September 25, 2012

Quotes from the book Beating the Street by Peter Lynch

One problem when trying to learn to become a better investor is that most books on these topics have not been written by professional investors themselves. Most of these books are based on interviews and facts found across the Internet and from different newspapers and annual reports. The result is that some books will contain errors, and you as a reader will learn the wrong things. One example here is the book The Warren Buffett Way. I read that book a couple of years ago when I was trying to learn everything on how Warren Buffett thought when he invested in stocks. The book has not been written by Warren Buffett himself - the author has used different writings about Warren Buffet, such as annual reports from Berkshire Hathaway. Fast forward a couple of years, and the book The Snowball was released. The Snowball has not been written by Warren Buffett himself, but he has been involved when the author Alice Schroeder wrote the book. After I've read The Snowball, I realized that some facts in the book The Warren Buffett Way wasn't completely correct. This is exactly why you should read books about investors written by the investors themselves, or in closely collaboration with the investors.

One famous investor who has written several books about himself and how he thought when he analyzed stocks is Peter Lynch. He has written several books, and I've read two of them: One Up On Wall Street, and Beating the Street. If you are going to read one book about Peter Lynch, you should read One Up On Wall Street - the book is on my top-5 list on books to read about stocks. The book Beating the Street was a great book as well, but not as good. However, you may find some interesting quotes from the latter book:

Why it is easier for an amateur to make money from stocks - compared with professionals:
The individual is free of a lot of the rules that make life difficult for the professionals. As an average investor, you don´t have to own more than a handful of stocks and you can do the research in your spare time. If no company appeals to you at the moment, you can stay in cash and wait for a better opportunity. You don't have to compete with the neighbors, the way professionals do, by publishing your quarterly results in the local shopper.
Always invest in companies you can easily understand:
Never invest in any idea you can't illustrate with a crayon.
Professionals are sometimes wrong. If I recall correctly, one can hear the same old thoughts from Jim Rogers in 2012:
The lone panelist to sound an alarm in 1987 was Jim Rogers, who in 1998 rang the alarm bell once again, warning of an impending collapse of stock prices around the world. But nothing happened in 1988. Jim Rogers also thought that we were going to get a worldwide depression like we saw in the early thirties. Friends of mine, sophisticated people and not easily frightened, were talking about taking the money out of banks and hiding it at home, because they thought the money-center banks might fail and collapse the banking system.
When choosing a fund, don't try to chase the latest hottest fund out there, pick one with a consistent track record:
This is another national pastime, reviewing the past performance of funds. Yet with few exceptions, this turns out to be a waste of time. The lesson here is: don't spend a lot of time poring over the past performance charts. That's not to say you shouldn't pick a fund with a good long-term record. But it's better to stick with a steady and consistent performer than to move in and out of funds, trying to catch the waves.
You don't have find new stocks to invest in:
The best stock to buy may be the one you already own.
Professionals are losing money on stocks, the key here is to sell the losers and not add more to the position. The famous trader Paul Tudor Jones always said: "Losers Average Losers" - or losers are buying more when the stock is moving down:
There's no shame in losing money on a stock. Everybody does it. What is shameful is to hold on to a stock, or, worse, to buy more of it, when the fundamentals are deteriorating. That's what I tried to avoid doing. Although I had more stocks that lost money than I had 10- baggers, I didn't keep adding to the losers as they headed for Chapter 11.

September 24, 2012

David Einhorn - He who predicted the fall of Lehman Brothers in 2008


Most investors and traders remember the fall of Lehman Brothers in 2008 with horror, but the hedge fund manager, David Einhorn, made money from the crash. David Einhorn was born in 1968 and graduated in 1991 from Cornell University with a degree in Government. He has been described as an independent, original thinker who isn't afraid to stand on the conviction of his ideas.
    After finishing his college degree, David Einhorn wanted to work for the CIA, but decided to work for the investment bank Donaldson, Lufkin & Jenrette. He didn't like the job, and instead he joined the hedge fund SC Fundamental Value Fund where he worked until he founded the hedge fund Greenlight Capital with $1 million in 1996. Originally he wanted to get a PhD in Economics, but he got rejected from every program to which he applied to. 
    David Einhorn is a board member of the charity organizations Michael J. Fox Foundation and the Robin Hood Foundation. The Robin Hood Foundation was founded by the hedge fund manager Paul Tudor Jones and the goal of the foundation is to help poor people in New York. One other contributor to the foundation is George Soros - another hedge fund manager - who gave a contribution of $50 million to the foundation in 2009.
    While not analyzing stocks, David Einhorn plays Bridge, but he's most famous for being a skilled poker player. In 2006, he finished in place 18 in the World Series of Poker, and he finished in 3rd place in the 2012 World Series of Poker Big One for One Drop Tournament. One note here is that he gave the price money to different charity organizations. He has also paid $250,100 in a charity auction to have a lunch with the famous investor Warren Buffett. Poker and investing are actually not that different from each other. "Both poker and investing are games of incomplete information," he said. "You have a certain set of facts and you are looking for situations where you have an edge, whether the edge is psychological or statistical."

On his own
The hedge fund Greenlight Capital is long-short, value-oriented, and has generated more than a 20 percent annualized net return for its partners and investors. Today, the hedge fund manages about $7 billion of capital.
    David Einhorn is famous for criticizing the rating agencies. Moody's sovereign risk team has only four professionals covering twenty countries in Asia and the Middle East. Moody's does not have a long-term quantitative model that incorporates changes in the population, incomes, expected tax rates, and so forth. They use a 12-18 months short-term outlook to analyze data to assess countries abilities to finance themselves. David Einhorn criticized them because they lower the rating of a country or company after an event has happened. Two examples here are Lehman Brothers and AIG. The rating agencies Moody, Standard & Poor, and Fitch Ratings all maintained at least A ratings (a good rating) on AIG and Lehman Brothers up until September of 2008. Lehman Brothers later had to shut down, and AIG had to be rescued with a large bailout. If these three large rating agencies couldn't see that these companies were bankrupt - why do we need these rating agencies? "The truth is that nobody I know buys or uses Moody's credit ratings because they believe in the brand, they use it because it is part of a government-created oligopoly and, often, because they are require to by law," David Einhorn said.
    One other investment made by David Einhorn was Apple. Greenlight Capital bought the Apple stock in 1999 at $14 per share, and later sold the shares for $18 in 2000 - a profitable investment. Apple is currently trading at $700 per share. Greenlight Capital later purchased Apple again, but at a much higher price. 
David Einhorn is negative to the Japanese debt-mountain and believes that the probability of a Japanese debt default is high. Japan may already be past the point when Japan can't reduce its ratio of debt to GDP over any time horizon, and thus can never repay its debts. The Japanese debt is currently financed by its own population. The problem is that the population in Japan decreases as the population get older because of demographic issues, and a smaller population can't finance a growing debt.  
    One asset David Einhorn is positive to is gold. Gold is often being criticized for just sitting in a vault earning no interest - but how much interest can you get on the bank account today? "But then I look at the other major currencies," he said. "The Euro, the Yen, and the British Pound might be worse. So, I conclude that picking one of these currencies is like choosing my favorite dental procedure. And I decide holding gold is better than holding cash, especially now, where both earn no yield."
    Gold is not a bet on inflation or deflation. Gold does well when monetary and fiscal policies are poor and does poorly when monetary and fiscal policies appear sensible. One should buy stocks in great companies, but David Einhorn believes that there's also room in the portfolio for some gold.

What David Einhor learned from his younger years at SC Fundamental Value Fund was to understand:
  • The nature of the business
  • The economics of the business compared to reported earnings
  • If the managements decisions are aligned with shareholder interests - David Einhorn doesn't like managers who don't answer questions directly
One of the analyzes made by Greenlight Capital is available in the book Fooling some of the people all of the time written by David Einhorn himself. The first chapter of the books gives a brief introduction to who David Einhorn is, and the rest of the book describes why the stock of the company Allied Capital is going to crash. David Einhorn began analyzing the company in 2002, but he had to wait until 2008 before the stock finally crashed. The shares of Allied Capital fell with 50 percent before the company was purchased in 2009 by Ares Capital.
    Greenlight Capital try to make money when a stock is moving up and when a stock is moving down, and they generally have a portfolio of companies with both types of long-short investments. The portfolio is always net-long - they have more long positions than short positions. In 2013, the average distribution between the positions looked like this: 109 percent long and 72 percent short.

  • It may take a very long time before the underlying value of a company is reflected by the stock price. David Einhorn analyzed the company Allied Capital in 2002, but had to wait until 2008 before Allied Capital finally crashed. The famous investor Peter Lynch always said that it takes between 3 and 10 years before the underlying value of a company is reflected by the stock price.
  • Professionals make mistakes. Both David Einhorn and Peter Lynch missed the large gains of the Apple stock. 

Source: Wikipedia, ValueWalk, Huffington Post, GuruFocus, Reuters, Bloomberg, Washington Post, New York Times, Scribd

Split of a second (crazy norwegians)

This is Split of a second - a breathtaking and nicely done documentary. It features a crazy Norwegian throwing himself out from a cliff and glides like a squirrel to the ground. Each jump involves a minute of flying time and they can only make seven jumps in seven days.

September 22, 2012

5 must read books about how you can sell and market your company

This is the distribution of your time when you are building a company:
  • 5 percent is the idea behind the company
  • 25 percent is the building of the product or service
  • 70 percent is the selling/marketing of the company
The number one reason to why a new company fails is that the founders of the company can't sell the idea. Some ideas can sell themselves if the ideas are good enough, but most ideas need some help to spread around the world. The best sellers can sell the worst idea, while the worst sellers can fail with the best idea. So, if you are building a company, you need to learn how to sell. Here are five good books about selling:

Crossing the chasm by Geoffrey Moore. This book is considered to be a bible if you would like to market a newly created company. The essence of the book is that when you are marketing a new company, you need to do it in several steps depending on the size of the company. Each step involves a certain type of target audience and you need to market differently to each target audience. Between step 2 and 3, there's a chasm you need to cross to reach step 3, hence the name of the book.  

The thank you economy by Gary Vaynerchuk. This book will tell you how to market your company by using the Internet. The author of the book used Twitter - and Twitter only - to market his wine business. He used to interact with people on Twitter, solving their problems involving wine, and he became some sort of expert on wine, and got more customers.

Influence by Robert Cialdini. The book will tell you how you can use different psychology principles to affect people. This book explains why the book above, "The thank you economy", actually works. One of the psychology principles covered in the book is "authority". The essence of the principle is that we as humans follow authorities. If we see someone in a black suit crossing the street despite a red traffic light, we follow him across the street. If we see someone wearing shorts, we wait until the traffic light turns green. This is what Gary Vaynerchuck did, he became an authority on wine, and his customers followed him. To be able to sell your business, you need to become an authority within your area. This book is similar to the book Predictably Irrational by Dan Ariely, and if you have the time you should read both. 

101 successful sales strategies by Stephan Schiffman. If you have never sold anything before, this book will give you an introduction to the art of selling. You can use the strategies from the book almost everywhere in every business area - not just online.  

Selling in a new market space by Brian Burns and Tom Snyder. This book will tell you how to sell something new no-one has ever heard about before. One example here is how to sell Trejdify. You can't tell someone that Trejdify is a social news site similar to Reddit where one can share and vote on the best business news. Almost no-one in the target audience will understand that. What you need to do is to change the description of the company to something people can understand. We changed the description to "online business newspaper where the readers are choosing the content". People will understand "online business newspaper" better compared with "social news site". 

Update! Since I made this list, I've discovered another good book on sales. It's called The Ultimate Sales Machine by Chet Holmes

The book's content is similar to other sales books - always prospect, write to-do-lists, etc. (That's is actually a good thing - it means you've learned something.) But it includes a few other pieces as well - including how to recruit sales people. 
Maybe the most important concept in the book is what is called "The Stadium Speech." The idea is that you should know enough to be able to sell your product/service to an entire stadium filled with people. What the author tells you to do is to change what you are selling. Let's say you are selling a kitchen. Tell that to the stadium and 95 percent will leave the stadium because they don't need a new kitchen. What you need to do is to change what you are selling into something else, such as "How to become a better chef." If you tell that to the stadium audience, then far more people will stay and listen to what you have to say. Then you just have to sneak in that kitchen you are selling into the presentation about how to become a better chef.   

September 19, 2012

Ryan Holiday explains how he can manipulate the media


The book Trust Me I'm Lying has been written by Ryan Holiday who's working as a media manipulator. The book will tell you how you can manipulate the media and how it has been done before. One may think that everything written today by the larger newspapers is the truth - but that is not always the case. The reporter on the newspaper may have been manipulated by a new group of people whose job it is to manipulate the media.

To find news stories, 89 percent of the journalists today are using blogs and other social media services such as Twitter. To manipulate the journalists, one has to begin with manipulating the blogs. Blogs are easy to manipulate - they are each day searching through the Internet for news stories - and they are desperate to find something to blog about. Many bloggers are making their money from ads - and to get money from ads, you need many users each day. To get many users each day, you need to write many posts - and if you write many posts, you don't really have the time to check the sources behind each story you publish. From the book, we also learn that many of the larger blogs are lying on purpose. They publish made up stories to get more traffic to their blogs.

Let's say that you come up with a fake story about Microsoft that goes viral across the Internet. After a while, someone discovers that the story was a fake one, and thus all the journalist have to admit that they were wrong. The people who read the first article and the article saying that the first article was wrong, they will still believe that some of the faulty facts from the first article is the truth. Most people will also miss the second article since these types of articles correcting faulty facts are often hidden somewhere in the newspaper.

Here's a video produced by Greepeace to manipulate the media:

The name of the person who submitted the video to YouTube is kstr3l and the description of the video says:
"This was a private send-off for Shell's arctic rigs (Kulluk and Noble discoverer) at the Seattle Space Needle. The rigs were visible outside the window. Incredibly, there was an obvious malfunction of the model rig that was supposed to pour drinks for guests."
To make the video go viral across the Internet, they published the video on a smaller blog written by Occupy Seattle. The video was later picked up by larger Internet sites like Gizmodo, and the local Seattle newspapers. To make it look even more real, the people involved created fake legal messages on behalf of Shell threatening bloggers who reported on the story. How are you supposed to know if this was a hoax - or not? How credible is Greenpeace if the produce fake videos? How are we supposed to know that future videos from Greenpeace are not also fabricated?

Source: Forbes

September 18, 2012

Never trust a journalist - or why we need services like Trejdify

I've recently found a research paper on the subject on which party Swedish journalists are voting on compared with what the people in Sweden are voting on. This is the result:

Party Journalists People
V 15% 5%
S 14 28
MP 41 12
C 4 5
F 7 7
M 14 34
KD 2 3
SD 1 3
Other 3 1

We can clearly see that there is a big difference between what the people in Sweden are voting on compared with what the journalists in Sweden are voting on. I believe that this is an important fact and that we don't always get the full picture from the newspapers.

The party most favorable by journalists is MP (Milj√∂partiet) - or the The Environmental Party the Greens translated to English. If you remember the earthquake in Japan in 2011, and the following Fukushima disaster, you might also remember that the news about the nuclear power plants spread around the world and everyone were terrified about the events. The stock market crashed and some people in Sweden bought those Iodine pills that are supposed to be good if you are exposed to dangerous radiation. Sweden is on the opposite side of the world from Japan, and the dangerous nuclear radiation from Japan could not have spread to Sweden. Many journalists compared the Fukushima disaster with the Chernobyl disaster - but you can't compare a Chernobyl reactor type with a reactor type from a modern nuclear power plant. This is what happened at Chernobyl:
"These events exposed the graphite moderator of the reactor to air, causing it to ignite. The resulting fire sent a plume of highly radioactive smoke fallout into the atmosphere and over an extensive geographical area, including Pripyat. The plume drifted over large parts of the western Soviet Union and Europe."
A modern reactor doesn't have a graphite moderator - the graphite has been replaced with water - and water can't ignite. So the spread of the dangerous radiation can't become as great as the spread from the Chernobyl disaster. Why didn't journalists mention this when scientists during the Fukushima disaster mentioned it? You had to dig really deep through the Internet to find out why the spread of dangerous radiation could not have reached Europe. I'm not saying that nuclear power is not dangerous - of all the nuclear power plants in the world, 20 percent have dangerous graphite moderators, and I believe that we should close these power plants. Living close (within 30 km) to a nuclear power plant is also still dangerous.

In the end many countries decided to shut down their nuclear power plants. One other interesting fact is that the MP party in Sweden also want to shut down the nuclear power plants. Is this a conflict of interest? Can we expect that journalists write objectively about nuclear power - or will their writings be influenced by what they themselves believe in?

This is exactly why we need social news services like Trejdify, Digg, Reddit, and Hacker News. These content aggregators publish articles made by journalists and amateur bloggers. The big difference is that it is the people - not the journalists - that determines which of the articles are the best.

September 15, 2012

Random Show Episode 18

A new episode of the Random Show with Kevin Rose (founder of Digg) and Tim Ferriss (author of The 4-Hour Workweek) is out! This is episode 18.

Ep18 THRQ7 from Glenn McElhose on Vimeo.

Lessons learned:
  • TF explained how you can find out whether a book is good or not by reading the most shared quotes on the Amazon Kindle site


If you want to watch the rest of the episodes, you can find them here:
The Random Show with Kevin Rose and Tim Ferriss

September 12, 2012

Case Study: The worlds greatest amateur investor according to Peter Lynch

Little is known these days that the famous investor Peter Lynch used to write columns labeled Investors Edge in the Worth Magazine. Most of these columns are not available online, so if you have them somewhere at home, please make them available to the rest of the world. One of the columns is however available online. The topic of that column is "Charlie Silk's 150-Bagger". In the column, Peter Lynch tells the story about Charlie Silk who was using the same methodologies as being used by Peter Lynch to find great stocks.

Charlie Silk used to run his own data-processing company, and since he had experience from that industry, he bought shares in the company Cook Data Services. The company sold software programs to oil and gas companies, didn't have any debt, had $4 per share in cash, and the stock itself was selling for $3. Charlie Silk bought as much as he could, and it proved to be a profitable decision. A couple of months later, Cook Data Services changed its name to Blockbuster Entertainment, and began renting video tapes to consumers. This was in the 1984 and only 30 percent of the US households owned VCR's to play the video tapes.

Charlie Silk talked directly with the management of Blockbuster, and one of the things he learned was that the revenues from the first Blockbuster store had doubled in the first 3 months after the opening. The customers could drive as far as 30 miles (48 kilometers) just to rent videotapes.

The Blockbuster stock increased 5 times between 1984 and 1985, but Charlie Silk didn't sell. He did not focus on the price of the stock, but on the company itself. Charlie Silk found the company before Peter Lynch himself had a chance to invest in it. The reason was that a Blockbuster store had opened in the same neighborhood as where Charlie Silk lived. Peter Lynch lived in a neighborhood without any Blockbuster video stores, so he didn't know about the company. Charlie Silk visited the stores himself, and he said:
"My sons and I would go over there on Saturday night and count cars. The parking lot was always packed."
Charlie Silk didn't sell when the analysts talked about that the US didn't need any more video stores, he had  seen the many customers in the store. Hard facts are often worth more compared with predictions from analysts.

The only mistake Charlie Silk made was to sell some stocks before the Black Monday crash of 1987. He didn't lose as much money has he could have short-term, but if he had kept his amount of stocks in Blockbuster Entertainment, he would have made 4 times his money. In the end, the Blockbuster stock had increased 150 times.

Source: Worth Magazine, May 1994 

September 11, 2012

What can the airliner SAS teach us about how to focus on our customers?

Source: Wikipedia

The book Moments of truth tells the story of how the Scandinavian airliner SAS went from an aircraft-focused company to a customer-focused company. Yes, you heard right, SAS used to prioritize their planes - not their customers. The book was written by the former SAS CEO Jan Carlzon, who was also responsible for the change of focus in the 1980s. I don't believe that it was the intention of the old SAS to not focus on their customers, no-one at the company did it on purpose. Many organizations today believe that they are focusing on their customers, but in reality they are focusing on their products.

If you are going to focus on your customers, you have to let the employees at the floor make up their own decisions - and it will always involve taking risks of making the wrong decisions. Sure, you may lose money short-term - but your customers will be more satisfied with your company long-term. If 10 million customers are meeting five employees each time they interact with the company, the total amount of meetings will be 50 million. You can't control these 50 million meetings with standardized rules and instructions from the top.

Lose money short-term while making money long-term
An American businessman stayed at a hotel in Stockholm before he went to the Arlanda Airport outside of Stockholm. At the airport, he realized that he had forgotten his ticket at the hotel.
The old way: SAS would have probably said something like: "No ticket, no flight!"
The new way: SAS gave him a temporary ticket while sending a car to his hotel to pick up his lost ticket. The ticket from his hotel arrived before the aircraft departed from Arlanda Airport. SAS probably lost money since sending a car to pick up a ticket is not free, but the customer was happy and could tell his friend about the event.

Speak the same language as your customers
Make sure your customers are understanding what you are saying. SAS offered a 50 percent discount to everyone aged below 27.
The old way: The discount was named Y50. No-one understood what it meant and no-customers used the discount.
The new way: The discount was re-named to the Hundred Note. The price of the ticket was 100 SEK, and everyone understood the meaning of the Hundred Note. The Result? 125,000 more customers the first summer.

Provide a service and a product
When you are oriented toward your customers, your are probably in the business of providing your customers with a service in addition to the basic product.
The old way: SAS is in the airline business.
The new way: SAS is in the service business, transporting people in the safest and most efficient way possible.

Adapt the product to the customers - not the other way around
The old way: The planes at the Copenhagen Airport were being positioned at the departure gate that was most convenient for the planes. The customers had to move around the terminal to find the plane.
The new way: The planes had to be moved around the airport to the departure gates most convenient for the customers.

Test if it works
Go on a holiday to see if everyone can take responsibility
The old way: Jan Carlzon took a two weeks long vacation at his country house. But as soon as he arrived, the phone began ringing, and it kept ringing with unimportant question from people at the office. After a couple of days answering the phone, Jan Carlzon had to go back to the office.
The new way: Jan Carlzon took a four weeks long vacation and the phone was silent during the four weeks.

September 8, 2012

How could Paul Tudor Jones predict the Black Monday 1987 crash?

Ask someone who was interested in the stock market in the 1980s to mention a day they will always remember, and the person will answer the Black Monday of October 19 1987. What happened on that day was that the Dow Jones fell with 22.61 percent. It was a bad day for all investors - but not for all traders. One trader who actually predicted the crash was Paul Tudor Jones. We are here going to explain exactly how he did it - and how you may do it yourself in the future.

To be able to understand the events of the Black Monday, we need to understand what happened in the markets the days before the crash. The Dow Jones moved from 777 in year 1982 to 1700 in year 1986 - that's 119 percent in 4 years. From that point and to August 1987, the Dow Jones moved up to 2700 in nine months. So the market had moved up very fast in a very short time, so the valuations were too high. These types of rapid movements are called parabolic curves, as seen in the image below.

Parabolic curve. Source: Chartpattern

If we draw a similar curve on the chart from the events around October 1987, we will find the following:

Dow Jones 1982-1988. Source: Yahoo Finance

Here's a more detailed chart:

Dow Jones 1983-1988. Source: Yahoo Finance

We can clearly see from the charts how the move before the crash of 1987 was parabolic, and how the crash began when the last "base 4" trend-line was crossed. The stock market has an historical tendency to accelerate downward whenever an upward sloping parabolic curve has been broken. This is a similar chart to the chart Paul Tudor Jones had before the crash. The same thing had happened in a similar crash in 1929, and Paul Tudor Jones had compared the chart from 1929 with the chart from 1987. He didn't know exactly when the crash would begin, but he had a plan drawn up to use when the crash finally happened.

We are not exactly sure what kind of plan Paul Tudor Jones had, but we know how Paul Tudor Jones finds the tops and the bottoms of the market. He has a very strong view of the long-run direction of the market and a very short-term horizon for pain. To find the bottom of a market, you need to test the bottom several times, sell if you haven't found the bottom, and buy again several times until you have found the bottom. You will end up with several small losses - and a big profit when you have finally found the bottom. That big profit is now hopefully larger compared with the small losses. Back in 1987, Paul Tudor Jones probably sold short several times as the market moved up - trying to make money when the market eventually would crash. He accumulated several small losses, but when the market crashed, he made a large profit. His fund's return after October 1987 had ended was 62 percent, and the fund's return after 1987 had ended was 200 percent.

It's also possible to see from the chart that it was a good idea to buy when the price had reached the "base 2" trend-line. Of course, the price could have continued to the "base 1" trend-line, but it can be something to have in the back of your head as a rule-of-thumb, to be ready to buy when the price is close to one of the lower bases.

One other funny thing from the crash was that after the crash, the stock market was at the same levels as one year before. The companies were doing just fine, and it was probably a buying opportunity of a lifetime. The famous investor Peter Lynch was on a holiday in Ireland at the time of the crash and had to fly home to New York. He later said:
"The decline was kinda scary and you'd tell yourself, "Will this infect the basic consumer? Will this drop make people stop buying cars, stop buying houses, stop buying appliances, stop going to restaurants?" And you worried about that."

September 5, 2012

How to solve a problem like North Korea in a peaceful manner


Let's say you are living in a country like North Korea and one day you wake up and you say to yourself that you have had enough of this Kim Jong-un dictator. This is the day when you and your neighbors are going to take charge and once for all end the dictatorship that's destroying your country. The big question now is: What's the next step? How do you actually overthrow a dictator? The man who has the answer to your questions is Gene Sharp.

Gene Sharp was born in the US in 1928. He has always been a man of peace, so when he protested against the conscription of soldiers to the Korean War, he ended up in jail. He now faced a prison sentence that should have lasted 14 years. Before ending up in prison, he had begun to write a book about Mahatma Gandhi, another man of peace who contributed to the non-violent liberation of India from the British Empire. Gene Sharp asked no-one else than Albert Einstein if Einstein could write the foreword to his book about Mahatma Gandhi. Albert Einstein accepted, and using his connections with Albert Einstein, Gene Sharp had to spend only 2 years in prison. Gene Sharp would later found the Albert Einstein Institution - a non-profit organization advancing the study and use of strategic non-violent action in conflicts throughout the world. The video at the top features Jamila Raqib, who's working at the institute. There's also a documentary about Gene Sharp: How to start a revolution? if you are interested in learning more about him and his work.

Gene Sharp has written several books on the subject of non-violence. The most famous book is "From Dictatorship to Democracy - A Conceptual Framework for Liberation". If you ever need a manual on how to overthrow dictatorship - this is the book you should read. The book is available for free here and it's available in 27 languages. The book has spread around the world and did probably inspire the recent uprisings in the Middle East known as the Arab Spring. We know that the methods from the book were used in Serbia to successfully overthrow the dictator Slobodan Milosevic.

From Dictatorship to Democracy focus on how to destroy a dictatorship and how to prevent the rise of a new dictatorship. Destroying a dictatorship will never be an easy or a cost-free endeavor. Fighting dictators will bring casualties, but these casualties can be minimized if you use the findings from the book. As of 2008, 34 percent of the world's population lived in countries with extremely restricted political rights and civil liberties. Non-violent struggle could help these people as it helped the people when overthrowing dictatorships in Estonia, Poland, East Germany, Slovenia, Bolivia, and many other countries. We don't know for how long these non-violent struggles will last before the dictator falls, some took years while other struggles only took a few days.

One common alternative when fighting dictatorship is to use violence. Violent rebellion rarely works and could trigger a brutal repression by the dictator that leaves the people more helpless than before - like in the current conflict in Syria. The dictators often have a superiority in military hardware, ammunition, and transportation. Violent struggle worked in the Libyan civil war, but only because the outside world helped the "rebels" to bomb the tanks and fighter planes used by the dictator Muammar Gaddafi. Other often non-working alternatives are:
  • Guerrilla warfare - will last a very long time
  • Military coup - will replace one dictator with another dictator
  • Elections - are rigged by the dictator
  • External forces from the outside, such as the United Nations. Many foreign states will act against a dictatorship only to gain their own economic, political, or military control over the country. International pressure, such as economic boycotts, can be useful, but the people in the country are the ones who have to do the main push
  • Negotiations with the dictator - the dictator often refuses this alternative, or the democratic negotiators disappears mysteriously to never be heard from again 

In the end, liberation from dictatorships has to ultimately depend on the people's ability to liberate themselves. To get to this point, the first step is to understand the relationship between the people and the dictator. Dictators require the assistance of the people they rule, without which they cannot secure and maintain the power. If a dictatorship depends on the cooperation of people and institutions, then all you have to do is shrink that support. A dictatorship may appear to be strong - and the opposition may appear to be weak. But in reality, all dictatorships have some sort of weakness, such as personal rivalries and internal conflicts. These weaknesses tend to make the regime more vulnerable to resistance. Target these weaknesses and your revolution will have a greater chance of success.

To peacefully fight a dictatorship, you should use strikes and mass demonstrations. These two methods are not always enough since there are 200 other methods available to use. The use of a considerable number of these methods - carefully chosen, applied persistently and on a large scale - should cause the current dictatorship severe problems. Some of the 200 other methods are:
  • Selective use of various types of strikes - what happens if you stop the delivery of petrol?
  • Operating an underground press distributing anti-dictatorship material
  • People may report for work, instead of striking, but may work more slowly
  • Educate children at home to protect them from the propaganda by the dictatorship
Non-violence is the key here. It is not possible to combine non-violence with violence despite brutalities by the dictators. Here's a scene from the movie about Gandhi showing non-violence despite violence by the dictatorship:

If we return to North Korea, we know that it is up to the people in the country to solve their own problem, as we learned in the previous post: The impossible peace between South Korea and North Korea. South Korea doesn't want to be re-united with North Korea because of the costs involved.

Source: CNN