners, kings, princes,

00:16:43.000 | the clergy to some extent, although they may have lived modest lives, they had a means of support,

00:16:49.000 | which is that they could ask the people for money and get it.

00:16:54.000 | And then later, bankers, 14th, 15th century Italy began to get rich.

00:17:01.000 | Merchants and traders have always been richer than other people, but these were a tiny minority.

00:17:06.000 | They were 1%, 2%, 3% of the population.

00:17:09.000 | Now, 85% of the population is rich enough to not think about whether or not to buy an egg.

00:17:15.000 | In the whole world, the rest of them, the World Bank tells us that only 9% of the world

00:17:22.000 | lives in extreme poverty, down from 40% in 1980.

00:17:27.000 | That's an incredible statistic.

00:17:29.000 | We have eliminated poverty for three quarters of the people who were poor only 40 years ago.

00:17:35.000 | Now, I don't mean that they're driving new shiny cars and live in sparkling condos in the suburbs of Shanghai.

00:17:42.000 | I mean that they live on more than $1.90 a day per person, which is a very low bar,

00:17:48.000 | but it's the difference between being able to sleep at night,

00:17:52.000 | knowing where your next three meals are coming from, and not.

00:17:57.000 | And that is a tremendous achievement, and of course it took place in the United States

00:18:02.000 | more than 200 years ago, maybe more than 300 years ago.

00:18:06.000 | But for the whole world, only in the last 40 years,

00:18:09.000 | and this has been a fabulously fertile period for global economic development.

00:18:15.000 | One of the things you look at is mobile phone cellular subscriptions across all the various countries.

00:18:22.000 | And I was surprised by your chart that for every 100 people in the United States,

00:18:27.000 | there's 120 cell phone subscriptions.

00:18:31.000 | And in South Africa, there's actually 160 cell phone subscriptions.

00:18:38.000 | In China, there's 110.

00:18:40.000 | In other words, we were talking before about if you knew where your next three meals were coming from, you were rich.

00:18:46.000 | Now it seems as though if you don't have a cell phone anywhere in the world, you're poor.

00:18:51.000 | Well, that's the standard, but it's not exactly what it seems.

00:18:55.000 | A cell phone to an artisan in Kenya is his or her way of making a living.

00:19:02.000 | Instead of whatever they make or sell, let's call it shoes.

00:19:08.000 | Instead of their market being the people that they can walk to within their village,

00:19:12.000 | and maybe another village two miles away, your market becomes anybody who you can reach by cell phone.

00:19:20.000 | Incomes have gone way up.

00:19:22.000 | They have a way to collect money over the cell phone, which is called M-Pesa.

00:19:29.000 | And it's an app on your cell phone that allows you to do all your banking without ever visiting a bank,

00:19:37.000 | to collect money from people who owe it to you, and to pay people whom you owe.

00:19:42.000 | So the fact that you have a cell phone subscription means that you also have a bank,

00:19:47.000 | as well as a television, a telephone, a camera, a video recording device, and 50 other gadgets,

00:19:53.000 | including a way to look up every fact and every idea that's stored on the Internet.

00:19:59.000 | So it's not a luxury good. It's become a necessity because that's how you organize your life to make a living.

00:20:07.000 | Why does anyone need more than one cell phone subscription?

00:20:10.000 | Why is the number of cell phone subscriptions more than the population?

00:20:14.000 | I don't know. I suspect that it's a data, not an error,

00:20:19.000 | but that they're counting all the cumulative cell phone subscriptions ever taken out and aren't canceling,

00:20:26.000 | aren't taking out of the data the ones that have been canceled because, you know,

00:20:31.000 | I have a family and the number of cell phone subscriptions is not larger than the number of people in the family.

00:20:37.000 | We throw them away or give them away.

00:20:39.000 | But the idea that everyone has a phone has really revolutionized the way that people do business and conduct their social life.

00:20:48.000 | Also, it's not a phone.

00:20:50.000 | It's a room full of gadgets compressed into a little computer that has a phone app.

00:20:56.000 | I call it a phone for historical reasons.

00:20:59.000 | You have a chart or a figure constructed by a fellow by the name of Dave Stanwyck,

00:21:06.000 | and it takes all of these products, phones, maps, flashlights, clocks,

00:21:15.000 | all the things that we used to need a gadget for books, leveling devices.

00:21:22.000 | And now all of that stuff that you used to need something, even a pad, you don't need it anymore because you could do it all on your phone.

00:21:31.000 | So, like you said, it's much more than just a phone.

00:21:34.000 | Well, Dave Stanwyck is my research assistant, and we had to take so many things out of the pile of gadgets in order to fit it on a page that we probably wound up getting rid of some of the good ones.

00:21:50.000 | But in another place, I added up the dollar value in 1980 of all of this stuff, and it was $32 million.

00:22:01.000 | But almost all of that was the Cray supercomputer that computed a little less quickly than the laptop in the lower right corner of the diagram.

00:22:12.000 | If you did without the Cray supercomputer, then you were down to about $32,000.

00:22:19.000 | That's still a lot of money, and you would have needed a very large room to hold it all.

00:22:25.000 | And you can get it all for $1,000 now, and it's just the cost of a very good cell phone.

00:22:31.000 | And the stuff works better.

00:22:33.000 | There was no gadget back in 1980 where I could call a cab, watch the cab drive to my house, call him and tell him that he was not going to find it if he kept making wrong turns because I could see where he was.

00:22:48.000 | And then he could see where I was so that if I walked across the street, he would go to the right side of the street to get me, then bill it to my company and take the shortest route because the software was tracking this route to make sure that he didn't take me on a joyride.

00:23:08.000 | I mean, what is the value of that?

00:23:10.000 | How much consumer surplus is there?

00:23:13.000 | Consumer surplus being the amount I'd be willing to pay that I don't have to pay for service like that.

00:23:18.000 | So the techie side of the improvement curve is the most dramatic part, and it's the most fun to focus on.

00:23:24.000 | But the medical side is also very dramatic.

00:23:27.000 | And then there are other little things that we don't necessarily appreciate, like the food supply has just suddenly in the last 40 years has become wildly varied.

00:23:37.000 | My mother used to thaw out frozen peas in the winter, and we didn't live under conditions of hardship.

00:23:45.000 | We were lower middle class working people.

00:23:48.000 | That was the only vegetable you could get in 1950 or 1955.

00:23:53.000 | Now you go to a grocery store, they have vegetables you can't even pronounce the name of.

00:23:58.000 | One thing that just struck me when I was reading your book, and I never thought about it before, and it just really hit me hard, was the price of lighting.

00:24:08.000 | You know, we turn on a lamp when we walk into our room at night and we sit down and we read a book, and we don't think anything of it.

00:24:14.000 | But what I learned in reading your book was lighting, probably just 200 years ago, was extremely expensive.

00:24:24.000 | We all know the story of Abraham Lincoln, who walked 20 miles to hear a lawyer speak because he wanted to become a lawyer.

00:24:31.000 | But in order to become a lawyer, you had to study law books and he had to work all day, which meant that he had to study at night.

00:24:39.000 | And the only lighting available in his frontier community was candles.

00:24:45.000 | Well, it's pretty hard to do a lot of reading by the light of candles, and lighting was so precious that you basically stopped doing whatever you were doing when the sun went down and went to bed.

00:24:57.000 | The productivity is going to be pretty low when you can't study, you can't do much of anything at home other than rest from the backbreaking work you've been doing all day.

00:25:07.000 | But as work got easier and new discoveries of energy sources were made and of lighting technology were made, right around 1800, the price of lighting began to plunge by factors of 10 over and over.

00:25:23.000 | So the first big innovation, which caused it to really fall quickly in the late 1700s and early 1800s, was whale oil.

00:25:33.000 | The idea of killing whales for their oil sounds kind of disgusting now, but when there are no alternatives, you do it.

00:25:41.000 | And whaling was one of the most dangerous occupations.

00:25:45.000 | Half of the sailors who went to sea, over their lifetime, half did not come back.

00:25:50.000 | The next one was the discovery of petroleum in the middle 1800s, put the whaling industry completely out of business.

00:25:59.000 | And the chemistry that was available at the time was, interestingly enough, fairly sophisticated and enabled oil refineries to be built that would take crude oil and turn it into kerosene, paraffin, eventually gasoline.

00:26:16.000 | All these different compounds that were good for generating energy in different situations.

00:26:21.000 | One of them, kerosene, could be safely put into a lamp and all of a sudden you had a light that was usable at night, relatively cheap to operate, and was really bright.

00:26:32.000 | It was nothing like a candle.

00:26:34.000 | Then the carbon arc lamp, which I won't get into because we don't have unlimited time, but it was invented by Sir Humphrey Davy in 1802.

00:26:43.000 | But there wasn't electricity to run it until probably 75 years later.

00:26:49.000 | So, starting about 1875, we had lighting from the carbon arc lamp and then Edison's light bulb, and that gets us to modern times.

00:27:01.000 | And you can turn on the light, but the cost of lighting has still fallen another couple of powers of 10 since Edison's day because of innovations in delivery and efficiency.

00:27:13.000 | And the latest innovation is LED, basically using a baby computer screen as a light instead of an incandescent light, which mostly gives off heat and then a little bit of light as a byproduct.

00:27:31.000 | In your book, you make a comment that in Babylon, which was 1750 BCE, a person would have had to do 50 hours of labor to get one hour of reading from the oil lamps that were available at the time.

00:27:52.000 | So, 50 hours of labor for one hour of light at night to be able to read a book.

00:27:59.000 | Today, it's less than a half a second of our labor to pay for the electricity to get the same light.

00:28:07.000 | That's correct. That's what I said, and it sums up the last five minutes of my talking in one sentence.

00:28:14.000 | You did it very nicely.

00:28:16.000 | I am a little skeptical that anyone really worked 50 hours to buy the oil, which would have been animal oil, to read.

00:28:23.000 | I think they just didn't read.

00:28:25.000 | I'm sure they didn't read. In fact, it also shows how fake Hollywood is, because if we look at movies that were depicting 15th century, 12th century, or sometime BC, they have all this light at night.

00:28:42.000 | There's all these lamps everywhere. They're all lit up. All of these castles are lit up.

00:28:47.000 | In fact, that is not true. That's not what happened.

00:28:50.000 | There might have been one light and one animal lamp, and that was it.

00:28:54.000 | But your lighting story really hits on the idea of productivity.

00:28:58.000 | What's amazing about the book is it talks about the human experience, if you will, pretty much did not improve a whole lot.

00:29:07.000 | So the richer part of your book, getting back to the title, the richer part of your book didn't really improve a whole lot until, say, the beginning of the Industrial Revolution, and then things just really took off.

00:29:22.000 | That's right. And of course, we can argue about when the Industrial Revolution began.

00:29:27.000 | John Locke, the philosopher who was the inspiration for the American Revolution, wrote in 1700 that a day laborer in London lived better than a king in America.

00:29:39.000 | By a king, he meant an Indian chief, because the day laborer slept indoors, had a probably a way of getting well water and so forth.

00:29:49.000 | So that's a certain amount of economic progress before we think of it as the Industrial Revolution, which was later.

00:29:57.000 | This revolution evolved slowly, and there were some amazing industrial innovations before the 1750 to 1800 period when it really kicked off.

00:30:07.000 | But it became a kind of a mass movement from growing your own food and self-sufficiency to manufacturing and trade and agriculture becoming a specialty right in that period, 1750 to 1800.

00:30:25.000 | For the most advanced countries, which were the United States, Britain and the Netherlands, and then from 1800 to 1850 or 1875 for the rest of Europe, Japan, and a scattering of other places.

00:30:40.000 | Then after that, even into our own lifetimes, China and India were mostly pre-industrial and became industrial and to some extent post-industrial in the last 50 to 75 years.

00:30:57.000 | One of the things you talk about that goes hand in hand with the Industrial Revolution is the migration to the cities.

00:31:06.000 | And you make the case that by people migrating to the cities to do the work that the Industrial Revolution basically created, it actually is saving the countryside.

00:31:17.000 | And I thought that was really fascinating how you looked at that.

00:31:22.000 | Well, if you took 7.8 billion people, which is the current population of the world, and distributed them evenly among all the arable land in the world so that they could grow their own food, you would ruin the arable land pretty quickly.

00:31:38.000 | And we wouldn't be able to support 7.8 billion people anymore, which is a polite way of saying they would starve.

00:31:46.000 | And in the attempt to not starve, they would mine the earth for every calorie that you could get out of the piece of land that they had been assigned and ruin the earth.

00:32:00.000 | An author whom I've quoted, I'm forgetting who it is, said, "If you want to protect the environment, stay away from it."

00:32:07.000 | I kind of like that.

00:32:09.000 | Now, I don't mean you shouldn't go visit national parks. We absolutely should. We should all spend as much time outdoors enjoying the beauty of nature as our way of life allows.

00:32:20.000 | But the back-to-the-land movement was one of the dumber ideas in the history of the human race.

00:32:26.000 | What it means is eliminating all the efficiencies and productivity gains that come from people clustering together in cities and towns, sharing their ideas, and specializing.

00:32:39.000 | So, you know, one person makes the shoes, and another person pumps the gas, and another person does the tax accounting, and so on, until you have a bunch of people who are experts at doing things, trading with each other, instead of everyone trying to become an expert at everything and completely failing.

00:32:58.000 | So, I believe that cities are the main generator of wealth in the world, and although we see a lot of poor people in cities, it's because they come to the city to try to not be poor, and they don't all succeed right away.

00:33:13.000 | We've got better health. We've got better jobs. We've got a cleaner environment, as well. But the other thing we really do, talking on the health side, though, is we're living longer, not only in the United States, but all over the world. What effect does this have on us?

00:33:32.000 | It's hard to live longer.

00:33:34.000 | I agree with that.

00:33:36.000 | It takes a lot of money, a lot of work, and some discomfort.

00:33:40.000 | First of all, we have to pay for a generation of people who have passed their best productive years, who would have been dead a century ago.

00:33:50.000 | Not all of them. My grandfather was born in 1887. He died in 1991, so he ran out of money well before he ran out of life, even though he was not a poor man.

00:34:02.000 | His kids and grandkids had to help him. So it's not only a lot of work being old, but it's a lot of work taking care of people who are old. Consider the alternative.

00:34:11.000 | George Bernard Shaw was asked when he turned 80 how it felt to be alive at that age, and he said, "Well, consider the alternative."

00:34:19.000 | I think that people can work longer. As work gets easier, it becomes less manual and more intellectual or organizational.

00:34:29.000 | The retirement age of 65, which is now 66 if you want to collect Social Security, is going to increase both voluntarily, because people want the money, and possibly by government action, where you have to work longer to get a full benefit.

00:34:48.000 | People tend to be healthier when they work longer. They're more socially connected, they feel productive, and they're not counting backwards on their bank balance to see when they need to die in order to not run out of money first.

00:35:02.000 | I've written an article on that, but I never finished it, so it's not really available yet, called "Longer, Healthier, Happier."

00:35:09.000 | It's a takeoff on Hugh R. Greener, but I'm writing it with a co-author, a fellow named Steve Sexauer.

00:35:16.000 | We're basically saying that the massive fiscal problems that governments are facing, the 1870s technology that we're using in order to pay for old age, was invented by Otto von Bismarck, the German chancellor.

00:35:33.000 | In his attempt to provide for the old people of Germany in the 1870s, they were expected to die at 62, but if they somehow managed to make it past 65, they would collect a government pension.

00:35:49.000 | Now, when you start to collect a government pension or Social Security at 66, your life expectancy is about 16 more years, so no wonder the government's broke. Come on.

00:36:02.000 | Larry, I think one of the interesting things about a population that is becoming richer is that we're actually becoming cleaner. Now, let me preface that.

00:36:15.000 | When I was in middle school back in the late 1960s, the big book out there was "Silent Spring," which talked about the terrible pollution that was going on.

00:36:28.000 | I grew up in Rhode Island, and I recall the Blackstone River was so polluted that if you lit a match, it might all go up in flames.

00:36:36.000 | And we couldn't go swimming in Narragansett Bay because of the pollution coming off of the raw sewerage being dumped into the bay by the city of Providence, and it went on for years and years and years.

00:36:48.000 | But we don't hear as much about that anymore, yet we're a bigger country, a richer country, so in fact, things are getting greener.

00:36:57.000 | The pollution levels of air and water in the United States have gone way down.

00:37:04.000 | Starting with the Clean Air Act in 1970, the air in the United States got dramatically cleaner.

00:37:10.000 | I used to land in Los Angeles and not be able to see the ground as I was approaching the airport.

00:37:17.000 | Now I can see from the Pacific to the San Gabriel Mountains, which is about 70 miles, and it's as clean as the air in Kansas.

00:37:29.000 | There are days when it's not quite so good, but it's pretty good.

00:37:32.000 | Water has gotten dramatically cleaner.

00:37:35.000 | I think you and I are probably roughly the same age.

00:37:38.000 | Can you remember when you turned on the tap and soap bubbles would come out?

00:37:43.000 | First of all, the Clean Water Act made it illegal to do stuff like that.

00:37:48.000 | Why did we wait for government intervention on a mammoth scale, a massive scale, to clean up our act?

00:37:58.000 | The reason is that pollution is an externality.

00:38:01.000 | You get something for nothing when you pollute the environment because you are foisting off one of your costs, business costs or personal costs, whatever, on other people, and they have no way of charging you for it.

00:38:20.000 | I grew up in Cleveland, where the Cuyahoga River not only could have been set on fire with a match, but was, and burned down part of a bridge over it.

00:38:30.000 | At least we got a good song out of it, which was called "Burn On, Big River, Burn On" by Randy Newman, and Cleveland became the laughingstock of the nation.

00:38:41.000 | We never really laughed at Providence because we didn't know it was there.

00:38:46.000 | Thanks a lot.

00:38:47.000 | I appreciate that.

00:38:48.000 | I'm happy to oblige.

00:38:51.000 | There are certain things that can only be done by governments, and economists have generally categorized those as public goods and externalities.

00:39:01.000 | A public good is something that everybody needs, but that if you paid for it individually, you wouldn't get it, like national defense.

00:39:08.000 | Nobody's going to pay for national defense without being required to because you could become a free rider on other people paying for it.

00:39:16.000 | The other is externalities, when you can get someone else to pay part of your costs by polluting a river instead of paying to get rid of the waste matter that you generate.

00:39:27.000 | It took until 1970 for us to gather the political will to do that, and there were several factors.

00:39:46.000 | One was the increasing wealth of the country made it possible to have these higher levels of government spending and taxation without depriving people of necessities, and we're seeing that now in China and India.

00:39:51.000 | They're beginning to clean up their environment, too, but at earlier stages in their development than we did because smart people learn from other people's mistakes instead of waiting to make their own.

00:40:02.000 | The other factor was that we had a government in the Nixon administration that was committed to that policy, and I don't know why him, but we had other fish to fry.

00:40:22.000 | We had a government in the 1940s, and we should have, so the first world has become shockingly clean.

00:40:43.000 | The newly industrialized countries, and I'm counting China and India in those, are later on the curve, and they're the source of most of our pollution now, and that will improve if we don't cut off our noses to spite our face and stop trading and limit the economic growth made possible by capitalism, globalization, and free trade.

00:41:06.000 | Those are the three key factors.

00:41:13.000 | There are some people in the country who have done very well for themselves, and they have become multi-billionaires, and I feel they sometimes get a bad rap, I mean, at least in the mass media, they talk about millionaires and billionaires eating their caviar and cruising on their yachts,

00:41:34.000 | a lot of these very wealthy entrepreneurs are taking their money and doing it for a lot of public good in order to try to help the world eradicate sickness, and could you talk about, we talked about the public side of things, can we talk about the private side of things?

00:41:52.000 | Sure, and I'm bound to offend somebody here. I think that Bill Gates and Warren Buffett are the exemplars of giving away a lot of money in ways that do good, but they're not the only ones.

00:42:04.000 | If you take someone who has not given away a lot of money, and I'd like to mention Jeff Bezos, because he has more than either of those other two guys, and he hasn't really started giving it away in a meaningful way, that money is not gone from the world economy.

00:42:22.000 | It's invested in businesses, it's invested in the stocks and bonds of companies and governments. If he does buy a yacht, is he doing anybody any good? Well, if you know anybody who builds yachts, and I do, they're not rich people.

00:42:38.000 | They're working people who have a payroll of perhaps hundreds, perhaps just dozens of craftsmen and engineers and artisans who make a lot of money if somebody buys a yacht, and they don't make any money if no one buys a yacht.

00:42:54.000 | Then they go out and spend the money they've made on food and clothing and shoes and restaurants. The economy is not a zero-sum game. If somebody makes a lot of money, and that money just sits in an account in the S&P 500 index fund or something like that, it's working.

00:43:14.000 | I don't feel that rich people need to give away their fortunes in order to do social good. I've heard it said, and I tend to agree, that if Bill Gates spent $50 billion starting new businesses, he would do more good than if he started a foundation because of all the people who'd get high-paying jobs and all of the technological improvement that those businesses would create over a period of generations.

00:43:40.000 | I do want him to give money away to eradicate malaria in Africa. You've got 300 million people suffering from a disease that doesn't kill them, but it makes them unproductive and slows down their ability to ever really accomplish anything. Let's just get rid of it.

00:43:56.000 | I think his heart is in the right place and his money is in the right place, but I don't think rich people are doing wrong by spending money on things they want because it gets recycled into every little corner of the economy through the process I was just describing.

00:44:13.000 | >> Your final thoughts on your book. Tell us, what does it look like to you going forward?

00:44:19.000 | >> Well, obviously, we're going to continue to face problems. But in the past, sometimes when we faced problems, we didn't win. The plague wiped out a third of Europe. The 30 Years War wiped out a third of Germany, and that was basically cultural suicide.

00:44:38.000 | Nature didn't do it. We did it to ourselves. So with more advanced technology, literacy, communication, transportation, knowledge, we're able to solve the problems that we encounter much more quickly and at lower cost.

00:44:56.000 | And in a couple of years, we'll have killed off the COVID virus with some kind of vaccine, and we'll be on to the next virus. And we'll have a tremendous new body of virological knowledge and epidemiological knowledge that we didn't have with which to face that future challenge. And this is going to keep on going.

00:45:18.000 | In 2120, as opposed to the year 2020, the poverty of Africa will look a lot more like the poverty of Thailand. It'll still be the poorest continent in the world, but it won't be that poor. And we will have effectively eliminated extreme poverty entirely from the world. That is just unimaginable, even 40 or 50 years ago. I won't be around to see it, but a lot of people will.

00:45:46.000 | Any last comments on your book or any other topic?

00:45:50.000 | Jason Zweig, the great Wall Street Journal reporter, had a conversation with a young woman that he wrote up in the journal a few months ago in which the woman said, "Well, why should I invest for the long term?" meaning in an IRA, which she would not be able to use for 40-some years, "when the planet will be a rotating cinder by then?"

00:46:16.000 | Well, come on, you know that it won't be. It'll be warmer in some places, and the ocean levels will be higher in some places, and we'll have to adapt to it the same way we adapted to a freezing Europe in the 1600s by migrating to the Americas.

00:46:32.000 | The final thought on my book is that children are being told that the world that they're born into is not worth living in. People are telling their children the worst nonsense about the future, and they're making the children not want to live.

00:46:48.000 | That's child abuse, and we just have to stop doing it. What we need to be telling our children is how to identify and solve real problems, and how to understand the difference between problems that we have to live with and problems we can fix.

00:47:03.000 | I've titled the final chapter of my book "Save the Children from Apocalyptic Thinking," and that chapter has been reproduced on a website called Advisor Perspectives. I really think we're doing the next generation a profound disservice by spreading doom and gloom to the point where they wish they hadn't been born, and I'm hearing it more than I want to hear it.

00:47:26.000 | The name of the book is Fewer, Richer, Greener by Larry Siegel, published by Wiley, a really good uplifting book. Larry, thank you. I know you've taken a lot of research doing the book. We wish you great success with it, and thank you for being my guest on Bogleheads on Investing.

00:47:43.000 | Thank you.

00:47:44.000 | This concludes Bogleheads on Investing, Episode #21. I'm your host, Rick Ferry. Join us each month to hear a new special guest. In the meantime, visit Bogleheads.org and the Bogleheads Wiki. Participate in the forum and help others find the forum. Thanks for listening.

00:48:03.000 | [Music]

Bogleheads® on Investing Podcast 021 – Larry Siegel, host Rick Ferri (audio only)

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