* Successful investing is about owning businesses and reaping the huge rewards provided by the dividends and earnings growth of our nation’s—and, for that matter, the world’s—corporations. The higher the level of their investment activity, the greater the cost of financial intermediation and taxes, the less the net return that shareholders—as a group, the owners of our businesses—receive. The lower the costs that investors as a group incur, the higher the rewards that they reap. So to enjoy the winning returns generated by businesses over the long term, the intelligent investor will reduce to the bare-bones minimum the costs of financial intermediation.
* Our system of financial intermediation has created enormous fortunes for those who manage other people’s money. Their self-interest will not soon change. But as an investor, you must look after your self-interest. Only by facing the obvious realities of investing can an intelligent investor succeed.
* In the investment field, time doesn’t heal all wounds. It makes them worse. Where returns are concerned, time is your friend. But where costs are concerned, time is your enemy.
* With each passing year, the reality is increasingly clear: relative returns of mutual funds are random. Yes, there are rare cases where skill seems to be involved, but it would require decades to determine how much of a fund’s success can be attributed to luck, and how much attributed to skill.
* While I can’t assure you that traditional index investing is the best strategy ever devised, I can assure you that the number of strategies that are worse is infinite.
* I urge you not to be tempted by the siren song of paradigms that promise the accumulation of wealth that are far beyond the rewards of the traditional index fund. Don’t forget the prophetic warning of Carl von Clausewitz, military theorist and Prussian general of the early nineteenth century: “The greatest enemy of a good plan is the dream of a perfect plan.”
* No matter what happens, stick to your program. Think long term. Patience and consistency are the most valuable assets for the intelligent investor.
* Whatever asset allocation strategy you decide is best for you, you absolutely must take into account the role of Social Security—a major source of income for most retirees—as you age. When determining their asset allocations, most investors need to take Social Security into consideration as a bond-like asset.
* The way to wealth, I repeat one final time, is not only to capitalize on the magic of long-term compounding of returns, but to avoid the tyranny of long-term compounding of costs. Avoid the high-cost, high-turnover, opportunistic marketing modalities that characterize today’s financial services system. While the interests of Wall Street’s businesses are well served by the aphorism “Don’t just stand there—do something!,” the interests of Main Street’s investors are well served by an approach that is its diametrical opposite: “Don’t do something—just stand there!”
* Since the year 2007, more than half of humanity has lived in cities (more than 80 percent in all affluent countries), and unlike in the industrializing cities of the 19th and early 20th centuries, jobs in modern urban areas are largely in services. Most modern urbanites are thus disconnected not only from the ways we produce our food but also from the ways we build our machines and devices, and the growing mechanization of all productive activity means that only a very small share of the global population now engages in delivering civilization’s energy and the materials that comprise our modern world.
* The proverbial best minds do not go into soil science and do not try their hand at making better cement; instead they are attracted to dealing with disembodied information, now just streams of electrons in myriads of microdevices. From lawyers and economists to code writers and money managers, their disproportionately high rewards are for work completely removed from the material realities of life on earth.
* The real wrench in the works: we are a fossil-fueled civilization whose technical and scientific advances, quality of life, and prosperity rest on the combustion of huge quantities of fossil carbon, and we cannot simply walk away from this critical determinant of our fortunes in a few decades, never mind years. Complete decarbonization of the global economy by 2050 is now conceivable only at the cost of unthinkable global economic retreat, or as a result of extraordinarily rapid transformations relying on near-miraculous technical advances.
* Most recently, a poor understanding of energy has the proponents of a new green world naively calling for a near-instant shift from abominable, polluting, and finite fossil fuels to superior, green and ever-renewable solar electricity.
* Even in this era of high-tech electronic miracles, it is still impossible to store electricity affordably in quantities sufficient to meet the demand of a medium-sized city (500,000 people) for only a week or two, or to supply a megacity (more than 10 million people) for just half a day.
* If the COVID-19 pandemic brought disruption, anguish, and unavoidable deaths, those effects would be minor compared to having just a few days of a severely reduced electricity supply in any densely populated region, and if prolonged for weeks nationwide it would be a catastrophic event with unprecedented consequences.
* The fundamental energy conversion producing our food has not changed: as always, we are eating, whether directly as plant foods or indirectly as animal foodstuffs, products of photosynthesis—the biosphere’s most important energy conversion, powered by solar radiation. What has changed is the intensity of our crop, and animal, production: we could not harvest such abundance, and in such a highly predictable manner, without the still-rising inputs of fossil fuels and electricity.
* Many people nowadays admiringly quote the performance gains of modern computing (“so much data”) or telecommunication (“so much cheaper”)—but what about harvests? In two centuries, the human labor to produce a kilogram of American wheat was reduced from 10 minutes to less than two seconds.
* The quest for mass-scale veganism is doomed to fail. Eating meat has been as significant a component of our evolutionary heritage as our large brains (which evolved partly because of meat eating), bipedalism, and symbolic language. All our hominin ancestors were omnivorous, as are both species of chimpanzees (Pan troglodytes and Pan paniscus), the hominins closest to us in their genetic makeup; they supplement their plant diet by hunting (and sharing) small monkeys, wild pigs, and tortoises. Full expression of human growth potential on a population basis can take place only when diets in childhood and adolescence contain sufficient quantities of animal protein, first in milk and later in other dairy products, eggs, and meat: rising post-1950 body heights in Japan, South Korea, and China, as a result of increased intake of animal products, are unmistakable testimonies to this reality.
* Rockefeller equated silence with strength: Weak men had loose tongues and blabbed to reporters, while prudent businessmen kept their own counsel. Two of his most cherished maxims were “Success comes from keeping the ears open and the mouth closed” and “A man of words and not of deeds is like a garden full of weeds.”
* Far more than a technocrat, Rockefeller was an inspirational leader who exerted a magnetic power over workers and especially prized executives with social skills. “The ability to deal with people is as purchasable a commodity as sugar or coffee,” he once said, “and I pay more for that ability than for any other under the sun.” Employees were invited to send complaints or suggestions directly to him, and he always took an interest in their affairs.
* At meetings, Rockefeller had a negative capability: The quieter he was, the more forceful his presence seemed, and he played on his mystique as the resident genius immune to petty concerns. As one director recalled, “I have seen board meetings, when excited men shouted profanity and made menacing gestures, but Mr. Rockefeller, maintaining the utmost courtesy, continued to dominate the room.”
* Standard Oil had taught the American public an important but paradoxical lesson: Free markets, if left completely to their own devices, can wind up terribly unfree. Competitive capitalism did not exist in a state of nature but had to be defined or restrained by law. Unfettered markets tended frequently toward monopoly or, at least, toward unhealthy levels of concentration, and government sometimes needed to intervene to ensure the full benefits of competition.
* “Great wealth is a great burden, a great responsibility. It invariably proves to be one of two things—either a great blessing or a great curse.”
* To Rockefeller, the least imaginative use of money was to give it to people outright instead of delving into the causes of human misery. “That has been our guiding principle, to benefit as many people as possible. Instead of giving alms to beggars, if anything can be done to remove the causes which lead to the existence of beggars, then something deeper and broader and more worthwhile will have been accomplished.”
* Rockefeller reviewed every bill that arrived at home and often patrolled the hallways, turning off gaslights. Such habits were not simply reflexive stinginess but were rooted in bedrock beliefs about the value of money.
* “A man’s wealth must be determined by the relation of his desires and expenditures to his income. If he feels rich on ten dollars, and has everything else he desires, he really is rich.”
* In 2016 motor and aviation gasoline accounted for a third of global refinery throughput. The US share of global gasoline consumption was about 41% of the total, or more than 1,200kg/capita: the country now consumes more gasoline than the combined total for the EU, Japan, China and India.
* Nearly two-thirds of the world’s refined products are now used in transportation (roughly 2.5Gt in 2005) and in the US that share is now more than 75%. Transportation’s dependence on liquid fuels is even higher: in 2015 about 93% of all energy used by road vehicles, trains, ships and planes came from crude oil.
* In 1900 American farmers needed an average of about three minutes’ labor to produce 1kg of wheat, but by the year 2000 the time was down to just two seconds and the best producers now do it in one second.
* The second most voluminous non-fuel use of a refined petroleum product is asphalt.
* Only about 20% of diamonds are sold to the jewellery trade; most of the rest go into drilling for hydrocarbons and metallic ores.
* Record US well depths reached with rotary rigs increased from 300m in 1895 to more than 1.5km by 1916; the 3km mark was reached in 1930, the deepest pre-WWII well was 4.5km (in 1938) and the 6km mark was surpassed in 1950.
* The average depth of new US exploratory oil wells increased from about 1,460m during the 1950s to nearly 2,300m during the first decade of the twenty-first century.
* Fracking fluid is about 90% water. Most of the rest is sand, and additives (hundreds of substances have been tried) usually make up less than 0.5% of the volume but they contain a mix of chemicals (acids, corrosion inhibitors, gelling agents, surfactants, biocides) that should never be allowed to contaminate drinking water. Usually this is not a problem as fracking takes place far below the aquifers, and steel and cement in properly finished wells should prevent any contamination closer to the surface.
* Moving Alaskan oil 3,800km by tanker from Valdez to Long Beach in California requires energy equivalent to only about 0.5% of the transported fuel. And a 300,000dwt supertanker needs an equivalent of only about 1% of the fuel it carries in order to travel more than 15,000km from Ra’s Tanūra, the world’s largest loading oil terminal on the Saudi coast of the Persian Gulf, to the US East Coast.
* By far the largest oil storage is the US Strategic Petroleum Reserve that began to fill in 1977 with imported Saudi oil. Crude oil is stored deep underground in four massive salt caverns along the Texas and Louisiana Gulf Coast. The maximum capacity is 713.5Mb and the reserves stood at 685Mb in June 2017, representing about 10% of US annual oil consumption.
* The chances of ending the fossil fuel era in a matter of two or three decades appear quite unrealistic: in 2017 the world derived about 85% of its primary commercial energy from the combustion of fossil carbon.
* Advertising developed in part as a result of mass production; likewise, it was said that advertising made mass production possible. Firms decided that there was a limit to attracting customers through lower prices, and they tried the alternative strategy of increasing volume by brand-centric advertising. Although advertising began in the late nineteenth century with the development of the first branded products, its true explosion came in the 1920s, when it became increasingly tied to the newly invented radio.
* Electric lights are an example of a technology that had a great burst of innovation early, in this case 1880–1920, and then stood still afterwards. Although the fluorescent bulb had come to dominate lighting in commercial and industrial settings by 1950, virtually nothing changed in home illumination from 1920 until the development of the compact fluorescent bulb after 1990.
* The current system of airport security all over the world represents an overreaction to the September 11, 2001, hijackings. There was only one weakness in the U.S. airline security system on September 11, and this was that the cockpit doors were flimsy. Within days, they were replaced by completely secure doors that nobody could break through. Although the security issue was completely solved within a week, fourteen years later billions of dollars per year of passenger time continues to be wasted in unnecessary additional security precautions. The pre-2001 security system, based on a quick walk through an X-ray machine to check for guns and metal weapons, would be enough.
* If any year can be anointed as the beginning of the Internet revolution, it is 1995. The introduction of Windows 95 was a sensation, creating long lines of eager buyers waiting for hours in front of stores that would sell it before the doors opened on August 24, 1995. This version of Windows represented the transitional moment in the history of the Internet in that Microsoft’s Internet Explorer, a web browser derived from Mosaic, was available as an add-on to Windows 95.
* Virtually every firm making consumer goods (except for basic food and clothing products) had been forced to make something else during World War II, and every one of these producers learned to be more efficient from the process.
* The unrivaled autonomy of the medical profession began to erode after the 1950s. As hospitals became larger and more complex, administrative control fell increasingly into the hands of professional administrators. Patients also began to challenge the authority of the medical profession. While “for the most part, the authority of the doctor was unquestioned” in 1960, with the surgical profession even earning such high praise as being called a “religion of competence,” by the early 1970s patients were demanding greater say in how they were treated. What had always been a tradition of “doctors know best” changed in 1972 when a federal appeals court in Washington, D.C., for the first time established a legal requirement for informed consent. “According to the new standard, the physician had to tell the patient whatever ‘a reasonable person’ would want to know in order to decide whether to accept the treatment.” In 1973, responding to increasing pressure from healthcare consumers, the American Hospital Association came out with a Patients’ Bill of Rights.
* One of the most important improvements in American industrial efficiency was the establishment by Herbert Hoover of the National Bureau of Standards. Its aim was to create a system of uniformly sized parts, down to screws and bolts, aimed at “simplification of practice, elimination of waste, conservation of materials, minimum training of workers, reduction and savings in supply purchasing and unwieldy inventories, defeat of confusion, and speed in production.”