Skip Young on The Wisdom of 76: Young America’s Way to Wealth
2016-03-26 · Guest: Skipper Young (Author and co-founder of Asia SF) · 52:30
Political and economic thought in 1776
Bob Zadek interviews Skipper Young, author of The Wisdom of 76, to discuss the remarkable convergence of political and economic thought in the year 1776. They explore how Thomas Paine’s Common Sense and Adam Smith’s The Wealth of Nations collectively laid the foundation for American prosperity, linking the concept of individual liberty to the “invisible hand” of the free market. Young also explains how these historical principles support modern index fund investing as a way for all Americans to own a piece of the national economy.
Topics: American History, Economics, Capitalism, Adam Smith, Thomas Paine, Index Funds, The Constitution, Wealth Creation, The Invisible Hand
Speakers:
- Bob Zadek: Host
- Skipper Young: Author of The Wisdom of 76 and co-founder of Asia SF
The Economic Neutrality of the Constitution [00:00]
Bob Zadek: Hello everyone, welcome to the Bob Zadek Show, the only live libertarian talk radio show on the air all weekend. Thank you for listening this Easter Sunday morning. We are the show of ideas, not attitude. 800-345-5639 to join my conversation at any time. Thank you so much for listening.
I, of course, spend a lot of my intellectual energy studying the history of our country. I just can’t get enough of it, frankly, and it helps me understand who we are and even to some degree who I am. I also, of course, read economics. I am, of course, profoundly in favor of the so-called, and not so-called perhaps, free market. I am a capitalist. I embrace capitalism.
But with all of that reading, never until about a week ago did I appreciate the fact that although everybody in the world more or less associates America and its founding with free markets and capitalism, I never quite realized until a week ago that the Constitution is what I’ll call economic theory neutral. There is nothing in the Constitution at all suggesting or dictating or creating any economic system. Yet everybody that I have spoken to, including myself, just assumed that the free market that we enjoy the benefits of came and flowed directly from the Constitution.
Well, what is the link between free market capitalism and the Constitution? What an interesting question I said to myself, hopefully you’re saying to yourselves. To help us understand that crucial link between our economic system and our political system, I am so very delighted to welcome to my show this morning, in the studio, Skipper Young. Skipper has written a wonderful book, The Wisdom of 76. And in reading this book, which is a must-read—it is a must-read—in reading this book, it all came together for me. Skipper brought together the free market economic system and our democratic political system. And now, after 74.5 years of being on this planet, I finally get it. Skipper, welcome to the show this morning and thank you so much for your book.
Skipper Young: Thank you, Bob.
1776: The Double Magic Year [04:58]
Bob Zadek: Now, Skipper, tell us—The Wisdom of 76. Every syllable in that title, every syllable in the book, is magnificently interconnected. Now, the first question is 1776. 1776 obviously appears throughout your book. What is the magic of that year? Why is—now, we all know the Declaration of Independence was written in that year. Some will say that is our country’s birth year, but actually it was not. The birth year, if you want to be technical, was the ratification of the Constitution in 1788. But why 1776? What is there about that year that makes it so special to you and ought to be so special to our listeners?
Skipper Young: Well, I believe that it is the greatest of all years, if you want to know the truth, because as my book says, 1776 is the double magic year. And that has two meanings. It means how you can double your money in wealth, but it also is about—it’s the story of 25 weeks in 1776 beginning on January 10th when Tom Paine printed Common Sense.
Bob Zadek: Now, Tom Paine—we’re mentioning names that our listeners perhaps haven’t thought that much about since high school or college or grad school. Now, Tom Paine, one of the most important immigrants ever to walk on the planet. So you talk about Common Sense. Finish your thought, and then I’m going to ask you to remind us who Thomas Paine was and why his immigration affected everybody’s life on Earth.
Skipper Young: Well, he was an amazing—well, first tell us about Common Sense, finish your story. So anyway, well, we’ll go back 13 months earlier. He had met Ben Franklin when they were both in England before Ben finally came back to America after being a representative of Massachusetts and Pennsylvania in front of the King for many years. And he finally realized that I think independence is on the way and came home. But while he was still in London, he met a young man named Thomas Paine. And he was so impressed by Tom that he encouraged him, because Tom didn’t have a very good job or prospects, to emigrate to America.
Bob Zadek: Tom Paine was a failure, in fact. Tom Paine was in England a failure at everything he tried. He was a tax collector, he made corsets. He had lots of interesting jobs. He wasn’t very good at any one of them. But notwithstanding that, his intellect impressed Ben Franklin.
Skipper Young: And they had many meetings, and he encouraged him to come to America. But most important, he gave him a letter of reference or recommendation because in this letter, when Tom came to America, it allowed him to get a job in writing, actually. I mean, in other words—and 13 months after coming to America, 13.
Bob Zadek: 13.
Skipper Young: That’s right. In just 13 months, for those 13 colonies, he publishes this little 48-page pamphlet called Common Sense. And it totally changed the mindset of the average American, if there is such a thing. Because I think most of us forget that most of our founding fathers were well-educated, many of them had gone to college and graduated. The exception is possibly George Washington. But it was a rather esoteric group of people that when they would write, they would write for newspapers and they’d use Latin names instead of their actual names.
Bob Zadek: Which was common in those days.
Skipper Young: It was common, but it was also high-end writing, let’s say. And Tom Paine wrote for the common man. And in January 10th, this book—this pamphlet is printed. It’s the most successful, I think the best-selling pamphlet certainly of the entire period. And by April 1st, George Washington is writing that Common Sense is changing the minds in men’s minds. In other words, it’s having a profound effect.
Bob Zadek: And just to build on that a tiny bit, up until then, the revolutionary fervor was primarily among what we would call today the elite. The elite who had a lot of money involved and they were paying—they feared the loss of their property to taxes. So the average—and I won’t say American because there was no such thing—but the average resident of the colonies didn’t care that much. They just wanted to make it through the week.
Skipper Young: Absolutely. And Thomas Paine made the revolution or the concept matter to them. And without them, there would never have been the popular support and the enlistments necessary. Absolutely. And I mean, it was also regional where New England was a hotbed of it, and New York and New Jersey, the vast majority I think of those people were in favor of staying with Britain. In other words, so that—and they also didn’t think of themselves as members of United States. “I’m a resident of Virginia” or “I’m a resident of Massachusetts,” okay? I mean, that’s—and my relationship is to England, it’s not to these other colonies. And Tom’s little pamphlet just literally changed the world.
Bob Zadek: And as you point out in your book, a little-known fact, there were royalties earned by, in fact, a lot of royalties earned by Tom Paine through the popularity of his book. And he didn’t accept any of them.
Skipper Young: Not one penny. And any that he got, he gave to the Continental Army that George Washington was heading up prior to July 4th. In other words, because he was already in Massachusetts with the Bunker Hill issue and that type of thing, in other words, surrounding the British and then on his way to New York right before.
Adam Smith and the Birth of Economics [11:15]
Bob Zadek: So 1776 gives us Common Sense, Tom Paine. It makes Tom Paine very important. But as if that would be enough to make 1776 an important year, but the story is only begun.
Skipper Young: That’s right. But the most amazing thing at the very end of Common Sense, Tom makes this amazing prediction. And the prediction is: “The birthday of a new world is at hand.” Now, you can say a hundred different ways a new world’s going to be born. I’m pretty sure we could all start writing—there must be—but that’s the way he said it, all right? And what I am now claiming in my book is that 1776 is the double magic year because if just one new world was born in 1776, it would make 1776 a magic year. But not one, but two new worlds are born in 25 weeks. Because—and the audience is dying to know what the other one was. I hope you’re—well, I hope you’re not dying, but I hope you’re eager. Okay. A little hyperbole, Skipper. That’s right. Because July 4th was the second time a new world—I don’t think anyone would doubt that the beginning of our nation in the Western Hemisphere, this is the birth of a new world, all right?
But the first new world was born on the 9th of March when a man named Adam Smith published The Wealth of Nations, which was the first great economics book. Adam Smith is like George Washington is the founder of our nation, Adam Smith is the founder of economics. And it is the story of capitalism. Now, I have to be careful. Adam Smith didn’t invent capitalism because I’m not sure—I think it’s innate in us, if you want to know the truth. I think Bob will probably agree.
Bob Zadek: And we’ll discuss that today. We’ll discuss that more before the show is over.
Skipper Young: Right. But in other words, but he saw it, all right? He—and he saw how governments could change or actually lessen their activities, I think, let people be freer. And the end result would be—and this is absolutely the truth—prior to his book, if I got richer, it usually meant someone else got poorer. If a nation got richer, it usually meant another nation got poorer. It was close to a zero-sum game.
Bob Zadek: In other words, wealth wasn’t being created, it was just moving around.
Skipper Young: That’s right. I mean, now you could discover gold or something, but once it was discovered, it didn’t bring you anything more than the wealth that you gained from that gold.
Bob Zadek: And the phrase we use today is zero-sum game. The socialists and other people who don’t subscribe to a free market truly believe and behave as if wealth is finite and the political system has to move a finite amount of wealth around to those who, as a political matter, deserve it. And in fact, when government today moves money around, it simply makes a decision that somebody else deserves the fruits of your labors more than you do. Adam Smith saw it differently. He didn’t see any need to take wealth from one and give it to another. He believed that if humans are left alone, they will create wealth. So you can get wealth into somebody who doesn’t have it, not by taking it from somebody else, but by allowing it to be created. Bingo. It all then works.
Skipper Young: And for the first time, he showed you how the nations of the world and the people living in those nations could become ever wealthier. And I mean, this is—I mean, it’s almost inconceivable that it was, I believe, something—maybe there were some centuries where the standard of living rose 1%. In other words, it was basically flat. I mean, you would have plagues and things which would maybe after the deaths would help increase standards of living briefly and then there’d be more children and you’d be right back where you began. And suddenly, here is the beginning of a brand new world of ever-greater wealth. And I don’t know if there’s no one, I don’t think in the world, has ever given the world greater wealth than Adam Smith. And with greater wealth, you gain greater health. I mean—and this is a man that a lot of people, I don’t think, give the proper respect to, and certainly our children don’t even know the man’s name.
Bob Zadek: And the Founders gave him great respect, didn’t they?
Skipper Young: I believe that every one of the Founders that I mention in my book had a copy of his book. As an example, George Washington’s copy is at William and Mary’s University’s library. Thomas Jefferson’s was given or sold to the Library of Congress, and it’s now in the Library of Congress. Alexander Hamilton wrote about it, studied it, argued about it, because much of his thinking was in the capitalistic area because he was our first Secretary of the Treasury. Yes, to the best of my knowledge. And Ben Franklin, the co-star of my book, many people believe he helped edit it, and he certainly had input into it and he greatly affected Adam and his thinking. And the magic about America, one of the things that America gave Adam was, we were the proof that the ideas he was putting there were valid and true, and in my mind, that were wisdom.
The Unifying Concept: Freedom [16:18]
Bob Zadek: And what Adam Smith—as I said in my introduction to today’s show—what does Adam Smith’s economic system have in common with the political system that our Founders gave to us? What did Adam Smith see as the potential? What is the unifying concept? And the unifying concept is simply freedom. Adam Smith’s economic system was a system where humans interacted with one another, cooperated, entered into voluntary arrangements where they both benefited, and it was voluntary. In other words, it was economic interactions uncontrolled by government. It was freedom, the quote “free market.” And so Adam Smith saw in America an atmosphere of respect for freedom, a tabula rasa. It’s a new starting point, a new horizon, a shining city on the hill, if you will. He said, here is a chance, here is the hope. And so Adam Smith, whose economic system is predicated upon voluntary exchanges, freedom, it merges with an economic system also predicated on freedom. And bingo, here we have it.
So the lesson that jumps off the pages of Skipper’s book that I didn’t put together—perhaps I should have, but I didn’t until I read this wonderful book—is that the common denominator is freedom. And to the extent that freedom is co-opted by government, which is the absence of freedom, removing of freedom, then we suffer economically as well as politically and quality of life.
This is Bob Zadek. I’m talking with Skipper Young. Skipper has written a must-read book called The Wisdom of 76, where Skipper discusses the significance of the year 1776. It was the year in which Adam Smith’s Wealth of Nations was published, which the Founders gobbled up, read, and learned from. It was the year of the Declaration of Independence and the year of the writing of Common Sense. Those events are, of course, greatly intertwined. 800-345-5639 to join my conversation with Skipper.
Skipper Young’s Background and the Origin of the Book [19:11]
Bob Zadek: Now, Skipper, you have an economics background. In fact, your background, if I were to share it with our listeners, it would take up the rest of the show. And frankly, I have to exercise great self-control because it is—your life is itself a wonderful story. But Skipper, that’s for another show when I do a Skipper Young retrospective or something and we discuss your life. But today we’re discussing the book. And what is there—here you are being a sailor or an economics professor or getting your PhD in economics or whatever other interesting thing you’re doing in your fabulous life. And all of a sudden you decide you want to be an author. Tell us about how you got to write The Wisdom of 76 and what you hope to accomplish other than to share something that you know with other people.
Skipper Young: Well, I want to correct one thing. I think one of the primary reasons I wrote this book is because I didn’t get a PhD in economics. I couldn’t write the dissertation. And I think 45 years later, this is my PhD dissertation, maybe, because it’s for young Americans and grown-ups alike.
What happened was—I did have a very long—in a nutshell, I taught econ—I have graduate degrees in economics and I taught econ in Boston area colleges. I was an investment advisor managing celebrity equity retirement investments in New York. I was then an advertising executive, a direct response executive in Washington, D.C. NASDAQ, that stock exchange, was one of my clients. And then at the age of 49, I moved to San Francisco and became a 49er. And five years later, I opened—I co-founded the cabaret restaurant Asia SF.
And before I did that, when I moved to San Francisco initially, I did some research on my proprietary equity screening model that I had used many years before. And the results were statistically significant, but not good enough, I don’t think, to find money to manage. And I started thinking about it and realizing how amazing index funds were. And this is now 1994, let’s say.
Index Funds and “All Street” [21:52]
Bob Zadek: Now, our listeners might know about index funds vaguely, but just tell us in a—we have to go to break in about three minutes. What is an index fund and what’s special about that as compared to other types of investments?
Skipper Young: Thank you for asking. Now, there are a million different funds now called index funds. But once upon a time, and what primarily they are, is it is a very, very cost-effective way of owning, as an example, a total market index fund means you own just the right amount of every one of the 5,000-plus companies that are American companies, as an example. All right? And so you can own it for like—eight-tenths of 1%. I mean, you’re not paying a lot of money for people to manage money.
Bob Zadek: Because nobody is making a decision to buy and sell.
Skipper Young: You’re buying and holding forever. Exactly. And it’s perfectly realigns every day. In other words—and so it is a most efficient way of, in my mind, of owning the wealth of our nation, is what I end up calling it. It’s owning our great American economy. In other words, you can buy a house, but you can’t own your share of all the real estate in America. And you can’t buy people anymore, okay? So you can own yourself, but nobody else. But what you can do is own your share of all of the capitalistic—the companies in America that have ticker symbols, that have capital letters that you can buy, which is how I talk about it in the book. And so I’d studied this and I tried to write a grown-up book about index fund investing. And I wrote a hundred pages of it and realized, oh god, you write in the passive voice, you’re not a real expert, there’s other people that are smarter than you are. But I did have this idea about wisdom in it that I couldn’t get out of my mind.
And so I started operating—we built this restaurant up and it distracted me. But I would walk around the restaurant and as a joke, I would tell customers, “And I’m writing a children’s book about index fund investing.” Because I realized that this little concept really worked for 10-year-olds, let’s say, that I had invented. And that it seemed so obvious and so easy, and of course they’d laugh—a children’s book on index funds, okay? Well, that’s what this started out as being.
And then because America is so magic, I kept discovering and discovering and discovering. I didn’t realize that The Wealth of Nations was written in 1776. I think it was going to be called Saving Wisdom.
Bob Zadek: We have 30 seconds to go, Skipper. I just want to go to break right now. Sorry to interrupt you. I hate when I have to do this. This is Bob Zadek. I’m talking with Skipper Young, who has just written a children’s book for grown-ups called The Wisdom of 76. It is a combination of economic history, American history, and very sagacious investing advice. 800-345-5639. Questions for Skipper. We’ll be back in 60 really short seconds.
The Invisible Hand vs. The Visible Hand [25:05]
Bob Zadek: Welcome back to the Bob Zadek Show, the only live libertarian talk radio show on the air all weekend. Proudly and always the show of ideas, not attitude. Thanks so much for listening. 800-345-5639 to join my conversation with Skipper Young, who has written a children’s book for grown-ups called The Wisdom of 76: Young America’s Way for Wealth. It is a wonderful book that combines rich anecdotes about American history with wonderful insights into free market capitalism and the wisdom of Adam Smith with investing advice. It is a great read, the perfect gift for everybody younger than 40 in your life. It is a children’s book for grown-ups.
Skipper, thank you so much for joining us on the show. Now, in your book, you remind us that Adam Smith, I guess, coined the phrase “the invisible hand.” I think you mention it only once in your book, or Adam Smith mentions it once in his book, that’s correct. Only once. But it is a very, very important concept. What did he mean and what do we mean today by the invisible hand? Because that is the secret sauce of free market capitalism.
Skipper Young: Yes, I believe—in my mind, I mean, they’re the two most magic words in the English language. Because what he is basically saying is, just let people alone. Let them do what they truly desire to do in commerce and other things. And this invisible hand will lead them in a path that makes them better, makes them wealthier, but makes others wealthier. I mean, the magic of index investing or anything else you’re doing is you don’t just make yourself wealthier by investing and buying and reinvesting the dividends, you help make others wealthier. You help create jobs. In other words, that this is not a zero-sum game. And the key to it is this invisible hand just leads you without knowing your free choice is the choice that leads to ever-greater wealth.
Bob Zadek: And I guess a bit more specifically, while your statement is true that it’s your free choice, but the invisible hand is the collective effect of everybody’s free choice—little free choice, private, unimportant to the world decision. But the collective effect of all of these individual thoughtful decisions becomes the invisible hand that raises all boats in the system. And that’s to be compared with another economic system, like any centrally managed system such as socialism or communism or fascism, any of the centrally controlled systems where there’s a visible hand and it is cloaked in chainmail. Because the visible hand of government managing the economy can never be as wise as the collective invisible hand of millions of people, each making decisions for their own self-interest. That how you can have millions of people making a decision about only what’s good for them, and the collective effect is that it is good for everybody. And that’s the magic of the invisible hand, a phrase that Skipper says is perhaps in his mind the two most important words of the English language. And it appears only one time in 900 pages of heavy reading.
Skipper Young: In 900 pages, The Wealth of Nations is a slog. Oh my goodness, is it a slog. It is very dense. But those two words appear only once, and they are the whole—a cornerstone of Adam Smith’s writing.
The Constitution as a Petri Dish for Freedom [30:09]
Bob Zadek: And that’s—so what—when Skipper was talking, what you’ve heard is Skipper mentioned that when you make a selfish decision motivated purely by self-interest, and so long as everybody else does the same thing, we’re all the better off. It sounds in a way counterintuitive, but as Adam Smith teaches us, it is the opposite—it’s intuitive. It results in a better world for us all.
So Skipper, Adam Smith writes The Wealth of Nations in March 9th—published March 9th of 76. It of course becomes widely read, it finds its way to America, the Founders read it. And although the Founders did not—they were clearly motivated by his thinking, they accepted what he wrote, they knew it perhaps themselves. And the Constitution, as I said, has nothing to say about an economic system. But it does provide the petri dish, which is the freedom in which a free market grows. And the way that the Constitution, I dare say, is Smithian in its approach is the Smithian—the Constitution says to the federal government, “Here are the only things you can do.” And by not empowering the government to manage the economy, it creates, as I said, the petri dish. And now if we have an unmanaged economy, that is automatically capitalism. So the Founders, in limiting federal powers, in effect created the world that Adam Smith envisioned.
Skipper Young: And I think not just created, because I think that most of them were living it. In other words, even before they got the book, if they were reading this book, what this book was saying is what they were living. We had a government where at the state level that was not as restrictive as anywhere else in the world. I mean, that we were Adam’s inspiration nation even before we became a nation. That talking to Ben Franklin and studying America gave Adam the proof that what he was saying was true, and in my mind, that were wisdom.
The Birth of the New York Stock Exchange [34:29]
Bob Zadek: And so Adam Smith, of course, never came to the US. His only contact with the Founders, I think, was Benjamin Franklin.
Skipper Young: And he may have known Tom Paine, but that’s iffy, we’re not sure.
Bob Zadek: To—and I guess Tom Paine qualifies as a Founder although he was an immigrant. He came to the US, as they said, as a failure and became—wrote Common Sense and then wrote Crisis.
Skipper Young: And then went and did the French Revolution.
Bob Zadek: And then did the French Revolution, and then wrote a book castigating organized religion, which he then fell into disfavor. Oh boy. He was not welcomed back. In fact, when he was buried, he was buried in Mount Vernon, New York, if I’m not mistaken, and his grave was robbed. No one knows where he is buried now because he was put into such disfavor. Washington brought him back, allowed him to come back shortly before Washington died, he invited him back. But he was in disfavor because he trashed organized religion, and you just didn’t do that in colonial America.
Skipper Young: They claimed he was an atheist. He wasn’t an atheist, but he was not in favor of organized religion.
Bob Zadek: Now, so Adam Smith creates or posits that a centrally managed system cannot work, but rather a free market system is the way to go. And then we have around the founding, we then have the creation in this, as I said, in this very fertile environment of economic freedom, it was inevitable, I guess. But then looking at the history of the capital markets, we then have the creation of this great story of the creation of the New York Stock Exchange. And tell us about—and it was quite natural that the Stock Exchange be created in the comfortable environment of a free market. But tell us about that and how that fits into the story.
Skipper Young: Oh, well, because I’m talking about index investing, etc., and of course you’d have to have a stock market to buy stock to create these funds. That on the 300th anniversary of Columbus discovering America, or at least that year, in 1792, there were 24 gentlemen who traded stock on Wall Street under a buttonwood tree. They literally would meet under the tree. I think until 1830 they met six days a week, even on Saturdays. But—and one day, I believe they only traded 22 shares on a some silly Saturday in a really bad year. But they met under this tree and they would trade securities. And they finally decided to make it official, and the 24 gentlemen signed the Buttonwood Agreement. And this ends up being—the tree was at 68 Wall Street, and that’s where the New York Stock Exchange is today. And what I—and the secret of owning a total market index fund, the chapter title that I tell you about the birth of Wall Street, I call it “All Street.” Because that’s what you really own when you own an American total market index fund. When you own the wealth of our nation, when you own our one dollar—that’s the W-O-N from Wealth of Nations—when you own our one dollar, you own every one of our companies in just the right amount, and that’s what the Stock Exchange gives you. And you end up owning All Street. Wall Street is your street.
A Children’s Book for Grown-ups [36:20]
Bob Zadek: Your book is full of—and it was such fun to read—is full of all of these connections of words and pieces of words: Wall Street, All Street, WON, capital. The book is just—if you like words and the interrelation of words and numbers and numerology, your book is—it’s a small-ish book, but it is every page, it is such a seductive read. I sat down to read it, and about three days ago when I got a draft of the book, I sat down to read it, and I had a few minutes, I figured I’ll just read—get the hang of the book and I’ll just read 10 or 20 pages. I couldn’t stop. It was like a controlled substance. I couldn’t stop. And so the book is—it’s a wonderful read. And as I said, the book is this amazing book that’s a children’s book written for grown-ups. But yet, I think if the child is precocious enough, it could—that child would also get a huge benefit.
Now, the book is relatively short. So I guess you knocked it off what, in an afternoon or two? Is that right?
Skipper Young: Yes, an afternoon of eight years. You were waiting on line at the Safeway and just wrote a book. Well, I thought that’s what I would do. In other words, that eight years ago I flew to Salt Lake City to see my four-year-old goddaughter. And the first night we were there, I was with some dear friends, and I said I wanted to do this. My mother had just died, and maybe I wanted to write this book. And the next day I was playing fish with my goddaughter and a dear friend, the smartest person I know. And my goddaughter was smart, and we’re playing fish and she’s asking me for cards that Roxanne has, not me. And the next day Roxanne says, “You know, Skip, you ought to write that book because you have a way with children. She knew that you had the cards, but she wanted to interact with you.” And I came back to San Francisco and I said, “Don’t say it, do it.” And I sit down and I write the book. And I’ve got about six pages and I’m totally done. There is no book.
And the most amazing thing happened when I went out to Salt Lake City was just when Oprah’s and a woman named Byrne had written a book called The Secret. And it was this huge popular book about—I think it’s fair to say—what do you really want in life? If you can picture it, it will come. And I’ve written the book and it’s six pages, there’s no book. I mean, I’m doomed. Okay. But I didn’t panic. And about two weeks later, as I’m shutting the refrigerator door, the secret comes to me. And the secret is: it’s all about capital letters. Which is an odd thing to say that this is the basis of the book, but that allowed me to talk about stocks to children. I mean, ticker symbols are capital letters. And what is capital? That’s your money that you want to make more money with.
And then one thing led to another. We’re still a long way from a book. But what I can’t believe is how magic our country is. I can’t tell you the number of times that I’ve said, “This story is too good, it can’t possibly be true.” But of course it’s true, it’s America. And I mean, this is not trite. That I don’t suddenly—I’m talking about capitalism and I’m talking about index funds, and suddenly, here comes—my gosh, The Wealth of Nations was written in 1776. I discover this. It takes another year and I’m in the bank one day. The whole basis of this book for a child is: you’re going to take your one dollar and you’re going to turn it into a WON dollar, a Wealth of Nations dollar, and you’re going to hold on to it until it doubles, until it becomes two. Well, that means it becomes a two-dollar bill. And I get the back of a two-dollar bill and my god, there’s all of our founding fathers at the presentation of the Declaration of Independence. I mean, this is so perfect I can’t believe it. So now I’ve got more tie-ins and I start doing research and I find out they all studied the book. I find out how important Ben Franklin is to Adam Smith. And finally, it took so long because there were so many stories to slowly uncover about this great country.
The July 4th Connection [41:03]
Skipper Young: I just read just one example. The second and third presidents of the United States, John Adams and Thomas Jefferson, two key people in the writing of the Declaration, both died 50 years to the day after the signing of the Declaration of Independence. Not one of them, but both died on July 4th, 1826.
Bob Zadek: Who died first?
Skipper Young: Well, that was great. Jefferson did, but supposedly later in the day when Adams is dying, Adams’ last words are, “Jefferson survives.” But actually he hadn’t, because he had died earlier in the day. But we’re not done yet. The fifth president, Monroe, dies five years later on the 4th of July. Now, I’m getting a little worried about 4th of July since that’s two days before my actual birthday, okay? But anyway, I mean, this is just one story after another that how just totally magic this country is. And what a great story it is. And I was able to—it was also very difficult. I was hard to let go because this is for young people, so it has to be good enough for young people, but young people aren’t going to want to read this, they’re not going to want to buy this. So it’s got to be interesting enough for grown-ups, because you’re my market. I mean, and I’m hoping this is not a story that our schools will tell. I mean, you are the only people that can possibly share this wisdom, if that’s what it is, with young Americans.
Bob Zadek: Now, you mentioned the death on the same day, the 50th anniversary of the publication of the Declaration of Independence. Not quite the signing, the signing was on the second. Right. Well, no, that’s not—well, no. It was adopted on the second, signed on the fourth. It actually was signed by Hancock, yeah. And—but when Adams died and his last words were—supposedly, and I think this is true—“Jefferson survives.” The speculation was they were rivals, of course, in the election of 1800 and they were, although close friends during the founding years, they never spoke to each other after 1800 when Adams lost to Jefferson. And they didn’t speak to each other for 12 years. Right. Until Benjamin Rush, a doctor who was a mutual friend in Philadelphia, induced Adams to write a letter to Jefferson. And then they ended up very close at the end. 157 letters back and forth over a 12-year period, from 1812 to 1826. But the speculation is when Adams said, excuse me, “Jefferson survives,” some say that he felt he could die because the country was in good hands, Jefferson was still around. And others think it was more “Crust, he outlived me,” and he beat me, even though Adams was the older of the two, by much. But that’s just an interesting aside. They died great friends, and their letters back and forth, 157 letters, have been published, of course. And they are wonderful reading as both men were writing for history. Absolutely, they were by then. And they were giving their own doctored version of their role. So they were doing a lot of PR work in writing back and forth. Interesting aside, just because you mentioned Jefferson and Adams dying on the same day.
The Buttonwood Agreement and “All Street” [44:45]
Bob Zadek: So we have the stock market formed, I guess in what, 1792? 1792, the stock market was formed in this environment. And from those 24—and they signed an agreement, didn’t they? Wasn’t it—
Skipper Young: Yes, it’s called—I have it in my book, you’ll see it, the 24 signatures. And they basically are agreeing that this is the standards we’re going to do, in other words, to make this more institutionalized. They hadn’t moved indoors yet, they were still under the tree. Okay. But yeah, and this was the beginning and it’s—I mean, and to this day, you buy memberships just like those 24 members of the Buttonwood Agreement. You’re basically buying their membership 200 years later.
Bob Zadek: Now, you wrote the book in the style of a children’s book, and it works. But yet for grown-ups. What is—I guess, I’ve never written a book, but I suppose that authors who devote so much time, because it has to be profoundly time-consuming, you had to have in part a goal. “Here’s what I hope, if I’ve done a good job,” you’re saying to yourself, “readers of my book will take away the following.” What do you hope they will take away? You weren’t just writing as a vanity exercise for yourself. You had a much deeper goal. So what is—what is your hope that somebody will put aside your book having read it, and how will they be, in your hope, better than before they read the book?
Goals for the Book [46:26]
Skipper Young: I think I have a number of answers to that. If you’re talking about a grown-up, someone of our age or younger, but still grown-up—there’s nobody older. I was going to say. One of the things I think I’m hoping for is that I do believe that index investing is a great way to grow wealth. All right? End of story. And I believe that once you see what I’m saying index funds are, I think you will be braver and calmer no matter what the stock market’s doing. So that I know what I really own now. I know how great America is, I know what our track record is, and I know that grown-ups are crazy and capital letters play with grown-ups’ emotions and the stock market can fall 50%, etc. But this is America I’m talking about, and I think you will be more comfortable holding in terrible times. That’s a—maybe that’s minor.
Because I think the more—the second thing I think, that you’re going to have a greater appreciation of our country while your country appreciates in value. I hope. The word again, appreciate. Thank you. Yes. I think more important, however, I was writing for my goddaughter. I mean, this was a story—unfortunately, she’s now 47, no, but—but I mean, she was this imaginary eight or nine-year-old, if that makes sense. And what I was hoping there was, I’m really worried about history being taught in our schools because it’s teaching to the test in English and in math, and history gets short shrift, I think. And as an example, I think on the back of the paperback it’s going to say: “This is what 1776 investing is. It’s your Declaration, Wealth of Nation, Common Sense way to wealth.”
Bob Zadek: Oh, what a wonderful use of words.
Skipper Young: Thank you. And if they just learned that, think what they’d know about 1776. All of these great things, and they’d know how to be wealthy when they get older.
Decentralized Wisdom [48:47]
Bob Zadek: You know, as you describe index investing, what occurred to me is I mentioned about 20 minutes ago how Adam Smith proved—and history has shown him right—that a centrally managed system is inferior in its decision-making ability to the unmanaged system, which is really not unmanaged, but the management is at the micro level. Every individual makes their own decision and the collective decision is better for everybody. And it’s efficient. You’re voluntarily doing this. But that’s what index investing is. Index investing means you will prosper based upon the collective wisdom of the movement of the entire stock market, which represents the collective decision of all of the investors. There is no centrally managed—not government, but centrally managed fund. There’s no wise man, because nobody is smart enough. Just like there’s no government official who is smart enough to make my decisions. Well, you are saying if you buy an index fund, you are saying, “I defer to the collective wisdom of a whole lot of individuals acting in their self-interest rather than to the decisions of a fund manager.” It’s the same anti-centralized management that—and that’s what makes index fund so interesting and so small-d democratic. It’s very Adam Smithian.
Skipper Young: Bob, this is new—yes, I don’t think I’ve ever seen it that way. Thank you. Yeah, it’s believing—it’s owning the invisible hand is what you’re owning.
Bob Zadek: It’s exactly right. That’s what it is. Now, we have—I hate it, I hate it, but we have only a minute to go. I must share how we met. Your nightclub, Asia SF, is a wonderful nightclub. It is—tell us about what OpenTable has just recognized your club in San Francisco.
Skipper Young: After 18 years—imagine staying in business 18 years—OpenTable, the restaurant reservation service, just announced based upon 5 million customers and I don’t know how many hundreds of thousands of reviews that we are one of the 100 hottest restaurants in America. And we are the only one in San Francisco. Now there’s one in Oakland, etc., but we are so proud of this and it is fun. It’s a celebration.
Bob Zadek: It is a fun evening. I pride myself on never going to hot restaurants, but I loved Asia SF. Please enjoy the restaurant, enjoy Skipper’s book, and just enjoy Skipper as I have. Thank you so much for listening. I’ll be back next Sunday for another hour of libertarian thought and opinion. Have a nice Easter Sunday.