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Malinvestment and Good Accidents

January 31, 2012

Matt Y talks about how Malinvestement doesn’t always have bad results due to luck.

As we know, Christopher Columbus had problems financing his journey – which created the most powerful empire of the next 200 years –  because he was totally wrong about the size of the earth and everyone knew it but a few rich fools.

“That said, it all made me wonder a bit about the social value of malinvestment. I’m really struck by the fact that Christopher Columbus sailed to the New World on the basis of a mathematical miscalculation about the size of the earth. It’s particularly striking that the conventional wisdom of Columbus’ time essentially had this question right—the earth, most scientists thought at the time, was much too large to make Columbus’ proposed westward sailing voyage a viable way of getting to China. Columbus shopped his idea to various monarchs, most of whom were in possession of accurate geographical analysis and rejected his idea. But Ferdinand and Isabella signed on to the crank’s erroneous ideas about where China was. For their trouble, they wound up in possession of a vast and wealthy empire and Spain became the leading Great Power of the 16th and 17th Century. Not bad for an unintended consequence of misguided idea based on an Italian navigator’s megalomania and calculation errors.”

This I think is one of the more important facets of human life: Luck. In this case, malinvestment turned out to have fantastically positive consequences for Spain. However, Luck isn’t always due to malinvestment.

There is a famous phrase about luck, “opportunity meeting preparation”, and lots of people try to apply this phrase to their lives. I know I do – it’s a good way to live.

But far fewer people think of this on the level of a country. How can we create situations where “good luck” happens? Well, keeping bunch of industries geographically close makes “lucky” things happen.

This is why Silicon Valley draws such bright people to it. It’s entirely possible to show up for work at some cool company and get lucky and become a multi-millionaire.  It happens all the time – I at least one person personally who took this life path and it worked great.

I think about Tesla, how he would just walk around New York City and meet with people who would fund his crazy ideas. Some of those ideas ended up creating our modern electrical society. We created a place where it was really possible for society to get lucky, and we did.

I think about Jobs tramping around Silicon Valley, selling computers, getting cheap parts, having Woz work at his desk on Apple stuff. We created a place where our society can get lucky, and we did.

Matt Y talks puts Malinvestment in the title, but this post is just as much about luck as Malinvestment. This is why it’s useful to build things here.  We could get lucky again.

 

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  1. Egggpaña va bien!
    January 31, 2012 at 10:00 am

    “In this case, malinvestment turned out to have fantastically positive consequences for Spain”.

    Some of us believe that the misfortunes that plague us today are rooted in that “stroke of luck”.

  2. TC
    January 31, 2012 at 10:32 am

    I apologize for this particular example of how luck can transform societies.

    There is no doubt the “luck” of Spain was hideously unlucky for the population of the Americas.

    I guess I should have gone more the Germs, Guns, Steel example rather than the “killing 95% of the population they didn’t enslave” example. 😦

  3. June 11, 2012 at 12:17 am

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