Renowned author, physiologist, evolutionary biologist and bio geographer, Dr. Jared Diamond, joins Jason Hartman for a discussion of his newest book, The World Until Yesterday. Dr. Diamond’s unique background has shaped his integrated version of human history. He posits that success – and failure – depends on how well societies adapt to their changing environment.
Dr. Diamond is also a medical researcher and professor of physiology at the UCLA School of Medicine. His book “Guns, Germs and Steel” won a Pulitzer Prize and “The Third Chimpanzee” was a best-selling award winner. Elected to the American Academy of Arts and Sciences, the National Academy of Sciences and the American Philosophical Society, Professor Diamond is a MacArthur Fellow who has published over 200 articles in Discover, Natural History, Nature and Geo magazines.
In his books Guns, Germs and Steel and Collapse (and the popular PBS and National Geographic documentaries they inspired), big-picture scholar Jared Diamond explores civilizations and why they all seem to fall. Now in his latest book, The World Until Yesterday, Diamond examines the traditional societies of New Guinea — and discovers that modern civilization is only our latest solution to survival.
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ANNOUNCER: Welcome to Creating Wealth with Jason Hartman! During this program Jason is going to tell you some really exciting things that you probably haven’t thought of before, and a new slant on investing: fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self-made multi-millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it! And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
JASON HARTMAN: Welcome to the Creating Wealth Show. This is your host, Jason Hartman, and we are now at episode number three hundred and forty. Thanks so much for joining us today. Today, as in our longstanding tradition on the Creating Wealth Show, this is a 10th episode, and we will have something that is off topic, that is of general interest, and today we have the very famous Jared Diamond on the show. Now, you’ve probably heard his name. he is the author of many books, including The World Until Yesterday, Collapse, Guns, Germs, and Steel, The Third Chimpanzee, Why Is Sex Fun—there’s a title for you. And a whole bunch of other books. So, we have Jared Diamond coming up here is just a few minutes. But first I’ve got Steve here to talk about a couple of economic, financial, and real estate things that I think will be important to you, and then we’ll get to Jared Diamond. Steve, welcome. How are you?
STEVE: I’m doing well! I was just laughing at those book names. I won’t say which book, but if you can’t figure that part out on your own, I think you’re just missing the point entirely.
JASON HARTMAN: [LAUGHTER]. There you go. Well, we’ll get to him. And by the way, I have to say, I find Jared Diamond’s work very interesting. I’ve been following him for several years now, and know about his work, and he’s a professor of geography at UCLA. And you know, he’s a scientist. He began a scientific career in physiology, and expanded into evolutionary biology, and biogeology, or—I’m sorry, biogeography, I should say. Sorry, I misread that. And he’s been elected to the National Academy of Sciences. It’s really super-interesting stuff. But I gotta tell you, on a future episode when I have time to talk about it, I’m going to blow a big hole in one of his major theories. I can’t remember if he talked about this today, because I recorded this a while back, his segment here. But stay tuned for a future episode, because I don’t know if anybody’s thought about one of his very major theories in the way I’ve thought about it. Maybe I’m the original in this way. Maybe I’m not. I’m not sure, but I think I poked a big hole in one of his theories. So…
STEVE: Well, let’s see.
JASON HARTMAN: Don’t let me forget that, because we’ve gotta talk about that in the future. But for this episode, we’ve got a few things on the agenda, and you know, we tend to go a little long, so let’s get right into it, Steve.
STEVE: We better giddyup, yeah. We just got back from the Equity Trust event in Florida.
JASON HARTMAN: Just yesterday. Or I’m sorry, Sunday night. It’s Tuesday already.
STEVE: Well, I got back on Monday, because of my layover in Lost Wages.
JASON HARTMAN: Ah, Lost Wages, Nevada, the place that you should be very careful if you consider it a real estate investment. You know, we haven’t recommended Las Vegas in quite a while, and you should definitely not be gambling, because gambling is a loser’s game.
STEVE: Well, we found some gamblers at the event, and I think we’ll get to that in just a minute. I was really impressed.
JASON HARTMAN: Yeah, let’s talk about where we were. So, this is the Equity Trust Equity University event that they have annually. And there were about 500 people there, so, it was in Orlando, Florida. We flew out on Thursday, and I met you out there—you picked me up in a rather impressive rental car. What was that rental car? I was impressed, I gotta tell you.
STEVE: Well, I show up, and they just start giving me awesome cars. But, it—you’ll be shocked to know that it was a brand new Chevy Impala.
JASON HARTMAN: I didn’t think Americans made very good cars.
STEVE: It’s not bad for a government car.
JASON HARTMAN: Yeah, government motors—you mean GM?
STEVE: Yeah, we liked it. Unfortunately we drove it to the hotel and parked it for three and a half days and then drove it to the airport after that.
JASON HARTMAN: That wasn’t very much use of it. But that was a really nice car, that Chevy Impala. I was pretty impressed. I wonder how much those things cost? I mean, that was like—had a beautiful interior, it drove very well—
STEVE: Yeah, it must have been the very top model, because I’m not used to being inside of those. And that’s good, because cops use Chevy Impalas.
JASON HARTMAN: I was pretty impressed. I thought I was getting into a Mercedes S-Class or something. I was surprised. But yeah, so Equity Trust is the largest self-directed IRA company in the nation, and get these. These are some amazing statistics you’re about to hear, okay? So they have about $13 billion, with a ‘b,’ in—I don’t want to say under management, because they don’t manage it, but in their self-directed IRA accounts, otherwise known as SDIRAs, self-directed IRAs, which we highly recommend, by the way. Because you don’t have to fall the victim—I mean, you don’t have to be one of the sheeople that fall victim to the Wall Street type investments. You can really plan your future, and you’ll be smarter about it than anybody else, because of course it’s your money, so you’re going to be more careful than the guy at Ameriprise, Merrill Lynch, or whatever the brokerage house is that you go to.
So you know, with self-directed IRAs, of course we’ve done many shows on this—people can invest in real estate, they can invest in notes or trust deeds or mortgages and be a private lender, a hard money lender, and other things too—tax liens, which I told the story of how I think I got ripped off, and amazingly, those guys were at that show! It’s funny, because one of them, I saw him walking around, and you know, he’s a nice guy. I hope this guy didn’t rip me off, because he seems like kind of a jolly nice guy. And I saw him, and you know, he was kind of walking near a booth. And I said, “Hi Don!” And he came over, and that was Don Fullman with PIP West, and he came over and Steve, you weren’t at the booth this time. Or maybe you were, but you were talking to someone else. But he came up to me, shook my hand, I said hi, how you doing? I was very cordial. And he started sweating profusely. Like, he had a guilty conscience and knew he did something bad. It was—remember how cold it was in there too? That room couldn’t have been more than 67 degrees. I mean, it was chilly. I was getting a cold. And everybody else was complaining about it—
STEVE: You had to be working to sweat in that room.
JASON HARTMAN: Totally.
STEVE: Or be under some serious psychological stress, for whatever reason.
JASON HARTMAN: Yeah, yeah. And so I said to him, I said, hey, is Charles Sells going to say hello to me? You know, I’ve never met him. Didn’t talk to me all weekend. You know, I didn’t approach him, because I didn’t wanna get in an argument with the guy. But yeah, Don was sweating like whoa. I thought wow, he was sweating like someone who got his hand caught in the cookie jar [LAUGHTER]. Listen folks, I’m going to let you know more about this, because that whole tax lien thing was pretty interesting to me. I had him on a show a long time ago, and he actually spoke at our very first Masters event many years ago. And you know, I liked the idea, but I gotta tell you, I think these guys just—they just snake me. So, I’m not happy about that at all.
STEVE: Well, the body language would back you up. But we’ll have to see. The jury’s still out.
JASON HARTMAN: The jury is out. We will see. More to come on that. But yeah, so they’ve got $13 billion in these self-directed IRA accounts. They’re the biggest custodian, or I guess, administrator, of self-directed IRAs in the nation, and what’s interesting is the stats we heard. There’s about $60 billion total in self-directed IRAs, so they’ve got almost 25% of the market, which is huge. I mean, and I think they said that company has about 500 employees. Of course, their competitors would be the people we’ve had on the show—Entrust, and Accuplan, and you know, there are many others out there too. But here’s the amazing number, the really amazing number. Only 2% of IRA money is self-directed, Steve! So that means—talk about a growth industry! I mean, if they can convince the other 98% of the people to become self-directed, which not all of them actually can, because some of them have restrictions that won’t allow them to, but I mean, that’s like, trillions of dollars, right? I haven’t done the math on it, because you’ve gotta reverse into it, but that’s a lot of money, okay? Who cares. It’s just a lot of money. And it is amazing—there’s all this talk about the government—and this used to be like, wacko tinfoil hat conspiracy theory type stuff—but now it’s becoming very much more mainstream. I mean, it’s really becoming much more mainstream.
About the government taking over peoples’ retirement plans, because look, let’s just face it, folks. Our government is broke. They’re looking for money. They try to get it through taxation. They try to get it through inflation, which is the liar and the thief—as I’ve said many times, the invisible tax that destroys your wealth, that pickpockets you, that takes the savings out of your savings account, that reduces the value of your brokerage account. But, it also thankfully reduces the value of your debt, which is what we call inflation-induced debt destruction, the thing we so love, because that makes real estate investors—that puts them in a very enviable position, and makes them far more wealthy.
It’s really the hidden wealth creator in the income property investment game. And then of course, the income property is pretty much indexed to inflation. Why? Well, just historically, history-wise, it typically appreciates a little bit faster than the consumer price index. And, what’s it made of? Commodities! And commodities, all of those, that basket of commodities, the ingredients of a house—copper wire, lumber, petroleum products, concrete, glass, steel, etcetera—they’re very indexed to inflation. They’re traded globally, they’re not attached to any one currency like the dollar. Which is wonderful. They’re a real thing that humans need around the world, and will continue to need. So that’s fantastic. But, the self-directed IRA thing—it’s pretty refreshing to see so many people like we met at this trade show and this convention, taking advantage of this, isn’t it?
STEVE: Yeah, it’s really cool. And these people were very savvy, educated investors. They’d come up to our table, or we’d chat with them in the main conference room, and they really knew the score. Message resonated with them. I think it’s because people are starting to realize that it’s not, what you were talking about earlier, it’s not a tinfoil hat deal where the government might have to dip into the private sector even though when you talk about how much money there is in retirement plans, even if you reversed into it. We’re obviously somewhere in the trillions. Well, what’s the national—what’s the deficit every year?
JASON HARTMAN: Yeah, so that could solve a lot of problems for the government, if they—if there’s some sort of crisis, and the government comes along and says, hey, we gotta make sure we protect you little people, you hoi polloi, you.
STEVE: Yeah, right.
JASON HARTMAN: And the masses, and so, we’re going to nationalize your retirement plans, and the low-hanging fruit is gonna be all the retirement plans that are not self-directed. It’s gonna be all the brokerage accounts, and just the simple, normal stuff that’s out there, that the sheeople do. The people that aren’t really thinking, that aren’t really paying attention, or maybe they just don’t really have the choice or the option to self-direct. And I tell you, they could really, really suffer pretty badly.
STEVE: Yeah, and the self-directed IRA people are not the low-hanging fruit. You need to get a crane and a pair of pliers to get up to them. You have to really want it.
JASON HARTMAN: That’s too hard, because all the assets in the self-directed IRAs are so fragmented! You’ve got a property here in one jurisdiction in one state, you got another property in another state, you got a couple of notes or mortgages over here that you’ve invested in, and you’re the lender on, your IRA is the lender on. So, that’s just too hard. The government can’t deal with all of that fragmentation.
STEVE: They can’t, they can’t. And I was kind of saying that it’s not very far-fetched, because we already have two things happening here. Somewhat of a precedent, that happened in Cyprus earlier this year. It wasn’t retirement accounts per se—I’m sure there were some, but—they went to the private banks, and they put caps on what people could take out of the country. They were really going to make a move on that kind of a thing. And number two, we were talking to Lisa Taylor, the syndication attorney—
JASON HARTMAN: Oh yeah, she was there! She was one of the speakers!
STEVE: Yeah.
JASON HARTMAN: I spoke at the event, and she also spoke at the event, so yeah! We just had her on the show, yeah.
STEVE: We had an informative yet exhaustingly frustrating conversation about California, and also about all these new crowdsourcing laws that are part of the JOBS Act. And she and I were laughing about it, because she said, you know what, Steve? It looks to me that as we get into this law about how you can raise money, and what the SEC will regulate, that it’s going to be a lot harder than it was previously. And we were laughing, saying, I can’t believe we were stupid enough to think that the government would make something easier and less complicated. They just don’t know how to do that. It’s not in their DNA. And then she was also telling us about how in the state of California, these laws that they’re enacting—I could have this wrong, Jason, but remember, she was saying that, let’s say there was an investment property in Kansas, and you lived in California and you had a business partner in Arizona.
JASON HARTMAN: Oh, yeah, that—what a mess! The California laws are just unbelievable!
STEVE: You form an LLC to take title to that property in Kansas, California is going to try to tax your Arizona business partner individually!
JASON HARTMAN: Yeah.
STEVE: And I told her, I said, well if they did that to me, I’d just make a copy of my middle finger and send it to them. And she said well yeah, and you could, but they’re building—and these were your words, Jason—an economic Berlin Wall around California. They’re trying to discourage the Californians from doing business with people out of state, investing out of state—they’re trying to keep them there because they just don’t have any money.
JASON HARTMAN: Yeah, right. What we are seeing is, there’s an old saying about the long arm of the law. Well, the long arm of a bankrupt state, California, essentially—not formally bankrupt, but essentially bankrupt—we’re seeing them trying in so many ways to build this economic Berlin Wall. I remember the first time I went to Berlin, Germany, okay, and that was I don’t know, 12 years ago. Maybe a little more than that. I wish I would have gone there when it was still Communist, because that would have been so interesting. I just would have been scared, though. I’m certain it would have been very scary to cross through Checkpoint Charlie, and go into East Berlin. But I went to the Checkpoint Charlie museum, and I spent about 6 hours there, and I gotta tell you, I got a little teary-eyed several times that day, because it is just mind-boggling to me that any—any dictator could not see the writing on the walls.
That they could be so evil and so cruel that so many people were trying to escape their clutches and get out of their country, that they put that Berlin Wall up basically in a weekend. I mean, it was fast. Because—and the reason they put the Berlin Wall up—the reason it happened in the first place—is because the east, where people could just sense there was no opportunity. They were experiencing this brain drain. Everybody was trying to leave East Berlin and go into West Berlin, where they could be paid based on their merits, and they could have ambitions, and they could succeed, and even fail in a free marketplace, and experiment. That’s human nature. Free market capitalism is—although we don’t really have free market capitalism in the US today, or in any places in the world in any real way—but we still call it that.
STEVE: Yeah, that’s what it is now. Not in its pure form.
JASON HARTMAN: Not in its pure form, certainly. But that’s what people wanted! It’s in keeping with human nature! And so, California and the United States is also doing it on a national scale, where you see, we’re reaching into every other country. If you’re an American, good luck trying to open up a foreign bank account! Obama has made it so that no other country wants to do business with an American, because America just puts too much pressure on them. And here’s what they do. They do a lot of things. But one of the things is real simple to understand. So, you used to have—and I guess you still do—all these Caribbean nations. A lot of them are sort of, Banana Republic type Podunk little places. But they all institute some very favorable laws. And it doesn’t have to be in the Caribbean—it could be in the Southeast Asia, South Pacific area. You know, wherever around the world, right? And they’ll institute a lot of very favorable laws to try and bring in business. It’s just like, look. If you’re in traditional business, you try to have a better product for a lower price than your competitor, so you bring in business. Well, on a government level, this happens, of course, from state to state. There are certain states that are more desirable to do business in, to incorporate in. And that all happens. Among the 50 states—well, Obama thinks there’s 58 states, but, close enough for government work.
STEVE: Well, what do you expect for somebody who’s not from here?
JASON HARTMAN: Ooh, good point!
STEVE: I went there.
JASON HARTMAN: Are you a birther?
STEVE: I actually watched that movie called Dreams From My Real Father.
JASON HARTMAN: Oh, yeah.
STEVE: And their whole reason that he didn’t release the birth certificate, and that he’s cagey about his past, is not that he’s not from here—it’s that his real father is not that guy from Kenya who he looks nothing like, by the way, but it’s really Frank Marshall Davis, a well-known Communist revolutionary.
JASON HARTMAN: Yep. It’s surprising how little we know about our president, isn’t it?
STEVE: Well, yeah. It’s surprising, and it’s sad, too, because we’re talking about the evils of Communism here, but I think if you told most of America today, yeah, Obama’s father is a Communist—most people would go, okay? Well, why is that bad? What’s wrong with that?
JASON HARTMAN: Oh god, that’s a scary—wow.
STEVE: Well, don’t you think? I mean, a lot of these people that just show up and vote and don’t pay any attention—they probably don’t even know what Communism is!
JASON HARTMAN: I tell you something, hey listeners. You know what you’ve gotta do? And I’m trying to get him on the show. But Mark Dice—watch some of his videos. Find him on the web—I’m sure he’s got a huge YouTube channel and a giant following, although I’ve never looked it up. But some of his videos are just—you know, there’s an old saying. Never overestimate the intelligence of the American electorate. You know?
STEVE: That’s right.
JASON HARTMAN: And of course, present company excluded, because all of you listeners are—I know you’re really smart, because I’ve dealt with a lot of you, and talked to a lot of you. But the general public out there is pretty scary. Mark Dice will go up to people—and you know, I saw this on Jimmy Kimmel live just the other night! He did the same thing! He walked up to people and asked them, what is the First Amendment? And nobody had any idea. The closest someone got was, oh, it was about your rights. Oh! Which rights? And Jimmy Kimmel tried—he tried to hand it to them! He said, he would say, well, you’re doing it right now. In other words, you’re speaking. And they still didn’t get it. Whatever.
STEVE: It’s amazing. Well, it’s—I was saying, I don’t know how they can flag down a taxi. Or get to the polls, or these very basic things, with some of these answers. I’m sure those Kimmel interviews he excluded 90 people for the one gem that he got, but…
JASON HARTMAN: Well, I don’t know. I don’t think they’re that bad. Of course I’m sure they do that, they don’t show you everybody, and some people got it right, but, just do your own informal survey, and you can find that it’s not that far off.
STEVE: Any time I have a hard time believing something, I usually say to myself, well, Obama is president. So it’s like, anything could happen.
JASON HARTMAN: But look, what was the alternative? Well, this last time around, Romney—I thought he was pretty good. But you know, McCain? I mean, come on. What a joke.
STEVE: McCain drives me nuts.
JASON HARTMAN: Yeah. Anyway, where were we? Economic Berlin Walls, right? Here we go.
STEVE: We were talking about IRAs, and why it’s a good idea to have one, because California’s taken a page out of the Obama playbook here, where Obama, the government, whoever you want to say—is making it really unattractive for Switzerland, or Panama, or whoever—to do business with US citizens. And now California is making it really unattractive for Texas, or Oklahoma, or Tennessee, to do business with Californians. That’s right out of their playbook.
JASON HARTMAN: Yeah, yeah. It’s true. That economic Berlin Wall is only going to get stronger and more oppressive. So, if you are a California resident, or if you are a resident of any state that is similar to California in that way—meaning, broke and desperate and liberal—then I would highly recommend—and those are a couple of bad ingredients—I would highly recommend that you have some affairs outside of that jurisdiction ASAP. Because the sooner you do it, you spread your chips around and diversify a little bit. Very wise thing to do.
STEVE: That is. And this crowd full of investors—they were very educated, very intelligent—that didn’t mean, however, that we didn’t have some pretty good pitches showing up—
JASON HARTMAN: Yes, those land people. Boy.
STEVE: Oh boy.
JASON HARTMAN: Well, okay. So, let’s just give them some context, the listeners here, Steve. So, when I did my speech, of course I said the usual thing I say, which is a really—on my PowerPoint slide, this part is in bold. It says, understand that anything that does not produce income (or, in parentheses, rent) is not an investment, but rather a speculation. In other words, you’re gambling. If you invest in anything that doesn’t produce actual income, like a non-dividend paying stock—well, I think any stock is a huge gamble, because that’s Wall Street, and that’s a whole nother problem. But say it’s real estate. You notice that I try to call it income property, because that’s what I like! Okay? I don’t like vacant land. I think vacant land is speculative. It’s highly risky.
Now granted, do some big players in the vacant land world, and occasionally a little guy, make money? Sure they do. Of course. You know, you get some vacant land on the path of progress, and you can make some money. But it’s the exception, not the norm, unless you’re a big developer like Pulte Homes, or D.R. Horton, or one of them, or some big commercial developer. I mean, those guys, they have huge resources, and they have land acquisition people that study this stuff all the time. And most importantly, they have huge influence with the government! Whether it be the county, or the city, as the case may be, where they can get them to do things and make huge deals with them that will raise—bring tons of property taxes, or sales taxes, into the coffers of that municipality! Well, this isn’t going to happen with a guy who buys an acre and a half.
STEVE: Right. If you’re saying hmm, I wonder if I should invest in raw land. If I could get an acre parcel, and how I should do that. If you’re asking yourselves those questions, raw land speculation is not for you. Unless you can go into your room of research dorks from Harvard that will analyze the economic trends—if you got those guys on your team, that means that you’re a developer! You work for a huge investment company. Then you should be in raw land. But otherwise, you are gambling, and that’s exactly what these people were proposing. They came to the table—and I’ll let you finish this story off, Jason. But they came to me while you were off somewhere else, and they just let me have it about raw land for a half hour. I glazed over, and thought about something else.
JASON HARTMAN: She was mad at me for saying that from the stage, you know?
STEVE: I know! So they came to you later—
JASON HARTMAN: It was mind-boggling, yeah!
STEVE: And she was trying to show this piece of real estate—
JASON HARTMAN: In Valencia, California, near Magic Mountain—
STEVE: Yes. And she kept saying, and in 2006, this was available for this amount! And now it’s available for this! And it was like, what? 20%?
JASON HARTMAN: It had to be the stupidest argument I have ever heard. I mean, she was a raw land broker and investor, and it’s funny, because I finally found out what were they selling. Was this just land that was available, you know, listed by someone else? Did they have the listing on it? No. The owner of the company is selling off their own land, and hired, according to her, a bunch of salespeople to sell their own land! Well, of course, I sell stuff that’s a good deal sometimes, that I think has a future prospect. We all move some money around, and line up our own ducks, and that doesn’t mean the next guy doesn’t get a good deal. But if you own all this land in a given area where you’ve got a bit of—not a monopoly, but a sort of monopoly, and you’re in a market like this, where the market is most definitely appreciating—I mean, by and large, I mean, things are going pretty well right now. Of course, a whole nother discussion, I think it’s a fake recovery, etcetera, etcetera. And I interviewed Harry Dent yesterday. That was a fascinating interview, by the way. He was on for the third time, and that’ll be published very quickly here in the members section. That’s gonna be a members-only podcast for a little while, because he gives some pretty major predictions, and I make him drill down and get specific about that stuff.
STEVE: Oh, that’s great.
JASON HARTMAN: So, that’ll be available to the members first. If you’re not a member, here’s my little sales pitch. 10 bucks a month, www.jasonhartman.com. Join, you get discounts on a whole bunch of things, blah blah blah.
STEVE: You just have to click join in the top right corner of www.jasonhartman.com, and then you’ll get your details.
JASON HARTMAN: And wasn’t my sales pitch good, Steve? And you get a bunch of things, blah blah blah?
STEVE: Yeah, you’re making sales trainers roll over in their graves right now.
JASON HARTMAN: I know, I’m terrible at this stuff.
STEVE: I guess that’s why people like the show. Is because we don’t just sit there and blast them with that kind of stuff.
JASON HARTMAN: Yeah, right, exactly.
STEVE: Like the land lady did to you. She just kept saying, it was available for this in 2006! And you kept asking her, what did it sell for? And she would say, well, Warren Buffet invests there. And you’d say, great! What did it sell for?
JASON HARTMAN: What she was doing, just to tell the listeners, okay—she was trying to give me a comparable sale. And when I drilled down on it, what I found out is that the property never sold. It was just listed only for sale. So, listing prices are fantasy land. Sales prices are reality, okay? And she’s showing me a nearby parcel that was never sold, and trying to tell me this is the comparable sale. And I said, you have to show me comps that are sold and closed, not for sale! And it’s not even for sale now! They took it off the market because they could never sell it! In 2006.
STEVE: It was ridiculous.
JASON HARTMAN: And then she’s telling me her own story. She’s got only one story of success. One story of her own. Now, she said she owned like 40 other parcels, and they wouldn’t let her buy anymore. I don’t know why, but they wouldn’t let her buy anymore. And she couldn’t buy anymore, and she had this one deal that she made some money on, and she’s telling me, Jason! You don’t understand, Jack In The Box is next to it, blah blah blah! I mean, it was just the most idiotic argument—I couldn’t believe how stupid it sounded. It was mind-boggling.
STEVE: Well it was starting to draw a crowd, too, because you kept demanding from her a simple answer—did it sell? And she was spinning! I mean, this was the most shameless spin, trying to not answer that question—
JASON HARTMAN: I literally had to tell her, stop talking! And let me ask a question. And she finally stopped talking, and everyone around was like, I can’t believe Jason said that!
STEVE: Well, you did—
JASON HARTMAN: I didn’t say shut up, okay, I said stop talking!
STEVE: Well, apparently she wasn’t getting the hint. Some people you just have to tell, STOP TALKING.
JASON HARTMAN: Exactly. But, crazy stuff. So, listen folks. If you want to gamble, this is not the show for you, okay?
STEVE: Yeah.
JASON HARTMAN: This is the show for prudent, real, long-term investing that makes sense, with properties that make sense the day you buy it. Granted, things don’t always go well. There are problems, there are bumps in the road. Nothing is perfect. We’re just trying to get as close as we can to that perfection, okay? And properties that actually rent out—and you know how you can always tell how good something is? Is whether or not the banks will finance it. And I’ve always said this with cars. You look at the Tesla, right? Now, Tesla Motors—I’ve been following this electric car that’s kind of a good-looking electric car, but I think by and large it’s going to be a flop. If they were to then bring them into the free market without a bunch of government financing, which is what Elon Musk got—you’ve got a bunch of Obama financing there to start the company and to support it, and I’m talking to the tunes of hundreds of millions of dollars, I believe. Maybe even half a billion. I’m not sure. And supposedly, I think Tesla’s like, profitable. Or doing pretty well. I don’t know the details. But, they wouldn’t—they didn’t have any financing, right? No one would finance the car.
STEVE: Yeah.
JASON HARTMAN: Okay? And then they finally came out with some sort of a lease program, but get this: my understanding—I could be wrong here, because in Arizona, in Scottsdale Shopping Center, they have a showroom, but they can’t talk to you about the details, because they do not have a car dealer’s license. So, they have the showroom, you can go in and see a car, in the mall, and—but it’s not a real dealership. You have to go to California. And I said well, you can’t tell me how the lease program works? No. You gotta go to California. We can’t sell them here. Okay, whatever. But the deal is, instead of being a closed-end lease, where you can return the car at the end and just give it back after leasing it for three or four years, which—that would be fine with me, because then I would know what my exact cost is.
See, when you lease a car, you don’t take—and you do it on a lease where you turn it in at the end—you don’t take the risk of depreciation. Whereas with an electric car that may be the next Edsel—you know, the Edsel was a flop. If you don’t know what an Edsel is, look it up. That may be the next disastrous flop—the bank, they only want to do an open end deal, where yeah, you pay the lease payment for three years, and then we don’t know if you can turn it in or not. It kind of, we’re gonna just see what the marketplace says, and if these cars—if we can resell them, we’ll take it back. If not, then you’re stuck with it. And that’s the deal. So, anyway. Just look around and see what financing is being offered. If you walk in any you wanna buy a Hyundai Genesis—great financing. You wanna buy a new BMW 5 Series? Fantastic financing, right? The Hyundai’s a little better, because it’s a better value. But on a car like that, you can’t get normal good financing. And so, that’s the same thing. On the vacant land? No financing. All cash. Period, end of discussion. Zero financing.
STEVE: Right. That’s it, and it’s a red flag if there isn’t financing available. And you and Michael talked about this on the last podcast—thank you. I got hit up on Detroit probably 5 or 6 times at this event. People just won’t drop it, and there’s that argument that you made of, well, it can only go up. And it’s just a purely speculative thing. And I bet you—I haven’t looked into it like ever, but—there’s a net population decline happening in Detroit right now. Banks are going to have a hard time financing properties there in the inner city.
JASON HARTMAN: Yeah. Detroit is a disaster. Okay, so let’s move on. Anything else on the conference? Good event. What else. Self-directed IRAs, definitely the way to go. Make sure to have one. I don’t know if there’s any other takeaways.
STEVE: There’s a couple of possibilities on some different products that we might be able to offer to everybody. Stay tuned—we’re digging through some due diligence on that right now.
JASON HARTMAN: Okay, good. Let’s talk about some properties, by the way.
STEVE: Yeah, we’ve got a couple of properties here.
JASON HARTMAN: One of these is so gorgeous, by the way. You know, my mom’s building—well, I think she’s done building it, I can say. I never really know if that house is exactly finished. But building her mansion in Alabama—southern Alabama. And I mean—this house, she’d love that house. It’s got four columns in front, it’s a gorgeous house. Tell us about that one.
STEVE: Totally. It looks just like your southern house in Memphis.
JASON HARTMAN: Southern. Little mini southern mansion, yeah.
STEVE: Yeah, totally. And the great thing about it—I don’t see this a lot in Memphis. This thing was built in 2002. Beautiful looking property, it’s 2100 square feet, and the projected rent is $1250 a month. And the purchase price is $106,900.
JASON HARTMAN: Unbelievable. So more than 1% RV. And this house is $51 per square foot. It’s 2100 feet, and the overall ROI projection here is 41% annually. 41% annually. And that’s just like a nice family neighborhood. That’s a great looking—go to www.jasonhartman.com, and look for the property in Memphis built in 2002. This house is flipping gorgeous. It’s stunning.
STEVE: Brick exterior, kind of a good colonial southern look. It’s—and I’ll spell it out for people here. This is built in 2002; we have well over a 1% rent-to-value ratio on this. I don’t see this. This—I don’t get these hardly ever. I would more expect this to be a cash on cash of 5 or 6 on this thing.
JASON HARTMAN: Yeah, yeah.
STEVE: With the way the market is today.
JASON HARTMAN: It’s better. I mean, a renter drives up to that house, who’s been living in an apartment and paying, you know, $1000, or $1100 per month, and maybe is doing a little better now, so they can spend another $150 per month. They drive up to that thing and they’re gonna go, wow. Wow.
STEVE: Right. Yeah, if you want more information on this one, just email your investment counselor, because it’s a good-looking—I don’t think it’s going to hang around long. It might be gone before we air this. We’ll have to see.
JASON HARTMAN: Okay, go. Next one. This one’s in Houston, right?
STEVE: That’s correct. I want to remind everybody about the great new construction we have going in Houston, which is booming.
JASON HARTMAN: Houston is just such a strong economy, you know. The only thing in Houston is, the supply is not very constrained. It does move out from the center of the city, and they’ve got the loops—the freeway loops there. But you’re moving out further and further as time goes on, but I tell you, the economy there is so strong. I mean, of course Texas is arguably the most business-friendly state in the US. And the energy sector and the medical sector in Houston are phenomenal.
STEVE: They are. And they can build out around Houston and keep expanding it. but what I’ve read lately too, and I think a lot of listeners have probably seen some of these articles—there have been multiple articles lately about how they’re having a tough time getting raw land to build in Houston fast enough. The demand is very high.
JASON HARTMAN: Well maybe they should go see that lady at the Equity Trust conference.
STEVE: Yeah, have her get some land in Houston.
JASON HARTMAN: She could get them an acre, they could build maybe four houses.
STEVE: Yeah, that’s great.
JASON HARTMAN: Next to a Jack In The Box.
STEVE: She kept saying—Warren Buffet! He bought land there! That was her failsafe.
JASON HARTMAN: Who cares! Oh my god.
STEVE: If you asked her a question she didn’t know—well, Warren Buffet! And you’re just supposed to roll over and say, here’s my wallet. Right?
JASON HARTMAN: What a joke.
STEVE: So, this is one of the new construction properties we do. These take about 60-90 days to build. Our local market specialist there helps you pick out a lot in one of the developments. They’re solid properties. They lease very, very quickly. People love to move into a brand new property. And this is probably, outside of the triplexes in Kansas City which we’re sold out on, this is the only place where we have reliable new construction happening.
JASON HARTMAN: So, the triplexes are officially sold out?
STEVE: Yeah, yeah. I talked to our local market specialist the other day, and he said yeah, I’m sold out on that. He’s working on another development.
JASON HARTMAN: That was quick! So we sold an entire tract of triplexes in Kansas City, and did we even ever mention them on the podcast? Yeah, we did. Because we had Jessica on talking about that a little bit.
STEVE: I think we did, but I’m pretty sure they were already spoken for before that.
JASON HARTMAN: Wow. That’s crazy. Well, business is good.
STEVE: That local market specialist is great. Did a lot of business, and a lot of people wanted to invest with him again. So. But this one in Texas, the projections on it—it’s a $1350 projected rent, with a 32% projected total return on investment. This is a brand new property. So, like I said, 60-90 days to build. We probably don’t have too many of these left. They’ve been threatening for a few months now that they’re towards the end, and I don’t know that we’ll be able to do too many more of these in this particular location. I think we’ll have another development come up.
JASON HARTMAN: Yeah, I hope he gets some more inventory. Because for the past year and a half, we’ve just been struggling with lack of inventory.
STEVE: Yeah. So, if you want something that’s just a very smooth deal, brand new property, the system runs very, very well with this local market specialist in Houston. I’d call your investment counselor or go to www.jasonhartman.com.
JASON HARTMAN: Yeah, okay. Good. And what else do we gotta talk about? Let’s talk about the Fed’s lockup room for media, real quickly. This was on the news this morning, and I thought this was kind of fascinating. It was about how last week when the Fed said that they’re just going to keep creating fake money out of thin air—in other words, no tapering—
STEVE: Which, hang on a second. Did you really ever expect Ben Bernanke to not do this?
JASON HARTMAN: You mean helicopter Ben?
STEVE: Yeah! He’s a Keynesian! This is all he knows how to do!
JASON HARTMAN: John Maynard Keynes is his hero. So he is the money printer of the universe. Even better than Alan Greenspan was, who was a total sellout money printer also, right?
STEVE: Yeah, the kangaroo is still hopping. What do you know? It didn’t start swimming.
JASON HARTMAN: No surprise. So in other words, last week what happened is basically, the Fed made the big announcement that they would not do any tapering of their bond buying program, the $85 billion per month. And what that means is that we are in right now a pure unadulterated money printing inflation is coming, inflation is coming, Paul Revere, you know, type of thing. And you may say well hey, there’s lots of deleveraging. And even Harry Dent, he thinks there’s going to be another crisis. And I agree with that. The only question is—and this is what the deflationists never get, and I disagree with Harry a little bit on this—is that I do believe there’s another crisis coming. However, I think that there is an unlimited ability to print your way out of it. And Harry Dent and I on the interview yesterday talked a lot about Japan and a lot about China, and using Japan as the case study for the past 2.3 decades, 23 years, where they’d been in these lost decades, and the US is different! I mean, it’s not the same, okay? We have the reserve currency, and we can print. And other people, they can print too, but it’s just not the same when you print and you don’t have the reserve currency. We are in a much better position.
STEVE: Can you clarify on “print your way out of it?” Because that makes it sound like the US is just going to sail off into the sunset all hunky-dory.
JASON HARTMAN: Yeah, okay. So, creating money out of thin air, and it’s not really even printing anymore, that’s just a metaphor. But we’re increasing the money supply, which the deflationists say, well, you can’t print enough money to inflate! Well, sure you can! It’s unlimited! It goes to—as Buzz Lightyear would say—infinity and beyond!
STEVE: Right. Buzz Lightyear, the next chairman of the Fed.
JASON HARTMAN: There is no limit here to what they can do. And remember, inflation is the best business plan for governments. It’s really the most politically tolerable way to get one—to get them out of a mess. And it’s what they’re going to do. It’s just what they’re going to do.
STEVE: I’m still laughing about—it’s not gonna be Larry Summers, everybody. Buzz Lightyear from Toy Story is going to be the new chairman of the Fed.
JASON HARTMAN: I think he’s already there.
STEVE: I think if you actually got the cartoon Buzz Lightyear, he would probably do a better job.
JASON HARTMAN: Probably, probably. At least he’s probably a lot more honest than the central bankers, you know.
STEVE: So, what’s this media room that they’ve got?
JASON HARTMAN: Okay, so, they have this—I think it was called the media lockup room. And what it is, is they call certain reporters in, in advance of a Fed announcement, which is of course—the whole market around the world reacts to this, right? So, they call them in, and they tell them what they’re going to say. What the announcement’s going to be. Well, it turns out there was a leak, they think. There was a leak. And this is how you cannot win as a small investor. Because what happened, is it takes 7 milliseconds for the speed of light, which is 186,253 miles per second—per second, not per hour—that means light can circle the earth more than 7 times in less than a second—bloop—okay? Well, there was a trade on the Chicago Exchange that appears to be a reaction to the Fed announcement, before it was announced. And so what they’re questioning now—there’s an investigation going on, that this could not travel faster than the speed of light. Literally they said that on the news today. And there’s a leak. And that’s what it is. And the high-frequency traders are going to always win, okay? So if you think you can be in the stock market and you can outsmart the high-frequency traders and the quants and the dark pools and the insiders, good luck. You need it.
STEVE: With your broadband connection from Cox Cable.
JASON HARTMAN: You may have your level 2 screen, and your broadband connection—and even if you pay for the faster broadband like I do—no way. I mean, literally, these high-speed, or high-frequency traders, they locate their servers, they use incredibly fast computers—not like your top of the line Mac like I have, okay? It’s not like that. they locate them literally right next door to the exchanges so that they can go the 7 milliseconds faster than the people a thousand miles away.
STEVE: Just because the speed of light is not fast enough. You have to be next door.
JASON HARTMAN: The speed of light is not fast enough, yeah.
STEVE: That’s crazy. So, it must have not been—it must have been such a big trade right at that time that they couldn’t just say it’s a coincidence of regular trading. Somebody obviously was making a play on this announcement, and had early information.
JASON HARTMAN: Yep, that’s right.
STEVE: Well, I’m not shocked. My jaw has not hit the floor. But I find it interesting nonetheless.
JASON HARTMAN: Yeah, right. Exactly. And Barney Frank was on the news this morning, and he’s kind of an idiot, if you ask me. But—
STEVE: Kind of? He’s on—we still have to listen to him?
JASON HARTMAN: You know what? He said something pretty smart today, I think, unless he—
STEVE: Now my jaw’s on the floor.
JASON HARTMAN: They were nailing him on his prior quotes, and saying he was changing the story. But he talked about homeownership, and I thought that was pretty interesting, and how homeownership is not that important to an economy. And I’ve said this before. I agree. I think homeownership—it is overrated. I’m just gonna tell you.
STEVE: That’s not what he was saying back in 2004.
JASON HARTMAN: Well, I know that. I know that. But homeownership for all the reasons I’ve talked about on prior episodes is overrated. I think being a renter is just fine, especially if you’re renting a high-end property where the rent-to-value ratio is favorable to you, the tenant. And in addition to that, you rent a lot of low-end properties to other people. So I think that’s good, it serves both needs. People can move to where the jobs are, you have a lot more flexibility—there’s nothing wrong with being a renter. Okay, anything else, Steve? We gotta get to Jared Diamond here.
STEVE: To infinity and beyond!
JASON HARTMAN: Alright. Thanks for joining me today. We will be back with Jared Diamond in just a quick moment.
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ANNOUNCER: Have you listened to the Creating Wealth series? I mean from the beginning. If not, you can go ahead and get book one—that’s shows 1-20—in digital download. These are advanced strategies for wealth creation. For more information, go to www.jasonhartman.com.
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JASON HARTMAN: It’s my pleasure to welcome Dr. Jared Diamond to the show! He is an author, a psychologist, an evolutionary biologist, and a biographer, and you’re going to like what he has to say. He makes some very interesting connections between science and culture. A lot of new thinking that you haven’t heard from anybody before, unless you’ve read one of his six books, which you may well have; they’re very popular sellers. And it’s my pleasure to welcome him to the show today. Jared, how are you?
JARED DIAMOND: I am fine. It’s a pleasure to be with you today.
JASON HARTMAN: Well the pleasure is all mine. So your latest book is entitled The World Until Yesterday. Why don’t we talk about that first, and then I’d like to touch on maybe two of the others.
JARED DIAMOND: Sure! The World Until Yesterday, my newest book that just came out December 31st, is—it took off from my experiences working in New Guinea for the last 50 years studying birds, but living among traditional people. That’s to say, small-scale societies where you deal with people that you know, and you don’t encounter strangers. That was what all human societies were like for 6 million years until things began to change with dense populations 10,000 years ago. And traditional societies are still widespread today in New Guinea and Africa, and they’re embedded within the United States [unintelligible] still largely traditional. So the new book, The World Until Yesterday, is about what’s fascinating in traditional societies, and what we can learn from them. Because traditional people face the same problems that all of us do. They have to bring up their children. They grow old. They want to avoid dangers. They want to stay healthy. They learn languages. They have to settle disputes. And many of the ways that they’ve come up with to deal with those basic human problems are ways from which we can learn, and which we would like adopt into our own life when we’ve heard of them. So the book is written partly because of the fascinating material, and partly because we can learn from all these natural experiments in how to run a human society.
JASON HARTMAN: And just to give people some context, you mentioned that 10,000 years ago populations became much more dense. I wouldn’t have put it that recently—or, that long ago. I would have put it more recently. But when you say dense, and the more traditional, sparsely populated communities—what sizes are these? You know, what population numbers are you talking about? Where in a tribe, or a community where everybody knows each other, for example. Is that 100 people? 500? 30? What’s the number like?
JARED DIAMOND: Good question. Just to calibrate it, the United States has 310 million people. And my campus at the University of California, UCLA, has 32,000 people. And the state of Montana, where my wife and kids and I spend parts of our summers, has somewhere under a million people. And the smallest state in the world, the smallest government in the world—which is probably a Pacific Island called Nauru, has about 10,000 people. Alright. By comparison, human societies throughout history were tiny—what are called bands—societies, especially of hunter gatherers. A few dozen people were called tribes. Villages, often of farmers, a few hundred people. What are called chiefdoms, where there is a chief but no bureaucrat, a few thousand people. And it’s only when you get to something like 10,000, 20, 50,000 people, that you need to centralize government with bureaucrats and politicians. But until agriculture began 10,000 years ago and started a population explosion, there weren’t such big societies. The first society that was big enough to require centralized government wasn’t until about 5,500 years ago. So, traditional societies are until yesterday, and big societies are new.
JASON HARTMAN: Okay, and so it really came about as a result of agriculture, then. I didn’t make that connection. So that’s very good to know. Well, tell us about some of these lessons. I mean, you talk about conflict resolution, all of the normal human problems we all face. But what can we learn from these societies?
JARED DIAMOND: Let me start by giving you a really [unintelligible] example that affects most of us: namely, how to bring up children. There are all these debates about, what should we do with our children? Should we spank them or not spank them? Should we give them as much freedom as possible, or not? Should they sleep in the same bedroom as parents, or should they sleep separately? And then a really elementary thing that you would think is not going to be a matter of passionate debate: how should we carry our infants? Usually we Americans carry our infants in baby carriages. We push them on their back, or we carry them in pouches where they face us, they face backwards. But in the great majority of traditional societies, infants are carried vertically—not in baby carriages—facing forwards. And so the infant has the same field of view as the person carrying the infant, and that means that the infant feels more in control, shares the same field of view with the caregiver, develops motor skills faster. That’s a really simple example that I never would have thought of until I learned about it from traditional societies.
JASON HARTMAN: But does that really—it has a major effect on the infant, and their development and so forth?
JARED DIAMOND: It’s thought to have an effect, together with other things. It’s not just that traditional infants are carried vertically facing forwards, and otherwise they’re brought up exactly in the same way as our American children. Other differences are that in really small traditional societies, there is no spanking whatsoever. No hitting the child. For an African Pygmy, if one parent hits the child once, that’s grounds for divorce. Other difference—and this is a big difference—is that children are, even young children, even infants—are given much more freedom to make their own decisions, and the result of this is that kids grow up in New Guinea and in other traditional societies with the virtues that we Americans would like for our own kids. And they become self confident, they can make their own decisions, they don’t have adolescent crises, they can negotiate, they are socially skilled. But the way we bring up American kids, we do everything possible to prevent this by micromanaging our kids and telling them what to do all the time.
JASON HARTMAN: So, the takeaway from that is that modern western cultures are over-parenting, and maybe practicing too much smother love?
JARED DIAMOND: That’s one lesson.
JASON HARTMAN: I would certainly say that’s true with Gen Y, the current generation [LAUGHTER].
JARED DIAMOND: It is a lesson, but the main lesson is that there are lots of other things that traditional societies do in bringing up children, and that we can learn from all those lessons. Traditional societies are natural experiments in how to organize the human society.
JASON HARTMAN: Very interesting. What else can we learn?
JARED DIAMOND: What else can we learn? We can learn how to stay healthy. Most Americans—you and I, most of our listeners, are going to die of what’s called non-communicable diseases. Non-infectious diseases such as diabetes, heart disease, stroke, and cancer, which are the main killers of Americans. But in traditional societies, people don’t die of these diseases at all. And that’s because of lifestyle. Because when New Guineans within the last 40 years have been starting to adopt the western lifestyle, they too start to get diabetes and stroke and heart disease. So here’s a simple example: namely, features of the traditional lifestyle protect people against the non-communicable diseases that will kill us. Elementary things that my wife and I have done is, we don’t have a salt shaker or sugar shaker on our dining room table. And we eat lots of vegetables and fruits, and non-fatty meats, and fish. Those are some simple things about diet. Plus I work out three or four times a week with my 26-year-old sons, and I’m still healthy at age 75. And I hope I’ll stick around.
JASON HARTMAN: Well, we do too. We want to see many more books from you. Do you want to move on and talk about some of your other work, or should we talk a little bit more about The World Until Yesterday?
JARED DIAMOND: Sure. If you’d like, we can move on. Let’s talk about whatever you would like to talk about.
JASON HARTMAN: I think what’s on so many peoples’ minds nowadays, especially with the peace problem around the world, the economic problems round the world, and you know, I don’t know how much you address these, but certainly we can learn from your work, and that is the concept of collapse. Many people nowadays are comparing the American Empire to the Roman Empire, talking about how no empire lasts forever, and there’s a lot going on in the world. It’s a fast-changing place nowadays. Maybe tell us a little bit about Collapse?
JARED DIAMOND: Sure. My book Collapse was an examination of societies in the past that either survived or didn’t survive in order to learn what it is that promotes success or failure of a society that might help us today, because today we are—our modern societies are facing problems that people faced in the past. Problems of population, problems of resources, problems of overfishing, problems of water and topsoil. There are societies in the past that solved those problems, and societies that failed to solve those problems. You mentioned that empires don’t last forever. Well, the reality is, there are societies that are carried on for a long time. The Japanese empire has lasted from its beginning. Japan has never been without an emperor. Japan has had longstanding continuity going back in fact something like 14, 18,000 years. And in New Guinea, there have been people from 46,000 years, and still no signs of collapse. So, there are societies that have solved their problems, and there are societies that spectacularly collapse, of which some well known examples are the collapse of Mayan society, of the Yucatan in Guatemala, about 1200 years ago, and the collapse of the Khmer Empire, which used to be the most powerful empire in Southeast Asia, and the fall of the Western Roman Empire. So yes, there were societies that collapsed, and maybe we can learn by not repeating their mistakes.
JASON HARTMAN: Yeah. Well, a lot of people talk about resource management, and you mentioned it, and that of course brings up the Malthusian ethic, and people have long predicted that resources will become scarce. I mean, especially just looking back recently to the 70s. The survivalist movement was huge back then, and you know, a lot of those problems were, I think you could argue that they were solved. Maybe not. Maybe they were just—the can was just kicked down the road further. But talk to us a little bit more about resource management issues, and environmental issues, if you would.
JARED DIAMOND: Yeah, let’s talk about resource management. In particular, let’s talk about the belief that the problems that were foreseen in the 1970s have been solved. These resource problems of farming and water and fishing, and other natural—
JASON HARTMAN: I mean, people were—there was a lot of talk about population problems, famine, you look at some of the movies of the time—I remember like Soylent Green, you know? It was very interesting. I mean, I don’t know. Go ahead.
JARED DIAMOND: It is interesting. It’s interesting from an American perspective. So here I sit in Los Angeles, and Americans sit anywhere in the United States, and if you talk about resource problems and collapse and famines, most people will say, what on earth are you talking about? We solved that. It’s true that the United States is not the richest country in the world, but it’s maybe the 4th richest country in the world, and we do natural [unintelligible]. On the other hand, if you think we solved these problems, there are billions of people in the world—nearly half the population of the world—has a marginal or sub-marginal calorie intake. So, half of the world’s population is malnourished. The lifespan in the United States and in developed countries is longer than in many, most other countries in the world. From the perspective of the developing world, from the perspective of Africa, and much of, most of Latin America, and much of Asia, if you were to say—we solved those problems in the 1970s, all those population problems, that would be an obscene untruth.
JASON HARTMAN: Well, fair enough. Fair enough. And I don’t mean to say that we’ve solved them. But I do mean to say—and I want to get your reasoning for saying that the US is the 4th richest country, that was an interesting statement. But before we go to that—I don’t mean that we’ve certainly solved them. But when you look at the population growth that has occurred since then, I mean, listening to the doom and gloom-ers in the 70s, it would make you think that we would have long been wiped out by now, given the population increases we’ve had. Yet you look at globalization, that has lifted about 300 million people out of poverty—I’m not saying they’re living extraordinary lives—you know, I believe that, not exactly like kicking the can down the road, but a lot of the consumption is really not financed but financed environmentally by outsourcing pollution to places like China, which is not a solution by any means. So, that’s what I’m really saying. I’m not saying the problem’s of course resolved. We’ve got huge problems facing us. But in comparison to the talk then, and adding into that equation the population growth we’ve had since then, you know, a Malthusian would say, how did this happen? I guess.
JARED DIAMOND: Yeah. There’s legitimate debate about the number of people that could be supported on Earth sustainably. I was talking recently with someone who said, so now we’ve got 7 billion hundred million people. That’s too many. The world could support sustainably only one and a half billion people. And somehow we have to get rid of or not replace five and a half billion people.
JASON HARTMAN: And who gets to decide?
JARED DIAMOND: This may not be a rational decision. Another point of view is that in fact, we know how to manage fisheries sustainably, and we know how to manage forests sustainably. There are some fisheries we do manage sustainably, such as Alaska Wild Salmon and West Coast Whitefish fisheries. So we know how to do it. The problem is that we just don’t manage most fisheries and forests the same way. But it’s calculated that if we did manage all of the world’s fisheries and forests sustainably, then we could feed and take care of the needs of 7 billion people for the indefinite future. Not 14 billion, not 20 billion, but 7 billion. So, one can make an argument that even the world’s present population we could support, but we can’t support it the way we are behaving now. We have to operate more sustainably.
JASON HARTMAN: So, where are we going? I mean, are we in danger of—I guess the $64,000 question is, are we in danger of collapse? And then the secondary question is, is that globally, or certain countries specifically?
JARED DIAMOND: Sure. And we can add a third question—are we in danger of collapse, is it globally or certain countries specifically, and what do I think is going to happen? In answer to your first question, are we in danger of collapse—yes. We’re certainly in danger of collapse, because we’re operating unsustainably at the moment, and if we continue to operate this way, we can operate this way only for a few more decades, and by 2050, it’ll get settled. Either we’ve figured out how to operate sustainably, and we have a happy world of our own choice, or resources limit themselves and we have an unhappy world not in ways we’ve devised. Number one. Number two, is it going to happen globally or locally? Well, it’s going to happen worse in some areas than in other areas. Haiti, Somalia, Rwanda, are already or have been in a state of virtual collapse. But with globalization, if people get unhappy in some part of the world, they now have ways of sharing their unhappiness with other parts of the world through terrorists and immigrants and diseases and other ways. And therefore, if there’s a collapse, it’s likely to be a global collapse. What I think is going to happen? I’d say the chances are 51% that we solve our problems, and 49% that we don’t solve our problems. And those of you who are younger than I am, younger than age 75, those of you who are under 50—will see what happens 30 years from now.
JASON HARTMAN: Yeah. And those are pretty tenuous odds. At least they’re slightly in our favor, but pretty tenuous. Just back to the Malthusian concept, and then I want to ask you why some societies make such bad decisions, and talk a little bit about big business and the environment and so forth, and maybe we can wrap up there. But I think part of the Malthusian thesis that I really struggle with, Jared, is the concept that people are only a cost. Like, they’re only a net cost to the globe, to the environment, versus being a resource. I mean, some of these people come up with great ideas that solve problems, great inventions, some of them spread ideas and create awareness, like yourself. And so when you look at, well, we’ve got 7 billion people—who knows what the sustainability number of the planet really is—whether it’s 10 billion, or 1 billion, or somewhere in the middle, or 30 billion, or half a billion, I don’t know. I’m sure you have an opinion on that, which I’d love to hear. But the fundamental question is, are people resources, or are they a net cost to the environment?
JARED DIAMOND: Both. You are of course correct that people, on the one hand, people consume, and so they require resources. On the other hand, people, or at least some people, produce. And they produce idea, and they produce stuff. So yes, people are both benefits and costs. The question is, how many people should we have in order to optimize those benefits and costs. If we had 70 billion people instead of the world’s current 7 billion people, or let’s say, if we had 700 billion people instead of the world’s 7 billion people, that means 100 times more people to have ideas and to produce stuff. On the other hand, 700 billion people—I think everybody would agreed is an impossible burden.
JASON HARTMAN: Yes, I will agree with that one, for sure.
JARED DIAMOND: To get good ideas, are 7 billion people enough to give us all the good ideas that we need, or do we need another 63 billion people? Personally, I’m happy with the ideas we’re getting from 7 billion people.
JASON HARTMAN: Okay. So, well, yeah. So that’s the fundamental question, and then, do you have an opinion on the number, the ideal optimal number? Did you already say it when you said one and a half billion? Because you did mention that number before. But I don’t know if that was an ideal number.
JARED DIAMOND: Well, we’ve got 7 billion one hundred million now, and I think we can live with 7 billion one hundred million if we manage our resources properly. In fact, population growth rates have dropped below the replacement level in Japan, and in Europe, and possibly—though this I’m not sure about—among native-born Americans. So there are already large parts of the world that are in declining population. That means that it’s not a pipe dream. It’s not unreasonable to believe that we could stabilize the world’s population at something not much above where it is now.
JASON HARTMAN: You know, that has some pretty—the ZPG, the zero population growth concept—has some pretty ominous economic consequences. You look at Japan, and that’s—I say, a big part of their economic malaise, is that they don’t have younger people coming into the system to support the older people. And of course, when you set up retirement schemes the way we’ve set it up in western countries, you know, US and Europe, it creates significant economic challenges. But again, those people, maybe they’re a resource. Maybe that problem will be solved other ways. Your website, I just don’t want to forget to give it out: www.jareddiamond.org. That’s www.jareddiamond.org. Of course your books are available on Amazon.com and at other bookstores, and boy, your books have so many reviews, and the reviews are so positive, by and large. 4½ stars, when you have 600 reviews of a book, that’s pretty impressive. So congratulations on that, and spreading such good ideas. But did you want to close—I know we’ve gotta wrap up here with—any thoughts on disastrous decisions, why societies make them, business environment, whatever you like. Just a closing thought?
JARED DIAMOND: Sure. Big question—why do societies make bad decisions. There are lots of spectacular cases of societies making bad decisions. Partly, societies make bad decisions for the same reasons that we as individuals make bad decisions. In some cases, we don’t have enough information, or the situation is completely new, and we’re not prepared, or we have out of date values. But there are also extra reasons why groups of people make bad decisions. Reasons separate from the reasons why individuals make bad decisions. In groups of people, you may have conflicts of interest, and the conflicts of interest may cause the leaders of society to make decisions that are good for them, the leaders, in the short run, but that are bad for the whole society, including the children of the leaders, in the long run. And so, that is—that’s a problem that concerns me increasingly in the United States, because within the last decade, people have commented on the richer people in the US getting richer and richer, and the politicians getting more and more cut off from the electorate. So the concern in the United States is that those making the decisions are not suffering the consequences of their bad decisions.
JASON HARTMAN: You are absolutely right. We need to eliminate lobbyists and special interest groups. That would be a good start. But go ahead.
JARED DIAMOND: Well, and even earlier, start—given that lobbyists and separate interest groups always can be ran—the first simple thing we can do is vote. Here I am in Los Angeles. I’m, what? Second largest city in the United States and we just had an election for mayor, a primary election. And 85% of the citizens of LA couldn’t be bothered to vote for their own mayor. Only 15% of our citizens voted. Well, a starting place for good decision-making in the United States is, for heaven’s sake, vote. If you’re not going to vote, you’re not making any decisions.
JASON HARTMAN: No question about it. That is an amazing number. I didn’t know that. I mean, I grew up in LA. 85% of the people didn’t vote in the mayoral election?
JARED DIAMOND: In the primary election, 85% didn’t vote. But that primary election narrowed it down to two, and the number of people who vote in the presidential elections, you know, in Australia, everybody has to vote. In American presidential elections, what, 50%? 55, 60% of Americans vote? If 40% of Americans can’t be bothered to vote for president, one doesn’t have to talk about good or bad decisions. It means that lots of Americans aren’t making any decisions at all, and just letting passively things happen to them.
JASON HARTMAN: As the old saying goes, if you choose not to decide, you still have made a choice. And that’s unfortunate, as you say. Well, Jared Diamond, thank you so much for joining us today. I know you’ve gotta run. I appreciate having you on the show, and keep up the good work. Do you have another book coming out?
JARED DIAMOND: I will 7 years from now, because this book I just finished, it’ll be a while till my next book.
JASON HARTMAN: 7 years exactly [LAUGHTER]. Fantastic. Well, we’ll keep our eyes peeled for that, and thanks for joining us.
JARED DIAMOND: Thank you. Pleasure to talk with you.
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