How does a bastard, orphan, son of a whore and a
Scotsman dropped in the middle of a
Forgotten spot in the Caribbean by providence
Impoverished in squalor
Grow up to be a hero and a scholar?
The ten-dollar founding father without a father
Got a lot farther by working a lot harder
By being a lot smarter
By being a self-starter
By fourteen, they placed him in charge of a
-Lyrics from Alexander Hamilton
I must admit that I have been caught up in the Hamilton craze that reached a crescendo with the recent Tony awards. I very much enjoy going to the theater and I can still remember being mesmerized by The Elephant Man when I saw it as a boy and being moved deeply by Les Miserables. I am particularly smitten with creative geniuses like Andrew Lloyd Webber (too many hits to list), Cameron Mackintosh (Les Miserables), Trey Parker and Matt Stone (Book of Mormon), and Lin-Manuel Miranda (Hamilton), just to name some very notable ones, who have created extraordinary content that can be monetized for decades. I read recently that the Lion King and Phantom of the Opera have generated over $6 billion in revenue each and in another article it discussed how the writers of Wicked had earned $95 million (this was as of 2012).
I have such admiration for people who can turn their creativity into annuities.
There is no question that Lin-Manuel Miranda is a true genius. What he did with a character like Alexander Hamilton and how he told his story and the history of the founding of America via an extraordinarily thoughtful and entertaining musical using rap as the communication medium is brilliant. It’s not only brilliant but has done a huge service to our country by making such vital and important history accessible (if you have big money for tickets!) to people who otherwise may not have shown an interest in learning about our Founding Fathers. The power of Hamilton led this year’s Tony Awards to have the highest ratings in 15 years.
Over the years, I have taken a stab at reading some of The Federalist Papers. These are the essays written by Alexander Hamilton, James Madison, and John Jay that were published in three New York newspapers to help convince the American public to ratify the Constitution. These are truly the source materials for the thinking behind what went into the Constitution and the rationale behind its design. Of the 85 articles, Hamilton wrote 51, Madison 26, Jay 5, and Hamilton and Madison collaborated on 3. Hamilton and Madison are much like Lennon and McCartney who gave each other credit for the other person’s work, while most of what was written were done more independently. The output was prodigious and the impact on the world by both collaborators was extraordinary. By the time Hamilton died from Aaron Burr’s bullet at the age of 49, he had written an estimated 22,000 pages over the course of his life.
While I have not read every essay, I have consumed enough to divine some very powerful ideas about human nature and how to design a system to minimize its negative effects and to maximize the positive ones. There is also a great deal that one can learn and apply when it comes to investing and organizational design. I often think about how Charlie Munger looks at the world through incentives and constraints when reading some of these essays. For example, Hamilton asks why is government necessary in the first place? A logical question. His response is human nature centric when he says in Federalist Paper #15:
Because the passions of men will not conform to the dictates of reason and justice, without constraint.
So there you have it. We are emotional, passionate creatures that often focus on our self-interest and don’t have the discipline to create restraints to subordinate our desires and needs to the greater good of our higher selves or society. Much the same can be said about investors who are often driven by fear and greed to buy and sell at the worst times.
When reading The Federalist Papers it makes me scornfully laugh at those who subscribe to the economic theory that investors are rational economic beings. This can be the case at times, but overall there are too many contrary examples for me to take rational economics seriously. Here are a couple of nuggets from Federalist Paper #1 written by Hamilton which discusses the tendency of people to delude themselves and how this can lead to very negative outcomes.
Hamiltonian Advice for Voters
So numerous indeed and so powerful are the causes which serve to give a false bias to the judgment, that we, upon many occasions, see wise and good men on the wrong as well as on the right side of questions of the first magnitude to society. This circumstance, if duly attended to, would furnish a lesson of moderation to those who are ever so much persuaded of their being in the right in any controversy. And a further reason for caution, in this respect, might be drawn from the reflection that we are not always sure that those who advocate the truth are influenced by purer principles than their antagonists.
In other words, keep an open mind and check your emotions and biases whenever possible because we just may be wrong when all is said and done. And listen to others through a prism of healthy skepticism as well since their motives may not always be pure. Unfortunately, this sure doesn’t seem to be the case when it comes to the political discourse in the country. It’s up to the electorate to listen skeptically but this is wishful thinking as there is such polarization that “people see what they want to see and disregard the rest” in the words of Paul Simon.
The next excerpt from Hamilton is a good reminder for us as voters going into this election cycle to keep what Hamilton says in mind when listening to the candidates.
On the other hand, it will be equally forgotten that the vigor of government is essential to the security of liberty; that, in the contemplation of a sound and well-informed judgment, their interest can never be separated; and that a dangerous ambition more often lurks behind the specious mask of zeal for the rights of the people than under the forbidden appearance of zeal for the firmness and efficiency of government. History will teach us that the former has been found a much more certain road to the introduction of despotism than the latter, and that of those men who have overturned the liberties of republics, the greatest number have begun their career by paying an obsequious court to the people; commencing demagogues, and ending tyrants.
Hamiltonian Lessons for Combating Terrorism?
I really don’t know what the answer is to combat the real and growing threat of terrorism in our country in terms of how to strike the delicate balance between protecting freedoms and protecting the citizenry. From Hamilton’s perspective, it was to lean more towards preserving freedoms as he elucidates in number 8.
The violent destruction of life and property incident to war, the continual effort and alarm attendant on a state of continual danger, will compel nations the most attached to liberty to resort for repose and security to institutions which have a tendency to destroy their civil and political rights. To be safer, they at length become willing to run the risk of being less free.
Unlike when Hamilton wrote so prolifically, today is an age when distraction runs rampant and attention spans are far shorter. As a result, I will stop here and use next week’s blog post to discuss the second part which relates to the fascinating top of factions, how they arise, why they are so pernicious, and what can be done about them.
Over to You:
Do you draw parallels between advice from our founding father and your daily life? Make sure you come back next Monday for Part 2.
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