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The thesis of this book is that prices fluctuate in large, durable waves for reasons other than changes in money supply. The author refers to these waves as price revolutions that can last for over a century. By his definition, “each price revolution developed through five stages: slow beginnings in a period of high prosperity; a period of surge and decline; a time of discovery and institutionalization; an era of growing imbalances and increasing instability; and finally a general crisis.”

While he does not deny that money printing can cause prices to go up, Fischer challenges Milton Friedman’s credo that inflation is always a monetary phenomenon. “American economists whom I consulted,” writes Fischer, “believed that inflation in the twentieth century began with Lyndon Johnson and the war in Vietnam.” He asserts that historians generally fail to grasp the nature of price movements. Of the historians that Fischer claims to have talked with, “none remembered the medieval price revolution. Even medievalists expressed surprise and even skepticism, until they were invited to examine the data, which was largely unknown to them.”

This book provides abundant evidence of how price waves have been governed by human experience, social mood, and spurious events (i.e. black swans), instead of just money supply growth. Weather, population growth, technological change, pandemics, wars and famines, are just some of the reasons that Fischer cites. Instead of blaming inflation on changes in money supply sparked by greed and incompetence of governments, Fischer helps us appreciate that it’s not so simple. “A monetary explanation cannot tell us why people choose to expand the money supply in the first place,” he argues, “or why they do so in some periods more than others.”

David Hackett Fischer is an American scholar and university professor who devoted most of his life to the study of economic history.  He has written a dozen other history books beside this one, with his latest titled African Founders (2022), on how slavery expanded American ideals.  His best known book was Washington’s Crossing (2004), which won the 2005 Pulitzer Prize for History.  While his specialty and most of his works relate to U.S. history, he claims that the thesis in The Great Wave was inspired by his PhD studies at The Johns Hopkins University under Frederic Chapin Lane, who specialized in Medieval and Renaissance economic history.

While Fischer makes a convincing case that he backs with fascinating accounts and data, I couldn’t help but question some of his historical inferences. In a sense, this book is similar to Ray Dalio’s Principles for Dealing with The Changing World Order (2021), in that it uses observations of long cycles in history to draw conclusions about what comes next. Unlike Dalio, though, who seems to believe that he possesses the gift of clairvoyance, Fischer admits that the study of history cannot reveal the future. But after reminding us of that caveat, he concludes that “the evidence of this inquiry tells us that we are living in the late stages of a very long price-revolution, perhaps in the critical stage.”

Ironically, “today” for Fischer was almost 30 years ago, when technology was about to change the world by more than he could have appreciated. He postulated that the great price revolution of the 20th Century, which started in the late 1900s and included the inflationary surge in the 1970s, still had not peaked. He did not mention the internet, and could not have mentioned the iPhone, which was still ten years away, but he rightly observed that a “cycle” of deflation had taken hold in the 1990s. “It should be understood clearly,” he writes, “that the movements we are studying are waves—not cycles. To repeat: not cycles, but waves.” Good thing he left that door open, since a multi-decade cycle of disinflation was only just getting started as his book went to print.

Fischer does engage in plenty of generalization and oversimplification when he tries to frame the history of price movements over the last 4000 years. It’s interesting and fascinating to study the distant past, but in my opinion it’s a bit too ambitious to try to draw simple patterns from periods spanning centuries. While there are lessons to be gleaned from Fischer’s studies, we should not forget the English historian Herbert Fisher’s assertion that “all of history is one great fact, about which there can be no generalization.”

While not perfect, this was a worthwhile read that I would recommend to anyone interested in the history of inflation. It is well written and organized, and as Barton Biggs put it in his 1997 review of the book, “Fischer is no sensationalist trying to crank out a pseudo-economic best-seller, but a serious economic historian.”

Regards,

Adriano

HIGHLIGHTED EXCERPTS

PREFACE

With all of this material in hand, it is possible to follow the movement of prices through nearly four thousand years of recorded history. The interpretive opportunities in these sources are limited only by the reach of our imagination.

Deep change may be understood as a change in the structure of change itself. In the language of mathematics, deep change is the second derivative. It may be calculated as a rate of change in rates of change.

In other ways the new era of the late 1990s is entirely without precedent. A novel tendency in a period of disinflation is a very powerful inflation of asset values, and especially in the price of common stocks on many exchanges. Here again the cause is to be found outside the conventional frame of economic analysis, in social and cultural tendencies that have caused investment in certain classes of assets to increase more rapidly than the supply of assets themselves. We might have a major problem here, in what an historian would call a shearing effect, created by countervailing price movements.

The world changes faster than our thoughts about it. For example, in the late 1990s, central bankers in many countries continued to think of themselves as inflation- fighters in a new era when greater dangers rose from disinflation or even deflation. Economists in the 1990s (monetarists especially) predicted that large increases in the money supply would cause inflation to pick up again, as would have happened a generation ago. But other factors have been more powerful.

The Greeks called it hubris, and thought that it always ended in the intervention of the goddess Nemesis. That lady makes her appearance when wave- riders begin to believe that they are wave-makers, at the moment when the great wave breaks and begins to gather its energy again. Wayland Massachusetts D.H.F. June 1999

INTRODUCTION

Upswing in the thirteenth century . . . downswing in the later middle ages . . . upswing in the sixteenth century which breaks in the seventeenth century; a third upswing in the eighteenth century . . . what is the meaning of these movements?—Wilhelm Abel, 1935

If we study the Phelps- Brown-Hopkins index and others like it, we find that most inflation in the past eight centuries has happened in four great waves of rising prices. The first wave continued from the late twelfth century to the early fourteenth century, and has been called the medieval price-revolution. The second was the familiar “price-revolution of the sixteenth century,” which actually began in the fifteenth century and ended in the mid-seventeenth. The third wave started circa 1730, and reached its climax in the age of the French Revolution and the Napoleonic Wars. It might be called the price-revolution of the eighteenth century. The fourth wave commenced in the year 1896, and has continued since, with a short intermission in some nations during the 1920s and early 1930s. It is the price-revolution of the twentieth century.

Economists in the United States also have little memory of these historical events, except for the price- revolution of the sixteenth century, which is distantly remembered as proving the truth of the axiom that inflation is “always and everywhere primarily a monetary phenomenon,” as the American economist Milton Friedman wrote in another context. Otherwise, the author has found that price-revolutions in general are (with some exceptions) entirely unknown to most economists, political leaders, social planners, business executives, and individual investors, even as they struggle to deal with one price- revolution in particular.

Before we begin to study these relationships, a caveat is necessary. It should be understood clearly that the movements we are studying are waves—not cycles. To repeat: not cycles, but waves. One great price-wave lasted less than ninety years; another continued more than 180 years.

All great waves had important qualities in common. They all shared the same wave-structure. They tended to have the same sequence of development, the same pattern of price-relatives, similar movements of wages, rent, interest-rates; and the same dangerous volatility in later stages. All major price revolutions in modern history began in periods of prosperity. Each ended in shattering world-crises and were followed by periods of recovery and comparative equilibrium.

Today, we are living in the late stages of the price revolution of the twentieth century. Disaster does not necessarily lie ahead for us. This book does not predict the apocalypse. It does not attempt to tell the future. To the contrary, it finds that uncertainty about the future is an inexorable fact of our condition.

Many readers who are literate in economics will remember the special meaning of the Keynesian dictum that in the long run we are all dead. The events of the twentieth century should have taught us that this idea, in its most common application, is very much mistaken. American economist Herbert Stein, after a term of service in Washington, wrote ruefully in 1979, “we woke up to discover that we were living in the long run, and were suffering for our failure to look after it.”

THE FIRST WAVE

The Crisis of the Fourteenth Century

The king was seized and tightly bound. A red- hot iron was driven slowly upward through his anus until it penetrated his brain. It is said that his dying screams could be heard for miles across the Severn Valley. The folk memory of this event is still alive in Gloucestershire. Some swear that the death cry of Edward II can still be heard in the silence of a moonless night.

These disorders, cruel as they may have been, were not the worst of Europe’s sufferings. Famine, pestilence, war and insurrection returned repeatedly to Europe during the 1320s and 1330s. Some places— Tuscany for example— suffered worse famines in the period 1328– 30 than in 1315– 20. Prices surged and declined in great swings. The rural population shrank, arable lands began to be abandoned, and peasants grew poorer. At the same time, some of the rich continued to grow richer. This was the period when the French popes lived in high luxury at Avignon. Pope John XXII (1316– 34) spent vast sums for jewels and ornaments and gold cloth for his vestments. Papal banquets were served on gold plate beneath gilded frescoes and ceilings. Petrarch protested that even the papal horses were “dressed in gold, fed on gold, and soon to be shod in gold if God does not stop this slavish luxury.” The cardinals accumulated great wealth; one Prince of the Church required 51 houses for his servants. Similar scenes were enacted in royal courts and noble households.

Meanwhile, the peasants suffered and the poor starved. The generation born in this age of crisis was so debilitated by hunger, disease, exploitation, war and disorder that a few years later it succumbed to a still greater catastrophe, the worst in world history.  In 1346 a Tartar army besieged the Genoese town of Caffa (now Feodosia) in the Crimea. The attackers were stricken by plague, and converted their misfortune into a weapon of war— catapulting their dead into the city in a deliberate attempt to spread the infection. This tactic succeeded so well that the Genoese abandoned the city and fled in their galleys through the Black Sea, the Aegean and the Mediterranean, carrying with them the plague that came to be called the Black Death. By October 1347, the Black Death had established itself in Sicily, and spread swiftly to Africa, Sardinia, Corsica and the mainland of Europe. In January 1348, it reached Venice, Genoa and Marseilles, where 56,000 people died. By June it crossed the Alps and Pyrenees. England was infected by December, and Scotland and Scandinavia by 1349. A few cities miraculously escaped— Milan, Nuremberg, Liège, and several fortunate regions such as Bearn, as well as much of eastern Germany and Poland where the population was sparse.

The Equilibrium of the Renaissance

The new Ottoman Empire was a mixture of light and shadow. It was created by slaughter and maintained by terror. Sultan Mehmed II alone was thought to have been responsible for the murder of more than 800,000 people. But brutal as the Turks may have been, they were humanitarians by contrast with some of the despots whom they destroyed. One of their enemies was the sadistic Vlad Dracul of Wallachia— the original Dracula who ordered mass murders merely for amusement, and once impaled and crucified 20,000 captives in a single orgy of violence. The Turks drove Dracula from power.

Throughout that region, a remarkable transformation occurred in the life of the mind during the quattrocento. “Ever since the humanists’ own days,” writes historian Hans Baron, “the transition from the fourteenth to the fifteenth century has been recognized as a time of big and decisive changes.” During the early decades of the fifteenth century, Florentine humanists such as Leonardo Bruni, Coluccio Salutati and Poggio Bracciolini produced a literature which celebrated republican virtue, the rule of law, and the power of reason.

THE SECOND WAVE

The Equilibrium of the Renaissance

The starving poor, driven to desperation by rising food prices, gathered before the granary in such numbers that some were crushed and others were suffocated. The surging crowd broke down the doors and attacked the granary, crying “Palle, palle,” the nickname of the Medici who had so often helped them in the past.

In 1498, the people of Florence began to blame Savonarola himself for their misfortunes, and turned savagely against their spiritual leader. On the eve of Ascension Day they burned him at the stake while the mob jeered, “Prophet, now is the time for a miracle.”

The Price Revolution of the Sixteenth Century

What set this change- regime in motion? There are many answers in the literature: monetarist, Malthusian, Marxist, and more. As the evidence continues to grow, many historians (including this one) have come to believe that prime mover of the price-revolution was a revival of population growth, which placed heavy pressure on material resources. …  The growth of population caused the price of food to rise, faster and farther than that of other commodities. Industrial products and wages lagged behind.

In an environment that was rapidly losing its forest cover, the rising price of firewood and charcoal soon outstripped even the cost of food. After 1530 or thereabouts, the price of wood in all its forms (including charcoal) increased more rapidly than that of grain or meat or any other commodity. Wood prices rose sharply in England, France, Germany and Poland. Energy prices were among the most volatile in the long inflation of the sixteenth century.

Some people, more than others, were able to respond to rising prices. As a consequence, social imbalances began to develop. At the beginning of the price- revolution, wages had risen more or less together with the cost of food and shelter. While they did so, there was a heady sense of high prosperity. In later stages of the price- revolution that pattern changed. Money- wages lagged behind the rising cost of living, and real wages fell sharply. By 1570 real wages were less than half of what they had been before the price- revolution began.

The largest part of this increase was American silver and gold, which flowed abundantly into Europe after 1500. The cause of the price- revolution of the sixteenth century has often been attributed to this single factor: large imports of American metal, which increased the quantity of money in circulation, and reduced its purchasing power by expanding its supply. In light of much historical research, this monetarist explanation must be revised, without being rejected. American treasure could not have been the first cause of a price-revolution. Prices began to go up as early as 1480, many years before American silver and gold arrived in Europe. In England and Germany, prices nearly doubled during the half century before American silver could have had a significant effect on their economies. … The evidence shows that American treasure contributed in a major way to the momentum of the price revolution, but did not set it in motion, or sustain it to the end. … The effect of vast new supplies of gold and silver was to support an existing economic trend and to intensify its effect.

Monetary theory explains why an increase in the supply of money drives up prices. It cannot explain why the money- supply increases in the first place, except by introducing the monetarist’s favorite diabolus ex machina in the form of corrupt and incompetent politicians who are believed to be too stupid or weak to understand the monetarist’s favorite remedies.

The same processes worked in other ways. Another monetary factor (small by the measure of American treasure but still important) was the mining of precious metals within Europe, which also expanded during the sixteenth century. The great inflation created a voracious hunger for a larger circulating medium. Old mines were reopened at heavy expense. Once again, most of this activity came after the price- revolution had begun.

The Crisis of the Seventeenth Century

As these very dangerous trends continued, the western world experienced a major disaster. In 1591, the weather turned wet and cold. European peasants watched helplessly as their wheat and rye were beaten down in the fields, and their hay crops rotted in the meadows. The same thing happened the next year, and the year after that, and altogether seven years running. In France, the wine harvest was late and small from 1591 to 1597. Grain crops fared even worse. English historian W. G. Hoskins observed, “the 1594 harvest was bad; 1595 was even worse; 1596 was a disaster; 1597 was bad too.” This was more than merely a short spell of bad weather. It was a shift in the climate— one of several sharp downturns in the early modern era that have been called collectively the “little ice age.” The decade of the 1590s was so cold that Alpine glaciers began to send rivers of ice through inhabited valleys. In 1595 the Giétroz glacier buried the villages of Martigny and killed seventy people. Disasters of the same sort happened at Grindelwald and Chamonix and the Val d’Aosta. 4 Similar events had happened before, but in the 1590s they came at a time when the economy was dangerously overstrained. Families had little in reserve. Food riots broke out in many parts of Europe. As the troubles continued, people began to starve. A season of scarcity grew into a massive famine that was called the “great dearth.” There were terrible scenes of suffering in many parts of Europe. A Swede wrote in 1597:

The combined effect of rising mortality and falling fertility caused a reversal of demographic growth in the seventeenth century. This was the only period after the Black Death when the population of Europe actually declined. As if these sufferings were not enough, a major economic collapse occurred in the period from 1610 to 1622. This was more than merely a cyclical downturn. It was a major break in the secular trend. Historian Ruggiero Romano observed its effects almost everywhere in Europe. In the Baltic, the number of ships passing through the Danish Sound reached its peak near the year 1600, and then after a period of fluctuation declined steadily for more than fifty years.

These works were dark visions of a disordered world that seemed to conspire against human hope and happiness. At the same time, Cervantes produced perhaps the greatest masterpiece of Spanish literature, Don Quixote (1605, 1615), which for all its mordant humor was a sad and bitter description of a world that had dissolved into social chaos.

In Poland, Catholic nobles destroyed most of the Protestant churches in that nation. In the Ukraine, the revolt of the Cossacks was in part a religious movement. Throughout central and eastern Europe, the people of Russia, Poland, and Germany expressed their unhappiness in the customary way, by slaughtering the Jews. Chmielnicki’s rebellion in Poland was wildly antisemitic. From 1648 to 1658, more than 700 Jewish settlements were destroyed; perhaps 100,000 Jews were killed. 

Beyond doubt, a long- term improvement had taken place during the intervening years in productivity, production and per capita income. Markets had become larger and more tightly integrated. Even the worst miseries of this dark era were measures of material progress. During the crisis of the fourteenth century, high medieval civilization had collapsed. In the crisis of the seventeenth century, the civilization of early modern Europe was shaken to its deepest foundations. But it survived.

The Equilibrium of the Enlightenment

At the same time that wages rose, rents came down. France’s pioneering price historian the Vicomte d’ Avenel calculated that the rent of one hectare of farmland fell from the equivalent of 12.8 francs in 1651– 75 to 7.5 francs by 1701– 25. Subsequent research by academic specialists has confirmed his general findings in France, England, Italy, Germany and most parts of Europe. Interest rates also declined in this period. The maximum lawful rate of interest in England fell from 10 to 6 percent in the seventeenth century. Further, economic historian H. J. Habakkuk discovered that interest actually charged by moneylenders declined even more sharply than the legal maximum. During the general crisis of the seventeenth century, English creditors had tended to charge the highest allowable rate. By the century’s end, actual rates had fallen below the statutory limit. French rentes declined from 10 to 4 percent. In England by the year 1735, the yield on long annuities sank as low of 3 percent. Dutch commercial loans drifted downward to 2 percent or even less in this period.

What was the “secret of stability” in this age of equilibrium? A simple monetarist model, that seeks an explanation of price movements primarily in terms of the quantity of money in circulation, works no better for this period than for any other. New research by Michel Morineau finds evidence that American treasure flowed abundantly into Europe during the period 1660–1730, in quantities almost (but not quite) equal to the price- revolution that preceded it. But this time there was no long- term inflation. In France, a large increase occurred in the supply of silver and gold in circulation during this period. Voltaire estimated that the quantity of silver money increased from five hundred million livres in 1683 to twelve hundred millions in 1730. Modern economic and social historians generally agree that the quantity of gold and silver doubled or trebled in France during this period. But the cost of living did not go up. Further, the French monetary system in particular also suffered many debasements between 1660 and 1730. One scholar writes that “recoinage after recoinage so altered the value of the real money of France that it caused serious economic difficulties at home and abroad. . . . Only with the great monetary reform and consolidations of 1726 did this era end.” But prices did not rise. Other monetary systems were more stable than that of France. Dutch guilders and rixdollars remained perfectly stable from 1691 to the nineteenth century. British guineas, Venetian ducats and Portuguese crusados also preserved their value. In Europe as a whole, however, price stability in this period was achieved not because of monetary factors but in spite of them.

The great cities, as always the barometers a civilization’s health, prospered throughout Europe in this period. London was rebuilt to the taste of Christopher Wren and Inigo Jones, and took on the neoclassical character that it preserves to this day. Paris became the metropolis of Europe— its beautiful squares and broad boulevards began to be laid out in this period. Berlin as late as 1654 had been a small river settlement of about 5,000 inhabitants; by 1740 it had become a stately city with nearly 100,000 people. Vienna was transformed from a grim medieval fortress town into an imperial capital of great beauty. The Schönbrunn palace was begun in 1695 and the Belvedere in 1717. The city’s great baroque churches and state buildings date from this period.

The turbulence of the early and mid-seventeenth centuries came to an end in many European states during the period from 1660 to 1740. English historian J. H. Plumb observes that “political stability, when it comes, often happens to a society . . . as suddenly as water becomes ice.”

“In the seventeenth century men killed, tortured and executed each other for political beliefs; they sacked towns and brutalized the countryside. They were subjected to conspiracy, plot and invasion. This uncertain political world lasted until 1715, and then rapidly began to vanish. By comparison, the political structure of eighteenth century England possesses adamantine strength and profound inertia.”

Many rulers were called “great” in this era: Louis Le Grand, Frederick the Great Elector, Frederick the Great, Peter the Great, Catherine the Great. These leaders were no more able than many of the failed monarchs who preceded them in the seventeenth century. The enlightened despots of Europe were consumed by vanity and greed. They quarreled incessantly with other princes, and squandered both the wealth of their nations and lives of their subjects on petty and destructive rivalries. But an age of equilibrium is kind to reigning kings. A reputation for greatness in a monarch often owes more to circumstance than to character.

The man who personified this era better than any other was Francois Marie Arouet (1694– 1778), better known by his pen name, Voltaire.

THE FOURTH WAVE

The Price Revolution of the Twentieth Century

“Wages chase prices, prices chase wages, and both chase their past history.” —Clyde Farnsworth, 1977

The institutionalization of inflation in the twentieth century was not limited to price and wage regulation itself. Systemic restraints were placed also upon supply. Many nations imposed limits on production: farm products in the United States, oil in Saudi Arabia, coffee in Colombia, gold in South Africa, and many other commodities throughout the world. International cartels pursued the same policy where they were able to do so. The classic example was the price of diamonds, which the De Beers syndicate inflated to many times their market value by restrictions on supply and other methods.

The Troubles of Our Time

This policy of using high interest rates to control high inflation had many economic and social effects. It increased inequality, discouraged investment, diminished productivity, reduced demand, and drove up unemployment. Ironically, in some ways it also promoted inflation. The cost of housing, for example, rose sharply in part because home construction was inflated by builders’ capital costs, which increased with the rate of interest. Interest-rate manipulation was a very powerful instrument of economic policy. Its impact was much broader than it was meant to be.

As the pace of population-growth diminished, rates of inflation also fell in the 1990s, with a speed that took experts by surprise. Inflation forecasts were repeatedly revised downward, but not fast enough to keep pace with the new trends. In 1994, economic forecasters around the world swallowed hard and predicted that prices would rise only 3.5 percent the next year. In fact, they rose 2.6 percent. A journalist who studied the accuracy of economic forecasts observed in 1995, “Over the past couple of years, inflation has been consistently lower than expected in Britain and America.”

All that was happening in the Spring of 1996, when this book went to press. The end of the story has not been written. It could end in many different ways. So fragile were the major trends that contingencies of various kinds threatened to disrupt them. A major war in the Middle East or eastern Europe or some other trouble spot could reignite inflation. A collapse of overvalued security markets could cause panic, depression and deep deflation.

CONCLUSION

WORKS ON THIS subject often end with a book of Revelations, or at least a chapter of Jeremiah, in which the reader is warned that we are heading for disaster— unless the author’s ideas are speedily enacted. These dark prophecies find a growing market with modern readers, who appear to have an insatiable appetite for predictions of their own impending doom. Even when prophecies fail, they are merely updated and sell briskly once again. They call to mind the career of the Reverend Samuel Miller, a Baptist minister in nineteenth century New England, who predicted that the world would end no later than December 31, 1843. When the fatal day approached, the Prophet discovered an error in his computations. He announced that the last trump had been rescheduled to March 21, 1844. His followers grew to many hundreds. They donned special “resurrection robes” and gathered to await the day of judgment. But Samuel Miller found another mistake in his arithmetic, and postponed the end of the world once again, this time to October 22, 1844. The faithful were undeterred. Their numbers rose so high that on the appointed day, business came to a halt in parts of New England. But Samuel Miller revised his numbers yet again and went on prophesying until his end arrived— without warning— in 1849. Those who believe that the economic future has been revealed to them should remember the story of Samuel Miller.

The first stage was one of silent beginnings and slow advances. Prices rose slowly in a period of prolonged prosperity. Magnitudes of increase remained within the range of previous fluctuations. At first the long wave appeared to be merely another short-run event. Only later did it emerge as a new secular tendency. … Food and fuel led the upward movement. Manufactured goods and services lagged behind. These patterns indicated that the prime mover was excess aggregate demand, generated by an acceleration of population growth, or by rising living standards, or both.

The first stage of every price-revolution was marked by material progress, cultural confidence, and optimism for the future. The second stage was very different. It began when prices broke through the boundaries of the previous equilibrium. This tended to happen when other events intervened — commonly wars of ambition that arose from the hubris of the preceding period. Examples included the rivalry between emperors and popes in the thirteenth century; the state- building conflicts of the late fifteenth and early sixteenth centuries; the dynastic and imperial struggles of the mid-eighteenth century; and the world wars of the twentieth century. These events sent prices surging up and down again, in a pattern that was both a symptom and a cause of instability. The consequences included political disorder, social disruption, and a growing mood of cultural anxiety. The third stage began when people discovered the fact of price inflation as a long-term trend, and began to think of it as an inexorable condition. They responded to this discovery by making choices that drove prices still higher. Governments and individuals expanded the supply of money and increased the velocity of its circulation. In each successive wave, price- inflation became more elaborately institutionalized. A fourth stage began as this new institutionalized inflation took hold. Prices went higher, and became highly unstable. They began to surge and decline in movements of increasing volatility. Severe price shocks were felt in commodity movements. The money supply was alternately expanded and contracted. Financial markets became unstable. Government spending grew faster than revenue, and public debt increased at a rapid rate. In every price-revolution, the strongest nation-states suffered severely from fiscal stresses: Spain in the sixteenth century, France in the eighteenth century, and the United States in the twentieth century. Other imbalances were even more dangerous. Wages, which had at first kept up with prices, now lagged behind. Returns to labor declined while returns to land and capital increased. The rich grew richer. People of middling estates lost ground. The poor suffered terribly. Inequalities of wealth and income increased. So also did hunger, homelessness, crime, violence, drink, drugs, and family disruption. These material events had cultural consequences. In literature and the arts, the penultimate stage of every price-revolution was an era of dark visions and restless dreams. This was a time of lost faith in institutions. It was also a period of desperate search for spiritual values. Sects and cults, often very angry and irrational, multiplied rapidly. Intellectuals turned furiously against their environing societies. Young people, uncertain of both the future and the past, gave way to alienation and cultural anomie. Finally, the great wave crested and broke with shattering force, in a cultural crisis that included demographic contraction, economic collapse, political revolution, international war and social violence. These events relieved the pressures that had set the price-revolution in motion.

Sequential Differences: Even as all price- revolutions shared a common wave-structure, they differed from one another in duration, magnitude, and range. These differences were not random variations. They comprised a coherent process of historical development from one great wave to the next. Since the twelfth century, price- revolutions have succeeded one another in a continuous sequence of historical change. Several sequential patterns of this sort can be identified. The most obvious was a change in rates of change. From one wave to the next, average annual rates of price- inflation tended to increase geometrically: 0.5 percent in the price- revolution of the thirteenth century; a little above I percent in the very long wave of the sixteenth century; nearly 2 percent in the shorter wave of the eighteenth century; and at least 4 percent in the price- revolution of the twentieth century. This acceleration was caused by the expansion of markets, and by the institutionalization of price- increases. Second, as rates of change increased, a larger proportion of total price gains became concentrated in the later stages of each price- revolution. In the medieval price- revolution, absolute magnitudes of gain were comparatively even in their distribution through time. In the price- revolution of the twentieth century, more than half of the total increase in prices from 1896 to 1996 happened after 1970. Nine- tenths of it came after 1945. This pattern was caused by acceleration in rates of price- change from one price- revolution to another. Third, the range of annual fluctuations diminished from one wave to the next. In the medieval price- revolution, these gyrations were very violent and dangerous, mainly as a consequence of changing harvest conditions. Food prices tended also to be less stable when people lived closer to the margin of subsistence. In each subsequent price- revolution, those movements became less extreme, and fluctuations were damped down. The growth of production created surpluses, which functioned as price- cushions. The expansion of markets and the improvement of communications also diminished the disruptive effect of local scarcities and seasonal oscillations. Fourth, from one wave to another, the final stage of cultural crisis became progressively less catastrophic. The medieval price- revolution ended in the massive famines and epidemics of the fourteenth century. The second wave culminated in the general crisis of the seventeenth century. This was the only period after the Black Death when the population of Europe declined, but not as much as in the fourteenth century. The third wave had its climax in an age of world revolutions (1776– 1815), a time of many troubles, but population continued to increase. The price- revolution of the twentieth century has yet to reach its climax. Fifth, as each successive crisis grew less severe in demographic terms, it became more sweeping in its social consequences. Every general crisis caused a social revolution, and the radicalism of these events increased through time. The crisis of the fourteenth century did much to end villeinage in western Europe, and to transform societies based on conquest and subjugation into customary systems of orders and estates. The general crisis of the seventeenth century transformed political systems and expanded the rule of law in Britain, America and Europe. The revolutionary crisis of the eighteenth and early nineteenth centuries (1776– 1815) made public institutions in America and Europe more responsive to the will of the people, and more protective of their individual rights. It also transformed systems of social orders into classes. The great wave of the twentieth century has not yet reached its end, but it has already caused the collapse of totalitarian systems of the left (eastern Europe) and the right (Latin America), as well as sweeping social and economic reforms in many nations. Every general crisis in modern history has improved the condition of ordinary people. It has also enlarged ideas of human dignity, freedom, and the rule of law. This tendency has become more powerful in each successive wave. To summarize, each price- revolution developed through five stages: slow beginnings in a period of high prosperity; a period of surge and decline; a time of discovery and institutionalization; an era of growing imbalances and increasing instability; and finally a general crisis. The climax was followed by a fall of prices, recovery of stability, and a long period of comparative price equilibrium. The social and cultural impact of these movements changed from one great wave to another. Velocity increased and variability declined. Each successive price- revolution became less catastrophic in its demographic consequences, but more sweeping in its social impact.

The most simple and straight- forward explanation of price- revolutions is the monetarist model, which holds that price levels are determined by the quantity and velocity of money in circulation. This explanation has major strengths, and has made an important contribution to knowledge. Much research has established beyond doubt that monetary factors make a major difference in price levels. But when monetarist models are introduced as the first cause of price-revolutions, difficulties appear. The timing is never quite right. The price- revolution of the sixteenth century, for example, began as early as 1475, thirty years before the first American treasure reached Europe, and fifty years before it began to flow in quantity. Further, a monetarist model cannot account for many aspects of a price-revolution. It alone cannot explain the movement of price- relatives, or the disparity between prices and wage movements, or the difference in returns to labor and capital. It does not help us to understand why prices and interest rates tend to rise together in long inflations — the Gibson paradox, which is a major problem for monetarists. A monetary explanation cannot tell us why people choose to expand the money supply in the first place, or why they do so in some periods more than others. Increases in the supply of money are not suddenly visited upon history as Zeus came to Danae, in a shower of gold. People deliberately decide to change the size of the money supply, for one reason or another. In the history of these events there is always a prior cause. Moreover, the monetarist model works better for some periods than others. It does well for middle and later stages of price revolutions, but badly for early stages, and for periods of price equilibrium. Its explanatory power increases when it is used as an historical variable rather than a theoretical constant. In some periods, monetary forces are strong and overriding. In others they are weak and secondary. Altogether, Wilhelm Abel observes from long and careful study that “Long- term trends in the price of grain . . . cannot be explained adequately by fluctuations in the circulation of money, though that has been attempted since the time of Jean Bodin (1568). Even when improved forms of the simple quantity theory are summoned to the rescue, the discrepancies of time apparent in the course of the price movements remain inexplicable.”  In short, a monetary model is a necessary and important part of any causal explanation of price- revolutions, but it is not a sufficient explanation. Monetarism alone won’t do.

Still the hardest questions remain. Where are we heading? What does the future hold for us? The study of history does not give us the answers to these questions. It cannot reveal the future. But it helps us to understand the present and very recent past. The evidence of this inquiry tells us that we are living in the late stages of a very long price- revolution, perhaps in the critical stage.

In economic history, equilibrium is the exception rather than the rule. A free market restores equilibrium only to break it down again, and to set in motion a new sequence of imbalances and instabilities with all the troubles that follow in their train. In the full span of modern history, most free markets have been in profound disequilibrium most of the time— often dangerous and destructive disequilibrium. A third fact is also frequently forgotten. In our complex and highly integrated modern economies, there are no truly free markets any more. The free market in the twentieth century is an economic fiction, much like the state of nature in the political theory of the eighteenth century. Markets today are highly regulated and actively manipulated by both public and private instruments. The real question is not whether we should interfere with the market, but what sort of interference we should make, and who will make it, and what its extent will be.

The historical record of the past eight hundred years shows that ordinary people are right to fear inflation, for they have been its victims— more so then elites. … Price-revolutions and the long-term inflation that they engendered have caused major social problems in the past eight centuries. But there is another difficulty. Recent anti-inflationary policies have also done major damage in other ways, and sometimes even in the same ways.

If both inflation and anti-inflationary policies have caused trouble, what should we do?

Many heads of government, leaders of corporations, business managers, economic theorists, and private investors have very little historical understanding of economic processes which they confront. Ideas and solutions are drawn from one set of historical circumstances (often very recent) and applied to others where they do not fit. The corrective is not merely historical knowledge. It is also historical thinking.

Important progress has been made in the use of interest rates as a way of regulating an economic system. This method was first applied on a large scale by the Federal Reserve Board as recently as 1966. In three decades it has become an indispensable instrument of economic policy throughout the world.

APPENDICES

The people of ancient Rome experienced repeated price-revolutions, which closely coincided with the rhythm of Roman political history. One great wave reached its climax in a major time of troubles for the early republic, circa 240–210 B.C. Another coincided with the collapse of the republican institutions. In between, there was an intervening period of comparative price stability.

Cycles and Waves Frank Manuel once remarked that every idea of history comes down to either the circle or the line.

A very different institutional model comes from economic historian Peter Lindert, who has framed the counterhypothesis called the “Robin Hood Paradox,” which holds that “across time and jurisdictions, redistribution toward the poor is least given when most needed . . . Robin Hood shows up least when needed most.” (“Toward a Comparative History of Income and Wealth Inequality,” in Brenner, Kaelbe and Thomas, eds., Income Distribution in Historical Perspective,” 226–29

The reason of a thing is not to be enquired after, till you are sure the thing itself be so. We commonly are at what’s the reason of it? before we are sure of the thing. —John Selden, Table Talk, 1689

NOTES

Daniel J. Boorstin, “Enlarging the Historian’s Vocabulary,” in R. W. Fogel and S. L. Engerman, eds., The Reinterpretation of American Economic History (New York, 1971), xi–xiv.

Homer, History of Interest Rates, 160.

BIBLIOGRAPHY

Every early American historian with whom I discussed this work expressed entire ignorance of the fact that prices were rising in the eighteenth century. All American economists whom I consulted believed that inflation in the twentieth century began with Lyndon Johnson and the war in Vietnam. Most scholars in both disciplines were aware of the price-revolution in the sixteenth century, but nearly all believed that it was a simple reflex of the supply of American treasure in Europe. None remembered the medieval price revolution. Even medievalists expressed surprise and even skepticism, until they were invited to examine the data, which was largely unknown to them.

ACKNOWLEDGMENTS

This book began nearly forty years ago at The Johns Hopkins University, where I studied economic history with Frederic Chapin Lane. Fred, as I later came to know him, was a scholar of the old school. His special field was the Venetian economy during the late Middle Ages and the Renaissance. Mine was (and is) American history, but I took a graduate course with him and found myself deeply drawn to the example of his scholarship. One course led to another, and then to a doctoral field under his direction on the economic and social history of Florence and Venice in the fifteenth century.

While I was teaching at Oxford, I got to know Henry Phelps-Brown whose work revolutionized price history by centering it on the experience of ordinary people, and correcting the elitist bias that had dominated earlier scholarship.

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John Illsley was the bass guitarist and one of the founding members of Dire Straits, my favorite band. I like this band so much that even my teenage boys, who aren’t diehard fans, can sing along to their many classic songs that I have played to them since they were babies.

Illsely was one of the founding members of Dire Straits in 1977, with the Knopfler brothers and drummer Pick Withers.  While Illsley was not fond of standing out with his base sound (no chord slapping), he played a major role in developing the band’s musical style, as well as in keeping the members together over the years.  In 1980 they added keyboardist Alan Clark, who modernized the band’s music and played a big role in the hit albums Making Movies (1980), Love Over Gold (1982), and Brothers in Arms (1985).

Mark’s brother, David, who played rhythm guitar, left the group after fighting with Mark while they were recording Making Movies, and wasn’t even credited in the album.  The band members “took a break” in 1988, but reunited a couple of years later to release On Every Street (1991), which was one of my favorites. Both Knopfler and Illsley went on to release solo albums after the break, with Knopfler venturing into country music and even making an appearance on Saturday Night Live in 1990.

Illsley and Knopfler have remained friends and by some accounts, Illsley has repeatedly asked Knopfler over the years to re-form Dire Straits, but to no avail.  Towards the end of the book Illsley discloses that with the help of a therapist, he has found inner peace in Hampshire, England, where he lives with his second wife. He also has four children and four grandchildren.  Having turned 73 in June, he spends much of his time painting, but also owns a couple of local hotels and a nearby pub called the East End Arms, situated in the New Forest National Park.

As with most books I venture to read, I was able to draw several great lessons on investing from Illsley’s biography, ranging from the importance of the band’s focus and perseverance in its early years, to the critical role that team dynamics played in their success. For example, Illsley recognized early on that his role as a base player was not to stand out, but to serve as a foundation, or the anchor, if you will, for the band.  He played this role not only with his instrument, but through how he interacted with the other members.

The Knopfler brothers had their issues, and this took its toll on the band during its early years. Illsley claims that Dave never accepted that it was his brother who ended up with all the attention when it was he who introduced Mark to the group. While I like their early material, there is no denying that the band blossomed after Dave left.  That said, Illsley claims that some of Mark’s best material was produced when he was confronting his darkest times.  But like other great bands and companies that thrive, Dire Straits was able to evolve and adapt to a changing world.  This ability is one of the most important attributes of outstanding organizations and is something we look for in our investments.  The magic doesn’t last forever, but when we conclude that it’s gone, we sell. Likewise, when Mark Knopfler decided it was time to end the gig for good, he did so with conviction and has never looked back.

According to Illsley, everyone understood that Mark was a genius and the star of the band.  They all looked up to Mark and drew inspiration from his brilliance and creativity.  “Without Mark, there was no Dire Straits,” Illsley writes, “but each of us brought something to the collective effort.” Interestingly, or better yet, impressively, Illsley claims that “Mark isn’t crazy about being the center of attention. He’s shy and modest.” Having a super star that is shy and modest wasn’t the only thing that set Dire Straits apart from the bands of the time.  They drank the occasional pint and smoked the occasional joint, but by Illsley’s account, “no one had anything like a serious problem with drink or drugs; it was just a case of how we unwound, dulled the post-gig buzz, and the lack of sleep that entailed.”  It was an unspoken rule, but one that was never really broken, that there would be no drinking before shows.

So, all told, this was an excellent book that I would recommend, even to those who are not Dire Straits fans.  Illsley comes across as a humble and likeable guy who you’d want as a friend and a mentor.  The book is well written and has some hilarious stories and passages that were probably unknown to the general public.  It was also a quick and easy read, which always helps.

Regards,

Adriano

HIGHLIGHTED EXCERPTS

Chapter 2:  Night Flight to Luxembourg

Our parents probably thought the guitar was the instrument of the devil, but they feigned indifference, happy, I guess, that at least we were learning to play an instrument and not smoking cigarettes down by the railway tracks (although we did that as well!). We had a basic chord book and some sheet music and, once I had mastered where to put my fingers, Will showed me some simple chords on his acoustic, starting with the three basic blues ones, E, A, and B. I found it very hard, but I persevered for hour after hour, barely emerging from my room all day in the holidays and at weekends, at first going from E to A, and from A to E, then expanding the repertoire until my fingers hurt and my brain was fried. You have to really want to learn to play the guitar, or any instrument. It’s why there are so many barely used guitars lying around in the world’s bedrooms, attics, and basements. It takes endless practice to break through and get to the stage when it becomes automatic and you’re not thinking about it, just feeling it.

The Rosetti Lucky Seven was a very crude instrument, but it was probably a good thing that I had to learn the craft the hard way. (Both Keith Richards and George Harrison also learned to play on a Rosetti and, for that reason alone, it deserves an honorable mention in the Rock ’n’ Roll Hall of Fame.)

When I upgraded to a half- decent Hofner, I was delighted to discover that not all guitars are born or built equal. It was like getting behind the wheel of a Mercedes after passing my test in a Robin Reliant.

Chapter 3:  Banjos, Beatings, and Bass

I was sixteen then, in my third year, and from that day on the art room became my sanctuary, a refuge from the harsher world beyond. It was the day I realized there was always a way out of whatever hell you might find yourself in. There was always sanctuary somewhere, be it in art, music, or the company of a good man. Or woman. “I’ll be here all the time,” Don said. “Come in whenever you like, even if you just want to hang out and chat.” The older I have become, the more I have come to respect John Hedley, but at the time it was very hard to imagine him making the same offer, and I needed no second invitation from Don to indulge in his company and enjoy his outlook on life and art.

Chapter 6:  Mr. Knopfler, I Presume?

There was a man lying on the cement floor fast asleep— the promised carpet had never materialized— and his head, propped against the only chair, was at right angles to his body. The guy had an electric guitar across his chest. To one side of him, the giant square ashtray spilled over with a thousand butts; on the other sat a couple of empty bottles of Newcastle Brown Ale. His face, sheet- white, revealed a hint of David. This must have been the brother he had mentioned. He stirred and groaned, and an eyelid unstuck itself. “Cup of tea?” I asked. When I came back, he had cleared up the cigarettes and the beer bottles and I heard him splashing his face in the bathroom. I picked up his guitar, a Gibson Les Paul Junior. Nice. He came back in and I handed the tea to him. He held out his hand and, in a mellow Geordie accent, he said, “Mark, by the way. Mark Knopfler, David’s brother.” “I guessed as much. Heard a lot about you. John— John Illsley. Nice one.” He sat down on the only chair and I perched on the old sofa bed I had found in a builder’s skip a few weeks earlier. We fell into an easy chat about this and that. I took to him at once. There was a natural air and softness about him, and you could see him thinking hard before he answered a question. The conversation drifted toward music and he picked up his Gibson and started playing. He plucked a few strings and twisted the tuning pegs. Then he really started playing, messing around with riffs and snatches of tunes. He had a curious finger- picking style. I had never seen anyone play a guitar like that, but even just fooling around, it was a great sound— a bit country, a bit rock— but fresh and original. Dave was right— his brother could play.

Chapter 7:  Punks on the Lawn

I played with the Café Racers now and then, and over a pint after one gig, Mark said, “Why don’t we put a band together?” Not long after, he played me a song he had been working on. He had called it “Sultans of Swing,” the name of an amateur jazz band he and Dave had seen playing in a half- empty Greenwich pub, just a bunch of ageing guys playing music for the sheer love of it. He played it on his newly acquired red Fender Stratocaster through a 1960s Vibrolux amp that I had recently given him. This was the moment when I realized something special was going on. It was just him and his Strat but, not long into it, I became aware I was listening to lyrics and a melody of true craftsmanship and originality. He still has the Strat and the Vibrolux today. Bought for a hundred pounds or so, the guitar is probably worth about £ 30,000 on the open market— and a great deal more on account of its owner.

A week later, we were in the apartment and I was messing around with some reggae sounds on my bass. Mark said, “Hey, that might just work on this song I’ve been toying with since that art exhibition. I’ve called it ‘In the Gallery.’”

There have been a number of stories about how the name Dire Straits came about, but we are in broad agreement that it probably came from a keyboard- playing pal of Pick’s north London roommate Simon Cowe, who was in the band Lindisfarne. We’d agreed to keep rehearsing together and to start hunting down some gigs, so we needed a name. Simon apparently said to Pick, “You’ve never made any money, mate, and you’re always in dire straits. How about that? Dire Straits!”

Punk was in full cry at the time, and I have to confess, apart from a few acts like the Clash and the Sex Pistols, I was no fan.

It made perfect sense. It was angry music, almost anti- music. That was the point of it, wasn’t it? To distort, to pervert, to mock, to do away with harmony and craft, and the anarchy of its outlook was reflected in the tuneless chaos of the “songs.” But they weren’t stupid, these guys, at least not the leading proponents of the movement. Some were putting on an act, and the best of them were consummate performers. Maybe that was because quite a few of them were middle- class lads who had been to art or drama school.

Looking back now, you can see it all more clearly. At the time, we never really thought about our identity. I don’t think we gave much thought to the fashions of the day, so there was no “look.” We didn’t belong to a movement or aspire to be part of one. As a band, we were developing our own style and identity— an attitude that we maintained from then on. Disco and punk were the dominant, happening sounds of the day, and the drift was toward what would become known as “new wave,” with bands like Talking Heads, Elvis Costello and the Attractions, the Police, Squeeze, the Boomtown Rats, and Blondie. We were just doing our own thing in a musical world of our own, and if people liked what we did and there was an appetite for it, then great, so much the better. That was a bonus.

Mark was in a highly creative period and soon we dropped the cover versions and we could fill the show with our own songs.

Chapter 8:  Five Hundred Pounds

By the time we made our way up the steps to 2a Grosvenor Avenue, we were in pretty good shape, musically. We didn’t have the time, money, or need to put all our songs down. We just needed the best possible versions of the ones we’d chosen: “Sultans of Swing,” “Wild West End,” “Water of Love,” “Down to the Waterline,” and one by Dave called “Sacred Loving.”

It was a strange experience to hear ourselves coming out of the speakers— it was as if it wasn’t us, but another band. The sound quality was great and the version of “Sultans,” in particular, was excellent. It sounded very pure. There are many people who believe that this is the best recorded version of the song we ever made, and I’m inclined to agree. Who knows? I love it. It’s a strange phenomenon, a song. You can play it a thousand times, but every single version is very slightly different. Again, it all goes back to feel, to the band clicking and syncing in a particular way, plugged into the same mood and vibe. [AA comment:  flow]

A bit of a cheer went up as we entered and, as we approached the bar, we got a slap on the back and some broad grins. “Well done, well done. Amazing! Brilliant news.” “What is? What are you on about?” “The radio! Charlie Gillett played ‘Sultans of Swing’ on the radio this morning.” “You’re bloody kidding!” “No, and it gets better. He said ‘Sultans’ was one of the best new songs he’s heard in years and that he was going to play it every Sunday until someone signed you guys up.” After that, as you can imagine, we drank a lot of pints.

Chapter 9:  Panic in the Shower

About a week later, the whole band were invited for an evening at a Greek restaurant up in Paddington, not far from Virgin’s offices. It was hilarious— like something out of a film. On arrival, we were ushered into a private room where there were quite a few extremely attractive women, all of whom worked for Virgin and none of whom were overly or formally dressed. A waiter came in with a tray of ready- rolled joints. At dinner, each of us sat next to one of the women and there was a quite a lot of wandering- hand business under the table, and those hands were not ours.

Chapter 10:  Off with the Heads

On the subject of hygiene, we were amused and surprised to discover that the [Talking] Heads never cleaned their guitars and only changed their strings when one broke. Even then, they would replace only the broken one, not the whole lot, as was standard practice. Mark and Dave changed theirs every other day.

We had our own instruments, of course, and Mark brought a couple of pedals, but otherwise we shared the equipment with the Heads, walking on and just plugging in. The Heads were very gracious and generous about us using their kit and also in their appreciation of us as their support act, always clapping and slapping our backs as we came off. Remarkably for a support act, we were getting encores from the first gig. Ordinarily, the audience can’t wait to get you off and get into the main act, so it was flattering to be called back on. That could have been awkward with other, less charitable bands than the Heads, but they were genuinely delighted for us. On a couple of occasions, they even asked Mark and me to come on and play “Psycho Killer” with them.

Without Mark, there was no Dire Straits, but each of us brought something to the collective effort.

There are way too many to name, but dozens of great bands and artists have recorded some of the biggest singles and albums of all time at Basing Street: the Stones, Bob Marley, Led Zep, Queen, the Who, Madonna, George Michael . . . the list really does go on and on.

Chapter 11:  Wolverhampton Woe to Marquee Magic

So out it came, we held our breath, drum roll and . . . pretty much nothing happened. First time out, “Sultans” barely troubled the charts, peaking at number thirty- seven. The length of it, the version of it— who knows why it failed to make a splash. Of course we were disappointed, but there was the album to come and the tours to promote it, so we got on with preparing for our first UK tour with us as the headline act. Rejection and public indifference are part of the experience for an aspiring band, just as they are in the book world. Both industries have produced countless tales of famous bands and authors who were turned down or ignored for years before breaking through. We were mature enough to understand and weather these harsh facts of life.

Mark had been writing fresh material out on the road for the second album, and we had played a few of the songs at our gigs. It was amazing that he had the time, energy, and inspiration when there was so much going on. I just wanted to go to bed. He was getting close to having a full complement of songs for the second album, which was to be recorded at the end of the year, including “Single- Handed Sailor,” “Lady Writer,” “Where Do You Think You’re Going?,” and “News,” a particular favorite of mine.

Chapter 12:  Sessions in the Sun

There are many reasons why it’s hard to sell an album to a record company, and especially in the States, but the main difficulty is that you are not courting and wooing an entire market or audience but just one or two people in an office. If they don’t like it, that’s pretty well the end of the talks, possibly the end of a promising career and the extinction of a great talent.

For example, one time I was in the control room with Barry, who was doing most of the production hard work, and Pick was working on some percussion for the song “Single- Handed Sailor,” about the yachtsman Sir Francis Chichester sailing around the world.

The mixing of an album, very different from recording, is an interesting stage of the process when each element of the music is examined in detail. Mixing is a fine art, but we all had the opportunity to contribute to the end product.

Chapter 14:  The Night at the Roxy

In spite of being the heart of the band, and quite literally center stage, Mark isn’t crazy about being the center of attention. He’s shy and modest.

Chapter 15:  Into the Arena

Refueling with the usual after- gig refreshments may have given us short- term, nightly relief but, over a long tour, you pay the cumulative price, the compound interest of late-night snacking and pints and any other self- medication of choice. It was around then that I gave up smoking and, although there had always been an unspoken agreement not to drink before a gig, from there on we got a bit smarter about how we unwound afterwards too. No one had anything like a serious problem with drink or drugs; it was just a case of how we unwound, dulled the post- gig buzz, and the lack of sleep that entailed. The main problem was exhaustion and tensions inside the band and with girlfriends, who were always having to compromise. Ed remembers this period as the lowest in the band’s experience.

Mark had been struggling in his private life, and I was astonished that he was able to produce something so beautiful while being so distracted. But, thinking about it afterwards, I realized it was precisely because he had been troubled and anxious that he was able to be so creative. I doubt whether much, if any, great music, art, or literature has ever emerged from the souls of the complacent. A soul in a state of agitation has a better chance of producing great art than one at ease with itself.

Chapter 18:  Electric Power

One song that didn’t make it on to the album in the end was “Private Dancer,” mainly because, Mark rightly decided, it should be sung by a woman. The lines “I’m your private dancer, a dancer for money, I’ll do what you want me to do” just didn’t sound right coming from Mark’s mouth! He ended up giving it to Tina Turner— with spectacular results, but more of that later.

I have been privileged to know two great artists well in my lifetime, both great friends: Mark and Brett. Some people you meet have a special way of seeing the world and reinterpret it for the rest of us. Brett was one of those. He did the world great favors with the art he left behind— check it out, it’s mind- blowing— but he did himself no favors in the execution of it. He was tormented by demons. To achieve what he wanted in art, he’d explain, he needed to “nudge it along a bit” or “trick them up” with drink and narcotics. When he was off heroin, he used to throw back three massive whisky and orange juices then hurl himself into his work. He was a very gifted draftsman but felt he needed the boldness he thought stimulants gave him.

Chapter 19:  Brothers and Souls

“Brothers in Arms,” inspired by the recent Falklands War, was a slow, powerful, mournful song about the futility of war, embraced ever since by the Armed Forces as an anthem at charity fund- raising events.

I remember one afternoon when we were recording “Money for Nothing.” The “I want my MTV” line at the end was inspired by Mark seeing the Police talking on an ad for MTV and simply saying, “I want my MTV.” He’d mated that with a few notes from Sting’s composition “Don’t Stand So Close to Me.” In the studio, Mark happened to remark, “I wish Sting was here to sing this part.” And someone said, “Well, he is. He’s here on holiday!” So the next morning, warming up, Sting started singing, “I want my MTV,” over and over. And that was it. His work was done.

Chapter 20:  Jerusalem Syndrome

All El Al pilots doubled as fighter pilots with the Israeli Defense Force and it was sobering to hear them explain that if they got the call, they’d be scrambling into their cockpits in half an hour on the wrong end of God knows how many beers and cocktails. We hung out with them until about four o’clock in the morning and, as we said goodbye, all of us pretty smashed, we asked them when they were next on duty. Tomorrow, they said, crewing the 11 a.m. flight to Athens. That was our flight! We were a little nervous, hungover ourselves, as we boarded the 747 just seven hours later, but the pilots were as fresh as daisies when they greeted us. They even invited us into the cockpit for the landing . . . which went very smoothly, in spite of the pilots almost certainly being over the limit.

From Greece, we moved on in our massive caravan of tour buses and trucks to the Montreux Festival in Switzerland, where we were reunited with Sting and his new band, which included Omar Hakim on drums. I am not sure he and Terry chatted for too long, but it was great to see him and thank him for his excellent work. A few gigs earlier, Sting told us, just before going on stage, the band had approached him and the management, saying they weren’t going to play unless they were given more money. Sting said, “Fine, no matter, I’ll play by myself.” And he did, just him and his guitar in front of ten thousand people. The band were back on stage the next night.

A little name- dropping, if you’ll excuse me, purely in the interests of historical record, of course, but after the show we were visited backstage by Prince Albert of Monaco and Princesses Stephanie and Caroline. Royalty had found their way into our sweaty dressing room to pay their compliments and I am happy to report that they were charming— though not so charming that Mark would hand over his shirt, which was an unexpected request.

Chapter 21:  Live Aid Union

The tour resumed in Tempe, an inner suburb of Phoenix, Arizona, a city that receives only three centimeters of rain a year and where the temperature averages 100 degrees Fahrenheit in September. It was there that I made the mistake of smoking some local grass that was so strong I couldn’t leave my room for six hours.

Crazier still was our experience in New York, as our crew was forced to work under the tyranny of the Teamsters, the incredibly powerful labor union. They took complete control of setting up the three shows in Radio City Music Hall at the start of October, and our brilliant crew were left as mere bystanders and lackeys. It was so absurd that our lot were forbidden from even touching any of the equipment, let alone plugging anything in— heaven forbid— unless or until they were told to do so. They were all experts in their roles, but they had to follow the Teamsters guys around and wait for orders. It was a corrupt racket and they charged so much money that what should have been three lucrative sold- out gigs ended with our hardly breaking even. There was nothing Ed could do about it because they would just refuse to let us play, but it was still a true joy to play Radio City Music Hall, a historic venue inside the Rockefeller Center and home to the Rockettes precision dance company, famous for their kick- lines. It was the same story when we played Madison Square Garden on the penultimate night of the leg, the Teamsters taking most of the cash and bossing everyone around. But we just had to deal with it and, besides, we were playing “The Garden,” one of the greatest venues in the world, “the holy temple of rock ’n’ roll,” as Billy Joel puts it.

We kept the show on the road for so long, going from strength to strength, rather than into a slow decline and collapse, principally because we looked after ourselves. We never went face- down in a heap of coke, never smashed up a bar, never threw a TV from the window, drove a car into a swimming pool, or wheelbarrowed a harem of hookers around our hotel rooms. That may not be very rock ‘n’ roll, but at least it meant we could keep playing it.

Chapter 22:  New Worlds

We stayed in George Martin’s beautiful plantation house, waited upon by the lovely house staff.

Bob Dylan, for me the Picasso of music, has always been prepared to take risks. Never bothered by what others might think, he does what he likes.

In spite of being a smoker then, Mark never suffered a chest cold or a sore throat. There are no understudies in a band, so you have to play.

Chapter 23:  What Now?

It would take an entire page to list all Mark’s projects in the years that followed. He wrote scores for films such as The Princess Bride and Last Exit to Brooklyn, produced albums for other artists, including Randy Newman’s Land of Dreams, played on others, appeared live . . . He may have had enough of tour buses, but he couldn’t keep away from the music.

I was thirty- seven when the tour finished and I still wanted to be active, to get involved, to engage with the world in a new way. It was just a question of how and what.

Chapter 24:  Here We Go Again

As with Brothers in Arms, it was the four of us who came together for the pre- recording session— Mark, Guy, Alan, and myself— and, as last time, there was the same anticipation to hear the new material for the first time.

I have often wondered how Dire Straits’ music might have turned out had Mark played with a completely different set of musicians. It may well have sounded exactly the same, or very close to what’s out there today, but I doubt it.

Mark was only interested in producing the best result. If something wasn’t working, he was the first to say it.

Chapter 25:  When the Music Stops

I was only forty- three, fit as a springer spaniel and, unlike many of my peers in the music industry, I had no substance problems or health issues. That much was good. My body was fine. It was just my head that needed some maintenance work, my soul some nourishment.

It was a relief, and therapy of sorts, to discover that the only people more self-centered and demanding than rock musicians are young kids.

It is not to dishonor the good times I had with Pauline and Louise to say that my marriage to Steph has been the best thing to happen to me, not least in its production of two more delightful children, Harry in 1996 and DeeDee in 1998, both of whom, funnily enough, are very musical. James and Jess are both very happily married, to Beth and Moses respectively, and have two children each. So, a lovely wife, four children, and four grandchildren.

Acknowledgments

The Dire Straits phenomenon began after a chance meeting with Mark Knopfler in a council flat in south London. A remarkably gifted songwriter and musician, and one of my oldest friends, he continues to be a constant inspiration and an exciting person to know.

About the Author

About the Author John Illsley rose to fame as the bass guitarist of the critically acclaimed band Dire Straits. With Dire Straits, John has been the recipient of multiple Grammy Awards and a Heritage Award. As one of the founding members (with Mark Knopfler, his brother David and drummer Pick Withers) John played a major role in the development of the Dire Straits sound. When Dire Straits finished touring in 1993, John became involved in the art world. Having carved a reputation for himself as a painter, John had solo exhibitions in London, New York, Sydney, and across Europe. He also cofounded the children’s charity Life Education in 1987, which was recently integrated into Coram, one of the oldest UK charities. John also owns a pub, the East End Arms in the New Forest.

The post My Life in Dire Straits: The Inside Story of One of the Biggest Bands in Rock History appeared first on VII Capital Management.

While I had read about Tulipmania in other books, such as Charles Mackay’s Memoirs of Extraordinary Popular Delusions and the Madness of Crowds (1841) and Edward Chancellor’s Devil Take the Hindmost (1999), this was my first book dedicated to the topic.  I read it with the purpose of drawing parallels with Cryptomania, and I was not disappointed with what it had to offer on this front.  It tells the story of how a mysterious man called Carolus Clusius became known as “the greatest botanist of the sixteenth century, indeed one of the greatest of all time, the father of the tulip.” Like the myth of Satoshi Nakamoto, known as the “father of Bitcoin” for publishing a 9-page whitepaper in 2008 containing flowcharts and complex scientific equations (link), the myth of Clusius the Botanist added respectability to the practice of collecting tulips in the early 1600s.  Notably, Clusius was not the botanist’s real name.

The flower lovers of Clusius’s day had only a handful of tulip species to pursue, while the noblemen who collected them relied on specialists like Clusius to help them understand what they owned. The book mentions several tulip species that gained prominence and traded at absurd prices at the peak of the bubble, but Dash focuses on Semper augustus.  Anyone who had seen one professed that it was a living wonder, yet, according to Dash, “very few people ever had this privilege”.  Dash makes the point that the Semper augustus was practically never actually traded, and was so rare that there were simply no bulbs to be had.  But Clusius, who was only known by a few prominent connoisseurs, was said to hold a huge collection of Semper augusti that he would never sell.  Sound familiar?

Mike Dash is a British writer and his book was not only extremely informative, but a joy to read.  I second the NY Times comment that he “writes with unabashedly cinematic flair, backed by meticulous research.”  I don’t think Dash considers himself a scholar, but his historic research and bibliographic citations are impressive, as is his background.  He attended King’s College, which is where John Maynard Keynes got his higher Mathematics degree.  But Dash went to King’s to complete an obscure PhD thesis focused on British submarine policy between the Crimean and the First World Wars. He has published four other history books, including Batavia’s Graveyard (2002), which tells the story of a mutiny on one of the Dutch East India Company’s ships in 1628, and The First Family (2009), which recounts the birth of the American Mafia.  What I appreciated the most from Dash’s narrative is that it is unbiased and well-balanced.  Towards the end of the book, for instance, Dash makes the case that “even after sounding the necessary notes of caution about the reliability of the popular accounts, historians and particularly economists remain guilty of exaggerating the real importance and extent of the tulip mania.”  This comment inspired me to re-read Mackay’s chapter on the mania, and indeed, it seems a tad exaggerated.

Mike Dash

By the time Tulipmania climaxed in 1636, there were close to six thousand different tulips cataloged, and hundreds of Tulip brokers, who were called Florists. As with cryptos, there were many different options for speculating.  But that’s not where the parallels end.  The Black Plague had created a shortage of labor, which in turn resulted in a rise in wages as employers competed for manpower. But instead of rising to the challenge by getting a real job, many younger Dutch laborers wanted more. “The notion of creating a little tulip nursery came naturally to many people who began to call themselves florists. It was lot easier than working an eighty-hour week hammering horseshoes or working a loom,” Dash explains, “and because demand for the flowers was steadily increasing, prices, at least for the finer varieties, consistently rose. No wonder Dutchmen thought they had chanced upon the dream of every gambler: a safe bet. … It was with this backdrop that people of all walks of life suspended disbelief. Ignoring the customs of the connoisseurs, increasing numbers of florists progressed from trading only tulips that they had in their possession to buying and selling flowers that were still in the ground. Bulbs then ceased to be the unit of exchange; now the only thing that changed hands was a promissory note— a scrap of paper giving details of the flower being sold and noting the date on which the bulb would be lifted and available for collection.” I am not saying (although the parallel is hard to ignore) that cryptos are like tulips.  But I am suggesting that the stories of bubbles often rhyme, and that the bitcoin story sounds a lot like the tulip story.

I had never quite understood why tulips became an article of wild speculation, but this book helped me see it.  Again, as with Bitcoin, there is a story of limited supply.  As Dash explains:  “Most tulip bulbs will produce only two or three offsets a year and can do so for only a couple of years before the mother bulb becomes exhausted and dies. For this reason new varieties of tulips multiply only very slowly at first. Once a grower has identified, in a single flower of some new variety, great beauty or strength that he may be able to sell, he will have— even if all goes well— quite possibly only two bulbs the next year, four the year after that, eight in the next year, and sixteen in the fourth year of cultivation. If he parts with some of these bulbs, moreover, he limits his own ability to produce large quantities of the new variety. Plainly, then, it can take a decade for a new tulip to become available in any sort of numbers— and in Golden Age Holland, where propagation was a poorly understood mystery at best, the number of bulbs that were actually produced would have fallen well short of the theoretical maximum. Any rare and coveted variety would thus inevitably remain in short supply for a number of years, and there was nothing that even the most brilliant bulb growers could do to increase production to meet demand.”  Buy!

While it’s possible to find parallels among most (if not all) speculative manias in history, it’s the differences that interest me the most.  Most people conflate the bursting of speculative bubbles with economic ruin, but as I learned from this book, Tulipmania stands out as an exception on this front.  There are, of course, the tales about people who lost everything in the frenzy, but what most people perhaps don’t realize is that Tulipmania was a contained event that took no more than two months to play out, and it did very little damage except to those who were directly involved.  Dash writes that “by 1636, there were at least 360 different commodities traded on the Amsterdam exchange. Tulips, however, were not among them.”  Mackay wrote in his 1841 book that “regular marts for their [tulips] sale were established on the Stock Exchange of Amsterdam, in Rotterdam, Harlaem, Leyden, Alkmar, Hoorn, and other towns,” but I prefer to go with Dash, who claims that “speculation in tulip bulbs always existed at the margins of Dutch economic life, but it was conducted by amateurs, not professional traders, and was never subject either to the customs (however peculiar) or to the regulation of the stock exchange.”  As so often happens, many of the folk who got burned by tulips were largely “country people and poor city dwellers who had, when they started dealing in bulbs, almost certainly never owned a single share in their whole lives.”

In closing, this was an excellent history book that I would recommend to anyone interested in manias and the human proclivity to engage in dangerous speculations based on popular delusions wrapped in a seductive veil of complexity.

Cheers,
Adriano

HIGHLIGHTED EXCERPTS

A Note on Prices

1,600 guilders: Rembrandt’s fee for his greatest masterpiece, The Night Watch, 1642

5,200 guilders: highest reliably attested price paid for a tulip bulb, 1637

…a Disease that ruined several rich Families. (LONDON, 1743)

Chapter 1 – A Mania for Tulips

The date was February 5, 1637, the day flower fever reached such a pitch of frenzy in the United Provinces that once- worthless bulbs truly theatened to supplant precious metals as objects of desire. That day the tulip completed a journey that had begun hundreds of years before and thousands of miles away.

Chapter 2 – The Valleys of Tien Shan

Hundreds of years after this story was first written down, wild red tulips remained a favorite Persian token of undying love. “When a young man presents one to his mistress,” the seventeenth- century traveler John Chardin recounted, “he gives her to understand, by the general colour of the flower, that he is on fire with her beauty; and by the black base of it, that his heart is burnt to a coal.”

Chapter 3 – Within the Abode of Bliss

Bayezid is the first man in history who can be personally identified with the tulip.

Admittedly Constantinople was something of a shadow city by 1400, its decline reflecting the fading fortunes of its Byzantine rulers. In fact it was more than half empty, the seven long miles of its walls enclosing a town of no more than fifty thousand people, scattered now among what were effectively large villages separated by ruins, working farms, and orchards. But in size and situation and repute, it was still the greatest city in the world. It was fit to be the capital of the Ottoman Empire— and the new home of the tulip too.

In 1453, after a desperate siege lasting less than two months, Mehmed’s troops forced a breach in the walls, and the Turks poured into Constantinople. The last Byzantine emperor threw away his imperial insignia and sought an anonymous death in the press of the fighting. Then amid terrible scenes of massacre, the Ottomans took Constantinople and made it Istanbul.

Europeans who traveled to Istanbul during the high days of the Ottoman Empire that Mehmed and his successors now built were generally surprised not merely by the city’s size and opulence but by its masters’ manners and good taste. This was a city of culture and coffeehouses that tolerated the religious diversity of its inhabitants in a manner inconceivable in Europe.

Chapter 4 – Stranger from the East

Fortunately such a man existed. He was indisputably the greatest botanist of the sixteenth century, indeed one of the greatest of all time. He was to become, in important respects, the father of the tulip. His name was Carolus Clusius.

Chapter 5 – Clusius

Clusius was not his real name.  By now the botanist was at the height of his powers. A contemporary portrait shows a long-faced gentleman of obvious intelligence with a steady, piercing gaze.

Chapter 6 – Leiden

Most tulip bulbs will produce only two or three offsets a year and can do so for only a couple of years before the mother bulb becomes exhausted and dies. For this reason new varieties of tulips multiply only very slowly at first. Once a grower has identified, in a single flower of some new variety, great beauty or strength that he may be able to sell, he will have— even if all goes well— quite possibly only two bulbs the next year, four the year after that, eight in the next year, and sixteen in the fourth year of cultivation. If he parts with some of these bulbs, moreover, he limits his own ability to produce large quantities of the new variety. Plainly, then, it can take a decade for a new tulip to become available in any sort of numbers— and in Golden Age Holland, where propagation was a poorly understood mystery at best, the number of bulbs that were actually produced would have fallen well short of the theoretical maximum. Any rare and coveted variety would thus inevitably remain in short supply for a number of years, and there was nothing that even the most brilliant bulb growers could do to increase production to meet demand.

Chapter 7 – An Adornment to the Cleavage

It was a time of tremendous cultural progress. The arts flourished as never before, fueled not only by the establishment of Leiden and other universities and schools but also by the arrival of many painters and writers from the south.

Chapter 8 – The Tulip in the Mirror

Those fortunate enough to actually see a specimen of Semper Augustus in flower thought it a living wonder, as seductive as Aphrodite. In truth, though, very few people ever had this privilege. Although the tulip was endlessly hymned by the connoisseurs, illustrated in more tulip books than any other variety, and mentioned so frequently in connection with the bulb craze that it has become virtually synonymous with it, Semper Augustus was practically never actually traded. It was so rare that there were simply no bulbs to be had. The earliest mentions of the flower date only to the 1620s. By 1624— according to the Dutch chronicler Nicolaes van Wassenaer, who is virtually the only reliable source on the subject— no more than a dozen examples were then in existence, and all twelve were in the hands of a single man who was generally rumored to live in Amsterdam. The identity of this unknown connoisseur is one of the great mysteries of the tulip craze. Van Wassenaer is careful not to name him, and in the absence of any other evidence, it seems unlikely that the puzzle will ever be solved. This, perhaps, is what the reclusive connoisseur would have wished, because the chronicler makes it clear that he was determined not to part with his flowers at any price.

…who had none of the skills needed to breed varieties of their own and few of the connections necessary to obtain bulbs in the traditional way, had begun to enter the market. Some possessed extensive gardens and wished to cultivate tulips of many different varieties. These newcomers were forced to look elsewhere for their supplies.

Clusius and his circle of aristocratic friends possessed a low opinion of these first professionals, criticizing them for their often alarming ignorance of botany and despising their willingness to bestow crudely populist names on the new varieties that occasionally appeared— more, perhaps, by luck than judgment— in their gardens.

Chapter 9 – Florists

The notion of creating a little tulip nursery would have come quite naturally to many of the florists.

Here two of the most striking characteristics of Dutch society came into play: the urge to save and the urge to gamble. These impulses may seem quite contradictory, but in fact they worked together to fuel the tulip mania.

Compared to such insane wagers, tulips looked like a good investment. Growing bulbs was a lot easier than working an eighty- hour week hammering horseshoes or working a loom, and because demand for the flowers was steadily increasing, prices, at least for the finer varieties, consistently rose. No wonder Dutchmen thought they had chanced upon the dream of every gambler: a safe bet.

Chapter 10 – Boom

The tulip mania climaxed in just two mad months: December 1636 and January 1637.

The appalling impact of the plague had two significant consequences. One was that it created a shortage of labor and thus resulted in a rise in wages as employers competed for manpower;

From the autumn of 1635, then, the bulb trade changed fundamentally and forever. Ignoring the customs of the connoisseurs, increasing numbers of florists progressed from trading only tulips that they had in their possession to buying and selling flowers that were still in the ground. Bulbs then ceased to be the unit of exchange; now the only thing that changed hands was a promissory note— a scrap of paper giving details of the flower being sold and noting the date on which the bulb would be lifted and available for collection.

Chapter 11 – At the Sign of The Golden Grape

Vega (Wikipedia) does not mention what his small-time broker was hoping to buy or sell for his handful of guilders, but he had a considerable choice: By 1636 at least 360 different commodities were traded on the Amsterdam exchange. Tulips, however, were not among them. This fact may come as a surprise to those who assume that a financial calamity with the reputation that the tulip mania enjoys must necessarily have been serious and widespread and have had a significant impact on the stock market, on trade, and on the Dutch economy in general. Nothing could be further from the truth. The speculation in tulip bulbs always existed at the margins of Dutch economic life. It was conducted by amateurs, not professional traders, and was never subject either to the customs (however peculiar) or to the regulation of the stock exchange. The mania took, in fact, the form of a rough but intended parody of the trade in commodities and shares that flourished on the beurs. It was the province not of financiers experienced in the ways of business, but of country people and poor city dwellers who had, when they started dealing in bulbs, almost certainly never owned a single share in their whole lives.

Chapter 12 – The Orphans of Wouter Winkel

…was the first week of February, 1637. The boom time was over.

Chapter 13 – Bust

On this day, however, there were no bidders for the bulbs at 1,250 guilders. The auctioneer offered them again, this time cutting the price to 1,100 guilders. Still there was no interest. Desperately now, he offered his bulbs for a third time, dropping his price to a risible thousand guilders the pound. Once again there were no bids. … It took only a few days for the panic to spread through the rest of the United Provinces. In college after college and in town after town, desperate florists discovered that flowers that had been worth thousands of guilders only a day or two before now could not be sold for any price. A few dealers kept their heads and tried to stimulate renewed interest by organizing mock auctions or offering bulbs at huge discounts, but they were ignored. In most places the tavern trade crashed so completely that it was not even a question of prices falling to a quarter or a tenth of what they had been when the mania was at its peak. The market for tulips simply ceased to exist.

…where tulips could be sold at all, they fetched, at best, just over 5 percent of their old values, and often 1 percent or less. There can be no doubt, then, that this was a truly spectacular crash. Even if it was not more or less instantaneous in each of the towns affected by the mania— and it probably was— the collapse of the tulip trade certainly cannot have taken more than three or four months.

Amid all the confusion few florists seem to have understood exactly why the bulb trade had collapsed in such spectacular fashion. Yet in retrospect it is not difficult to see that the crash was all but inevitable.

Chapter 14 – Goddess of Whores

Few of the florists possessed enough money to be worth suing.

Chapter 15 – At the Court of the Tulip King

The new sultan was besotted by the flower, so much so that the tulip became the most prominent feature of his long reign, and the Turkish historian Ahmed Refik was moved to bestow the title lale devri, the tulip era, on the period. From the time of his accession in 1703, tulip mania bust forth again, in Istanbul this time. It was to rage on in the Turkish capital for almost three decades.

Chapter 16 – Late Flowering

The bulb industry views the destruction of the mosaic virus as one of its proudest achievements, and with good reason. It is the florists’ equivalent of the elimination of smallpox. Yet it can hardly be denied that something has been lost in the winning of this war. The infinite variety that each broken tulip could display is gone, and with it much of the flower’s capacity to fascinate and astound.

The flower lover of Clusius’s day had only a handful of species to enjoy, but now close to six thousand different tulips have been bred, described, and cataloged.

The most recent manifestation of the old virus occurred as recently as 1985, when a mania broke out in China that followed the template of the tulip craze almost exactly. In this case speculation centered on yet another bulbous flower, the jun zi lan plant, or Lycoris radiata— the red spider lily.

It would be wrong to see the Dutch tulip mania as unique. Similar booms— by which economists mean exceptionally rapid rises in prices— and bubbles (booms in which a commodity’s price quite outstrips what it is actually worth to anyone other than a speculator) have occurred all over the world throughout the last four hundred years. The objects of speculation vary from the obvious— stocks and shares, land and oil— to the unusual. In the United Provinces themselves there was a boom in investment in the passenger canal system begun in 1630— a genuinely useful development in the transport system that made many men rich— and during the 1670s a bubble involving the erection of elaborate public clocks.

An edition of the Miami Daily News published in the summer of 1925 ran to 504 pages, almost all of it real estate advertising— a world record at the time. It was said there were two thousand estate agents in Miami alone, employing 25,000 salespeople. The crash came in the autumn, as crashes often do.

Notes

…good early summaries such as Sir Daniel Hall’s The Book of the Tulip (London: Martin Hopkinson, 1929),

The most comprehensive general account, however, is undoubtedly Anna Pavord’s The Tulip (London: Bloomsbury, 1998).

The Dutch Republic: Its Rise, Greatness and Fall, 1477– 1806

Many of the short accounts of the subject are based on badly flawed popular studies, most notably Charles Mackay’s entertaining but misleading Memoirs of Extraordinary Popular Delusions and the Madness of Crowds (Ware: Wordsworth Editions, 1995), which remains in print today despite having originally appeared in 1841.

Ponzi Schemes, Invaders from Mars and More Extraordinary Popular Delusions and the Madness of Crowds [New York: Harmony, 1992],

The post Tulipomania: The Story of the World’s Most Coveted Flower & the Extraordinary Passions It Aroused appeared first on VII Capital Management.

I admit to being a Beatles fan, but the main reason I decided to read Bob Spitz’s 990-page book was that I figured there would be something to learn about team dynamics, and how it relates to investing.  The book is a must-read on that angle alone!  What I didn’t expect though, was how the Beatles story would captivate me and get better by the page.  Spitz does a fantastic job with facts and story-telling.  He succeeds in demonstrating how complicated it was to be a Beatle, and how much those four lads loved their music. Towards the end of their 10-year run as the most famous band ever, they hated each other – and yet, to the last day, they would get together for only one reason – to record great music.  It was on April 10, 1970 (link) that Paul McCartney officially announced that the Beatles were done for good, although John claims he quit first.  When asked why, Paul answered: “Personal differences, business differences, musical differences, but most of all because I have a better time with my family.”

Bob Spitz is an outstanding biographer.  On his website (https://bobspitz.com/) he lists four of his more recent books beside this one.  They include Barefoot in Babylon (2014), which tells the story of the Woodstock Music Festival, a Biography of Ronald Reagan (2018), and one of Led Zeppelin (2021). Early in his career, Spitz worked as a manager for Bruce Springsteen and Elton John, so he’s clearly been around the block.  Indeed, Spitz has been a writer for a long time.  He published a biography of Bob Dylan in 1988, and a book on the New York Knicks 1970 NBA title (1995).  The Beatles: The Biography, was my first Spitz book, and it won’t be the last.

As Spitz pointed out in the End Note, “when the band split, McCartney was all of twenty-nine years old; John and Ringo, thirty; and George, twenty-seven.”  That they were young goes a long way in explaining their many mistakes, as do their rocky upbringings, and the zeitgeist of the period.  They all took drugs, but it was only John who really lost it because of the drugs, and that only really happened after Yoko introduced John to heroin. Spitz paints John as a selfish and cruel individual, but also a bit of a mad genius, while Paul comes across as a control freak.  The book leaves no question that it was Paul who deserves the credit for keeping it together, but then again, Paul and John did more working together than each would ever have done on their own. “Through it all,” Spitz writes, “John and Paul continued to write, with blocks of time devoted to working in their comfort zone: eyeball-to-eyeball.”  This was true even when they were already fighting, and it didn’t apply to just John and Paul.  When Ringo walked out in 1969 (link), “it didn’t take long for the Beatles to appreciate his absence. A week later a telegram arrived at Ringo’s Mediterranean beach retreat, begging him to return to the studio. Needing no further invitation, he reached Abbey Road on September 9, in time to participate in an uproarious remake of Helter Skelter.” Spitz paints Ringo as a nice guy, but some of my Google searches revealed plenty of dirt. For example, according to this article (link), Ringo’s first wife accused him of being “a drunk, a wife-beater, and an absent father.”

Every Beatles fan has his favorite, and for a long time I thought mine was Paul.  He is the brainy Beatle, who according to Spitz, loves to read about all sorts of things, including art and artificial intelligence.  But after reading this book, I changed my mind to George – the young one.  A mug shot of Harrison taken in Hamburg in Aug 1960, shows just how young he looked when they got started.  John and Paul were just 17, but George was 14! When the Beatles landed at JFK airport in early Feb 1964, George was still only 20.  Most of the places where they had played to that day would not have let George in, were he not playing with the band.  For the next six years since that landing, George would blossom, both spiritually and as an artist.  “It was this sense of alienation as much as his interest in music that made George so susceptible to guiding spirits,” explains Spitz. “In the Bahamas during the filming of Help!, he heard the siren song of the sitar and came under the influence of Swami Vishnu- devananda, who introduced him to hatha yoga and Eastern religions. Later in life he would become a vegetarian, consult an astrologer, and devote himself to Transcendental Meditation before embracing traditional Christianity. Like many others who flirted with mysticism, it gave him a sense of authority and confidence.”  Unfortunately, Harrison died of cancer in 2001, when he was only 58.

The biggest insight I took away from this book was the importance that purpose played in making the Beatles a huge success. Their purpose was to make music that people liked, and the more people liked what they made, the more focused they became. Shortly after Beatlemania started, the four lads began to dislike their jobs. They were turned off by all the screaming, and took insult (especially John) by the notion that nobody was really listening at the concerts.  John started feeling like his whole life was a lie, but he was not alone in being frustrated.  Their meteoric rise to fame destroyed their private lives – even though it was precisely what they thought they wanted, and what they had worked so hard for. They craved attention, but they soon began to hate it when they got too much.  As Spitz quotes John complaining angrily, “I’ve sold myself to the devil.” They were not the only ones to struggle with fame, but Beatlemania was unlike anything the world had ever seen.  People had lost their rockers and young women everywhere were fainting at the site of a Beatle.

In a paper titled  Form Follows Function: Organizational Structure and Investment Results (2016), Mauboussin concludes that “the organization is more important than the individuals within it,” before observing that when it comes to performance, “a team with an odd number of members is at the top of the list. Having three team members allows sufficient diversity to entertain and vet multiple points of views and has a built-in mechanism to break ties.”  Some people have called Brian Epstein the Fifth Beatle, while others have bestowed George Martin with that title, but the reality was that there was no odd Beatle.  Had Martin gotten his way and they named the band Paul McCartney and the Beatles, there would likely be nothing amazing to write about.  To me the number of people matters less than everyone having a unifying purpose.  John was crazy enough to say it, but he spoke for their misdirected purpose when he bragged that “the Beatles had become more popular than Jesus.”  It wasn’t the money nor the music itself, but the popularity that guided their way, and caused their demise.  Viewed from afar and with 50 years of hindsight, it’s amazing they managed to pull it off for as long as they did.  Interestingly, some of their best work came out of their most turbulent times.

Regards,
Adriano

PS:  I put some extra effort into the Highlighted Excerpts section below.

HIGHLIGHTED EXCERPTS

Note:  The earlier chapters focus on the family background and childhood of each Beatle.  It’s interesting, but it got better after they started the band.    

Chapter 8. The College Band

One pint, however, led to two, then three. “Aside from George,” recalls Hanton, “Paul, John, and I got pretty well drunk.” Slowly but steadily, they got plastered on black velvets— a bottle of Guinness mixed with a half- pint of cider. “By the time we had to go on again, we were totally out of it,” George recalled. Any effort to contain the damage backfired.

Chapter 11. Hit the Road: Jac

Paul remembers being told of the name the next day, along with George, and immediately liking it. “John and Stuart came out of their flat and said, ‘We’ve just thought of a name!’ ” he recalls, smiling. The Beatals. It had the right sound, its reference a dazzling throwback. The name was bluff and cheeky, sturdy; it possessed an easy, buoyant, ornamental quality. The Beatals. Yes, he thought, it would do, it would do nicely.

Not quite everyone. It never even dawned on Williams to include the Beatals on the program. Without a drummer, they wouldn’t stand a chance alongside other major bands. To spare the lads the embarrassment, he made sure they had good seats. In the audience. Punters. Fans. Like everyone else.

It is not entirely clear who Moore was. Like many musicians who hung around the scene, he was familiar to others by his face, but few had ever heard Tommy actually play. Part of the reason was his age. Already thirty- six, he was well outside the core rock ’n roll demographic— twice Paul’s age— and part of another world as far as performance bands went. He also had a day job, operating a forklift at the Garston bottle works, which made him unfamiliar to the Jac’s daytime crowd. Still, he had all the qualifications: he was small but stocky, with powerful, responsive wrists and impeccable timing. “Tommy Moore was a pro,” says one of the Cassanovas, “what we call a session drummer today. He had played in dance bands, at social clubs. He could put the beat in the right place, and he could play anything.”

Crowning a burst of energy and artifice, arrangements were hastily made. George and Tommy took time off from their jobs, Paul sweet- talked his father into a holiday before the upcoming exams, while John and Stuart simply cut classes. The problem of equipment was similarly solved when they decided to “borrow” the art school P.A. All the pieces fell neatly into place. Suddenly everything seemed possible. They were actually going on the road— a road from which they would never look back. It began with a baby step.

Chapter 13. A Revelation to Behold

But they were records in name only— and not even in their name. As a concession to German slang, in which the word peedles skewed as “tiny dicks”

Chapter 15. A Gigantic Leap of Faith

That was the intricate nature of the band. It put Paul and John at cross- purposes, terrific cross- purposes, that would grow in intensity over the years. Passing was the perfect harmony that marked their songwriting relationship. In its place was a distinction so contrary, a conflict so profound, that the friction it produced built up an armor. Both men schemed aggressively to impose their vision on the Beatles. Always there was Paul’s need to smooth the rough edges and John’s need to rough them up. Somehow, it drove them to fertile middle ground. But the constant compromise was ultimately a debilitating position, and the balance on both sides could not be sustained forever.

Chapter 16. The Road to London

Ron Appleby, who promoted the show, recalled an incident that would soon have far-reaching repercussions. “Brian Epstein decided that everyone who came into the dance before eight [o’clock] would be given a photograph of the Beatles.” It was a nice incentive, although an unusual practice for a Liverpool dance, and it went over in a big way before taking an unforeseen turn. “The girls were ripping up the photograph and sticking the picture of Pete Best onto their jumpers.” No one, especially Pete, had counted on that happening. He was “embarrassed” by the attention, but it wasn’t an isolated incident. “Almost since he joined the band, Pete was the most popular Beatle,” says Bill Harry, expressing a view shared by many early fans. “He was certainly the best-looking among them, and the girls used to go bananas over him.” This phenomenon was nothing new. Best had immense stage presence. Unlike the other Beatles, who mugged shamelessly for the girls, Pete, unsmiling, ignored the crowd, attacking the drums with his long muscular arms, which only heightened his mystique. One can only imagine how much resentment and envy that stirred, especially in Paul, who was sensitive to being upstaged. He’d already gotten bent out of shape by the way Stuart Sutcliffe used to steal the limelight. Now suddenly Pete was crawling up his back. “If one of the others got more applause, Paul would notice and be on him like lightning,” recalls Bob Wooler, whose own behavior did nothing to tone down the jealousy. Wooler had worked out a little rap he delivered at the end of a band’s set to introduce individual musicians. A poster for The Outlaw he’d seen described Jane Russell as being “mean, moody, and magnificent,” which Wooler borrowed and applied to Pete Best. “He was the only Beatle I mentioned by name every time, and it sparked enmity between them—especially with McCartney.”

Chapter 17. Do the Right Thing

Abbey Road wasn’t meant to look like a recording complex, much less a facility like EMI’s other studios at Hayes, which adjoined its record factories. It had originated in 1831 as a nine- bedroom residence, with five reception rooms, servants’ quarters, and a wine cellar, before being converted in 1928 into the world’s first “purpose- [or custom-] built” studio. For all the building’s unpretentiousness, much of the modern technology found in the more imposing high- tech studios was first designed by EMI engineers in one of its boxy, low- ceilinged rooms. The fundamentals of stereo were developed here, as were moving- coil microphones, large- valve tape recorders, and an amusing battery of sound effects that gained industrywide use throughout the war years and beyond. None of that, however, would have impressed the apprehensive Beatles, who were growing increasingly anxious to make their own mark.

The Beatles managed to climb into the coach, but the girls were mobbing Pete and he couldn’t get on.” Everyone on the bus had to wait— and watch. John, Paul, and George watched expressionlessly in the dark. Few friends who observed them realized what this grave demeanor concealed— how, in fact, it was a mask worn to conceal a bitter dissatisfaction. So hard were the lines of their lips and the set of their jaws that they might have been statues for a garden display. Outwardly, their composure never cracked, but inwardly they smoldered as Neil Aspinall extricated his friend from the crowd’s adoring grip. The Beatles never said a word— it was Jim McCartney, of all people, who angrily accosted Pete and accused him of trying to upstage the others— but they had already made up their minds to make sure that it never happened again.

Chapter 18. Starr Time

Of all the drummers in Liverpool, where the pecking order was so clearly established, bands ranked Ringo among the best. And by the summer of 1962, he figured in many of their plans. One band in particular.

It was only ever music, only the band, only the Beatles. There were no other options. This was their life’s work.

Paul’s own deep passion for drumming had never been concealed. He’d long had a trap set at home, which he mastered as he did all the other instruments in the band. And during jam sessions at the Blue Angel, with Gerry Marsden and Wally Shepherd, he “always made for the drums.” Earl Preston’s drummer, Ritchie Galvin, recalled encountering Paul and Pete huddled at the Mandolin Club one afternoon in 1962 after a lunchtime session at the Cavern. “Paul was showing Pete the drum pattern that he wanted on a particular song,” Galvin remembered. “Pete tried to do it, but he didn’t get it.”

The saga of Ringo’s personal history— more like a Dickensian chronicle of misfortune— is one of the erratic tragic chapters in the glittering Beatles legacy. In contrast to the others, who were middle- (John) or working- class (Paul and George), Ringo was “ordinary, poor,” a hardship case. “He was not a barefoot, ragged child,” recalls Marie Maguire Crawford, a neighbor who doubled as his surrogate sister, “but like all of the families who lived in the Dingle, he was part of an ongoing struggle to survive.”

Chapter 19. A Touch of the Barnum & Bailey

Martin, however, was already thinking ahead. The Beatles had put a bug into his ear about image, and he was concerned that the first record should lay it all on the line. “He knew how important it was to establish their identity,” Richards says, “so we kept walking and talked about what to call them— Paul McCartney and the Beatles, or John Lennon and the Beatles.” Martin felt they needed a leader out front, like Cliff and the Shadows. Paul could handle that; he was “the pretty boy” and more outgoing, whereas “John was the down- to- earth type” and the sharp wit. That could also work to the band’s advantage, they decided. It was a tough choice. Paul… John? John… Paul? “It went on like that, back and forth, as we continued along Oxford Street,” Richards says. Nothing emerged from their various proposed scenarios to sway things one way or the other. Each boy had enough star power to carry the group. And yet, a move like that might serve to fracture the beautiful balance they seemed to have found. The band’s personality was pretty much intact— and a very important part of their appeal. There were no apparent power struggles. Besides, Martin mused, maybe the Beatles were right. Maybe this was something new and different that didn’t fall into the same tired mold. “And when we got to the end, we knew it was perfect the way it was.”

Forty years later, Paul McCartney, in nearly every reminiscence, goes out of his way to curse the Northern Songs pact as “a slave deal”— and worse. He believes they were bamboozled out of the rights to their songs and, ultimately, untold millions of dollars, saying: “Dick James’s entire empire was built on our backs.” But at the time, it must have sounded like a sweetheart of an offer. When they were asked if they wanted to read the agreement, John and Paul declined. It called for Northern Songs to acquire Lenmac Enterprises, a holding company set up in April by Brian that owned fifty- nine Lennon- McCartney songs. Under the terms of the agreement, John and Paul were obligated to write only six songs per year for the next four years. During that time, however, they would add an extraordinary hundred new copyrights to the catalogue, each one a classic that would never again be under their control.

Chapter 20. Dead Chuffed

“I think the Beatles shook those crowds up, even scared them a little,” says Kenny Lynch, who watched every set from the cinema wings. “They were so different, so tight, so confident, really playing their hearts out. It was like no experience those kids ever had before. Every girl thought they were singing straight to her, every boy saw himself standing in their place. “It all changed from that night. We took a break a day or two later, before the next leg of the tour, but when we went back out on the road you could tell the whole balance had shifted, because all anyone wanted to hear was the Beatles.”

John was wasted, near collapse, but the others already knew what he was about to find out from a playback: that for all its hairiness, “Twist and Shout” is a masterpiece— imperfect but no less masterful, with all the rough edges exposed to underscore its power. It is raw, explosive. The sound of ravaged lassitude, of everything coming apart, only complements the spirit of a tumultuous live performance.

Mania

Chapter 21. The Jungle Drums

As dreary as the theaters were, their accommodations were often worse— the guesthouses they stayed in run- down, staffed with local help who regarded them as nothing more than riffraff. All- night service stations were the restaurant of choice for most package- tour units, with a heaping portion of starchy beans on toast and chips a safe enough bet to see them through until the next opportunity arose to eat something.

“It was always the same routine: one would play, and the other would be writing down lyrics and chord changes.” They were in their own private world back there, absorbed by the instant gratification of the work and adept at blocking out distractions. [AA comment: Flow].

“John told me that there had never been a day in his life when he didn’t feel he needed some kind of drug,” Dot recalls.

In the first hours of April 8, Cynthia, who had been staying at Aunt Mimi’s house with her friend Phyllis McKenzie, was rushed by ambulance to Sefton General Hospital, where just after 6 A.M. she gave birth to a six- pound, eight- ounce boy. Had it been a girl, she was to be called Julia, after John’s mother. For the birth certificate, however, Cynthia confidently recorded his name as John Charles Julian Lennon.  [AA comment:  Julian suffered.  There is a YouTube interview with him where he says his dad never gave him anything, not even money.]

Sexuality. John was almost as unsparing about gays as he was about cripples and the retarded. “My God, how he ranted about ‘fucking queers’ and ‘fucking fags!’ ” says Bob Wooler, who was privy to many of John’s backstage outbursts. “He was very outspoken, indifferent to anyone’s feelings. He didn’t give a shite about anyone, really— but he was especially intolerant of gays.” But there is every reason to believe that as they became more relaxed, John was drawn further and further into Brian’s guarded confidence. … No doubt John encouraged the direction of the conversation, but Brian did most of the talking, regaling John with details about the life, sometimes with rapturous descriptions of encounters and taboos. In the provocative Spanish sun, Brian became bold enough to behave with John as he might naturally around other gay men, pointing out “all the boys” he found attractive, even daring to act on his desires. “I watched Brian picking up boys,” John recalled, “and I liked playing it a bit faggy— it’s enjoyable.”

Albert Goldman is most emphatic: “[John] and Brian had sex,” he declares in The Lives of John Lennon. Pete Shotton, in his footloose memoir, claims that John told him: “I let [Brian] toss me off.” And in The Love You Make, Peter Brown and his coauthor, Steven Gaines, go so far as to construct an intimate bedroom scene, complete with cartoonish, overheated dialogue, in which “John lay there, tentative and still, and Brian fulfilled the fantasies he was so sure would bring him contentment….” As far as it is known, the issue of homosexuality never surfaced again in John’s life.

Still, it set a dangerous precedent. Brian came away from the vacation brimming with exhilaration, overjoyed that John had opened up to him and poised for something more. He told friends that their time together had been “something to build on” in the months ahead. The other Beatles were aware that something consensual had gone on between John and Brian. In retrospect, Paul referred to it as “the homosexual thing” and suggested that it was John’s way of exercising power over their manager. But if power was part of John’s strategy, he was also exercising it over Paul. More influence with Brian also meant more control of Paul— and ultimately of the Beatles. It was a currency he would collect for the rest of his life.

The Rolling Stones. It was only a month earlier that the Beatles had first laid eyes on them. Following the taping of Thank Your Lucky Stars, an experimental filmmaker and part- time jazz promoter named Giorgio Gomelsky had approached the Beatles in Twickenham, with the intention of making a documentary film about them. Brian, who was already fantasizing about Hollywood, gave him a polite brush- off. Nevertheless, Gomelsky invited the boys to hear a great “full- bodied R& B” band playing at the Crawdaddy Club, which he ran in a room behind the Station Hotel in Richmond, later that night.

Chapter 22. Kings of the Jungle

“There was no longer any question of the Beatles appearing in a club or, indeed, anywhere in direct contact with their public,” writes George Melly in Revolt Into Style. “They had become a four- headed Orpheus. They would have been torn to pieces by the teenage Furies.”

“She Loves You” was finished the next evening, during a rare day off in Liverpool. The boys worked intently in the tiny dining nook at Forthlin Road while Paul’s father sat not five feet away, chain- smoking and watching TV.

“Sometimes, you know, I feel as if there’s nothing I’d like better than to get back to the kind of thing we were doing a year ago,” Paul mused in the midst of the hot summer tour. “Just playing the Cavern and some of the other places around Liverpool. I suppose the rest of the lads feel that way at times, too. You feel as if you’d like to turn back the clock.” If that was even remotely feasible before, all bets were off the moment “She Loves You” hit the airwaves.

Chapter 23. So This Is Beatlemania

Britain’s papers had discovered sex earlier that spring, when they began tracking a colorful rumor that John Profumo, the secretary of state of war, had engaged in a sexual liaison with a young call girl named Christine Keeler. Word had it that he’d met her in 1961 during a weekend social at Cliveden, Lord Astor’s estate, where she was staying with her friend Dr. Stephen Ward. To make matters worse, there were also reports of Keeler’s involvement with a man named Eugene Ivanov, a Russian naval attaché and reported KGB agent, possibly compromising state secrets. At first no paper dared run any part of the story, fearing the harsh slap of England’s libel laws.

NME’s album chart was even more rewarding, listing With the Beatles and Please Please Me as vying for the very top, with three EPs— Twist and Shout, The Beatles Hits, and Beatles No. 1— padding close behind. The dominance was unprecedented. In a single outburst, the Beatles had hijacked the charts.

Chapter 24. Once Upon a Time in America

The New York Times’ TV critic, Jack Gould, dismissed the Beatles as nothing more than “a fad” while giving them credit for a “bemused awareness” that acknowledged their complicity in the clever affair. “Televised Beatlemania,” Gould wrote, “appeared to be a fine mass placebo,” and he summed up the performance itself as a “sedate anticlimax” to all the hype New York had withstood since the Beatles hit town.  Visually they are a nightmare: tight, dandified Edwardian beatnik suits and great pudding- bowls of hair. Musically they are a near disaster, guitars and drums slamming out a merciless beat that does away with secondary rhythms, harmony and melody. Their lyrics (punctuated by nutty shouts of yeah, yeah, yeah!) are a catastrophe, a preposterous farrago of Valentine- card romantic sentiments.

When a skeptical reporter speculated in a column as to whether the Beatles’ longevity would last through the month, a colleague pointed out that their ratings for the second Ed Sullivan Show had doubled, and at that rate, there weren’t enough people left in the United States to cover the third appearance.

Chapter 25. Tomorrow Never Knows

As it turned out, it was impossible to put a real dollar value on their worth to Great Britain. No one knew about the $253,000 check from Capitol Records in Brian’s pocket— the Beatles’ share of royalties so far— but it was hot news that the Barclays Bank Review had declared them an “invisible export,” estimating their overseas record sales at something over $ 7 million. But there was no clear picture of what the Beatles actually brought in. Aside from records and performances, merchandising remained a vast gray area. The Seltaeb compact was practically minting money— published reports put it somewhere around $50 million— but who knew how much of that would ever find its way back to the source. Income from the enormous number of bootleg products was impossible to peg.

For the first time in the history of the English charts, British records occupied the top fourteen places. The days of second billing and second- class citizenship for British rock ’n roll seemed over. “With this transition,” wrote pop music historian Greg Shaw, “British rock became real.”

The next morning, Tuesday, February 25— George’s twenty- first birthday— the boys checked into the Abbey Road studio to work on songs for a new album. They could hardly wait to get started. Since the beginning of the year, they had barely played a note that wasn’t drowned out by screams and, as musicians, they had become clearly frustrated by the emptiness of it.

The work itself was more demanding than they’d expected. For one thing, they had to report for costume and makeup at six o’clock in the morning, which meant getting up at five— an ungodly hour for most people but especially for a Beatle. Moreover, they were seriously out of their element. Learning lines was an uphill battle on top of everything else that was going on in their lives. Victor Spinetti, another of their costars, observed how “the lads never touched the script.” In fact, they “frantically” gave it a once- over in the car each morning on their way to the studio, then simply winged it. “You never knew what they were going to say or do.” “We’d make things up because of our being so comfortable with each other,” recalled Ringo. Some real gems came out of their mouths, the same kind of spontaneous witty stuff that dazzled at their press conferences, but for a seasoned film crew it was a hair- raising way to work. To counteract the Beatles’ lack of preparation, Dick Lester kept five cameras running, even after a scene technically ended. “Dick just went on shooting,” Spinetti recalled, “shooting everything…. [H]e just pointed the cameras at them and let them go…. And I just used to keep going…. [W]hen he caught them actually talking amongst themselves, it was just magical.”

Though the review made no strides in the advancement of rock criticism, it gave the record a commendable launch. It also helped distract from the pack of would- be marauders who were pecking at the kingdom walls. Competitors were flooding the market with anything that might capitalize on the Beatles’ success. All along, there had been scores of singles that made no pretensions as to their agenda: “My Boyfriend Got a Beatle Haircut,” “Yes, You Can Hold My Hand,” “Beatle Fever,” “The Beatle Dance,” “The Boy with the Beatle Hair,” “Beatle Mania in the U.S.A.” (by the Liverpools, no less), “We Love You Beatles”— there were too many to keep track of. A start-up label, Top Six, announced that its debut album would provide a full menu of Beatles covers, coincidentally entitled Beatlemania. Another new label, Dial, was banking on a group called the Grasshoppers. Even Decca, at the behest of onetime Beatles producer Mike Smith, recognized the value of ancestry by signing a band called the All- Stars to be led by Pete Best. To their credit, the Beatles wasted not so much as a glance on any of these coattail surfers, their evil eyes trained on more unbenign targets that threatened to cut into their royalties.

It helped defuse the situation temporarily. Still, John wasn’t particularly sympathetic toward the broken-down man and the timing of his visit. “He turned up after I was famous,” complained John, who remained “furious” at Freddie for abandoning him as a child. “He knew where I was all my life— I’d lived in the same house in the same place for most of my childhood, and he knew where.” It may have crushed John to grow up without a father, but it took no effort for him to cut short Freddie’s visit and ultimately order him from Brian’s office. Whatever reasons had rendered his father no longer incommunicado, it was more convenient for John that Freddie remain at large. (Wikipedia for Freddie Lennon).

The women were, in fact, only one small cloudburst in the mammoth typhoon of press that surged through the spring of 1964. Everyone followed the Beatles like a favorite soap opera. Not a day went by that didn’t offer ample stories about their exploits, even if they were only vague speculation. Papers reported on where they were last seen and with whom, how they were dressed, what they had for dinner, when they went home (and with whom). The gloves had come off; all angles were now fair game.

There are several “official” versions of how the title was finally arrived at. What they all agree on is that it occurred during a lunch break at Twickenham Studios, where either Paul remarked to Bud Ornstein— or John to Walter Shenson—“ There was something Ringo said the other day…,” at which point, the two Beatles recounted their drummer’s penchant for “abusing the English language.” “Ringo would always say grammatically incorrect phrases and we’d all laugh,” George recalled. One that sprang easily to mind had popped out at the Heathrow press conference, when Ringo described having his hair cut at the British embassy soiree. “I was just talking, having an interview… and then ‘snip’… Well, what can you say? Tomorrow never knows.” Tomorrow never knows! The Beatles cut wicked glances at one another when that gem fell out. And John promptly wrote it down, to use in one of his stories and, later, songs. There was another malapropism— or “Ringosim,” as John called them— that had already appeared in John’s book, In His Own Write: “He’d had a hard day’s night that day.” One of the boys entertained the lunch gathering with details of its origin, following a grueling late- night gig, but they were already one step ahead of him. “We’ve just got our title!” one of the producers exclaimed.

The next morning on the set, the assistant producer paged Shenson and told him: “John Lennon wants to see you in his dressing room.” The producer went through every imaginable scenario, wondering how he’d respond to the young man’s irritation. “He and Paul were standing there, with their guitars slung over their shoulders,” Shenson recalls. “John fiddled with a matchbook cover on which were scrawled the lyrics to a song—‘ A Hard Day’s Night’— which they played and sang to perfection. This was ten hours after I’d asked for a song.” When they’d finished, John glanced at the producer and said, “Okay, that’s it, right?” It was all Shenson could do to feebly mutter, “Right.” “Good,” John said, “now don’t bother us about songs anymore.”

How George came up with it remains a mystery to this day; he never discussed it, even though the chord has become as identifiable as the song that follows. As it uncoils, there is nothing left to chance. The energy it delivers is explosive, full of fireworks—“ It’s been a haaaard daaaays night…”— and musically as daring, with a vocal track that gathers so much steam that the middle eight (sung by Paul, John explained, “because I couldn’t reach the notes”) comes as almost a relief.

While the Beatles wrapped up work on A Hard Day’s Night, as the movie was now readily being called, Brian left for the Devon coast, where he planned to begin work on an autobiography that had been commissioned by a small London publisher.

Chapter 26. In the Eye of a Hurricane

Over Derek Taylor’s objections, they refused to get off the plane anywhere other than Bangkok, fueling their dark mood with a steady diet of stimulants. “We’d been sitting on the floor, drinking and taking Preludins for about thirty hours [sic],” George recalled. Then, arriving in Kowloon, exhausted and grimy, they were expected to judge the finals of the Miss Hong Kong beauty pageant.

Peter Brown and Brian had spent part of May together, following the feria in Seville among a crowd of aficións that included Ken Tynan and Orson Welles. There, Brown noticed Brian’s growing dependence on pills, amphetamines, that he buffered with excessive quantities of alcohol in an attempt to offset the highs with lows. “It had a disastrous effect on him. It accelerated the mood swings. He was really the sweetest, most sensitive man, but he became belligerent in the blink of an eye. And the worst part was that nobody understood where it came from.”

Art Schreiber, who happened to be passing through the suite, was startled when Paul motioned with his chin and whispered, “I like that one. Can you get her for me?” Answered Schreiber: “Listen, pal, I’m no fucking pimp. I’m a reporter.”

…it was Dylan with whom they would reshape their generation. Paul had discovered him first, buying the Freewheelin’ album before they’d left for Paris at the beginning of the year. That record hit the turntable the moment the Beatles settled into their suite at the George V. “And for the rest of our three weeks in Paris we didn’t stop playing it,” John recalled. In fact, George considered the experience “one of the most memorable things of the trip,” alleviating the irritation of being cooped up in their rooms. One can only imagine the impact that Dylan’s music had on the boys.

It didn’t take long before someone retrieved the communal pillbox from John’s leather bag and Drinamyls and Preludins were offered like after- dinner mints to the edgy guests. The Beatles downed a handful on most nights of the tour as a way of staying up— and up— when their bodies ached for sleep. But Dylan took one look at the assortment of gaily colored pills and shook his head. “How about something a little more organic?” he suggested. “Something green… marijuana.” The Beatles recoiled. They were scotch and Coke men, chain- smokers. Granted, there were the pills, but they served a purpose other than getting stoned. “We’ve never really smoked marijuana before,” Brian interjected, sensing the boys’ immediate discomfort. This, unbeknownst to him, wasn’t entirely true. “We first got marijuana from an older drummer with another group in Liverpool,” George recalled. Besides, an acquaintance had shared a joint with the Beatles at the Star- Club in Hamburg, but it was what Neil called “just the sticks,” which probably meant a deposit of stems mixed with dried oregano or some such filler.

No matter. Rolling “a skinny American joint,” Dylan handed it to John, who gave it a dubious look and passed it on to Ringo, dubbing him “my official taster.” Ringo was no blushing maiden. Without a word, he retreated to a back room sealed with rolled towels— there was a battalion of New York City policemen on a security detail in the hall— and smoked it down to his fingertips. A few minutes later he emerged with a twisted grin plastered on his face. As Paul recounted the experience, “We said, ‘How is it?’ He said, ‘The ceiling’s coming down on me.’ And we went, Wow! Leaped up, ‘God, got to do this!’ So we ran into the back room— first John, then me and George, then Brian.”

The pot had loosened up Brian to a degree that was truly emancipating. He became entranced by his reflection in the mirror. After a moment or two he stood back, then pointed to himself, and blurted out: “Jew!” to everyone’s hilarity. Paul noted how that was the first time Brian had ever referred to himself as a Jew. “It may not seem the least bit significant to anyone else,” he admitted, “but in our circle, it was very liberating.” And a sign to those not red-eyed of Brian’s deep self-loathing.

Chapter 27. Lennon and McCartney to the Rescue

John and Paul had been writing steadily— together and apart— throughout their travels, with about eight songs in good enough shape to record right away. But it had not been a breeze, unlike the previous records. They’d struggled through what John described as “a lousy period,” a time when everything they came up with sounded trite, even flat. There were even hints that the album might have to be put off until the material was up to snuff; but before anyone panicked, they’d finally pounded out a few gems that had the earmarks of their very best work.

Through it all, John and Paul continued to write, with blocks of time devoted to working in their comfort zone: eyeball- to- eyeball. There was always a room available at Abbey Road studios where they could steal a few minutes to bash around ideas. There was also the tiny music salon below the Ashers’ flat, when it wasn’t booked for lessons. Otherwise, Paul ran his new forest green Aston Martin DB out to Kenwood, where John was spending most of his spare time since returning from the States, and they’d spread out in a little mess of an attic room overlooking the garden to “kick things around” for two or three hours.

One day, just as the limo was turning into the driveway, Paul put down his paper and, more out of politeness than real interest, asked the chauffeur how he’d been. The driver gazed in his rearview mirror and shook his head. “Oh, working hard,” he replied with an emphatic huff, “working eight days a week.” A bell went off in Paul’s head. Eight days a week! “It was like a little blessing from the gods,” Paul recalled. No sooner had John answered his door than Paul dropped this little nugget into his hands. “Well, I’ve got the title,” he insisted, and blurted it out. John, normally as competitive as an insurance salesman, knew when to hop on the bus. They practically dashed upstairs and began spitting out lyrics, just “filling it in from the title,” as Paul remembered it. Bam, bam, bam. Much later John dismissed “Eight Days a Week,” saying it “was never a good song,” but at the time they wrote it there was no hesitation as to whether it would fit into their recording plans. An obvious crowd- pleaser, “Eight Days a Week” contains all the drive and spunk of their previous hits, its exuberant spirit punctuated by explosive guitar fanfare, joyous handclaps, and an unforgettable hook—“a typical happy John- and- Paul song,” as Derek Johnson, writing in NME, described it. And each pop hit they offered carved out space for more radical exploration.

There was other carelessness. NEMS’ finances in America were particularly a mess. The proceeds from the last tour had been frozen by the Internal Revenue Service until it was satisfied that proper taxes were paid. That left the Beatles completely out- of- pocket for their five weeks of work. Moreover, during most of the tour Brian had effectively isolated himself from the outside world— there were strings of days when he simply disappeared— to the point that scores of producers and entrepreneurs bearing lucrative proposals, proposals the Beatles should have accepted, were unable to contact him. The number of important deals he let slip through his fingers is scandalous.

It took nearly three years to settle the suit, untangling thirty- nine separate claims against NEMS and a $ 22 million claim for damages, which eventually broke Nicky Byrne and rent the merchandising deal asunder. “The reality is that the Beatles never saw a penny out of the merchandising,” says Nat Weiss, the avuncular divorce lawyer Brian befriended in New York who subsequently took over their American affairs. “Tens of millions of dollars went down the drain because of the way the whole thing was mishandled. Even after the judgment was vacated, you could smell the smoke from the ashes, that’s how badly they had been burned.”

They wanted to make records, not statements. There was too much at stake, too much fever and magic, to antagonize their largely mainstream audience, leaving the extreme rule- breaking to newcomers like the Stones and the Who, both of whom were willing to be outrageous and risk everything for maximum impact.

Most nights, he got stoned in the spacious Gothic toilet. Since returning from the States, John had become more and more devoted to the giddy pleasures of pot, smoking it intermittently throughout the day, from the time he got up until he collapsed from exhaustion. Then he curled up on a couch, brooding and sending out the kind of barbed- wire vibes that discouraged idle chitchat, let alone anything close to intimacy. Guests avoided him, knowing how lethal the combination of sycophants and drugs (and/ or alcohol) could be for John. Of course, the more distant he became, the more the guests ignored him and the harder he had to strike out to draw enough attention. No one was immune. “Everyone who came in was a potential target,” says a frequent guest. When Brian’s favorite, Judy Garland, arrived on Sid Luft’s arm one night, John berated her indiscriminately, implying that she was a hack and introducing her as “Judy Garbage.” On another occasion, feeling “particularly wicked,” he lashed out at an actor’s German girlfriend, blaming her parents for killing 6 million Jews, until the poor girl fled in terror. Other times he was content to pick on Brian, embarrassing him about his sexuality—“ If he pretended to be straight, for instance,” says Bart, “John wouldn’t let him get away with it”— in front of as many people as he could attract. John’s behavior was nothing new. It was the usual outlet for a lifetime of anger, anger at being given up by his mother and her subsequent death, anger at his father for abandoning him without a fair chance, anger at all the parochial teachers who demanded he conform, anger at Brian for tidying up the Beatles’ jagged image (“I’ve sold myself to the devil,” he complained to Tony Sheridan), and anger at trusted friends like Stu Sutcliffe, who died without warning, and now even Paul, who continuously upstaged him.

“Cynthia wanted to settle John down, pipe and slippers” according to Paul— a decision that, to his mind, spelled imminent disaster. “The minute she said that to me I thought, Kiss of Death, I know my mate and that is not what he wants.” For another, they’d been cooped up rather annoyingly in the attic apartment of their new posh home while a team of local contractors gave the living quarters a thorough makeover. It had been hard enough living with Cynthia and Julian in the Emperor’s Gate flat, but in the attic— and miles from nowhere— the situation groaned under the strain. To make matters worse, Cynthia’s mother, Lillian Powell, recently returned from Canada, had moved in while John was on tour and now all of them squeezed into the accommodations like rabbits in a hutch. There wasn’t an ounce of love lost between John and Mrs. Powell, a spiteful, insufferable woman who had never forgiven him for impregnating her daughter and fulminated against her son- in- law every chance she got.

Incredibly, neither Cynthia nor John knew how to drive. They had bought a new Rolls- Royce that sat in the garage until a chauffeur was eventually hired, but even then, with few friends and a young son to take care of, any attempt to steal time away from home was futile. “I would frequently spend weeks of being virtually housebound by duties to child and staff,” Cynthia complained in a memoir. Even when John was around, he usually slept until one or two, then took off for London, rarely coming home until the early hours of the morning, often stoned and drunk. Cynthia had learned to endure his new love of pot, which she viewed as being “relatively harmless” compared with alcohol, but despite the hip and social aspect of getting stoned, it was never something they would share. Alas, marijuana only made Cynthia “sick and sleepy,” further distancing them in their eroding relationship.

Paul, on the other hand, lived between the cracks. Beatlemania was rampant in London, yet for some inexplicable reason he was free to move about with little regard for the usual encroachments. Throughout the end of 1964 and well into the New Year, Paul became a habitué of London nightlife, aggressively cultivating an image as a young man of substance.

Not that they could recall much from the shoot. They had packed ample reserves of pot to get them through the process. The Beatles were so stoned, so distracted, they couldn’t remember lines. Brian’s effort to contain the damage went for naught. Even though, as John revealed, they were “smoking marijuana for breakfast,” mornings seemed to be the only time scenes got completed. By noon they were out of their gourds. “Dick Lester knew that very little would get done after lunch,” Ringo recalled. “In the afternoon, we very seldom got past the first line of the script.”

“Ringo received the most applause, screams, and gasps from the audience.” “I Love Ringo” badges outsold all their other merchandise. The same proved true wherever the Beatles went. “In the States, I know I went over well,” Ringo admitted in a moment of pardonable pride. “It knocked me out to see and hear the kids waving for me. I’d made it as a personality.”

In spite of everything, Ringo was excited to tie the knot. “He’s the marrying kind,” John explained after the news hit the papers, “a sort of family man,” which was true enough. Only a few months earlier, Ringo had told a reporter: “No matter what the consequences, I don’t want to remain single all my life. I want to get married some day and I don’t plan to wait too long about it. I’m 23 now and that can seem pretty old when you look out every night and see an audience full of 13- and 14- year- old girls.”

https://www.grunge.com/284616/the-tragic-death-of-ringo-starrs-first-wife/

“Ticket to Ride” is hardly gobbledegook, and not at all the self- penned effort for which John eventually took credit. In a hasty reflection, he reduced Paul’s contribution to “the way Ringo played the drums.” However, Paul later argued: “We sat down and wrote it together…. [W] e sat down and worked on that song for a full three- hour songwriting session, and at the end of it all we had all the words, we had the harmonies, and we had all the little bits.”

He [John] was getting tired of hearing Paul described as “the handsome Beatle” or “the cute Beatle,” tired of seeing Paul charm the media, posing as the band’s spokesperson, voicing opinions he didn’t share. Never had John seen anyone turn on the gas like that; throw the spotlight on him and he popped off like a parrot on speed. “He’s a good P.R. man, Paul,” John said, only half seriously. “He’s about the best in the world, probably, he really does a job.” Even as a rock ’n roller, Paul continued to court the kind of establishment approval that offended John. Paul was slick, as slick as they came—“ He could charm the Queen’s profile off a shiny shilling,” says Bob Wooler and not at all kindly— and it stuck in John’s craw. Paul still deferred to John, but skillfully. He knew how to play the angles, which is what it took to humor a cranky hothead like John. Paul could dance archly around his partner’s subtle moods, but on tiptoe, always ready to concede center stage rather than risk confrontation.

To make Paul more comfortable, Martin had the studio lights dimmed to a shade resembling candlelight and moved the other Beatles out of his sight line before retreating with the engineers into the overhead control booth. There was a short last- minute lull while Smith spun dials to get a proper balance. When he finally flashed the thumbs- up, Paul stabbed out his cigarette in an ashtray, cleared his throat, and delivered a “remarkably controlled” take of a ballad that would become the most recorded song of all time. “Yesterday” had been rattling around Paul’s head for nearly two years, since he “woke up one morning with the tune,” tumbled out of bed, and before even washing his face ran through it at the upright piano propped against the wall by the window in his room. What was the source of his inspiration? The question gnawed at him for weeks afterward. Had it come in a dream, as he initially suspected? Was it something he’d heard that his subconscious refused to let go of? Paul hadn’t the foggiest. The chords just kept coming, one after another, falling neatly into place. The melody sounded familiar, to say nothing of cozy, like one of the old standards that his father used to pound out after dinner at Forthlin Road, and while the overall impression it left was “very nice” indeed, Paul convinced himself the tune was “a nick,” something he’d lifted.

“Yesterday” warranted a solo release. Brian, to his credit, wouldn’t hear of it. He was adamant: “No, whatever we do we are not splitting up the Beatles.” But in a way, the bubble was already beginning to burst.

Chapter 28. Into the Cosmic Consciousness

“We’ve had LSD,” John finally revealed to George in a bone-dry voice. The acid had been slipped into their coffee on sugar cubes and might have been an after- dinner cordial, for all George knew. … John was livid. He had not come to dinner to be dosed by a virtual stranger. Mumbling good-byes, they grabbed the girls and bolted, speeding toward the Pickwick, a London nightclub, with the dentist in hot pursuit. For a few minutes everything was fine. They got seated and ordered drinks, squinting in the low light to identify the faces of other musicians who waved to get their attention. “Suddenly I felt the most incredible feeling come over me,” George remembered. “It was something like a very concentrated version of the best feeling I’d ever had in my whole life.” He was overcome with love— hot, feathery, dizzying love. … And none of the Beatles was more receptive to LSD’s spiritual potential than George Harrison. From that very first trip, he felt “a light bulb” go on in his head that blazed the way to enlightenment.

Paul, cautious as ever, wanted nothing to do with it. But Ringo was game, as was Neil, who had Paul’s share, with enough left over for Roger McGuinn, David Crosby, and Peter Fonda. “We were all ripped on LSD,” recalls Fonda, who joined the guests around the pool, while Paul worked in his usual capacity “to keep everything calm and level.”

It was this sense of alienation as much as his interest in music that made George so susceptible to guiding spirits. In the Bahamas during the filming of Help!, he heard the siren song of the sitar and came under the influence of Swami Vishnu- devananda, who introduced him to hatha yoga and Eastern religions. Later in life he would become vegetarian, consult an astrologer, and devote himself to Transcendental Meditation before embracing traditional Christianity. Like many others who flirted with mysticism, it gave him a sense of authority and confidence. But with LSD, George stepped out— and into the cosmic consciousness.

Mick Jagger, who, along with Keith Richards, was watching from a seat behind the first- base dugout, was visibly shaken by the crowd’s behavior. “It’s frightening,” he told a companion.

George Martin had been with EMI for fourteen years, ten of them as head of Parlophone, and after a feeble contract negotiation in 1963, he was still earning less than £ 70 a week. All his requests for a commission against sales were rejected out of hand— an outcome made all the more incredible considering his monumental effort in breaking seven or eight NEMS acts, to say nothing of the Beatles. “I was in the studio twenty- four hours a day,” Martin argued. “You know, you don’t [spend] thirty- seven weeks out of fifty- two at number one without working quite hard.” Even so, a commission was unheard- of. Producers and A& R men were company drones, ciphers, lacking any residual perks— not even a car or a negligible Christmas bonus. Martin, who not only brought in tens of millions of pounds, reversing EMI’s flat earnings, but was largely responsible for thrusting the label into the rock ’n roll era, surely deserved at least the same kind of compensation as company sales reps, a reward for his extraordinary success— or so he thought. EMI balked until the summer of 1964, when Martin notified the label that he would not be renewing his contract at the end of its current term. Len Wood attempted to broker a new deal, but each proposal he made was more preposterous, more arrogant— and ultimately more insulting— than the last. When, at their final meeting, Wood, sitting ramrod- stiff and imperious behind a polished yacht- size desk, proposed a deal by which Martin would be forced to reimburse EMI for departmental costs out of his profit, the producer yanked the plug. “Thank you, very much,” George informed him. “I’m leaving.” Martin decided to start an independent production company— a revolutionary concept, “a shock to the recording industry,” NME conceded— that would lease its staff’s services to the labels for a respectable fee against royalties. Not only that, but he was taking a couple of EMI’s young frontline producers, Ron Richards and John Burgess, as well as Decca’s Peter Sullivan, along with him. That gave them— or A.I.R. (Associated Independent Recording), as it was to be called— an artist base that included Adam Faith, Manfred Mann, Cilla Black, Tom Jones, Peter and Gordon, the Hollies, Gerry and the Pacemakers, Matt Monro, Freddy and the Dreamers, Billy J. Kramer, P. J. Proby, Lulu, the Fourmost, and, of course, the Beatles.

Harrison had already become fascinated, if not yet proficient, with the sitar, an Indian lute popularized by Wendy Hanson’s friend Ravi Shankar, and he worked out a subtle arrangement that helped dramatize “Norwegian Wood.” [AA comment:  One of my favorites.]

Such experiments were hastened by Martin. “He’d come up with amazing technical things, slowing down the piano and things like that,” John recalled. “They were incredibly inquisitive about the recording process,” Martin recalled. “They wanted to know what they could do that people hadn’t [already] done.” A guideline was immediately established: no idea, however vague or outlandish, was too risky or off- limits. Martin knew better than to dismiss their penchant for experimentation. For every trial concept that crashed and burned, there were four that not only took off but soared.

When it came to musical terminology, however, they couldn’t speak the language. Not only didn’t any of the Beatles have formal training, none could read a note. To stem the lack of communication, they developed a rapport with the eloquent Martin that facilitated discussions about music free of theory- loaded jargon. “Give it some color here,” they might suggest. “Make it punchier.” On one number, “In My Life,” which required an instrumental bridge between the verses, John’s instruction got whittled down to “play it like Bach.” Exchanges like that galvanized Martin, who took up each of their abstract ideas as a challenge. Play it like Bach. That one especially intrigued him. They needed to fill about twelve bars with a piano solo that would lend the song a classical feel. Martin felt he could swing it. Not a pianist by training, he could still manage a fairly decent passage that would approximate “something baroque- sounding,” as John expressed it. “I quickly wrote out a Bach two- part invention [for piano],” he recalled, “ but it was too fast for me to play. So I lowered the speed of the tape to half speed… and then speeded it up [on playback],” an engineering trick that allowed him to simulate an Elizabethan- style harpsichord. Another time, he wove a few sheets of newspaper through the strings of the piano “to make it sound different.” He wrote the middle figure of “Michelle” as well, taking the song’s basic chord structure and inverting it as an instrumental that he played in a duet with John against George’s guitar solo. Martin called these departures “just manipulations of the resources we had at the time,” but that would be akin to playing Hamlet just by putting on the clothes. Resources take resourceful people to manipulate them, and the Beatles, with George Martin’s able assistance, injected originality and daring into the mix that hinted at the great artistic recordings to come.

Mastery

Chapter 29. Just Sort of a Freak Show

Stoned— which they were most of the time in the studio— the experiments became part prank, part innovation. In that kind of dreamy, altered— impractical— state, the possibilities were limitless. Recording became no longer just another way of putting out songs, but a new way of creating them.

“Got to Get You into My Life,” which had begun, according to studio notes, as “a very acoustic number.” Paul had not composed it in a romantic gist, as the lyric might indicate, but ironically, as an ode to drugs. “It was a song about pot actually,” he admitted— not about acid, as John later suspected (Paul hadn’t taken acid yet)— written to a great extent after Bob Dylan turned on the Beatles in New York.

“We were really hard workers… we worked like dogs to get it right.”

Foot pedals for guitars were still a few years off, there were no remote sound- mixing boards, no faders, no monitors. Their new songs, like “Eleanor Rigby” and “Tomorrow Never Knows,” contained crucial sounds that could be made only in the studio. It’d take a pretty substantial horn section to pull off “Got to Get You into My Life.”

A Melody Maker poll reflected the residual impact this had on the Beatles’ popularity by a tabulation showing that 80 percent of respondents were greatly disappointed by the band’s dearth of personal appearances, with only slightly less declaring that Beatlemania had passed its peak. But the Beatles couldn’t have cared less. “Musically, we’re only just starting,” George told a reporter. “We’ve realized for ourselves that as far as recording is concerned most of the things that recording men have said were impossible for 39 years are in fact very possible.”

The Beatles let their hair down for one of the album’s final tracks. On “Yellow Submarine” they gave a blunt comic edge to a children’s song Paul had brought in by layering it with gentle wisecracks and sound effects from their boyhood iconography. Studio Two was in complete disarray as the four Beatles, along with Neil, Mal, and a full battalion of Abbey Road irregulars, ransacked the trap room, a small equipment closet just inside the door, where a trove of noisemaking effects was conveniently stashed. The vast wooden floor was suddenly littered with “chains, ship’s bells, hand bells from wartime, tap dancing mats, whistles, hooters, wind machines, thunderstorm machines”— every oddity they could lay their hands on. A cash register (the one eventually used to ring up Pink Floyd’s “Money”) was dragged out, along with several buckets, a set of bar glasses, even an old metal bath that was promptly filled with water.

Four years: in that brief span they’d collected nineteen number one hits and six gold albums; they’d made two box- office smashes, become virtuosos, and played in front of more people than any other act in the history of show business.

“Christianity will go. It will vanish and shrink. I needn’t argue about that. I’m right and will be proved right. We’re more popular than Jesus now. I don’t know which will go first— rock ’n roll or Christianity. Jesus was all right, but his disciples were thick and ordinary. It’s them twisting it that ruins it for me.” – John Lennon

The concerts were just as remarkable, with none of the hysteria or even screaming that was the hallmark of Beatlemania. “The audience was very subdued,” Ringo recalled. The unsuspecting Beatles found they could actually hear themselves play! “There were one or two screamers,” according to an account, “but for the most part the teenaged boys and girls sat politely in their seats and applauded enthusiastically after each number.” The politeness was due in no small part to the cultural ethos of Japan, as well as the three thousand cops stationed conspicuously in the arena— one for every three kids who’d bought a ticket to the show.

Chapter 30. A Storm in a Teacup

Of all the Beatles, only Paul was inclined to play along. Paul loved the showbiz aspect of Beatlemania, to say nothing of the acclaim. The times he spent on the road— engaging the fans, jawing with reporters, mugging for photographers, and winding up the crowds— were among the highlights of his life. Lionel Bart, who saw him often during this time, called him a born crowd- pleaser and presumed that he’d eventually find his place on mainstream stages like those at the Palladium. “It was clear from the start that show business ran deep in Paul’s veins and he was committed to a lifetime on the stage.” But the other three were disgusted. George especially had had his fill. Ren Grevatt, Melody Maker’s American stringer, had been watching throughout the tour how the whole grind weighed on the Beatles’ personalities. “I’ve noticed that George Harrison is getting deeper and deeper every day and will probably end up being a bald recluse monk,” he observed in an unusually frank column. “He’s trying to figure out life, but don’t let this sound mocking— he is very serious.”

George was fed up with the grim, chaotic life of the Beatles. In discussions with friends, he talked of feeling “wasted” and virtually “imprisoned” by the constraints of Beatlemania. The touring and its effluvia had beat him up, physically and emotionally. “It had been four years of legging around in a screaming mania,” he grumbled. Endless performances—“ about 1,400 live shows,” by George’s count— had left him bored and dispirited. It was all he could do to get up for the thirty-minute appearance.

“We didn’t make a formal announcement that we were going to stop touring,” Ringo recalled. Nevertheless, the matter was settled between them. The August 29 concert in San Francisco would be their last. There would be no more Beatles shows, no more participation in the tumult of Beatlemania. From now on, they would exist solely in the studio as a band that made records.

“We would be Sgt. Pepper’s band, and for the whole of the album we’d pretend to be someone else,” Paul explained. Pretend! Pretend was one of those words that always raised a red flag; the whole thing sounded like a gimmick. Besides, everyone’s head was in a different place.

The skinny, pale boy with big ears and no ambition, the dropout burdened with intellectual insecurity, who used to follow half a block behind John Lennon, had developed into a grimly optimistic, pensive young man clamoring for “the meaning of it all.” LSD had jolted George awake.

… when Brown got back to Chapel Street the next day, he found a note on Brian’s night table, next to an empty vial of Nembutal. Written in Brian’s familiar script, it said: “I can’t deal with this anymore. It’s beyond me, and I just can’t go on.” There was a codicil attached, in which he left his estate to Queenie and his brother, Clive, with other belongings to be distributed among Brown, Geoffrey Ellis, and Nat Weiss. Brian’s desperate act shocked his closest friends. Throughout the tour, his erratic behavior and manic depression had stirred up sympathy and concern. But in the many years they’d known him, even grown accustomed to the emotional jags of his “torturous life,” there was never any indication that he intended to kill himself. Certainly there had been irrational talk, even some low- grade drama. “But none of us, however shortsighted, suspected he was suicidal,” says Nat Weiss.

Certainly, John and Cyn had little more than familiarity left to give each other. There was Julian, of course, but John was hardly an attentive father. He left the parenting to his wife, along with most other household responsibilities. Days went by in which they barely exchanged five words between them, even when living— or rather, coexisting— under the same roof. John was aloof, uncooperative, disappearing into the music room for hours on end or staring hypnotically at the television until he passed out from fatigue. Paul, who seldom saw John during this time, remembered encountering him once in London and asking what he’d been up to. “Well, watching telly, smoking pot,” John replied.

Chapter 31. A Very Freaky Experience

Groups like the Doors and those psychedelic boogie bands that were emerging out of San Francisco put listeners on notice that rock music was growing up. Within the next few years, they would be joined by virtually the entire sixties rock pantheon: Pink Floyd, Janis Joplin, Traffic, Jethro Tull, Sly and the Family Stone, the Band, the Chambers Brothers, Ten Years After, the Jefferson Airplane, Elton John, Credence Clearwater Revival, the Allman Brothers, Joni Mitchell, Led Zeppelin, as well as the entire Motown and Stax/ Volt rosters— all of them swept in in the aftermath of the British invasion and subsequent demise of the Brill Building factory sound. “To those of us making music for a living,” said Pete Townshend, “it seemed like, finally, rock ’n roll had found a perfect groove.” Pop playlists began mixing more progressive “album cuts” with singles, so that songs such as “Windy,” “Happy Together,” and “Somethin’ Stupid” were programmed with “For What It’s Worth” and “A Whiter Shade of Pale.”

The lyric came, he maintained, during a stretch at the piano, with the January 17 edition of the Daily Mail propped open on the music stand in front of him. “I noticed two stories,” he explained. “One was about the Guinness heir”— Tara Browne, a friend of Paul’s—“ who killed himself in a car.  That was the main headline story…. On the next page was a story about four thousand potholes in the streets of Blackburn, Lancashire, that needed to be filled.” Paul’s contribution, he said, was “the beautiful little lick ‘I’d love to turn you on’ ” that had been “floating around” unused.

It had become such an issue that late in 1966, against his better judgment, Paul succumbed to the pressure and dropped some acid in the company of Tara Browne. If he was unwilling to take the drug before, his reaction to it leaned more to ambivalence. Overall, he found it quite “spacy,” a “very, very deeply emotional experience,” ranging in sensations from godliness to depression. Most likely, Paul was too uptight to give it a fair ride.

https://en.wikipedia.org/wiki/Tara_Browne

In the meantime, they set to work on the title song, “Sgt. Pepper’s Lonely Hearts Club Band,” which Paul wrote, he claimed, “with little or no input from John.”

In the studio, the Beatles’ regimen of drugs was fairly limited, although Paul has reported— quite surprisingly— that “the one hard drug used during the making of Sgt. Pepper was cocaine.” This amounted to a few lines before the sessions: “For Sgt. Pepper I used to have a bit of coke and then smoke some grass to balance it out.”

Somewhere between Abbey Road and Cavendish Avenue, Paul reached a pivotal decision. “I thought, Maybe this is the moment where I should take a trip with [John],” he recalled. Paul had avoided tripping with the other Beatles. He described himself as “a guy who wasn’t keen on getting that weird” because of “a disturbing element to it.” As a matter of fact, the prospect terrified him. He later attributed his abstinence to common sense; Paul had great reserves of self-control and an eye on posterity. Even with pot, which was consumed with relish, he felt the reins of responsibility.

According to Cynthia, she decided to go against her better judgment and drop acid along with everyone else. In her memoir, she de- scribes it as a “paralyzing” experience, during which she sank into a hollow- eyed depression, withdrew to a bedroom on the second floor of the house, and contemplated jumping out the window onto the stone driveway below. Instead of being drawn into her husband’s grateful embrace, John was furious with her for ruining his drug reverie.

Deep down, Paul loved John in the way someone loved an elder brother. He knew all of John’s faults— many of which frustrated Paul’s ambition— but he still looked up to his partner, even courted his attention. John was a loose cannon, but he was the genuine article.

Chapter 32. The Summer of Love

“I still felt every now and then that Brian would come in and say, ‘It’s time to record,’ or ‘Time to do this,’ ” John recalled. “And [now] Paul started doing that: ‘Now we’re going to make a movie. Now we’re going to make a record.’ ” A feeling crept over John that Paul was somehow trying to dominate the Beatles, which, after all, had been his group. Paul had all but taken over the Sgt. Pepper’s sessions. He contributed so many suggestions for the arrangements, and so fast, so fluently, it was all John could do to keep up with him. It angered him that Paul had come up with the mystery tour concept; he grew peevish, jealous. Why hadn’t he thought of it first? And yet, admittedly, John “enjoyed the fish and chip quality of [it],” the idea that they’d go out “with a load of freaks” and make a low- budget, tongue- in- cheek film. And even if he hated the idea, he may have been distracted— or too fucked- up— to resist.

According to a music journalist, “McCartney arrived at the studio with only three chords and the opening line of the lyric:” “Roll up! Roll up!— for the Magical Mystery Tour.” John and Paul had hit on what was, for them, the perfect bit of wordplay: a phrase that fired up listeners with the keen, romantic cry of circus troupes and carnival barkers rolling their riggings into town— and, a phrase that, to any fan with the slightest streak of hipness, served as a veiled invitation to roll up a joint. It was chock- full of feeble “references to drugs and to trips,” Paul recalled.

Obviously, this frustrated Paul, who thrived on the energy crackling in the atmosphere. Even when the Beatles had no commitments, he seldom rested. At the slightest spark, he would flame into action. “We can do this. Then we can do that. And maybe if this falls into place, we can take it there and do…” If the rest of them wanted to get stoned and sleep in front of the telly, that was their problem. Fuck the dopeheads! Paul was bursting at the seams with creative energy, and nothing, absolutely nothing, was going to stand in his path.

During the afternoon photo shoot, Paul deposited himself majestically in an armchair by the fireplace, sipping champagne and dispensing opinions on everything from art to artificial intelligence, a subject he’d just read about in one of the underground journals he devoured.

Chapter 33. From Bad to Worse

After a brief Hindu prayer was intoned, the Maharishi whispered a handpicked mantra in the disciple’s ear, along with advice that he or she was never to share it with anyone. “It has been specially chosen to harmonize with your personal vibration,” he said. Weeks later, after the novelty had worn off, Mal Evans divulged that his mantra was I-ing, at which point everyone discovered they’d been given the same word.

Peter Brown: The last thing Paul wanted that day was to speak with anyone from NEMS, but if there was Beatles business that needed immediate attention, then he was the only one suited to take care of it. As it turned out, however, this was business of the kind that even Paul was incapable of processing. Brian had so looked forward to the weekend “divertissement” that he skipped the Beatles’ send- off to Wales and headed straight for Sussex in his precious Bentley convertible. There were too many last- minute details that required his attention— an alluring dinner menu, drugs, recreation, discreet sleeping arrangements. … “It was some time before we called the police,” Joanne remembered, “because we wanted to make sure that things were okay in the house— that there were no substances for them to find.” They combed through Brian’s study, tidying up this and that, and waited for David Jacobs, Brian’s lawyer, who was already on his way, via fast train, from Brighton. … Brian Epstein was all of thirty- two years old. On a lovely summer night, he finally got the one thing that had always eluded him: eternal peace.

However, when the Beatles entered Studio Two on Tuesday evening, ready to roll, it was evident that John had come up with a killer. “I Am the Walrus” is pure Lennon fantasy, written, he claimed, over the course of two acid trips. The lyric is based on Lewis Carroll’s “The Walrus and the Carpenter” from Through the Looking- Glass, which John considered “a beautiful poem,” although he pleaded ignorance when it came to the political undertones in the narrative.

“The Fool on the Hill,” by contrast, evolved in a stunningly straightforward way. Written back in March, days before finishing “With a Little Help from My Friends,” Paul drew unknowingly on personal feelings about social hermits like the Maharishi, whom he had not met at the time. “It was this idea of a fool on the hill, a guru in a cave, I was attracted to,” he recalled. Years earlier he’d heard the tale about a recluse in an Italian hill town who had missed World War II, and that may have sparked the title. But one night in Liverpool Paul conjured up the lonely image and wrote what is arguably one of his finest and most beautiful compositions.

Only John made a specific casting request: he insisted on hiring Nat Jackley, an old- style music hall comedian whom he had always admired, as well as a couple of midgets. (“John would always want a midget or two around,” Ringo noted.)

Stigwood needed control, the Beatles craved complete freedom— neither was willing to give an inch. Of course, Brian’s unsecured 70 percent stake in NEMS raised the possibility of a hostile takeover. Such action was never threatened per se, although elements in the heated exchange gave the impression that it might be considered, prompting the Beatles to issue a public statement. “They would be willing to put money into NEMS if there was any question of a takeover from an outsider,” a spokesman told NME. “The Beatles will not withdraw their shares from NEMS. Things will go on just as before.”

Throughout the fall of 1967, while Britain waged an all- out assault on conformity, the Beatles hastened to consolidate their interests. The longtime holding company, Beatles Ltd., was officially renamed Apple Music Ltd., after which seven subsidiaries were formed: Apricot Investments Ltd., Blackberry Investments Ltd., Cornflower Investments Ltd., Daffodil Investments Ltd., Edelweiss Investments Ltd., Foxglove Investments Ltd., and Greengage Investments Ltd., each capitalized with a substantial financial endowment. Money was no problem. “There was an enormous sum of money— well over a million pounds— that had been accumulated by EMI while the new contract was being negotiated,” recalls Peter Brown. “The Beatles received twenty- five percent of that— and that was the money that set up Apple.”

Paul fancied himself a pretty good businessman. … It mirrored their bickering over the music: each of the two Beatles wanted to put his own stamp on the boutique, each suspicious and jealous of the other’s contribution. Unable to take sides in the matter, Shotton struggled, ineffectually, to please both John and Paul. “They needed someone strong, someone like Brian, to say no, and I wasn’t the one who could do it…. I only ever wanted to be friends with them.”

Chapter 34. An Additional Act

The same rules pertained to the music. John and Paul might preview a nascent song they’d just written for Cynthia or Jane, but other than a rare special occasion— like the “All You Need Is Love” broadcast— women were barred. No woman had ever been invited into the studio and, as far as can be determined, none had asked. In Paul’s view, the studio was sacrosanct, the Beatles’ relationship to it like “four miners who go down the pit.”

Of all the plum roles that had come her way, the Subservient Beatles Woman was the only one Jane Asher refused to play. And Jane hated the drug scene. “Jane confided in me enough to say that Paul wanted her to become the little woman at home with the kiddies,” Cynthia wrote. Another reliable observer says Jane had “clearly decided that she was setting her own terms on how she conducted her career.” There were to be no cop-outs, no compromises, no backseats taken to pop stars.

Although no one else knew it— not even Paul, George, or Ringo— John Lennon found himself wrestling with similar emotional issues. Cynthia noticed that a look of “pure shock” crossed her husband’s face— then said, “This is Yoko. Do you mind if she comes back with us?”  …  The trouble was, he was married. And so, it turned out, was she.  In fact, Yoko had been married for almost half of her young life. She was born on February 18, 1933, into a spectacularly prosperous Japanese family descended from samurai that was as wealthy and influential as, say, the Rockefellers in the United States. Her father, Eisuke, a Christian financier proficient in English and French who headed an institution that would eventually merge with the Bank of Japan, moved his family to America on two separate occasions— once in 1936 and again in 1940, not all that long before the Japanese attack on Pearl Harbor.

Yoko had unchecked access to a prescription for sleeping pills and the requisite overdose nearly delivered the coup de grâce. Yoko woke up in a sanitorium, where she was confined for several weeks. It was during this time that Yoko met Tony Cox, a small-time hustler with an art background, who rescued her from her depression and set out to make her a star. In the course of their tempestuous romance, there was one remaining hitch: she still had not resolved the situation with Toshi. Further complications arose when Yoko discovered she was pregnant.

In Peter Brown’s estimation, “Paul and Jane were much too sophisticated for [the Maharishi’s] mystical gibberish.” Paul was obviously never as committed to TM in the way that John and George were, never one to expect “some huge spiritual lift- off.”

“John took meditation very seriously,” Cynthia recalled. His approach to it brought with it a remarkable transformation; he seemed happier, certainly healthier, now that drugs and hard liquor were out of the picture. But Cynthia was beginning to suspect the Maharishi’s sweeping power over John: suspicion that there was some sort of mind control involved to wrest her husband away from his career. “He seemed very isolated and would spend days on end with the Maharishi, emerging bleary- eyed and not wanting to communicate with me or anyone…. He went so deeply within himself through meditation that he separated himself from everything.” It didn’t occur to Cynthia at the time that John was struggling to separate himself from her. He’d moved into a separate bedroom, hardly exchanging a word with her, even in private moments. Knowing that John despised confrontations with her, Cynthia chose to ignore the bad vibes. “Something had gone very wrong between John and me,” Cynthia concluded. “It was as if a brick wall had gone up between us.”  Yoko Ono, not the Maharishi, had taken control of John’s mind.

Despite the institutional setting, complete with a cordon of bodyguards in three- piece suits and a gallery of doting blue- haired dowagers, the Beatles were clearly entranced by the Maharishi. He was an extraordinary sight to behold: an elfin, bronze- skinned holy man draped in an immaculate white dhoti, positioned in front of acres of soothing lemony yellow curtains. A picture of contentment, he sat cross- legged on a deerskin mat strewn with flowers and, between arpeggios of an irrepressible giggle, offered to clarify anyone’s experiences. … Despite the embarrassing criticism from more traditional Hindu teachers and a predilection for publicity and fund- raising— followers were required to donate the equivalent of a week’s salary to the ministry, which ran contrary to the basic Hindu principles of free instruction— the Spiritual Regeneration Movement grew into a worldwide organization, with a luxurious, air- conditioned ashram situated on a fifteen- acre estate in Rishikesh, in the foothills of the Himalaya. There were already meditation centers in more than fifty countries, with the London office attracting more new followers than it was able to process.

The actress Mia Farrow, who had matriculated some weeks earlier, at the beginning of the term, recalled experiencing an initial regret at the boys’ noisy presence, feeling that it disrupted the commune’s focus. “Nevertheless,” she later wrote in her 1997 memoir, “with their cheerful chatter and guitars and singing, the new arrivals brought an element of ‘normalcy’ to the ashram— a sort of contemporary reality, which at first seemed jarringly out of place.”

Ringo, still tormented by childhood gastrointestinal problems, couldn’t handle the spicy curries used to season the food.

In her memoir Mia Farrow intimates that the Maharishi might have come on to her, but then acknowledges she may have been disoriented and misinterpreted the “advance”: it may have been nothing more than the traditional embrace given by a holy man after meditation.

George and John went back and forth all night, arguing heatedly: was it true, or not? Throughout their soul- searching, Alex continued to pour it on, tossing in excoriating details to inflame their doubt. There was really no way the beleaguered guru could defend himself in this situation. The more Alex talked, the more guilty— and despicable— the Maharishi seemed. Eventually George’s faith buckled ever so slightly. “When George started thinking it might be true,” John said, “I thought, ‘Well, it must be true, because if George is doubting him, there must be something in it.’ ”

(Though Peter Brown insists that some months later “John told me he knew for a fact that Maharishi had fucked that young girl.”) Why? the Maharishi repeatedly implored. A wave of belligerence swept over John, who responded: “If you’re so cosmically conscious, as you claim, then you should know why we’re leaving.” With those words, the two remaining Beatles walked out of the ashram at Rishikesh— and out of the Maharishi Mahesh Yogi’s life forever.

No opportunity to inflict pain, no matter how insignificant, went unseized [by John]. Liverpool, Hamburg, London, America, Australia, Japan, France— he claimed to have screwed his way around the globe. Hundreds, thousands, of girls; he’d lost count a long time ago. It was a cruel, horrible way to put his wife on notice, but John, in his rage, saw no other way of doing it. Later Cynthia wrote: “I never dreamed that he had been unfaithful to me during our married life,” but that denial is so much blather. Whatever the case, she undoubtedly understood the indiscreet confession: her marriage, as everyone else knew, was teetering on the edge of collapse. Still, she swallowed her outrage and continued to play the dutiful wife. As if to underscore his disaffection, two weeks after they returned home, John sent Cynthia on a fateful vacation to Greece.

“Paul, for the longest time, was Apple,” says Peter Brown. “It was his baby. He was coming in every day, and decisions were made by either Neil or me going to him and saying, ‘Do you approve?’ ‘Yes.’ Okay, it was done. Paul oversaw everything, from building the offices to designing the layouts.” Technically, George and John were also directors of the company and, therefore, necessary to any major decisions, but Brown, as much as possible, avoided getting either one of them involved. “John wouldn’t give me an answer,” he says, “and George would give me a runaround.”

Which only made things worse for John. By all accounts, John had hit an all- time low. “John was in a rage because God had forsaken him,” George recalled. “Then he went and completely reversed himself. He turned from being positive to being totally negative.” According to Pete Shotton, who was spending time with John at Weybridge, there was an overriding feeling of humiliation— from the Maharishi, from the Apple Boutique shambles, from his deteriorating marriage, from what he felt was his shrinking position in the Beatles. “He was more fucked up than I’d even seen him,” Shotton remembers. “It seemed like everything was going to the dogs. He’d been desperately grasping [at] straws, as far as I was concerned, and there wasn’t even a straw there.” The nonstop drug- taking had left John hollowed- out. Stoned and cranky during his brief outings to the Apple office, he growled at the inexperienced young staff, firing off obscenities at the most insignificant provocation. Otherwise, he just checked out. At a London party on April 18 for the launch of Bell Records, an independent pop label, John arrived already higher than a kite and drank so much champagne that he passed out at the table and had to be carried to his car.

Anyone who thought the Beatles would relinquish creative control to an outsider was, however, seriously mistaken.

In fact, no sooner had Peter Asher come on board at the end of May than he officially signed Apple’s first outside artist, a lanky, twenty- year-old folkie named James Taylor. “He is an American song writer and singer who is extremely good,” Asher explained with typical understatement, in a June 1 memo to Ron Kass. “We intend to start recording him 20th June…. He is ready to discuss contracts and things as soon as you are.”

“The Beatles were getting real tense with each other,” said John, who pegged Paul and George as being “resentful” with regard to his songs.

Chapter 35. Good-bye to the Boys in the Band!

It also meant that the writing process would forgo the critical feedback— the suggestion of a phrase, a few bars, or a middle eight— that helped shape a Lennon- McCartney song in the past. One of the key ingredients unique to John and Paul’s partnership was their reliance on and trust in each other to fine- tune, or, as John described it, “just finish off the tail ends” of each composition. Even with songs that were written almost entirely by one person, some last- minute advice would polish it to perfection. That give- and- take had been instrumental to their success from the very beginning. But now, as Paul pointed out, “it meant that I’d hear some of the songs for the first time when [John] came to the studio, whereas in the past we checked them with each other.” Even though he no longer depended on it, Paul regretted the loss of John’s influence, blaming the intensifying emotional crisis in his partner’s life for the breach. Over a few weeks in May John’s affair with Yoko Ono had all but thrown his life into complete upheaval. After that first encounter John stumbled through the early days of summer in what he described as “my love cloud,” admitting, when it came to Yoko, he’d “never known love like this before.” It must have been as unnerving as it was exhilarating. He managed to fill those scattered weeks with mundane Apple business but became too distracted, too rocked by the constant clash of emotions. John later claimed that every time he was in Yoko’s company “my head would go off like I was on an acid trip.” One “sniff” of her potent mojo and he “was hooked,” he said, mixing drugs and metaphors in equal measure. “She was the ultimate trip.”

The latter condition, as it happened, was most essential to their needs: wearied by itinerancy and the accumulation of tension around them, John and Yoko had begun a chilling dependence on heroin. Paul assumed that his hospitality would have a therapeutic effect on John and Yoko, that they would enjoy a carefree, homey stay and start off life together on the right romantic foot. Instead, they spent almost all their time at Cavendish camped out on his couch, watching television and staring vacantly into each other’s eyes— activities, that, according to Barry Miles, made “Paul [feel] uncomfortable.” Miles put much of the blame on “their drug use [which] made communication difficult,” but attributed it to smoking weed and “eating hash cookies that Yoko baked.” Paul, however, knew different. “[John] was getting into harder drugs than we’d been into,” he recalled, crediting it to a sinister liaison with the junkie art dealer Robert Fraser (link), who’d only recently gained his release from prison on a drug charge. It was Fraser, according to Paul, who introduced John to heroin before the Beatles left for India, and he’d begun sniffing it with Yoko soon after their return. The residual effects both troubled and “disappointed” Paul, as well as the other Beatles. Outwardly, the drug manifested itself, he said, in John’s “adversity and… craziness,” but the underlying influence had also crept insidiously into the songs. It was evident right off the bat, when on May 30, 1968, the Beatles began work on the new album. The first song they tackled was John’s indecisive but audacious, bluesy “Revolution,” which kicked things off in tantalizingly chaotic fashion. Eventually, three versions of the song would find its way into release, but the foundation of this track set the tone for the contradictory rhetoric that followed.

Robert Fraser (Wikipedia)

Now, suddenly, Yoko had landed in the thick of things. She “just moved in,” according to George, who was not at all pleased. “John brought her into the control room… at the start of the ‘White Album’ sessions,” said Geoff Emerick. “He quickly introduced her to everyone and that was it. She was always by his side after that.” … As John waded deeper into the junk, his bond with Yoko strengthened. There wasn’t anywhere he went that she didn’t follow. If John entered the control room to speak with George Martin, Yoko accompanied him. If he huddled with Paul regarding a song or arrangement, Yoko joined the discussion.

In his enthusiasm, he rushed to play “Hey Jude” for John and Yoko, who had arrived upstairs in his music room as it all came together. The couple, stoned and sullen, were not so easily impressed, but John later acknowledged the song as “one of [Paul’s] masterpieces.” His account, however, differs as to what the lyric really means. “He said it was written about Julian, my child,” John told Playboy in the days preceding his death, “but I always heard it as a song to me. If you think about it, Yoko’s just come into the picture [and]… the words ‘go out and get her’— subconsciously he was saying, Go ahead, leave me.”

John was better equipped to deal with Paul’s business because of the impregnability of his own success, but for George it stung— and doubly so— from years of mistreatment and insecurity. He’d been spending mornings down the hall, producing “Sour Milk Sea,” a single he’d written for Jackie Lomax, and even had the structure for a new song, “Something,” pretty much down. And while it was no “Hey Jude,” the Beatles only days earlier had finished laying down a demo of “While My Guitar Gently Weeps,” which is as close to brilliance as George ever got. No, George had come a long way since that evening he played “Raunchy” on the upper level of a Liverpool bus, and he’d had about all the bullshit he was going to take from Paul McCartney— and he told him that, in not so many words.

Finally, on August 22, sensing that “the whole thing was going down,” Ringo threw his hands up and walked out, effectively quitting the group. The in- fighting had finally gotten to him. Everywhere he turned, he encountered the same crude, belligerent exchanges. The ongoing party that had been the Beatles’ recording sessions had turned cruel and forbidding. “I couldn’t take it anymore,” Ringo said upon reflection. “There was no magic, and the relationships were terrible.”  Convinced that he wouldn’t be missed, Ringo took his family to Sardinia for a vacation on Peter Sellers’s yacht. The band tried carrying on without him, recording a blistering version of “Back in the U.S.S.R.,” but it took all three of them to patch together a composite drum track that suffered from being too mannered. They sorely missed Ringo’s “feel and soul,” his intuitive fills, which established the beat and kept the rhythm in check. He never got much credit, but his drumming had become a kind of center of gravity for the songs, just as Ringo’s droll deadpan helped anchor the band. From the beginning, he’d been the missing piece of the puzzle, and it didn’t take long for the Beatles to appreciate his absence. A week later a telegram arrived at Ringo’s Mediterranean beach retreat, begging him to return to the studio. Needing no further invitation, he reached Abbey Road on September 9, in time to participate in an uproarious remake of “Helter Skelter,” Paul’s attempt at making “the most raucous… loudest,” dirtiest- sounding track possible, which had originally run on for an epic twenty- seven minutes.

The release of The Beatles— known forever afterward as the White Album— on November 22, 1968 was regarded in most quarters as an international event, certainly “the most important musical event of the year,” as the Times (London) expressed it in a column that morning. Except for the news that Yoko had miscarried the night before, nothing upstaged its long- awaited appearance.

“I [John] decided to leave the group when I decided that I could no longer get anything out of the Beatles. And here was someone who could turn me on to a million things.” Yoko represented his ultimate rejection of the Beatles— a rejection that John had been entertaining for some time. With Yoko there to stimulate him, John said, “the boys became of no interest whatsoever, other than they were like old friends.” From that moment on, he told Ray Coleman, “It was ‘Goodbye to the boys in the band!’ ”

Chapter 36. Disturbing the Peace

“When Paul got bored,” says Peter Brown, “his dick got twitchy.” … Together, he and Linda explored every neighborhood, from Chinatown to Harlem, where Paul lingered in local record shops disguised in army- navy surplus and “a big beard, like Ratso out of Midnight Cowboy.” In a way, it was the culmination of a dream.

Yoko’s interference continued to make a bad situation worse. More than ever, according to George, she was putting out “negative vibes.” Between the Beatles’ takes, John withdrew further from the group fold, whispering in studio corners with Yoko, missing cues, often not showing up on time for a session and refusing to apologize for it. His mood vacillated wildly between the wittiness of previous occasions and the dark self- doubts fed and fueled by Yoko.

Although many had claimed the title— Brian Epstein, George Martin, and Murray the K, to name a few— there was no room in the band for a “fifth Beatle.” Paul felt the same way when John had suggested replacing George with Eric Clapton; he never would have agreed to it— never. The Beatles had a legacy to protect. As far as he cared, they were— and always would be— John, Paul, George, and Ringo.

A day or two later, when Paul confronted John about selecting Allen Klein as his manager, John sheepishly admitted it was more her decision than his, saying, “Well, he’s the only one Yoko liked.” That sounded more like a convenient dodge, except for one thing: Yoko was clearly pulling John’s strings. Since they became an item, at her insistence John never strayed more than a few inches from her side. Everything he did, everything he said, filtered through her for approval. … John was her insurance policy, her safeguard. He gave her instant credibility as a media star.

Chapter 37. And in the End…

Their behavior, too much of a liability, put his investment at risk, providing even more justification for the sale.

Months later he actually was approached by Andrew Lloyd Webber and Tim Rice to play the title role in Jesus Christ Superstar, but they lost their interest when he said: “If I do it, I would want Yoko Ono to play Mary.” Loyal fans, to say nothing of his closest friends, found him bizarre. “I don’t know what people think of John at the moment,” Ringo said, puzzled. “Maureen was in Liverpool and I know a lot of people there are saying that he has gone a bit crazy…. [T]hey think he has gone off his head.”

Throughout May and into July they blazed through most of the album’s basic tracks. Beginning with George’s masterpiece, “Something,” the Beatles laid the groundwork for an intensely stirring romantic ballad that would challenge “Yesterday” and “Michelle” as one of the most recognizable songs they ever produced. In John’s opinion, George’s songwriting “wasn’t in the same league [as his and Paul’s] for a long time,” but that opinion changed after “Something.” Even George Martin admitted being “surprised that George had it in him.” There was a sense of structure they could no longer overlook, an instinct for atmosphere and emotion that was absent in his earlier songs. Time, in its review, called “Something” simply “the best song on the album.” Paul, delivering a somewhat backhanded compliment, felt it “came out of left field,” but he was struck by its “very beautiful melody” and suggested releasing it as a single. … “Here Comes the Sun,” which George wrote while meandering around the garden of Eric Clapton’s house one gorgeous afternoon in June, increased his currency. No lightweight throwaway, on the order of “Blue Jay Way” or “You Like Me Too Much,” it held its own against the Lennon and McCartney songs already on the album, standing out from the pack for its wispy, rolling simplicity and irregular guitar lick that seems to stutter behind the vocal: “Sun, sun, sun— here it comes.”

Finally, with all the distractions and everyone’s patience growing thin, they lined up for a final take, as Macmillan climbed a ladder in the middle of the street. At the last minute, Paul kicked off his sandals and rejoined the procession. “Barefoot, nice warm day, I didn’t feel like wearing shoes,” he remembered. Accordingly, he lit a cigarette and carried it at his side. The ordeal was over after six quick shots, but the scene that morning would linger for posterity. Aside from being perhaps the most famous cover shot ever taken, it inspired a bizarre episode— another bizarre episode— in the extraordinary Beatles saga. When Abbey Road was released on September 26, 1969, it touched off a feeding frenzy unusual even for Beatles albums.

In late August 1969, John, Paul, George, and Ringo sold their remaining shares in NEMS Enterprises, officially ending all ties to the company they had joined in January 1962. Then, on September 25 they finally lost the yearlong battle with ATV for control of their Northern Songs catalogue; Paul and John held on to about 30 percent of their songs, but the takeover signaled that the identity they had fought so dearly to preserve was slipping from their hands. Impatient to divest themselves of the equity, they sold their remaining shares in Northern Songs to a reluctant ATV board based on Lew Grade’s recommendation that “the songs in Northern will live on forever.”

Whether or not Paul felt encouraged by John’s compromise, he was deeply disturbed by subsequent events. In the days that followed, everyone went his own way, which only heightened the feeling that the Beatles had indeed disbanded. He lapsed into a depression—“ a withdrawal,” he called it in retrospect— that swung between two emotional extremes. Some days he really missed the band, the guys and their horseplay, but there were also times he despised them. “Anger, deep, deep anger sets in,” he recalled, “… with yourself, number one, and with everything in the world, number two.” He felt cheated, abused. “And justifiably so because I was being screwed by my mates.”

Still, it didn’t end there. With the release date now only weeks away, the others decided they had to confront Paul directly in an effort to change his mind. One of them was recruited to go ring his doorbell and reach a compromise. “Unfortunately, it was Ringo,” Paul recalled. The gentlest of the Beatles, the only one who never uttered a bad word about his bandmates, who genuinely loved the others and wanted only their love in return, Ringo appeared at Cavendish Avenue with a letter from the group. “We want you to put your release date back, it’s for the good of the group,” he told Paul, who went blind with rage. Paul finally snapped and in an interview a week later said, “I called him everything under the sun.” He gave poor Ringo a royal tongue-lashing, backing him helplessly against a wall and shaking a finger in his face as all the bitterness and frustration came hurling out. Paul has said in subsequent interviews that it almost came to blows—“ it was near enough,” he admitted— but just before things reached that point, he came to his senses and simply threw Ringo out.

From Google Research:  April 1970 Interview: (Link).

Q: “Is your break with the Beatles temporary or permanent, due to personal differences or musical ones?”

PAUL: “Personal differences, business differences, musical differences, but most of all because I have a better time with my family. Temporary or permanent? I don’t really know.”

Q: “Do you foresee a time when Lennon-McCartney becomes an active songwriting partnership again?”

PAUL: “No.”

Endnote

Endnote There would be the release of Let It Be, in all its suffocated Phil Spector production, and then one after another Beatles re- release— red albums, blue albums, rock albums, movie albums, number ones and studio tapes, all massive sellers, all exposing not just old fans but new ones to the magic and the myth. There would be solo careers with hits and misses, crass duets (Paul) and graying all- star supergroups (Ringo and George). There would be huge stadiums of fans cheering Wings, Paul’s post- Beatles group, and strollers in Manhattan’s Central Park who would smile as John and Yoko passed them by, as if the most normal thing in the world was one of the Beatles at ease. There would be a December night in 1980 when a man walked up to John and shot him in the chest, ending his life. There would be the night, nineteen years later, when an intruder broke into George’s home and stabbed him, then the Tuesday in November 2001, when George succumbed to cancer, the cigarettes catching up to him before the jelly babies. Ringo’s ex, Maureen, died of cancer in 1996; Paul’s “Lovely Linda” would die of cancer, too, in 1998.

And the story changed as the players aged. Paul was no longer Paul— he was Sir Paul, knighted by the Queen in 1997. John was no longer John— he was Saint John, an archetype to angry young rock ’n rollers everywhere. George was no longer a third wheel— he was George Harrison, an artist in his own right and a humanitarian who organized benefit concerts to feed the poor and change the world, something and then some. And Ringo— well, he was still Ringo. Always would be. Sure, he had married a former Bond girl, and his son had become the drummer he feared he would, but otherwise, life remained full of simple pleasures. The sickly boy who had almost died so many times had outlived two of his bandmates and so many others in this story. Lives begun together ended apart, as happens everywhere, even in pop songs. But the Beatles were no longer just boys who had played rock ’n roll. They had been mere babes when it all happened; when the band split, McCartney was all of twenty- nine years old; John and Ringo, thirty; and George, twenty- seven.

Acknowledgments

No one suspected that the two years set aside to research and write this book would ultimately stretch into seven. Throughout the often rugged, always solitary process, I was the beneficiary of the kindness of many people whose assistance and encouragement are responsible for the outcome, and they deserve to share the credit— though none of the criticism— for its content. The book grew out of a profile commissioned by the New York Times Magazine (and eventually published in the newspaper’s Arts and Leisure section), which has always been the preeminent showcase for a journalist’s work, or as the Beatles might put it: the toppermost of the poppermost. In addition, the paper’s morgue and files served as an essential resource, as well as the blueprint for an accurate chronology.

About the Author

Bob Spitz has represented the careers of Bruce Springsteen and Elton John. He is also the author of the books The Making of Superstars, Barefoot in Babylon, Dylan: A Biography, and Shoot Out the Lights, as well as of the screenplay Silent Victim. His articles appear regularly in the New York Times Magazine, GQ, Condé Nast Traveler, Men’s Journal, In Style, Esquire, Sky, and the Washington Post. He lives in Connecticut and can be reached at thebeatles@bobspitz.com.

The post The Beatles: The Biography appeared first on VII Capital Management.

This was a fantastic book that I read in one sitting. Seessel is a fund manager who does frequent appearances in the media, yet I had never heard of him until a friend asked me yesterday if I had read his book. Seessel tells us of his pilgrimage from hard core value investor (disciple of Graham & Dodd, Buffett & Munger), to a state of enlightenment and harmony in a world where only high-multiple, durable growth stocks make any sense for the long term. To me its clear that Seessel still struggles with valuation, or he wouldn’t bother with writing this book, nor the mental accounting contortions he describes in Part II, my least favorite part of the book.  I agree with Bill Ackman, who commented that this was one of the best investment books he has read in a while, but the reason I liked it so much is that Seessel does a fine job of pitching three of our favorite holdings: Alphabet, Intuit, and Heico.

Here is a 4 minute interview on CNBC where Adam Seessel is introduced as “the founder of Gravity Capital Management, advisers on roughly $8 billion.” I was unable to pull up Gravity Capital’s portfolio on the Bloomberg, which suggests they aren’t really that big by SEC standards.  I searched through SEC.gov and saw that in fact, they filed as an “exempt reporting advisor” in March 2022, with regulatory assets of $25-100m – but its common in this business for people to count assets that the SEC doesn’t, so nothing against Seessel.  With a quick Google search, I discovered that “Gravity Capital Management manages money in both a partnership and a separate-account format.  It has a long-term record of beating the market after fees, with special focus on capital preservation. In 2008, for example, the Gravity Long-Biased Fund lost only 5.5% of capital and returned 27% in 2009.” (link).  I also learned that Seessel and his wife, an artist, live in Manhattan, and that they have a grown son who is a software engineer. Adam graduated summa cum laude from Dartmouth College in 1985, with a BA in Religion.  Google also revealed that he runs Clear Mind at Work Program for the Kadampa Meditation Center of New York (link), which is a charitable entity with ties to the International Kadampa Buddhist Union – a global religious movement founded by Kelsang Gyatso in England in 1991 (Wikipedia). He mentions meditation once in his book (next to parenting), but doesn’t elaborate.

I loved the book and would recommend it as a top 10 on investing, but that doesn’t mean I wasn’t disappointed by a detail or two. Seessel never even mentions Phil Fisher, for example, yet he devotes a lot of attention to Ben Graham. Buffett even gives Fisher credit for helping him see the light on growth, but Seessel doesn’t acknowledge it.  But then, as if trying to win sympathy with the “value” school, Seessel goes and throws Jesse Livermore, the boy plunger, under the bus. “In 1940, rather than face another personal financial crisis, Livermore took a Colt pistol and shot himself in the head,” he reminds us before he utters: “Don’t be this guy.” I didn’t like that line. Jesse Livermore was a genius who was said to suffer from clinical depression, so the fact that he shot himself at 63 doesn’t mean he was a bad investor with the wrong ideas. In fact, he was known to put much weight on the quality of the people and the durability of the narratives that he invested in.  While he was famous for his trading, he recognized, like Seessel, that the big money was not made by trading, but by sitting.  Edwin Lefevre told Livermore’s story in Reminiscences of a Stock Operator (1923), and Livermore published his own book, How to Trade in Stocks (1940), seventeen years later. It remains to be seen is Seessel’s book will age as well as those two classics.

Adam Seessel and I have some friends in common so I need to take my jabs carefully.  But it would be impossible for me to read a book like his without finding some flaws.  When describing Intuit, for instance, Seessel portrays Turbotax as being “largely mature” – which is a dated view, in my opinion.  After Intuit acquired Credit Karma in Dec 2020, which Seessel doesn’t mention, they pivoted the Consumer Group (which houses TurboTax), towards a much larger total addressable market (TAM) than just tax filers. Seessell also fails to mention the acquisition of MailChimp in 2021, which significantly expanded Quickbooks’ growth opportunities. While about a third of QBO subscribers are global, international subscribers account for less than 10% of QBO revenues.  Seessel doesn’t mention this, probably because he wanted to keep it simple.  But then he suggests that Intuit overstates their TAM, which I don’t agree with.  Seessel also claims in Chapter 9 that Intuit “invented and brought to market TurboTax,” which I know isn’t true.  Turbotax was developed by Michael Chipman, founder of Chipsoft, not by Intuit.  Intuit agreed to acquire Chipsoft in September 1993, the same year it had come public. As the 1993 press release announcing the deal explained (link), Chipsoft shareholders ended up holding 39% of the merged company. I also believed TurboTax was “largely mature” when we started buying Intuit in our accounts in Q2-2017, but today we disagree with that view.  The opportunity to go up-market is enormous, and indeed, management expects half of the Consumer Group growth will come from upselling their premium offerings, including TurboTax Live and TurboTax Full Service (link).

Below I share some of my highlights from the book, but only up to Chapter 4, which is as much as the publisher allowed me to export from the Kindle. That Adam Seessel and I don’t agree on everything, is what makes a market.  I do think, though, that his book is a masterpiece.  And hats off to Professor Chris Begg of Columbia Business School, for giving Seessel the idea of framing the evolution of value investing as a series of software releases. That’s an interesting way to think about it, but beware the Value 3.0 release, since in the era of cloud computing, such launches can become obsolete quickly.

Best,
Adriano

HIGHLIGHTED EXCERPTS

Introduction: So Big, So Fast

Apple’s wonderful ascent, however, obscures the fact that four times over the last fifteen years, Apple’s stock lost 30% of its market value. Once every three to four years, Alex saw his life savings decline by almost a third. As anyone who has ever invested in the stock market can tell you, that does not feel good. But Alex didn’t lose his head, or his lunch, or his conviction in the logic for owning Apple, and he has become wealthy simply by identifying a single, superior business and sticking with it. A $10,000 investment in Apple when the iPhone came out is today worth nearly $500,000, about fifteen times what he would have made if he’d invested in the S&P 500 index.

Contrary to what many people believe, the market is neither a hall of mirrors nor the Emerald City, where the Wizard of Oz hides behind the curtain pulling the strings. The stock market is nothing more than a collection of American companies whose profits grow over time. As their profits grow, so does their market value. If you believe that the United States will continue to grow and prosper, you should own a piece of that action.

Because 5% annual appreciation is decent, putting $10,000 to work in the American real estate market over fifty years will net you slightly more than $100,000. But investing that same amount at the average stock market return will generate more than $700,000.

Even if you’re, say, forty years old, I believe you shouldn’t have much at all in bonds, which barely pay more than a three-year CD. Some so-called 2045 target date funds have as much as 15% bond exposure in them, which is 15% too much for me. With more than twenty years ahead of you to smooth out returns, you should be letting the growth of American business work for you.

Like Alex with his Apple, I want to find businesses that are going to do better than the market’s average of roughly 9% annual growth. In this book, I am going to suggest that you do the same, and I’m going to give you techniques to do so.

The magic of compounding will see to that: $10,000 invested at the market average of 9% will give you more than $700,000 after fifty years, but that same amount invested at a 12% rate will give you almost $3 million.

Lynch’s words remain as true as ever, but the problem is that over the last generation technological change has altered the economy so much that the nature and character of what constitutes a superior business has also dramatically changed. The internet, the cell phone, and social media didn’t exist when Lynch wrote. Many of the everyday examples that he used to illustrate superior businesses—Toys “R” Us, Subaru, and Hanes, the maker of L’eggs pantyhose—are now laughably out of date. That’s no knock on Peter Lynch—the world changes—but we must acknowledge that the same common sense that led him to those stocks now tells us to go nowhere near them. The internal-combustion automobile today faces threats from both driverless and electric cars; most women stopped wearing pantyhose a long time ago; and as for Toys “R” Us, squeezed between the giant pincers of Walmart and e-commerce, it filed for bankruptcy protection in 2017.

Tech dominates our daily lives so thoroughly that it’s natural to think the digital revolution is largely complete, but that’s not true. In many ways, it’s just beginning. Even after a generation of growth, Amazon’s annual retail sales volume only now matches Walmart’s. Cloud computing, which today accounts for roughly 10% to 15% of all spending on information technology, will one day likely account for more than two-thirds. Intuit, the world’s leading provider of small-business accounting software, reaches only 1% to 2% of its ultimate addressable market. The list goes on, and as computing power compounds, the list gets longer every year.

Tech’s dramatic rise has been accompanied by an astonishing fall in the old economy’s market value. Over the last decade, the fossil fuel sector has shrunk from 13% of the U.S. stock market’s value to less than 3%. During the same period, the financial services industry has shrunk from 15% of the market to 10%. As recently as 2015, Exxon Mobil and Wells Fargo, two reliable blue-chip investments for generations, were each two to three times more valuable than Amazon. Today, as the chart below shows, Amazon is four times more valuable than Exxon Mobil and Wells Fargo combined.

Big tech gets most of the headlines, but hundreds of smaller, lesser-known tech companies have also continued to appreciate. Adobe in document productivity and digital marketing; Ansys in design-simulation software; and Autodesk in digital construction tools are only a few examples, and I’ve not yet exhausted the list of companies beginning with the letter A. Most people know Adobe because of its PDF functionality; fewer know that in 2020 Adobe earned roughly $3.5 billion, about the same as Kraft Heinz, whose brands like Oscar Mayer hot dogs and Philadelphia cream cheese have been around since the 1800s.

Pessimists are wrong, however, to suggest that we’re in for another bust. Today’s tech companies have put down powerful and profitable roots in ways that the first wave of dot-com companies never did. Two decades ago, businesses such as Pets.com IPO’d at multi-hundred-million-dollar valuations on the dubious proposition that they were somehow valuable because they attracted lots of “eyeballs.” At its peak, however, Pets.com never turned a profit and never generated more than $50 million a year in sales despite spending more than twice that in marketing. Today’s online companies don’t look anything like Pets.com. Adobe’s annual revenues are nearly $16 billion, from which it makes $5 billion in profit. Facebook has 3.5 billion users, and its annual earnings approach $40 billion, which is roughly four times what Disney makes.

Some also believe that, given all the concern over big tech’s sudden influence over our lives, government intervention will soon check tech’s power and, with it, its ability to generate wealth for shareholders. Governments may well move to curb the influence of the digital giants. They may even succeed in breaking them up altogether—but it’s impossible for regulation or legislation to undo a generation of daily, habit-forming usage of the world’s largest tech applications. How is any government going to regulate away the fact that, every day, people around the world search on Google 5.5 billion times? Are politicians going to outlaw Facebook from serving its billions of regular monthly users? These companies’ applications are woven into the fabric of daily life around the world, and every year the weave gets tighter and stronger. As such, companies like Google and Facebook can rightly be regarded as the Coca-Cola and the General Motors of our generation.

When technologists introduced the field-effect transistor, a basic semiconductor that’s become the most manufactured artifact in human history, it could hold only a single chip and it cost more than $1. Today, each field-effect transistor contains millions of chips and costs $0.000000001, or one billionth of a dollar. This price/performance explosion became known as Moore’s law, and it’s been in force now for more than sixty years. Engineers have been predicting the death of Moore’s law for at least a decade, but so far it hasn’t happened.

At the turn of the millennium, only 1% of the world’s population had a broadband internet connection, as the venture capitalist Marc Andreessen pointed out in a seminal essay a decade ago. Cell phones were so expensive then that only 15% of the world’s population owned one. Such facts help explain why the dot-com boom busted: the technological backbone wasn’t strong enough yet to support it.I

Today, more than half the world’s population has both broadband access and a powerful smartphone. As a result, much of the world searches, shops, chats, banks, and performs many other everyday activities online.

Before Google Search, you had to go to the library or invest in a set of encyclopedias, which were bulky, went quickly out of date, and were hardly interactive. Before digital maps, you needed paper maps, which often ripped, never folded properly, and didn’t give you alternate routes or reports on traffic accidents along the way.

A recent MIT study led by Erik Brynjolfsson quantified how much consumers value their everyday tech applications. He and his team asked consumers how much money it would take to get them to forsake their accounts at Facebook, Google, and others. On average, the study found, it would take $550 in annual payments to make a Facebook user quit Facebook. The number was much higher, nearly ten times so, for WhatsApp. Almost unbelievably, the study found that to go without Google, the average user would require a $17,500 annual payment. That’s almost one-third the average American citizen’s income.

Intuit, the small-business software provider, has profit margins twice that of Campbell’s, the soup maker, even though Intuit spends roughly four times as much in marketing, sales, and research and development. How can that be? Campbell’s raw materials are tomatoes and chicken and noodles, which cost a lot; Intuit’s raw materials are nonphysical and therefore cost almost nothing. Moreover, software-based enterprises like Intuit have no major capital or manufacturing needs. When Campbell’s wants to make more soup, it must build a new production line or a new plant. Even Coca-Cola, which sells sugar water, must have its subsidiaries build a bottling plant and invest in trucks and vending machines to expand. Software companies don’t require factories or production lines; they require laptops manned by intelligent engineers. When a software company wants to enter a new geographic market, its engineers write new code, hit “deploy,” and their software is available around the globe, instantaneously and with almost no incremental costs. Even a software company’s major capital requirement, giant servers that process and store data, can now be rented rather than bought. That’s the essence of cloud computing. Higher profitability + lower asset intensity = the highest return on capital businesses ever seen. When Ford wants to grow its business, it must invest $10 in assets to generate $1 in profit. Coke requires roughly $6. Facebook, only $2.

Stock market speculators have always been with us, but they now can place their bets wherever they have cell reception. Recently, they banded together on social media and used new trading platforms to cripple professional short sellers. Given such turbulence and confusion, an inexperienced investor might reasonably ask: Why should we invest in the stock market at all? The answer is not complicated. We invest our money because, while it would be nice to spend all of it today, we know that we’ll require some down the road. We will need money to put our kids through college, to help our parents get long-term care, and to make sure we ourselves can live comfortably during retirement. We forgo the pleasure of spending $1 in the present to transform that $1 into $5 and then $10 to use at some time in the future. And as I laid out earlier, for the last one hundred years the U.S. stock market has been the best place to do that.

Peter Lynch told us to “invest in what you know,” and this is generally good advice. Like hunters, investors do best when they understand the terrain. Many older investors, however, today find themselves in an unfamiliar landscape. What do companies with nonsensical names such as Chegg, Splunk, and Pinduoduo do, anyway?

Younger and less experienced investors have the opposite problem. They grew up in the digital ecosystem, and they know the territory in that intuitive, born-with-it way that positions them to hunt and track today’s investment opportunities. On the other hand, many younger investors mistrust the markets and “the system” in general. They have legitimate reasons. Young investors have already endured three major market meltdowns—the dot-com bust in 2000–2001, the financial crisis in 2008–2009, and the coronavirus pandemic in 2020—and they have entered adulthood with lower incomes and more debt than their parents. No wonder that, rather than turning to reliable investments to build wealth as their elders did, the younger generation has turned to newer, more experimental asset classes like cryptocurrency, socially responsible stocks, and speculations promoted on Reddit message boards. Don’t get me wrong: I dislike crypto as an investment not because it’s young and I’m not. I dislike cryptocurrency for the same reason I dislike gold. Neither crypto nor gold are living, dynamic businesses that can expand over time. Bitcoin may be a new storehouse of value, but in the end it’s just a currency. It has no customers, no revenues, and no profits to grow.

We must remind ourselves that the stock market is nothing more than a collection of businesses and that investing in them has historically been the best way to build wealth. We should acknowledge that the world’s economy is increasingly digital, so we must learn how digital companies create wealth. We should invest in the best such companies, then let compounding do its job.

No subset of investors has had a harder time adapting to the changes brought on by the Digital Age than value investors, an investment discipline of which I’m proud to be part. Although the term is often used, “value investing” is rather hard to define. Just as there are many sects of Christianity, so are there many branches of value investing.

Value investing does, however, revolve around a few central principles. Chief among these is an insistence upon discipline, rigor, and study. Value investors approach the stock market not as a betting parlor or a bodega where we can buy a lottery ticket but as a place where we can systematically attempt to build wealth. We are not traders or speculators. We are bookish and analytical, and we love metrics, yardsticks, and ratios—anything that can help us make sense of the public markets. Above all, we seek to codify our approach to investing through a set of rules. We use a framework that we impose on the stock market so that when we beat it, it’s not a matter of luck, but rather of a system. Value investors are also notorious cheapskates who hate to pay a high price for an investment. That’s why we’re called “value” investors and that’s why we look down on other methods that give price less weight in the decision-making process. We disdain so-called growth investors, who are interested mainly in companies with steep sales and earnings trajectories. We are even more disgusted by momentum investors, who do in fact treat the market like a casino, seeking to ride their luck by following short-term trends. Because of value investing’s disciplined approach, study after academic study has shown that a value-based discipline has led to long-term, market-beating results.II Faced with technology’s radically new and alien business models, however, value investing’s frameworks have begun to break down. Reliable value-based metrics like price to book value, which measures how expensive a company is relative to its assets, and price to current earnings, which measures expensiveness in relation to how much profit a company is generating, have failed to capture tech’s enormous value creation. As a result, these same academic studies are now beginning to show that value investing hasn’t been working the way that it once did. Even Warren Buffett, the high priest of value investing and widely considered the most successful investor of all time, has struggled to navigate the new economic landscape. While Buffett’s long-term returns remain awesome in the original sense of the word, they have been diminishing. As the following chart shows, his market-beating performance peaked in the 1980s, lessened in the 1990s, and since 2017 has turned into underperformance.

As a Wall Street investment analyst since 1995, I’ve watched as tech stocks have grown from gawky adolescents into some of the most powerful economic specimens the world has ever seen. For the last several years, I’ve been wrestling with these issues as both a full-time money manager and as a contributor to Barron’s and Fortune. In this book, I do my best to resolve them.

Honestly, I’d rather not have had to investigate “tech” at all. Only a half dozen years ago, I was a stodgy value investor who was comfortable with the old orthodoxies. I’d have been happy to spend the next twenty-five years of my investing career in the same way I’d spent the first twenty-five. I have no innate interest in technology, I dislike gadgets, and I barely understand how electricity works. If it weren’t so financially dangerous to do so, I’d stay set in my ways—but old industries are dying and new ones are being born at a rate not seen in more than a century. To continue as I had would have been to ignore economic reality and to consign myself and my clients to a future of dismal performance. I arrived at this conclusion only after several years of struggle, research, and contemplation. I came to it unwillingly, with the same reluctance that a true believer gives up his faith. But as a student of business, and as someone devoted to what might be grandiosely called Truth, I had to admit that something important had happened. So I recalibrated my instruments and focused my attention on the digital economy. I did this not because tech is sexy, or interesting, or beneficial to society. I did it for the same reason Willie Sutton robbed banks: it’s where the money is.

Anyone interested in this subject would enjoy reading Andreessen’s “Why Software Is Eating the World,” first published in the Wall Street Journal in 2011. Likewise, you should read Gordon Moore’s less elegantly titled “Cramming More Components onto Integrated Circuits,” a 1965 essay that laid out the price/performance dynamics of computing power. The former is five pages long and the latter is four pages. Why are all the most important papers so short?

See for example Eugene F. Fama and Kenneth R. French, “Value Versus Growth: The International Evidence,” Journal of Finance 53, no. 6 (1998): 1975–99, http://www.jstor.org/stable/117458. “Long term” here means a decade or more.

See for example Baruch Lev and Anup Srivastava, “Explaining the Recent Failure of Value Investing,” New York University, Stern School of Business, October 2019, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3442539.

Part I: Preparing to Invest

My first job was at Sanford C. Bernstein, a firm known for the thoroughness of its investment research, and its halls were as quiet as a monastery’s.

Good investors do not live by testosterone or adrenaline; they ignore them. Peter Lynch said that his most valuable course in college had nothing to do with finance—it was a course on logic. To relax, Warren Buffett reads the philosopher Bertrand Russell and plays bridge.

This slow, incremental approach especially characterizes long-term investors, who don’t see the stock exchange as a gambling hall in which we “play the market.” Instead, we see it as a place where, over time, value is found out.

As Peter Lynch has said, superior businesses win in the stock market over time. Inferior ones either languish or die.

All value investors do their research. All value investors are disciplined about the price they pay. Above all, all value investors scorn randomness; instead, like Graham, we impose a framework onto the markets. We invest using a set of rules that we rarely alter, trusting that our discipline will help us outperform the market averages over time.

The reversion to the mean framework measures stocks as Buffett does, comparing a business’s current quoted price to its profits, and the essence of the discipline can be summed up by value investor Sir John Templeton’s dictum, “The four most dangerous words in the English language are ‘this time it’s different.’” At Bernstein, this phrase was our Apostle’s Creed. Don’t try to predict wholesale change, we were taught, because it’s not going to happen. Simply buy the companies that are historically cheap and sell the ones that are historically expensive. Eventually, life will return to normal.

I was the junior oil and gas analyst apprenticed to the senior one, and it was our job, along with all the other analysts, to feed data about the companies we covered into what we called “the black box.” This wasn’t a box at all, but rather a sophisticated computer model Bernstein used to determine statistical cheapness using mean reversion calculations. In would go data on projected sales, estimated earnings, debt ratios, and so forth, and out would come the stocks and the sectors that the black box deemed expensive and the ones it deemed cheap.

Because in the late twentieth century everything did eventually return to normal, the black box generated large gains for the firm and its clients. At its peak, Bernstein managed $800 billion, making us one of the largest money management firms in the world.

The man who presided over the black box when I was there was Lew Sanders, Bernstein’s chief investment officer. Lew was slim and quiet, and he moved through Bernstein’s corridors with the quiet grace of an abbot in his priory. Lew embodied the kind of cerebral, tide-mapping investor I wanted to be.

When I felt my apprenticeship at Bernstein was done, I left to become a more senior analyst at first one and then another firm, Baron Capital and Davis Selected Advisors. In 2000, I began co-managing a mutual fund for Davis, and by 2003 I felt experienced enough as a value investor to start my own firm.

Then, in the middle of the last decade, my system rather suddenly stopped working.

Sitting at my desk that dark December evening, however, I had the uncomfortable feeling that the market had finished weighing my stocks and found them wanting.

What if the businesses I owned were not cheap because they were on sale—what if they were cheap because their futures were bleak?

Software companies have few tangible assets and cannot therefore be valued using Graham’s original asset-based analysis.

When tech stocks collapsed in the dot-com bust, it confirmed to value investors that the four most dangerous words in the English language were indeed “this time it’s different.” If there was any reversion to the mean in the tech sector, it was to the mean of chaos, and no serious value investor was interested in that. Fifteen years later, however, something unusual happened. In 2016, Buffett, the guiding light of value investors and the keeper of the flame passed down to him by Ben Graham, bought $7 billion worth of shares in Apple. To say that this move mystified the investment community is like saying Catholics would be confused by a pope who opened the priesthood to women. Apple was a hardware technology company so historically brutalized by competition that in the late 1990s it was ninety days away from declaring bankruptcy. What, the value investing community asked itself, was the Oracle of Omaha doing? Fortunately, I had a plane ticket to hear Buffett explain himself. Every spring, 40,000 of value investing’s faithful gather in Omaha, Buffett’s hometown, to hear him and Charlie Munger expound on the state of their holding company, Berkshire Hathaway, and the world at large. Anyone interested in investing should make the pilgrimage to Omaha at least once: Buffett and Munger sit on a dais in a basketball arena and answer a full day of questions, laying out what they invested in over the past year and why. Even though Buffett is ninety-one years old and Munger’s well past that, they remain committed to transmitting the lineage of value investing the old-fashioned way: orally and in person.

By the time I went to Omaha, I’d sold Avon, Tribune, and the other stocks whose best days were behind them. I’d concluded that these companies were, in Wall Street parlance, value traps: cheap, but not valuable. My largest position was now Alphabet, my performance had improved, and my conversion to a new way of looking at the world was deepening. But it was still new, and I wanted to hear from Buffett why he’d bought Apple. Misery loves company, but so does conviction, especially when it’s recently discovered.

“I didn’t go into Apple because it was a tech stock in the least,” he would later say. “I went into Apple because I came to certain conclusions about the value of its ecosystem, and how permanent that ecosystem could be.”

Munger, who is almost always more direct than Buffett, chided both himself and his partner for not buying Alphabet, the parent company of Google. “If you ask me in retrospect what was our worst mistake in the tech field, I think we were smart enough to figure out Google,” Munger told the crowd. “So I would say we failed you there. We were smart enough to do it and didn’t do it.” Buffett agreed, recalling how Google had first appeared on his radar screen a decade earlier when GEICO, Berkshire’s auto insurance subsidiary, began to buy Google Search ads on a per-click basis. “We were paying them $10 or $11 a click or something like that,” Buffett said. “Any time you’re paying $10 or $11 every time someone just punches a little thing where you’ve got no incremental cost at all, that’s a good business.”

Aha, I thought. Buffett and I are on to the same idea, and the word is getting out. As the meeting ended, I found myself looking forward to talking about it with my peers at the dinners and cocktail parties that followed the gathering. At these events, however, I found that nobody wanted to talk about Apple. Nobody, in fact, wanted to talk about tech in general or the new world that Buffett had just described. Instead, everyone continued to chatter away about the same old old-economy businesses they’d been chattering away about for years. They talked about Buffett’s recent airline investments, even though these investments represented a smaller dollar commitment than the one he’d made to Apple. People also spent lots of time unpacking tiny, incremental changes Buffett had made to Berkshire’s various insurance subsidiaries. This struck me as insane. Both airline and insurance companies were the very kind of mature, capital-intensive businesses that Buffett had just said were fading away. Had nobody heard our guru telling us it was time to look forward rather than back?

By late 2009, the market had recovered from the crisis and the S&P was on its way to its best year in decades; Bernstein’s flagship fund, however, remained down more than 50%. On another dark day in late December, Lew Sanders left his office at Bernstein for the last time. I lost track of Lew after that, but he resurfaced for me as I began to wrestle with the ascent of the Digital Age. He had started his own firm, Sanders Capital, and I was shocked when I read that his top holdings included several tech companies, including Alphabet and Microsoft. Neither of these stocks was even close to attractive when viewed through traditional value lenses. This made me very curious indeed. What had made the archbishop of reversion to the mean renounce it? “Lew,” I began, “over the last few years I’ve come to suspect that many of our old investing methods no longer work. Businesses like Alibaba, Facebook, and dozens of other, smaller companies are prospering. None look attractive when you look at them using conventional metrics—but maybe the conventional metrics are wrong. Maybe ‘this time it’s different’ aren’t the most dangerous words in the English language anymore; maybe it’s ‘life is going back to normal.’” Lew was silent, and his ice-blue eyes were downcast. So I continued. “I’ve begun to invest in such businesses,” I said, “and I notice you’re doing the same.” Still nothing. “So, Lew, I have to ask you,” I finally said. “What the hell is going on?” Lew smiled, raised his glacial eyes to mine, and uttered four words that will remain with me for some time. “The world,” he said, “has changed.”

Chapter 2: Value 1.0: Ben Graham and the Age of Asset Values

Although Graham became known as the father of modern security analysis, he was at heart an intellectual. He knew seven languages and routinely quoted Corneille in French, Kafka in German, and Homer in ancient Greek. Graham is likely the only financial analyst in history who, during a poor stretch of investment performance during the Great Depression, composed a poem about it. (“Where shall he sleep whose soul knows no rest,” the poem concludes. “Poor hunted stag in wild woods of care?”) Like many thinkers, Graham was known in equal measure for his brilliance and his absentmindedness. He invented a new version of the slide rule, but he would also often show up at work wearing two different-colored shoes.

In 1923, Graham quit Newburger, Henderson & Loeb to start his own investment operation. He was only twenty-nine but he had an edge, and he knew it.

“To old Wall Street hands it seemed silly to pore over dry statistics when the determiners of price change were thought to be an entirely different set of factors—all of them very human,” Graham later wrote in his memoirs. But “[a]s a newcomer—uninfluenced by the distorting traditions of the old regime—I could respond readily to the new forces that were beginning to enter the financial scene. I learned to distinguish between what was important and unimportant, dependable and undependable, even what was honest and dishonest, with a clearer eye and better judgment than many of my seniors, whose intelligence had been corrupted by their experience” (emphasis added).

Graham’s reputation, his bank account, and his self-confidence all grew. His asset-based approach was working well—so well that he used the securities he owned as collateral to borrow money and buy even more stocks with it. He leveraged up, as we say on Wall Street, or “went on margin,” and he did this right into the Crash of 1929. All stocks sank, and Graham’s borrowings amplified his losses. By 1932, his investment partnership was down 70% from its peak. It would not be until five years after the crash that Graham’s fund recovered to pre-1929 levels.

Graham moved his family to a smaller apartment, and his wife found work as a dance instructor. He abandoned the car and chauffeur he’d kept for his mother, but he did not abandon his investment discipline. While other investors despaired, Graham continued to invest using his asset-based system.

While Graham’s full performance records do not survive, it appears that by using this system he outperformed the larger market by a comfortable margin from the 1930s until he retired in 1956. Graham estimated his returns to be 20% per year, roughly double the market averages over that period.

There are deeper problems with Graham’s system, however. Value 1.0 is largely a short-term strategy, one that requires a constant portfolio recycling as inexpensive stocks appreciate to fair value. Graham’s approach came to be known as “cigar butt investing,” because the stocks in a Graham portfolio are like cheap stogies picked up off the sidewalk. Good for only one or two puffs, they must be quickly discarded, then new ones found. It’s time-intensive to find such stocks, track them, and decide on entry and exit points for each one. Because the recycling is rapid, gains in cigar butt investing are also often taxed at ordinary-income rates, which are higher than long-term capital gains rates. In the upper tax brackets, a 20% short-term investment gain becomes a 10% gain after paying 50% taxes on it. Finally, and most importantly, Value 1.0 is rigid, rote, and monomaniacal in its focus on asset prices. As a result, the biggest fish routinely slip through its net. Value 1.0 was well-suited to its times; its strict adherence to numerical formulas kept investors away from speculating. It’s a simple system with easy, binary answers: either a stock meets Graham’s liquidation criteria, or it does not. Finding a company you can invest in with a margin of safety, Graham wrote in The Intelligent Investor, “rests upon simple and definite arithmetical reasoning from statistical data.”

Obsessed with formulas, Graham ignored any sort of qualitative analysis; one of his assistants recalled that he would get bored and look out the window if anyone started talking about what a company actually did.

Walter Schloss, who worked for Graham and later became a legendary value investor in his own right, once pitched Graham on a company that wasn’t selling for a fire sale price but owned a promising new technology: Haloid, which would later commercialize the Xerox machine. “Walter, I’m not interested,” Graham told Schloss. “It’s not cheap enough.”

Graham retired early for a portfolio manager, at sixty-two. A wealthy man, he could afford to return to his earlier, more intellectual interests. He translated a novel from Spanish, published a volume of poetry, and began to split his time among the United States, Portugal, and Aix-en-Provence. Shortly before he died, however, Graham made a bizarre, indirect confession about the limitations of the discipline he had created. The confession came in a two-page postscript from the final edition of The Intelligent Investor, published in 1973. Graham apparently felt so sheepish about the matter that he wrote of himself in the third person. He describes what transpired as if it had happened to someone else, whereas in fact it happened to him and his longtime business partner, Jerome Newman. “We know very well two partners who spent a good part of their lives handling their own and other people’s funds in Wall Street,” Graham begins in the postscript. “Some hard experience taught them it was better to be safe and careful rather than to try to make all the money in the world…. In this way they did quite well through many years of ups and downs in the general market…” Graham goes on to say that in 1948 he put 20% of his partnership’s assets into a single stock. The stock was cheap relative to both assets and earnings, and, Graham writes, he and his partner were “impressed by the company’s possibilities.” Almost soon after Graham bought it, the stock took off and continued to appreciate—so much so that over time, it made Graham and his partners two hundred times their initial investment. This appreciation quickly made it look expensive on Graham’s asset-based metrics, but he decided to keep it because, as he says in his memoirs, he regarded the company as “sort of a family business.” “Ironically enough,” Graham concludes in The Intelligent Investor, “the aggregate of profits accruing from this single investment decision far exceed the sum of all the others realized through 20 years of wide-ranging operations in the partners’ specialized fields, involving much investigation, endless pondering, and countless individual decisions” (emphasis added). In other words, a single investment in one great business made Graham more money than a generation’s worth of cigar butts combined. The company was GEICO, the automobile insurer. Yet in Graham’s memoirs, he mentions GEICO only twice, once in relation to an insurance claim he filed with them. Northern Pipe Line, on the other hand, receives a whole chapter. “Are there morals to this story of value to the intelligent investor?” Graham asks in the conclusion to his postscript. “An obvious one is that there are several different ways to make and keep money on Wall Street. Another, not so obvious, is that one lucky break, or one supremely shrewd decision—can we tell them apart?—may count for more than a lifetime of journeyman efforts.” Here, Graham was dissembling. By the time he wrote this postscript, he knew that identifying great businesses like GEICO did not involve a lucky break. He knew that the identification of great businesses could be systemized, just as he had systematized asset-based investing. One of his former Columbia students—his star pupil, in fact, the only one he ever awarded an A+—was proving it through his own investment track record.

End of Chapter Footnote:  I am indebted to my friend and colleague Chris Begg, cofounder and chief investment officer of East Coast Asset Management, who gave me the terms Value 1.0, Value 2.0, and Value 3.0, which I use throughout the book.

Chapter 3: Value 2.0: Warren Buffett and the Brand-TV Ecosystem

Buffett was heavily influenced in his thinking by John Burr Williams, an economist who had written a book called The Theory of Investment Value. Like Graham’s Security Analysis, Williams’s book had been written in the depths of the Depression, but it was as optimistic and as forward-looking as Graham’s was cautious.

“The key to investing,” Buffett said in a 1999 speech that was later published in Fortune, “is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”

In both its general worldview and its specific tools, Value 2.0 is beginning to fail us. As the economy changes, the moats that protect many of Buffett’s classic postwar franchises are weakening. At the same time, Buffett’s valuation framework, with its focus on mature companies generating lots of current earnings, hasn’t captured the enormous value being created in the Digital Age. While Value 2.0 was exquisite in capturing where the money was, it’s not capturing where the money is.

the pair have been slower to recognize the secondary effects that media’s decline has had on mass brands: Coca-Cola and Kraft Heinz remain large Berkshire positions.

A third of Buffett’s top fifteen publicly traded stocks are financial-services companies, including American Express, Bank of America, and, until recently, Wells Fargo. This is a real problem, because digital companies are looking at legacy banks the way a lion sizes up an aging zebra. Like GEICO, a bank’s competitive advantages arises from its low-cost position. Unlike GEICO, however, which offers its customers better deals, banks have offered customers worse deals, betting—correctly, so far—that customers would put up with them. However, those days may soon be over.

While it’s true that it’s hard to change banks when you have so many accounts with them, banks have abused their customers’ trust for so long that they are all but inviting customers to leave. Not only do banks offer below-market rates, but they also routinely ding their customers with fees. Account-opening fees, account maintenance fees, fees for using another bank’s ATM, fees for failing to maintain a minimum balance, overdraft fees—as anyone who has seen them on their monthly statement knows, the list is long. The average American pays roughly $20 in banking fees every month, more than they pay for a Netflix subscription. But at least, with Netflix, people get something.

Why is that? What is it about value investing as currently constructed that lets most tech companies slip through its net? The answer is complex, but I think it begins with Buffett’s worldview. Buffett’s career coincided with a time when the American economy was unusually stable and homogenous.

Unlike many other tech companies, Apple is relatively unambitious in terms of trying to attack new markets; as a percentage of sales, Apple spends only about one-third of what Alphabet, Microsoft, and Facebook spend on R & D. Over the last decade, the company has acted like an old-fashioned capital allocator, using much of its cash flow to repurchase its own shares in the open market.

Experience has taught them to look for steady, persistent economic farmers, safe behind their moats and castle walls. The blitzkrieg success of companies like Alphabet, Facebook, and Netflix is alien to them, and little wonder. They’d never seen anything like it until they were more than seventy years old.

Alternatively, read Berkshire Hathaway’s 1992 annual report, in which Buffett gives a condensed version of Williams’s ideas.

Chapter 4: Value 3.0 and the BMP Checklist

This company makes generic spare parts for airplanes. Like GEICO in 1951, it has a small share of a huge addressable market. Like GEICO, its competitive advantage stems from being the low-cost provider of an essential product. Even its name resembles GEICO’s: It’s HEICO, a company I came across during my wretched period of underperformance in the mid-2010s.

At the time, I was working with a talented analyst named Clint Leman. I asked Clint to write a simple computer program that used different metrics from the “look for cheap stocks” criteria I’d been using. No longer would I put price ahead of business quality as I had with Avon, Tribune Media, and the rest. Instead, I would search for businesses with superior economic characteristics, then see about price later. I also asked Clint to screen for management quality using a single simple yardstick: whether executives owned a lot of stock in the company they were running. Clint’s screen turned up a dozen names, the most interesting of which was HEICO. The company was founded in 1957 as Heinicke Instruments Company, but the story really begins in the late 1980s, when one of Larry Mendelson’s kids stumbled upon it. Larry Mendelson was a New Yorker who, while attending Columbia Business School a decade after Buffett, took the same security analysis course Buffett had. After graduation, Mendelson moved to Florida and made a lot of money in real estate, but he put his value-investing skills to work in the stock market as well. In the 1980s, his sons Eric and Victor attended Columbia as undergraduates; while they were there, Larry asked them to look for undervalued securities in their spare time. Interest rates were falling, stocks were modestly priced, and Larry was looking for a business he and his sons could take over and run. In keeping with Ben Graham’s tradition, the Mendelsons didn’t particularly care what the business did. It just needed to be cheap, poorly managed, and located in Florida, where the family wanted to stay. One day, while doing research in the Columbia law school library, Victor found HEICO, which appeared to meet the family’s criteria. The company specialized in making medical-laboratory equipment, but it had made a series of acquisitions, including one in the aerospace business. By the time Victor found HEICO, it had been public for nearly thirty years but barely made any money. Like Graham with Northern Pipe Line and Buffett with Sanborn Map, the Mendelsons saw HEICO as a company whose shares they could buy in the open market and then agitate for change. Unlike Northern Pipe Line and Sanborn Map, however, HEICO’s appeal lay not in the liquidation value of its assets, but in the latent earnings potential of its aerospace subsidiary.

As they learned more about airline spare parts, the Mendelsons discovered that HEICO could produce and sell a generic option at a 30% to 40% discount and still make healthy profits and returns on capital. The Mendelsons also found that there were few patents or intellectual-property rights attached to aerospace replacement parts. Moreover, the market for spares was huge—it’s roughly $50 billion a year today—and the aerospace industry was growing. Like American Express, investing in airline travel is a classic call on rising worldwide prosperity, which leads to a rising demand for travel.

In 1989, the Mendelsons and their allies bought 15% of HEICO’s stock in the open market. After a proxy fight almost as ludicrous as Graham’s Northern Pipe Line contest, they secured four seats on the board and named Larry Mendelson the new CEO.

He immediately sold HEICO’s lab business and focused on the market for airplane spares.

When Clint’s screen led me to HEICO in 2015, it had shipped 68 million parts without a single adverse incident, and nineteen of the world’s top twenty airlines bought parts from the company.

Part II: Tools for Picking Winners

Chapter 5: Competitive Advantage Then and Now

Go to Intuit’s site and you will see that Intuit now has 5 million online subscribers to QuickBooks, its small-business accounting product. Intuit says that the worldwide addressable market for QuickBooks is 800 million customers. Five million divided by 800 million equals less than a 1% share—I’m interested.

Chapter 6: Management: Some Things Never Change

Chapter 7: Price and Value 3.0 Toolbox

Chapter 8: Earnings Power

Chapter 9: BMP Case Studies: Alphabet and Intuit

Chapter 10: Investing in Non-Tech Companies

Part III:  Putting it All Together

Chapter 11: Buy What You Know – With a Twist

Chapter 12: Thoughts on Process and Priorities

Chapter 13: Regulation, Innovation, and Second Half of the Chessboard

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