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Presentation on China/Japan (video, audio, updated slides)

Submitted by Vitaliy Katsenelson on 04/03/2011 00:02 -0400

I gave a presentation on China/Japan at
the “Rethinking Seminar” at Johns Hopkins University Applied Physics
Lab. My presentation was videotaped; video (both streaming and
download), audio, and even cliff notes may be found here (by the way, make sure to take a look at other presentations on their website). Also, I updated my slides on China/Japan; you can download them here.

It was a slightly surreal experience,
because the presentation was right across the street from the Pentagon.
So the Russian immigrant who until 1987 believed Americans were
horrible people (read the story of how my family emigrated from Russia) was lecturing Americans on the virtues of capitalism at the doorstep of the Pentagon!

Here are some random thoughts on subjects unrelated to investing.

DC, Wright Flyer, Blackbird…

I had been in DC a few times before but
never really had time to see the city. I took my almost-ten-year-old
son Jonah with me on this trip, and we had an amazing experience. It
was father-and-son, embrace history, see new things, eat donuts every
morning for breakfast at Dunkin’ Donuts time (mother was not there to
set us straight). Here are some pictures from this trip.

We spent a lot of time browsing
Smithsonian museums – Air and Space, American History, and the Air and
Space Udvar-Hazy (giant hanger with over a hundred planes, by Dulles
Airport). The Wright brothers’ first plane (the Wright Flyer) was
really a shocking exhibit. The Wright Flyer looks like an oversized
wooden kite, with strings and a few levers. It barely looks like a
plane. In its first flight it only went 120 feet – that was it! If
you look at the planes that came out a decade or two later, they were
real planes – metal wings, wheels, a pilot’s seat, etc. But the Wright
Flyer was the paradigm breaker, it proved that an object heavier than
air, powered, and operated by a human, could fly. It unleashed the
imagination of the generations who followed.

Fast forward six decades, and you find
us standing in front of the plane that impressed the most: the
Blackbird. The Blackbird is a reconnaissance plane; it has no weapons,
just cameras. It was the first plane to use stealth technology, though
it wasn’t until decades later that that technology was perfected. The
Blackbird’s engines are each the size of a small plane. Despite being
developed 47 years ago, it is still the fastest plane today, flying at
Mach 3, over 2,100 miles an hour! It flew from LA to DC in 64
minutes. It flew so high, at 80,000 feet, and so fast that if it was
detected by radar the pilot’s strategy was not to go to evasive
maneuvers but to push on the throttle. Not a single Blackbird was ever
shot down. What’s ironic about Blackbird is that it was discontinued not
because the US came out with a better or faster plane, no, but because
of the development of satellites. Satellites don’t cause international
incidents, don’t put pilots at risk, and don’t cost $85,000 an hour to
operate.

Productivity is very difficult to
observe in the short run, but in the long run it is really incredible
how we manage to do ever more with ever less. In the American History
Museum there was an exhibit on ports and ships, where I found this
remarkable statistic: “1960: 25 million tons handled by 15,000
longshoremen at the West Coast ports. 2000: 250 million tons handled by
10,000 longshoremen at the West Coast ports.” Two-thirds of the people
did 10 times more – that is productivity!

I was really reluctant to go to the
Holocaust museum, as I did not want to subject myself to the pain I knew
would come with it, but my wife convinced me and Jonah to go. I am
glad we listened to her. There are two things that stuck with me.

There was a wall of photos, five hundred
or so family pictures and portraits from a small Lithuanian town that
was home to 4,000 Jews for 900 years. I was magnetically attracted to
the photos, but it took me a few minutes to figure out that these people
looked like my relatives. A young fellow in his thirties looked just
like my uncle at that age, a 15-year-old kid looked like Jonah will look
five years from now, a Hassidic gentleman looked just like my cousin
who is a rabbi in Rego Park, Queens, and so on. These pictures impacted
me a lot more than the pictures of dead bodies, pictures from the
concentration camps, that I’ve seen so many times over the years, which
my brain has learned how to dehumanize. I could relate to these photos a
lot more. Nazis killed ALL the Jews in that village, including women
and kids, in two days. 900 years of history and tradition were wiped
from the face of the Earth in just two days! I have to admit I could
not keep my eyes dry after.

A quotation on the wall at the very end
of the exhibit really underlined why this museum is so important. It
was written by a German pastor, Martin Niemoller:

First they came for the Socialists, and I did not speak out —
Because I was not a Socialist.

Then they came for the Trade Unionists, and I did not speak out —
Because I was not a Trade Unionist.

Then they came for the Jews, and I did not speak out —
Because I was not a Jew.

Then they came for me — and there was no one left to speak for me.

As a parent you try to instill values
into your kids that you may not always possess; but you want your kids
to have them, and your children inspire you to be better people. Jonah
and I had a long discussion about how, when we see injustice that
doesn’t really touch us, we should not sit still.

Jonah had a blast in DC, but the
culmination for him was our trip to the Pentagon. I had a meeting at
the Pentagon, and to keep Jonah occupied while I was busy, he received a
private tour of the place from a lieutenant colonel. Jonah was
absolutely stunned – a few days later his eyes are still glowing when he
talks about it.

Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of The Little Book of Sideways Markets (Wiley, December 2010). To receive Vitaliy’s future articles by email, click here or read his articles here. .

Copyright Vitaliy N. Katsenelson 2011. This article may be republished only in its entirety and without modifications.

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Sun, 04/03/2011 - 13:25 | 1129906 MolotovCockhead

You and your son probably did not learn anything from the trip!! Didn't hear you mention anything on the real perpetrators behind the holocaust! Did you not teach your son on the involvement of IBM, Prescott Bush and a number of Wall Street Bankers backing Hitler. If you missed teaching that to your son, then the whole is a complete waste!

Sun, 04/03/2011 - 12:14 | 1129789 Rogerwilco

At the rollout in 1960 Kelly Johnson, the man responsible for the SR-71, said that it would still be an advanced aircraft if it was unveiled in the year 2010. He was right.

I saw the one on exhibit at the Air Force Museum in Dayton Ohio when it was still possible to walk up to it and touch the metal. There isn't a straight line on the fuselage or wings, everything is curved in at least one dimension. What an incredible feat of engineering in an era when slide rules were the norm.

Sun, 04/03/2011 - 11:58 | 1129763 whatz that smell