Human and Economic Evolution

Demographic trends and their effects on the economy are a big part of our research. We generally have a practical goal, such as estimating the demand for a company or industry’s products. However, sometimes we like to look at the long term—the extreme long term. This month we are going to take a look at some fascinating new research from Gregory Cochran and Henry Harpending, both professors of anthropology at the University of Utah. Their new book, The 10,000 Year Explosion: How Civilization Accelerated Human Evolution, is a revolutionary new look at modern human evolution with several important implications for the future.

The traditional view among both natural and social scientists is that human evolution stopped before the advent of civilization and that all human progress in the millennia that followed was a result of cultural rather than physical evolution. The belief is that complex brains enable humans to create and harness the power of new technology, making biological evolution unnecessary. In order to fly, modern humans do not have to mutate and sprout wings, they can instead invent the airplane. Darwinian natural selection now is applied to ideas, technologies, and economic systems rather than to the human genome.

Cochran and Harpending take a very different view. Rather than make continued evolution unnecessary, civilization and its new innovations actually accelerated human evolution by increasing the rate of reproduction and creating new criteria for reproductive fitness and advantage. As the authors describe their approach,

Conventional social sciences, such as history and anthropology, chiefly concern themselves with brain software, by which we mean cultural developments such as mores, mythology, or social structure. Genetic history addresses changes in the underlying hardware, changes in the body and brain, which also matter. If they didn’t, dogs really could play poker.

Those early humans who were better adapted to a settled, agrarian lifestyle had more children survive than average and thus left a larger genetic “footprint” on the human race over the course of several generations. Over time, genes favored in a given cultural and economic environment spread to an ever-larger percentage of the population. One such example is lactose tolerance. Early humans were lactose intolerant. Those lucky enough to have developed the mutation that allowed them to drink animal milk well into adulthood were able to enjoy a higher-calorie diet at a lower cost (it’s far cheaper per calorie to milk cows than to slaughter them for meat). The benefits of this are obvious. Healthier, stronger, and more energetic adults will be more economically productive and will have an advantage in military struggles as well. As a result, the lactose tolerant had a significantly higher fertility rate than the intolerant, and today lactose tolerance is the norm.

Other, more regional mutations are also obvious today. Sub-Saharan Africans developed a mutation that gave them strong genetic resistance to malaria. It’s not hard to see how this mutation could spread quickly across a continent; resistance to such a deadly disease would obviously enable the first Africans who developed it to enjoy a much higher fertility rate and also a military advantage over their disease-weakened rivals. (Sickle-cell anemia, which is common among African Americans, is an unfortunate genetic side effect of the malaria-protection gene.) This beneficial mutation also kept Sub-Saharan Africans safe from outside invaders for centuries, until the British began mixing their gin with tonic water flavored with quinine—thus acquiring “medically” what native Africans were lucky to be born with.

Europeans, however, had genetic advantages of their own, fit for their climate. In northern Europe, the days get short in the winter. The lack of sunlight can cause diseases related to vitamin D deficiency, such as rickets. A diet high in meat, such as that practiced by hunter-gatherers, generally will have sufficient vitamin D, but a diet high in grains will not. Thus, Cochran and Harpending contend that the adoption of agriculture favored mutation that led to lighter skin in Europe and northern Asia. Lighter skin absorbs more solar radiation, thus enabling the body to produce vitamin D on its own. Lighter skin is clearly not a favorable mutation in areas with more intense sunlight. (The high rate of skin cancer in Australia is unfortunate proof of this.)

Europeans, like Africans, also developed mutations that gave them resistance to certain diseases, such as smallpox. This, as Jared Diamond outlines in his excellent study Guns, Germs, and Steel, is what enabled a small band of Spanish conquistadors to conquer entire empires in the Americas. As a result, the Spanish and Portuguese were able to leave a cultural as well as genetic imprint that is far more significant than in other areas of European colonization.

Speeding Up Natural Selection

For those familiar with animal husbandry, none of this would be surprising. Horse and dog breeds have been created by nothing more than human tinkering. Selective pairing over the centuries (or in some cases, only decades) has given us breeds as diverse as Chihuahuas and Great Danes, to use the authors’ examples.

Likewise, the Peruvian Paso Horse has been bred over the past 400 years for its distinctive high-step gait, considered by many to be the smoothest in the world. The Peruvian is one of the few horse breeds that walks with an even “1-2-3-4” hoof beat rather than the “2-2” trot common in most other breeds. This behavior is not learned; the horses are born with it. (I only know this because my wife is from a family of Peruvian horse breeders.)

This brings up interesting points for human behavior, although we wouldn’t consider gait one of them. No one would say with a straight face that John Wayne’s cowboy strut was a genetic phenomenon caused by selective breeding. (Although George W. Bush did defend his own distinct gait in his 2004 speech at the Republican convention by saying, “In Texas, we call that walking.”) But could other human behaviors be introduced through breeding?

Cochran and Harpending suggest that Ashkenazi (Northern European) Jews were, quite literally, born to be bankers. Their existence in northern Europe for 1,200 years as an unassimilated subpopulation make them an interesting case study. Today, Ashkenazi Jews are measurably more intelligent on average that the overall human population, on the basis of IQ tests, Nobel prizes won, and representation in academia and among the upper echelons of the business and even entertainment worlds. As a tiny minority, their achievement is almost unbelievable.

It was not always that way, however. According to the authors, the Jews were considered to be of average intelligence in the classical and early medieval world; nothing more, nothing less. As a culture they certainly had nothing to match the body of scientific and philosophical work of their Greek contemporaries. So what changed?

The socioeconomic conditions in Northern Europe created unique selective pressures that had never before been reproduced in history and likely never will be again. The Ashkenazi Jews, due to their own religious prohibition against intermarriage and due to European bigotry against them, remained a relatively small, isolated community—and thus provided a perfect “laboratory” for natural selection.

The Ashkenazim were attracted to the profitable professions of trade and banking because, as a religious minority, they were exempt from the Catholic prohibitions on the charging of interest. Many times, they were excluded from landowning or from other trades as well, making finance one of the few career options available. What followed, in the view of Cochran and Harpending, was an acceleration of the natural selection process. Jews who had a natural talent for finance—including a high degree of literacy and mathematical and abstract thinking skills—were far more likely to have economic success. With economic success came better marriage prospects. (Even today, successful bankers are considered highly eligible bachelors.) Furthermore, with economic success came better nutrition and a higher percentage of surviving children. As a result, over the course of several generations, an increasing percentage of the Ashkenazim began to exhibit the traits that made for successful financiers. The less adept Ashkenazim had lower prospects for marriage and children—and thus gradually were weeded out of the gene pool.

So, due to a truly unique set of selective pressures, the Jews of Europe evolved into a measurably more intelligent subset of population over the course of 40 generations (roughly 1,000 years).

It’s Good to Be King

We’ve written in the past about Gregory Clark’s groundbreaking work A Farewell to Alms. Clark proposed an unorthodox theory for why the Industrial Revolution happened in Britain and not elsewhere. Clark argues that the prevailing theories—that the UK industrialized first due to its relative political stability and traditions of liberty and property rights—do not hold water. He instead makes the case that the change was cultural, based on breeding. The upper and middle classes in medieval England had more surviving children than the national average. At the same time, primogeniture laws required that only the eldest son inherit the family estates. This left quite a few “second sons” to make their own fortune. The end result was what Clark called “downward mobility,” i.e., upper and middle class Englishman were forced down the economic ladder. There is, after all, only so much room at the top. This situation caused “bourgeoisie” values, such as hard work, delayed gratification, and an appreciation for learning, to trickle down the economic rungs of society, which provided a fertile ground for the Industrial Revolution to take root.

Clark’s theory is based on culture, not genetics. However, a genetic argument certainly can be made, and Cochran and Harpending do exactly that. Throughout much of human history, elites did reproduce themselves at much higher rates.

For example, Alexander the Great did more than just spread Greek culture; he also spread Greek genes. Today, distinctly Greek chromosomes can be found as far east as Afghanistan.

“Once elites became possible, elite reproductive advantage kicked in,” Cochran and Harpending write, and perhaps no better example can be given than that of Genghis Khan. As the authors continue,

About 800 years ago, Genghis and his descendents conquered everything from Peking to Damascus. Genghis knew how to have a good time. Here’s his definition of supreme joy: “to cut my enemies to pieces, drive them before me, seize their possessions, witness the tears of those dear to them, and embrace their wives and daughters!” It appears that the last part of that list especially appealed to him. He and his sons and his son’s sons—the Golden Family—ruled over much of Asia for several hundred years, tending to the harem throughout. In doing so, they made the greatest of all genetic impacts. Today some 16 million men in central Asia are his direct male descendants, as shown by their possession of a distinctive Y chromosome. It just shows that one man can make a difference.

Cochran and Harpending also relate the story of Niall of the Nine Hostages, a king of Ireland around the year 400 AD. A full 8% of Ireland’s male population carry Niall’s Y chromosomes, and 2 to 3 million men worldwide carry them.

Implications for the Future

Today, in the post-WWII era of urban mass affluence, reproductive realities are far different. In all developed countries, birthrates have fallen to between 1 and 3 children per woman, and it is often the most educated and most successful economically who have the fewest children. A large family is now an economic burden, and having several children limits the time and monetary resources that can be dedicated to each child. Attempting to send six children to elite prep schools en route to Harvard would bankrupt all but the richest among us. Americans and Europeans have recreated a de facto system of primogeniture, except that rather than exclude younger children from their would-be inheritance the younger children are simply never born to begin with.

Those who do have large families tend to do so for religious reasons. Many evangelical Christians and Catholics take the Bible’s command to “be fruitful and multiply” seriously, as do Mormons, Orthodox Jews, and devout Muslims.

This brings up several questions for the future. What will the world look like in a few generations? Demographer Philip Longman (whose work we highly recommend) wrote an insightful article in 2006 titled “The Return of Patriarchy.” Longman, tracking birth trends, sees a cultural shift underway. Social conservatives tend to have more children than social liberals, and children more often than not tend to adopt the political and social views of their parents. All else equal, this points to a less libertine future, perhaps within our lifetime. This is not necessarily bad, of course. Societal views change over time. As we wrote in the April newsletter, summarizing the views of Thomas Sowell, social views on gender roles were actually more conservative in the 1950s than they were in the early 1900s. Views change and life goes on.

Of course, we see that this trend could be problematic in certain parts of the world, such as the Middle East. Barring significant immigration of socially liberal Jews from abroad, Israel will quickly become a more conservative country as more orthodox sects of Judaism have much higher birthrates than do secular Israelis. In a small country like Israel, the entire character of the state could change, for better or for worse.  (See “Israel and Turkey: How Changing Global Demographics are Affecting International Relations in the Middle East.“)

Likewise, the elites of many Muslim states tend to be secular, but the majorities of their populations are not. As birthrates among the secular elite have fallen to Western levels and decreased levels of infant mortality have enabled more children of the poor to survive to adulthood, the balance of power inevitably will shift. A case in point is Turkey. The Turkish state founded by Mustafa Kemal Ataturk after WWI was militantly secular. Ataturk himself made a strong effort to “de-Islamify” the country as a way of pulling it into the Western sphere. Ataturk went so far as to officially drop Arabic script from written Turkish, moving the language to a Latin-based alphabet instead. (To appreciate how truly radical this was, imagine today being told by the U.S. government that henceforth, English will be written in Japanese characters or in the Greek alphabet. Wouldn’t that be fun?)

It’s hard to imagine a time when a guy won’t be able to enjoy a drink overlooking the Bosphorus in Istanbul, but that day might come. Turkey is becoming more Islamic—not because of a shift in values among Turks but because devout families simply have more children.

Again, this is not to say that any of these trends are “bad” (unless you’re a bar owner in Turkey). Unlike the biological changes described by Cochran and Harpending, these changes are cultural and thus more capable of quicker adaptation. Devout Turks may suddenly decide that big-city living is more to their liking. At any rate, these shifts in attitudes are what they are: another chapter in human history.

We have no “call to arms” in this article. Any attempt to change demographic and cultural trends is likely to end in failure. (Just ask Vladimir Putin about his program to pay Russian women to bear children.) Our only recommendation is that you learn to view the world through a demographic lens. This is, in our view, the best way to understand the changes in the world around us and, ideally, to profit from them.


Risk, Return, and Reality Revisited

This article originally appeared in the November 2008 HS Dent Forecast Newsletter. In the year and a half that has passed, the key insights remain: this recession is fundamentally different from all others of the post-WWII era.

On Friday, October 24, 2008, the Financial Times reported that swap spreads turned negative. It would be easy to dismiss this headline as just another bit of media noise except for one little technicality: according to all of the rules of finance, it is a mathematical impossibility. A negative swap spread means that the Treasury yield is higher than that of a swap of a similar maturity. As the “risk free” rate in virtually all financial models, the Treasury should always give the lowest taxable yield without exception. The pricing in the swaps market implies that the private issuers of swaps are somehow less risky than the U.S. government! Of course, this is absurd. All doubts about the fiscal responsibility of the government aside, no private company can ever be less risky than the U.S. government. With unlimited ability to tax and, if need be, print the needed money, a sovereign government by definition cannot default on debts denominated in its own currency.

Meanwhile, across the Atlantic, we found another absurd anomaly. Volkswagen briefly became the most valuable company in the world! A rush of panicked short covering caused the stock to triple in one day before finally easing to lower, albeit still grossly overvalued, price. Short sellers of Volkswagen found themselves wiped out…in the middle of an economic contraction that has decimated the auto industry.

Nassim Nicholas Taleb must be proud: “Black Swan” has become a standard expression in the American financial vocabulary, and his 2007 book by that name could not have been timelier. In Taleb’s context, a Black Swan is a high-impact, low-probability event beyond the realm of normal expectations, something along the lines of a tornado or earthquake in the natural world. Such natural disasters are highly destructive when they hit, but they are infrequent enough to make living in high-risk places such as Oklahoma or California possible and, in a financial context, affordable to insure. The problem, as Taleb repeats throughout his writings, is that in financial markets, “low-probability” events are a lot more common than our standard models allow.

Continue reading “Risk, Return, and Reality Revisited”

Follow-up to Israel and Turkey: How Changing Demographics are Affecting International Relations in the Middle East

As a follow-up to my prior post on how demographics are affecting the calculus of international relations in the Middle East—and between Turkey and Israel in particular—I’d like to start with some comments from Mark Steyn.

Steyn is a bit of a controversial shock jock—the Howard Stern of conservative commentary, if you will—so I hesitate to quote him too regularly. Still, despite his rhetorical bluster, he is a man who has a firm understanding of demographic trends and what they mean for the future. (His 2006 book America Alone, though a bit of a political screed, is also an astute look at global demographic trends and what they imply for geopolitics.)

Writing for Investor’s Business Daily (link to article) on the Mavi Marmara incident, Steyn writes,

[W]hat was most striking was the behavior of the Turks… Ten years ago, Turkey’s behavior would have been unthinkable. Ankara was Israel’s best friend in a region where every other neighbor wishes, to one degree or another, the Jewish state’s destruction…

Making me reminisce about some of my own late-night bar conversations in Istanbul, Steyn continues,

I remember sitting in a plush bar late one night with a former Turkish foreign minister, who told me, in between passing round the cigars and chugging back the Scotch, that, yes, the new crowd [the AK Party led by Prime Minister Erdogan] weren’t quite so convivial in the wee small hours but, other than that, they knew where their interests lay. 

Like many Turkish movers and shakers of his generation, my drinking companion loved the Israelis. “They’re tough hombres,” he said admiringly. “You have to be in this part of the world.”

Six years later, the Turkish state is tacitly supporting a “charity” organization suspected of ties to terror groups and has gone so far as to threaten breaking the Israeli blockade by force—an overt act of war.

Turkey has essentially turned its back on more than twenty years of friendship with Israel and by proxy more than eighty years of friendship with the West in order to pursue an independent foreign policy nearly 100% at odds with its former allies.  Some have called Erdogan’s policy the “re-Ottomanization” of Turkey.  We’ll return to this theme shortly.  But first, we will return to Steyn.

Steyn asks rhetorically, “Who lost Turkey?”  His surprising answer is Kemal Ataturk, the founder of the staunchly secular post-Ottoman Turkish state.

Steyn writes,

The short version of Turkish demographics in the 20th century is that Rumelian Turkey — i.e., western, European, secular, Kemalist Turkey — has been out-bred by Anatolian Turkey — i.e., eastern, rural, traditionalist, Islamic Turkey.

Ataturk and most of his supporters were from Rumelia, and they imposed the modern Turkish republic on a reluctant Anatolia, where Ataturk’s distinction between the state and Islam was never accepted. Now they don’t have to accept it. The swelling population has spilled out of its rural hinterland and into the once solidly Kemalist cities.

Some readers might have heard the expression “Young Turks.”  For those unfamiliar with the term, the Young Turks were a reform movement in the late 1800s that sought to modernize the Ottoman Empire, making it more Western.

But as Steyn puts it, the Young Turks are now the Old Turks.  The new Young Turks are less modern than their forbears.  Call it the “demodernization” of Turkey.

The Re-Ottomanization of Turkey

How can we explain Turkey’s diplomatic break with its decades-long allies?  In short, Turkey is doing it because it can.  With EU membership now highly unlikely, Turkey has decided to change it focus to its other frontiers.  Rather than being an unwanted periphery member of the West, Turkey sees an opportunity to reassert the role it played prior to World War I the leader of the Islamic world and of the broader Middle East.

Writing for the Financial Times, Josef Joffe writes,

Next to Iran, Nato member Turkey is now the biggest headache for the west. With Egypt sinking into torpor and Riyadh firmly ensconced on the fence between Washington and Tehran, Turkey has seen the leadership of the region up for grabs – and is going for it. It has drawn Syria into its orbit and has reached a nuclear deal with Iran, its rival for hegemony.

What better way to pursue this end than to lead a crusade against the Jewish state? Going after the “Little Satan” is the card that trumps them all, and it embarrasses the “Great Satan” to boot. The real game is about dominance at the expense of America... The US must learn that the real contest is between itself, Turkey and Iran. It is now up against both. 

So, Turkey’s war of words with Israel has little to do with the Palestinian cause and everything to do with reestablishing Turkey as the preeminent power in the Middle East a role it has eschewed for nearly a century.

Given the regional alternatives, Turkish hegemony might not be the worst outcome.  Turkish hegemony would certainly be preferable to Iranian or Saudi.  Though drifting towards soft Islamism, Turkey is still a constitutionally secular republic.  And despite Steyn’s grim words, secular Turks are not exactly dying out.  Were Erdogan to lose the next election (which could happen if the Kemalist opposition found credible leadership),  Turkey’s anti-Western lurch could come to an abrupt end.

Outside of Israel, Turkey also has the most developed and diversified economy in the region and has its most important city in Istanbul.  Among emerging markets, Turkey remains one of Sizemore Capital’s favorite investment targets.

Still, shifting geopolitical relationships promise to make this region highly volatile in the decades ahead. And if we intend to invest in this part of the world, we must understand the changes taking place.

Israel and Turkey: How Changing Demographics Are Affecting International Relations in the Middle East

Years ago, when I was earning my master’s degree at the London School of Economics, I had a memorable conversation with a classmate of mine from Istanbul named Deniz. Over a couple beers at the Three Tuns, Deniz explained Turkey’s two most pressing problems—the rise of political Islam and the Kurdish separatist movement—and he tied both to one primary factor: demographics. (The Three Tuns is one of the few bars in the world where young men talk equally about normal bar topics, such as sports and the attractive young female at the next table, and topics as arcane as Turkish demographics.)

“When Atatürk founded Turkey, there was no Kurdish problem,” Deniz explained, “because there were practically no Kurds. But because the Kurds have had larger families for decades, they’ve become a larger percentage of the population. The next thing you know, they’re wanting independence and we have a problem. Ocalan, the leader of the PKK (Kurdish separatist group), is said to have suggested that every Kurd must either grab his gun every morning…or grab his wife every night.”

The rise of political Islam follows a similar storyline. Turkey is constitutionally secular. In fact, the separation of church (or mosque) and state in Turkey is in some ways significantly stricter than in the United States or in virtually any European country but France. (Atatürk used secular France as a model when he founded the Turkish Republic).

Turkey has become distinctly more Islamic in recent years, and this is largely a demographic phenomenon. Naturally, some formerly secular Turks have decided to grow out their beards and observe Ramadan. But much of the shift has been due to the simple fact that devoutly Islamic Turkish women have more babies and at younger ages than their secular sisters.

I recollected this conversation years later after reading Tobias Buck’s May 22, 2010 article in the Financial Times: “Secular Israel senses threat in rise of the ultra-orthodox.”

Ultra-orthodox Jews are easy to spot in a crowd. They wear wide-brimmed black hats, full beards, and distinctive side locks of hair that nearly stretch to their chins. To the casual gentile observer, they look a lot like the Amish or Mennonites. And they are becoming an increasingly large and restive percentage of the Israeli population.

Like the Amish in Pennsylvania, the ultra-orthodox are in the State of Israel but not of it.

As Buck describes the situation, “The ultra-orthodox have always had a troubled relationship with Israel. A minority reject the secular Jewish state as a religious abomination and refuse to vote or pay taxes…. Mostly, however, the two sides [secular/moderately religious and ultra-orthodox] have kept to an intricate set of live-and-let-live agreements. Crucially, the ultra-orthodox have their own stream of schools, and those in a yeshiva, of Jewish seminary, are exempt from military service.

“But that deal is starting to unravel because of the sharp increase in the ultra-orthodox population. Once a tiny minority, the community now accounts for at least 8 per cent of the Israeli adult population. It is forecast to double every 16 years.”

This is becoming an economic problem for Israel. Two thirds of ultra-orthodox men do not work, and for good reason. They learn no marketable skills in their religious schools. The only thing they are qualified to do is sit in a synagogue and read. So, ultra-orthodox families are becoming larger and larger burden to Israel’s welfare state.

By now, you might be legitimately wondering why any of this matters. I assure you that it does.

Turkey and Israel have had one of the strongest alliances in the greater Middle East for over two decades. The made sense for a number of reasons: Turkey and Israel were both secular, Western-oriented countries with world-class armies and dynamic economies. And perhaps more critically, both have a deeply-rooted fear and dislike of their Arab and Persian neighbors. (As another old LSE classmate, a Turkish Cypriot from Nicosia, explained it, “We Turks have never forgiven the Arabs for siding with the British in World War I. It’s their fault that we lost the Ottoman Empire.”)

In the days when nationality trumped religion, the Turkish-Israeli alliance was natural. But with religion increasingly filling the identity void once filled by the state, many Turks are starting to question why they are allied with Jews against their fellow Muslims.  The recent incident in which Israeli soldiers clashed with a group of Turkish pro-Palestinian activists at sea vividly illustrates how badly relations have deteriorated.  In protest over the clash, in which at least nine activists were killed, Turkish prime minister Tayyip Erdogan labeled Israel’s actions “inhuman state terror” against unarmed civilians while Israel defended the actions as being in legitimate self defense against armed agents provocateurs who were anything but innocent.  I suspect that once investigations are done, the Israeli explanation will prove to be closer to the truth (Israel has already released footage of its soldiers being severely beaten by the pro-Palestinian mob), but in the end it doesn’t matter.  The damage to the relationship between the two countries is done.

Of course, any war of words in the Middle East has to be viewed in a broader context. Some of Erdogan’s rhetoric is no doubt aimed at pleasing the core of his electoral support, Turkey’s devout Muslims. Some is likely aimed at buying other friends in the region.  But no small part of Erdogan’s motivation is his desire to assert a Turkish foreign policy in his own image.  By bashing Israel, Erdogan is asserting his independence both from Turkey’s traditional Western allies and from its own recent past.

Turkish-American relations in the wake of the Iraq War are at the lowest point since the Turkish invasion of Cyprus in 1974, and Turkish-European relations are likewise rather strained by the EU’s stonewalling of Turkey’s negotiations for membership in the bloc. It could be that the recent Turkish antagonism towards Israel is more of a blowback against the West in general than an attack on Israel in particular. But from the Israeli perspective it is disturbing nonetheless.

For Israel, losing Turkey as an ally would be a major strategic setback. It would leave Israel increasingly dependent on the United States and Europe for diplomatic, financial, and military support, and Europe has proven over the years to be an unreliable ally when allies are actually needed.

That leaves the United States. While both the Republicans and the Democrats are currently staunch supporters of Israel, the country is still taking an enormous risk by depending so heavily on one foreign ally. It reduces Israel to the status of a client state and reduces its room to maneuver. Should there come a time when the strategic goals of the United States and Israel diverge, Israel could find itself isolated. Given the country’s precarious existence in a hostile neighborhood, this could literally mean the difference between life and death.

All of this is speculation, of course. Demographics, however, are cold, hard facts. And the facts show that the Middle East is changing. The decline of the Lebanese Christians over the past three decades was one of the first major shifts (see “Changing Global Demographics: Christians and Muslims in the Mideast” ). Today, we see Turkey and Israel becoming distinctly more Muslim and more Jewish, respectively. This subtle shift away from their secular identities will make it increasingly harder for these two nations to cooperate in the future.

This is not to say that I am necessarily bearish on the economic prospects for either country. In fact, I’m actually quite bullish. Both have world-class companies and increasingly open and competitive economies, and I see both prospering in the years ahead. I’ve even recommended Turkish stocks in the recent past.

The changing demographic picture does, however, add an interesting wrinkle. And understanding this wrinkle will go a long way to helping understand the mystery and intrigue of Middle Eastern international relations.

What to Read: The Best Financial Newspapers and Magazines

I’m often asked where I get my investment ideas and what sources I read to keep abreast of financial news.  The fact is, you can’t read everything that comes across your desk; there is simply not enough time in the day to get through it all.  You have to prioritize and organize your reading list, or you’ll waste your entire working day reading information that is irrelevant to your investing.  Let us not forget that time is money!

I created the list below to highlight some of my regular news sources.  I hope you find them as valuable as I have in my investing career.

If I could only read one publication, it would without a doubt be the Financial Times. The FT is the premier global financial newspaper for serious investors, and it covers the entire globe.  Most newspapers, even the good ones, are at least half full of trivial fluff and local interest.  Not the FT.

I started reading the FT when I was a graduate student at the London School of Economics, and I haven’t stopped reading it since.

If you want to know what is happening in the world, laid out in a clear, concise manner, you need to be reading the Financial Times.

For American financial news, it’s hard to beat The Wall Street Journal.  I must admit, I am very partial to the Financial Times, but I do consider the Wall Street Journal a worthwhile read as well.  In a typical morning, I read the FT cover-to-cover, whereas I skim the Journal for any relevant points that the FT might have missed.

Barron’s is my favorite weekly financial publication.  Much of the news will be repeated from daily sources like the FT and the Journal, but Barron’s has a lot of original reporting that makes it a staple part of my weekly reading.

Barron’s routinely polls money managers about their favorite sectors, and this is a contrarian indicator I use to watch for herding behavior.  I also find the annual Barron’s Round Table to be a good source for investment ideas, and I enjoy the interviews that the magazine routinely does with fund managers.

The magazine is also busting at the seams with financial statistics.  Barron’s is probably the best source I’ve found for data on closed-end funds.

My only complaint with Barron’s is that its overall tone tends to be quite bearish, but this is also a source of credibility.  If the editors were a bunch of glassy-eyed optimists, they wouldn’t be adding a lot of value.

If you don’t have time to read the Financial Times daily (or even if you do), reading The Economist weekly is the next best thing.

I like The Economist for two primary reasons:

1. It is an excellent source for global news and analysis.

2. I find value in seeing American domestic news through the eyes of a foreign publication.

This magazine is certainly worth including in your weekly reading routine.