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Human Inertia and Blindness

Last night I hosted a small dinner at my home, and among the guests were friends of ours visiting New York from Caracas, Venezuela.  My wife hails from there, but for those of you who haven’t kept up on the situation in Venezuela all you need to know is that people are having numbers marked onto their forearms, akin to the tattoos given to concentration camp inmates during the Holocaust, and these numbers are being used as queuing reference points to alert one when it becomes his/her turn to purchase an allotment of toilet paper.

As shocking and disturbing as this is, what I found even more unnerving is that our friends, who have an apartment in New York that they visit once or twice per year for vacation, plan to return in the coming days to that hellhole called Caracas.  When I ask them “why return?”
they shrugged in a sadly resigned manner, admitted that it was completely illogical, and recalled conversations we had years ago during which we all agreed that the future of their country was surely bleak given the socialist/collectivist leadership that had taken hold.   We laughed last night, we recalled many past wonderful times spent together, we drank some wine, and generally had a wonderful evening.  But there was a pall that hung over it all for me and it was caused by the incredible sadness I felt witnessing the powerful tug of human inertia even in the face of a fairly horrible reality.

A very good friend of mine, Geoff Dohrmann, who publishes the Institutional Real Estate Investor, is fond of saying that institutional capital is so sticky that a manager has to shoot himself in the head…twice at least, before losing an investor’s mandate.  Like my friends’ decision to continue to reside in Caracas, this statement captures well the essence of the power of inertia.  I don’t have an answer to this riddle as to why we tend to stay way too long even when we know better, but I felt that it is worth noting and is surely worth us examining in ourselves on a regular basis.

Finally, while on the topic of Venezuela, I must also raise the issue of human blindness even in the face of overwhelming anecdotal evidence.  In the late-1990’s Hugo Chavez came to power in Venezuela riding a populist message that contained virtually the identical messaging of past populist socialist/collectivist leaders.  Re-distribution and fairness were words that flowed freely from him, with grand promises of delivering a better reality for all of his constituents.  In his time in power Mr. Chavez followed through on his plan, seizing many businesses, setting strict price controls in order to make things more affordable, all I am pretty sure with the best of intentions.  In the process Venezuela’s freedoms and rights eroded and what was once the Venezuelan private sector was vilified and greatly diminished.  Today, in the wake of his Bolivarian Revolution, Venezuela lies in ruins, much of its wealth has been squandered or has fled, its oil wells pumping vastly reduced oil, and crime and despondency rampant.  All of this could have, and should have been broadly anticipated given the many, many times that socialism and a heavy-handed central planning government has been tried in order to right the perceived wrongs of the free market, and how consistent the outcome has always been.  Again, I am left to ask a rhetorical question, even as we hear some of the same messaging emanating from the mouths of some of our own leaders in the U.S.  How is it that we all fall for the same thing time and time again knowing full well, based upon well-documented history, what the outcome will surely be?

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