I wrote this for CFA Institute and first published it on the Enterprising Investor.
Many people believe they know a lot about the world. My contention at the beginning of this article is a reminder: We all know much less than we think.
As you learn more about investing, you find the distinction between “inaccurate models” and “models” becomes more and more narrow. So with cartography. The West Wing viewers might remember chuckling at the notion of cartography playing a role in social equality, and then wondering why so many different types of map projections need to exist.
In a nutshell, you can’t draw a completely accurate flat picture of a sphere. The folks at The Flat Earth Society would likely disagree with me, but I’m not sure their association is global enough yet to collaborate across time zones.
So if you feel you can draw an accurate picture of Finland and the rest of the world at the same time, you are wrong. Good luck even measuring its coastline. A country doesn’t even need to have contested borders for your mental image of it to be wrong.
A lot of thought is focused on geopolitics these days, and it’s worth remembering that some basic things are quite easy to misunderstand. But even an inaccurate picture can be useful if you approach it with humility and curiosity. Take a look at this.
Ortelius World Map Typvs Orbis Terrarvm, 1570. Source: Library of Congress
The important question here is: is this map mostly useless or mostly useful?
Be kind to the elderly: it was published almost 450 years ago. But even flawed data allowed the map’s author to wonder whether Latin America, Africa, and Europe had once been part of the same landmass about 150 years before others asked the same question. That doesn’t mean he didn’t miss plenty. When I showed it to a fellow I met while working on this, he asked a great question: Where is Australia?
Like I said, one need not know everything in order to create value. I don’t want to veer too far into the history of maps, but my first recommendation for you this week is this amazing English explanation of a fascinating Arabic manuscript from the 11th century called Kitab Gharaib al-funun wa-mulah al-uyun. Here is why you should read it: things need context. This document contains the earliest known rectangular map of the world with a graphic scale.
If you know one thing about India’s economy, you know that it just eliminated a whole lot of cash. My colleague, Ron Rimkus, CFA, thinks this is mad science. A key reason is that demonetization can be seen as representing an affront to freedom.
The reasoning in favor depends upon who you ask. Getting “black money” out of the economy is one reason, but do you remember how in 2010 wealthy Athenians, in aggregate, had claimed only 324 swimming pools? Greek tax authorities decided to use satellite photos to count, and found there were 16,974 of them. I am partial to the headline that The New York Times used to describe this phenomenon: “Greek Wealth is Everywhere but Tax Forms.”
In many countries that is quite typical, but it bears mentioning that you don’t need fancy cameras to see evidence of tax avoidance in India — it’s about as evident as jaywalking in New York City. In 2013, McKinsey & Company estimated that India’s “shadow economy” represented 26% of gross domestic product (GDP). And those transactions are not taxed.
Here is India’s Chief Economist, Arvind Subramanian, sharing the chart from his recently released Economic Survey. You’ll note that India has a much larger taxpayer base than Greece. Bringing more people into the system will create additional freedom for those who dutifully pay their taxes, and they will be able to stop subsidizing those who don’t.
Remember that Reading is Fun
Here are a few more eclectic things for you to take a look at. Until next time, have a great weekend.