An Investment Classic!

This was yet another book picked up on a whim. And by the time I finished reading it turned out to be classic investment advice book. Needs to be added alongside The Intelligent Investor and Margin of Safety.

The author David Dreman seems to be in the value investor camp and champions contrarian investment strategies. There were some important investment lessons in the book!

He started from basics reminding how it is very difficult to spot a bubble until after the fact when its bursting confirms its existence. And there’s a reason for that. To a crowd few images are more alluring than the promise of instant wealth and everyone FOMO’ing into those asset classes. This is where the human psychology comes into play. Because if the potential outcome of the gamble is emotionally powerful, its attractiveness is insensitive to changes in probability. No wonder psychology becomes an integral part of investment. The book does a good job on reminding the humans cannot process large amounts of info. Investors mistakenly believe that with more data points they can predict/forecast accurately but that's not the case!

The book then delves into the Efficient Market Hypothesis (EMH) and a lot of pages are devoted to why it’s inaccurate backed by many surveys, studies, and contradictions. Although at some point, it started to feel like a rant to me.

David Dreman does share his secret sauce later – describing how low P/E, low P/B, low P/CF and low industry average stocks tend to do well over a long period of time and also remain relatively unscathed during periods of high volatility. I get that this book is a reprint edition of 2012 thus data of most of the surveys referenced is dated up to 2010 alone. I was interested to look for data within the last few years where growth stocks and mega caps like FAANG have been the hot picks. It’s relevant cause they have traded at expensive multiples thus my guess is that Dreman’s strategy would have always excluded them and robbed the investor of crème de la crème. 

I found a fund which runs a portfolio based on David Dreman’s contrarian principles and it seems to have under-performed the market by ~53% since 2003. 

https://www.validea.com/contrarian-investor-portfolio/david-dreman

Nonetheless, the book served as a good refresher of certain key fundamentals-  

• Never FOMO 

• Position Sizing matters a lot

• Never place too much trust in analysts 

• There is a chapter where Dreman goes into lot of detail about how analysts have huge conflicts. The brokerage firm where they work, also has an investment firm which wants underwriting opportunities in offerings. And a lot goes on behind the scenes to curry Buy side recommendations and invites blowback too on Sell side recommendations.

• Valuation matters aka multiples matters.

• Liquidity and leverage together can be huge risks as proven time and time again. Stay away from leverage!

Lockdown Reading - Golden Gates

Strongly recommend this book for anyone interested in housing. And of-course, everyone would be somewhat interested in it because it is such a basic "goal" on almost everyone's list.

The book talks about in detail the problems that are plaguing the housing market - why at some places rents and prices are exorbitantly high, through multiple interwoven stories.

Housing is such a vast and complex subject. It has so many aspects to consider. Some of them that I can think of are  - 

• Affordable Housing
• Gentrification
• Homelessness
• Climate Change (yes even climate change. Third of the greenhouse emissions are from transport. If people cannot afford close to live close to where they work, they drive to work daily. Let's be honest on an average public-transport is poor in most of the world).
• Zoning Laws (or laws governing how houses need to be built)
• NIMBY/YIMBY
• Redlining
• Evictions

Reading it I had moments of realizations and exasperations in equal measure.

• It seems quite unfair to me that the neighbors can bully the developers to build less housing on the pretext of it'd bring in more crime, spoil the nature of the neighborhood. A new excuse now is the effect on the environment. City councils often bow down to such pressures.
   
• The above ideas can be clubbed under NIMBYism. Also, common is that people objecting are already house owners and make claims like - "...I have no problems with affordable housing but it needs to be built in the right place." 
  Emphasis on right. Also, contributing is the perverse incentive of house price. The law of economics is that if something is in short supply it'll become more valuable and its prices will shoot up.   
• Listening to an interview of the author, the significance of title of the book GOLDEN GATES dawned on me. Remember how in ancient times people who were poor used to live outside the city gates? Similarly, now we have these tendencies to thwart new housing to be built so our "homogeneous, affluent" neighborhood vibe is not disturbed. 
   
• Local politics is scrappy but that is where decisions about approving/denying housing projects are made. Most people do not pay attention to it let alone attend those meetings. But that's what helps people with vested interests (shills) to get the council to do what they want. Also, would note that legislation or passing laws involves serious amount of paperwork and technicalities.
    
• To be realistic, the government alone cannot fix this problem. Cue innovation and technological disruption. Housing Construction is one of the industries that has not seen enough advancement and improvement in terms of productivity. 
  This is where lots of companies like Blokable building modular homes - can come in to help. Imagine a factory churning out houses which just need to be nailed together at the site. Such a process can help a great deal with the supply. However, there's another problem with these - the stigma!   
  Notice how there's a certain kind of perception on those living in trailer homes? What is to say it won't happen with modular homes? What if people from an affluent neighborhood object to modular homes being set up near their area? Do you think the VC or the founder of such modular homes companies would themselves live in this modular home? I think the only way this perception problem would get solved is perhaps if big giants like Amazon jump into this business and make it acceptable and we would see a change in perception in matter of a generation.  

Overall, it's a good read if you want to understand what plagues the housing market.

Lockdown Reading - Adaptive Markets

I don’t remember from where I picked up a recommendation for this book but what a great investment buying this turned out to be. It will not be an exaggeration to say that I really enjoyed this book. It was indeed informative but what made it enjoyable was how easily the transition was between points - concepts supported by anecdotes, stories and research studies and how beautifully in the end they all tie together to frame a powerful, optimistic call to action. The author’s work does make him sound like a good professor. 😃

The book is a collection of a lot of interesting concepts - 

• It talks about how human behavior, emotions influence our financial decisions. It is one of the reasons why the Efficient Market Hypothesis(E.M.H) doesn’t hold true.

• It does critique E.M.H and provides two strong points -

• If the market is really efficient with all the info priced in then what’s the point for any investor to do some work getting new info or numbers when everything is already priced in ?

• Also, if the market is really efficient with all the info priced in then how come George Soros’, Jim Simons’ and Warren Buffets of the world have made billions of dollars?

• It gives a good glimpse on how the concept of “money” has not been around forever and is relatively recent on an evolutionary scale. So the idea of losing money generates similar emotions as “fight or flight” in case of a physical attack.

• Using advanced technologies such as fMRI it has been found that similar centers in the brain are activated when there are prospects of making/losing money.

• Humans are not rational beings and are influenced by emotions of fear, panic and pleasure and thus that is what makes them take irrational decisions in the context of money.

• Concept of probability matching with the help of an experiment:

• Consider the game Psychic Hotline. Either letter A or B will be shown on the screen. If you get it right +$1 else -$1. 

• After a few rounds, the participants observe that A appears more often than B. Say 75% of the times it is A, and B appears 25% times.

• So the optimal strategy is to always pick A.

• But people try to mix it up which is called “Probability Matching” and that is sub-optimal thus reducing the earnings to only 62.5% times.

• It is definitely worth pondering that our DNA is 97% similar to an orangutan but the 3% difference is big enough to keep us on different sides of the fence.
  
  
• Emotion isn't the source of irrationality. The author's proposition is that we wrongly conclude that emotions are the reason for our irrational actions when infact they are the reason of rationality.
  
  
• The author reminds us that although there were so many attempts to draw inspiration from Physics to apply to Economics - it is infact more similar to Biology. Both are equally complicated fields.
  
  
• The author puts forward a new theory to beat the E.M.H. He talks of Adaptive Market Hypothesis.
  This theory is about revolving around heuristics.  It blends in the concept of "bounded rationality" too. A very good example of this is how we may have 10 shirts, 10 pants, 5 ties and 5 jackets. We don't try out every single of them every day before going to work. Because in our minds already have a heuristic/idea about which shirt will shirt well enough with a pant. 
  
  
• Also, going by the word "adaptive" we continue to adapt and learn from our experiences and surroundings (dressing appropriately is an example - while going to a function we don't try out running shorts - adapting and cutting down our choices. This is another example of bounded rationality).

The example that blew my mind was around Biological Evolution. It was fascinating to see how the concepts of risks - system

ic and idiosyncratic can be tied to evolution.

Here's my attempt to summarize it -

Let's say a hypothetical creature which could produce only 3 offsprings (Tribble) has a choice to dwell on a plateau or a valley. Odds are such that in the

a) Valley - 3 offsprings are guaranteed.

b) Plateau - 50% chance for 2; 50% chance for 4 offsprings. Net being still 3.

Now if everyone of the tribble chooses to live in the valley - they will be safe from sunshine but not from floods. If everyone of the tribble chooses to live in the plateau - they will be safe from the floods but not from sunshine.

So which option should they choose? Let, f be probability of choosing the valley. 1-f be probability of choosing the plateau.

Here, even though more tribbles chose to nest in the valley - all of them would be wiped out as soon as there is a heavy rainy season. So, what should be the optimal percentage of tribbles residing in a valley. This is where the principle of Probability Matching ties back in. f should be same as the probability of the sunlight. By probability matching, the reproductive bets will be hedged so that the expected number of offspring will be same, no matter whether it rains or shines. Sparing the complex maths behind it, so you've to trust this!

Another variation of this would be - every tribble family have their own individual experiences ie microclimate. Each family faces rain or shine in a separate and independent toss of a coin that is something like sunshine 75% of the time and rain 25%.

So the probability that all of them (say 10 tribble families) will be washed away is (1/4)^10 i.e 1 in a million. Basically, nature has diversified the risk of extinction via microclimates i.e diversification is necessary in an evolutionary cycle. It also explains why dinosaurs got extinct cause they didn't hedge their bets - they were all on one planet and got wiped out together when a meteor hit. Similarly, you can also argue why it's important for humans to inhabit some other planet too!

I thought this was a very cool thing I learned!

Something that gave me lot of optimism was how finance can actually help fund researches for life saving drugs or even the current Covid-19 crisis. We all are aware how governments are cutting funding for health and research. A cancer drug research takes 10 years and $200 million with a 5% chance of success. Clearly, no private investor would want to put their money in such a venture where they would lose their money 95% of the time. They would rather fund a tech startup and sell to FAANG later.

Better approach is to invest rather one project at a time than to invest in 150 such research projects. Even with 5% chance of success - you can to do the math to see that it is promising that atleast 3 of them will succeed. Now, the crucial part is funding $200mn x 150 i.e $30billion. Here's where you can issue bonds and finance more than half of the projects with long term debt; the intellectual property of 150 projects can be the collateral. And if you get fancy you can use derivatives - securitization, CDOs, Credit Default Swaps. Insurance companies can be invited to buy them too and it'd be a way for them to hedge their bets too considering they use an ugly term called "longevity risk". This $30 billion cancer bonds market will still be way smaller than the housing market. I wrote earlier here how this same principle can be used to fund Covid-19 research as well.

I'm still waiting to come across a logical argument of why this is not a feasible way to cure diseases like Cancer!

Overall, this was a fantastic book and worth my time reading during the lockdown. Hope it excited you to give it a try as well.

BookShop link - https://bookshop.org/books/adaptive-markets-financial-evolution-at-the-speed-of-thought/9780691191362

And the Weak Suffer What They Must

To be honest this book was not even on my reading list. I had my eyes for "The Adults in The Room" - considered to be one of the Top 100 books of the 2010s decade by The Guardian. But it wasn't available in my library. And researching about the author made me aware about this book. 

Besides the provocative title, the subtitle said "Europe's crisis and America's future" which piqued my curiosity as someone who is interested in learning and understanding more about how economies work and specially in this case Europe - of which my knowledge is next to zero.

The book is well-written, easy-to-understand which is not a surprise because the author was a professor at UT Austin and was also Greek finance minister during the most turbulent times. After reading the book I was able to understand why the European Union is a bad idea but the real takeaways for me were the crystal clear understanding of three fundamental questions. 

• How deficits and trade surplus work?
• What does it mean to devalue a currency?
• How lowering interesting rates (or the financial jargon QE) are not granted to work always?

How Deficits Happen?

First this basic principle - One person's debt is another person's asset. Similarly, one nation's surplus is another nation's deficit. 

• In an asymmetrical world, the money that surplus economies amass from selling more stuff to the deficit economies than they buy from them - accumulates in their banks.
• The way banks make money is by lending. With this surplus in their vaults, they are tempted to lend much of it back to the deficit countries where interests rates are always higher [because money is scarce there and, to invite investment those countries resort to increasing their interest rates. Investors love higher rate of returns.]

For example -

• One French family buys a Volkswagen car (a German company).
  Now there is a trade imbalance. To set it right, one German family will have to buy a French car (why would they when German cars are better) or a French wine. Think about competitive advantage here.
• But suppose this balance doesn't happen to the same matching degree i.e a trade imbalance occurs. Surplus (Germany) - Deficit (France)
• Now as soon as the whiff of this gets to the markets, currency traders and speculators will bet on the Franc to be devalued by the IMF.
• They will bet by taking out loans in Paris (in Francs) and buying Deutsche marks and whenever, in future Francs get devalued - sell those Deutsche marks back, repay the loan and make handsome profit.
• Interesting thing is - unlike sporting/weather events the bets here make the event more likely.
• This is how -
  With every Franc borrowed by speculators to buy Deutsche marks it will push Franc's value down. Now there are two exchange rates for Franc - one official and, the other unofficial rate in the markets run by the speculators.
• To defend the official exchange rate, France's Central bank would have to step in using its reserves of Deutsche marks to buy Francs and soak the excess Francs in circulation.
• But now a game of chicken is on and who will blink first.
  If speculators persist - the reserves of Deutsche marks will eventually start to run out.
• Finally, Central Bank will have to call its minister and tell them that they can no longer afford any more French families buying Volkswagen cars. Please call IMF and arrange for the devaluation of Franc.
• The only thing that now stand between speculators and their victory is Bundesbank (German Central Bank). If it prints more Deutsche marks and asks it "chosen traders" to buy more Francs and soak up the excess Francs in circulation thus bringing its price down and burning the speculators.
• But Bundesbank will not like to print more Deutsche marks to defend an exchange rate designed by politicians. As now there will be more Deutsche marks in the system it will cause domestic prices to rise (inflation).
• So the story unravels from here on then.

How does Quantitative Easing (QE) work?

• The Central Bank buys from commercial banks other people's debts.
• In exchange of these debts - the Central Bank deposits dollars to an account the commercial bank keeps at the Central Bank.
• It is hoped that the banks will pass on these huge sums of money to businesses wishing to invest.
• If it happens, the economy rises as the liquidity rushes in.
  
  But for it to work, lots of things have to align. Like,
• Customers for eg. have to believe that the real estate market has bottomed out and their jobs are secure. Only if they feel so they will ask a bank for a loan.
• Bank must be willing to lend the money.
• Companies which employ people must believe that since banks are lending money - the demands for their products will increase.
• Often, even when banks have done their job (under a directive) - companies hesitate to invest more in their operations fearing that demand is not there. So, instead they just buy back their own shares which increases the stock price and get a nice bonus for the execs for supposedly increasing the stock price. Shares rise and everyone thinks all is well while behind the scenes economy is not doing well.
• Mind you, this is not what QE was intended for. These benefits were supposed to trickle down. And for these failures, "trickle down economics" is now not very liked.

I have read bunch of books, articles on these topics and watched lots of videos explaining these concepts but I found the explanation in this book to be the best!

Other than these fundamental explanations, the author also makes a case that European Union essentially favors only a select few countries, likening them to a cartel and run by bureaucrats having plush jobs and perks in Brussels. Inspite of having a Maastricht treaty to draw inspiration from with some shady maneuvering few countries got admitted to the E.U. Read this. 

Yanis does make a good point when he points out that E.U tends to overrule and impose conditions on sovereign countries and democratically elected govts' arm-twisting to do things they weren't elected to do.

Another, interesting argument he makes is that after the end of Bretton Woods era United States propped up E.U with Germany as one surplus country in Europe and Japan in Asia. The way he explains this is that the plan was to entice the surplus nations to send their surpluses to WallStreet by -
i) Pushing American interest rates higher

ii) Make WallStreet more lucrative than its equivalents in London, Tokyo, Frankfurt, Paris etc.

And recycling those surpluses.

The analogy of the Greek fable: Minotaur and King Minos was quite striking here.
WallStreet = Crete

Minotaur = US' trade deficit that kept devouring R.O.W's net exports and their industries running. With profits being sent to WallStreet as a tribute to Minotaur.

To add context, he was the Greek finance minister during a tumultuous period and he resigned when Greece was asked to follow severe austerity measures by the E.U. So he definitely knows the inner-workings of the E.U as he had a seat at the table and was right in the middle of it. He also gives a fascinating account of how the concept of European Union took shape and gives lots of anecdotes.

Overall, I picked this up not entirely sure what this is going to be like but I definitely enjoyed reading and learning a few things!

The Box: Internet Alone did not bring Globalization

I do not remember where I read about this book but I do remember adding it to my To-Read list. But when I got to it was worth the recommendation! Wonderful book - which gave me lots of valuable insights and perspective on how the world has not solely been transformed by bits and bytes alone. The book's TL;DR can easily be - Globalization did not happen only cause of the Internet, It was the 

Container which laid the groundwork. If the transportation industry hadn't figured out how to ship products from one corner of the world to other efficiently with lowest costs - no matter how easy was it for two people to talk across the world, higher costs would have deterred any free flow of commerce and trade.

I also understood how seemingly slow changes change the course of society and ultimately transform cities and towns unheard before - changing the fortunes of many overnight.

Some might argue that this book is academic and dry at places but having read it thoroughly I would point that the author did an extremely good job in covering all aspects revolving around the container technology - the shippers, trucker, dockworkers, exporters and regulators who were at the center of it but also the macro effect.

What I wish would have been there was some maps of the shipping routes to help the reader easily visualize the challenges and travails of maritime trade. 

Overall it was a great read - feel like I learnt quite a few things!

The Internet is given a lot of credit for the globalization - how the world came closer and trade between countries far across became possible. But it is containerization that was a major precursor to the internet revolution which made the Internet impact possible.

Containers - “the box” made logistically possible how competition would be right there at the doorstep - forcing almost all industries to innovate and take measures to cut costs to stay in the game. 

Ideal X - First container ship to sail in 1956 from Newark to Houston 

Before containers were a thing - shipping was done in break-bulk ships as in all commodities were stocked in the cargo hold of the ship. (breakbulk - all discrete items had to be handled individually - cement bags next to sugar next to copper wires). There was no pattern in how the items were stored - often it would require that at a port all the items to be unloaded because the cargo meant for the that port was at the bottom under all other cargo. Also, loading & unloading was all done by dock workers and longshoremen which were all unionized. Since it was all manual labor they had very less incentive to be efficient which was in direct contrast to the shippers’ interests.

It is also worth mentioning that the working conditions at the docks were not at all safe. Dock workers had low salaries and they had to literally fight to get a job each day by assembling at the square - waiting for the ship to arrive whenever that maybe. Going to home to grab a quick bite or for other errands even though the ship was scheduled for arrival in the evening - usually meant losing their spot in the queue. All this unorganized system meant that the dockworkers had developed more 

loyalty towards each other than to the company. They formed unions which were interested in drawing up contracts with every minute detail like time to take breaks and how long they would be in.

Another thing that happened was that these unions were strictly against outsiders - with the dockworkers living near the docks - it became a family profession i.e the grandfather got his son his place in the docks when he retired and the son tried to make sure no outsiders came in so as to reserve a place for his son in the future. The dockworkers culture was very insular.

Even after unloading a complicated web of interchanges from the port to trucks, trains, planes and ferries awaited the exporters - which drove up the costs. Freight transportation was ultimately too unpredictable for manufacturer to take risk on delivering on time. Large inventory thus became a need to keep the production lines moving. With all these inefficiencies ships spent more time anchored at the docks than sailing which was what it should be primarily doing. The shipping industry was crying in need of an innovation to fix all these problems.

Malcolm McLean came up with this idea of containers and the first container ship - a refitted oil tanker sailed in 1956. It brought with it these benefits: 

• all items could be stored without the need to be handled individually,
  
• also it stopped cases of thefts - thus driving down insurance costs,
  
• The shipping line company over the years made the loading & unloading process more efficient using machinery and custom built cranes - cause of which the longshoremen gangs size constantly dropped from a once all time high of 22. Ultimately all that is needed now is a crane operator who sits many feet above the ground in a crane and picks up the container via the hooks on its corners and places it on a truck (or a flat railway car) and the truck (or the train) drives away to a distribution hub where the container is unloaded - thus reducing the time ship spent waiting for its cargo to unload.
  
• Lots of cities which were hesitant to invest or lacked foresight to see the change coming in maritime industry via containers - missed out.
  On the West coast - Los Angeles, Oakland - Alameda (home to Matson), Seattle and on the East coast - New York (after substantial investment), Savannah (late joiner) cashed in as traditional hubs like San Francisco, Portland and in Europe- London, Liverpool and Paris missed out.
  Globally, Rotterdam, Felixstowe and Antwerp in Europe and China with its relentless investments in its shipping ports caught up late but now is the leader with the most busiest and thriving ports. https://en.wikipedia.org/wiki/List_of_busiest_container_ports
  
• The shipping line companies were earlier organized more as cartels (they were called “conferences”) - they charged for every type of commodity in the cargo which didn’t make sense. And if an exporter ever used any shipping line outside the conference - the next time he tried to use any of the shipping lines of the conference he had to pay fine and pay more over. With the advent of containerships - what was inside a container became immaterial. TEU (20 foot Equivalent Units) became the unit on what was charged. Also, resistance of unions, the proximity of the port to the nearest railroad and trucking routes became super important on where the ships would make a stop. Little known ports benefitted.
  
• Some of the shipping lines tried to tap on the containerization- commissioning new ships to be built for different sizes of containers - a capital intensive project. This was before container sizes were standardized. Different sizes was a problem as it meant all container ships couldn’t stop at any ports as often a port wasn’t equipped with containers of various sizes. Many trucking and railroad companies couldn’t handle different container sizes - thus providing an opportunity for a mini-cartel. There was a difference in container sizes in use between Europe and USA causing logistical nightmares. Until after a long drawn process standardized the container-sizes bringing in some semblance of order.
  
• The time the first container ship sailed in 1956 is consequential as around the same time lots of ports on the Pacific side lost traffic as lumber moved on to road leaving the huge investments as white elephants. It revived the slowing maritime trade. 

If you look around today you can see the undeniable impact of containers all around us - Amazon and e-commerce websites ship multitude of items to their customers all in a box - inspired by the steel container. At a few places you can see people living out of containers or even hosting creative studios or workshops.

Another interesting observation I had was that Malcolm McLean - the pioneer of this technology was not able to cash in completely on the revolution his brainchild ushered. Read about his struggles to keep his shipping line companies (SeaLand and United States Lines) afloat. There were others who built on top of his vision and made the benefits of this technology more profound. Perhaps, this is what should happen - people build on top of each others ideas and visions to arrive at a magnificent future whose scope is way beyond the original idea. Major reason why competition is a good thing!

Interesting tidbits: 

• BBC did story called the Box Project where it covered the journey of the box. http://news.bbc.co.uk/2/hi/in_depth/business/2008/the_box/default.stm

• Panama Canal - how locks work https://www.youtube.com/watch?v=pHmaZw5j1is

• World’s Largest Containership makes its maiden call at a port 

          https://www.youtube.com/watch?v=Moxpa7f1BqM

Fair Shot

I think this book is a very honest attempt to explain why guaranteed income is needed specially now.

Some of the reasons why it is in the news is because of the looming threat of Artificial Intelligence which

is going to change the nature of economy but keeping that aside there are strong enough reasons to consider it.  Even though employment numbers tell a different story (less unemployment) -  the number of people living paycheck to paycheck, doing more than one job with no benefits - has increased. The benchmark of “employment numbers” no longer fully reflects the reality.

The author Chris Hughes’ Facebook co-founder has been humble enough to admit that “he got lucky”. His working class parents did just enough to provide him with opportunities (education) and he ended up at Harvard where he happened to choose Mark Zuckerberg as his roommate - what if he hadn’t?. It then turned out that they created Facebook and he ended up with half-a-billion dollars even before he had turned 30.

From his life story you get that working class vibe which is totally true.

He seems to have done a lot of introspection how he ended up in the 1% of the population and so young and it seems to have had a profound effect on him.

He makes a very passionate case for Guaranteed Income.

Everyone seems to have their own definition/interpretation of Guaranteed Income. It is sometimes called as Universal Basic Income i.e for all the people. I was a little surprised by his manifest for Guaranteed Income (note - he doesn’t call it UBI) but he does make a strong case for it with solid numbers and study as evidence. He calls for every working age adult making less than $50,000 a year to be given a $500 month which would be paid for by the top 1%  - total budget for it would be $290 billion i.e less than half of the US defense budget or the Social Security system. In Chapter-9 he also points out that there are some ridiculous tax loopholes which if plugged can provide funding for such a system. Like, Warren Buffett pays less tax than his assistant cause if you earn more than $250,000 a year - your capital gains tax rate is less and if you inherit some property or a mansion - you do not pay tax on it. Popular loophole for the ultra-rich.

This gives a very reasonable estimate for the programme and also answers a popular criticism of who’s going to fund it.

Also, there’s a common tendency to label the recipients of such a benefit as lazy or few other derogatory terms - but I find it appalling and the author also points out that such efforts in the past have been invasive - asking extremely personal and uncomfortable questions to females.

A relevant reading would be “Regulating the poor”.

I also got the sense in Chapter-8 about how extremely difficult it is to get such a bill (or as a matter of fact any bill) passed in both the Houses. Everyone has their own views, understanding of the subject and are eager to leave their own stamp on the bill - which leads to concessions, negotiations, stalemates and a few times it all works out.

I was a bit confused about why guaranteed income implementation is needed when there’s an Income Tax credit (EITC). There’s a chapter about it but I’m not fully clear yet.

I don’t say it often but this book has a very sincere moving “Afterword”!

To summarize I agree that The natural drift of capitalism toward inequality requires a constant vigilance to make the market for everyone, not just for the rich. And such a system is needed.

P.S -

It was remarkable to note that MLK was in favor of such an idea but was assassinated before he could start a movement for it. Alaska already has a similar prototype, Permanent Fund out of which all Alaskans are on an average paid $1400 a year and it has relatively less inequality.

Links - Stockton California,

Basic Income Earth Network