Saturday, August 08, 2009

surviving the end of civilization

In his 2008 bestseller, "Wealth, War and Wisdom," hedge fund manager Barton Biggs warns that investors must "assume the possibility of a breakdown of the civilized infrastructure."

And to prepare for a breakdown of civilization, "your safe haven must be self-sufficient and capable of growing some kind of food ... It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc." Bloomberg Markets suggested that by "etc." he meant guns, as Biggs added "a few rounds over the approaching brigands' heads would probably be a compelling persuader that there are easier farms to pillage."

That warning's not from a hippie radical. Biggs was a respected Wall Street guru at Morgan Stanley for 30 years. As the chief global strategist Institutional Investor magazine put him on its "All-America Research Team" 10 times. Smart Money said: "Biggs is without question the premier prognosticator on the international scene and a mover of markets from Argentina to Hong Kong."

Behavioral economists have answers. But your gut's also good at predicting. So here's what you'll likely do:

You'll go see the new disaster film, "2012" about the end of the Mayan calendar. After all, it's by the same director who "destroyed" the earth in "The Day After Tomorrow," "Independence Day" and "Godzilla." No new investment strategies, but a must-see film, a great catharsis and distraction.

What will Main Street investors do? Here again, even with the planet's survival threatened, they'll go watch "2012," be entertained, experience a catharsis, feel relieved, and afterwards, have dinner, slip back into denial. And later, they'll vote against anything that offers solutions to future problems, especially if it raises taxes.

Why? Very simple: Our "Brains Aren't Wired to Fear the Future," writes New York Times columnist Nicholas Kristof. We're wired to respond to crises, while pushing off the real big problems (health care, Social Security, etc.)

That's basic behavioral economics: Over tens of thousands of years, evolution has programmed our brains so that collectively we will behave counter-productive with the future, making an "End of Civilization" scenario inevitable, a foregone conclusion, a self-fulfilling prophecy ["Mr. Anderson"]. Why? Because our brains are handicapped, we are literally incapable of acting soon enough to solve the problem.

[via pbo]

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