As Warren Buffet said, “read … every day.  That’s how knowledge works. It builds up, like compound interest.”

So, in honor of this dictum, here are three books I read recently that I recommend.

War and Peace and War by Peter Turchin

Peter Turchin is a Russian-American scientist specializing in constructing mathematical models of populations and social trends. He believes the study of history is a particularly fertile area for the application of mathematical and statistical modeling.  His approach provides a different perspective from traditional historical analysis.

His major thesis proposes that the rise and fall of empires is largely determined by three interlocking cycles.  The longest cycle of 1000 years is a result of the rise and fall of Asabiyya, an Arab concept denoting ‘ability to engage in collective action.’ Asabiyya is typically built from society coming together to fight an existential risk – typically war with an enemy.

Over time, as the risk decreases, there is less social cohesion, greater internal tension and a rise in the production of ‘elites’ who are increasingly unable to find employment. These under or unemployed disaffected elites sow dissent among the hoi polloi, making the empire vulnerable to attack … and the cycle repeats.

A problem with his thesis for me is that much of it is untestable. His timeline and explanatory variables are so flexible they can fit almost any historical arc.  Still, this book is intriguing and thought provoking.

His focus is on the ability of nations to marshal the will for “collective action.”  In recent years, I have thought that many of our financial and social issues are closely related to this issue. The book was written in 2006 and now seems quite prescient. It is easy to use his theory as an explanation of the rise of populism, extreme partisanship and recent anti-democratic trends. If he is correct, the United States is likely facing tough years ahead.

China’s Economy: What Everyone Needs to Know by Arthur Kroeber

China will likely be the most important foreign policy story for the United States for the foreseeable future.  After reading this book, I realized I had a very superficial understanding of the Chinese economy.  I imagine that is true for most Americans.

Kroeber, a Senior Fellow at the Brookings Institution, has been based in Beijing since 2002. His book does an excellent job of explaining in clear, concise and direct language the major issues of China’s development over the last 40 years and the issues it faces today and in the future. 

During most of our lifetime, China has been a weak and poor country.  However, the Chinese perspective focuses on a longer time frame.  They remember that until the early 19^th century, for roughly 1,000 years China was the largest and most technologically advanced country in the world.  For the Chinese, the rapid rise of wealth and power is simply restoring the country’s rightful place in the world.

By any measure, the story of China since Deng introduced the reform and openness policy of 1979 is truly remarkable. As a result of dogged and intentional effort, per capita income has increased 30-fold. Since World War II, the global economic and political climate has been, in effect, constructed by the United States.  China is the first country to potentially challenge this status quo. 

China is now facing several issues. In particular, Kroeber concludes that to continue its economic success, China must now transform its economic engine from mobilizing resources to using those resources profitably.  In addition, it must do this while grappling with sharp demographic changes.  The population is beginning to age rapidly and the ratio of productive workers to dependent older citizens is projected to drop precipitously.  This is all taking place at the same time that the regime is tightening its autocratic grip.   

Reading this book will definitely enhance most readers’ abilities to more deeply understand the ever-growing daily news articles focused on China.

Perilous Bounty by Tom Philpott

Philpott focuses on the fruit, vegetable and nut production in California’s Central Valley as well as the corn and soybean production in Iowa.  The California Central Valley represents 1% of the land devoted to agriculture in the United States but produces roughly one third of the vegetables and two thirds of the fruit and nuts in the county.  Iowa is the most productive state of the Midwest region in raising corn and soybeans primarily as feed for meat production.

Philpott makes a convincing argument that water availability is fragile and declining as a resource in California.  Causing this crisis is a combination of decisions based on a short-term time horizon combined with the impact of natural long term weather cycles.   As a result, this agricultural bounty will likely soon decline.   In Iowa, he makes a convincing case that the loss of topsoil is alarming and will cause declining grain yields.

He concludes that the focus on short term results is degrading our natural environment.  Consequently, if we don’t change our farming practices, we could be facing diminished agricultural production.

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At Eastgate, we take an historical approach to investing and consider a wide variety of perspectives in our analysis.  While they are not directly applicable to investment decisions, books such as these can give us greater breadth to make sense of what we see today and are likely to see tomorrow.  If you want to talk about the books, investments, or anything else, call or email me. 

All information presented in this article is the personal opinion of the author only.  This article does not constitute professional advice.  Past performance does not guarantee future results.