Book Review: “Wealth, War & Wisdom”

Financial Wellness Lessons Learned from WWII

Confucius said, “Study the past if you would divine the future”.  With that in mind, I’ve always been a fan of history.  I recall reading Greek comedies in high school and realizing that they were the same plot as Shakespearian comedies as 70’s sitcoms.  People are people are people.  Study what people did in the past under various pressures and you can get a pretty good clue about what people will do under similar pressures in the future.

I’ve grown up in a situation that is almost unique in the history of the world: my hometown, my valley, has not been attacked since February 29, 1704.   We have had 300 years of not having our crops burned, not having our women raped, not having our animals slaughtered to feed a marauding troop.  Yes, we’ve sent our men away to war, but they didn’t have to worry that their children were being murdered in their beds while they were away.  And when the men returned from war they weren’t shot on sight by the conquerers.

We’ve come to think this is normal.

For a variety of converging reasons, I do not believe the United States is likely to keep this absurdly lucky privilege for much longer.  So, because my actual field of expertise is financial wellness, I’ve been thinking about how to preserve wealth in tumultuous times.

So recently I picked up a book at Border’s: “Wealth, War & Wisdom: Surviving Today’s Financial Armageddon” by Barton Biggs.  It’s a strange little book: an amateur historian’s version of WWII (and the Korean war) as told through anecdotes he’s heard personally about how businesses did.  It’s viewed through the lens of how the rich people managed in these trying circumstances.  He mentions, for example, Otto Frank’s business tribulations without ever mentioning his children being murdered by Nazis.

With close up views of Churchill, FDR, Mussolini, Stalin, Hitler, and Hirohito, the real monster in this story is Stalin.  The author mentions several times how upset the German military command was that Hitler turned out to be criminally insane: they knew he was a bit off but hadn’t counted on it working out that way.   He even explains the French in business terms: they wanted to unite against Stalin, even if that meant getting into bed with Hitler.  It makes sense when you read it from an economist’s point of view.  Personally, I have trouble letting the part where he’s a homicidal maniac slip into the background, but whatever.

I am woefully ignorant about the actual events of WW2.  I didn’t know about the fall of Singapore or what happened at Midway or why we were marching around Bataan.  All I know about Korea is that they had mobile medical units with witty doctors.  (That part might be wrong.)  This book takes me through the various battles (I didn’t know Dunkirk was in France!) and traces how it affected the stock market.  It was a long way around to tell his moral, but I benefited from the cultural knowledge about this basic history I hadn’t ever read.

But the lessons are pretty quick to tell.

1.  Don’t be there when the army comes through: either army.  Any army.  Get out.  Particularly if you’re rich, particularly if you’re part of a minority group.  Leave.  Leave now.  Even if you can’t find a buyer for your business, leave leave leave.  Leave.  And, by the way, have parked some money and/or land in a place that you’re heading to that you (or your descendants – let them know how) will be able to access.  The time to set this up is BEFORE invading armies start tromping through.  This isn’t just for rich people, by the way.  If you had 30 minutes notice that you need to hit the road do NOT spend that time in line at the ATM machine or gas station.  Keep cash in your house and gas in your car at all times.  Becoming a refugee is a normal part of human existence and we’ve been absurdly lucky to have skipped it so often in this country.

2.  Be invested in equities, preferably in index funds.  Government bonds return abysmal real returns over the long term in winning countries.  They return negative real returns in losing countries.  Equities reliably produce real returns over the long haul, but no one stock ever has (except G.E.).  Don’t go for blue chips, go for index funds that change what is in the index from time to time.

3.  Buy productive land.  Wood lots or agricultural land nearly always retain title and value.  Houses turn out to be depreciating assets and you won’t be able to collect rents in many cases – and in some cases you will be killed for trying to – but owning the land UNDER the buildings ends up being okay because when the chaos stops (as it will, because it turns out that killing all the productive people is a bad idea in the long run) then the title to the land will revert to the owner (or his descendants.)

4.  Have jewelry and warm clothes and cheap luxuries: booze, cigarettes, chocolate to barter for food.

5.  Bury gold in your back yard.  Don’t leave it in a bank, as the bank can and will have the safe deposits seized.  Pretty much first thing.

6.  Art is nice for making refugees remember the glories of their old homes.  Knick knacks work just as well.  Emotional attachments to pretty things are normal, but don’t make them an investment strategy.

7.  Diversify your holdings as to asset classes AND location.  Having all your money in a savings account at your local bank is just as risky as having it all invested in S&P 500 stocks.

Originally published February 3, 2010 at