Outside the Box

Geopolitical Journey: Europe, the Glorious and the Banal

John Mauldin

May 14, 2013

Standing at the edge of the old world and the beginning of the new one, at the tip of Portugal, Stratfor's George Friedman is moved by the exploits of 15th-century European explorers and dismayed by the present fear pervading the Continent that "any decisive action will tear the place apart."

Europeans wreaked much havoc as they spread throughout the world, but they also "left as [their] legacy something extraordinary: a world that knew itself and all of its parts." But now, George asks, with "the death of hubris and of risk-taking … what follows, what is left?" The Europeans are "now reduced to finding a way to resume the comforts of the unexceptional…. Europe has chosen comfort, and now has lost it. It sought transcendence and tore itself apart."

This is an unusual Outside the Box, not focused on markets per se but on the human endeavor, which inspires and creates markets. Sure, Henry the Navigator may have been enamored of Prester John legends, but he did something that changed the world. That vision exists today but not in those who opt for comfort as a goal rather than as an outcome. I think this may be George’s best writing yet.

I am back in Dallas, working my way through a pile of material and writing madly on various projects, but I'm about to take a break to go look at plumbing fixtures. Who knew there were so many choices and prices? I was vaguely aware of all this on a theoretical basis, but when confronted with the thousands of varieties of simple faucets and shower controls, I find myself smiling and reflecting on businesses focused on giving consumers what they want and not just what they need. Do you know you can get someone to create a work of art on steel that covers an entire bathroom wall and is waterproof and does not cost much more than tile? Or that there were warehouses crammed with massive slabs of granite and marble and tiles from all over the world? You've got to love the fabulous interplay of hundreds of thousands of people working in their own niches of the market, just to make sure I can design a home that fits my style and budget. Which is maybe not as important as creating a school of navigation and sending people off to discover the New World, but it definitely calls forth the same human drive. Off I go to plumb the depths … of plumbing fixtures.

Have a great week. I see Tulsa and a wedding coming my way…

Your always seeing an opportunity somewhere analyst,

John Mauldin, Editor
Outside the Box

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Geopolitical Journey: Europe, the Glorious and the Banal

By George Friedman

We flew into Lisbon and immediately rented a car to drive to the edge of the Earth and the beginning of the world. This edge has a name: Cabo de Sao Vicente. A small cape jutting into the Atlantic Ocean, it is the bitter end of Europe. Beyond this point, the world was once unknown to Europeans, becoming a realm inhabited…

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ajobpd@gmail.com

May 15, 4:33 a.m.

Great story—and if you are inspired by places such as Cabo San Vicente, be sure to also visit the far more intimidating Cape Wrath in Northwest Scotland.

Let me add one more perspective to these thoughts.

Columbus’ first expedition brought little knowledge—as the Italians say, he left without knowing where he was going, returned without knowing where had been… and all this on borrowed money.

But his second expedition was a far different story: based on the flimsy knowledge of the first one, the wealthy Andalusian Duke of Medina Sidonia mortgaged about half of his real estate—tens of thousands of acres—and organized a commercial venture of some 17 ships—the cost of each comparable today to a large space rocket—and changed the course of history.

It probably represents the largest ever venture capital operation in human history, both in comparative resources applied and results obtained.

At that time the towering “global financial centre” was in Constantinople, the capital of the Byzantine and its successor Ottoman Empire. I often imagine the world’s biggest blunder when the resident Ottoman spy in Andalusia reported back about this ocean-crossing venture and it was likely filed as an irrelevant information.

Exciting times!

Alvaro de Orleans-Borbon

The whole exploratory effort maintained momentum because the financial margins of such ventures were well aligned with the risks:  for his first-round-the world trip Magellan sailed with five ships and 265 people. Only 18 made it back on one ship years later. The cargo of this single surviving ship netted a nice profit to the private investors of this trip. Magellan never made it back.

Michael Crofts

May 14, 9:37 p.m.

The circle is a compass rose where they swung their compasses and learned their use.

Mainland Europe would indeed like to ‘resume the comforts of the unexceptional’ but they will never succeed under current arrangements. Meanwhile here in the UK there seems to be a re-awakening as we consider the real possibility of leaving the EU. It seems to be a reinvigorating process with political meetings attracting higher numbers and some passion.

David Dale

May 14, 9:35 p.m.

Excellent article, George Friedman has caught the present mood and attitudes of Europe to a ‘T’.

Clarity, sharply observed and well written. Thank you

chrisvan@rocketmail.com

May 14, 7:58 p.m.

This may be the best online article I have read. In the context of the article, “Europe” is a metaphor for ourselves.

Patrick Sullivan

May 14, 6:48 p.m.

this from adam smith, “the wealth of nations”....

In a country which had acquired that full complement of riches which the nature of its soil and climate, and its situation with respect to other countries, allowed it to acquire, which could, therefore, advance no further, and which was not going backwards, both the wages of labour and the profits of stock would probably be very low. In a country fully peopled in proportion to what either its territory could maintain, or its stock employ, the compe- tition for employment would necessarily be so great as to reduce the wages of labour to what was barely sufficient to keep up the number of labourers, and the country being already fully peopled, that number could never be augmented. In a country fully stocked in proportion to all the business it had to transact, as great a quantity of stock would be employed in every particular branch as the nature and extent of the trade would admit. The competition, therefore, would everywhere be as great, and, consequently, the ordinary profit as low as possible.

and…

It deserves to be remarked, perhaps, that it is in the progressive
state, while the society is advancing to the further acquisition, rather than when it has acquired its full complement of riches, that the condition of the labouring poor, of the great body of the people, seems to be the happiest and the most comfortable. It is hard in the stationary, and miserable in the declining state. The progressive state is, in reality, the cheerful and the hearty state to all the different orders of the society; the stationary is dull; the declining melancholy.

and again….

In a country which had acquired its full complement of riches, where, in every particular branch of business, there was the greatest quantity of stock that could be employed in it, as the ordinary rate of clear profit would be very small, so the usual market rate of interest which could be afforded out of it would be so low as to render it impossible for any but the very wealthiest people to live upon the interest of their money. All people of small or middling fortunes would be obliged to superintend themselves the employment of their own stocks. It would be necessary that almost every man should be a man of business, or engage in some sort of trade.

europe, and the developing world, at long last, has indeed arrived at this state of affairs that adam speculating on so long ago….....he, and david hume, figured all this out 250 years ago…...

find a copy of david hume’s “of public credit” if you want to know the future of sovereign debt…..

the “developing world” is now in that “progressive state” that adam smith identified…..but they are on an exponential growth curve….they will catch up to us in a matter of decades if not merely years…..

globally, we will soon arrive at this dull and melancholy state of affairs….and capitalism will of necessity morph into the next socio-economic system…...at that time, if not sooner, there will be a great culling of population…..either by war or disease, or something much more sinister…..then, some sort of steady state, non-growth economic model will be implemented….

 

 

Kim Rampling

May 14, 2:48 p.m.

Agree that this writing is some of the best I have read on the European condition.

Also, many of pearls of wisdom in the article: “One group of people has always been stealing land from other groups in a constant flow of history.”

Fascinating…

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