“For the most part, false and harmful opinions are distributed and supported by influence. We are too likely to accept the views and thoughts of other people without trying to investigate them deeper and further ourselves. Unimportant people are those who accept other people’s thoughts without developing them themselves.”

— Leo Tolstoy, A Calendar of Wisdom

The questions of why Europe industrialized before China and why anyone industrialized at all are important historical questions that remain unanswered. Though they’re not formally answered, I think the broad strokes behind why China fell behind are now known…

Remember the tax figures from KKS? The per capita tax revenue in 1700 for China was 10.4 silver grams… But with their greater size and higher total revenue, by 1780, that figure had reached 9.2 silver grams per capita…

As time advances, the Chinese state generally sees its revenues fall, reducing its capacity to maintain infrastructure, spend on the upkeep of the military, and provide other crucial state services. Contrarily, in fragmented societies like Japan and Europe, the fragmented states are more capable of reliably taxing their citizenry because—as we know—state capacity decays with scale…

Volatile psychology, skewed perception, overreaction, cognitive dissonance, rapid-fire contagion, irrationality, wishful thinking, forgetfulness, and the lack of dependable principles. That’s quite a laundry list of ills.

Together, they constitute the main cause of extreme market highs and lows and are responsible for the volatile swings between them. Ben Graham said that, in the long run, the market is a weighing machine that assesses the merit of each asset and assigns an appropriate price. But in the short term, it’s merely a voting machine, and the investor sentiment that moves it swings wildly, incorporating little rationality and assigning daily prices that often reflect little in terms of intelligence…

The market fluctuates at the whim of its most volatile participants: those who are willing (a) to buy at a big premium to the former price when the news is good and enthusiasm is riding high and (b) to sell at a big discount from the former price when the news is bad and pessimism is rampant.

Charlie Munger said that Li Lu was the only outsider he ever trusted with his money. Decades before Li Lu made Munger half a billion dollars, Li survived one of the most horrific childhoods imaginable: Born into poverty, abandoned, hungry, beaten, surrounded by death. Persistent. Smart. Disciplined. Intensely curious. Obsessed with reading and learning. Determined to escape. This is a story you absolutely cannot miss.

I. Always Carry a Book

This simple rule has helped me read much more each year. You’ll be amazed at how 5, 10, or 20 minute periods will add up to hours of reading each month. If you’re reading a good book, it will be more enticing than your phone.